Category Archives: Legal Environment

Uber Case Highlights Employment Liability Risk

By now you’ll have read the troubling tale of alleged workplace sexual harassment as told by a former Uber employee on her personal blog.

As the LA Times reports, Uber CEO Travis Kalanick has called in former U.S. Attorney General Eric Holder to conduct an independent investigation and claimed that the blog post was the first he knew of the incident.

The allegations are a warning to the tech industry and its so-called rockstar culture, the LA Times notes.

The New York Times goes into more detail here.

In a statement issued following a meeting with Kalanick and staff to discuss diversity and inclusion, Uber board member Arianna Huffington said:

“I view it as my responsibility to hold the leadership team’s feet to the fire on this issue.”

This is not the first time that the ridesharing company has been in the hot seat for behaving badly, as discussed in this earlier blog post.

Charges of sex discrimination, including sexual harassment and pregnancy discrimination accounted for 26,934, or 29.4 percent of all job bias charges reported to the U.S. Equal Employment Opportunity Commission (EEOC) in 2016.

As the Insurance Information Institute (I.I.I.) notes, the number of employee lawsuits has increased in recent years, and any size business is vulnerable to this type of risk.

Employment Practices Liability Insurance (EPLI) provides important financial protection to businesses against claims or lawsuits filed by employees, former employees, or potential employees.

EPLI covers legal costs, settlements and judgments that arise from claims of: discrimination (age, sex, race, disability, etc.); wrongful termination of employment; sexual harassment and other employment-related allegations and lawsuits.

In addition to insurance protection, I.I.I. says businesses should take key steps to reduce the risk of an employee lawsuit, such as creating clear workplace practices on employment practices and educating management and employees.

A recent Insurance Journal article took a look at what to expect in EPLI in 2017.

Hatching A Lawsuit? Protect Your Business With Insurance

If you didn’t think suing over Santa was bad enough shed a tear over the unfortunate case of the Hatchimal.

For those of you who aren’t familiar with the latest toy craze (or weren’t lucky enough to find one under the Christmas tree), the Hatchimal is basically an interactive stuffed animal that hatches from an egg.

Created by toy maker Spin Master Corp, each Hatchimal learns how to walk, talk and play games as it goes through the five stages of its life: egg, hatching, baby, toddler and kid.

Cute, right? Yes, but…

What if your Hatchimal fails to hatch?

For my sons, the case of the unhatching Hatchimal was remedied simply by a cuddle and some (admittedly overly exuberant) help breaking open its shell.

But as Business Insurance reports, the failure to perform has led one disappointed parent—Jodie Hejduk of Bakersfield, California, to file a lawsuit seeking class action against Spin Master Corp.

The complaint, filed in U.S. District Court in the Eastern District of California charges Spin Master with spoiling the holidays and false advertising after the toy Hedjuk purchased for her daughter failed to hatch.

The suit alleges the hottest toy of the season which retails at $50-$60 was so hard to find that some were selling on the black market for $350:

“For the few children who were lucky enough to receive a Hatchimal, many were left disappointed when their Hatchimal failed to live up to its name. Despite Spin Master’s representations that the toy would “hatch”, many Hatchimals did not hatch.”

The suit asserts violations of the California Consumer Legal Remedies Act, Unfair Competition Law and False Advertising Law. It also brings claims for unjust enrichment, breach of express warranty and injunctive relief.

A note on Spin Master’s website says:

“We have had more than a million successful hatches since we first launched Hatchimals on October 7th and we are still hard at work making sure that everyone has a magical hatching experience. We are 100% committed to bringing the magic of Hatchimals to all of our consumers.”

Spin Master also offers some troubleshooting tips on its Support/FAQs page.

And here’s the must-watch video on how to hatch your Hatchimal:

Businesses address their liability concerns through many types of risk management, of which insurance is an important component, according to the Insurance Information Institute (I.I.I.). See I.I.I. facts and statistics on litigiousness.

Women’s Marches And Insurance

The Women’s March on Washington has inspired a grassroots movement of tens of thousands who will show their solidarity in sister marches held in cities across the country on January 21, the day after the inauguration of U.S. president-elect Donald Trump.

All 50 states and Puerto Rico are confirmed to have at least one grassroots-led march on that day, with more than 500,000 people expected to march across the U.S. and in 55 cities around the world.

For volunteer organizers of sister marches, what began with a simple Facebook posting in many cases has grown into a much bigger event for which organizers have taken on not just leadership responsibility, but potential liability consequences too.

Notwithstanding the rights of individuals to come together in peaceful protest, there’s the potential for claims for bodily injury or property damage in the event a march becomes less peaceful than expected.

What this means is that local volunteer organizers may want to explore their insurance options.

For example, many (but not all) municipalities require individuals or groups using public property to purchase liability insurance as part of the application process for a permit to hold an event.

This issue is already a hot topic in Phoenix, Arizona, where under state regulation, organizers of the sister march are required to secure some $2 million in liability insurance, per this AZCentral.com report.

A number of municipalities also offer tenant user liability programs (so-called TULIP programs) that enable organizers of certain public events on city property to more easily obtain event liability insurance.

Legal Fallout From Oakland Warehouse Tragedy

Filing of the first lawsuits in connection with the December 2 Oakland warehouse fire that killed 36, underscores the importance of managing legal risks that arise from disaster.

The fire was the deadliest in the United States since a 2003 nightclub fire in Rhode Island that killed 100.

Civil complaints were filed Friday on behalf of families of two students who died in the blaze against a number of people, including the building’s owner and those who transformed the space into an artist community that was home to 20 people but not permitted for residential use, promoters and those involved with the event.

Separate claims were also filed against employees of Oakland city and Alameda County departments.

The Wall Street Journal reports that the city of Oakland has come under increasing scrutiny since the Dec. 2 fire for failing to prevent the blaze. City officials have said no building inspector had been in the warehouse for the past three decades even though complaints had been made for years.

Although state law provides a broad liability shield for local governments for failing to conduct building inspections, the immunity is “not insurmountable,” according to the lawyer representing families.

Criminal charges may also follow.

Among the lawsuits’ allegations, according to CNN:

—“The interior of the approximately 10,000-square-foot Ghost Ship was a death trap, which contained a maze of makeshift rooms, alcoves and partitions. It was cluttered with carvings, mannequins, paintings, artwork, scraps of wood, pianos, furniture, tapestries and at least one recreational vehicle trailer, which were kindling for the fire.”

and

—The building contained insufficient smoke alarms, fire extinguishers, sprinklers, exit signs and emergency lighting.

The Insuring California blog post Can cities and artists work together to create safe spaces for venues? explores some of the other factors contributing to the deadly blaze.

U.S. fire departments responded to an estimated average of 1,210 fires in warehouse properties per year (excluding refrigerated or cold storage), which represents less than 1% of all structure fires, the National Fire Protection Association (NFPA) reports.

These fires caused an annual average of $155 million in direct property damage, three civilian deaths, and 19 civilian injuries.

Fires that were intentionally set and fires caused by electrical distribution and lighting equipment are the leading causes of warehouse fires, according to the NFPA (below).

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NFPA notes:

“Warehouses present special challenges for fire protection because their contents and layouts are conducive to fire spread and present obstacles to manual fire suppression efforts.”

More on structure fires available in the Insurance Information Institute’s facts and statistics on fire.

‘Tis The Season…For Lawsuits

In true holiday spirit we just got our kids to the mall to see Santa this week. Its an annual tradition, a visit that helps keep the magic alive in our all-too-knowing six and four-year olds’ minds and more importantly yields the holiday photo that keeps on giving throughout the years.

Every year Santa faces a barrage of questions. This year was no different. Our six year-old started: “Santa, I have a question. How come you know I want a two-wheeled scooter?”

Luckily, the letter from the North Pole had arrived a few days earlier telling him he had made the Nice List and that Santa knew from our elf Chippy just what he was wishing for.

This was confirmed by Santa at the mall who said: “Because you’ve been good and it’s magic.”

But what if the conversation had gone a different way?

Sometimes magic confronts reality and a lawsuit ensues, reminding us what’s at stake for Santa and the mall this Christmas.

Take this post over at Randy Spencer’s Open Mic published in the latest issue of online newsletter Coverage Opinions (edited by attorney Randy Maniloff of White and Williams LLP)

In the post, Court Holds a Mail Santa Liable: Damages Owed For Failure To Deliver A Toy Fire Truck, Randy Spencer – the only stand-up comic to specialize in insurance – tells of a Montana trial court that found a mall and its Santa liable for a child’s emotional injuries after promising a toy that was not left under the tree come Christmas Day.

How much damages did the court award in this case? $95,000.

All of which is a timely reminder that Santa (and the malls that embrace the Christmas spirit) need insurance too.

Which is why the Insurance Information Institute (I.I.I.) urges St. Nick to review his insurance policies to be sure he’s got the right insurance coverage with its Santa’s Insurance Wish List.

And we suggest the I.I.I.’s business insurance checklist would make a great stocking stuffer in this case.

All the best for a happy and safe holiday season!

Rolling Stone Defamation Case Highlights Insurance Need

As the Rolling Stone defamation case moves into the damages phase today, media businesses everywhere—and their insurers—will be watching closely.

A federal jury on Friday found that Rolling Stone magazine, its parent company Wenner Media and Sabrina Rubin Erdely, the author of a discredited 2014 article about an alleged gang rape at the University of Virginia, were liable for defaming Nicole Eramo, a former associate dean of students at the school.

According to this Wall Street Journal report, Ms. Eramo is seeking $7.5 million but the award could potentially go higher.

Rolling Stone also faces a defamation suit brought by the UVA chapter of the fraternity Phi Kappa Psi, the focus of the 2014 article. That case is seeking $25 million.

The verdict against Rolling Stone is the second large media liability claim this year.

In June, a jury awarded $140 million in damages to the former professional wrestler known as Hulk Hogan in an invasion-of-privacy case against Gawker Media Group over the publication of a sex tape.

Gawker settled the lawsuit just last week agreeing to pay the wrestling star, whose actual name is Terry Bollea, $31 million. Gawker was forced into bankruptcy and sold to Univision in August.

The cases have prompted legal experts to express concerns over the increasing frequency with which complaints about journalism are being settled in the “unpredictable and expensive sphere of the courts”, according to this New York Times article.

From the insurance perspective, the cases underscore how important it is for online and traditional publishers, broadcasters and other media-related firms to purchase media liability insurance.

This specialist type of errors and omissions (E&O) insurance protects creators of content against liability claims resulting from a range of exposures, including, but not limited to, defamation, invasion of privacy, infringement of copyright, and plagiarism.

While there is a fair amount of media liability insurance sold (an estimated $300 million to $500 million in the United States, and $50 million elsewhere (mostly in the United Kingdom)), according to this 2016 survey by Betterley Risk Consultants, further growth is predicted:

“We suspect that much of the media market is untapped risk, self-assumed by large organizations that can afford to self-insure, or ignored by small organizations that don’t think they are exposed.”

In the case of Rolling Stone, its parent company Wenner Media, is reported to have an undisclosed amount of media liability insurance to cover any damages related to the trial.

Still, at least one analyst cited in this report by the Wall Street Journal, says that if costs related to this lawsuit and other pending lawsuits exceed $50 million, Wenner Media may not be able to fund it with existing resources.

Check out I.I.I. resources on E&O insurance for small businesses here.

Pride Round-Up

June is Pride month and our annual round-up of the latest insurance news around the LGBT (lesbian, gay, bisexual and transgender) community must first acknowledge the June 12 tragedy at the Pulse gay nightclub in Orlando, Florida. Some of the insurance implications of the attack are discussed in this Insurance Business Magazine article.

LGBT Financials: In the year since the landmark U.S. Supreme Court decision mandating states must permit same-sex marriages, LGBT households are changing and marriage equality has simplified finances for many, according to the 2016/2017 LGBT Financial Experience survey by Prudential. Commentary from survey respondents suggests this is due to simplified taxes, insurance coverage and estate planning. Despite agreement on the importance of saving for the future, in comparison to the general population, fewer LGBT respondents have retirement accounts, life insurance or a will or estate plan.

Transgender Rights: As discussed in our earlier blog post Where Insurance Meets Transgender Rights, recent federal and state rulings pertaining to the rights of transgender individuals (including laws restricting restroom access) raise a number of issues, and there are potential insurance implications to consider. While this is an evolving area of law and liability for businesses and municipalities everywhere, insurers—and the policies they write—will no doubt be implicated. Businesses need to know what their state or municipality has enacted on this issue and establish a coherent nondiscriminatory policy to minimize their liabilities.

Corporate Equality: A record 407 businesses, including 27 insurers scored 100 percent in the Human Rights Campaign Foundation’s 2016 Corporate Equality Index (CEI) based on their workplace policies, benefits and practices pertinent to lesbian, gay, bisexual, transgender and queer employees. The number of insurers achieving the top ranking has seen a steady increase over the last decade. A total of 851 businesses were rated in the 2016 CEI. Some 165 of the Fortune 500-ranked businesses achieved a 100 percent rating.

Have a safe and Happy Pride!

Where Insurance Meets Transgender Rights

Both as assumers of risk and as employers, insurers are in a unique position when it comes to navigating the changing legal environment and civil rights.

Recent federal and state rulings pertaining to the rights of transgender individuals raise a number of issues, and there are potential insurance implications to consider.

In March North Carolina passed a controversial law (HB 2) requiring transgender individuals to use public bathrooms that correspond to their gender at birth. This led the U.S. Justice Department to send a letter to North Carolina leaders saying the law violates the U.S. Civil Rights Act and Title IX.

More than 150 CEOs and business leaders of major companies voiced their opposition. PayPal withdrew its plans for a $3.6 million investment and 400 jobs in the Tar Heel state.

Also in April, in a landmark ruling on transgender students’ rights in schools, the Fourth Circuit Court of Appeals in Virginia decided that the U.S. Department of Education can prohibit anti-transgender discrimination under Title IX, a federal law that prohibits sex discrimination in education. (G.G. v Gloucester County School Board)

In the wake of this ruling, President Obama issued a directive instructing public schools to allow transgender students to use the restroom that matches their gender identity.

Meanwhile, several federal agencies have issued strong opinions on the issue of discrimination and transgender rights, for example:

—The U.S. Department of Health and Human Services has ruled that hospitals, clinics and other healthcare providers cannot discriminate against patients on the basis of gender identity.

U.S. Attorney General Loretta Lynch has made clear that laws restricting restroom access that affect transgender individuals are discriminatory.

—The Departments of Justice and Education issued a joint letter to public schools explaining how federal law prohibiting sex discrimination affects schools’ obligations toward transgender students.

—The U.S. Equal Employment Opportunity Commission (EEOC) has sued several employers over their treatment of transgender employees, including restroom access, on the basis that alleged conduct violates Title VII of the Civil Rights Act of 1964, which prohibits sex discrimination, i.e.. employment discrimination based on gender identity or sexual orientation.

While this is an evolving area of law and liability for businesses and municipalities everywhere, insurers—and the policies they write—will no doubt be implicated.

Industry experts say it’s critical that businesses find out what their state or municipality has enacted on this issue and establish a coherent nondiscriminatory policy to minimize their own liabilities.

In a recent PodCast with A.M. Best on the legal issues surrounding transgender restroom access Brian Cafritz, a partner at Kalbaugh, Pfund & Messersmith Law P.C. said there could be potential implications for commercial general liability policies that cover slander, defamation, assaults, or other discrimination acts.

Cafritz also noted that as federal laws change, negligent hiring or retention claims could be raised impacting the insurance policies that cover these entities.

School districts and municipalities in particular face rising potential liability. A recent brief by Munich Re noted that policy coverage that might be impacted by transgender litigation against school personnel include:

—General liability: physical bodily injury and/or mental anguish, mental injury

—Personal Injury: defamation of character, violation of privacy rights

—Wrongful Acts – tortious error, act or omission

Workplace issues as they relate to transgender employees was a topic of discussion at the recent RIMS conference session, as reported by Business Insurance.

Fido Takes A Bite Out of Homeowners Claims

Don’t bite on this, but next week’s National Dog Bite Prevention Week is a reminder that Fido can cost dog owners—and their insurers—dearly.

Dog bite (and dog-related injuries) accounted for more than one-third of all homeowners insurance liability claim dollars paid out in 2015, costing in excess of $570 million, according to the Insurance Information Institute (I.I.I.) and insurer State Farm.

In its analysis, the I.I.I. found that while the number of dog bite claims nationwide decreased 7.2 percent in 2015, the average cost per claim for the year was up 16 percent.

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The average cost paid out for dog bite claims nationwide was $37,214 in 2015, compared with $32,072 in 2014 and $27,862 in 2013.

In fact, the average cost per claim nationally has risen more than 94 percent since 2003.

Why is this?

Loretta Worters, vice president at the I.I.I., says increased medical costs as well as the size of settlements, judgments and jury awards given to plaintiffs, which are still on the upswing, are responsible for the higher costs per claim.

Dog-related injuries also have an impact on the potential severity of losses. In addition to bites, dogs knock down children, cyclists, the elderly, all of which can result in fractures and other blunt force trauma injuries.

Another factor might be the surge in U.S. Post Office worker attacks, many of which take place at the customer’s door.

The study found the average cost per claim varies substantially across the country.

While Arizona had only the ninth largest number of claims at 393, it registered the highest average cost per claim of the 10 states with the most claims: a staggering $56,654.

State Farm notes that insurance is an important aspect to being a responsible dog owner and offers this important advice:

“When renting a property make sure to have rental insurance because most landlords do not provide coverage should there be a dog bite incident. If you are a homeowner, talk to your insurance agent about what is covered under a standard homeowner policy related to dogs.”

More on this story over at propertycasualty360.com

 

Environmental Pollution and Liabilities: Renewed Concerns

Environmental pollution stories seem to be dominating the headlines and with this comes renewed awareness of potential environmental liabilities among companies, municipalities and their (re)insurers.

An ongoing gas leak at the Southern California Gas Co Aliso Canyon natural gas storage facility near the Porter Ranch suburb of Los Angeles, has forced thousands of residents to evacuate, many of whom have been experiencing health problems.

The Los Angeles Times reports that so far, the gas company has spent more than $50 million to combat the methane leak that began October 23, and more than 25 lawsuits have been filed against the utility.

A securities filing last week stated that the cost of defending the lawsuits, and any damages, if awarded, could be significant.

As the LA Times reports:

The utility has told the U.S. Securities and Exchange Commission that it had “at least four types of insurance policies that it believes will cover many of the current and expected claims, losses and litigation…associated with the natural gas leak at Aliso Canyon.”

Those insurance policies are understood to have a combined available limit in excess of $1 billion, though legal experts suggest the ultimate costs could run much higher.

Meanwhile, officials in Flint, Michigan, made a cost-saving decision to switch the source of their drinking water to the Flint River from Lake Huron in April 2014, a move  that has exposed thousands of children to dangerous levels of lead.

While the city has since switched back to Lake Huron water, and started distributing water filters and bottled water to the city’s residents, The New York Times reports that many have called for state money to replace Flint’s aging pipe infrastructure (at an estimated cost of $1.5 billion) and a fund to address any developmental impact on children.

Last week Michigan governor Rick Snyder declared the city to be in a state of emergency just as federal officials opened an investigation into the water contamination.

Other environmental pollution stories in the news include one lawyer’s fight against DuPont’s decades-long history of chemical pollution and further away the recent Samarco dam burst in Brazil–described as the worst environmental disaster in the country’s history.

In a recent note AIG Environmental Insurance said that environmental pollution continues to be a major source of concern for the (re)insurance market.

AIG noted that the potential environmental liability impact of the Samarco dam burst remains the unknown factor, with market sources putting the overall insured coverage at in excess of $600 million.

Taken together with the property and business interruption elements of the cover, the (re)insurance market is facing a potential overall loss that could be in excess of $1 billion.”