Tag: Bodily Injury

Workers’ Compensation Insurance Limits

Workers’ Compensation Insurance comes in two parts, coverage A and coverage B.  Coverage B is technically called Employers’ Liability Insurance, but the 2 types of insurance are often generically referred to as workers comp insurance in common usage.  With respect to employees injured on the job, coverage A (Work Comp) provides unlimited coverage of all medical expenses, a set percentage of lost wages (which varies by state), a lump sum for disabling injuries as well as a disfigurement and death benefit.  Business owners often confuse the coverage that part B limits. This effects workers comp benefits, but workers comp benefits are established by the individual state’s statutes. They generally cover all medical expenses when they are implicated.  The limits on a policy only relate to employers’ liability claims.

Thus, it is important to know when employers’ liability limits could come into play.  As written about in a previous blog entry, the most common types of employers’ liability claims are as follows:

(1) Third party claims: these claims are generally brought about by an injured employee against a manufacturer of the object causing the employee’s injury. The manufacturer then brings a claim against the employer for contributory negligence.

(2) Dual capacity claims:  This is similar to the above, but it comes up when the employer is also a manufacturer.  If an employee is injured by a defective product manufactured by his or her employer, he or she might bring a product liability claim against the employer in addition to claiming workers’ compensation benefits.

(3) Loss of consortium or other services to family members: loss of consortium and other claims such as modifications to homes or lost parental services resulting from a workplace injury can be covered.

(4) Consequential bodily injury: claims by the spouse or other family members of an injured employee arising from the injury such as a heart attack due to the stress of the news of the employee injury.

(5) Intentional acts/torts by the employer: claims covered in some jurisdictions such as knowingly allowing employees to work in unsafe workplace conditions.

Employers’ liability claims are rare.  However, they can occur and are often costly when they occur.  Employers’ liability coverage can cover damages/judgments, settlements, legal defense fees and other court costs.  Increased employers’ liability limits generally only increase the cost of the workers’ compensation insurance policy by around 1%.  Statutory minimum limits are usually (in all but a couple states) $100,000 bodily injury by accident (each accident), $500,000 bodily injury by disease (policy limit), and $100,000 bodily injury by disease (per each employee).  These limits can also be increased to $500,000/$500,000/$500,000 or $1,000,000/$1,000,000/$1,000,000 in almost all cases as well as $2,000,000/$2,000,000/$2,000,000 is sometimes available.

Now that we have created a better understanding of why increased limits could come into play, what are the most common reasons for a business owner to need increased employers’ liability limits?  The most common reason to get increased limits is probably that they are required by a contract important to a business owner.  This is a common request, and it is the most common reason our agency sees for increased limits.  However, there are several other good reasons to use higher than statutory minimum limits. To include a workers’ comp and employers’ liability policy under most umbrella policies, the limits generally need to be at least $500,000/$500,000/$500,000 and sometimes as high $1,000,000/$1,000,000/$1,000,000 limits.  Another good reason to have increased limits is for businesses which are in industries that are more likely to have an employers’ liability claim arise.  Such industries are generally higher risk industries which are more likely to experience devastating claims or manufacturing industries.  Devastating claims are more likely to lead to loss of consortium or other services by family members type claims.  Additionally, manufacturers are most likely to risk claims from disease exposures or dual capacity products liability type claims from employees.  This should provide an understanding of when it is worthwhile to consider purchasing a slightly more expensive workers comp policy.

EPLI (Employment Practices Liability Insurance)

What you need to know about Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance

 

The Need

I’ve seen numerous places that the Equal Employment Opportunity Commission (EEOC) receives around 100,000 charges of employment discrimination a year — hardly a drop in the bucket.  Employment discrimination claims are only one type of claim covered by EPLI Insurance. Furthermore, businesses are three times more likely to be sued by an employee or former employee than to experience fire damage (something nearly every business insures against occurring). In addition to heavy defense costs, the average compensatory award in a federal employment discrimination case is around $500,000 and growing. This excludes defense costs and punitive damages. In summary, EPLI related claims are relatively common and are growing in frequency. Such claims can lead to a devastating liability for businesses.

Basic Overview

As similarly described in resources devoted to the ins and outs of insurance coverage, like www.IRMI.com, Employment Practices Liability Insurance is a type of liability insurance covering wrongful acts arising from the employment process. EPLI provides protection against many kinds of employee lawsuits, including claims of:

Wrongful termination
Retaliation
Sexual harassment
Discrimination
Breach of employment contract
Negligent evaluation
Failure to promote
Wrongful discipline
Deprivation of career opportunity
Wrongful infliction of emotional distress
Mismanagement of employee benefit plans

The most frequent types of claims covered under such policies include: wrongful termination, discrimination, sexual harassment, and retaliation. The policies generally cover management personnel, directors and officers, and even employees as insureds. The most common exclusions are for bodily injury, property damage, and intentional/dishonest acts. Employment Practices Liability Insurance policies are written on a claims-made basis. The forms contain “shrinking limits” provisions, meaning that insurer payment of defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability policies, in which defense is covered in addition to policy limits. Although EPLI is available as a stand-alone coverage, it is also frequently sold as part of a management liability package policy.

 

 

Employment Practices Liability Insurance Coverage can vary substantially among insurance carriers. Some of the most important considerations include whose acts are covered which is beneficial to be as broad as possible. This is especially beneficial to independent contractors, a company’s board of directors (and it’s affiliates) and leased or seasonal employees and volunteers. The definition of which claims are covered can vary. It is beneficial to the insured for the definition to be as broad as possible. Another relevant clause related to EPLI coverage is the “hammer clause”. A strict hammer clause means an insurer must seek an insured’s approval prior to accepting a settlement offer. This requires the insured to be responsible for all additional costs which accrue above the cost of an offered settlement. Typically the insurer recommends the insured accept. A soft hammer is sometimes available which is similar to the hammer clause. Except that the insured and insurer split the costs above the cost of the settlement at some agreed upon percentage (often 50/50). Retention limits and limits of insurance are also relevant. There are often higher deductibles/retention associated with EPLI claims than other types of insurance. Retention levels and limits of insurance substantially affect the cost of EPLI policies.

Claims Examples

The Hartford, one of the leaders in providing Employment Practices Liability Insurance, provides numerous claims examples. One example includes a retaliation claim where an employment offer was rescinded. The claimant alleged the offer was rescinded due to complaints about sexual harassment where as the employer claims the offer was rescinded due to the applicant’s overreaching in the hiring process. The case didn’t settle due to the applicant’s hefty demands. While the insured prevailed at trial with a defense verdict, they were left with $254,000 in defense costs (which are generally covered under EPLI policies). As with many examples, the insured may prevail in the claim (or make a modest settlement), but defense costs often run up into the hundreds of thousands. Without adequate EPLI insurance, that could lead to devastating liability for insureds (or lead to ill-advised settlements to avoid defense costs).

 

 

Ride Sharing and Auto Insurance

Our country is dealing with some phenomenon’s that we have never experienced before and its causing some big changes in the insurance business.  Not all insurance companies have caught up to the technological advances of Drones, Driverless Cars and Ride Sharing or “Transportation Network Companies” as states are now referring to now.

Drones and Driverless cars are going to have to be an article for another day. For now, companies like Uber and Lyft are quickly changing how Americans get around. They both offer an opportunity for individuals to make money off their personal vehicle by giving others a ride for a fee. Ride sharing is a trend that is developing into a major industry that insurance companies and state lawmakers have quickly had to adjust to. Most states are opening up to this, some more openly than others as you would expect and the same goes with insurance companies.

 

What does Ride sharing have to do with Insurance?

Most personal auto policies are going to exclude business use from coverage on your policy. Many carriers have “business use” as an option, however it is important to know what that means as the coverage can vary greatly from carrier to carrier. So if you are driving for one of the new or existing Ride sharing companies it is important to know your personal auto coverage well. If Ride sharing is not covered at all, you really should take action. Either by seeing if a commercial policy is available with your current insurance company that would cover Ride sharing (not all carriers do) or by shopping for a new personal or commercial auto policy that will cover these operations.

 

Limits, limits limits….

As insurance agents we preach that the state minimum limits are very risky for your personal auto policy. In states like Missouri the state minimum liability limits are $25,000 for bodily injury, $50,000 for total bodily injury and $10,000 for total property damage. Think about the last time you went to the doctor with anything serious. It’s not far fetched to say these types of limits are not hard to meet in any serious vehicle accident. Consider if you were to have a paying customer in the car or possibly multiple. Many articles are pointing out the coverage gaps that Ride sharing brings about. This is important, however the limits of your policy are something that need to be addressed even if your insurance carrier says they will cover the claim. The coverage doesn’t matter as much if the limit of the coverage is too small to cover the claims.

For example; say you were to get into an accident which caused injuries to the another person which resulted in bodily injury claims of $90,000. If you have state minimum limits in Missouri with $25,000 in bodily injury liability per person this means $65,000 of the damages are not covered by your insurance and that goes back to you personally. Forget about mortgage, student loans and all other bills, that is a big hit that leaves nothing for you to show for it. If you had spent a little more on your auto insurance policy and had limits that were more acceptable, your insurance could cover this.

The amount an agent would recommend for auto insurance is going to vary on your individual circumstances and risk. Generally most recommended commercial auto policies have limits of at least $1 Million combined single limit. This allows a sufficient baseline of liability limits to make sure your covered claims are covered to the amount you would need them to be. The minimum limits we would typically recommend for a personal auto policy are around $100,000 bodily injury for each person, $300,000 for bodily injury liability for each accident and $100,000 Property Damage Liability. If you add the Ride-Share exposure, increasing those limits to at least $500,000 or $1 Million individually or combined single limit is better to make sure your protected for the full amount you need. This does cost a little more in premium. However, if a claim occurs the premium difference is the last thing you are going to worry about. Especially if your limits are less than the cost of the accident.

Employer’s Liability Coverage Explained

Most business owners are familiar with workers’ compensation insurance. However, many do not know it almost always comes in two parts. There is workers’ compensation coverage and employer’s liability coverage. Workers’ compensation coverage has unlimited benefits for covered claims where as employer’s liability insurance has limits to its benefits. Employer’s liability insurance protects employers from claims caused by workplace conditions or practices which are not covered by workers’ compensation coverage.

Employer’s liability claims are very rare. However, they can occur and are often costly when they occur. Employer’s liability coverage can cover damages, judgments, settlements, legal defense fees, and other court costs. Increased employer’s liability limits generally only increase the cost of the workers’ compensation insurance policy by around 1%. Employers liability coverage is part of every work comp policy. You may be able to increase or decrease the amount of coverage (and the cost) based on your needs and risk exposure. This is a good reason to partner with an experienced independent insurance agent because they will be able to advise on how much coverage your business actually needs.

The most common types of employer’s liability limits are as follows:

  • Third Party Claims
  • Dual Capacity Claims
  • Loss of Consortium
  • Consequential bodily injury
  • Intentional acts/torts by the employer

(1) Third party claims: these are generally claims brought by an injured employee against a manufacturer of the object causing the employee’s injury. The manufacturer then brings a claim against the employer for contributory negligence.

(2) Dual capacity claims: Dual Capacity Claims are similar to Third Party Claims, but it comes up when the employer is also a manufacturer. If an employee is injured by a defective product manufactured by their employer, they might bring a product liability claim against the employer in addition to claiming workers’ compensation benefits.

(3) Loss of consortium or other services to family members: loss of consortium and other claims such as modifications to homes or lost parental services resulting from a workplace injury can be covered.

(4) Consequential bodily injury: claims by a spouse or other family member of an injured employee arising from the injury such as a heart attack due to the stress of the news of the employee injury. It is common for these types of claims to include alleged mental injuries. Legislative action in many states has narrowed the applicability of this type of lawsuit so it is important to know the laws within the state or states that your business operates in.

(5) Intentional acts/torts by the employer: claims covered in some jurisdictions such as knowingly allowing employees to work in unsafe workplace conditions.

Employers Liability Insurance Coverage Explained