Tag Archives: compensatory damages

What Coverage Does a Consultancy Need?

Insuring a consulting firm can pose a challenge. Many professionals start a firm today out of necessity — creating their own employment. You take years of expertise and open a consultancy, often out of your home or in an office suite. This means a tight budget.

Insurance is one of the areas where entrepreneurs may try to cut costs, but, to protect your business, you need to have your insurance agent evaluate all the exposures you face and offer solid coverage solutions.

What does the professional liability policy cover?

The consultant and its employees provide a service or offer advice, but what if it is faulty? Any professional consultant needs professional liability coverage, also called errors and omissions.

The professional liability policy may be worded as follows:

“The company will pay on behalf of the insured any loss excess of the deductible not exceeding the limit of liability to which this coverage applies that the insured becomes legally obligated to pay because of claims made against the insured during the policy period for wrongful acts of an insured or because of personal injury arising out of wrongful acts of an insured.”

In addition, the policy may say, “Coverage for allegations of bodily injury, sickness, disease, or death of any person, or damage to or destruction of any tangible property, including the loss of use….”‘

This wording shows the limited scope of the professional liability policy. The intent is to cover only negligent professional or “wrongful” acts. The policy also provides limited protection for personal injury, such as libel or slander, committed by the insured against a third party.

What does the commercial general liability (CGL) policy cover?

The CGL covers bodily injury to a person or damage to the property of others caused by a firm’s negligence. As courts have ruled repeatedly, the CGL policy is not a performance bond. A CGL policy is not intended to cover the quality of a company’s advice or service. This helps constrain the contractor from low-bidding a job, performing poorly and then relying on the insurance carrier to cover that risk.

Look first at CGL policy language under the insuring agreement, the heart of the policy:

“We will pay those sums that the insured becomes legally obligated to pay as compensatory damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.”

Here are a few of the exposures covered under the CGL:

  • Premises and operations liability for persons injured or items damaged while on your business premises or because of your business operations.
  • Additional insured coverage when you sign certain written contracts or agreements such as leases.
  • Tenant’s liability in the event the business operations, for example, accidentally start a fire in rented premises.
  • Host liquor liability if you are not in the liquor business.
  • Defense for covered claims.
  • Bonds and court courts associated with a claim.
  • Limited financial remuneration when assisting your carrier in the defense of a claim.

In addition to bodily injury and property damage, the CGL covers personal injury liability, including libel and slander, as well as advertising injury. The CGL offers consultancies broad coverage and peace of mind. You can run your business knowing that help is available in the event of a broad range of losses.

Althought there is a great deal of uniformity between professional liability forms and commercial general liability forms, all carriers use a variety of forms. Coverage can vary widely from one insurance carrier to another, so an agent should be able to help you determine the coverage differences and help you make a strong choice to protect your growing consultancy.

What are some CGL exclusions?

There are many exclusions under the CGL, and to understand each one is tricky. Forms differ and jurisdictions that hear lawsuits vary greatly. However, here are some general exclusions:

  • Intentional injury — When a business owner acts in self-defense, there is generally coverage. For example, suppose a robber breaks into the darkened firm and brandishes a knife at the owner, who is catnapping. He heaves a computer monitor at the burglar and injures the burglar. Carriers should defend the case unless it appears the insured intended to inflict malicious injury.
  • Care, custody and control of property owned by others — For the consultancy that repairs computers or other equipment, bailee coverage may be necessary.
  • Faulty workmanship.
  • Liability arising from an aircraft, auto or watercraft — If you use any of those conveyances in your business, you’ll require specific coverage to protect your assets. However, if you provide an automobile to an employee who gets in an accident, you may have coverage, depending on the coverage form and the jurisdiction.

While the CGL policy offers the majority of consultancies broad coverage, your agent must evaluate each risk carefully to ensure the CGL adequately protects the consultancy’s unique exposures.

The CGL may still lack scope

As your consultancy grows, the CGL is only part of your coverage solution. The CGL will not cover every exposure you face, especially once you hire employees.

In most states, after you hire either one or a small number of employees, the state mandates workers’ compensation coverage. In addition, employment practices coverage is important in today’s complicated employment arena. There is no coverage under the CGL for most employment exposures like a wrongful termination or a discrimination claim.

Your consultancy may start with only one computer and a printer, but as your firm grows so does its personal property. Don’t forget to insure your personal property, as well.

For firms with even the most trusted employees, crime policies are vital. For example, suppose you hire a bookkeeper to assist with accounting and administrative tasks. Unbeknownst to you, she likes to gamble. Over time, she begins to embezzle funds, and, before you know it, you are short thousands of dollars. Crime coverage is designed to defend and pay these types losses. The Association of Certified Fraud Examiners found that firms with fewer than 100 employees were frequently hit by fraud, accounting for 32% of the incidents they surveyed.

Clearly, the CGL offers broad coverage and peace of mind for any consulting firm, but there are many other risks your business faces that may require specialized coverages. An independent agent can help you sort out the risks.

One easy approach to coverage

If you own a consultancy, you may be confused about your unique coverage needs. The way many agents approach your coverage is to tell every new business owner he or she needs general liability coverage. Then they review the consultancy’s business operations to determine what additional coverage, such as professional liability, employment practices or workers’ compensation are required.

Because most consultants have auto insurance, to some extent you understand liability coverage. The CGL is more complicated, but the general principles of coverage for bodily injury and property damage are similar to the auto policy. For the new consultant, this comparison may be a good starting point to help you understand your company’s need for general liability coverage.

In today’s complex business environment, no consultancy should go without two types of coverage — professional and general liability — at a minimum. An experienced independent agent can help you ensure your business thrives and prospers in the coming years.

 

An Overlooked Attorney Fee Statute in Oregon

Companies doing business in Oregon should be aware of ORS 20.080, which can provide for attorney fees in cases seeking damages of $10,000 or less.  That statute provides that prevailing plaintiffs may be awarded attorney fees. It is important to be aware that, in ORS 20.080 cases seeking compensatory damages of $10,000 or less, the attorney fees can quickly approach or outstrip the compensatory damages.

This article will explore three key questions that clients generally have when defending against an ORS 20.080 case: 1) How does the plaintiff receive attorney fees?; 2) Do courts require plaintiffs to strictly comply with ORS 20.080?; and 3) How can defendants escape attorney fees in ORS 20.080 cases?

1. How Does the Plaintiff Receive Attorney Fees Under ORS 20.080?

Generally, a plaintiff has a claim for attorney fees under ORS 20.080 if the plaintiff: gives the defendant notice of a claim for $10,000 or less at least 30 days before the plaintiff files a lawsuit; provides enough documentation for the defendant to generally value the claim; and was awarded more at trial or arbitration than the defendant offered before the plaintiff filed the lawsuit. 

ORS 20.080 provides that:

“(1) In any action for damages for an injury or wrong to the person or property, or both, of another where the amount pleaded is $10,000 or less, and the plaintiff prevails in the action, there shall be taxed and allowed to the plaintiff, at trial and on appeal, a reasonable amount to be fixed by the court as attorney fees for the prosecution of the action, if the court finds that written demand for the payment of such claim was made on the defendant, and on the defendant's insurer, if known to the plaintiff, not less than 30 days before the commencement of the action or the filing of a formal complaint under ORS 46.465, or not more than 30 days after the transfer of the action under ORS 46.461. However, no attorney fees shall be allowed to the plaintiff if the court finds that the defendant tendered to the plaintiff, prior to the commencement of the action or the filing of a formal complaint under ORS 46.465, or not more than 30 days after the transfer of the action under ORS 46.461, an amount not less than the damages awarded to the plaintiff.

“(2) If the defendant pleads a counterclaim, not to exceed $10,000, and the defendant prevails in the action, there shall be taxed and allowed to the defendant, at trial and on appeal, a reasonable amount to be fixed by the court as attorney fees for the prosecution of the counterclaim.

“(3) A written demand for the payment of damages under this section must include the following information, if the information is in the plaintiff's possession or reasonably available to the plaintiff at the time the demand is made:

“(a) In an action for an injury or wrong to a person, a copy of medical records and bills for medical treatment adequate to reasonably inform the person receiving the written demand of the nature and scope of the injury claimed; or

“(b) In an action for damage to property, documentation of the repair of the property, a written estimate for the repair of the property or a written estimate of the difference in the value of the property before the damage and the value of the property after the damage.

“(4) If after making a demand under this section, and before commencing an action, a plaintiff acquires any additional information described in subsection (3) of this section that was not provided with the demand, the plaintiff must provide that information to the defendant, and to the defendant's insurer, if known to the plaintiff, as soon as possible after the information becomes available to the plaintiff.

“(5) A plaintiff may not recover attorney fees under this section if the plaintiff does not comply with the requirements of subsections (3) and (4) of this section.

“(6) The provisions of this section do not apply to any action based on contract.”

2. Do Courts Require Plaintiffs to Strictly Comply With ORS 20.080?

The short answer is no.  Although ORS 20.080 requires that plaintiffs make their demands in writing to the defendant AND the defendant’s insurer, if known, courts generally do not require plaintiffs to strictly comply with this portion of the statute.  Under Schwartzkopf v. Shannon the Cannon’s Window & Other Works, Inc., 166 Or App 466, 471, 998 P2d 244 (2000), a person may act as an agent for the defendant (and therefore may be considered “the defendant”) for purposes of ORS 20.080 if that person has authority to defend or settle a claim for the defendant.  Under Schwartzkopf, trial court judges have allowed plaintiff’s lawyers to provide notice to the defendant’s insurer without providing notice to the defendant, even though the plain language of ORS 20.080 requires that the plaintiff provide notice to both.  In these kinds of cases, the insurer has usually already engaged in some kind of negotiations for the defendant or has gathered facts for and on behalf of the defendant, giving the plaintiff evidence of agency.  Therefore, under ORS 20.080 and Schwartzkopf, if the insurer is the only person who receives a demand, practically and generally speaking, the insurer should treat that demand as sufficient notice as long as it was made at least 30 days before plaintiff filed the lawsuit.

Courts do generally require plaintiffs to send any additional written information that the demand would include, such as additional medical bills, to the defendant (or the defendant’s insurer) as soon as possible if the plaintiff obtains such information after the plaintiff has made her written 20.080 demand and before she has filed the lawsuit.

However, in the initial written demand, courts generally give plaintiffs leeway and, as long as the plaintiff has provided the defendant with enough documentation to generally value the claim, the plaintiff generally does not have to strictly comply with the statute and provide all of the documentation “reasonably available at to the plaintiff at the time.”  For example, if you are provided with an ORS 20.080 notice from a plaintiff’s lawyer that includes most of the medical records and bills but does not include copies of the x-rays, a trial judge will generally hold that the plaintiff’s lawyer substantially complied with ORS 20.080 and that the claim may proceed.

3. How Can Defendants Escape Attorney Fees in ORS 20.080 Cases?

The only way the defendant can escape attorney fees in ORS 20.080 cases is if the defendant makes an offer to the plaintiff before the lawsuit is filed that is more than the damages ultimately awarded to the plaintiff. In other words, if the plaintiff recovers $5,000, but the defendant offered $3,000 before the lawsuit was filed, the plaintiff gets her attorney fees.  If the plaintiff recovers $5,000, but the defendant offered $8,000 before the lawsuit was filed, the plaintiff does not receive her attorney fees.

If the lawsuit is filed and the defendant has a counterclaim of up to $10,000 and the defendant prevails in the lawsuit, the defendant gets its reasonable attorney fees.  What is “reasonable” is decided by the court.

In Oregon, it is important to notify your attorney right away after receipt of an ORS 20.080 letter to ensure that you strategize appropriately.  Although it may seem unpalatable, generally the best strategy is for defendant to make its best offer first, to minimize the risk of an award in excess of the offer and exposure to attorney fees. Many times, lawyers don’t receive cases until the lawsuit is filed and, in ORS 20.080 cases, that is usually too late; the plaintiff’s attorney fee claim is already in play.