U.S. Supreme Court Strengthens Employers’ Hand Against Age Discrimination Claims

The American workforce is growing older and the economy is struggling. These two factors indicate that, as companies lay off workers to cope with a slow economy, older workers who lose their jobs may increasingly take their former employers to court for alleged age discrimination. However, a recent decision of the U.S. Supreme Court may make it harder for workers to win those lawsuits.

Jack Gross, a 54 year-old claims administration director for a financial services firm, was reassigned in 2003 to the position of claims project coordinator; some of his duties were transferred to a person in her forties whom he formerly supervised. Because he lost some of his duties, he considered the move a demotion and sued his employer a year later, claiming a violation of the Age Discrimination in Employment Act of 1967. At trial, the judge instructed the jury that it must find in Gross’s favor if he proved that he had been demoted and that age played a part in the employer’s decision. The jury did return a verdict in his favor and awarded him lost wages. An appeals court reversed the ruling, saying that the judge’s instructions were incorrect, and Gross appealed to the U.S. Supreme Court.

On June 18, 2009, a divided court ruled against Gross. Writing for the majority, Justice Clarence Thomas said that a person suing for a violation of the ADEA must prove that the employer would not have taken the action if not for the person’s advanced age. The employer does not have the burden of proving that it would have taken the action regardless of the employee’s age, even when the employee has evidence that age was one factor in the decision. He also wrote that the ADEA requires the employee to show that age was the primary reason for a demotion, not just one of multiple reasons. He noted that Congress had the opportunity to prohibit considering age among other factors and neglected to do so.

Justice John Paul Stevens denounced the majority’s interpretation of the ADEA as “an unabashed display of judicial lawmaking.” Noting that the court had interpreted other anti-discrimination laws to prohibit discriminatory actions based partly on a protected characteristic, he said it was inconsistent and arbitrary for the court to apply a different standard to ADEA violations. He pointed to a previous decision where the court held that an action was illegal if discrimination against a protected characteristic was “a motivating factor” in the decision. Justice Stephen Breyer added that to apply the majority’s standard “is to engage in a hypothetical inquiry about what would have happened if the employer’s thoughts and other circumstances had been different.” The answer, he wrote, will often be far from obvious.

This decision should be good news for employers and their insurance companies. Employment Practices Liability Insurance policies normally cover employment terminations, demotions, decisions not to hire or promote, and denials of employment benefits based on factors such as age, sex, race, religion, sexual orientation, and others. This decision should result in fewer successful lawsuits against employers for alleged age discrimination, with a corresponding drop in payments under EPLI policies for these actions. While insurance companies will still incur the cost of legal defense, they are less likely to pay for judgments against employers.

Because the court based its reasoning on Congress’s failure to clearly prohibit actions based even in part on age, members of Congress may seek to change the law. Employers should continue to avoid any actions that older workers could perceive as unfairly discriminatory. If that proves to be unworkable, they should work with their attorneys and insurance agents to ensure that their practices are legal and their insurance coverages adequate.

Safeguarding Your Wedding Ring

Wearing a wedding ring is a tradition that dates back centuries. According to The Knot.com, the custom began with the Romans, who believed that “the vein of love” in the fourth finger of the left hand traveled directly to the heart.

Today, brides and grooms still exchange rings as a symbol of love. Because your wedding ring has such deep sentimental value, you want to do all you can to take care of it. Here are some tips from DiamondHelpers.com:

  • Protect the setting – Take your diamond off and put it in a safe place when washing dishes. Never put it near the sink because it can accidentally fall down the drain. Avoid wearing your diamond when gardening or during household repairs, since these activities might scratch the setting or damage the prongs that keep the stone secure.
  • Avoid exposing your diamond to household chemicals – Chlorine and hairspray can accumulate on the surface of a diamond and dull it. Periodic cleanings are crucial if you want to keep your diamond brilliant and prismatic.
  • Clean your diamond – Gently scrub it with a soft-bristle brush in a solution of plain alcohol diluted in warm water. Periodic ultrasonic cleanings by your local jeweler are also recommended to clean hard-to-reach areas under the settings.
  • Check the prongs – Be sure to occasionally take your diamond ring to a trusted local jeweler to check for loose prongs. They can weaken or break, even with normal wear.

Another important way to protect your wedding ring is to have adequate insurance should it be lost or stolen. Start by examining your homeowner’s or renters’ insurance. Although this policy may cover your ring if it is stolen, there may be no coverage if it is lost. Read your policy carefully, as it may have a coverage limit for certain kinds of personal property, such as your wedding ring. If the value of your ring exceeds the policy limit, or if you want to ensure that you have coverage if the ring is lost, consider purchasing a rider.

A rider is an endorsement to a homeowner’s or renter’s insurance policy that provides coverage for a particular piece of personal property. Items such as jewelry or furs whose full value is not covered under standard policies are typically covered by riders.

Typically, the additional premium required to insure a wedding ring would be approximately $1-2 per $100 of appraised value. For example, a ring appraised for $10,000 would cost about $100-200 per year to insure, but maybe slightly more in higher crime areas. To request coverage, you must have your wedding ring appraised and provide a certified copy of that appraisal to your insurer.

When It Comes to Insuring Losses, Contractors Have Options

The commercial insurance market can often be a difficult place for contractors. The insurance industry goes through market cycles; companies that are eager to insure contractors today may have no desire to do so when their losses mount and the market tightens. Because of this uncertainty, larger contractors often consider alternative markets for financing their risks of loss. One alternative is a captive insurance company, which is created and owned by one or more non-insurance companies to insure the owners’ loss exposures. Other options include self-insurance (paying losses out of pocket) and insurance options such as dividend plans, large deductible plans, retrospective rating plans, risk retention groups and purchasing groups.

According to Business Insurance magazine, there were more than 5,200 captive insurance companies operating in 2008, falling into several types. Single parent captives are owned by one company. Group and association captives are owned by multiple entities. For example, groups of contractors could form captives to insure themselves and others. Businesses that cannot afford the capital requirements of a captive can “rent” one from an insurance company or reinsurer, allowing them to share in the risks and the profits. Captives often use what is called a “fronting” mechanism, where an insurance company or reinsurer issues and administers the policies and handles the claims, and the insured businesses pay for the losses. Captives may insure the risks of their major owners only, or they may also insure other organizations.

Large companies may choose to self-insure; groups of companies in particular industries may band together to self-insure the risks of the group. For example, in some states groups of contractors have formed trusts to self-insure for workers’ compensation losses. Companies may also choose to partially self-insure by purchasing a large deductible program (one with a deductible of $100,000 or greater per occurrence) for workers’ compensation. Retrospective rating plans, while still insurance policies, are closer to self-insurance in that the final premium includes the amount of the business’ losses during the policy term, subject to a minimum and maximum. Dividend plans are types of insurance policies that typically offer the business the chance of receiving a portion of the premium back via a dividend should losses fall below a specified level. Risk retention groups are groups of businesses in the same industry that have created an insurance company for liability coverage. Purchasing groups are groups in the same industry who band together to buy liability insurance from one insurance company.

Each alternative has advantages and disadvantages. Captives may offer tax advantages, they cut out the portion of the premium spent on insurance company overhead and profit, and they give the owners control over risk management. However, they must meet large capital requirements to comply with state laws, and fronting arrangements still require insurance company involvement. Self-insurance, large deductible and retrospective plans reduce premium costs, give businesses some control over their loss costs, and provide incentives for safe operations, but they can also be a drain on cash flow and their ultimate costs may be hard to predict. Contractors that can predict their future losses with reasonable accuracy may find these plans advantageous.

Since all of these options require contractors to finance at least some losses themselves, they should have access to significant financial resources before using any of them. Also, the options can be complex; a contractor should consult with a professional insurance agent to investigate each option’s implications for the business. Traditional insurance is no longer the only financial protection option available to contractors, but it would be unwise to jump into an alternative without learning the facts.

Using a Cell Phone While Driving Is Similar to Driving Under the Influence

A 2005 study conducted by the Insurance Institute for Highway Safety found that drivers who use cell phones while driving were four times more likely to get involved in an accident. It also concluded that accident risk wasn’t affected by whether the driver was using a hand-held phone or a hands-free phone.

New research from Carnegie Mellon University shows that just listening on a cell phone while driving is enough to distract a driver.  In this study, 29 volunteers used a driving simulator while inside an MRI brain scanner. They steered a car along a virtual winding road, driving at a high, fixed rate of speed. They were tested while driving undisturbed, and while driving and trying to decide whether a sentence they heard was true or false. The researchers measured activity in 20,000 brain locations, each about the size of a peppercorn.

After a thorough analysis of the data, the researchers were able to conclude that:

  • When the drivers were tested while listening to the sentence to see if it was true or false, they lost 37 percent of the normal activity of their brain’s parietal lobe. This is significant because this area of the brain is the one motorists rely on the most when driving. The parietal lobe assimilates all the information the body receives from the senses, and uses it to determine how near/far perceived objects are. There was also a decrease in the activity of the occipital lobe, which assimilates visual information.
  • When the drivers were tested while listening, they lost their ability to control the car. They not only were unable to stay in their lane, but they frequently hit objects such as guardrails. These are the kinds of driving errors most closely associated with motorists who drive while under the influence of alcohol.

Same-Sex Sexual Harassment in the Workplace

Over the past few decades, employers have become increasingly aware of the dangers of tolerating sexual harassment in the workplace. Many businesses now have formal policies on the subject. Insurance companies have made employment practices liability insurance available to protect businesses from the financial consequences of alleged harassment claims. When people imagine a sexual harassment situation, they may think of a male employee harassing a female one. However, that is not the only possible scenario. As society has grown more accepting of gay and lesbian lifestyles, such employees have become more comfortable revealing this aspect of themselves. One consequence of this is the potential for same-sex sexual harassment claims.

The U.S. Supreme Court dealt with the matter of same-sex sexual harassment in a 1998 decision, Oncale v. Sundowner Offshore Services, Inc. Joseph Oncale worked on an offshore oil platform as part of an eight-man crew. Three members of the crew forcibly subjected him to sex-related, humiliating actions in front of the other crewmen; two of them sexually assaulted him and one threatened him with rape. His complaints to company supervisors produced no improvement in the situation; in fact, the supervisor verbally abused him. He eventually quit due to the harassment and verbal abuse. He sued the company, but the trial and appellate courts ruled that, as a male employee, he had no cause of action under the federal Civil Rights Act of 1964 because the alleged harassers were also male. The Supreme Court, however, disagreed.

Writing for a unanimous court, Justice Antonin Scalia said that there was no justification in the law for excluding same-sex harassment claims from its requirements. The prohibition of sexual harassment, he wrote, forbids behavior “so objectively offensive as to alter the ‘conditions’ of the victim’s employment.” However, he cautioned that the social context in which behavior occurs weighs on whether it is harassment. “A professional football player’s working environment is not severely or pervasively abusive, for example, if the coach smacks him on the buttocks as he heads onto the field-even if the same behavior would reasonably be experienced as abusive by the coach’s secretary (male or female) back at the office…Common sense, and an appropriate sensitivity to social context, will enable courts and juries to distinguish between simple teasing or roughhousing among members of the same sex, and conduct which a reasonable person in the plaintiff’s position would find severely hostile or abusive.”

This implies that, for an employee to win a same-sex sexual harassment claim, the employee must suffer some kind of negative consequence in addition to the sexual nature of the behavior. If suggestive remarks are made in the person’s presence but he suffers no resulting harm (such as denial of promotions or salary increases) and management responds to his complaints, a court will probably not find this to be harassment. Conversely, if his work conditions deteriorate because he will not “play along” with his harassers, the court will be more likely to rule in his favor.

Employers should be aware that same-sex sexual harassment is legally equivalent to heterosexual harassment, and they should not permit it to occur in their workplaces. They need not ban all suggestive talk from the workplace, but they cannot allow unfair treatment against those who object. Finally, unwanted physical contact such as sexual assault is never excusable or permissible.

Employers should make sure their sexual harassment policies include statements about same-sex harassment, and they should educate supervisors and employees about the policy. All allegations of harassment should be promptly investigated. Finally, they should check with their insurance agents to make certain that they have the proper coverage for those claims that turn into lawsuits.

Debunking Some Popular Car Insurance Folklore

You have probably heard at least one piece of urban folklore regarding some aspect of your daily life. Folklore is a bit of “wisdom” that gets repeated over and over as true, even though it usually has little or no basis in reality. It typically develops when people try to make sense out of a process they perceive as being complex, without bothering to investigate the facts.

Even something as routine as buying car insurance comes with its own folklore. Here are some popular myths:

Myth 1: The color of your car affects your insurance rate. This bit of folklore developed out of another popular myth – that people who drive red cars get more speeding rickets than other drivers. Insurance companies, in anticipation of this phenomenon, supposedly base a driver’s insurance rates on the color of the car they are driving, which is coded into the VIN number of your vehicle.

Truth: Both myths are false. An insurer takes a number of factors into consideration when determining rates, but color isn’t one of them. Driving a red car isn’t necessarily a precursor to a speeding ticket and the VIN number doesn’t provide any information about a vehicle’s color.

Myth 2: It’s more expensive to insure a two-door car than a four-door one.

Truth: It’s possible. Depending on the way companies classify cars when they analyze loss, injuries and claims, something as simple as the number of doors on your car could affect your insurance rates. Thus, one company may associate a relatively low history of claims with a particular model, while another company may have experienced nothing but trouble with the same vehicle.

Myth 3: Parking tickets affect your rates.

Truth: Parking tickets alone won’t affect your insurance rates. However, unpaid parking tickets could lead to license suspension which would affect your insurance rates. 

Myth 4: If I lend my car to a friend and they wreck it, their insurance will cover the damage.

Truth: Your car, your responsibility! And even though you weren’t in the car at the time of the accident, you will still receive a mark on your insurance record and your premium could possibly increase.

Keep the Lid on Workers’ Comp Costs During a Layoff

Between December 2007 and July 2009, the U.S. economy lost almost seven million jobs. In times of economic uncertainty, employees worried about their jobs may look toward the workers’ compensation system for supplemental income. Workers who have ignored aches and pains over the years and haven’t reported them might decide that the time is right to make a claim. Others who may have been healthy and who suffer an injury that they might have previously ignored may now decide they have nothing to lose by reporting it. Employers facing the possibility of having to lay off employees must be aware that their workers’ compensation costs may rise. However, there are steps they can take to keep a lid on costs.

Once a risk manager learns that a workforce reduction is coming, she can prepare in a number of ways. She should become familiar with the unemployment insurance laws in each affected state, including the levels and durations of benefits and how they affect workers’ compensation benefits. She should investigate other state programs available to employees that may offset workers’ compensation costs. She also might want to meet with the firm’s insurance broker to review pending claims and identify those that might become problems.

Another priority is claims documentation. The firm should backup employee records and store both in secure locations. Claim records should be updated with the latest available information. The risk manager might want to create a video record of conditions in the building prior to the layoff so that she can demonstrate to a court what the work environment was like. Finally, exit interviews that include written questionnaires completed by the employees can serve as evidence as to the employees’ physical condition at the time of termination.

When the layoffs occur, the company should handle them as sensitively as possible. Losing a job is a traumatic experience for anyone; clumsy communications from the employer can inspire a worker to seek retribution. To the extent that the employer can help affected employees, it should do so. For example, it may want to offer resume preparation or outplacement services or employee assistance programs for those who need emotional support. Also, if the company can afford them, it may want to offer severance payments to the employees in return for their written agreement to forego any future claims against the company. Finally, though it may seem unlikely, the company should have contingency plans in place should any of the employees become violent, either at the time of the layoff or later.

To defend against exaggerated or fraudulent claims, the risk manager should ask the broker and the insurance company to coordinate claims handling through one office and one senior claims adjuster. She should also request that the insurer assign the defense of all cases to one law firm. To assist in the defense, she should make relevant records, such as videos, employee files, job descriptions, and exit questionnaires, easily accessible to the attorneys and any medical specialists the firm may hire. Finally, she should identify key personnel who may be available to testify as to job requirements and conditions, and she should make a list of their names and contact information available to the attorneys.

Cutting jobs is one of the most difficult things any organization must do. The goal of a workforce reduction is to lower the firm’s costs; uncontrolled workers’ compensation expenses resulting from the action may wipe out any benefits from it. Careful planning and handling of the action and its aftermath can go a long way toward ensuring that the company’s pain will not be for nothing.

What’s the Difference Between Policy Cancellation and Non-Renewal?

In some policyowners’ minds, whether your insurance company cancels your auto coverage, or simply chooses not to renew it, it all means the same – you’re suddenly without insurance. However, it isn’t quite that simple. The difference between cancellation and non-renewal can be a significant factor in finding another auto insurance policy.

There are specific conditions, outlined in each state’s laws, under which an auto insurer is permitted to cancel your policy. Here are some common ones:

  • Failing to pay your premium in a timely manner.
  • Losing your ability to drive because your license was suspended or revoked, or because it expired during the term of the policy. This can also apply to any members of your family who are covered under the policy.
  • Falsifying information on your insurance application.

Your insurer has the right to cancel your policy at any time if you’re guilty of one of these actions. If it decides to do so, it must send you a written notice of the cancellation that explains why your coverage is being cancelled. Depending on the laws of your state, your insurer must provide 10 to 30 days notice before the cancellation becomes effective.

There is one other instance where an insurer has the right to cancel your coverage, and that is during the 60 day binding period immediately following your application. An insurer could cancel your policy during this time if it discovers some information that marks you as an unacceptable risk.

If your auto insurance is cancelled for any reason, you will likely have trouble finding another insurance company willing to issue you a policy. The only cancellation circumstance where the possibility of reinstatement exists, is being cancelled for not paying your premium.

In this case, you would be sent a letter informing you that your premium was not received and providing a specific amount of time to rectify the situation. If the payment is received before the cancellation date, you will receive a letter of reinstatement. However, reinstatement does carry consequences. You will probably have to pay a late fee and an extra premium to cover the period between the cancellation and the reinstatement.

You auto insurer can also elect not to renew your policy. State laws aren’t always as specific about what constitutes reasons for non-renewal as they are about reasons for cancellation.

If your insurer decides not to renew, it is usually because you filed too many claims for at fault accidents, were convicted of driving under the influence, or were cited for too many traffic violations during the previous three to five years.

As is the case with cancellation, your auto insurer has between 10 to 30 days to send written notice of non-renewal, which should explain the reason they chose not to renew. If this isn’t included in your non-renewal notice, request an explanation from your insurer. The one advantage non-renewal has over cancellation is that it is less of a deterrent in finding another company to provide you with auto coverage.

Keep a Time Limit on Workers’ Comp Claims and Hold Down Costs

Workers’ compensation claims are a major cost of doing business, and the length of time a claim remains open has a large effect. Claims that stay open for long periods of time are more likely to involve attorneys, high medical bills, and significant payments for lost wages. According to the Insurance Information Institute, between 2002 and 2007 the medical cost per lost-time claim (claims where the injured employee is unable to work) rose 50 percent faster than the annual rate of medical inflation for the economy as a whole. The institute estimates that attorney fees increase claim costs by 12 to 15 percent with no net gain in benefits to the worker. Most states index the maximum payment for lost wages to the state’s average weekly wage, a figure that generally rises each year.

Limiting the duration of workers’ compensation claims is an important strategy in the effort to hold down costs. To do this, employers have several options at their disposal:

  • Prompt notice of claims to the insurance company hastens the onset of medical treatment, speeds up the injured worker’s recovery and return to work, and reduces the likelihood that he will hire an attorney. Therefore, requiring workers to immediately report all injuries, however minor, and promptly reporting them to the insurance company can have a huge impact on the duration of a claim.
  • A prompt and thorough investigation of the incident is just as important. Interviews with the injured worker and witnesses, photographs, and other information gathered as soon as possible will help the insurance company to properly adjust the claim.
  • If the employee will be out of work for an extended length of time, the employer should keep in regular contact. An injured worker who gets the sense that his employer does not care will become a receptive audience for plaintiff attorneys. Employers may want to call the worker periodically to check on his condition, offer assistance with completing the paperwork, and generally to check on his emotional state.
  • The employer should have a good understanding of the state law pertaining to the waiting period for benefits covering lost wages. This is especially true if the employer operates in several states, as their laws may vary widely. Understanding how the law applies to the worker’s situation will help the employer set expectations properly. This reduces the chance of misunderstandings that can lead to problems down the road.
  • Building relationships with the physicians treating the employee will keep the employer better informed as to his condition, treatments, medications, and expected duration of disability. This should eliminate surprises and help the employer get the employee back to work sooner.
  • Return to work programs can shorten claim duration and reduce costs significantly. These programs permit an injured employee to return to work in some capacity before he has recovered to the point where he can resume his previous duties. They reduce payments for lost wages, meet the worker’s need to feel productive again, and remove incentives for the worker to hire an attorney.
  • Employers should review loss reports with their insurance agents and claim adjusters and ask questions about losses that do not appear to be progressing toward closure. They should also look for patterns in the loss reports to identify correctible factors that raise the cost of lost-time injuries.

Employers owe it to their workers to provide a safe workplace and benefits to help them should they get hurt. With some extra care and attention, employers can meet those obligations and keep costs in check.

Don’t Be Victimized Twice By a Hit and Run Driver

The National Highway Traffic Safety Administration (NHTSA) reports that nationally, from 2003 to 2006, one out of every eight accidents was a hit-and-run; however, some regions of the country exceeded the national average.

The South had more than one million reported hit-and-run crashes, making it number one nationwide. The Midwest ranked second with over 835,000 reported incidents. California received state honors for having one of the highest rates of hit-and-run accidents in the nation.

If you are the victim of a hit-and-run, it doesn’t matter where your region ranked on NHTSA’s survey. What is important is that you aren’t victimized twice because you aren’t prepared for the financial consequences. In a hit-and-run accident, you become responsible for all the expenses associated with medical care, car repairs and replacement car rental that normally would have been covered by the at-fault driver’s auto insurance carrier.

That’s why the Insurance Information Institute recommends that you purchase Uninsured Motorist coverage, if not already required in your state. Since being involved in a hit-and-run accident is essentially the same as being in one with an uninsured driver, uninsured motorist coverage will pay the costs resulting from the accident.

Also consider that some auto insurance companies don’t necessarily cover the cost of a replacement rental car, even if a hit-and-run driver damaged yours. So it makes sense to add replacement rental car coverage to your auto policy because it typically costs less per year than the average daily rate for most rental cars.

While having proper insurance protection is important if you are involved in a hit-and-run, the best strategy is to avoid being a victim in the first place. Here are some simple tips to remember:

  • If you have to stop on the highway, be safe — Stop on the right shoulder. Stopping on the left side will increase your chances of being involved in an accident by 80 percent.
  • Carry flares or triangles in your trunk — Use these to mark your location once you come to a stop on the side of the road. You should also put on your hazard lights. Emergency flashers, used in conjunction with flares/triangles, are an effective way of giving other drivers advance warning of your location. Flares/triangles can also act as a backup if flashers become inoperable in the event of a failure in your car’s electrical system.
  • Become a member of an emergency roadside service — Although you may have to wait as long as an hour for assistance, it is preferable to trying to fix the problem yourself. Working on your vehicle in high traffic or where oncoming motorists may not see you is asking for trouble.
  • Maintain your car — Tire blowouts are a common reason vehicles become inoperable. Always keep your tires inflated according to the manufacturer’s recommendations. Check your tires periodically for wear and tear, cuts, or abrasions that could cause the tire to deflate while you are driving.