Category: Lawyers Insurance

Directors and officers liability insurance protects law firms.

Why do law firms need directors and officers insurance

Directors’ and Officers’ liability insurance is most often associated with large for-profit companies; however, they are not the only ones that need it. Nonprofit directors and officers may have an even more demanding job because the operations may be less familiar to the individual, and they are at a higher risk for litigation.

There are two types of nonprofit organizations, each having a different form of exposure for its directors and officers. The first is a Public Benefit nonprofit organization, which exists to serve the community at large, such as a religious organization or academic institution. The second type of organization is a mutual benefit nonprofit organization formed to serve its members. Examples include trade associations, cooperatives, and social organizations.

Approximately 20 percent of all U.S. corporations are nonprofit, which indicates a significant exposure to directors and officers all over the country. Even worse, many of these directors don’t realize they have liability exposure.

The function of nonprofit directors

The primary function of nonprofit directors is to maintain financial stability and provide the necessary resources to help the organization.

While many for-profit corporations are subject to various performance standards and behaviors with reporting requirements and regulatory agencies, nonprofits are mainly exempt from these regulations. Many nonprofit directors and officers must implement their internal information systems and performance criteria.

Also, because many nonprofit directors and officers are frequently subjected to less scrutiny, there is a higher probability of litigation regarding their fiduciary role.

In addition, the resources of many nonprofit organizations are insufficient to provide directors and officers with the most desirable support. As a result, decision-making may be hindered by incomplete information, adequate time, and the inability to investigate and document relevant factors carefully.

The legal climate

While many states make it difficult to prove negligence against directors and officers, that doesn’t mean they should rely upon those immunities and limitations as protection. Especially because, while even their defenses may eventually prevail, the bills associated with the defense can grow very quickly.

With the litigiousness of today’s society, board members commonly face lawsuits for an extended list of wrongdoings, including discrimination, harassment, wrongful termination of employees, inefficient administration or supervision, waste of assets, misleading reports, and other misrepresentations.

In addition to lawsuits and potential judgments, the cost to defend an organization can be prohibitive. Current studies show that the cost to defend a lawsuit can run anywhere from $35,000 to $100,000.

 

Create return-to-work procedures for your firm.

Return-to-Work Procedures

In working with law firms, we have found that many employees don’t know how to report an injury or where to go for treatment.  With that in mind, we want to share some tips for helping employees report injuries but, more importantly, return to work in a quick, efficient fashion.

Steps after the Worker Has Been Injured On the Job

If possible, develop a relationship with specific doctors to treat on-the-job injuries.  Doing so will help the doctor become more familiar with your firm’s operations and ensure better employee treatment.   Your worker’s compensation carrier may even be able to suggest some preferred doctor’s help.

Knowing where to send your employees is just as important.  The difference in costs can be substantial.  Compare these average medical costs when an injured worker needs non-life-threatening medical care:

  • $1,300 to a hospital emergency room
  • $175 to an urgent care center visit
  • $150 for a doctor’s office visit
  • $73 to a walk-in convenience care clinic

Quickly reporting injuries to your worker’s compensation claim department is also very important.   Also, incorporating a return to work program helps companies save money in the following areas:

  • Reduced medical costs and disability duration
  • Improved productivity, and
  • Reduced attorney intervention

Steps after the Doctor’s Visit

Did you know that studies show that the longer an injured employee is away from work, the lower the probability that person will return to their job?   A Bureau of Labor Statistics study found the chance an injured employee will return to work is typical:

  • 90% after 30 days
  • 50% after six months
  • 25% after one year, and
  • <2% after two years

This highlights the importance of creating a return-to-work program.  These “transitional duty” jobs should:

  • Match the physical capabilities of the person doing the work.
  • It should be offered in writing, and it should be very specific in scope and description.

Done correctly, an effective return to work program saves 35% on medical costs and 30% on lost time days.

To find out more, please get in touch with our office.

 

Help prevent repetitive stress injuries in your firm.

Preventing Repetitive Stress Injuries

One of the most common employee-related injuries within a law firm is a repetitive stress injury.

Repetitive Stress Injuries are common for anyone that does any of the following:

  • Sit at a desk in front of a computer all day?
  • Drive a bus or operate heavy equipment?
  • Stretch your arms or twist your back to reach your work
  • Lift or carry materials?
  • Spend most of the day on your feet?
  • Use hand tools?
  • Repeat the same motions over and over?

Education support professionals can suffer from hand and wrist disorders, back and neck injuries, and muscle strains due to repetitive motions or awkward work positions. Poor designed equipment, improper lifting, and forceful exertions increase the chances of injury to wrists, arms, back, or shoulders.

Specific work activities that you do every day can cause tiny injuries to your shoulders, elbows, wrists, hands, fingers, knees, or back. Each trauma alone is so minor that you don’t know it is happening . . . until all the little injuries add up and you’re in pain.

The good news is that most of these disorders are preventable. For ample, just as you would adjust a vehicle’s seat if you sat in it for the first time, your workstation needs the same type of adjustments. If y  work in a seated position, you may need to raise or lower your chair. Compu er operators usually can adjust the height of their keyboard and the angles of their monitor and keyboard.

In many cases, the problem isn’t the job you’re doing or the tool you’re using but how you’re doing or using it. Over ad reaches, lots of lifting and bending, wrist rotations — the things you usually do without thinking can create a problem. The motion itself may be harmless, but when you do it many times a day, you can hurt yourself.

Poorly designed or maintained work environments and a poorly designed job or workstation can increase the likelihood of repetitive stress injuries or other adverse health effects. Environmental factors such as heat or cold, lack of ventilation, noise, vibration, and too much or too little light can worsen ergonomic problems.

For every law firm, we recommend taking some time to ensure your employees’ workstations are correctly adjusted and will help your support staff avoid potential injuries.

Protect your law firm with sewer backup coverage.

Sewer Backup

One of the most overlooked but essential insurance coverage a law firm can purchase is sewer and drain backup coverage.

What is “Sewer Backup”?

Large rain storms and floods can cause extensive water damage, but they can also cause sewage lines to overfill and back up into your law firm through the drain pipe. These types of backups are not only difficult and expensive to repair, but they can also pose a health hazard to other employees and students.

This type of insurance claim is typically excluded from a standard insurance policy unless you purchase an endorsement adding the coverage.

Sewer Lateral?

Did you know that you (or possibly your landlord) are responsible for the maintenance and repair of the pipeline between the city’s sewer main and your building (the sewer lateral)?   A cracked or deteriorated lateral can allow groundwater to seep into the system, contributing to the possible sewer backup problems.

Causes of Sewer Backup

  • Blockages due to Tree Roots: Shrubs and trees seeking moisture can make their way in to sewer line cracks causing extensive damage. They may start small, getting into a small crack in the pipe, but as the tree or shrub continues to grow, so does the root. Tree roots can enter the service pipe at joints and cause blockages.
  • Sanitary Main: A blockage can occur in a city sanitary main. If the blockage is not detected in time, sewage from the main can back up into your firm through floor drains. These types of leaks will typically happen slowly.
  • Water in Basement: Most basement flooding is unrelated to the sanitary sewer system, and it is typically a case of how the soil around the building has settled. If not fixed, this can drain rainwater into your firm instead of away from it.

Business Insurance Will Not Cover Flood Damage

Only flood insurance will cover your losses in the event of a flood. Federal flood insurance policies can be purchased directly from an insurance agent or a company representative and are available to communities participating in the National Flood Insurance Program.

Ways to Prevent Backups in Your Lateral and the City’s Main

  • Dispose of Grease Properly: Cooking oil should be poured into a heat-resistant container and disposed of properly after cooling off, not in the drain. Washing grease down the drain with hot water can cause significant problems. As the grease cools off, it will solidify either in the drain, the property owner’s line, or the main sewer causing the line to constrict and eventually clog.
  • Dispose of Paper Products Properly: Paper towels, disposable (and cloth) diapers, and feminine products can cause many problems in the property owner’s lateral and the city main because they do not deteriorate quickly, as bathroom tissue does.
  • Replace your line with a new plastic pipe: To prevent tree roots from entering your line, replace your line and tap with a new plastic pipe. If you still have problems with tree roots growing in your lateral, you may have to have roots cut periodically.
  • Install a Backwater Prevention Valve: A backwater valve is a fixture installed into a sewer line, and sometimes into a drain line, in the basement of your home or business to prevent sewer backflows. A properly installed and maintained backwater valve allows sewage to go out but not to come back in. Property owners are responsible for the installation and maintenance of backwater valves.

What to do if you Experience a Sewer Backup

A sewer backup can lead to disease, damage your valuables, damage your house or business, and even result in electrical malfunctions. Prompt cleanup of the affected property can help minimize the inconvenience and prevent mold and further damage. In the event of sewer backup, immediately arrange for the cleanup of your property. This should include:

  • Wet-vacuuming or removing spillage
  • Mopping floors and wiping walls with soap and disinfectant
  • Flushing out and disinfecting plumbing fixtures
  • Steam cleaning or removing wet carpets or drapes
  • Repairing or removing damaged wallboard or wall covering
  • Cleanup of ductwork

How to File a Claim

For insurance claim purposes, take before and after photos of the affected areas and itemize any property losses. Save all receipts related to repairs, cleaning, or damages and contact your Independent Insurance Agent as soon as possible.

Importance of Client Documentation

While it is impossible to avoid every single potential claim, there are plenty of risk management steps that can be taken to at least help defend such a suit. One of the most important steps that can be taken is to maintain proper documentation of your communications with clients.   This becomes extremely important when the client and attorney disagree.

This came to light in a recent professional liability claim/ lawsuit.  The CEO of a shipping company retained counsel to settle a dispute with the board of directors of his company.  However, the CEO and Board engaged in settlement discussions without the hired counsel, who repeatedly advised the CEO not to proceed with the settlement.  Nevertheless, the settlement was reached and the CEO stated on records that he understood and approved the settlement.

Two years later, the CEO filed a malpractice claim against his former counsel claiming it was their ineffective representation which led to the unfavorable settlement.   The court ruled in favor of the law firm, as the CEO was unable to provide any evidence that he was not advised of the consequences of the proposed settlement.  In fact, there were at least 13 separate documents that showed the CEO proceeded against the advice of his attorneys.

This case shows that a well-documented client file can go a long way toward defending a malpractice claim. When settling cases, attorneys need to be mindful of the possibility of buyer’s remorse and take precautions to avoid liability.  Attorneys should be careful to explain all the terms of the settlement and give their client ample time to weigh their options.   Attorneys should also document their explanation of the settlement terms and the client’s consent in writing. This may not stave off the buyer’s remorse lawsuit, but may help to preclude liability.

EDP insurance protects your law firm.

EDP Insurance Coverage

Electronic Data Protection (EDP) Insurance coverage can be one of the most crucial insurance coverages your law firm can purchase.

The data stored on computers and servers is one of the essential items firms possess. EDP protects you if all of your firm’s data is lost or destroyed.

Electronic data loss insurance does cover:

Lost or damaged electronic data. You never know when you may lose all your essential data, so you must be protected. It pays to replace or restore your electronic data that is lost due to an insured loss, e.g., a  fire that destroys your computer system or a virus.

Interruption of computer operations. Data loss can severely impact a business. EDP policies can also include coverage for your law firm’s actual income and extra expenses incurred if you cannot operate the firm due to the data loss.

Electronic data loss insurance does not cover:

Your liability due to data loss (not a third party). A standard EDP only covers your losses due to lost electronic data, and it does not provide coverage for a liability you may have to a third party due to such losses.

Your mistakes. A standard policy doesn’t cover any losses due to a mistake in processing electronic data or mistakes made in your computer systems or networks’ design, implementation, or support unless those mistakes result in a fire that subsequently destroys the data.

Employee actions. A standard policy won’t cover any losses to electronic data if those losses result from your employees’ actions, whether intentional or not.

EDP insurance claims examples:

Fire
A small fire in your building destroys or damages your server. Your EDP insurance will cover the cost (up to your limit) of restoring that data and lost income.

Prepare your firm's disaster recovery plan.

Preparing a Disaster Recovery Plan

Law firms face a variety of risks. There are the natural disaster risks like fire, flood, and snowstorms, And then there are other risks like litigation from property damage or bodily injury or theft and data loss.
The key for firms to rise above all these risks is preparation. Your ability to recover quickly may differ in your firm’s survival.
The following four steps will hopefully help you prepare a sound law firm disaster recovery plan:
  1. Assess your risks. Before creating a plan to deal with potential disasters, you must know what they are. Take some time to think through the potential dangers your firm could face and how they could affect your operations.
  2. Prioritize functions. Deciding the proper order in which operations should be restored is another vital piece to your disaster recovery plan. For law firms, typically, the first two most important functions are ensuring the safety of your students and teachers and then finding a new place to hold class; if necessary, Proper insurance can go a long way towards helping with newly incurred expenses as well.
  3. Develop prevention and mitigation strategies  Once you’ve determined your firm’s most essential functions, the next step is to develop strategies around them to prevent and mitigate the various types of disasters you may encounter.
  4. Test and maintain your plan. As hokey as it may sound, testing out your disaster recovery plan may differ in its success should a real catastrophe occur.
If you are interested in finding out more about how to implement a proper disaster recovery plan for your law firm, please feel free to reach out to our agency, and we’ll be more than happy to help.
As an agency that specializes in law firm insurance, we understand the risks you face daily and how to protect you from them.

Protect your firm with employee benefits liability.

What is employee benefits liability?

Most law firms offer health insurance to their employees. And while those benefits help attract and retain qualified workers, errors in your plan’s administration can lead to lawsuits against your firm.

For example, suppose your firm hires a new paralegal. The new hire completes the necessary paperwork to be enrolled in the firm’s health plan. However, due to a clerical error by one of the human resource employees, the new teacher is not enrolled in the plan.   Sometime later, the teacher is hospitalized with a severe illness and discovers she doesn’t have any health insurance. As the medical bills pile up, the teacher seeks restitution for the mistake and sues the law firm. A general liability policy does not cover this claim but rather an employee benefits liability policy.
Employee Benefits Liability An employee benefits liability policy typically covers errors and omissions for the following:

  • Accurately describing plan benefits and eligibility rules.
  • Maintaining files and records related to benefits.
  • Enrolling, maintaining, and terminating employees, eligible family members, or beneficiaries in benefit plans.

Covered Benefits

What constitutes “employee benefits”? This term generally includes the following:

  • Insurance Life, accident, dental and medical, and other types of insurance
  • Plans Pension, profit sharing, stock ownership, and savings, and other plans
  • Benefits Social security, workers compensation, disability, and unemployment benefits
  • Additional Tuition assistance, maternity leave, etc.

Policy Limits

This Liability coverage usually includes two separate limits. The Each Employee limit is the most the insurer will pay for any one employee, their family members, and beneficiaries. The Aggregate limit is the most the insurer will pay for all acts, errors, or omissions.

Cost

Employee benefits liability is a relatively inexpensive coverage to purchase. Policies will start with an annual premium of $250 to $300 and increase as the number of employees at your firm increases.

If you are interested in receiving a quote for your law firm, please contact our office.

Dual-role Employees

A risk management position is an example of a role that, even when filled by a lawyer, frequently involves both legal and non-legal work. “Attorneys can be hired in a myriad of roles not requiring their status as attorneys,” says Richard T. Seymour, former chair of the ABA Section of Labor and Employment Law.

When determining whether a dual-role employee is acting as legal counsel and thus invoking attorney-client privilege protection, courts should focus on function more than a title. Status is not the same thing as role. While risk managers’ views may be partially influenced by their legal degrees, their employer is not necessarily looking for legal advice, as opposed to business advice.

Just because certain positions (like risk management positions) are not part of a company’s legal group and don’t require a law degree doesn’t necessarily reveal the employee’s accurate and complete role. Whether a dual employee is functioning as in-house counsel is not a bright-line test.

Rather than focusing on labels and bright-line tests, the emphasis should be on how the company utilizes risk management employees. There is a lot at stake in determining the applicability of privilege, so the focus should be on whether the company’s employees are reaching out to the risk management director to seek legal advice. Risk managers can deal with critical legal issues.

Bringing Risk Managers Within the Privilege

If the applicability of privilege to a risk management employee is driven by function rather than form, then companies should consider how to characterize and implement those functions. Companies should give serious thought to dual-role employees like risk managers. The intent to preserve privilege cannot be assumed—the company needs to be specific that legal advice is being sought.

Bringing risk management employees within the privilege requires planning and foresight. Place risk management departments under the supervision and control of their general counsel and have the general counsel issue instructions to them. Operational changes may also help a court see the department as more legal than business. These could include: (i) modifying risk managers’ job descriptions to state that the position will involve the company seeking legal advice concerning matters they handle; (ii) requiring risk managers to keep separate files for legal and non-legal matters, and (iii) limiting email discussions on legal matters only to those who need to be involved in legal discussions.

Learn how medical payments coverage works.

What is medical payments coverage?

One of the questions we often hear is regarding the medical payments coverage on a law firm’s general liability policy. Many firms wonder what it covers and how it works.

The medical payments coverage referenced in your business’ commercial general liability policy can best be compared to the med-pay coverage found in your homeowner policy. This coverage provides payment for first aid, necessary medical and dental treatment, ambulance, hospital, professional nursing, and funeral services to persons other than the insured. The intent is to compensate people injured on the insured’s premises or due to the insured’s operations, regardless of fault.

Most law firm general liability policies come with medical payments coverage of either $5,000 or $10,000.

Medical payments coverage is often referred to as no-fault coverage because the injured party doesn’t have to prove the insured’s negligence to receive payment. Medical payments coverage is a way for a firm to take care of the injured party without filing a liability claim.