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December 1999 • Volume 6, Issue 2
In this issue
Report on The McLaughlin Company’s Y2K Compliance Status
By Theodore M. Pappas, CLU, CIC
The McLaughlin Company has worked diligently to assure readiness on Year 2000 issues. Following is a synopsis of our actions:
Our former agency management system was Year 2000 compliant. However, while our testing on the system provided compliance through the year 2009, there were problems beyond 2009.
We decided to move up the upgrading and replacement of our agency management system by two years. A new system was installed on April 5, 1999 and personnel went through training. We went live on July 12, 1999.
In the process of testing for the new computer configurations, we had existing PC’s tested for Year 2000 compliance and all existing software checked and any upgrades and corrections were made. As a result of this testing one older PC which was used strictly for word processing was the only piece of hardware not Year 2000 compliant. We removed that piece of equipment from service in the agency.
After installing the new agency management system at the beginning of April we were not happy with the speed of movement between screens (part of the problem was the fact that the new system is a Microsoft window platform and needed more memory than we anticipated). As a result we moved our PC replacement timetable up by 9 months and replaced all PC’s in the office.
Our normal change over on computer equipment has been new PC’s every 36 months and a new operating platform every 60 to 72 months.
Between the new platform, PC’s and other peripherals, we have blown our budget but everything is brand spanking new.
While we are now Year 2000 compliant, it should be remembered that what we do is only one level of multiple redundancies; and for services we provide you there are many checks and balances both inside and outside the agency.
The insurance company is primarily responsible for having complete records of your coverages. State insurance regulations require certain notifications and our system monitors (as well as several manual systems that are in place) that the insurance company is complying with those mandated notices. This is not to say some administrative error could not occur, but there is so much redundancy built into our procedures and the regulatory items mandated that any failures can be corrected after the fact.
When we make the full transition to our new system, we will be able to have greater communication capabilities.
We were not able to satisfactorily certify Year 2000 compliance of the software we use supplied to us by the insurance companies we represent. However, this software is not critical in providing you with insurance coverage – by and large it is rating and similar type programs. Rates change frequently and have been prone not to be the most current. If an error occurs because insurance company information was not accurate, insurance companies have given the insureds the benefit of the lower premium and this practice is not expected to change.
We look forward to working through this millennium and into the new one and hope your transition goes as planned. We are excited about having created flexibility and communication capabilities with our new system.
Rest assured that whatever concern you may have due to the Year 2000 compliance, we at The McLaughlin Company have spared no expense to have the most current hardware and software available and expect no interruption in supplying your insurance needs.
What Did the Millennium Bring?
By Diane Murphy, CPCU
By the time most of you read this, we will probably know the answer to that question.
Even if the world didn’t come to a crashing halt as some "experts” were predicting, there are bound to be a few problems.
The experts are still predicting an explosion in Y2K litigation. Lloyds of London is estimating losses and litigation from the Y2K bug could top $1 Trillion in North America alone.
In this litigation, the question will become, when should companies have first recognized this problem and when was action taken to prevent the looming computer crisis? If you should have checked for compliance but failed to do so, you may be at risk for litigation. If you are involved in a suit, how will you defend yourself? Will your insurance coverage provide defense? The experts are divided on this issue.
Whether or not your policy protects you will depend on the allegations. In order for your General Liability insurance to respond, the party must allege that they suffered bodily injury or property damage. If the party’s software crashes, the insurance company may say that they did not suffer property damage.
Another issue with the Y2K bug that hasn’t been addressed by many "experts” is that of crime. There is bound to be some initial confusion and we can expect this to continue for a while. This is an excellent opportunity for those with devious minds to wreak havoc and take advantage of the situation. You, as an unsuspecting consumer, may have hired a computer consultant to come and check your system for Y2K compliance. This consultant said that you were not compliant but he could "fix” your system. Little do you know that Y2K software the consultant installed tells your computer to transfer funds from your account to their bank account on 1/1/00 or 2/29/00. When you check your funds, you notice money is missing. You assume that it is a Y2K glitch with the bank and they will straighten everything out. Wrong. That consultant is now vacationing in South America with his little Y2K windfall.
Lloyds of London is estimating losses and litigation from the Y2K bug could top $1 Trillion in North America alone
What did the millennium bring? Hopefully not the chaos that some were predicting. Our advice: be proactive instead of reactive. Report all potential claims promptly. And most important, enjoy the celebration of the new millennium and look forward to a bright future.
Diane Murphy is an Account Executive with The McLaughlin Company. She has ten years of insurance experience in commercial lines Diane obtained her CPCU designation in 1997. She holds a Maryland resident P&C and Life license.
What Should you Say?
By Juanita Radden
In the first few minutes after an accident confusion abounds. But the things you say and do in those critical moments can have a tremendous effect on the outcome of your insurance claim.
The question is often asked: "What should an insured say to the injured party when an accident has occurred?” I have raised this question with several claims professionals and have gotten their advice on what our insured should say and more importantly what they should not say. I have spoken with several adjusters in the areas of Automobile claims, Property claims, General Liability claims and Worker’s Compensation claims and they had this to say:
On the subject of automobiles, the claims professional can not stress enough to secure as much information about the other driver and/or owner, their vehicle and insurance information. But more importantly, verify the extent of the damage and make sure that both parties are clear as to the specific area of damage. For example, the damage is to the front end of the vehicle. It is plausible that you could have damage to the alignment. However, if the other party contends that damage was also done to their rear end because of a frontal impact, then more than likely, that damage is not related to this loss. If the person is injured, seek medical assistance for that individual immediately by contacting the local authorities. Always let your answers be truthful, but never admit liability. Allow the investigation to proceed and permit all parties to tell their version of the events.
With property damage claims, acknowledge the fact that the accident occurred, but never admit liability. With all claims, we suggest that you contact the insurance company immediately so that an investigation into the cause of the loss can be done. During the process of the claim, remember to always maintain a friendly rapport with the individuals. Allow the claims professional to handle all aspects of the claim with that individual. This cuts down on the possibility of unnecessary litigation.
With general liability claims, the claims adjuster advises to again, use the "duck tape” rule, never admit liability. Show concern and be cordial but be mindful not to over exaggerate. Make sure to contact the proper authorities if an injury has occurred and cooperate fully with those persons to ensure that the injured party has been attended to. They also recommend taking photographs immediately and securing witnesses, if applicable. This helps to preserve evidence and give the claims professional some additional help in determining liability.
Finally, Worker’s Compensation. Claims professionals suggest that you immediately start asking about the facts surrounding the claim. Be specific!! Ask the injured party:
- When did it happen?
- How did it happen?
- Who was the first person notified? A supervisor?
- Were their any witnesses? Get their names and phone numbers.
- Did you ever experience this problem before? If so, then what contributing factors led up to this report?
Always recommend that they see a medical professional. Preferably your company clinic (if on premises) before sending them to their own physician. As soon as you have assembled as many facts as you can, notify the insurance carrier immediately to advise. Gathering all information up front can prevent long drawn out claims. Understand that the longer it takes to establish the compensability of the claim, the more dollars are paid on this claim and the longer it takes to resolve this claim.
They also suggest that you take photos if necessary to preserve the evidence of how the alleged injury occurred.
As you can see, there are some similar elements running through the handling of all claims. We urge you to take note of these handy little tips so when you are faced with a claim situation, you will be ready to handle it! .
Juanita Radden is a Claims Coordinator with The McLaughlin Company. Since her graduation from college in 1988, she has worked in insurance. She has worked in several different capacities including claims representative, telephone-performance analyst and field claims representative.
The Problems with Independent Contractors
The following article was written by Jordan Siev as follow-up to a seminar conducted by the law firm of Anderson Kill and Olick entitled "Can You Tell Your Employees from Your Independent Contractors?”
Many businesses have recently come under increased scrutiny with respect to their classification of workers as either employees or independent contractors. The Internal Revenue Service (IRS), the United States Department of Labor (DOL) and private litigants have recently stepped up their efforts to have workers classified as independent contractors reclassified as employees, and to have their "employers” foot the bill for the misclassification.
The penalties for misclassification can be staggering. The IRS has forced employers to pay back taxes, interest and penalties for workers originally classified as independent contractors, on whom employers have not paid their share of employment taxes. The IRS has also required that such individuals be reclassified as employees on a going forward basis. In addition, private litigants, as well as the DOL, have brought lawsuits under the Employee Retirement Income Security Act (ERISA) seeking back benefits (with interest), attorneys’ fees and/or removal of ERISA plan fiduciaries. Such lawsuits may also result in the imposition of penalties of $100 per day per plaintiff for violations of ERISA, and these penalties can quickly add up as many ERISA suits are brought as class actions. In extreme cases of reclassification, ERISA benefit plans can have their tax-advantaged status revoked, resulting in huge tax liabilities for employers and participating employees.
Microsoft and Time-Warner are just two of the well-known companies to have faced this problem recently. Microsoft not only faced IRS liability, but also was sued under ERISA by a class of workers who successfully sought, among other things, stock purchase benefit.
Time-Warner was sued in 1998 by DOL for allegedly violating the Employee Retirement Income Security Act of 1974 by misclassifying workers as either temporary employees or independent contractors, thus wrongly depriving them of benefits. The DOL is seeking, among other things, the payment of back benefits to the wrongfully excluded workers, removal of Time-Warner’s plan fiduciaries, and the imposition of personal liability on the fiduciaries for any losses incurred by the plans as a result of the alleged ERISA violations. Time-Warner moved to dismiss the lawsuit claiming, in essence, that the DOL lacked authority to bring the claims, as they were actually claims for individual benefits.
In early September, the Court denied Time-Warner’s motion to dismiss in its entirety. The Court found that the DOL had properly alleged a claim for breach of fiduciary duty, which was within the authority granted to DOL under section 502(a) (2) of ERISA. The Court noted that, although individuals may have a claim for benefits, this "does not preclude the government from bringing a separate action.” The Court stated that governmental action was appropriate because misclassified workers may not even have known their rights under ERISA may have been violated.
As a result, the first court to be faced with a test of the DOL’s powers in this area has sided with the Government, further necessitating that companies closely monitor their independent contractor relationships.
The McLaughlin Company and Creative Risk Management, Inc. will be devoting an entire edition of an upcoming SOLUTIONS to the Problem with Independent Contractors.
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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
