2012 - New Laws for Employers

Hello!

As 2011draws to a close, it is time to start preparing for the New Year!

New laws going into effect January 1^st will require employers to make some changes. As a Wateridge client you have access to the resources of the American Consulting Group, a HR, safety and labor consulting firm. ACG’s attorneys have put together the following update on the new laws that you need to be aware of and appropriate measures to consider:

22 New Employment Laws Will Impact California Businesses in 2012

Beginning January 1, 2012, a variety of new laws will take effect that will impact the employment practices of companies doing business in California.  The American Consulting Group is strongly recommending that all companies begin revising their employment policies and making modifications to employee handbooks in order to conform to the new legislation. 

Recommended Action Items for Employers

• Conduct an audit of wage and hour practices to insure exempt employees and independent contractors qualify for that status.  New Labor Code Section 226.8 mandates stiff penalties ($5000 to $15000 per violation) for misclassifying employees as independent contractors.
• Modify your company’s workers' compensation postings to include the website address and contact information that employees may use to obtain further information about the workers' compensation claims process and an injured employee's rights and obligations, including the location and telephone number of the nearest information and assistance officer.
• Confirm that employee payroll records are retained for at least three years vs. two years (Amended Labor Code section 1174).
• Consider adding an affirmative confirmation on every hourly, non-exempt employee's time sheet, verifying that the hours entered accurately state all of the employee's hours worked during the period covered by the time sheet or record.
• Prepare to provide each employee with a written notice, at the time of hiring, that specifies all of the information required by new Labor Code section 2810.5.
• Begin preparing written commission agreements for employees who receive commissions to prepare for compliance with AB 1396, which requires such written agreements to be in place by 2013.
• Review your leave and benefit policies and make revisions to comply with changes to Pregnancy Disability Leave rights (SB 299).
• Add a Social Media policy to your employee handbook that addresses recent National Labor Relations Board (NLRB) rulings respective to protected concerted activities and rights of employee to disclose information. Additionally, modify company’s electronics within the workplace, confidentiality and conflicts policies to bring current with recent NLRB rulings.
• Review all of your company’s written safety policy programs to ensure the following: 1.) That only the programs that a company is REQUIRED to adhere to are noted in any documentation, 2.) that any “borrowed” or vendor-provided documents are reviewed first by a specialist before implementing and to check that each actually meets YOUR SPECIFIC company’s requirements, 3.) Review all safety programs to ensure that all policies included are actually operational, 4.) Review your company’s system for appeals respective to any government issued citations is functional.

Please feel free to contact me with any questions or assistance.

Have a wonderful and safe New Years!

Carol

Protecting Personal Assets with a D&O policy – a False Sense of Security?

When talking with executives about Directors and Officers insurance, I often hear the same comment - "We already have a policy in place through a Broker that handles all of our insurance". What I have found however, is that even the most sophisticated insureds and those well versed in D&O are unaware of critical exclusions and conditions precedent to coverage contained in their policy. Numerous assumptions are common as well:

• all D&O policies are good ones
• all policies are similar
• all Brokers are knowledgeable on this type of insurance

Unfortunately, many seem to be lured into a false sense of security by the presence of a D&O policy without scrutiny.

Think of an alarm system that you pay for and install to protect you and your possessions. You would probably do some homework on the various brands and features and, not dismiss the installers before they instructed you on how to use the product. Directors and Officers insurance policies are similar to alarm systems in several respects:

If you don’t know how to work them, they may not protect you.

All D&O policies contain conditions precedent to coverage – meaning you have to do certain things according to stipulations in the policy in order to trigger coverage. Failure to do so can result in a denial of coverage by the insurance carrier.

25% of D&O claims are denied with no contest! - simply because the insured did not comply with one provision of the policy (they did not report in time).

Product specifications, operation, features and characteristics differ by brand.

D&O policies differ significantly from one another and are more sophisticated than other types of policies. Let me address some common myths.

Myth #1: Insurance is a commodity; all policies are the same or similar.

            Many common insurance policies are derived from an ISO (Insurance Services

            Office) standard. There is however, no ISO standard D&O policy; each insurance

            carrier writes their own. Language, terms, conditions, clauses and exclusions all

differ from policy to policy. As such, specimen copies of each quoted policy

need to be requested, read and compared in order to truly understand what is

being quoted and what you are getting. It’s a challenging task which begs the

question – how often is it being done?

                       

Myth #2: All Insurance Brokers are created equal and they all know everything you need them to know about D&O insurance.

You might be surprised to know that information on D&O insurance is not included in Broker training or common Continuing Education curriculum. Like doctors and attorneys, each Broker evolves expertise in certain areas. You would not ask a patent attorney to handle your divorce or a dermatologist to treat a vision problem. D&O insurance requires attention to details that are not readily apparent. Knowing what to look for and how to negotiate such policies is not a common skill set. Unfortunately, for insureds and Brokers alike,

                        “You don’t know what you don’t know!”

Understandably, insureds are reluctance to address the D&O policy in depth. In today’s environment bandwidths are stretched beyond capacity – no one has the time or inclination to take on another potential problem. Rules, regulations and standards by which companies are held however, keep increasing. Publicly we see these standards being difficult to meet even by large companies that have resources with which to comply. Small and mid-size companies with few resources are actually more at risk. Claim statistics show frequency and claim costs rising. Reliance on an existing D&O policy may be convenient but might not provide the protection that you are expecting.

Do not fall prey to a false sense of security

It’s not realistic or wise to assume protection just because you have a D&O policy.

You rely on the D&O policy to protect your personal assets: your home, savings and possessions. Find out what the professionals you are relying on really know about the coverage. Ask questions!

            What do they look for in a policy?

            What are the red flags in a policy?

            How can they negotiate a policy to be more in your favor?

You may find that a generalist Broker is not appropriate.

Make sure that you know how to operate your policy by asking your Broker what the conditions are. Find out what is excluded – you will be alarmed at the sheer number of exclusions! Most importantly, when obtaining or renewing a D&O policy work with an Insurance Broker that specializes in D&O coverage and has attorney resources that specialize in insurance to refer to. 

Commercial Auto Insurance – Coverage details often forgotten

Company Autos

When it comes to company autos, there are several very important insurance coverages that often get overlooked.

Drive Other Car  (DOC) coverage

Loan/Lease Gap coverage

Employees as Additional Insureds

DOC:

This is important for employees who drive company cars and do not have their own personal auto insurance. In order to be covered while driving autos other than the company car, say a car belonging to a spouse, relative or friend, then alternative liability coverage is necessary in addition to the commercial auto policy. This can be accomplished by either adding the DOC endorsement to the commercial auto policy or by the employee obtaining a personal auto policy. Often, family vehicles are insured under the other family member’s names – in which case, it is usually cheaper to get the employees name added as an additionally insured driver under the family auto policy.

Loan  / Lease Gap:

In the event of a total loss, situations can arise in which the actual cash value of the car is less than what is still owed on the vehicle or the lease payoff amount. Note that the value of a new car can be 20-30% less than what you paid for it for several months after you drive it off of the new car lot. This endorsement when added to the physical damage portion of your commercial auto policy endeavors to cover unforeseen gaps between the cars value and what is still owed. Early termination fees could also be covered by such endorsement.

Employees as Additional Insureds:

Once in a while we see employee owned autos get insured by the company and get referred to as company autos. Since technically you cannot insure property that you do not own, a problem can arise if a claim occurs and is submitted to the commercial auto carrier but the car is registered under the employee’s name. To avoid the potential denial of coverage in this case, it is necessary to add the registered owner of the vehicle as an additional insured on the commercial auto policy.

These endorsements are simple and inexpensive to obtain – but you do need to ask for them!

Call me – I can help!

Carol L. Corporales, CIC
Wateridge Insurance Services
858.202.6187 Direct
ccorporales@wateridge.com

Employee Theft - A Big Exposure Often Overlooked

Employee Theft

Not just office supplies! We’re talking about cash, revenues, PROFITS!

According to Chubb Insurance – more than one in three private companies, many of which were uninsured, experienced an employee theft averaging nearly $350,000 within the past five years.

Crime related losses are not typically covered under commercial property insurance policies. Most thefts go undetected for years and when finally discovered can amount to significant damages – even crippling if not killing the organization.

Employee theft can range from the simple isolated event to the elaborate re-occurring scheme and involve one or more employees. The bookkeeper or controller is not always to blame – surveys suggest that trouble can come from any type of employee and that more than half comes from upper management.

Methods of employee theft typically include:

• Manipulation of company records
• Direct theft of cash or products
• Theft of information 

A study in 2008 by the Association of Certified Fraud Examiners revealed that the median loss suffered by organizations with fewer than 100 employees was $200,000.

In the last three years I’ve had 3 clients hit with significant employee theft losses. Two were cases in which an employee diverted receivables to their own bank account the third manipulated work hours and the payout of vacation time through a third party payroll company. In all cases, these were trusted employees and worse yet, family friends of the owners and executives. One owner told me “I knew him since he was 18…he was in my will.” Another executive told me that the person spent holidays with their family – and now understood how they could afford to be coming in with Starbucks most days when the owners themselves were sometimes foregoing their own income to make payroll! The stories are usually heartbreaking on many levels. 

These thefts ranged from $30K to $250K and took place over 1-2 years.

Diligent hiring practices, mandatory vacation policies, accounting controls and oversight work well but may not always be enough. Protecting the company’s balance sheet can be easy and inexpensive with the addition of employee theft coverage on your commercial property insurance policy. 

Ask me about Employee Theft coverage for your business.

Information Liability - Event Invitation! Come find out what it's all about.

Information Liability

It has many names – Privacy Insurance, Cyber Liability, E-Commerce Risk Insurance…

As businesses of all types increase their reliance on information and networks, while assuming responsibility for their customers’ data, they face increased exposure to computer attacks, viruses and security breaches.

Are you exposed? What are the ramifications of a breach?

Here’s a quick assessment -

This liability exposure applies to those who: 

• Are entrusted with sensitive data by others (think clients, customers, patients, employees)
• Collect or are in possession of credit information, trade secrets and or proprietary information of others 
• Export data in the course of their operations – thus exposed to the inherent risk of electronic virus transmission
• Are concerned about denial of service attacks or security breaches that impact customers economically
• Are concerned about theft of others' trade secrets from breaches or rogue employees

If any of these apply to you, then come learn more from two industry experts about your potential exposures and strategies to reduce your risk.

June 16^th

8:00am to 9:00am

Studley Conference Room, Carmel Valley

Speakers:

Louis Filaccio, VP Technology/e-Business Underwriting, CNA Insurance

Jefferi Hamilton, Managing Trial Attorney, Law Offices of Jefferi Hamilton

Space is limited – register early via email to ccorporales@wateridge.com

Data Breach Cost Considerations

Are you concerned about your own costs to restore your network caused by a virus, denial of service attack, breach or extortion event? In addition to covering your own loss and defense costs, there are remediation costs to consider as well…

Information Liability policies typically provide coverage for:

• Costs to remedy a privacy compliance deficiency
• Costs to notify those impacted by a breach
• Costs to procure credit monitoring services
• Costs to restore reputation
• Defense of a proceeding brought by a privacy regulator, including remediation
• Privacy Injury Liability - private actions due to privacy rights violations, including emotional distress
• Network Security Liability - financial loss due to an infection of others' network caused by the Insured  
• Content Injury Liability - covers all forms of electronic media that may cause a personal injury or infringement
• Network Extortion - pays for an extortionists demands to prevent a network loss or execution of a threat
• Network Damage - pays for the restoration costs of your network to pre-loss conditions due to an exploit
• Business Interruption/Extra Expense - pays for lost online and offline income caused by a network dependent exploit and extra expense to mitigate the loss

• Pre-Claim Assistance - resources prior to a claim being commenced in an effort to mitigate loss and hopefully avoid the claim or be in the best position to handle it effectively should a claim be submitted.

Directors & Officers Insurance - The Critical Basics

Hello!
I wanted to let you know about a presentation that is coming up on the topic of D&O insurance coverage.

Founder Roundtable  Presents: Directors & Officers Insurance – The Critical Basics

May 12, 2011, 8:15 - 10:00am   Barrister Suites Board Room, San Diego, CA 92130

Speaker:  Carol Corporales, CIC

See the calendar of events and register for this topic at http://founderroundtable.com/directors-and-officers-insurance-the-critical-basics/

Directors & Officers Insurance – The Critical Basics     An overview of the basic intelligence necessary to consider, evaluate and negotiate effective coverage for the personal asset protection of executives, and the balance sheet protection of the corporation.

Topic Description: 

Directors and Officers of both public and private companies are subject to scrutiny from a myriad of stakeholders. Expectations as to duty of care, litigation and defense costs continue to rise. Insurance products containing hundreds of variables differ among each carrier. The complex nature of D&O policies makes protecting the personal assets of executives a daunting task.   

During this session, you will learn…

·        Why D&O insurance is necessary and how it applies to all companies

·        What questions to ask when evaluating quotes

·        How to avoid coverage pitfalls and denial of claims

·        How to identify policy language that drastically reduces your coverage

·        Critical coverage triggers

During the session, we will talk about where suits are coming from and how much insurance is appropriate. You will be introduced to the most common policy exclusions and ways to minimize their impact. An explanation of the three insuring agreements will help you determine what type of policy is right for your company. Most importantly you will learn the critical things you must do in order to activate coverage and avoid claims being denied.

You’ll come away from this session armed with the information necessary to make the most appropriate choices and decisions for protecting your executives and corporate balance sheet.

Register at http://founderroundtable.com/directors-and-officers-insurance-the-critical-basics/

New Laws Effecting CA Employers

We want to alert you to some recent court, legislative and regulatory agency decisions that will have a significant impact upon employers in California and in other states.  Two of the most recent employment law issues that caught our attention were the recent ruling by the National Labor Relations Board against a company specific to their social networking policies (Facebook/ Twitter et al) and the new Department of Labor program designed to assist workers with wage and hour claims by connecting them to a private attorney to handle their case.

Social networking sites have become mainstream and are here to stay, creating challenges for employers managing their company policies on employee use of social networking both within and outside of the workplace. The recent National Labor Relations Board (NLRB) ruling that Facebook postings are “protected” in many instances and overbroad policies are unlawful is just one additional- and urgent- sign for employers that they need to develop properly drafted, very specific company policies addressing the use of social networking sites.

Social networking poses many potentially challenging issues for employers and owners in many other areas, including hiring discrimination, defamation, privacy & confidentiality, infringement upon Federal Trade Commission marketing guidelines, termination of employment, workplace violence / workplace security, and harassment.

Consequently, ACG consultants will be continuing to strongly encourage all our clients to be extremely diligent about updating both their company employee handbook and social networking policies. By properly updating these critical employment documents, employers can protect against legal exposure and also provide their HR administrative function with the guidelines to effectively deal with any challenges that arise specific to social networking issues. Bottom line, the time for employers to properly develop their own company-specific social networking policy is now, rather than in response to threatened litigation or some other challenge.

Additionally, the federal Department of Labor’s Wage and Hour Division (WHD) recently announced a new program to assist workers in pursuing wage and hour claims against their current or former employers by connecting them with private attorneys. What this means is many workers with claims specific to laws such as the Family Medical Leave Act (FMLA) and the federal Fair Labor Standards Act (FLSA) will be receiving notification that due to the “high volume of claims and lack of agency resources,” the WHD will provide them with contact information for private attorneys with expertise in wage and hour or protected leave laws.

The WHD has also stated that they will provide assistance to both the employee and their attorney in obtaining any relevant case information that may be advantageous while pursuing legal action against the employer.

In the past, many complaints filed the WHD would get lost in the bureaucracy and ultimately would be dismissed. With the advent of this new program, however, we believe it is reasonable to assume that many more FMLA and wage and hour related lawsuits will now be filed against employers by attorneys who are referred by the WHD.

In summary, stepped up regulatory enforcement specific to employment and workplace safety compliance is a continuing trend at both the federal and state level.  The newly implemented WHD/DOL program described here is just one of many similar programs we expect to be implemented in the coming year.  One of the most effective defenses to protect against compliance exposures is for businesses to perform a complete HR “audit” of their company that includes all of the company’s wage and hour practices and employment policies, including social networking.  Lastly, every company employee handbook should be updated or at least reviewed annually.

Clients have access to free and discounted services to address these protective measures. For more information, contact Carol L. Corporales at 858.202.6187 Directly or by email at

ccorporales@wateridge.com

D & O Insurance Binders - Potential Pitfalls

You’ve told your Broker/Agent to accept/bind coverage on your behalf for a new Directors  & Officers or Professional Liability policy and in turn you received a “Binder.” According to the California Department of Insurance, a binder

“is a temporary or preliminary agreement which provides coverage until a policy

can be written or delivered.”

 So, at this point you might very well think that coverage is in place – but it may not be.

There are three potential pitfalls of which insureds need to be aware.

Insurance quotes often come with “subjectivities” upon which coverage is conditional on “receipt and acceptance” of these items. Binders sometimes contain subjectivities as well.

• If these items are not received within the allotted timeframe, coverage could be in jeopardy. 
• “Acceptance” is not usually defined, leaving it up to the insured or Broker/Agent to obtain confirmation – another potential loop hole.
• Lastly, it is important to make sure that the binder, which is typically good for 30-60 days, does not expire prior to issuance of the policy which can void coverage altogether.

Case law presents a multitude of variables by which insurers have alleged no coverage for claims reported during the binder period. For this reason, insureds need to be aware of the pitfalls and understand that claims may be in jeopardy of declination – particularly if subjectivities or conditions have not been met or if the binder has expired prior to policy issuance.

Best Defense:

• Get quotes well in advance – with time enough to complete and submit all “subjectivities” prior to the policy effective date or at least within the time required
• Once all subjectivities have been provided, press for issuance of the policy
• You can ask your Broker/Agent to state that Binders will not be accepted on the Acord application when they request quotes – but this may not be honored
• Do not let the binder expire before the policy is issued – extensions are usually available if necessary upon request

Binders are commonplace; the point here is that insureds need to be alert as to the terms of the Binder and when a policy is issued.

OSHA Log of Work-Related Injuries - Time to Post

It is nearly that time of year again - when Cal OSHA requires the Log of Work-Related Injuries and Illnesses (Form 300) be posted for the previous calendar year from February 1 through April 30.

You must save the Cal/OSHA Form 300, the privacy case list (if one exists), the Cal/OSHA Form 300A, and the Cal/OSHA Form 301 Incident Reports for five (5) years following the end of the calendar year that these records cover. Failure to maintain and post the log could result in a Cal OSHA citation and fines costing an employer thousands of dollars.

If you need more information, or the forms, click here.

For a listing of those exempt industries in California, click here.

If you would like to discuss your situation, feel free to contact me at:  858-202-6187.

Current clients can also contact Chris Malicki at the Pacific Safety Council for more information: 858-621-2313 x120