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December 1995
In this issue
Ergonomics Update
The advent of advanced computer systems did not make life easier for you. A decade ago, carpal tunnel syndrome was fairly rare. Now it is the cause of the second most frequently performed surgery. Other computer related injuries include neck and low-back pain.
Most of these complaints can be resolved with a little ergonomic education and a change of habits. Correcting your posture, taking reasonable breaks, and using good equipment properly will go a long way toward preventing the pains—and expenses—of these injuries.
- Set the top of your monitor at eye level directly in front of you.
- Adjust the height of your chair so that your feet are on the ground, your back is against the seat back, and your knees are level or slightly lower than your hips.
- Adjust the table's height so that your arms bend 90 degrees and your hands rest flat on the keyboard without having to be extended or flexed.
- Fit the low back support into the curve of your lower back. Do not place it so low as to push your buttocks forward, forcing your lumbar spine away from the supporting cushion.
- Adjust the armrests so that, with your arms at 90 degrees and your shoulders completely relaxed and dropped, your forearms will rest comfortably upon them. The armrests should not be too wide apart, forcing you to hold your arms away from your side.
- Rest against your chair. Sit straight and allow yourself to tilt back whenever it feels comfortable.
- Use a wrist cushion, and avoid bending your wrists forward or backward or resting them on a hard surface. Avoid wrist deviations either to the little finger or thumb side; instead, move your forearm.
- Tap lightly on the keyboard. Don't take your aggressions out on the plastic—it will always win, and you will go faster with a lighter touch.
- Wear a headset when using the phone for extended periods.
- Take five to ten minute breaks from keypunching every hour. During these breaks, do wrist and back stretches.
- Focus your eyes on an object at least 20 feet away during this break (or for shorter breaks several times each hour).
- Try to eliminate significant reflection from your monitor's screen. Look for the source; close the blinds, lower the fluorescent lighting, and use table lamps that focus on your work and not the monitor.
- When several monitors are used, place them as close together as possible.
- Get help at the first sign of any discomfort that may be related to your work. Prevention is a whole lot easier than cure.
Employment Related Practices Update
The application form is your first line of inquiry into a job candidate's qualifications. It provides the basis for your initial interview with the candidate, so it should gather as much information as possible, within the requirements of the law.
Understanding the true job-related requirements of the vacant position is key to an effective and legally sound interviewing process. If a qualification is necessary for successful job performance, you can safely ask candidates about it. If, on the other hand, a skill or experience is not required to perform a function successfully, questions about that skill or experience are probably illegal.
Process all candidates equally through your hiring procedure. In case of a legal challenge, it's important to be able to show that you have used a consistent procedure. Have every candidate complete an application. If you
use testing, test all applicants. Check everyone's references. Then put each applicant's information in a candidate pool for evaluation and selection.
In cases claiming hiring discrimination, emphasis has been given to statistics gathered on applications collected over time. For example, if someone charges you with not hiring divorced people, and an audit of your applications shows that a disproportionate number of divorced people were bypassed, a case for discrimination against divorced people can be made.
A good application form can help overcome the problems associated with discrimination in hiring. A question on an application is safe if it is job-related and the information requested is necessary for successful evaluation.
What To Ask And What Not To Ask
Your application form should capture information about the candidate's work experience and qualifications for the position. The basic areas to explore, in addition to name, address, and phone number, are employment history, educational background, and job-related skills.
Various federal and state laws prohibit discrimination because of age, sex, race, color, religious creed, national origin, ancestry, physical disability, sexual orientation, or military status. Avoid these topics to protect you from suits.
Avoid asking questions about:
- AGE OR DATE OF BIRTH.
- Unless you can prove that the applicant needs to be a certain age to qualify (such as for licensing or driving a car), don't ask.
- GENDER.
- The only place this applies is for rest room attendants.
- LANGUAGE SPOKEN.
- Use caution. You may require effective communication, but you may not eliminate a candidate due to a slight accent.
- HOMEOWNER OR RENTER.
- Don't ask. You may be discriminating against protected classes.
- NUMBER OF CHILDREN, CHILD CARE ARRANGEMENTS, MARITAL STATUS.
- This is confidential information.
- CLUB MEMBERSHIPS.
- Don't ask. This can reveal religious affiliation or ethnic background.
- PHOTOGRAPHS.
- Avoid these. They may divulge national origin. Avoid height and weight requirements as well.
- PHYSICAL DISABILITY.
- The ADA prohibits pre-employment, pre-offer inquiries regarding disability. After you describe the position to the candidate, you may ask whether the candidate can perform the functions of the job as described, with or without reasonable accommodation. The need for reasonable accommodation should not be a factor when considering the disabled individual. You may not ask specifically about a disability, but you can make a job offer that is conditioned on satisfactory results of a post-offer medical examination or inquiry, provided that this condition is made clear to all applicants for the position.
- ARREST RECORDS.
- Don't ask. You may ask if the person is eligible to be bonded, since that might be a requirement for certain positions.
Disclaimer
Only the employment contract or intended contract should imply a promise of employment. Be sure your application contains a disclaimer, such as, "Nothing contained here shall constitute an employment contract; any contract of employment shall be executed in writing."
FMLA - Update
The Family Medical Leave Act sets federal guidelines that require U.S. businesses with 50 or more employees to offer employees up to 12 weeks of unpaid leave in any 12-month period for certain circumstances. The Act went into effect August 5, 1993. Here are answers to common questions a business owner might ask regarding the Act:
- Q: My company employs 48 persons. Am I required to offer any unpaid leave under the Family Medical Leave Act?
- A: No. Only companies that employ 50 or more persons are so required. If your company grows to 50 or more employees in the future, it will then come under the provisions of the Act.
- Q: For what reasons am I required to offer unpaid leave?
- A: Companies must offer up to 12 weeks unpaid leave for the following reasons:
- To allow the employee to care for a close family member who is suffering from a "serious health condition."
- If the employee's own serious health condition makes him or her unable to perform the job.
- For childbirth. Leave must be offered to new mothers and to new fathers who request it for childbirth and/or to care for the child.
- For the care of an adopted or foster child when the child enters the employee's home.
- Q: How can I be sure an employee's request for leave is warranted under the terms of the Act?
- A: The employee is required to submit documentation from the health care provider treating the employee or family member, from the adoption agency, or from social services (in the case of a foster child). In some cases, employers may require further opinions from physicians they select, or periodic reports from an employee on leave.
- Q: Must each leave last 12 weeks?
- A: No. You are required only to offer "up to" 12 weeks. If the employee takes less than 12 weeks at one time, however, you may be required to offer further leave up to a total of 12 weeks within the one-year period—for a relapse of an illness or for a later birth or adoption of a child, for instance. You are not required to offer more than a total of 12 weeks per year, however.
- Q: Does the Act require me to pay my employees for any of the 12 weeks leave I must offer?
- A: No, but see the next question.
- Q: If I already offer some paid leave for certain circumstances, must I continue to pay employees for such leave?
- A: Yes. The provisions of the Act do not supersede existing benefits to your employees. However, your company is not required to offer any more in terms of paid leave than it already does.
- Q: I'm afraid my business would be seriously damaged if I had to give some of my higher-level employees such leave. Do I have any recourse?
- A: You may. The Act provides exemptions for certain highly compensated employees whose leave would result in "substantial and grievous economic injury" to the operations of the business. Under the provisions of the Act, you may deny such an employee a request for leave.
- Q: I have a married couple working for me. Must I offer both husband and wife up to 12 weeks leave for the same circumstances?
- A: Under the terms of the Act, the employer of a married couple is required to offer only up to 12 weeks paid leave for both husband and wife under the same circumstances. However, the person who did not already take the 12 weeks of leave could for another reason.
- Q: Must I offer an employee exactly the same job at exactly the same pay when he or she returns from leave?
- A: Yes and no. You must offer the employee an "equivalent position" after leave, but not necessarily the very same job. You must, however, offer the same benefits, pay, and other terms of employment the employee received before the leave began.
- Q: Who decides what an "equivalent position" is?
- A: The employer decides. However, an employee may appeal the employer's decision under the terms of the Act.
- Q: What if an employee requests 12 weeks leave every year—must I grant it?
- A: Yes, if the employee can provide documentation of need.
- Q: Can an employee come into my office with a request for leave and expect it to begin the next day? In other words, am I allowed to require a certain amount of notice?
- A: If the purpose of the leave is "foreseeable," the Act says, the employer can require up to 30 days' notice before leave begins; otherwise, the employee must give "practicable" notice.
The Reservation of Rights Letter
Reservation-of-rights letters often leave our insureds scratching their heads in shock and anger. What does the insurer mean? How should we react to the letter? How does one deal with gray coverage areas? This article examines some key facets of reservation-of-rights letters and discusses ways to react when one is received.
"Does a reservation of rights mean I have no coverage?" Not necessarily. It does suggest that a cloud hovers over your coverage. It signals that the insurer thinks there might be grounds to deny coverage for at least part of the claim. A claim can allege some counts that the policy may or may not cover, such as intentional torts, financial loss with no property damage or bodily injury, or a matter clearly outside the policy scope. A claim may include both covered and excluded matters.
Months may pass before an insurer knows enough to tell whether coverage exists. Only a full investigation or trial might determine if facts support a denial of coverage. In the meantime, the clock ticks. Insurers must enter an appearance, hire a defense lawyer, and file an answer to the lawsuit.
If an insurer does not reserve rights and defends a claim, but later discovers that "questionable" allegations raise coverage issues, the insurer may be estopped from raising a coverage defense. Courts could say that by its acts, an insurer waived its right to deny coverage. Rather than deny coverage outright—a high-stakes gesture that might trigger a bad faith lawsuit—or proceed as though nothing was awry, the insurer seeks middle ground by sending a reservation-of-rights letter. The letter says in effect, "We are investigating this claim but preserve our right to later deny coverage if investigation shows that it is not a covered loss." Insureds cannot claim that the insurer, by its actions, led the policyholder to believe that coverage existed.
As confrontational as reservation-of-rights letters tend to be, they steer insurers between the twin perils of total acceptance or total denial of coverage. Reservation-of-rights letters allow the insurer to keep its options open. If no strong coverage defenses emerge, it has not lost face. Reservation-of-rights letters give insurers more time to investigate a claim or unearth facts through the discovery process. Erring on the side of caution, an insurer can disclaim coverage if investigation reveals that the facts do not support coverage.
There are several options for insureds who receive reservation of rights letters.
Ignore it.
Maybe the insurer is correct in reserving its coverage rights. For example, maybe a suit seeks punitive damages and your policy clearly excludes them. Or perhaps your policy does not exclude them but your state law forbids coverage on public-policy grounds. In some cases, insureds and brokers report a loss simply for due diligence, or to test the coverage waters, not because they expect that the loss will be covered.
Dispute the reservation.
If you disagree with the reservation of rights, promptly go "on record," advising the insurer of your reason(s). This paper trail will be helpful if the case ends up in court. Maybe the insurer has misinterpreted a state law regarding insurance coverage for punitive damages. Or perhaps its interpretation of "occurrence" is unduly narrow in light of policy language. Spell out your rationale, send it to the claims rep via certified mail return receipt requested, and set a deadline for a response. This turns up the heat on an insurer to reassess its position, or provide further insight as to whether you are on solid footing.
Press for specifics.
Some insurers believe that reservation-of-rights letters should be vague. The rationale is that this leaves the insurer with more options. Policyholders should counterattack vaguely worded reservation-of-rights letters. Do not tolerate fuzzy letters that do not specifically refer to policy language and policy provisions, chapter and verse. Press for particulars.
Start your stopwatch.
Once an insurer has reserved its rights, it must eventually declare whether or not it is covering the claim. In other words, reservation-of-rights letters have limited shelf lives. An insurer must eventually get off the fence. If not, a court may decide the issue or an insurer may be estopped (through inaction) from using its coverage defenses, notwithstanding its reservation. After receiving a reservation of rights, keep after the insurer periodically to either disclaim or accept coverage. Seize the initiative. Advise the insurer that after a reasonable amount of time you are entitled to a definitive stance as to coverage, or else the carrier is estopped. Be a nag!
Recognize what new doors and options this opens.
If the insurer reserves its rights, you may be entitled to hire a lawyer of your choice—not the insurer's—at the insurer's expense. When an insurer hires the lawyer and reserves rights, it creates a potential conflict of interest: the lawyer hired by the insurer may uncover some facts that if disclosed to the insurer might cloud coverage. To avoid putting lawyers in this position and to minimize the odds of mischief to policyholders, many courts allow insureds to retain their own counsel when an insurer reserves its rights. In California, for example, this has created a whole cottage industry of Cumis counsel, taken from the name of the court case. A reservation of rights might be a blessing in disguise, to the extent it opens the door for you to hire a lawyer who works for you and is not beholden to any insurer, but whose fee is still paid by the insurer! Insurers don't like this, but it may work out better for you in the long run.
Seek a declaratory judgment action.
This will get the coverage issue settled before proceeding on with the merits of the underlying claim. Do you need a lawyer? Again, the answer is, "It depends." If you have an in-house legal department and a knowledge of the issues involved in the claim, maybe not. For a small business, seeking the advice of a lawyer may be prudent. If you and your lawyer feel strongly that coverage exists, you may want to seek a declaratory judgment. In fact, if the insured seeks a "D.J.," it can often influence the state, jurisdiction or forum where the court will hear the case. This is key, since some parts of the U.S. are much more congenial to policyholders and hostile to insurers. Thus, seeking a preemptive strike via a D.J. action may make sense to force an insurer's hand. The prospect of spending more legal fees to handle a D.J. action may also inspire an insurer to reconsider its coverage position, and it may even relent, seeing things your way.
Sue the insurer for coverage and for additional damages.
Consider this the "nuclear warhead response." First, though, make sure that you're actually in a war. An understandable question arising for policyholders receiving reservation-of-rights letters is, "Do I need to seek legal counsel?" In lawyerly fashion, the answer is both yes and no. If you feel an insurer's position is groundless, capricious, or done simply to harass, then you can sue your insurer for bad faith, punitive damages, and breach of contract. Seek legal advice to determine whether you have a strong case. If your lawyer says yes, then raise the ante.
Simply threatening to play this card may make the insurer sweat. Insurers do not make sympathetic defendants in courtrooms. They know this, and will often avoid the specter of a whopping jury hit and publicity black eye. If the reservation of rights is genuinely premised on a "gray area" in insurance policy interpretation, then a suit against the insurer for money damages may not be viable. Still, recall that insurance policies are adhesion contracts, and courts usually interpret reasonable ambiguities in the policyholder's favor. Your idea of a reasonable ambiguity and the insurer's may not coincide, though.
If you and your attorney feel the issue is black-and-white and that the insurer is reserving rights on specious grounds, consider a suit rooted in breach of contract and/or bad faith claims handling. Or perhaps—better yet—threaten such action. Sabre-rattling will, at least, likely get the claim file bucked up the corporate hierarchy and may inspire some agonizing reappraisal on the insurer's part over its coverage stance. This is a use-only-in-emergency remedy, not one to deploy cavalierly. Once used, it may get your claim file off the desk of that adjuster trainee and into the domain of the V.P. of Claims, where cooler and more seasoned heads might prevail—in your favor.
One frustrating issue is that all insurers do not use uniform criteria when issuing reservation-of-rights letters. While in theory, any gray area coverage topic should trigger one, one insurer's ambiguity is another's clear issue. Some insurer claim departments or adjusters may neglect to issue such letters out of oversight, overwork, inexperience or plain difference of opinion. Other carriers are aggressive in staking out any coverage issue, challenging insureds or testing the outer limits of the coverage envelope. In fairness to insurers, it is no more realistic to expect all carriers to take the same position than it is to expect all attorneys to agree on a certain point of law or all doctors to agree to one diagnosis in the face of certain symptoms.
Reservation-of-rights letters are a symptom of a possible coverage gap. To that end, wise policyholders will treat them as "red flags" and opportunities to diagnose the health of their own insurance and risk management programs. New challenges bring new opportunities and, in this light, the policyholder can transform the coverage issue into a plan to patch up a possible "hole" in coverage or consciously decide to retain or self-fund.
In the Chinese language, the character for the word "danger" connotes a double meaning of "opportunity" as well. In a similar vein, reservation-of-rights letters carry overtones of danger, the danger of an uncovered loss. Viewed in a more positive light, however, such letters may flag an opportunity for companies to strengthen their own insurance and risk management programs, learning from the past to avoid future perils.
Catastrophe Preparedness
In case Of catastrophe, what will you drink?
- How much water will be needed?
- How long will stored water last?
- Where can more water be found in case you run out?
These questions need to be answered before the catastrophe hits.
Store a minimum of one-half gallon of water per person per day for drinking, and have at least a three-day supply. Don't forget additional water for pets and for brushing teeth, bathing, and dishwashing. It is also wise to consider storing water for a longer period in the event of a major catastrophe affecting water supplies. (Ask victims of Hurricane Andrew!)
The good news is, there may be other sources of water in your home to obtain water. Here are a few ideas:
- Use water drained from the hot-water heater, if it is still upright. Turn off the electricity/gas and close the inlet water valve. Drain water into a container from the faucet at the bottom of the tank.
- Use water dipped from the flush tank of toilets (not the bowl), but purify it before drinking.
- Melt ice cubes.
- Use liquid from canned fruit or vegetables.
- Do not drink water that is used in a water bed because the plastic may have released chemicals into it.
- Do not drink water from swimming pools or spas. Such water can be used for personal hygiene, but drinking it can cause permanent kidney damage because of high salt level, or it can cause diarrhea because of over-chlorination.
With proper planning by everyone, there should be sufficient water when it is needed most during a catastrophe.
More Updates
Disability
New policy forms allow you to exchange a Long Term Disability Policy for a Long Term Care Policy. While not a solution to both problems, it does take care of the insurability concerns for individuals at the end of their working years. Good creative design. (For more on this topic, see the October 1995 issue of Solutions.)
Children Away from Home
Cautionary Advice! With tuition payments significantly lower for instate students, it is tempting to have children take up residency away from home. Any child who is not a resident of the parents' household has no protection under any of the parents' insurance policies....no fire and theft coverage on personal property, none on computers and jewelry unless scheduled property on an inland marine policy form. More importantly, there is no coverage for liability. If you provide them with an automobile, they would have coverage while driving that auto, but no coverage while renting, borrowing or riding in another auto, no uninsured/underinsured motorist, medical payments or "No Fault" coverage—and no access to excess liability coverage. In addition, they may not fit the definition of a dependent under your group medical coverage. Small claims may not be questioned, but a serious claim would be. You need to review the legal residency status of your children living away from home if you expect your insurance to respond. Remember, they may be a dependent for tax purposes, but that does not make them a household resident and it is household residents that are insureds. (For more information on this topic, see the June 1995 issue of Solutions.)
Leased Equipment
Leased equipment is subject to valuation at the time of a loss. It is not Replacement Cost or Actual Cash Value…it is Economic Value. Economic Value is the buyout value of the equipment lease at the time of the loss. Most insureds over insure leased equipment. The solution to the problem is not in insurance policies, but in the lease itself. All equipment leases should contain a clause on liquidating value and how damaged equipment is to be treated. The more sensitive the equipment, the more care needs to be given to the contract wording. This is especially true if the leasing company is controlled by the insured. Contact us if you need help negotiating lease language. Remember, you may suffer a serious underinsured loss if your lease does not address this problem. (For more on this topic, see the April 1995 issue of Solutions.)
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SOLUTIONS is a service of The McLaughlin Company and Creative Risk Management, Inc.—offering you timely and creative solutions to all your INSURANCE and RISK MANAGEMENT needs.
THE McLAUGHLIN COMPANY
CREATIVE RISK MANAGEMENT, INC.
1725 DeSales Street, NW
Washington DC 20036
Fax 202-857-8355 - 800-233-2258 - 202-293-5566
