The most common cause of childhood lead poisoning is the dust that comes from lead based paint. While lead paint was banned for NYC residential use in 1960, and nationwide in 1978, Read More »
If you read our first article in the series “Managing Insurance Claims First Reports Can Have Big Impact for Schools & Non Profits” then you know that it’s a two part process, Read More »
Above all else a school’s primary responsibility is to keep their children and teens safe at all times.
Unfortunately this is not always the case as during the past few years several high-profile incidents have rocked the industry. Behind these high profile cases are many other incidents just as terrible that haven’t caught the attention of the national press. Behind those are even more incidents that never even get reported.
No matter the details, any act of this kind, in any sector, will have devastating consequences for both the victims and the organizations involved.
This will be a 3 part series including:
Part 1 – The Wake Up Call
Part 2 – Prevention
Part 3 – Responding
On Tuesday August 28th, 2012 U.S. District Court Judge Frederic Block ruled the statute of limitations didn’t automatically disqualify a sexual abuse case against Poly Prep Country Day School even as some allegations date back to 1966. It’s well documented that NY State has one of the countries strictest statute of limitations for sexual abuse and molestation claims.
If the 40 page ruling stands it opens the doors for other potential victims to come forward and press legal action. According to the recent Wall Street Journal article by Sophia Hollander, the case against Poly Prep has been carefully followed as the impact could be wide spread.
Why then do I assert that insurance costs will be impacted? Simple; if insurance carriers begin to see an uptick in sexual abuse & molestation claims, forget merits for a second, just pure cases reported, premiums are going to rise. If the underwriters sense the NY Legislators in Albany will mollify plaintiffs and weaken the statute of limitations, more cases will be open, which will translate into more sexual abuse and molestation claims, which translates into higher losses for insurance carriers. Finally, as insurance carrier’s losses increase they need to raise insurance premiums to off set these losses.
For insurers, and ultimately buyers of liability insurance such as nursery schools, private schools, charter schools, and religious organizations, it’s very difficult to assess the final cost of an abuse and molestation claim. Sexual abuse and molestation insurance claims tend to get their initial reserves set low, and then watch the cost of the claims rise as time goes on. This is called loss development; as time grows so does the cost to administer, defend, and ultimately settle the loss.
Insurance carriers can predict through actuaries the number of sexual abuse and molestation insurance claims they can expect in a given year as the historical data tends to be accurate. If the laws change in favor of the plaintiffs allowing more cases and thus more liability claims to move forward the losses on this class of business will increase, perhaps dramatically. This will move their actuarial tables resulting in higher loss trending and thus the need for more premiums. The carriers won’t wait for the claims to start rolling in to raise rates, it will happen much sooner, perhaps as early as 1st quarter 2013.
There are macro events that happen in the insurance industry that affect both carriers and customers alike in one fell swoop. The key for any nursery school, private school, charter school, religious organization, or non profit is to find line items on their own P&L that they can impact. Our favorite is workers compensation insurance as that is rich in opportunity to lower costs though protocol. For purposes of this article our intent is to simply make you aware of this potential macro trend that may ultimately drive your costs for sexual abuse and molestation liability insurance.
If you read our first article in the series “Managing Insurance Claims First Reports Can Have Big Impact for Schools & Non Profits” then you know that it’s a two part process, “be prepared” and “follow up.” This article shares the concept of how important proper claims follow up is for all workers compensation insurance claims, and all general liability insurance claims.
WHY WORKERS COMPENSATION CLAIMS & GENERAL LIABILITY INSURANCE CLAIMS ARE DIFFERENT:
Unlike many other types of insurance claims, many liability and workers compensation claims can get larger with time. In industry parlance this is called Loss Development as the claim develops over time it tends to get larger as law suits, negotiations, cost of continual medical e.t.c. increase the ultimate insurance carrier payout over time. A property claim for a burned structure does not deviate as much outside perhaps loss to the business income.
Thus we typically refer to both Workers Compensation Insurance & General Liability Insurance as very expensive credit lines that carry a high interest rate, comp especially. Although the carrier pays the loss upfront, the insurance marketplace is very efficient in re-couping the money from the policy holders in the form of premium increases for 4 to 5 years upon each renewal which is essentially a charge back.
THE IMPORTANCE OF DEVELOPING A CLAIMS FOLLOW UP PROCEDURE FOR YOUR SCHOOL OR NON PROFIT:
You wouldn’t hand a stranger your school’s checkbook, sign the blank checks and forget about it! That’s absurd, yet that is exactly what most Non Profit Organizations, Private Schools, and Charter Schools do. That stranger is the claims adjuster.
If you have a set procedure in place of when to follow up , with whom to follow up, and questions to ask you can and will have an outsized impact on the ultimate payout of a claim. In one example our claims staff followed up with a client and asked if there were any alternative duties at their facility their injured worker could perform instead of sitting at home and collecting workers compensation benefits. They assigned this injured workers a file scanning project that enabled the worker to come back, and be productive saving the School close to $67,000 in additional workers compensation costs. This only happened because someone was involved, asked the right questions, and had taken corrective action.
The bottom line is it’s critical that someone in organization have a set follow up procedure in place so they can monitor and effect not just the claim value, but the ultimate cost to your organization.
Download our Free Claims Report Tool for both Workers Compensation & General Liability Insurance. Take back your check book, control and manage your costs as it’s ultimately your hard earned dollars at stake NOT the insurance companies.
A staff member arrives at your door, panicked; someone has been injured in your facility, now what? If you’re an average non profit or school you simply pick up the phone and call EMS and wait.
Once the dust settles you sit back in your chair and call your insurance broker who transfers you to a claims admin person in their office to take down basic information. A week later you get a call from a company adjuster who asks the same information. You hang up and try and forget the whole experience only to be reminded upon your liability insurance renewal, or your workers compensation renewal, that your insurance premiums have doubled as a result of that claim. Sound familiar?
We believe the best approach to claims is the dual philosophy of being prepared AND following up. These two approaches are not mutually exclusive but work in tandem to deliver substantive results to any for profit or not for profit organization. This article deals with the first principle “Be Prepared”. Understand that improvement to your insurance claims practices drives both cost efficiency and cost consistency. Our clients understand the price they pay on insurance is a direct function of how well they manage their claims, period. This is why we coach our clients to our specific claims protocol.
The Scouts of America had it right, be prepared. Any top flight organization has an emergency procedure action plan if certain events present themselves. They know that when they are “IN” a situation, panic, uncertainty, and hasty decisions result in a suspect outcome. That is why we advocate during a claim event that a very specific claims form tailored to your business model and your organization be drafted, thoughtfully and un-emotionally which will help organize your approach to this event. Capturing little details such as what the weather conditions were like, potential witness statements, photographs, contributing physical evidence like a broken chair, or floor obstacle, can immediately make a HUGE difference in helping craft a defense for your Non Profit Insurance Company and your organization that will ultimately save you much in the way of blood and treasure.
If you’re a Nursery School, Private School, Charter School, Non Profit Organization, Adult Day Care or Home Health Care Business that operates a facility, we suggest you download our Free Claims Report Tool that was developed specifically for school based organizations that cater to children, students, and teachers. Being prepared, building your defense file IMMEDIATELY with all the little details will pay huge long term dividends. Do what you have always done and get what you have always gotten.
In our next article we will discuss the second principle, “Follow Up Procedures.”
We just posted an article on our company website but figured it was important enough to post here as well. The article speaks to Adult Day Care Centers, Nursery Schools, Private and Charter Schools, Home Health Care Agencies, Non Profits, Nursing Homes and Assisted Living Centers considering purchasing workers comp through a payroll provider such as ADP and Paychex. We give you the skinny on the pros & cons relating to admin costs, rates, and claims. When it comes down to it, the cost/benefit analysis reveals that the costs are significantly higher for most businesses. Click here to read the full article!
As is often the case with risk and insurance, a few extra steps and attention to detail can pay an enormous dividend. We all have basic employee files with the standard information. We suggest to many of our clients however that they should include a few extra details about their employees for future reference.
1. Take a Digital Picture (Head Shot) – You never know when and how valuable this one picture could be. Here a just a few examples of future potential uses:
- If the employee travels domestically or internationally and runs into trouble either from a kidnapping or other nefarious event, the ability to respond quickly to local authorities request for recent information can make a huge difference.
- In larger organizations, or organizations with a transitional workforce where you might not know all employees, a photo on file might help identify a potential assailant in a workplace violence event.
- If you are ever in the unenviable position of having to hire a private investigator to track an ex employee it’s very helpful if the investigators have a recent photo to help them identify the person they are investigating as it saves time, and insures accuracy.
2. If employees travel with their own personal vehicle on business, such as sales people, job superintendents, e.t.c., it is helpful to have the declarations page of their personal auto policy showing coverage limits, effective dates, and the policy number. If they are involved in a motor vehicle accident HR will want to be sure a claim has been filed on their personal auto policy first. It also offers the opportunity to increase limits to protect the corporate P&L.
In our business the more info we have the better as I have yet to meet anyone smart enough to see it all coming from a mile away!
Attorney General Eric T. Schneiderman first introduced a plan in February to reform and revitalize New York’s nonprofit sector. A major component of that plan is the “Non Profit Revitalization Act” which was brought to the New York State Senate in May. The act is scheduled to take effect January 1, 2013. The attorney general’s plan includes legislation to eliminate outdated and costly burdens on nonprofits, strengthen oversight and accountability, and reaffirm his commitment to policing fraud and abuse. Acknowledging that organizations throughout New York have been facing historic financial and strategic challenges, the attorney general’s plan also includes several new partnerships with the business and academic communities to enhance nonprofit governance.
Schneiderman’s legislation includes a number of key reforms:
Streamlining bureaucratic processes to expedite the formation of nonprofits and approval of key nonprofit transactions;
Modernizing outdated requirements, such as permitting the use of technology to facilitate more efficient operations and to reduce costs;
Requiring that boards provide improved and independent oversight of executive compensation;
Increasing board responsibilities to oversee financial audits;
Enhancing the Attorney General’s tools to police self-dealing and other forms of corruption;
Requiring nonprofits adopt conflict-of-interest and whistleblower policies.
The Nonprofit Revitalization Act represents the most comprehensive reform to New York’s nonprofit laws in over 40 years. If implemented, it will revitalize the nonprofit sector by substantially reducing burdens and costs on nonprofits and strengthening governance and accountability.
What does this have to do with risk and insurance? Simple, risk comes in all sizes and shapes. Insurance is just one way to transfer risk. However, not all risk can be transferred to insure such a legislative risk. It’s important that you engage with a risk advisor who works in the Non Profit industry instead of purchasing insurance through a broker who simply handles a transaction that deals with only a small part of your risk.
We think this report is a critical read for anyone who works in or leads a Non Profit in New York. Make sure to give the full report a read and as always contact us with any questions you may have on how this could affect your non profit.
Federal regulatory agencies have been increasing investigations and enforcement in the past few years, and recent reforms in health care, banking, and consumer protection will likely generate new liabilities for companies.
Most mid-market for profit and not for profit businesses carry some form of directors and officers liability insurance to protect the company and its executives in the event of a regulatory investigation or penalty. But those policies often have limits or exclusions to the coverage based on corporate structure, industry, and the nature of the investigation itself. Many companies that we have spoken to didn’t know how their D&O policies were structured.
Because insurance buyers at mid-market companies may not fully understand their D&O coverage, they expect that it’s all-inclusive, and that anything that comes about is going to be picked up. So when they receive a denial or a reservation of rights letter from the carrier, they are obviously surprised and disappointed.
Lets go over the basics:
- Costs from an investigation in which a company is merely a party of interest, and not the target of the investigation itself, are typically not covered by most D&O policies.
- Do not limit your coverage to any specific agency by listing them, as you could run into a problem with interpretation. If you’re investigated, but not by the particular named agency in the policy, the implication is that it’s not covered.
- Until recently, legal fees and other costs associated with an investigation prior to the issuance of a subpoena or official notice of an accusation, known as “pre-claim” costs, were the responsibility of the company or its directors. Private companies could only obtain coverage for costs after an official notice of investigation was received. Insurers have recently begun offering products to cover pre-claim costs in certain situations but have yet to form a comprehensive coverage package for costs on both sides of an official agency action.
- It would certainly benefit you to hire a lawyer before you sit down with any federal or state regulatory agency. Your policy may be limited to formal investigations only. If so you may not be covered for costs, or at the very least you’re going to have a dispute over what constitutes a formal investigation.
Now that you know the basics, let’s go over some common mistakes that are made:
- One common mistake is failing to notify your broker/insurer when contacted by a regulator. Most policies have a fixed time period within which a client must report a claim. As a result failing to do so at the earliest possible opportunity could jeopardize coverage for the investigation and subsequent claims arising from the original event.
- Employers worried about their company’s profits may assume that simply fulfilling an agency’s initial request for information will satisfy their obligations under their D&O policy. Then they may decide not to report the contact to their insurer, hoping to improve their chances at favorable renewal rates.
- Employers sometimes struggle to file claims in a timely manner if their staff has not been properly instructed on the matter. The problem we see all the time is a human resource director often won’t know that they need to inform their CEO or CFO that they were contacted by a regulator, because that’s what triggers coverage.
- A final mistake lies in the selection of counsel once a director has been contacted by a regulator. Smaller companies often turn to an in-house legal adviser or an external general practice lawyer that they’ve worked with before. General business litigation experience likely will not prepare a company or its lawyers for the intricacies of regulatory investigations and the insurance policies that guard against the damage they can inflict.
We hope you come away from this article with a greater education on D&O Insurance policies. If you have any more questions on directors and officers insurance please feel free to contact one of our experts.