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Closing the Coverage Gaps in Lawyer’s Professional Liability Insurance Policy

Having gaps in your liability coverage is like venturing out into a snowstorm without an overcoat. In either case, it’s tough to succeed without protection. Before purchasing any insurance policy, you need to fully understand the basic structure of the contract in terms of what’s covered and not covered.

In general, liability policies are written as “claims-made” policies; that is, the claim for a wrongful act, error or omission must be made and reported to the carrier while the policy is in effect. This means that should your current insurance policy terminate for any reason, such as the insurer refusing to renew or your firm allowing the policy to lapse while shopping for new coverage, any wrongful acts occurring during this gap between the expiration of the old policy and the start date of the new one will not be covered unless you have either “prior acts coverage” or “extended reporting endorsements.”

The first of these, “prior acts coverage” is written into your new policy.  This allows for all incidents leading to claims after your former policy expired to be covered regardless of when they happened provided the coverage is written without a time limitation. There is generally a surcharge for this unlimited coverage based upon how many previous years you want covered. A carrier will not always write this type of “full prior acts” coverage even if you agree to the surcharge. For example, a carrier may refuse because information on your application indicates a high level of risk. Another alternative may be that the carrier provides full coverage, but only within a more restrictive policy. The carrier may also elect to provide prior acts coverage but with the stipulation that coverage would not be in effect under certain circumstances, such as a claim in which the firm knew of the wrongful act, error or omission or should reasonably have know about it prior to the start date of the policy.

Adding “extended reporting endorsements” or “tail” coverage to your current liability policy allows you to make and report claims for prior wrongful acts, errors or omissions after the policy has expired for a specific period of time. There are several instances when this type of coverage is critical. The first is when the insured is changing carriers and “prior acts coverage” is not available or is too restrictive in scope. Secondly, this coverage is even more important when the carrier change is necessitated by the insurer’s refusal to renew coverage and your law firm doesn’t have an alternative yet. There is an additional surcharge for extended reporting coverage.

The other scenario in which this coverage is vital is when a lawyer is no longer actively practicing. When an attorney retires, becomes a judge, or goes from private practice to in-house counsel, the exposures that may arise from the former practice can be covered by “extended reporting endorsements.”

The time to determine what kind of extended reporting your policy provides is before you purchase. Each carrier determines how long an extended period they will provide, under what conditions this coverage can be purchased, and the cost for such an endorsement. In some cases, the coverage is sold in multiples of the policy premium; while in other cases, the cost is the rate that is in effect at the time the endorsement is purchased.

Finding the Best Home Contractor for the Job

Let’s say you’re about to take on a house project, whether it’s a major kitchen renovation or a simple painting job, and you decide to hire a contractor. So, you flip through the phone book and call the first number you see listed under “Kitchen Remodeling” or “Painters.” Not so fast.

Many homeowners don’t realize that they are taking a huge risk when they hire just any contractor off the street. If you don’t do your homework, you could be exposing yourself to massive amounts of liability. What if a painter falls off his ladder and badly injures his back while painting your living room? What if a kitchen contractor hits a pipe and floods your home? Who will cover the lofty expenses associated with these types of accidents?

The thought of such a home improvement catastrophe is enough to send chills down any homeowner’s spine. This is why it’s so important to hire only licensed, insured, highly experienced contractors to work on your house project-no matter how big or small the job may be.

Here are a few rules of thumb for hiring a reliable contractor and limiting your liability:

Ask for recommendations

One of the best ways to find a dependable contractor is simply to ask your friends, family members, co-workers and neighbors. Ask everyone you know and trust if they can suggest a reputable contractor who did exceptional work for them. More than likely, if a friend was happy with a contractor, you will be too.

Avoid solicitors

Steer clear of contractors who go door-to-door or make cold calls in search of work. The best, most reliable contractors don’t have to resort to such solicitations.

Don’t fall for “limited time” offers

If a contractor quotes you a “limited time” project price that will increase if you don’t hire him immediately, run like the wind. This can be a sign that the contractor is dishonest or illegitimate.

Get it in writing

Don’t settle for verbal agreements. Request a written estimate that includes a detailed breakdown of the project costs, including materials and labor fees.

Verify, verify, verify

Before you hire any contractor, make sure that they are licensed, bonded and insured-and don’t just take their word for it. Verify all of this by asking for certificates of insurance for workers’ compensation as well as info on their general liability policies. If the contractor working on your home plans to use subcontractors, be sure to ask for the certificates for those subcontractors as well.

Read the fine print

Before the contractor begins work on your house project, request a copy of the proposed contract. Read all of the fine print and make sure all the terms are fair and reasonable. The contract should clearly establish an independent contractor relationship. It should also include a “hold harmless clause” in your favor, especially if the contractor is doing major work that involves heavy equipment (such as installing a swimming pool or adding a room to your house.) A hold harmless clause ensures that the contractor will cover any expenses associated with members of the public who are injured or whose property is damaged during the project.

Check with the Better Business Bureau

If you’re still not sure, contact the Better Business Bureau for more information. They can tell you if any consumers have filed complaints against the contractor. Visit the bureau’s website at www.bbb.org.

Does Your Insurance Cover What You Agreed to in That Contract?

Most construction projects involve written contracts. A contractor signs a contract with the project owner, with the general contractor, or with a subcontractor on the project. The contract normally spells out the obligations of the contractor regarding, among other things, the insurance the contractor must carry and liability that he will assume. Construction contracts often contain “indemnification” agreements under which the contractor agrees to assume some of the owner’s or general contractor’s liability for accidents that occur during the project. Should something happen, will the contractor’s general liability insurance policy pay for the damages he assumed?

The policy is probably similar to the Insurance Services Office’s Commercial General Liability Coverage Form. This form covers the injury or damage for which the insured is liable because he assumed liability in an “insured contract” executed prior to the accident. It also covers attorney fees and other litigation expenses to defend the owner or GC if the contractor agreed to assume those costs in the contract. By an insured contract, the form means:

  • A lease of premises
  • A sidetrack agreement with a railroad
  • An easement or license agreement
  • An indemnification agreement with a municipality
  • An elevator maintenance agreement
  • Other business contracts

Contractors are mainly concerned with these “other” business contracts, as construction contracts fall into this category. The general liability form covers the tort liability of one party assumed by another. This means that, for coverage to apply, the first party must have some legal responsibility for injury or damage suffered by someone else.

For example, assume GC hires SC to run the cabling in an office building GC is constructing. GC and SC sign a contract in which SC agrees to assume GC’s liability for injuries and damage SC may cause during the project. One of SC’s employees trips over a toolbox that was resting on a ladder, and the falling tools injure an employee of another contractor on the job. The injured employee sues both GC and SC for medical costs and pain and suffering. Because SC agreed to assume GC’s liability for injury or damage suffered by a third party (GC’s tort liability), the contract qualifies as an insured contract. SC’s liability insurance will cover GC’s liability and provide legal defense for GC.

The insurance will not cover all of a GC’s tort liability, however. A third party must suffer bodily injury or property damage before coverage will apply. Suppose GC turns the completed building over to the owner, and the owner finds that computer networks do not work in four offices. The owner determines that the problem is the result of faulty cabling, and he sues GC and SC. Even though SC has agreed to assume GC’s liability, the liability insurance will not cover this loss. That is because the building owner did not suffer property damage. The building is defective, but it has not been damaged.

Contractors should expect to find indemnification agreements in most construction contracts. Because of this, the contractual liability coverage contained in general liability insurance policies is critical to their financial health. It is very important for contractors to review their liability policies to ensure that their insurance companies have not limited this coverage.

Contractual liability coverage is vital to a contractor’s business. Make sure that it does all that you need it to do.

AAA Study Shows After School Hours Dangerous for Teen Drivers

Parents have always been concerned about their teenagers driving on the weekend, especially at night. However, a new AAA study of crash data reveals that after school hours can be as deadly for teenage drivers as weekend nights. The researchers advise parents that they need to be just as vigilant about monitoring their teens’ driving on weekday afternoons as they are on weekend nights.

The researchers studied the number of fatal crashes involving teenage drivers between 2002 and 2005. What they discovered is that almost as many 16 and 17-year-old drivers were involved in fatal crashes between 3 and 5 p.m. Monday through Friday as were on Friday and Saturday nights between 9 p.m. and 2 a.m. There were 1,100 weekday crashes and 1,237 weekend crashes.

To combat this growing problem, the AAA recommends that parents do the following:

·  Establish specific driving rules with your teen. If they follow the rules, they will be permitted to increase their amount of driving time. Breaking the rules leads to fewer liberties. Parents can find a parent-teen driver agreement at http://www.aaa.com/publicaffairs.

·  Don’t allow a new teen driver to carry passengers during the first three months of driving. Allow them to carry no more than one passenger for the rest of the first year of independent driving. Crash rates increase drastically for 16 and 17-year-old drivers as you add more teenage passengers to a car. Thirty-five states limit passengers for new teen drivers. Every parent should do the same, regardless of state law.

·  Don’t permit your teen to ride with a new teen driver. Carpooling seems like a sensible way for teens to ride to school, home and activities, but it can promote risky passenger behavior. Research shows that it is more dangerous for several teens to ride in one car than for them to drive individually.

·  Ban cell phone usage while driving. Teens have trouble managing distractions, especially while driving.

·  Require your teen to wear a seat belt every time s/he rides in a car. Teens have the lowest belt usage rate of any age group, even though new teen drivers have the highest crash rates.

·  Make your rules known to other adults in your teen’s life. A parent-to-parent agreement with your teen driver’s friends will standardize rules among a group of teenagers. Letting your neighbors know your teen’s driving rules can provide you extra sets of eyes when you’re not around. You can also find a parent-to-parent agreement at http://www.aaa.com/publicaffairs.

Protect Your Company from Nuisance Lawsuits

A March 2007 study from the Pacific Research Institute titled Jackpot Justice: The True Cost of America’s Tort System, stated that lawsuits in the U.S. cost the American Public an estimated $865 billion dollars per year. Much of this litigation was needless or stemmed from nuisance lawsuits which could have been largely avoided. In these litigious times, business owners need to sit down and analyze their risk exposure.

Here are 6 proactive steps that every business owner can implement to reduce their liability resulting from nuisance lawsuits:

  • Form an asset protection plan by designing a list of all the potential assets you stand to lose from a lawsuit. Take a hard look at your current insurance coverage. Make a point to sit down with both your insurance agent and lawyer to limit your exposure from both an insurance and legal perspective.
  • Separate your personal assets from business assets by setting up a C or S corporation or else consider a Limited Liability partnership or even a Limited Liability company. Although this action does nothing to limit lawsuits, you may be able to remove your personal assets from a lawsuit settlement. Consider setting up a qualified retirement plan as federal laws offer protection from creditors for such accounts. However, remember that some states may not include IRA’s so seek qualified advice.
  • Purchase the right liability insurance for your business as this can be the best investment you can make. Seriously consider buying excess or umbrella coverage as you can easily get additional $1,000,000 coverage for a very cheap rate. Today, almost every business which has employees should seriously consider Employment Practices Liability Coverage (EPL) This form of insurance covers current employees, past employees, potential employees, customers or clients from employment related civil actions of discrimination such as gender, age, race or disability, sexual harassment litigation, wrongful dismissal actions, breach of contract, retaliation and other claims brought against your company. Due to the significant rise in such claims, this relatively new insurance coverage has taken on significant importance for companies of any size in recent years.
  • Form your own risk management plan to eliminate unnecessary risk in your workplace. Be proactive in the house cleaning for your company and eliminate hazards by performing repairs or maintenance as they arise. Instill strict and enforceable policies to protect the safety of workers and the public from harmful situations that can quickly translate into a needless lawsuit.
  • Specify your policies to clarify everything and anything that could result in a lawsuit. An employee handbook should be issued to all staff. Have them read the handbook before they start work and sign an appropriate form stating they have read and understood the material. Ensure any policies directed to your customers or general public are clearly visible and explicit. Incorporate your customer policies in all your promotional material. Don’t trip yourself up by making promises which can’t be kept. Train all your staff so they clearly understand any policies which apply to customers or other relevant third parties.
  • Consider taping phone conversations so you have a record of what your caller is inquiring or complaining about. This also provides you with a record of how staff are responding or stating to the caller. Remember that if you decide to take this approach, you must initiate the call with a notice that the call is being recorded. Clear this with your legal advisor first.

These are but a few simple steps that any company can take to reduce their liability exposure from a host of costly yet nuisance lawsuits.

Thirteen Vehicles Named to The Insurance Institute for Highway Safety List of Safest Vehicles

Thirteen vehicles, including four cars, seven SUVs, and two minivans, earned The Insurance Institute for Highway Safety’s Top Safety Pick awards for 2007. The award is given to vehicles that best protect people in front, side, and rear crashes based on ratings in Institute tests. Winners are also required to be equipped with electronic stability control. Honda and Subaru each manufacture three of the 13 winning vehicles.

The complete list of winners for 2007 include:

·   Large car: Audi A6 manufactured Dec. 2006 and after

·   Midsize cars: Audi A4, Saab 9-3, Subaru Legacy equipped with optional electronic stability control

·   Minivans: Hyundai Entourage, Kia Sedona

·   Luxury SUVs: Mercedes M class, Volvo XC90

·   Midsize SUVs: Acura RDX, Honda Pilot, Subaru B9 Tribeca

·   Small SUVs: Honda CR-V, Subaru Forester equipped with optional electronic stability control

Pickups were not included in this round of awards because the Institute hasn’t begun to evaluate their side crashworthiness.

The Institute ratings of good, acceptable, marginal, or poor are based on each vehicle’s performance in high-speed front and side crash tests. Consideration is also provided for how well seat/head restraints protect passengers against neck injuries during rear impacts. For a vehicle to become a top pick it must obtain at least good ratings in all three of these tests.

A new electronic stability control requirement was added for 2007. This requirement was added because Institute research found that electronic stability control greatly reduces crash potential by helping drivers stay in control during emergency maneuvers. Single-vehicle crashes in general were reduced 40 percent with the addition of this feature. Fatal single-vehicle crashes declined 56 percent, and fatal rollovers decreased by nearly 80 percent.

Some manufacturers improved their vehicles specifically to earn the awards. The Institute noted that Audi redesigned the seat/head restraints in the A4 and A6 to improve performance in the rear impact test and Subaru stepped up its plans to offer electronic stability control on some versions of the Forester and Legacy in order to meet the new requirement.

Other vehicles are also in the process of being changed to make them eligible for an award. Ford will add electronic stability control to 2008 Freestyles. Most automakers have added standard side airbags with head protection, even though government regulations don’t require them yet. All 2007 winners have standard side airbags.

Seventeen other vehicles would have won awards with better seat/head restraint designs. Toyota would have earned nine awards, including three Lexus winners. Honda could have added four more awards, including one for an Acura. The Institute stated that rear crash protection is a safety area in which many automakers lag behind.

Increased Use of Medical Services Contributes to Higher Workers’ Compensation Costs

In December 2003, the American College of Occupational and Environmental Medicine (ACOEM) developed a set of medical protocols, backed by scientific findings, for the treatment of injured workers. Occupational medicine physicians and other specialists involved in the medical care of workers developed these guidelines to provide practitioners with:

  • A step-by-step outline to assess the patient’s condition, and to educate the patient about that condition.
  • Specific guidelines about what physical findings and/or test results are required to establish a diagnosis.
  • A methodology for identifying the role psycho/social factors plays in a worker’s response to treatment.

The effectiveness of these guidelines was documented in a study titled Acceptance and Self-Reported Use of National Occupational Medicine Practice Guidelines, published in the April 2000 issue of Journal of Occupational & Environmental Medicine.

Ninety-five percent of those polled reported that the guidelines improved their practice in some manner. Fifty-two percent of physicians thought that guideline use decreased medical costs. Seventy-one percent reported that their care complied with the guidelines in 70 percent or more of their cases. The researchers concluded from their study that physicians’ attitudes toward the guidelines were positive and that reported compliance was high.

However, a 2006 study conducted by the National Commission of Compensation Insurance (NCCI) titled Workers’ Compensation vs. Group Health: A Comparison of Utilization, showed that compliance with ACOEM protocols had dropped considerably since 2000. In fact, the researchers uncovered significant growth in the number and mix of medical treatments practitioners provided compensation patients. The study, which compared 2001-2002 to 1996-1997, found that the number of treatments for all diagnoses increased 45 percent, except for injuries such as knee and leg sprains, which had increased as much as 80 percent.

But increased levels of treatment and unnecessary testing are just the tip of the iceberg. There are some other serious outcomes resulting from over utilization:

  • The barrage of doctor’s visits, tests, prescriptions, therapy sessions, etc., convinces the employee that they are getting all of this treatment because they are seriously injured. The employee begins making emotional decisions, and overlooks their economic well being. This kind of response often results in lawsuits and the loss of a valuable employee.
  • More narcotics are being prescribed as part of the treatment program, resulting in addiction among some employees.

Given these outcomes, it is incumbent upon employers to select a doctor who will follow evidence-based treatment protocols. The doctor should be in agreement with the ACOEM philosophy that it is important to return the injured employee to the workplace in the appropriate time, whether to their own job, or to a modified position.

The best way to find the right doctor is to talk to other local companies, asking if they use physicians who are specifically trained in occupational medicine. After you have found the right doctor, establish a line of communication. Be sure your doctor knows that their recommendations and restrictions will be respected. They should also be fully aware of the return-to-work possibilities that exist within your company so that they can make the appropriate decision for their patients.

Taking Another Look At Flood Insurance

According to an August 2006 article published on SmartMoney.com, the Federal Emergency Management Agency reported that only 40 percent of all residents in the flooded areas hit by Hurricane Katrina were covered by flood insurance. The majority of those insured were required to have the coverage in order to obtain a mortgage.

The other 60 percent who didn’t have flood insurance fall into two main categories: renters and homeowners without a mortgage.

The uninsured group faced a serious problem. Standard homeowner and renter’s policies cover damage from wind or rain. These policies, however, don’t cover damage as a result of flooding. These individuals’ only recourse was to rely on federal disaster aid.

Flood insurance is available through the National Flood Insurance Program to any property owner living in an area with an established flood plan. This is used to gauge the community’s vulnerability by creating an area flood map. Flood plans also help lessen some of the risk by establishing certain zoning and building policies, which include types of allowed construction, elevation at which building is allowed, permissible building materials, and construction reinforcement techniques.

The National Flood Insurance Program offers three different types of policies:

·   The Dwelling Form – this insures one to four family residential structures and/or contents. This form can also be used to insure residential condominium units.

·   The General Property Form – this insures residential buildings housing more than four families as well as non-residential and commercial buildings.

·   The Residential Condominium Building Association Policy Form – this insures associations operating under the condominium form of ownership.

There is also a Preferred Risk Policy designed for residential and non-residential properties in low-to-moderate risk areas. The policy can be written with one of several combinations of building and contents protections:

·   Renters pay $39 per year for $8,000 of contents coverage.

·   Business owners can buy $50,000 of building and contents coverage for $550 per year per building.

·   Business owners who lease their space can purchase $50,000 of contents coverage for $145 per year.

Finally, keep in mind that flood insurance is easy to obtain. While the federal government may administer the program, it is sold through regular insurance companies. To find out more about flood insurance, call us today or log on to www.floodsmart.gov.

Data Theft Is Big Business – Are You Protected?

According to the U.S. Federal Trade Commission Internet fraud complaints soared from $206 million in 2003 to $336 million in 2005. The worst news, according to a survey performed by the Enterprise Strategy Group in 2006, is that your data is more likely to be stolen from inside your company by employees or on-site contractors than by outside hackers.

Protecting your most valuable and sensitive data must be a three-fold approach:

Assess Your Data Risk

Begin the process by asking yourself three basic questions.

  • Who would want steal from my company? Consider the possibilities from different perspectives such as hackers, competitors, thieves, disgruntled current or former employees.
  • What data would they want to steal? Sensitive data is any information which compromises the security of your company. Client information, product and technology information, social security numbers, bank account and financial information, credit card numbers are just a few examples of the data which could be at risk.
  • What do I need to do to plug the leaks and protect this data? Security measures you can implement range from the very economical, such as purchasing commercial security software, to having an IT security consultant develop a custom security system appropriate to your company’s needs.

Formulate Internal Security Procedures

Creating in-house security procedures is the only sure way to prevent data leaks from occurring inside your company. Security measures should include technical features, physical safeguards and the human element. Proactive steps to remedy potential weak points include:

  • Ensuring terminated employees lose access to not just the physical locale, but to the computer network, e-mail, and voice-mail systems as well.
  • Implementing access controls through the creation of internal firewalls to restrict the availability of sensitive data to only those employees who need it.
  • Creating stringent password policies to ensure employees do not share passwords. Alter passwords when employees leave or use additional passwords for sensitive data. Passwords should be strengthened by using a mixture of letters and symbols.
  • Updating your operating system regularly. Newer systems upgrade their security software and the options relating to access control giving you better security.
  • Scrutinizing how employees use your computer system. Prevent employees from being able to download material to CD’s or Ipods. Install security alarms to alert you when large blocks of data are deleted. Include a system to allow designated IT staff to be guard against unauthorized remote access to internal data.

Develop Systems/Internet Security

Data threats from within your physical locale can be solved by:

  • Employing encryption algorithms to protect vital data by making it unreadable to outside eyes. This includes your order forms where sensitive information such as credit card numbers or bank account information is involved and e-mail between employees who are transmitting crucial or sensitive information should also be encrypted.
  • Basic or custom designed security software packages which guard against viruses and worms are essential. Many companies fail to regularly update their security protection. Hackers or crackers evolve their methods and strategy of attack frequently and can be incredibly diabolical and creative.
  • Ensure you have a firewall suitable to the needs of your company. Commercial software packages may be adequate for smaller companies, but larger companies may require custom designed systems to safeguard sensitive data.
  • Back up all of your systems on a regular basis. Larger companies should do so daily while smaller companies could get by with weekly backups. Regardless, backups should be stored off-site! Should you keep backups on-site when your business experiences a natural disaster your backup system could also be destroyed. Companies need to be able to set up their system from another location with minimal delay.
  • Consider adding a virtual private network (VPN). Vested partners must be able to access the necessary data from your company in a secure manner. A VPN will allow safe access from remote locations. Extend your security system to any hardware employees are using such as cell phones, laptops etc.

Motorists Still Driving While Talking on Cell Phones

The Cellular Telecommunications & Internet Association reports that more than 231 million people are currently subscribed to wireless communication devices, namely cell phones, compared to roughly 4.3 million in 1990. This increase in cell phone usage has resulted in a rise in the number of people using the devices while driving.

Since 2001, when the first law banning hand-held cell-phone use while driving was passed in New York State, the subject has been a hotly contested issue. There has been sharp disagreement as to  exactly how much of a hazard talking on a cell phone while driving actually creates. The results of several recent studies indicate that cell phone use while driving isn’t the most dangerous distraction. However, because it is so widespread, it is the most common cause of crashes and near crashes resulting from the driver being distracted.

An August 2006 survey conducted by the Liberty Mutual Research Institute for Safety studied teenagers use of text messaging while driving. The research showed that teens considered sending text messages to be their biggest distraction. Of those polled, 37 percent said that text messaging was extremely or very distracting.

An April 2006 study conducted by the Virginia Tech Transportation Institute and the National Highway Traffic Safety Administration discovered that approximately 80 percent of crashes and 65 percent of near crashes resulted from some kind of driver distraction within three seconds of the event. The study also found that the most common distraction is the use of cell phones. However, the researchers went on to note that cell phone use is far less likely to be the cause of a crash or near crash than other distractions. They found that reaching for a moving object such as a falling cup increased the risk of a crash or near crash by 9 times, while talking on a hand-held cell phone only increased the risk by 1.3 times.

The results of the Virginia Tech study confirm an August 2003 report from the AAA Foundation for Traffic Safety which concluded that drivers are decidedly less distracted by their cell phones than by other activities, such as reaching for items on the seat or in the glove compartment or talking to passengers. The AAA study was based on an analysis of videotapes from cameras installed in the cars of 70 drivers in North Carolina and Pennsylvania.

Research conducted in July 2005 by the Insurance Institute for Highway Safety discovered that motorists who use cell phones while driving are four times more likely to get into crashes serious enough to cause injury to themselves. The results also showed that banning hand-held phone use and mandating that drivers switch to hand-free phones doesn’t improve safety. The study found that injury crash risk didn’t vary with the type of phone, because the driver was still distracted by the conversation.