Workplace Romances Foster Challenges

The U.S. workplace has become one of the preferred locations to meet prospective romantic partners. With more men and women working together, and many Americans working longer hours, the workplace has become the new “watering hole.” There are estimates that as many as eight million people have become romantically involved at work. That means about one-third of all romances start at work. However, there is a downside – more than half of these romances also end at work.

This trend has not gone unnoticed by employers. The biggest question they have to answer is when does romance end and sexual harassment begin. The Equal Employment Opportunity Commission (EEOC) receives about 15,000 sexual harassment complaints per year. Even when they don't reach the harassment stage, office romances still can cause significant legal, personnel, and operational headaches. By far the worst headaches come from supervisor-subordinate relationships.  What is an appropriate response to workplace romances? Everyone agrees you must have a clearly written policy statement that provides guidance to both employer and employee. One approach to consider is the “date and tell” policy that requires employees to report the relationship to upper management. There are also variations on this concept that are revised to fit the culture of the company.

Another method that sounds good, but rarely works, is the “no-dating” approach. The “no-dating” approach can engender resentment and deceit and can be damaging to morale in general.

While policy statements provide a good starting point for handling office romances, proper insurance is also necessary. We can assist you with employment practices liability coverage.

Untapped Insurance Coverage for Rising
Asbestos Claims

Once again, asbestos liability suits are one of the hottest areas in claims.  Many corporations at risk for claims-driven bankruptcy believe they must face new claims without insurance. They believe they’ve either exhausted their previous policy limits or settled past claims and lost their coverage. There are several possible sources for additional coverage, however.

Frequently, insureds look for coverage under the “products liability” section of their general liability policy. A frequent practice was to purchase a policy with separate limits for products liability and premises liability, or to buy separate policies for these two exposures. As a result, insureds may be able to find some additional limits for potential asbestos claims under the “premises-operation” section.

It also may be possible to find coverage under “other people’s insurance.” This underutilized source of coverage comes when a company is named as an additional insured under another organization’s policy. For example, as a building owner, your company may have been added to a contractor’s policy when it installed/removed any asbestos-related products.

Any corporation facing these types of claims should completely analyze possible coverage options.

Age Discrimination Cases Prove Costly

Employment discrimination lawsuits have become a fact of life for all employers. Certainly, sexual harassment cases get the majority of attention in the newspapers, but age discrimination cases can be far more costly. These cases cause particular problems for employers, not only from the size of the awards, but also from increasing frequency of such suits over the past few years.

While it’s not illegal to discriminate against someone who is “too young,” you cannot discriminate against workers because they are “too old.”

There are several aspects that make these claims particularly difficult for employers. Most discrimination cases center on an ex-employee trying to recover lost wages and benefits, compensation for emotional distress, and punitive damages. Since many of these older workers made higher salaries, the lost wage issue can be substantial. Additionally, it is difficult for an older employee to find comparable employment, so any shortfall might have to be made up by the ex-employer.

The emotional issue is also a big concern for employers. Juries, since they are made up of older people or people who, like all of us, are going to be old, have been sympathetic toward plaintiffs in age discrimination suits. Technically, an employee must prove that the reason for termination was unlawful discrimination, but, in practice, the sympathies of the jury have tended to make the burden of proof somewhat lighter.

If you’re in the position of having to terminate an older employee, make certain that you review the case in detail. And don’t forget to have the proper insurance in place. These cases can be expensive, even when you win. We’ll be happy to assist you in this important area.

Structured Settlement Protection

A trend in large claims settlements over the past eight to 10 years has been to award the plaintiff a structured settlement in lieu of a lump-sum settlement. The intent of the structured settlement is to avoid problems that arise when an injured person receives one huge payment and spends it too quickly, leaving him or her without needed funds to pay for future medical or other needs. Structured settlements usually take the form of an annuity.

However, over the past few years, the plaintiffs have thwarted the court's intent by having the cash flow from a structured settlement converted into immediate capital. A new industry has been developed to handle these types of transactions. The members of this new industry are known as “factoring” companies. They purchase the settlement at a discounted rate. But problems have occurred with “factors” because they don’t disclose all fees deducted from the proceeds. Many claimants have ended up receiving only pennies on the dollar.

The problem has gotten so critical that a number of states recently passed laws against such “cash flow” dealers. Most of these states have incorporated two key provisions into their laws. The first requires total disclosure of all fees and charges that the factoring company will be making. The second requires that a court or another administrative authority approve the transfer of such funds.

About a dozen states either have passed similar laws or are in the process of doing so. All these laws are aimed at ensuring the long-term financial security that the claimant was originally awarded.

Legal Malpractice Issues

Each year public practice lawyers leave law firms to become corporate counsel. They trade the multi-client work environment for a position where they only have one client, their employer. While there are a number of advantages to such a move, protection from professional liability risks is not necessarily one of them.

Legal malpractice cases against corporate counsel have been rising sharply recently, and, surprisingly, the corporate lawyer’s own employer is one of the primary sources. But employers are not the only ones suing. Wrongfully terminated employees also sue if counsel was involved in the human resources process that led to the termination.

A frequent complaint in these types of suits is conflict of interest. Conflict-of-interest allegations also arise from securities-related issues and frequently involve disgruntled investors. Securities work that involves corporate counsel also can result in insider trading claims. This is especially true in IPO issues where corporate counsel may be handling the initial offering and also may try to defend against securities litigation that arises later.

For these reasons, it may be time for in-house counsel to think about purchasing his or her own personal professional liability coverage. We can assist you in finding the right policy. Just give us a call.

Insuring Mergers and Acquisitions on Both Sides of Deal

Corporate mergers and acquisitions are common in business today; nonetheless, they remain complex. While there are a number of potential trouble spots, some of the most significant are in representations and warranties.

The exposure arises when the seller makes contractual representations and warranties that ultimately serve as the basis of the buyer’s purchasing decision. Legally, representations are statements that a certain thing is true, while warranties are promises that back up the truth of such statements. In a typical merger or acquisition, the seller makes these statements in good faith, and the buyer relies on them to determine the value of the transaction.

While the representations and warranties aspect of merger and acquisition activities is generally quite straightforward, recently there have been a number of unanticipated liabilities that have arisen after the completion of the deal. These liabilities can cause financial harm to the buyer and/or seller and may cast doubt on the legality of the transaction.

Until recently, the seller and buyer had to purchase separate insurance policies to protect their interests. Today, there is a simpler solution: Parties to merger/acquisition transactions can purchase a single policy that covers the interest of both parties. We can show you how this coverage can benefit your next merger or acquisition.

Minimizing Auditors Liability

Lawsuits against corporate directors and officers continue to grow as sub-par financial returns are reported by many of the nation’s businesses. CPAs who are in the audit profession are sustaining collateral claims activity as a result. Auditors, though, can avoid many of these suits, according to a study by Camico Mutual Insurance Co., a large national provider of CPA professional liability coverage. The Camico study analyzes claims data from 1986 through 2000.

Tax engagements have the highest frequency of claims, accounting for well more than 57% of all claims, Camico found. Tax-engagement suits also account for about 34% of all claims dollars. For 2000, the average tax claim was around $105,000.

By far the largest average settlements come from audit engagements, with average claims cost for 2000 at $341,000.

Camico offers suggestions to help minimize the risk exposures faced by CPAs:

• Put all advice in writing.
• Document files frequently because, without proper documentation, the CPA is at a real disadvantage should a dispute arise.
• Make certain that each job has an engagement letter that spells out the details of the work. Engagement letters should be designed to limit risk exposures, not expand them.

Remember, too, that proper insurance protection is part of a comprehensive risk-management program. We would be happy to discuss your insurance needs with you.

Healthcare Executives Have Significant D&O Exposures

The face of healthcare in the U.S. has been changing over the past few years. Intense pressure to show bottom-line improvements has caused healthcare organizations to go through significant consolidations. As a result, healthcare executives are beginning to face many of the same problems as corporate directors and officers in other professions.

The bankruptcies and consolidations in the healthcare industry over the past five years have been huge, and they have led to many D&O liability claims. Another leading problem has been physician, nursing and labor staffing shortages within the industry.

The most visible attacks have come from governmental agencies. Many governmental agencies are trying to force for-profit institutions to act like non-profit organizations, thereby causing smaller facilities to go out of business at a record pace. Additional pressure on directors and officers is coming from liability arising over informed consent cases and peer review activities.

It is important that healthcare institutions have proper protection for their facilities as well as their officers and directors. Our agency would be happy to review this matter with you and your board.