“You can’t know where you’re going until you know where you’ve been.” We couldn’t agree more. So, as we embark on the new year, we’ve asked our brokers to share their views on major 2016 events and more importantly what you need to know for a successful and happy new year. Here’s what they had to say.
Broker insight #1 – Take a critical look at your D&O policy. Ensure that coverage is expanded as broadly as possible to include proper triggers in the event of a regulatory investigation. Ensure adequate limits of insurance for both executives and the company given the potential for legal expenses from multiple defense counsel teams. Here’s why -
Regulatory enforcement – noncompliance can lead to costly fines and penalties
2016 was an active year for SEC and DOJ enforcement and not just for public companies. Privately held companies like Theranos saw action from the SEC signifying increased and ongoing investigations into executive misconduct. Other regulatory agencies were also active on the employment and employee benefits, including review of wage and hour issues, employee / independent contractor misclassification, joint employer liability, and fiduciary and benefits plan administration under the Affordable Care Act.
So what? Well unfortunately, most of these fines and penalties are not covered in insurance policies with limited exceptions. However, costs to defend one’s self can be covered and those costs can be substantial. With the U.S. Department of Justice’s guidance (see recent memo from Deputy Attorney General Sally Yates), regulators are charged with adopting the policy to focus on individual accountability for corporate wrongdoing. A well-crafted D&O policy is critical to ensure coverage for leadership as they navigate these murky waters of personal liability.
Broker insight #2 – You may not think you need comprehensive cyber coverage, but the government does. This is the year every organization should assess their cyber protection measures and data backup procedures with an expert well versed in cyber risk and insurance as opposed to a generalist. Cyber coverage offered as part of a business insurance package is probably not going to protect you in the event of a breach.
Newly introduced cyber laws to protect your business from data breaches
Cyber threats have hit a tipping point in 2016. This year more than 25 states either considered or formally introduced new regulations, resolutions or formal bills to address cyber security and notification requirements.
What does this mean? New cyber laws broaden the definition of Personally Identifiable Information (PII), and require businesses to implement security measures and for educational institutions to notify parents or government entities of a breach. New York State is leading the way with ground breaking legislation that requires financial institutions to establish a cyber security program, adopt a written cybersecurity policy, designate a Chief Information Security Officer and have policies and procedures that protect information held by third party vendors. As each state has unique laws, it is critical to your business that you are in compliance with your local jurisdiction.
Broker insight #3 - Consider partnerships with urgent care facilities and telemedicine providers to reduce workers’ compensation costs.
There are ways to reduce workers’ compensation costs
Many organizations feel like their hands are tied when it comes to lowering workers’ compensation expenses. However, there are two options that are not frequently leveraged that can make a substantial impact in reducing workers’ compensation costs: 1) partnering with occupational medicine clinics and 2) engaging a telemedicine provider.
Establishing medical provider relationships in advance of claims occurring can reduce medical treatment costs by limiting over-prescription of medical treatment and encouraging employees to return to work earlier. To achieve these goals, employers should consider scheduling face-to-face meetings with medical providers to establish firm medical treatment protocols and understand the provider’s medical treatment philosophy.
Telemedicine is not a new service, but this may be your year to consider it. By giving employees access to around-the-clock medical treatment, you can eliminate an in person office visit and reduce claim costs.
Broker insight #4 – Keeping up with employment practices liability laws is a full time job and odds are your organization could find itself fighting an EPL claim sooner or later. In this ever changing business environment, the best thing you can do is verify that your organization has an Employment Practice Liability insurance policy that covers defense costs for employee misclassification lawsuits. Be vigilant in your understanding of evolving employment law and engage a law firm to review company policies and procedures annually. This includes employee handbooks, codes of conduct and employee training guides.
All employers get sued
2016’s ongoing rise of wage & hour class action claims as a result of the Department of Labor cracking down on employee misclassification of independent contractors is showing no slow down. Over the last 20 years employee lawsuits have risen roughly 400% with 41% of those claims brought against private companies that have less than 100 employees. The financial damage can be sizeable with jury awards averaging $217,000.
As these claims have become more frequent, insurers have introduced endorsements designed to include coverage for defense costs.
Minimizing Employment Practices Liability exposure means complying with employment law, understanding emerging claims trends (religious, gender/sexual orientation, pregnancy) and maintaining a professional work environment.
Broker insight #5 – Offering employees the option to work ‘anywhere, anytime’ is great and even cool. Just be sure that you’re adequately covered. Ensure your organization is protected with cyber data security policies, robust security software, and a plan for data recovery. This also means having a firm grasp of wage and hour polices, employment laws and proper job descriptions that are updated regularly to appropriately reflect job status as either exempt or non- exempt to ensure that organizations are in compliance with the changing rules in regulations that are currently being challenged.
Working wherever, whenever – Strengthening your workforce with flexible work options
The demand for organizations to provide flexible work options is here to stay. Younger workers continue to stretch the definition of ‘the office” and this model is now the rule and not the exception. Creating a dynamic, flexible and supportive culture that attracts employees has great advantages but also increased responsibilities that force employers to clearly identify job descriptions, work behavior and data security protocols.
With an increase in remote workplaces, organizations need to understand and be prepared for cyber security breaches that are more easily penetrated through wireless networks.
Broker insight #6 – Make sure your insurance coverage is equipped to support your 2017 business goals and the risks associated with your plans. Competitive rates are expected to continue through 2017. Take this opportunity to lock in attractive insurance rates and add coverage.
Competitive insurance market provides greater insurance options and better pricing
Competitive insurance rates for business insurance will most likely continue through 2017, allowing organizations an opportunity to significantly increase insurance protection. Whether through a higher limits structure in current policies or by adding additional lines of coverage, organizations can negotiate favorable pricing or add coverage once thought to be too expensive.
Additional coverage features such as wage and hour defense costs, workplace violence expense, social engineering or fraudulent instruction indemnity, and immigration claims defense coverage among many others are now available at rates that most organizations can afford.
See what we’ve been working on to help keep you in the know and fully covered. Read our latest Broker Insight Report:
How Insurance Oversights Can Lead to Devastating Claims Denials