PROTECT YOUR COMPANY WHEN EMPLOYEES DRIVE PERSONAL VEHICLES FOR BUSINESS-RELATED PURPOSES

If an accident occurs while an employee or volunteer is operating their personal vehicle for company business, your company could be held liable. Even when an employee is just running an errand, such as making a bank deposit, dropping off a proposal, or picking up a part, if an accident occurs your company could suffer as a result.

Although you cannot insure a non-owned vehicle, there are other steps you can take to protect your company before a loss occurs. If your employees or volunteers use personal vehicles for company business, even if just occasionally, the following guidelines can help reduce your risk:

(...continued)

(...continued from previous page)

• Determine a minimum level of Auto Liability insurance your employees and/or volunteers must carry. Also consider what documentation should be provided to your company to demonstrate that proper insurance coverage is in effect. For example, you might require that employees or volunteers submit a certificate of insurance each year that verifies coverage limits.
• Driving records should be checked prior to an employee’s hiring. Validate driving credentials and check for accidents and moving violations during the past five years. All recruiters, managers and human resource people should be aware of this policy.
• Avoid having youthful drivers, those with little driving experience, or drivers with more than one moving violation or accident use their vehicle for business-related purposes.
• Periodically check driving records for new offenses and moving violations. Introduce a procedure for how discovery of new offenses will be handled.
• Develop a written policy on business use of personal vehicles and communicate to all employees. Managers, human resource personnel and recruiters should share this information with any potential new hires.
• Be sure you remain in compliance with local, state and federal statutes while obtaining private information about your employees.

Insurance can play a role in helping to protect your business from this exposure. Non-Owned Auto Liability insurance may be obtained on a stand-alone basis or in conjunction with your General Liability coverage. Coverage for hired vehicles might also be available, if needed.

Insurance premiums for Non-Owned Automobile Liability depend on the frequency of personal vehicle use and how employees use their vehicles for your business. Premiums for this line of coverage are generally fairly reasonable.

Another way to reduce risk is to eliminate the exposure. If employees or volunteers are prohibited from using their personal vehicles for business-related purposes, it eliminates the possibility of an accident that will affect your company.

In the meantime, while you are mapping out your risk reduction strategy, maybe you should consider making that bank deposit yourself.

DOES CONTRACTUAL LIABILITY COVERAGE MEAN ADDITIONAL INSURED COVERAGE?

Construction contracts usually include many provisions aimed toward transferring legal liability from one party to another. In an agreement between a general contractor and a subcontractor, the sub assumes the general’s liability. The contract does this by inserting an indemnity agreement (also known as a hold harmless agreement) into the contract’s terms. The contract may also require the sub to have the general named as an additional insured on its General Liability insurance policy. Though not all contracts do this, it is a mistake for either contractor to assume that the insurance company will provide the same protection to the general without an additional insured endorsement to the policy

The standard Insurance Services Office Commercial General Liability Coverage Form specifically excludes coverage for liability that the insured assumes is in a contract. However, it adds coverage back if the contract is an “insured contract,” as the policy defines the term. The policy’s definition includes hold harmless agreements where the insured assumes another’s tort liability. That would appear to take care of the sub’s obligations under the contract, but it is not the whole story. The coverage may still contain a potentially large gap for the general.

It is important to keep in mind that in any Liability insurance claim scenario, the parties fall into three categories: Insurance company; insured; and claimant. A claim may involve multiple insureds, multiple claimants, and even multiple insurance companies, but all parties will fall into one of the three categories. If a party is not an insurance company and is not an insured by virtue of an additional insured endorsement, then it must be a claimant. Therefore, a general contractor in this situation becomes a claimant, together with all other claimants seeking damages.

Although the general could receive the same recovery for damages that it might have received as an additional insured, it might not fare as well regarding the cost of its legal defense. The CGL policy pays for defense costs incurred by anyone who is an insured under the policy, and coverage for those costs is in addition to the policy limits. If the policy has a limit of $1 million per occurrence and an insured is found liable for $1 million and runs up $500,000 in defense costs, the policy pays for both in full. As a claimant, however, the general can recover defense costs only if the hold harmless agreement with the sub required the sub to indemnify it for defense costs.

Also, it is likely that coverage for those costs will not be in addition to the policy limits. The ISO CGL policy provides defense in addition to the limits for the general only if all of the following conditions are met:

• The sub assumed the general’s liability in an insured contract.
• The policy covers the loss.
• The sub assumed the general’s defense costs in the contract.
• There is no conflict of interest between the general and the sub.
• Both parties ask the company to control and conduct the defense and both agree to the same counsel for defense.
• The general agrees in writing to cooperate with the insurance company in the settlement of the claim.

If any one of these conditions is not met, the company will pay the general’s defense costs only until the claim exhausts the insurance limits.

Coverage for defense costs is one of the most important benefits of being named as an additional insured on another entity’s liability insurance. An entity that needs this coverage should require the other contractor to provide the additional insured endorsement. Relying on the contractor’s contractual liability coverage is a major financial gamble. Call us today to sort through your specific liability requirements.

LOOK FOR RED FLAGS TO SPOT WORKERS COMP FRAUD

Spotting the red flags that indicate possible Workers Compensation fraud by employees is the best way to prevent fraud from occurring. Knowing how to spot the red flags is a proactive way to nip a potentially costly but false Workers Compensation claim before it begins.

Most instances of Workers Compensation fraud occur when the claimant:

• Deliberately falsifies information about how an injury occurred, such as claiming the injury was work-related when it was not.
• Deliberately amplifies the seriousness of an injury to falsely prolong the claim.
• Deliberately continues to collect entitlements while working on the sly for their own purposes or with another employer.

Common Signs of Workers Compensation Fraud

• Lack of witnesses – The majority of people claiming false work-related injuries usually do not have witnesses to support their claim. Vigilance is especially necessary when the employee normally works with other co-workers who should have witnessed the injury but did not.
• Contradictory accounts of how the injury occurred – This can be particularly blatant when any of the doctor’s, employer’s, or witnesses’ reports contradict the employee’s report of the incident. Another red flag should be raised when the employee is deliberately vague about how the injury occurred.
• Dissatisfied employees – Unhappy employees can be motivated to make a false Workers Compensation claim, especially if a recent incident such as a reprimand, changed responsibilities, or a possible demotion has occurred.
• Time occurrence of the injury – Many false Workers Compensation claims are submitted before a potential strike, project conclusion, strike, or possible layoff. Many false claims also happen to be submitted on either a Friday or a Monday.
• Inconsistent injury – The nature and extent of the injury is not consistent with their duties or type of job performed.
• Inconsistent reporting procedures – Occurs when there is an inexplicable gap between when the injury occurred and when the employee reported the injury. Be alert if crucial injury data is absent, such as no definite time reported when the injury happened or if other vital dates are absent.
• Lack of contact – The employee cannot be contacted easily by the claims rep or employer. Continuous lack of contact could indicate that the employee is working elsewhere while receiving ongoing entitlements. Another red flag should be raised when the employee immediately moves to another state or foreign destination after going on Workers Compensation.
• Lack of cooperation – The employee deliberately delays or avoids medical treatment or medical diagnostics needed to clarify the medical condition of the employee’s alleged injury.
• Physical signs – The employee exhibits physical signs of working such as dirt or grease on their hands or fingernails, work clothes that exhibit traces of work, or scrapes or bruises.
• Newer employee – From a statistics vantage, new employees are more likely to commit Workers Compensation fraud than senior employees. The most proactive means to counter this is to screen carefully all new employees in the hiring process beforehand.

(...continued)

(...continued from previous page)

Although red flags can help minimize potential Workers Compensation losses from fraud, your best strategies to counter these problems should include:

• Implement a Zero Tolerance policy for Workers Compensation fraud and be sure your employees know about it.
• Take a hands-on approach with all Workers Compensation claims and become especially vigilant when red flags appear.
• Keep in regular communication with your injured employee.
• Have a consistent new employee screening process. Offer new employees a thorough orientation and communicate a comprehensive explanation of the Workers Compensation process together with the employee’s rights and responsibilities.

Fraudulent Workers Compensation claims are a severe drag on the costs of any business. By being aware of how to spot potential problems and being proactive at the outset can help you reduce Workers Compensation fraud in the workplace. Call one of our Comp specialists today for more information.