Employment practices liability has become one of the risk professional's most important concerns. Every week we see headlines of major suits, awards, or settlements, and it seems the Supreme Court issues an important decision in the field every session.

To help risk professionals respond to this difficult risk, we launched a special newsletter, "Employment Practices Liability Consultant," ("EPLiC") several years ago. Don Phin, the coeditor of EPLiC, is an independent employment lawyer and consultant who specializes in helping businesses implement powerful employment practices that significantly reduce their liability risks while increasing employee moral and productivity.

Don has developed an easy-to-use but very effective online system that allows small and mid-size businesses to use his program. Recognizing its value (we use it ourselves), I asked Don if he'd work with us to put it in the hands of independent agents/brokers (and even insurers) who could then provide it to their customers as a value-added service. And that's exactly what we've done.

If you are with an agency/brokerage or insurer that focuses on small or mid-size commercial accounts and you'd like to expand your website to provide your clients with this powerful risk management program, visit this Web page for more information or to request a demo.

For more information about EPLiC, our employment risk management newsletter, visit this Web page.

Thank you for your confidence and support. Have a great day!

Jack

Jack P. Gibson
President
IRMI

Risk Tip

Develop a Legal Fee Management Strategy Before It's Needed. In a significant majority of lawsuits, legal fees outweigh the cost of indemnity. This doesn't mean conceding cases because of the anticipated defense expenses. It does indicate the importance of developing an effective strategy to anticipate the cost and prepare for the process before it occurs. Here is a suggested approach:

Create an internal litigation management profile with an outline of what fees and expenses you will and won't pay, the acceptable rate, and how the fees will be paid.
Create a contract for the engagement of counsel and then use it to manage counsel. Include provisions for dispute management through arbitration/mediation, an agreement as to the payment of travel expenses, and policy on experts and consultants.
Use a careful selection process to create a counsel panel before it's needed. Remember, it's not the hourly charge that determines counsel's value, it's the performance in the task given.
Once involved in litigation, empower a single, experienced individual to serve as the primary contact for counsel. With one contact, extraneous charges will be significantly reduced.
Monitor the case on a monthly basis. Closely examine fees and settlement opportunities.
Adjusting attorney fees after counsel has been engaged is expensive, time consuming, and distracting. Doing so beforehand not only conserves your economic resources, but promotes the long-term interest in your products or services as well.

Developing a strategy and implementing tactics to manage claims and litigation requires general counsel or personnel with the knowledge and time necessary to succeed. If this is not possible through in-house staff, consider retaining an outside litigation management professional.

By: John M. Beringer Jr., LPCS, RPA
Beringer & Associates, Inc.
Orange, CA

Suggest a Risk Tip. Future issues of IRMI Update will include more risk tips from our readers. Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. We'll give you credit for your contribution.

Linking to IRMI.com

No Need To Ask for Permission. We receive many requests for permission to add a link to IRMI.com from other websites, and we thought it would be helpful to let you know our policy. You may link from your website into any part of IRMI.com without requesting our specific permission as long as the website does not enclose IRMI.com within frames or otherwise mask our identity. So, if you believe IRMI.com is worthy of sharing with visitors to your website, feel free to link to it!

New Expert Commentary

There are now 277 articles on IRMI.com, and many more are in production. Below you'll find summaries of some recent additions with links to the articles.

The Hong Kong Insurance Market—As with its industry, Hong Kong's insurance market switched from industrial to commercial. Jorn Kristensen and Philip Chan examine its structure, regulatory environment, coverages, and profitability.
Managing Earthquake Risk—Since September 11, risk managers have focused on man-made risk. However, Ron Hamburger explains the greater danger of natural catastrophes, particularly earthquakes, and how their risk should be assessed and handled.
Seven Tips for Improving Your Loss Control Documents—Throughout the world of insurance, people struggle to write clearly and concisely. In this new column, Gary Blake provides writing tips for insurance professionals.
The Battle Against Terrorism: A Battle for Stomachs, Hearts, and Minds—Daniel Wagner explains why the fight against terrorism needs to start with putting food in starving people's stomachs in the developing world and creating a more open, less hostile, political environment.
2002 Medical Professional Liability Insurance Renewals—For many medical professionals, the search for insurance coverage this year may be very difficult. Charles Kolodkin explains.
Measuring And Managing Operational Risks—In this first in a series of articles, Samir Shah describes several promising methods for quantifying operational risks.

New IRMI Insights

Does the Discovery Provision Apply during the Extended Reporting Period?—This article examines an often-overlooked but critical variation in claims-made policies: whether the policy's discovery provision is operative during the time period covered by the ERP.

Products & Services

Sales of New Captives Book Prove Hard Market! If we needed proof of the hard market, we certainly got it from the response to our newest book, Captives and the Management of Risk. It has enjoyed several favorable book reviews and the brisk sales demonstrate that risk professionals are seeking alternatives to insurance. For more information on Kathryn Westover's fine work, see the description in our Products subweb.

Your View

Alerting Insureds and Brokers of Policy Modifications. We received nearly 200 responses to Jack's editorial in IRMI Update 37 asking readers their opinion of insurers issuing modified "standard" policies or endorsements without indicating they have been altered. By far, the consensus was that—while perhaps not fraudulent, depending on intent—doing so was simply not good business practice. Suggestions for pointing out modifications were plentiful:

Increasing the point size or changing the font of modified verbiage.
Adding "mod" to the policy/endorsement number.
Changing the edition/form number completely
Providing a written notice to the agent/broker/policyholder.
Placing a "Modified" stamp or sticker on the endorsement/policy.
Providing a cover page highlighting coverage changes.

Several readers voiced their belief that such sleight-of-hand modifications were in fact illegal. They suggested the practice could be a violation of copyright, a case of bad faith, a misrepresentation under a state's insurance code or other Consumer Protection Act, a breach of the implied covenant of good faith and fair dealing, or a violation of most states' property and casualty filing laws and "60-day advance notice" rules.

Other voices sounded an opposite chorus, however, citing overworked underwriters, CSRs, and insurer processing units. After all, they chimed, isn't it the obligation of all insureds, brokers, agents, risk managers, etc., to read—word for word—the policies and endorsements provided? Isn't failing to do so not only an abdication of good business practice but a failure of duty and common sense? Is it really the insurers' fault when policyholders fail to read their policies and endorsements?

Whether this practice is seen as outright deception or simple miscommunication is obviously a matter of opinion. Perhaps the question we should ask is not whether the practice is deceptive but how can we as an industry solve the problem? What do you think? Below are some reader comments, edited for length.

We all (carriers, brokers, agents, risk managers, insureds) rely on ISO to set "standards." These standards should be protected property. If one wishes to build or take away from its original form as occurs frequently, then the ISO identifier should be removed completely.

—C. Dwayne Shelton, Account Executive,
First Arkansas Insurance, Little Rock, AR

As for the ease of amending the standard form, I reject that theory. It's not that much wording to put on a piece of paper and it's not that hard to add the words "material used from" to the ISO wording at the bottom. Yes Jack, they knew exactly what they were doing. Deceit, fraud, and infringement. They know they can get away with it. If this wasn't insurance, this story would be on Dateline as a feature story.

—Mark A. Leininger, Opinions, Ltd.

The form has a space for a typed entry and it has wording that refers to the typing above and if none, refer to the policy. I would think anyone that received an attachment with a certificate should deem that attachment important enough to review and read. Any entry that was on the form should be obvious and not need to be highlighted or flagged. I don't see this as modifying and endorsement. I see it as completing an endorsement that can be used one of two ways. That is why the warning you refer to is already at the top of the page saying THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. I don't think it needs to be there twice.

—Mike Sawyer

CSRs are expected to handle more and more volume every year. Although our agency believes it is incumbent on the marketing department, CSR, and the agent to notice any gaps in coverage, it would be almost impossible for us to catch a change in the standard policy writing without microscopic inspection of each policy. A page showing any deviations from ISO provided by the companies would be most helpful and in today's age of technology it should not be that difficult to achieve.

—Jack Laseter, Marketing Director, Bryson & Company

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IRMI Update—Issue #38

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