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robintek

Oct 01
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LIABILITY FOR ADDITIONAL INSUREDS: NO CONTRACT, NO BLANKET!

By Workplace Safety

Adding additional insureds to a Liability policy is a common request in the construction industry. It’s so common, in fact, that the Insurance Services Office (ISO), the organization which develops many of the standard insurance coverage forms in the marketplace, has created an endorsement for Liability policies that adds additional insureds on a blanket basis.

Before these endorsements, contractors had to add a new endorsement to their Liability policy for each additional insured. When a contractor had to add multitudes of additional insureds, the avalanche of paperwork became a burdensome task, particularly for smaller firms.

The blanket approach replaced the multitude of endorsements with a single attachment by changing the endorsement wording. A typical additional insured endorsement employs this (or similar) wording: “Who Is an Insured (Section II) is amended to include as an insured the person or organization shown in the Schedule.” In the ISO blanket endorsement (CG 20 33 10 01), the wording reads: “Section II — Who Is an Insured is amended to include as an insured any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.”

A word of caution about using the blanket approach: Although the endorsement greatly simplifies the process of adding additional insureds by removing the requirement to name each one, it makes this inclusion contingent on a written contract or agreement stating that the additional insured must be added to the contractor’s policy. So, when using the blanket endorsement, be sure to keep copies of the contract, which provides the necessary written agreement to avoid any conflicts over insured status at the time of a claim.

If you have other questions about additional insureds, or any other endorsements to make certain your Liability coverage continues to meet your needs, please feel free to get in touch with us.

Oct 01
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CLEAR EXPECTATIONS HELP AVOID COMPLICATIONS

By Workplace Safety

A review of many lawsuits and claims against firms in the construction industry reveals that one of the key causes of disputes, and thus litigation, can be summarized as “unmet expectations.”

Whether it’s a clear case of the contractor failing to deliver what was promised (such as work that doesn’t meet project specs), or an evolving standard on the part of clients (workmanship issues), an unhappy client/contractor relationship creates a fertile breeding ground for allegations of liability. Although we review your Liability coverage program and needs regularly, good risk management also requires other measures to help minimize or prevent such actions.

For example, when negotiating agreements, it’s crucial to define project parameters clearly. Never begin work until the agreements are completed fully. According to one industry study, companies experienced far more claims when they provided services before a completed agreement.

It also helps to be selective in choosing clients. A potential client’s history of past litigation, complaints against you or other contractors, and their reputation for fairness and financial stability all indicate what you can expect in future dealings. If there are one or more red flags, proceed with caution.

Beyond the specifics of any agreement, it’s also critical to manage the client’s expectations. Although it might be tempting to brag about how great the final product will be and list numerous examples of superior work during the negotiation (and pricing) process, the fact is that the higher the client’s expectations, the greater their dissatisfaction when you don’t meet those expectations. Be clear about what you can accomplish within a given budget and the effects of making changes once the job is underway. The more the client is prepared to accept what happens during a project, the less likely that they’ll immediately go to the mattresses once a problem arises.

It’s always better to negotiate expectations with your clients now, than to have their attorneys negotiating settlements later.

Oct 01
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IS SUBROGATION SUBVERSIVE?

By Workplace Safety

Subrogation occurs when an insurance company pays a claim and then uses the insured’s right to sue the other party for causing the loss as a way to recover their funds. This seems reasonable, so why do business contracts commonly include a “waiver of subrogation” clause?

Business contracts often require that one party or the other be primarily responsible for providing insurance. The purpose of including a waiver clause is to have the party carrying the insurance waive any rights of recovery against the other party for claims covered by the insurance. The intent is to reduce risks significantly by preventing the insurance company from circumventing the contract’s intent of making one party financially responsible for the losses through the purchase of insurance.

However, it’s also possible that overly broad language in the contract might leave the insured agreeing to take on far more responsibility than is reasonable. In such a case, agreeing to a blanket-waiver of subrogation might not be in the best interests of you and your insurance company. The party that transfers all of its responsibilities onto the insurance of others distorts the basic principle of liability, which is that the guilty party should pay.

Whenever you’re presented with a contract that requires you to purchase insurance for the interests of another and includes a waiver of subrogation, be certain to review the provisions with your attorney — and with us.

Oct 01
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SAFETY TRAINING: FROM MELTING POT TO SMORGASBORD

By Workplace Safety

The American melting pot is fast becoming a smorgasbord of distinctive cultures. During the past 10 years, more than half (51%) of new entrants into the U.S. workforce have been minorities. The next 10 years will see a dramatic increase in minority workers, many of whom might lack English proficiency and familiarity with basic workplace safety precautions. To help you meet the safety needs of an increasingly diverse workforce — especially where language barriers are an issue — we’d recommend these guidelines:

  • Speak slowly, explain fully, and repeat important points several times.
  • Choose simple words and avoid technical jargon (whenever possible).
  • Use a translator with groups of employees who have only minimal English skills.
  • Team up non-English-speaking employees with English-speaking employees.
  • Provide handouts in the language(s) that trainees speak and read.
  • Make sure that workers are able to understand written materials. Don’t assume that they can read forms, signs, written directions, etc.
  • Stress the importance of following safety regulations and policies.
  • Show employees how to use safety protections and explain why they’re important.
  • Demonstrate while you speak and use pictures, diagrams, props, etc., to supplement your words.
  • Follow up on the job to make sure that employees properly apply what they’ve learned in training.
Oct 01
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USE MVRs AS A RISK MANAGEMENT TOOL

By Risk Management Bulletin

Let’s say one of your employees gets into an accident while driving for company business and causes bodily injury that results in a lawsuit — and suppose your driver had multiple traffic violations — and you had no idea about his or her driving history. In a worst-case scenario, you might well be facing a catastrophic loss!

Because time is money, it’s tempting to get your employees behind the wheel and on the road to start making money. However, it’s far better to manage this risk proactively by getting updated Motor Vehicle Reports (MVRs) on every employee who drives regularly during working hours. We’d recommend that you:

  • Make providing an MVR a condition of employment for any potential hire who might be driving on company time and check their record before hiring them.
  • Set your standards for acceptability.
  • Have the employee sign an MVR consent form.

It makes sense to check your drivers’ MVRs on a regular basis. For example, one company has all drivers order their records from the state every six months and give them to their managers for review (the company reimburses them for the expense). This practice encourages drivers to take an active role in thinking about their safety record — much like a report card. As with any type of risk management, employee activity works better than passivity.

Our agency would be happy to help you implement a comprehensive MVR review program.

This is one case when a few ounces of prevention can be worth a ton (or more) of cure.

Oct 01
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JOB SAFETY: COMPLACENCY CAN KILL

By Risk Management Bulletin

You work hard to create a safe workplace for your workers. However, if you examine your accident records for the past few years, you’ll probably find that unsafe acts, rather than unsafe conditions, caused most of these mishaps.

Complacency on the job can injure and kill — and it spreads like a disease from one worker to another. One employee sees a co-worker taking a shortcut and figures, “If they can do it, why can’t I?” You can’t afford to let complacency take over in your workplace!

Unless your employees keep thinking about what could go wrong every day, all day, while they work, they’re not going to be completely safe. Train them to think ahead as they approach each task and consider:

  • What they’re working with.
  • What they’ll be doing.
  • What could go wrong.

Encourage employees to examine the substances, equipment, procedures, and situations on their job for possible hazards. Remind them that to be safe, they need to focus on their work, physically and mentally, no matter how many times they might have done the same job. Stress that accidents occur in the blink of an eye — all it takes is a single second of inattention, or a moment of carelessness.

Use safety meetings and other training opportunities to get across the message that complacency can be just as dangerous as any other workplace hazard. Use a strong commitment to training and awareness to create a safety culture that replaces complacency with an emphasis on alertness, planning, hazard identification, problem solving, and accident prevention.

Oct 01
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BEFORE CRISIS STRIKES: BE PREPARED!

By Risk Management Bulletin

Using the American Society of Safety Engineers (ASSE) Crisis Management Plan Guidelines can go far to improve safety and security in your workplace. To make the most effective use of the guidelines, ASSE recommends taking these steps:

  • Reassure employees that safety measures are being taken for their protection.
  • Report unusual or suspicious activity or strangers in or near the facility to authorities; if immediate attention is warranted, call 911.
  • Urge employees and their families to be aware of their surroundings. Increase security and surveillance activities and enhance outdoor lighting; check the IDs of everyone entering the building.
  • Update the company emergency response plan regularly and review it with employees. Make sure that all necessary contact names and numbers are correct and easily accessible.
  • Consider upgrading in-house emergency services capability to EMT or 40-hour First Responder.
  • Offer employees escorts to parking lots and public transportation.
  • Share your response plan with local municipalities and emergency response units.
  • Help employees get information during a crisis by making a news network available on breaks.

Our risk management professionals would be happy to help you implement workplace crisis planning. Just give us a call!

Sep 01
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THE COST OF NOT HAVING EMPLOYMENT PRACTICE LIABILITY INSURANCE

By Your Employee Matters

According to insurance industry estimates, fewer than 50% of companies carry EPLI — and the smaller the employer, the lower the percentage. Although the cost of coverage varies, a $1 million policy with a $5,000 deductible usually costs from $50 to $250 a year per employee. When you think about obtaining EPLI, weigh the cost of this protection against the likelihood of a claim, settlement, verdict, etc.

Check out the cost figures on claims, derived from Jury Verdict Research and other sources:

  • Median award (2004-2010:) $199,600
  • Mean award (2004-2010): $632,589
  • Median settlement (2004-2010): $85,000
  • Mean settlement (2004-2010): $515,816
  • Nearly two in four plaintiffs’ verdict (39%) ranged from $100,000 to $500,000 range; 12% of verdicts were $1 million or more. Note: Verdicts tend to be higher in state cases than in federal ones.
  • Legal fees, stress, additional exposures, etc. — a minimum of $25,000 per claim and going up from there.
  • Loss of pre-claim non-productivity due to the fear of not letting a poor performer go because you might get sued — hard to quantify.
  • Impact on the company’s loss of reputation among all stakeholders — priceless.

Note: The mean is the arithmetical average of a group of scores. The mean is sensitive to extreme scores when population samples are small. Means are often used with samples of larger sizes. The median is the middle score in a list of scores; it’s the point at which half the scores are higher and half the scores are lower. Because medians are less sensitive to extreme scores, they’re probably a better indicator with smaller samples.

That’s the potential exposure. What’s the potential of getting hit with it? According to CNA, an employer is more likely to face an EPLI claim than a Property or General Liability claim. Almost 75% of litigation against corporations involves employment disputes. Nearly 100,000 sector charges were filed in 2011 against private employers under EEOC statutes, leading to more than $450 million in settlements and charges. This does not include statistically-based claims or settlements that never see the EEOC, state agency or courtroom. More than 40% of Employment Practices claims are filed against companies with 15-100 employees.

Doing some rough math, there are about 6 million companies in the U.S. Although many of these firms are too small to bother suing, some 2.5 million businesses have 15 or more employees. My experience tells me that tripling the number of EEOC claims give a fairly realistic number of total claims filed. Dividing 2.5 million companies by 300,000 claims comes to roughly a one in eight chance of experiencing a claim during a given year — which means the firm can expect to face at least one employment-related claim over an eight-year period (of course, this probability depends on the size of the company, location, compliance practices, culture, etc.).

By purchasing EPLI, you not only cap your risk at $5,000 to $10,000 a year, but you allow yourself the freedom to let go of poor performers without the threat of litigation. Let’s say a 50-person company pays $7,200 a year (an average of $120 per employee) for EPLI coverage. Over an eight-year period, this comes to a total cost of $57,600, plus the time value of those dollars. The chances are that the company will face a claim at some time during those eight years, which will cost an average of $85,000 just to settle, plus another $25,000 in legal fees, for a total of $110,000 (see the average premium cost and settlement figures above). You’d still come out $52,400 ahead — not to mention eliminating the hassle. If the case goes to verdict, those numbers can easily triple. Bear in mind that there is no way you can amortize this expense! Of course, you might easily face more than one claim during the policy term.

The bottom line: Not getting EPLI is a gamble that could significantly impact or even wipe out your cash flow at any time.

If you’re interested in a checklist for purchasing EPLI, please contact me at don@hrthatworks.com.

Sep 01
Love0

GETTING COMMISSIONS AGREEMENTS RIGHT

By Your Employee Matters

A recent California case, DeLeon v. Verizon Wireless, involved an attack on the company’s commission program for alleged violation of a labor code section that prohibits the secret underpayment of wages. Basically, the complaint was that the Verizon employees who were paid both a wage and a commission should not have been charged back against those commissions for customers who did not fulfill their agreements.

Verizon prevailed for these reasons:

  1. The commission was clearly defined as such, and the employees already received a wage that satisfied minimum wage standards.
  2. Employees knew that the commissions were not final until the customer completed their contract period, and that anything paid was considered an advance on commissions.
  3. Employees underwent training which included the chargeback feature.
  4. The court reminded employees that “the essence of an advance is that at the time of payment the employer cannot determine whether the commission will eventually be earned because a condition to the employee’s right to the commission has yet to occur or its occurrence as yet is otherwise unascertainable.” In this case, an advance was not a wage because all conditions for performance have not been satisfied.
  5. The court reminded employers that a chargeback based on “unidentified returns” from the wages of all sale associates violates the law. There are also cases in which the employee cannot be charged with business losses i.e. work comp claims, theft, etc.

Settling commission claims can be costly — so get the agreement right!

Sep 01
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INSPIRED HR: AN ‘INSIDE-OUT’ OPPORTUNITY

By Your Employee Matters

Because so few companies have inspired HR practices, those that do enjoy an enormous competitive advantage. Unfortunately, all too many businesses don’t take advantage of this opportunity. Here’s why:

  1. Cultivating great HR practices must be an “inside-out” job. I’ve reached this conclusion after coaching and working with hundreds of HR executives over the years. Those who believe, achieve. There are a number of reasons why someone might not believe that they’re capable of producing great HR practices:
    • They don’t have the skill set. If that’s the case, they can learn one critical aspect of HR at a time and implement this expertise. Most people can only do things one step at a time anyway.
    • They don’t feel they have the time it takes to improve HR practices. The solution is to make the time. Great HR practices offer a cost-effective return on investment. I advise HR executives to save at least five hours a week by outsourcing or delegating these activities, so they can in turn devote this time to strategic activities.
    • They don’t believe they have the support of top management. When it comes to business owners, nothing is more important than demonstrating the potential ROI of good HR practices. This is why we’ve created the HR Cost Calculator. I start my CEO workshops with an hour-long review of this form so that participants understand the math surrounding their HR practices.
  2. Private companies, unlike their publicly held counterparts, aren’t required to have anything but basic compliance. There’s no Board of Directors demanding that they get their HR act together; as a result, most privately-held firms do little or no real HR.
  3. HR professionals don’t get managers on their side. Begin by surveying them. HR That Works members can use the HR Department Survey to have managers rank specific practices and comment on opportunities for improvement.
  4. Failing to educate everyone in the company about the opportunities that a good HR program offers them. Learn to let people know the progress you’ve made every month and how this impacts best practices and the bottom line. Show that your HR practices are better than those of the competition.
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