Did You Know?

While background checks are fundamental, they can have limited value in screening out potential wrongdoers.

According to a study by the Association of Certified Fraud Examiners, 86 percent of people found to be perpetuating fraud in businesses – misappropriating funds, tampering with the books – have never been charged with a prior offense.

Takeaway? While you should certainly perform background checks, don't assume you can relax other methods to detect fraud just because employees have been screened.

Return-to-Work Toolkit Offers Insight on Rights and Responsibilities

The Office of Disability and Employment Policy (ODEP) recently released an online return-to-work toolkit designed to educate employers and employees about the return-to-work process and inform both groups of their rights and responsibilities following an employee's disability-related leave of absence.

Resources in the employee portion of the toolkit include information about job accommodation, preparing for a job interview, resume writing, self-employment and employment-related laws. The employer portion of the toolkit features topics ranging from modifying work duties and helping disabled employees perform essential job functions to reducing workers' compensation costs. It also provides overviews of employers' obligations under federal laws including the FMLA, ADA, the Rehabilitation Act of 1973 and workers' compensation laws.

Access the resource at www.dol.gov/odep/return-to-work


This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Content © 2010 Zywave, Inc. All rights reserved.

Preparing for Office Infestations

Infestations of bedbugs seem an unlikely threat to offices, but in reality, any building with carpet, fabric or furniture is at risk. Bedbugs are easily transported from one location to another, so offices with many employees and visitors face extra risk. In fact, according to pest-control company Orkin, 10 percent of bed bug reports come from commercial properties.

Thankfully, bedbugs are not known to spread disease, but they do cause painful, itchy welts that can be miserable and psychologically tortuous for those who come into contact with them. To avoid a human resources issue, plan and prepare for an infestation so you are able to respond quickly should the need arise.

Communicate the Risk
Communicate the risk to employees. Post signs and symptoms of infestations in public gathering areas such as kitchens or on the corporate intranet. Ask employees to check for bedbugs in the office, during travel and at home. They should look for living or dead bugs, small bloodstains from crushed insects and dark spots from droppings. These identifiers can be anywhere, from floor boards to walls to carpet. Bedbugs themselves are often found in hidden places, such as cracks or crevices. And while they prefer cloth and wood, bedbugs can adapt to almost any environment.

Take Swift Action
It is crucial to have a plan in place to address a possible infestation. Swift action ensures minimum liability and the least damage to your reputation – think of it as if you are preparing for a pandemic. When an infestation has been confirmed, evacuate the premises and allow a pest control expert to clean and disinfect all areas. Follow the cleaning with a thorough inspection and treatment of the entire facility with a licensed pest control professional.

Using Pesticides
Cleaning, disinfecting and eliminating hiding places are the most effective methods of ridding your facility of bedbugs and other pests. However, many pests are able to live for several months without food and water, so it may be advisable to use a pesticide. To protect the health of employees, work with an exterminator to:
• Choose the least toxic pesticide available that will be effective. Stronger-than-necessary chemicals could harm your employees.
• Follow all manufacturer instructions for pesticide use.
• Advise employees and visitors to stay away from treated areas until the recommended time period has elapsed.
• Treat furniture with pesticide only if necessary and only in small amounts on the seams.

Know Your Liability
For liability purposes, thoroughly document your pest mitigation process, and swiftly resolve all identified infestations. If an employee or visitor does pursue litigation, weigh the cost of settlement against lost business and damaged reputation carefully. An infestation can be ruinous for brand image.

Employment-Related Practices: Are You Prepared?

Employment-related lawsuits are a growing concern for employers of all sizes. In 2007, the U.S. Equal Employment Opportunity Commission (EEOC) reported 82,792 charges filed for harassment, and harassment charge receipts filed and resolved were $251.7 million. As costs for litigation and damage awards climb, experts predict that employment liability will only become more complex. As a result, it is critical for employers to understand their exposures and options to manage the risk.

Strategies to reduce your company's exposure
Two effective risk management strategies include solid human resources practices and employment practices liability (EPL) insurance coverage, a policy used to cover your risk due to the ever-changing legal and employment environment.

The three most common employment-related lawsuits today are:

1. Wrongful termination - the discharge of an employee for invalid reasons
2. Discrimination - the denial of equal treatment of workers who are members of a protected class
3. Sexual Harassment - when a worker is subject to unwelcome sexual advances, obscene or offensive remarks, or the failure to stop such behavior

Employment practices liability (EPL) insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim. To best understand how to cover your EPL risk, it's important to know the potential sources:
- Recruitment practices;
- Employment applications;
- Employment offers;
- Employee orientation;
- Annual conduct reviews;
- Enforcing performance policies;
- Termination; and
- Improper documentation of the above items

To limit your exposure, engaging in solid human resources practices is an important strategy in reducing your company's liability. To verify your HR policies and best practices, conduct a thorough HR audit:
- Verify the Employee Handbook outlines all policies and terms of employment in clear and concise language;
- Require employees to sign an acknowledgment form for receipt of Handbook; and
- Develop training for supervisors including interview skills, performance reviews, 'zero-tolerance' policy, etc.

Employment law is often complex and varies depending on the jurisdiction. Well-organized and credible documents can demonstrate fair treatment, deter litigation, ensure employee honesty, and, should litigation occur, demonstrate the employer's actions. In addition to having the appropriate employment policies and HR best practices in place, EPL insurance coverage is another useful risk management tool used to defend against a suit or pay a claim.

Why Choose Employment Practices Liability Insurance?
According to researchers, three out of five employers will be sued by a prospective, current or former employee while they are in business. While many suits are groundless, defending against them is costly and time-consuming.

Employment Practices Liability Insurance typically provides protection from the following wrongful employment practices:
- Harassment
- Discrimination
- Actual or alleged wrongful dismissal, discharge or termination
- Employment-related misrepresentation
- Employment-related libel, slander, humiliation, defamation or invasion of privacy
- Wrongful failure to employ or promote
- Wrongful deprivation of a career opportunity, wrongful demotion or negligent evaluation
- Wrongful discipline
- Vicarious liability for intentional acts
- Punitive damages (where allowed by law)
- Coercion or humiliation in relation to race, marital status, gender, age, physical and/or mental impairments, pregnancy, sexual orientation and any other protected class established by federal, state and local statutes.

Many policies also offer HR assistance and other risk management consultative services.

From the moment that you start the pre-hiring process until the exit interview, you are vulnerable for a lawsuit. EPL insurance works hand-in-hand with your internal employment practices to provide the necessary resources to defend your company against a suit or to pay a claim.

As with all of your risk-management needs, Michelle Keller is committed to assisting you in assessing your employment-related policies and helping you to develop best-practice solutions. Call us today at 585-641-2548 to learn more about our effective risk management services. ◊


This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Content © 2009 Zywave, Inc.

Did you know?

Contrary to common belief, texting while driving is a vice more prevalent among adults than teens. A recent report by the Pew Research Center's Internet and American Life Project reveals that 47 percent of adults who text have done it while driving compared to 34 percent of teens who text. Activities such as reading or sending a text that distract a driver's attention and take his or her eyes away from the road increase the risk of a crash.

Warn your company's drivers about the dangers, and be sure to have a fleet safety policy in place.

Report Provides Insight into the Plague of Occupational Fraud and Theft

A recent report by the Association of Certified Fraud Examiners revealed the breadth and scope as well as emerging trends in occupational fraud across the globe. From Ponzi schemes to data breaches and falsified expense reports, fraud poses a serious threat across all industries. Following is a sampling of the study's findings.

• It is estimated that the typical organization loses 5 percent of its annual revenue to fraud.
• Small organizations are disproportionately affected by occupational fraud; they often lack the anti-fraud controls of their larger counterparts.
• More than 85 percent of those committing fraud in the study had never been previously charged or convicted for a fraud-related offense.
• Fraud reporting mechanisms are an effective means of receiving tips from both internal and external sources. Fraud is more likely to be detected by tip than by any other means, including audit.
• Perpetrators often displayed warning signs, most prevalently living beyond their means and experiencing financial difficulties.
• Surprise audits can be useful in both uncovering fraud and deterring it by creating a perception of detection. Organizations generally rely on audits too much; in fact, external audits were the control mechanism most widely used by fraud victims in the survey. • Frauds lasted a median of 18 months before detection.
• Executive-level frauds, partially because of their extended detection time, proved to be three times as costly as those committed by managers and nine times those committed by employees.
• Ninety percent of fraud cases were a form of asset misappropriation, with a median loss of $135,000. Rare, but with a median loss of more than $4 million, are financial statement fraud schemes.

Taking steps to prevent occupational fraud through employee education and the institution of fraud reporting mechanisms could save your company serious loss. You should also review your insurance contracts to be sure you have the appropriate employee dishonesty coverage in place for your company.


Content © 2010 Zywave, Inc. All rights reserved.

International Exposures - Are You Covered?

When was the last time you reviewed your foreign exposures and coverage? According to government statistics*:

- The number of small and medium-sized U.S. firms exporting goods has more than doubled since the 1990s.
- International trade accounts for nearly one-third of the U.S. Gross Domestic Product.
- U.S. exports accounted for about 25 percent of U.S. economic growth during the 1990s and supported an estimated 12 million jobs.

If doing business abroad is part of your company's growth strategy, understanding the scope of insurance available for international business is critical to protecting corporate assets. Most insurance policies placed in the U.S. provide limited, if any, coverage for losses occurring abroad. The good news is that there are numerous specialized insurance coverages available for companies conducting international business that are specifically designed to provide global protection.

Depending on the extent of the foreign business being conducted, typical coverages that should be considered are as follows:

 Foreign Commercial General Liability coverage is similar to domestic liability coverage; however, it applies to foreign occurrences and includes protection for U.S. occurrences when a suit is brought outside the U.S. or Canada. For example, manufacturers and distributors that sell products outside of the U.S. may be sued in foreign jurisdictions. Typically, a U.S.-based policy only covers lawsuits that are filed in U.S. or Canada.

 Foreign Business Auto coverage provides physical damage and liability coverage for hired and non-owned vehicles operated overseas. Coverage is typically needed for limits over and above the minimum or statutory limits that are required to be purchased from the rental company in the foreign country.

 Foreign Voluntary Workers' Compensation/Employers Liability coverage extends benefits for U.S. employees while traveling overseas or assigned to work outside the U.S. and Canada. Coverage can include medical assistance programs and repatriation expenses.

 Foreign Commercial Property coverage affords protection at unscheduled locations while in transit for laptop computers, sales samples and personal property at trade shows overseas. A more extensive policy may be required for owned or leased facilities.

 Foreign Travel Accident & Sickness coverage provides additional protection in the event of an emergency while traveling overseas.

 Kidnap, Ransom and Extortion coverage is an important consideration; as global commerce grows the risk of kidnapping increases for corporate executives, key employees, wealthy citizens and their families.

 Marine Ocean Cargo offers coverage for international shipments.

 Political Risk covers losses arising from confiscation, expropriation, nationalization/selective discrimination of property by foreign governments or embargo/license cancellation coverage for contracts.

 Foreign Travel Assist coverage is designed to provide employees 24-hour emergency travel assistance services.

It is also important to note that if you are importing products from anywhere outside the U.S., that you have essentially become the manufacturer in the case of a suit from the sale of those products. You may have the ability to be indemnified by your overseas partner providing that product, but it will be your risk management/insurance program that will be the first line of defense for payment of damages. You need to be certain that you have addressed it in your current insurance program so that you are accounting for the cost associated with those import sales appropriately.

Many foreign liability coverages can be purchased together as a package policy and expanded as your business grows. Certain countries can be excluded. Securing coverage from a reputable carrier with international expertise, specialized products and strong global network capabilities will mitigate the risks associated with conducting business in other countries. Please contact Michelle Keller to discuss your foreign exposures and to obtain more information on how we can assist you. ◊

* Bureau of Economic Analysis, U.S. Department of Congress

This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.All rights reserved. Content © 2008-2010 Zywave, Inc.

Another Effect of Today's Stock Market - Fiduciary Liability Claims

Employers who offer investment funds to their employees often see an increase in fiduciary liability claims when the stock market is unstable or has dipped substantially. Even though a plan administrator is extremely competent, some employees who face losses are looking for someone to blame. Very often they blame the plan administrator alleging that the administrator's choices have posted greater losses than those of other funds in the market.

In this particular market, many investors buoyed up by their successes took uncharacteristic risks and suffered losses. They, too, might allege that the choices offered were not good, or the risks were not adequately explained. If these investors are employees who had anticipated retiring soon, they may have to postpone retiring or resign themselves to tightening their retirement spending. This situation, and many more, can prompt employees to take an employer to court over "negligent" or "incompetent" plan administration.

What's the risk?
Unfortunately, many employers don't fear liability because they mistakenly believe that they have no risk, and that the risk belongs solely to the plan administrator. Not so. Typically, a fiduciary chooses the plan administrator and describes the company's investment goals. The administrator selects specific funds subject to the approval of the employer, making the employer an active member in the decision-making process.

An employer may be held liable in the event of a claim, but the plan administrator individually may also be named in a suit. The fiduciary liability policy can protect both the entity and the individual. Fiduciary liability coverage is defined as "protection for those who administer pension and welfare funds, profit-sharing and other employee benefit programs against loss for errors and omissions by the administrator." The need for this coverage was created by the Employee Retirement Income Security Act (ERISA) of 1974, and it is also known as pension trust liability insurance.

Often, claims against employers do not surface for one or two years after the market's downturn, when people realize the impact on their retirement portfolio. You should be prepared. If you haven't carried fiduciary liability insurance in the past, now might be the time to look into it. This is a relatively inexpensive insurance policy that will see you through tough market times.


This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. All rights reserved. Content © 2009 Zywave, Inc. All rights reserved.

Combating the Rise of Workplace Violence in an Economic Downturn

During tough economic times your employees are most likely worrying about their finances, especially if your company has been subject to layoffs, benefit reductions or pay freezes. Workplace violence has always been a concern, but as the economy continues to suffer, ordinarily composed employees may suddenly become aggressive in expressing their mounting frustrations and worries.

Pinpointing employees who may turn to violence is difficult because they usually have no history or previous signs of violence and are generally compliant, veteran workers. This Risk Insights outlines the origins of workplace violence during tough economic times and what you can do to minimize the risk.

Economy-Driven Causes
One of the biggest fears that fuels workplace violence is the potential for job loss, or a reduction in hours or wages. Employees who fear being laid off feel less comfortable coming to work. Normally even-keeled employees who find themselves unable to make ends meet could suddenly take their disappointment out on others in the workplace.

Also, because of the lack of job availability, employees are more likely to butt heads with co-workers and compete viciously for a new position or promotion. The increased pressure to succeed and provide for a family in the midst of economic crisis may drive even the most unsuspected employee to violence, hostile behavior, threatening behavior or bullying. Desperation can be an extremely powerful force behind many cases of workplace violence.

In some cases, the economy may cause you to lay off employees who have dedicated years of service to your company. People that feel they have been loyal to the company for years may consider the layoff unfair, and these ex-employees may seek violent retaliation. Similarly, disputes over economically-driven benefit changes may be the source of violent actions.

Preventing Violence Driven by Economic Struggle
One of the most important things you can do as an employer is ensure your employees that their work is valuable. Look for extreme stress, anxiety and other behavior changes in employees to identify those that might be at risk.

Another side effect of economic downturn and layoffs is the remaining employees tend to pick up slack and commit extra hours to complete increased task loads. This occurs sometimes by necessity, but often times it is a choice employees feel they need to make to avoid being the next one laid off. Avoid placing this kind of pressure on remaining staff through effective management – carefully monitor work levels, and never let employees take on more than they can handle.

Communication is key to preventing workplace violence, especially when the economic climate is the underlying factor. Speak with employees who feel overworked and find out what you can do to alleviate some of the stress. Explicitly explain to longtime employees the reason for the layoff and make an effort to part on the most positive terms possible. Be as transparent as possible by letting employees know about any company changes, and most importantly, encourage open communication between management and workers to ensure a healthy, safe environment.

This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. All rights reserved. Content © 2010 Zywave, Inc. All rights reserved.

Liability Coverage Goes Cyber

Covering your business for cyber liabilities used to be a concern only for the highest-tech companies, but as times change, so should your policies. With universal business use of the Internet and states increasingly enforcing privacy and security breach notification laws, all employers should look at their policies to insure cyber liability coverage.

Many businesses do not realize how big their technological liabilities are until there is a problem. If a security breach occurs, it can cost companies hundreds of thousands of dollars not only in damages and losses, but also to re-build the brand or business' reputation among customers.

Some experts in the industry estimate that about 90 percent of U.S. businesses have a large need for cyber coverage in their commercial liability policies. The number is high because security breaches extend far beyond the Internet – any company that stores sensitive customer information, whether over the internet or simply on a laptop computer, could be in danger.

Besides adding on to and tweaking existing policies, businesses that want to protect themselves from cyber liability can take other steps. Obviously, carefully following all security laws and regulations is a great start. Also consider putting company policies in place that further protect sensitive information and that could ensure employees are aware of the dangers as well. These would include:

- Internet security policies
- Company e-mail policies
- Policies on employee conduct with personal customer information
- Computer security policies to protect other private data, including internal personnel information

Think of cyber liability coverage as an evolution of traditional liability insurance policies. It is not just for e-businesses anymore, and it has progressed into a risk for almost every company no matter how large or what kind of business it does. Cyber liability can be complicated, so contact me with questions or concerns.

Content © 2009-2010 Zywave, Inc. All rights reserved.

Data Breach Notification Laws

According to a recent report, almost 340 million records containing "sensitive personal information" have been involved in security breaches since January 2005. Consumers have begun to realize how easily their private and personal information can become vulnerable or accessible. Over the last 5 years, there have been dozens of reports in the media of large corporations and institutions who have had the information of their customers breached in some way. But how many smaller organizations have had a breach that we haven't heard about? Do you know what the law requires if your customer's information is compromised?
There is a federal bill (Data Accountability and Trust Act) that has been passed by the House and is awaiting a vote in Congress. It would require, among other things, that all businesses implement safeguards to protect data, and to notify customers if their personal information is breached. In the meantime most states already have a law requiring notification of security breaches. In general, consumers are to be informed of a breach when their information is lost or compromised, putting them on alert for possible identity theft. The individual laws differ as to what is defined as "personal information" and under what circumstances the notification must be made. Some laws, including those in New York State, require notification to consumers any time there has been a breach of unencrypted data- regardless of whether the company determines there was not a significant risk.

The laws also dictate when and how the notification must be made. A recent study relating to 2009 data security breaches in the US shows an average cost of $204 per customer with a potentially compromised data record. In addition to the cost of notification and remediation, companies who have a breach will be subject to the costs of regulatory investigations, as well as penalties and fines.

There are numerous practical steps you can take to ensure compliance and prevent breaches. Review how your firm safeguards non-public customer and employee data, and implement safeguards and controls using industry best practices. You should also take a look at the organization's data privacy policies and notices, and make changes if necessary. In addition, consider the acquisition of a Privacy Breach and Network Security Liability policy. Although these policies have been available for quite some time, over the last few years both coverage and accessibility have improved significantly. In addition to the expense of notification and remediation following a breach, there is also the potential for suits filed by consumers which will result in defense costs- at a minimum.

In this current regulatory environment, every company is susceptible to these threats and need to take appropriate steps to address them.

This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

Employee Cell Phone Use While Driving: What is Your Company's Exposure and Liability?

Cell phone use has become commonplace, and text messaging, e-mailing and conducting business via cell phone have become routine. While the convenience of cell phones can be enormous, problems arise when using a cell phone while driving.

A Nationwide Insurance poll found that 81 percent of cell phone owners admitted to talking on a cell phone while driving. While employers may be aware of the obvious benefits of allowing employees to use cell phones to conduct business while driving, they may be unaware of the significant liability risks associated with cell phone use while driving. A National Safety Council survey found that of employers who had a cell phone driving policy, 70 percent saw no decrease in productivity and over 20 percent saw decreases in employee vehicle crashes.

Currently, there is mounting evidence supporting the dangerous link between cell phone usage and car accidents. According to Johns Hopkins University, as individuals focus on listening and engaging in conversation, the activity in the visual part of the brain decreases, even when using a hands-free device. In addition, the University of Utah found that drivers are as impaired on a cell phone as they are while driving under the influence of alcohol. The National Safety Council found that 28 percent of car crashes (1.6 million crashes per year in the U.S.) are attributable to cell phone use while driving.

As a result, if you have employees driving on company time, you need to be aware of your cell phone use exposure and take the appropriate steps to mitigate your risks.

Case Studies
In 2004, a Georgia employee making a business call while driving hit and caused serious injury to another driver. The employee's company agreed to pay $5 million in damages after the court found that the company was liable since the employee was making a business-related call. In a different case, two million dollars in damages were awarded to a little girl's family after an employee hit and killed her in 2004. The family also sued the employee's company after phone records revealed that the employee was talking to a client at the time of the crash.

In addition to third-party claims resulting from accidents, employers increasingly face claims by employees for health problems allegedly stemming from cell phone use. Although the science appears contradictory and inconclusive, some employees contend that the radio frequency radiation emitted during cell phone usage may lead to various forms of brain cancer or other illnesses. Employees who use cell phones while on the job have begun to file Workers' Compensation claims and lawsuits based on this theory.

Minimizing Employer Liability
While there is no guaranteed defense to liability, developing an appropriate employee cell phone use policy, training employees about the dangers of talking on a cell phone while driving, and enforcing policies with signed written acknowledgments from employees all can help to limit an employer's potential liability.

In the policy, beyond setting clear-cut rules limiting cell phone use while driving, offer suggestions such as informing clients of driving schedule to avoid calls while on the road, pulling over to place or receive an important call, or asking a passenger to handle cell phone usage. Be sure to emphasize that while productivity is certainly important, more important is their safety and the safety of others on the road – safety that is neglected when using a cell phone.
Even with a comprehensive cell phone use policy, courts may still hold employers responsible for any harm caused by employees while on company business, so it is important to ensure that your policy is being upheld and enforced. Be clear about the importance of following the policy, and follow through with consequences if employees are found to be disobeying it.

State Laws
Several states currently ban the use of hand held cell phones while driving, and many states have taken an increasingly active role in addressing the relationship between driver cell phone use and traffic safety. These laws are changing frequently, so employers should always be cognizant of their state's laws and require employees to observe those regulations regarding cell phone use while driving (include the current state law in your policy, and require employees to review and re-sign it whenever the law changes). While state laws do not directly address employer liability, they have the potential to increase employer exposure for cell phone-related accidents. For more information about state requirements, access the Governor's Highway Safety Association Web site at: http://www.statehighwaysafety.org/.


What should you do?
In addition to updating your company Cell Phone/Hand Held Use Policy and training program, employers should also review their insurance policies. For help assessing your company's risk regarding employee cell phone use or for assistance in developing a Cell Phone Use Policy, contact Michelle Keller.



This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.
Content © 2006-2010 Zywave, Inc.