Business Protection Bulletin

Most employers look at Workers Compensation as just another necessary evil and unavoidable cost of doing business. It’s usually one of those out of sight, out of mind things when rates are low. It’s not until an employer is hit with a rate hike that they really start to give some thought to their Workers Compensation rates.

Employers need to constantly look at Workers Compensation as a tool to improve their business’s bottom line, and they certainly need to make an effort to keep their low rates over the long term so that they can take advantage of some significant savings.

Here are four common mistakes made by employers that frequently deter their Workers Compensation savings:

1. Assuming that lower rates equate to lower costs. Don’t make the faulty assumption that your cost will go down automatically just because your rates have been reduced. Workers Compensation insurers use an experience modification factor to examine the actual losses incurred by the insured company and establish cost. The actual losses are compared with other companies in similar industries. If the insured company’s past losses are below average, then the insurer gives the company a credit rating lowering their premium, but an added surcharge is applied to the premium if the insured company’s past losses are above average.

2. Believing that employers have little control when it comes to the expense of Workers Compensation. Employers know they’ve got to have Workers Compensation insurance. However, this acknowledgment shouldn’t lead to an employer thinking they’ve got to pay excessively for it; employers don’t and shouldn’t. Cost reduction starts at the hiring process. Initiate effective interview techniques and background checks to help ensure the right people are hired for the right jobs. That said, there’s no way to eliminate the possibility of injuries in a workplace completely. Therefore, it’s equally important to have an effective return-to-work program in place to assist injured workers return to work as soon as possible and reduce the cost of their claims.

3. Neglecting or de-emphasizing cost containment and injury management during low rate periods. Safety should be an unyielding focus at all times. This will not only help a company reduce their claim numbers, but also keep their rates low over the long term. Employers need to keep an eye on the issues that frequently impact the costs of claims, such as medical care costs and lost wages. Also, remember that open claims mean escalating costs and negative impacts to the company’s modification factor. Of course, this causes an increased cost for coverage.

4. Not making the association between cost containment and worker retention. Studies have shown that fewer accidents occur among skilled workforces, but even skilled workers can have an accident. A large part of whether or not an injured skilled employee returns to work is based on how their employer responds to them during and after recovery. An important part of an employer’s response will be in having a return-to-work program that includes maintaining constant contact with all injured workers and their health care providers to monitor how they’re recovering and when and how they can get back to work as soon as possible. Skilled employees that are kept in the loop with a return to work program’s periodic phone calls about what workplace changes are occurring in their absence are more likely to return. On the other hand, skilled employees that feel forgotten, undervalued, and disconnected aren’t very likely to return.

There are four types of insurance that most small businesses purchase. The first is Property insurance. This type of coverage provides compensation if business property is damaged, stolen or lost. In addition to covering the physical business structure, property insurance covers personal property. This includes inventory, office furnishings, raw materials, computers, machinery and other items that are part of business operations. Property insurance coverage doesn’t end with protecting physical assets. It also affords operating funds when business owners are forced to take steps to get their business back on track following a major loss. Property insurance might provide coverage for broken equipment in some cases. It can also provide coverage for water damage, debris removal following a fire and several other specific items.

Business Vehicle insurance is the second type of coverage many small businesses purchase. Anyone who uses their own personal vehicle for business purposes should discuss this type of coverage with their agent. Most personal vehicle insurance policies don’t provide coverage if the automobile that is involved in an accident is used mostly for business purposes. Business Auto insurance policies afford coverage for vehicles that are owned and used by a business. Third parties injured by the policyholder’s vehicle receive compensation for damages up to the policy limit amount. Some policies might provide compensation for repair or replacement of vehicles that are damaged from flooding, theft, accidents and similar events.

The third type of coverage most small businesses purchase is Liability insurance. Any business can face a lawsuit at some point in today’s litigious society. For example, a person might claim that a business caused them harm from a service error, defective product or negligence in providing a safe environment. Liability coverage provides compensation for damages a company is liable for. However, the coverage is only provided up to the policy’s limit amounts. These policies usually also provide funds for legal defense expenses, attorneys’ fees, medical bills and several other related expenses.

Workers Compensation is the fourth type of insurance purchased by many small businesses. In nearly every state, employers are required by law to have Workers Compensation coverage if they have employees. This number usually varies from three to five, and even if a business employs fewer than three employees, it is still wise to purchase this coverage. Workers Compensation pays for a portion of lost wages for workers who are injured. In addition to this, it also covers the medical care they require. Coverage is provided to employees who are injured at work regardless of who is at fault. If workers die as a result of the injuries they sustain, the insurance company compensates the surviving family members of the deceased worker.

In addition to the four major types of coverage purchased, there are several other valuable policies some companies might want to purchase. Umbrella policies, Terrorism coverage and specialized liability policies are all helpful. Umbrella policies, much like an umbrella, cover above and beyond the normal inclusions. These are usually obtained to prevent high losses by businesses with high risks. Specialized liability policies are made up of several types of individual coverage. Terrorism coverage provides compensation for damages and medical care to a certain extent in the event of terrorism.

To find out which options are best for your business, be sure to speak with one of our agents.

Business owners know an injury to an employee or severe property damage destroys productivity; so all losses should be avoided or reduced. So why do insurance loss control representatives’ visits and the ensuing safety recommendations bother business owners so frequently? Is it a nuisance? Is it the money to implement loss control strategies? Insurance companies understand that the frequency of claims, that is the number of claims, predicts risk levels much more accurately than does the severity of claims.

Insurance company recommendations tend to reduce the frequency of claims. In the long run, reduced frequency leads to better experience and greater discounts. Selfishly, you should implement loss control recommendations that lead to lower costs.

For small business, as defined as those that cannot afford an in-house full time safety officer, the insurance company loss control representative acts in that capacity to review the overall loss control picture. Use this service to your advantage. The insurance company wants to reduce risk as much as you do. Of course, the company is less concerned about the budget to do so when you’re fulfilling their recommendations. So, what can you do about costly compliance measures? Ask the loss control representative for help. These professionals are in the field all the time and see many solutions to the same problems. They will have some cost effective ideas.

What other proactive measures can a business owner implement? First, a loss control survey, sometimes called a risk management survey, outlines every process, job, piece of equipment, or operation with regard to safety.

Once your safety concerns are identified, you can manage the risks in two ways: Loss control measures or strategies. A loss control measure reduces the frequency of claims. A strategy eliminates or reduces risk. Loss measures include installing equipment safety devices, controlling environmental conditions, and supplying proper protective gear. Right now would be a good time to solicit feedback from the insurance loss control representative. They have valuable experience in this area.

Manufacturers and contractors are familiar with equipment safety devices, such as guards on saw blades or operator cages. Ergonomics has become a popular form of loss control that ties into safety devices. Differing control knobs, placement of controls and sight lines improve operator efficiency and eliminate unsafe habits.

Environmental controls, for example ventilation and lighting, reduce worker fatigue, unhealthy air quality, and poor visibility. Injuries decrease in frequency as a result.

Proper protective gear might seem a bit old school, but goggles, gloves, hard hats, protective clothing, and even proper work clothing can help to reduce claims.

Installing guards and providing equipment protection is half the battle. Safety must be taught to employees at all levels for an effective loss reduction program. New and old measures should be embraced by management and implemented correctly.

Insurance loss control departments are a good source for safety lesson plans, posters, or even direct employee meetings to teach and discuss safety issues.

Loss control strategies eliminate or reduce risks. Prevention, avoidance, transfer, and separation are examples of viable strategies.

Prevention strategies anticipate future problems. A business can carefully screen driver applicants with background checks, records, and road testing to preclude poor operators from damaging valuable vehicles or injuring third parties. Avoidance eliminates existing or potential risks. The business screens drivers unsuccessfully; and therefore decides to eliminate its fleet and use common carriers. The business has avoided all risks associated with operating vehicles, but not those associated with shipping products.

Separation segregates risk. The business decides to build a second manufacturing site rather than place both lines in the same building. The risk of both lines being destroyed at the same time is greatly prevented because the exposures are separated.

This strategy might allow one site to shut down for difficult maintenance while the second site continues filling orders. Better maintenance is a safety measure granted by the separation strategy.

Transfer strategies include contractual transfers, subcontracting work, and buying insurance. Transferring is usually a legal risk reducing strategy.

Purchasing insurance is a strategy to fund claims. The business might not technically be reducing losses, but it is keeping those losses – premiums – at a tolerable level. This strategy brings us back to listening to the insurance company recommendations.

If you manage the input proactively rather than withhold feedback from the safety representative, in the long run, you will focus on the important issues, eliminate the intolerable risks, and attain affordable insurance premiums.

Disaster can strike a business in a multitude of ways. Businesses located near the coast from Texas to Maine are highly susceptible to hurricane damage. Fires and explosions can devastate buildings regardless of where they’re located. A building need not be the target of a terrorist attack to feel its effects, as many business owners discovered after the September 11 attacks. After a catastrophic event, evaluating the damage to the facilities quickly and accurately is essential for both insurance recovery purposes and for getting back into operation as soon as possible.

The business must do much of the important work before the disaster occurs. Identifying the facilities and equipment at risk is the first step. For a small business with one or two locations, this may be obvious; for a larger business with operations in many states and localities, the question may be more complex. Some locations may be in earthquake-prone areas, while others may be relatively safe from natural disasters. Such businesses must evaluate the worst-case scenario for any one event and plan around that.

Businesses must also address the question of who will do the evaluating. After a disaster, some members of the group may be injured or otherwise unable to reach the scene because of the severity of the damage or law enforcement restrictions. Therefore, the list should include several names with multiple people able to fill each role. The business should also have a written communications plan for reaching members of the group, including all of their phone numbers (both land lines and cellular), e-mail addresses, and each person’s emergency contact information.

The more information a business has about its property after a loss, the better. Therefore, it should assemble multiple copies of documents such as architectural drawings, appraisals, inspection reports, maintenance records, and others. The business should store documents in several locations and media so that backups exist should one set be destroyed. Members of the disaster recovery team should survey each location, identifying special features, key processes, characteristics that increase the building’s vulnerability to a particular threat, and equipment that will be difficult to replace.

It is often helpful to have members of the local police and fire departments tour the building and meet with personnel to discuss disaster planning. They may identify weaknesses in the plan or deficiencies in the building that the disaster recovery group missed. Also, the more familiar they are with the building before a loss, the better able they will be to respond after it.

After a disaster occurs, the disaster team coordinator should take steps to contact each member of the group and arrange for inspection of the facility at the soonest possible moment. The group may not be able to enter the building immediately due to safety concerns or orders from law enforcement. As soon as the group can inspect, they should identify emergency measures necessary to protect the facility from further damage, assess the extent of the damage, identify areas that are unsafe to enter, and evaluate the condition of the areas where critical processes occur. They should use the information developed before the loss to assist in their evaluation.

After the inspection, the group should prepare reports on each damaged facility. Local authorities may require the business to file these; in addition, government bodies that assist with disaster recovery and insurance companies may need the information.

Business owners should ask their insurance agents for resources to help with disaster preparation. Many insurance companies have loss control departments that can offer valuable assistance, as well. Government agencies such as the federal Small Business Administration, the Federal Emergency Management Agency, and Web sites such as Business.gov have plenty of information on this topic. To a large extent, a business owner has control over whether the business will survive a disaster. With some careful planning, the business will survive it and thrive.

With more jobs becoming available today, there is a major problem presenting itself for employers. Employees who are applying for jobs are lying about important aspects of their lives. In most cases, the truth may be a disqualifying factor. To avoid the hassle of hiring an unfit employee, it’s important to conduct a background check.

Background Check Result Statistics. According to the ADP’s 2009 Hiring Index, 46% of 1.7 million applicants reviewed had discrepancies in their resume’s employment, credentials, education or reference checks sections. In addition to this, 37% of applicants had traffic violations or convictions, and 6% had criminal charges within the past seven years. While not all applicants lie about convictions, others may fabricate details that make them look more appealing. This practice, which is commonly called resume padding, is a method used by people who aren’t qualified for a position to attempt to obtain it. It’s important to be able to identify both omissions and lies.

Understanding What Is in a Background Check. Not all background checks are the same. There are hundreds of online services that advertise cheap and fast background checks. However, these companies provide limited information. They often have limited access to databases that are not regularly updated. In order to get the most accurate and recent records, it’s best to use state resources.

How to Perform a Background Check. Usually the office of the Highway Patrol is the best place to begin a search. Some jobs require a prospective employee to manage a budget and handle money. If this is the case, it’s a good idea to request a credit check also. It’s important to have the applicant’s SSN, date of birth and any last names or aliases they’ve used in the past 10 years. Be sure to have the applicant’s approval before performing a background check. Some employers have found that searching for an applicant on Facebook or other social media sites is beneficial. Keep in mind that people may make fictitious profiles and claims on these sites, so this information shouldn’t replace what is available on a background check. However, sometimes discrepancies between resumes and social profiles is enough to raise a red flag against a potential employee.

Deciding What Information to Verify. There is no need to verify information that doesn’t pertain to the job. For example, if an applicant for an accounting firm has degrees in nursing and accounting, there is no need to verify the nursing degree. To do so would be a waste of time since the applicant won’t be using nursing skills in an accounting job. There is no need to request information that isn’t necessary. In addition to being more costly, it is a waste of time. For example, don’t request a credit check for an employee who won’t be controlling a budget or working with cash. However, if an applicant will be caring for disabled individuals, it’s important to verify that they don’t have any past charges of abuse, assault or neglect. Always use common sense to determine which bits of information need to be verified.

Employer Reference Considerations. Verifying employment and inquiring about an applicant’s work ethic with a previous employer is important. However, it’s also important to make the reference call count. Never rely on the phone number provided by the applicant. Either look up the number through an online phone directory or use a reliable source to verify the number. Although it isn’t common, sometimes applicants provide erroneous phone numbers that may not belong to the previous employer they listed. In some cases, employees may provide a friend’s number instead. That friend will often provide a bogus reference to make the employee look good. Be sure to ask pointed and concise questions to the applicant’s previous employer. The following questions are good examples:

• What are the applicant’s strengths?
• How does the applicant deal with stress and conflict?
• In what ways could the applicant improve?
• How do the applicant’s skills with other team members rank?

The best time to perform a background check is after extending an offer for employment. However, be sure to tell the applicant that their employment with the company is contingent upon them passing a background check. It’s always a good idea to specify that a background check will be conducted in a wanted ad or online job posting. This is usually effective in discouraging applicants who know they have a checkered past and intend to lie about it. The most important thing to remember is to always obtain an applicant’s written permission before ordering a background or credit check for them.

It’s no secret that insurance companies hire from among the best attorneys available, and those attorneys defend you when you get into a legal incident covered by a liability policy that you have secured. But you might ask these two questions: Is it still cost effective to get such legal defense through an insurance policy and what policies does a business need to secure to get the best legal guns to defend themselves in a given situation?

If you get an attorney demand letter or any kind of notice of legal action, who do you call? Well you can always call an attorney who might be a friend, done a trust for you, or might have put together some contracts for you, but would they be the best litigation attorney for you if it came to that? Keep in mind the plaintiff will probably know if you have a qualified attorney or not and that will dictate how they will proceed and how much they are willing to settle for. The less qualified your attorney is, the more leverage the opposition will have against you and the more likely it is that they will drag out a settlement or even take the case to litigation. The worst part of this is when these legal issues take away time and distract you from running your business.

The bottom line: Hiring an attorney yourself can be very costly when compared with the benefits of going through your insurance company. Insurance company claims departments handle these kinds of incidents every day, and they know exactly how to keep costs low without compromising on skill. They specialize in managing attorneys and claims incidents. The bottom line is, they are so efficient that it costs them less to settle than it will ever cost you doing it by yourself. This savings is built into the cost of the premium for liability coverage. The good news is, this cost is capped every year for whatever your insurance policy premium is. By not having a policy, legal expenses can easily run into six figures, even before any settlement or litigation takes place. Also, in many cases those taking action against you, most especially if it is frivolous, would rather not face an insurance company attorney and this puts you in a much better position.

Does a liability policy cover every incident? Of course not, but you can mitigate your legal risks by making sure you have the right policies in place. Here are the most common policies that your business will need to cap your legal exposure:

General Liability (GL). This is the most common type of business liability policy. GL covers injuries caused to others, damage to the property of others, and may cover personal and advertising injury coverage, such as incidents caused by libel or slander. Many of these policies include products liability, which covers defective products that might cause injury or property damage.

Employment Practices Liability (EPLI). EPLI insurance is becoming more and more necessary for employers, both large and small alike. EPLI provides protection against employee lawsuits such as discrimination, sexual harassment, failure to employ, and many others. This coverage generally does not pay for punitive damages, but instead will pay for the company’s legal costs associated with a covered lawsuit.

Errors & Omissions Coverage (E&O). Also known as malpractice insurance, E&O provides coverage to individuals and firms who provide a certain expertise and counseling to their clients. When a professional receives payment in exchange for services, they are held to a high standard by both the client and the legal system. Although incidents are not common, when they do happen they are very costly. Having the right insurance coverage in place helps to allow continuity of a practice, while minimizing possible huge financial burdens and distractions by transferring these burdens to the insurance company.

Directors & Officers Liability (D&O). This type of insurance is taken out to protect legal action against directors and officers of a company. Any firm that has a board of directors, such as privately held companies, non-profit organizations, and homeowners associations, need this coverage. Anyone serving on a board without this coverage is putting their own personal assets at risk. Legal action against Directors and Officers can come from competitors, government agencies, creditors, employees, stockholders, and other third parties.

Pollution Liability. A Contractor’s Pollution Liability insurance policy covers environmental liabilities excluded by standard General Liability insurance. This coverage helps protect contractors against pollution incidents, such as contaminated soil disposal, accidental release of fuel oil, chemicals/toxic gases from broken pipelines, utilities, and stationary and mobile fuel tanks.

Auto Liability. A business should not neglect getting Auto Liability even if they don’t own any vehicles. If an incident happens during working hours and the injured employee was using their personal vehicle for business use, the business may be named as a party to legal action on any injury or property damage that may occur. If the business is using personal vehicles on the job full time, it is probably best to have those insured under the company to make sure the company has coverage against legal action due to an automobile incident.

Each business is different, which is why it’s so important to review all potential exposures with your agent to determine if any of these exposures can be covered by insurance. A business owner truly gets a great bang for their buck when having these liability policies because as mentioned earlier, you are dealing with experts who know how to leverage their expertise most effectively. These types of insurance policies also bring more certainty to your business, the premium is all you pay, you have no worries of losing your business or facing significant setbacks due to spending tens or hundreds of thousands of dollars defending and paying claims that most people have no idea how to handle.

Whether claims involve liability, property, workers compensation or other types of insurance, policies outline the obligations of the policyholder in the event they must file a claim. Regardless of the type of claim, policyholders are required to make contact with their insurers immediately.

Property Claims. Policies have specific wording regarding the obligations of a policyholder in the event a claim must be made. The Business Owners Policy, which is also called a BOP, requires policyholders to take the following steps:

• Report legal violations to the police immediately.
• Make immediate contact with a personal insurance agent.
• Resume the maximum volume of regular business operations as soon as possible.
• Make temporary repairs and take any other necessary steps to protect property from further damage. It’s also important to save the damaged parts if they must be replaced. In some cases, the claims adjuster will want to examine them.

Business Income Claims. In order to establish an amount of insurance benefits for a policy that provides business income coverage, BOP holders need to keep specific business records. The following are required records:

• Expense and income information must reflect recent profit and loss statements and income tax forms.
• Historical sales records for the company must be kept.
• Businesses must keep a thorough record of extra expenses required to resume business operations after a covered loss is experienced. Some examples include temporary equipment rental, temporary rental space and moving expenses.
• Receipts or other records for damaged inventory are necessary to replace lost items.
• Any other business records that might assist in determining a company’s projected profits if the loss hadn’t occurred are also helpful.

Workers Compensation Claims. For a workers compensation claim, it’s important to notify the insurer immediately after an employee suffers a work-related injury. Notifying the insurer immediately is the best way to help the employee recover quickly, get through rehabilitation and return to work. Employers must comply with the insurer’s investigation following a claim. This means that records must also be provided if requested.

Liability Claims. Contact an insurer immediately if a person threatens to file a lawsuit against the company. In some cases, there might be a good reason for an individual to pursue a lawsuit. However, they might not choose to do so. For example, if a person falls on a business property, they might or might not sue. It’s important to report the incident and possibility of a lawsuit to an insurer immediately. Be sure to include specific details, contact witnesses and make necessary followups. Business owners shouldn’t spend any money on injured persons aside from basic first aid care if they claim to be injured. If the individual sues, it’s important to cooperate in the investigation.

Vehicle Claims. If employees drive business vehicles, they should be instructed on the proper responses to accidents. Employers should put an accident kit in each company vehicle to ensure that a proper response is possible. The police must be notified immediately after an accident occurs. Employees should obtain the names of all other individuals and witnesses involved. Contact the insurer immediately to report the accident. There is probably specific information regarding how policyholders should proceed if they’re unhappy with the way a claim is handled. It’s important to read the instructions carefully and follow procedures. If there are any issues or concerns, contact one of our agents to discuss them.

If you are not taking full advantage of LinkedIn to make connections and market your business, you are truly missing out on a great opportunity. For those of you who are not familiar with LinkedIn, it is the social media equivalent of Facebook for the business world and is a great tool for professional networking.

To get started on LinkedIn, you will need to create a profile. Your profile should be as complete as possible, as this can also double up as your online resume. Using the email address you provide, LinkedIn helps you find connections right away by matching your email contacts with LinkedIn’s member database. The best way to get started with networking on LinkedIn is to start building up your connections by adding people you know first. LinkedIn also has a number of other tools and options to allow you to search for connections. Making connections with those you know is important on LinkedIn because many people often turn to LinkedIn to make contacts as they search for services, business deals, employees and a number of other needs. You are also branding yourself as a professional with your profile in a convenient place where people are searching to make business connections.

Once you have completed your profile, you can also create a profile for your company. This will allow you to showcase your company information, together with the products or services that you provide. What is nice about the company page is the ability to add not just your company website, but any other website you have for each respective product and service you provide. Adding a company page will not only help you within the LinkedIn network, it will help you beyond the network, as LinkedIn ranks very high in search engine search results. This can help you in two ways. First, if someone is trying to find your company, chances are your LinkedIn company profile will appear on the first page of search results. It might also benefit your own website search engine result ranking because you are now listed on and linked to by a reputable, high-ranking site, which search engine algorithms pick up and use to add points to your website ranking.

Another popular place on LinkedIn is the tens of thousands of professional groups on the site. Most of these groups revolve around a discussion forum. LinkedIn often recommends groups as you browse the site, based on your job title or industry information in your profile, but you can also search for groups by going to the group tab and using a number of different options to search for relevant professional groups in your industry or an industry you work with. By initiating or participating in a discussion, you can build your reputation, most especially if your discussion draws a lot of interest and you demonstrate a certain expertise. People often make contact with you from these discussions, which could result in a key contract or a potential client. You can also create your own group; however, you will need to invest time into inviting people and building the group.

For those who don’t have a lot of time to invest, yet want to promote their business, LinkedIn has a similar program to Google AdWords called “LinkedIn Ads.” This is a pay-per-click (PPC) or “impression” based advertising structure that is very simple to set up. You can add a headline and two additional lines about your product or service. LinkedIn allows you to target your ads specifically toward the audience you want to reach, so the ad will only appear on those types of profiles you identify. The system allows you to choose by industry, position, age group, region and a few other criteria. The nice thing about this is you can drill down and pay for ads only viewed and potentially clicked by your specific target audience, thereby saving money on advertising and getting a higher return on your advertising investment.

LinkedIn has a lot to offer, and without a presence on this system you are left out of a huge network where a significant amount of business takes place. In addition, your key clients might be on LinkedIn, and keeping your name in front of them is important in maintaining a relationship and a presence with those clients. To begin using LinkedIn, go to www.linkedin.com and walk through the steps to get your profile up within minutes.

Since Title VII of the Civil Rights Act of 1964 passed, the issue of employees’ rights continues to be controversial. Employers involved in interstate commerce are prohibited from discriminating against applicants.

Understanding How Fast Lawsuit Risks Are Increasing. As more laws are enacted for workplaces, employers face a higher risk of lawsuits. The likelihood of discrimination lawsuits is especially high. In order to minimize this risk, employers need to create a workplace that offers workers equal rights, opportunities, job access, working conditions, job security and opportunities for advancement. They must also strive to create a workplace that is in compliance with federal employment guidelines for mature and disabled workers. During the period between 1992 and 2004, the number of individual discrimination charges jumped from 72,302 to 79,432 annually. These figures, which were collected by the Equal Employment Opportunity Commission, include all types of discrimination filings.

The 2010 Wal-Mart Example. Claims of workplace discrimination hit a record high in 2010. The total number of claims was 99,922 during the fiscal year. This number gained national attention after the story of a class-action discrimination lawsuit was filed against Wal-Mart. The U.S. Supreme Court threw out the case. This case stated that more than 1.5 million female workers faced workplace discrimination in the aspects of pay and promotions. The Court ruled that the case couldn’t continue because of the varied circumstances of the plaintiffs, which lacked uniformity. This was the most high-profile employee discrimination case of 2010. It was also the largest class-action lawsuit in U.S. history.

The Small Business Perspective. Wal-Mart had a policy against uniform employment practices. Since duties were delegated to individuals in specific branch locations, the case was overthrown. Smaller companies need to take the examples of larger companies by ensuring that they’re properly protected from such lawsuits. On a smaller scale, discrimination lawsuits could devastate or bankrupt a small business. When employers have more personnel policies in place, there are fewer lawsuits filed. This is especially true if the policies are outlined well in a handbook and given to new employees. Educating new employees thoroughly is important. It’s also essential to fully educate employees who already work for the company at the time such changes are made. However, even if the law is interpreted carefully, there are still times when employees may allege discrimination. During such times, employers are always thankful and reassured that they possess Employment Practices Liability Insurance (EPLI).

Importance of Employment Practices Liability Insurance. Most people aren’t aware just how important this type of coverage is. The importance of it can be discovered by carefully examining the workplace. Most workplaces have an ethnic and racial composition that is constantly changing and evolving. In addition to workplaces, the entire country is changing because of these factors. Cultural aspects have become one of the most common roots of discrimination cases. Although America is known for high levels of educated workers, discrimination continues to thrive among employees. We are taught in school to tolerate and accept other cultures. However, exercising equal treatment in the workplace seems to be a problem for many. In addition to this, sexual harassment, handicap bias actions and age discrimination lawsuits are common. Workplaces facing these issues are finding themselves in serious legal trouble.

The Solutions. In order to avoid legal battles, it’s important to have EPLI. Although many employers think it’s too expensive, it can save a company from going under if a lawsuit is filed. Have one of our professionals perform a risk assessment to determine how much insurance is needed. In addition to having ample coverage, it’s important to implement policies in the workplace that encourage equality and discourage discrimination. Information needs to be made available to workers to make them aware of what discrimination is and how to avoid it. Encourage workers to treat one another with equal and mutual respect. The press and human rights organizations are becoming more vigilant about spotting discrimination in multinational companies. With so many scrutinizing eyes watching, it’s important to assess the workplace regularly to ensure that discrimination risks are low. Educate executives on proper hiring, firing and disciplinary guidelines.

Two factors are contributing to the rising number of lawsuits. First, employees are being educated about their discrimination rights more thoroughly. Second, financial hardships caused by the recession are making employees desperate enough to file claims that might not be legitimate. Regardless of whether claims are legitimate or not, it’s essential to have EPLI to protect your business.

The owners of a new company found a building on the market for an affordable price, so they bought it. Built in the 1940s to manufacture aircraft for the war effort, the metal structure had a large open space. The company occupying this space was in the software development business and the building was much larger than it needed, but the price made it seem like a sensible move. However, the owners got a surprise from their insurance agent about property coverage. Insurance companies base limits of insurance on the cost of replacing a building exactly as it was before the loss. The cost of reconstructing this old building was much higher than both its purchase price and that of other suitable properties. The company did not need that much insurance, and paying the higher premium for it would have been wasteful, so the owners asked the agent for alternatives. What if, they asked, we don’t rebuild our building as it was?

After a fire or some other catastrophe destroys a building, its owners may decide not to rebuild or replace with a similar structure for a number of reasons.

• As was the case with the software company, the current building’s design may be impractical. The company bought the building because of a good price, not because of its large open space. A software developer ordinarily does not need that much space; if it were to rebuild, it would almost certainly choose a smaller building with a different layout. Also, very old buildings often include materials that builders do not commonly use today, such as plaster and lathe. Reconstruction with these materials is expensive and often unnecessary for the continued operation of the business.
• The company may decide to consolidate the operations of two locations into one. The second location may have the capacity to absorb the first one’s operations, and management may feel that it will gain efficiencies by consolidating.
• Depending on the building’s age, it may not meet current building codes. The local government may require any new buildings to meet expensive new codes.

The standard Business Property insurance policy states that the insurance company will pay “actual cash value” — the cost of replacing the property minus an amount for depreciation. However, it offers the option of valuing a loss at replacement cost without deduction for depreciation. A business that chooses this option will need to purchase the amount of insurance equal to the cost of replacing the building “as is.” The company will pay the difference between the actual cash value and the replacement cost only if the property owner actually rebuilds or replaces the property, and then only if he does so as soon as reasonably possible after the loss. The policy also provides a small amount of additional insurance (typically the lesser of 5% of the insurance on the building or $10,000) to cover the increased cost of construction resulting from changes in building codes.

Businesses like the software company, who do not need an exact replacement of their current buildings, should ask their agent about adding a “functional building valuation” endorsement to their policies. It establishes a limit of insurance somewhere between actual cash value and full replacement cost and allows the property owner to replace the building with one that fulfills the same function as the old one at a lesser cost. The discussion with the agent should also include increased “ordinance or law” coverage to provide additional insurance for increased costs from new building codes. With the right attention to detail, a business can get the property insurance it needs without having to waste money on unnecessary coverage.