Blog - Tag: Measured Risk Insurance
Protect Your Officers with ‘Drive Other Car’ Coverage
Linda is a junior partner in a law firm and drives a car that the firm owns and insures. The firm’s auto insurance covers her as a partner and she doesn’t own another car, so she sees no need to have her own policy.
Most of the time, this is not a problem. However, spring break comes and she takes her kids to DisneyWorld. She rents a car at the Orlando airport and never gives a thought to whether her firm’s insurance will cover her if she has an accident with the rental.
But in this case, a phone conversation with the firm’s insurance agent would have been a great idea.
While driving to her hotel one night, Linda rear-ends a new Lexus. The damage to the other car is extensive; she looks to her firm’s auto liability coverage for the cost of repairing it.
The ISO Business Auto Policy covers the person or organization shown in the Policy Declarations (the information page at the beginning.) In this case, the name shown is that of Linda’s law firm.
The policy goes on to say that, for liability insurance, the firm is an insured and so is anyone else using, with the firm’s permission, a covered auto the firm owns, hires or borrows, with some exceptions.
Unfortunately for Linda, the firm didn’t rent the car; she did … in her own name. Consequently, the firm’s insurance will not cover her liability for this accident. She will be forced to pay for it out of her own funds.
However, there are a couple of policy endorsements that her firm could have purchased that would have solved the junior partner’s problem.
‘Drive Other Car‘ Coverage — Broadened Coverage for Named Individuals
The insurance company will require the insured to list the names of one or more individuals on the endorsement.
The change extends several of the policy’s coverages so that they apply to the listed individuals and their resident spouses. This Drive Other Car endorsement comes with some significant limitations:
- It extends to the listed individuals’ coverages that the policy already provides; it does not add coverages not provided. If the firm’s policy does not provide collision coverage on its vehicles, Linda would not have collision coverage on a car she rents.
- It covers the named individual’s spouse if they live together. If Linda is married to Jim, he automatically has coverage for a car he rents in his name.
- The only family member it automatically covers is the resident spouse. It will not cover any other family members in the household unless the endorsement specifically lists their names.
Individual Named Insured
An alternative to the above endorsement is to list individuals’ names in the Policy Declarations along with the firm’s name and attach an endorsement called Individual Named Insured.
This endorsement covers the individual listed in the declarations and automatically covers the person’s resident spouse and family members. It also covers these individuals should they injure another of the policyholder’s employees.
These policy changes affect several coverages, including liability, uninsured motorist, medical payments and physical damage.
If you are considering this type of extended coverage, you should consult with us to discuss the endorsements’ details and identify the one that will best insure the concerned individual(s).
With the right coverage in place, Linda would have been able to enjoy her vacation without having to worry about who would pay for the fender-bender.
The Holidays Have Their Own Workplace Perils
On-the-job accidents may increase during the holidays as distractions in the workplace increase and decorations can pose safety issues.
Normal routines and schedules are disrupted, and your staff — like everyone else — are also rushing around to crowded and chaotic stores and malls after work and on weekends.
Be aware that accidents may be more likely to happen at this time of the year at the workplace, on the road or at home. Employees tend to take extra physical risks ― such as when hanging lights and lugging trees around. And if you hold a holiday party, it opens up a new set of potential liabilities.
In-office safety
When planning decorations for the office, it is important to keep holiday safety in mind.
Decorating the office helps workers enjoy the spirit of the season together, but remember that proper safety precautions should be observed at all times:
- Be mindful of potential fire hazards when selecting holiday decorations and where you place them.
- Be careful of stapling holiday lights, do not add too many strings of lights and make sure illuminated items are turned off.
- Verify that all fire extinguishers are in place and fully charged and accessible.
- Do not block exits, hang decorations on fire extinguishers, fire alarms or fire hose boxes, or obstruct the view of exit signs.
- Do not hang decorations from sprinkler heads or electrical panels.
- Without proper planning, holiday decorations can create tripping hazards. Extension cords should not be run through traffic areas where they pose trip hazards and, if you have to use an extension cord, use the proper one.
- Avoid placing trees, freestanding decorations and presents in traffic areas.
Holiday party
The holidays bring office parties and, if alcohol is being served, keep in mind the liability involved.
Provide plenty of alternatives to alcohol, such as soft drinks, coffee, tea, water and cocoa. Hire a professional bartender who can cut people off if they have too much.
Enforce the same workplace rules of etiquette at the party as you do in the workplace.
If you serve alcohol, also serve food.
Stop serving alcohol a few hours before the party ends. Offer to cover the cost of an Uber or Lyft ride home for anyone who needs it.
The takeaway
If you keep in mind that the holidays put extra pressure on everyone, it may help you to keep your workplace free of accidents.
By following a few simple safety tips, it will be easy to enjoy the holiday and the events at work without dealing with injuries or damage to property.
When planning for the holidays, incorporate safety precautions into the planning process.
New Class-Action Lawsuits Target Group Health Plan Tobacco Surcharges
A new wave of class-action lawsuits is targeting employers that apply health insurance premium surcharges to employees who use tobacco, accusing them of discrimination and violating the Employee Retirement Income Security Act (ERISA), according to two new blogs by prominent law firms.
The lawsuits, according to a blog by Chicago-based Thompson Coburn LLP, assert that the surcharges are violations of fiduciary duty rules under ERISA, as well as discrimination regulations under the Health Insurance Portability and Accountability Act (HIPAA).
The law firm says these cases are being filed across the country on an almost daily basis and to date no courts have ruled to have the cases dismissed.
The fast-developing lawsuit trend is notable, considering that tobacco surcharges are widely used, and if any of the new lawsuits are successful, they could set a precedent that could expose thousands of employers to legal action. Most of the lawsuits are against self-insured plans, but even employers who purchase health insurance and also impose surcharges for tobacco use could be targeted as they are considered “fiduciaries” under ERISA.
The lawsuits hinge, in part, on a HIPAA prohibition on group health plans and wellness plans discriminating on the basis of health status. For example, health plans are barred by the law from charging higher premiums to group health plan participants with pre-existing conditions.
However, HIPAA has one exception to the rule: It allows plans to charge different premiums for employees who enroll in and adhere to “programs of health promotion and disease prevention.”
You can find HIPAA’s non-discrimination rules for wellness plans here.
The lawsuits target a common practice: requiring employees who use tobacco to pay higher health plan premiums than their colleagues who certify that they don’t use tobacco products (cigarettes, e-cigarettes, chewing tobacco and similar products).
Common themes
The lawsuits have two common themes. They allege that the plan:
- Did not provide an alternative standard for tobacco users to obtain a discount because the premium reductions for participating in the wellness plans are only available on a prospective basis, in violation of ERISA Section 702, and
- Failed to provide information on the existence of such alternatives in “all plan materials.”
The lawsuits typically seek several of the following remedies:
- Declaratory and injunctive relief.
- An order instructing the employers to reimburse all persons who paid the surcharges, with interest.
- Disgorgement of any benefits of profits the businesses received as a result of the surcharges.
- Restitution of all surcharge amounts charged.
It should be noted that as of the end of October 2024, no court has ruled on a motion to dismiss a case, according to the blog. At least one case has settled as a class action and the employer and plaintiffs in another class-action case had informed the court that they were working on a settlement agreement and would both ask the court to dismiss the case.
In addition to these private actions, the Department of Labor has sued several employers targeting premium surcharges, including in 2023 when it brought action against a firm whose health plan was charging tobacco users a $20 per month surcharge, according to a blog by Washington, D.C.-based Groom Law Group.
The takeaway
Thompson Coburn said in its blog that these types of cases are snowballing: “Given the number of complaints being filed weekly — at times daily — it is highly possible that any group health plan that applies tobacco surcharges as discussed faces the possibility of a class action lawsuit.”
The law firm recommends that businesses consider reviewing their health plans to ensure that they comply with HIPAA’s non-discrimination rules for wellness plans, which allow tobacco surcharges when applied properly, such as charging different premiums for workers who enroll in and adhere to a program that’s focused on promoting health and preventing disease.
This is a newly evolving threat to employers. We’ll provide future updates after courts rule on the merits of the cases, which will provide more guidance on when tobacco surcharges can be applied.
Why It Is Important to Review Your Business Insurance Annually
One of the keys to managing risks when you first start a business is getting the right insurance to cover your operations, property and potential liabilities.
Unfortunately, many business owners fail to update their policies and just renew them year after year even if the company has grown, expanded operations and facilities, and added new equipment and property. If this is the case, the old coverage would be insufficient.
Business owners should review their policies every year to catch any omissions and make sure they are not underinsured. It is common for smaller businesses to secure a basic business owner’s policy (BOP) and workers’ comp when they first get started. A BOP includes:
- Property insurance for buildings and contents owned by the company.
- Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business.
- Liability protection, which covers your company’s legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations and errors in services provided.
Outgrowing BOP coverage
As your business expands, you may outgrow the BOP and need additional coverage to manage your risks. Some examples include the following:
- Workers’ comp. While you likely added a workers’ comp policy when you made your first hire, you will need to update it as you add more staff. If you don’t, when your insurer audits you, you may face a hefty bill for additional premium. Be diligent about your policy and inform your insurer as you grow.
- Excess umbrella or liability coverage. You should consider this insurance to cover claims that exceed your BOP’s limit, providing you with an added layer of protection to protect your assets.
- Professional liability insurance. These policies provide coverage for mistakes for any professional services you provide. This used to be mainly for doctors, attorneys and accountants, but as our service sector has expanded it includes services provided by coders and software developers, appraisers, consultants, real estate brokers, graphic designers and home inspectors, among others.
- Auto, non-owned and hired coverage. This protects business owners if an employee has an accident while driving a rental or personal vehicle on the job.
- Employment practices liability insurance. This covers human resources issues related to discrimination, harassment and termination.
- Commercial auto insurance. This coverage protects autos that are not under a personal policy.
- Directors and officers liability coverage. This protects officers and directors in the event they are sued for wrongful acts while on duty.
Depending on the business, some or most of these insurance options may be required for adequate protection. Annual reviews with us are ideal for discussing your options. Make sure these elements are considered:
- If computers, equipment or other types of property have been added, this would be reason to increase policy limits.
- While revenue is an important consideration, it is also important to remember that it is a potential liability.
- A general liability or BOP may be affected if the owner has moved, added or closed locations.
- Hired and non-hired auto insurance is necessary if workers are driving frequently in rented vehicles.
- For specific types of work and services, employers may need additional endorsements for their general liability policies.
- People who are serving new industries or clients may have problems with their professional liability coverage if they have large amounts of high-risk industries or customers.
- If you experience an increase in the number of workers you have, or there is a higher turnover rate, it is important to think about employment practices liability coverage. And as mentioned, your workers’ comp policy should be updated to reflect any staffing changes and that you categorize your workers properly.
Businesses Suffer as Employee Theft Grows
Organizations around the world lose an estimated 5% of their annual revenues to occupational fraud, according to a survey by the Association of Certified Fraud Examiners (ACFE).
The association estimates that U.S. businesses lose some $50 billion a year to employee theft, and that 75% of employees have stolen at least once from their employer — and 37% have stolen at least twice. It also estimates that about 33% of business bankruptcies are in part due to employee theft.
So, what can your organization do to avoid falling victim? The U.S. Small Business Administration and the ACFE recommend that companies:
Use pre-employment background checks — Making the right hiring decision can greatly reduce the risk of future heartache.
Basic pre-employment background checks are a good business practice, especially for employees who will be handling cash, high-value merchandise, or having access to sensitive customer or financial data.
But be aware that laws on background checks vary from state to state and if you go too far in your check, you may be in breach of the law and risk being sued. Recently the U.S. Equal Employment Opportunity Commission raised concerns that criminal background checks may disproportionately discriminate against some racial groups.
Check candidate references — It’s surprising how few employers check candidates’ references. Make a practice of calling all references, particularly if they are former employers or supervisors.
If your candidate has a history of fraudulent behavior, then you’ll want to know about it before you hand them a job offer.
While some former employers may be loath to tell you anything bad, they will often give you cues in the conversation that the employee may have had some problems.
Implement a fraud hotline — Occupational fraud is far more likely to be detected by a tip than by any other method.
More than 40% of all cases were detected by a tip — with the majority of them coming from employees of the victim organization. There are several providers of hotline services that can help implement an anonymous tip-reporting system for businesses of all sizes and industries.
Conduct regular audits — Regular audits can help you detect theft and fraud and can be a significant deterrent to fraud or criminal activity, because many perpetrators of workplace fraud seize opportunity where weak internal controls exist.
You should identify high-risk areas for your business and audit for violations on a six- to 12-month basis. Items to look at include business expense reports, cash and sales reconciliation, vacation and sick day reports, and violations of e-mail/social media or Web-use policies.
Recognize the signs — Studies show that perpetrators of workplace crime or fraud do so because they are either under pressure, feel underappreciated or perceive that management behavior is unethical or unfair.
They rationalize their behavior based on the fact that they feel they are owed something or deserve it.
Some of the potential red flags to look out for include:
- Not taking vacations. Many violations are discovered while the perpetrator is on vacation.
- Being overly protective or exclusive about their workspace.
- Employees that prefer to be unsupervised by working after hours or taking work home.
- Financial records sometimes disappearing.
- Unexplained debt.
- An employee living beyond their means.
Set the right management tone — One of the best techniques for preventing and combating employee theft or fraud is to create and communicate a business climate that shows that you take it seriously. You may want to consider:
- Reconciling statements on a regular basis to check for fraudulent activity.
- Holding regular one-on-one review meetings with employees.
- Offering to assist workers who are experiencing stress or difficult times.
- Having an open-door policy that gives employees the opportunity to speak freely and share their concerns about potential violations.
- Creating strong internal controls.
- Requiring employees to take vacations.
You should also treat unusual transactions with suspicion and trust your instincts.
Secure employee theft insurance
Employee dishonesty insurance coverage — sometimes referred to as fidelity bond, crime coverage or crime fidelity insurance — protects a small business employer from a financial loss as a result of fraudulent acts by employees.
The financial loss can be caused by an employee’s theft of property, money or securities owned by the small business.
Cal/OSHA Proposed Workplace Violence Prevention Rules Muddy the Waters
Cal/OSHA has proposed new regulations that would incorporate California’s new workplace violence prevention law — which took effect July 1 — into Title 8, the set of regulations that covers workplace safety in the Golden State.
However, the proposed rules add a number of new requirements that some safety observers say would be unworkable in many workplaces and may create burdensome new standards for employers to follow.
Under the law passed last year, SB 553, virtually all California employers are required to establish, implement and maintain an effective workplace violence prevention plan and effective procedures to respond to “actual or potential” workplace violence emergencies.
The proposed additional requirements surpass those set out in state Labor Code as a result of SB 553. Here’s a look at some of the most significant changes.
Workplace controls
The proposed regulations list a number of acceptable procedures and rules that can be used to effectively reduce workplace violence hazards, including:
- Appropriate staffing levels,
- Hiring dedicated security personnel,
- Effective means to alert employees of the presence, location and nature of a security threat,
- Control of visitor entry, and
- Methods and procedures to prevent unauthorized firearms and weapons in the workplace.
Engineering controls
The proposal adds a number of suggestions for engineering controls that can help prevent violence in the workplace. These include:
- Electronic or mechanical access controls to employee-occupied areas,
- Weapon detectors (installed or handheld),
- Enclosed workstations with shatter-resistant glass,
- Deep service counters,
- Spaces configured to optimize employee access to exits, escape routes and alarms,
- Separate rooms or areas for high-risk persons,
- Locks on doors,
- Affixing furniture to the floor,
- Opaque glass windows (which can protect privacy, but allow employees to see where potential risks are),
- Improving lighting in dark areas, sight-aids, enhancing visibility and removing sight barriers,
- Video monitoring and recording, and
- Personal and workplace alarms.
The proposed rules also list situations or locations that have a higher risk of workplace violence. These include:
- Employees working alone or in locations isolated from other employees,
- Areas with poor illumination or blocked visibility (such as blind spots),
- Entries to places of employment where unauthorized access can occur,
- Work locations that lack effective escape routes,
- The presence of money or valuable items such as jewelry or luxury goods,
- Frequent or regular contact with the public,
- Working late at night or early morning, and
- Selling, distributing or providing alcohol, marijuana or pharmaceutical drugs.
The draft language would bar employers from requiring or encouraging employees to confront individuals suspected of theft or of engaging in violence in the workplace, except for dedicated security staff.
Finally, the proposed regulations outline steps employers can take when responding to and then investigating a case of workplace violence, post-incident:
- Provide immediate medical care or first aid to workers who have been injured in the incident,
- Identify employees involved in the incident,
- For employers with more than 25 employees, make available individual trauma counseling to those staff affected by the incident,
- Conduct a post-incident debriefing as soon as possible after the incident with employees, supervisors and security involved in the incident,
- Identify and evaluate workplace violence hazards that may have contributed to the incident,
- Identify and evaluate whether appropriate corrective measures developed under the firm’s workplace violence prevention plan were effectively implemented, and if any new or additional corrective measures should be made, and
- Solicit from employees involved in the incident their opinions regarding the cause of the incident, and whether any measures would have prevented it.
The takeaway
The proposed rules are just the first step. They still have to go through a public comment period and the Division of Occupational Safety and Health, which writes new regulations.
However, the rules have already received plenty of pushback from employers.
Karen Tynan, an attorney specializing in workplace safety and health for the Ogletree Deakins law firm, told the Cal-OSHA Reporter that there are potential pitfalls in the added provisions. The examples of engineering and work practice controls “may be helpful to employers, but certainly we don’t want to see inspectors demanding these examples in every workplace,” she said.
She also criticized the post-incident response procedures as “overbroad and overly burdensome. The demand for a post-incident investigation report will be incredibly difficult for even mid-sized employers or employers who do not regularly face workplace violence hazards.”
What Business Insurance Policies Cover Rioting, Looting
Protests and mass demonstrations that can sometimes descend into rioting and civil unrest are becoming more common not just in the U.S., but all over the world. Businesses can sometimes unwittingly become collateral damage from vandalism and looting.
It doesn’t have to be a retail establishment; office buildings and other commercial properties can also face looting and damage during civil unrest. For business owners whose properties are damaged or destroyed, the ordeal can be both unsettling and stressful as they wrestle with the specifics of filing insurance claims.
Fortunately, you don’t need special insurance policies to cover these events. Your basic commercial property policy and commercial auto (if you have business vehicles that are damaged) will usually suffice.
Here’s a look at what your policies may cover and how to prepare for filing a claim if your business is damaged during rioting or civil unrest.
Property damage
Standard commercial property policies cover damage to a business property caused by fire, explosion, riot or civil commotion, vandalism or malicious mischief. This would include coverage to the structure, as well as any inventory, fixtures and other contents. Business owner’s policies also include this risk.
Damage payouts would be subject to sublimits (specific or blanket) for inventory, fixtures and other items, as well as the policy deductible.
Commercial vehicle damage
For business-owned vehicles to be covered for damage for these types of events, you’ll want to ensure that you have purchased comprehensive coverage, which is an optional, but highly recommended part of your policy.
Comprehensive coverage may cover a vehicle if it is:
- Stolen,
- Damaged, or
- Destroyed.
One of the most common damages to vehicles during riots is broken windshields, which you can usually get covered with an optional glass coverage rider.
Business interruption coverage
Companies that are forced to close as a result of rioting and looting damage may have coverage for business interruption under a business property policy.
Business interruption insurance may cover lost income if a company is unable to operate after its premises were damaged during a riot or social unrest. Coverage may also apply if a business suffers a loss of income because of curfews or if authorities bar access to a property.
Coverage is typically triggered if there is direct physical damage to the premises.
Filing a claim
When filing a claim, read your policy or give us a call to determine how to best present it. It’s important to understand the policy’s limits and deductibles before spending time documenting losses that may not be covered.
If you are going to file a claim, document all damage. Keep receipts for all your inventory and fixtures.
In the event of a claim:
- Take photos of all damage.
- Contact your agent and file a claim immediately.
- Clean up to protect your building, but do not make major repairs until you talk to the insurance company.
- Keep receipts for any remediation work.
If you’re going to file a business interruption insurance claim, you will need:
- Pre-riot financial statements and income tax returns.
- Post-riot business records.
- Copies of current utility bills, employee wage and benefit statements, and other records showing continuing operating expenses.
- Receipts for building materials, a portable generator and other supplies needed for immediate repairs or remediation.
- Paid invoices from contractors, security personnel, media outlets and other service providers.
- Receipts for rental payments, if you move your business to a temporary location.
Note: Many policies require a 72-hour waiting period before a policyholder can begin making a business interruption claim. That’s because the first three days of business shutdown, access constraints or limited hours of operation because of a civil authority action, are often excluded from coverage.
There may also be a limit to the claim period. A standard limit is up to three weeks of losses.
More Businesses Sued Over Disabled Website Access
Businesses with a web presence, particularly those that are consumer-facing, are increasingly being sued over website accessibility issues that prevent disabled individuals from using a website.
While the number of such cases has been growing, 2,281 website accessibility lawsuits were filed in 2023, down from 2,387 the prior year and 2,352 in 2021, according to a report by Accessibility.com, a firm that helps businesses make their websites useable for certain disabled individuals.
The drop in cases actually filed is due to more organizations settling with law firms without going to court, in light of the fact that there was an 18% year-on-year increase in demand notices in 2023, the report concludes.
For businesses with customer-facing websites, this is a new risk that must be taken seriously as people can access the websites from anywhere in the country. Just because a business is located in say, Kentucky, a person in New York may sue in their local jurisdiction over website access issues.
Even if a business succeeds in fighting one of these cases, the litigation costs can be substantial.
What is website accessibility?
Website accessibility refers to the extent to which a site can be used by individuals with disabilities. This can include people who are blind or have low vision, those who are deaf or hard of hearing, and people with mobility impairments, cognitive disabilities or other disabilities.
It involves designing your website so that its content is available to and functional for everyone, including those who might use assistive technologies like screen readers, voice recognition software, or specialized input devices.
What’s happening?
The Americans with Disabilities Act allows individuals with disabilities to bring lawsuits against businesses directly. A plaintiff can seek injunctive relief, such as asking for a court order requiring the website to be changed as well as attorneys’ fees or costs. However, the ADA does not permit the recovery of monetary damages in these cases.
That said, many states, including New York and California, have enacted state laws allowing individuals to recover monetary damages for disability discrimination. Courts in both states have ruled that websites are places of public accommodation akin to establishments with physical locations, and, thus, are subject to the ADA.
As a result, more than 85% of website accessibility lawsuits are filed in those two states, according to the Accessibility.com report.
There are indications that filing these types of lawsuits has become a moneymaker for a few law firms and individuals. The report found that:
- New York had nearly 73% of all the cases filed nationwide, followed by California and Illinois.
- Over 69% of all website accessibility lawsuits were filed by five law firms out of New York and California.
- Almost 16% of website accessibility lawsuits in 2023 were filed by five plaintiffs. One of them filed more than 105 lawsuits that year after filing 108 in 2022. The report found that four other individuals filed between 52 and 78 cases apiece in 2023.
What should businesses do?
Most of these lawsuits cite the “Web Content Accessibility Guidelines,” published by the World Wide Web Consortium. While these guidelines are advisory only, they have become the standard to follow when making websites accessible to individuals with disabilities.
Courts have accepted these guidelines as the applicable standard for ADA website accessibility compliance. Many of these cases are settled with the condition that the website become compliant with WCAG, which is focused on making websites perceivable, operable, understandable and robust.
There are widgets that can be installed on websites to ensure they comply with the WCAG, but even so, 933 lawsuits filed in 2023 were against businesses that had installed such widgets on their websites.
Experts recommend:
- Regularly checking your website and digital content to ensure it is accessible to individuals with disabilities.
- Ensuring that your website complies with the latest WCAG guidelines and includes a general statement regarding accessibility and a clear indication of how to contact your company if an issue with accessibility arises.
- If necessary, hire an outside vendor that can bring your website into compliance with the WCAG guidelines.
- If you receive an ADA demand letter or complaint, you should consult with attorneys who are experienced in these types of cases.
Cal/OSHA Proposed Rules Would Impose Large Penalties for ‘Egregious,’ ‘Enterprise-Wide’ Violations
Cal/OSHA is working on new rules that would crack down and step up enforcement and penalties against California employers that commit “egregious” and “enterprise-wide” workplace safety violations.
The forthcoming rules would impose substantial penalties on companies that have shown a disregard towards California workplace safety regulations and the wellbeing of their employees. Employers that are cited for egregious violations could be fined up to $158,000 “per instance,” meaning it can be applied for each employee exposed to the violation. And there’s more.
Employers that are cited for egregious violations could be fined up to $158,000 “per instance,” meaning it can be applied for each employee exposed to the violation.
As well, businesses with multiple locations will have to be especially mindful of complying with Cal/OSHA regulations to ensure they are not snared for the same violations at two or more locations.
The new rules implement a 2021 law, SB 606, and will bring Cal/OSHA’s rules in line with Fed-OSHA’s as federal law requires that state-run OSHA enforcement programs to be “at least as effective” as the federal program.
Here’s what’s on tap:
Enterprise-wide violation
Under the proposed rules, a violation is enterprise-wide if an employer has multiple worksites and either of the following is true:
- The employer has a written policy or procedure that violates occupational safety and health regulations; or
- The Division of Occupational Safety and Health has evidence of a pattern or practice of the same violation or violations involving more than one of the employer’s worksites.
The proposed penalty for enterprise-wide violations is multiplied by the number of worksites covered at inspection, up to a maximum of $158,727 per exposed worker, and will be adjusted each year for inflation.
If an employer fails to abate violations noted by a Cal/OSHA inspector at any worksite covered by the citation in a timely manner, a separate “failure to abate” penalty of up to $15,000 may be assessed for each instance.
Egregious violation
The proposed rules define an egregious violation as a willful violation where the employer has had a previous egregious violation in the past five years. One or more of the following apply:
- The employer, intentionally, through conscious, voluntary action or inaction, made no reasonable effort to eliminate the known violation.
- The employer has a history of one or more serious, repeat or willful violations or more than 20 general or regulatory violations per 100 employees.
- The employer intentionally disregarded its health and safety responsibilities, such as by failing to maintain an effective Injury and Illness Program, ignoring safety and health hazards, or refusing to comply with the Cal/OSHA Act.
- The employer’s conduct, taken as a whole, amounts to clear bad faith in the performance of their duties to comply with occupational safety and health standards.
- Within the five years preceding a citation for an egregious violation, the employer has committed more than five violations of any Title 8 standard that has become finalized.
- The violations resulted in worker fatalities, a worksite catastrophe, or five or more injuries or illnesses. Catastrophe is defined as inpatient hospitalization of three or more workers from a workplace hazard.
- Within the 12 months immediately preceding the underlying violation, 10% of all employees at the cited worksite sustained workplace injuries or illnesses.
According to the Cal-OSHA Reporter newsletter, it’s expected that the proposed maximum penalty for egregious violations will be $158,727, adjusted each year according to the consumer price index. Importantly, each employee that is exposed to an egregious violation would be considered a separate violation. Since the penalty can be assessed on a per-instance basis, it could quickly spiral for some employers.
The takeaway
The proposed regulations pose the largest risk for companies with multiple locations.
Employers should double down on their workplace safety efforts and ensure that there is buy-in to the program from top management down to supervisors and line workers at all locations.
Commissioner Orders Benchmark Workers’ Comp Rate Reduction
California Insurance Commissioner Ricardo Lara has ordered that the state’s average benchmark workers’ compensation rate be cut by 2.1%, starting Sept. 1.
The decision rejected the Workers’ Compensation Insurance Rating Bureau’s recommendation that the benchmark rate be raised by 0.9%, citing a slight uptick in claims costs and claims-adjusting costs.
The benchmark rate, also known as the pure premium rate, is a base rate that insurers can use to price their policies. It only includes only the cost of claims and claims-adjusting costs and does not take into account other forms of overhead and profits.
Each class code gets its own pure premium rate, and some classes may see increases and others further decreases. Every employer’s premiums will differ depending on their claims experience, industry and location.
Also, insurers are not required to use the pure premium rate and are free to price their policies as they see fit.
The decision is a further reflection of the low pricing environment for workers’ compensation, a rare bright spot in an insurance market that has seen hefty rate increases in other lines, such as commercial property and liability coverage.
The average benchmark rate will fall to $1.38 per $100 of payroll, down from the current $1.41.
Reasons behind Lara’s decision
Factors that the commissioner cited as influencing his decision include:
- The continuing decrease in the number of medical services associated with each workers’ comp claim, and
- A continuing decline in the percentage of claims with permanent disability benefits.
The new rate applies to policies incepting on or after Sept.1, 2024.
If you have questions about your coverage, please give your agent a call.