Tag Archives: epl

Risky Spots for EPL Suits by Employees

A new study of employment practices litigation (EPL) data by Hiscox found four states — California, Illinois, Alabama and Mississippi — along with the District of Columbia, to be the riskiest areas of the U.S. for employee lawsuits. Businesses in these five jurisdictions face a risk that is substantially higher than the national average for being sued by their employees.

According to the study, a U.S.-based business with at least 10 employees has a 12.5% chance each year of having an employment liability charge filed against it. California has the most frequent incidences of EPL charges in the country, with a 42% higher-than-average chance of being sued by an employee. Other high-risk jurisdictions include the District of Columbia (32% above the national average), Illinois (26%), Alabama (25%), Mississippi (19%), Arizona (19%) and Georgia (18%). Lower-risk states for EPL charges include West Virginia, Massachusetts, Michigan, Kentucky and Washington.

Bert Spunberg, a colleague at Hiscox who is a senior vice president and the practice leader for executive risk, says: “Federal level information on employee charges is generally available, but state specific information is more difficult to aggregate. Understanding employee litigation risk at a state level is a crucial step for an organization to establish the processes and protections to effectively manage their risk in this changing legal environment.”

State laws can have a significant impact on risk. For example, the employee-friendly nature of California law in the area of disability discrimination may contribute to the high charge frequency in the state. Discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA). FEHA applies to a broader swath of businesses, covering any company with five employees, vs. a 15-employee minimum for cases brought under federal law as outlined in Title VII of the Civil Rights Act.

Mark Ogden, managing partner of Littler Mendelson, the largest employment and labor law firm in the world, says: “Not only are employment lawsuits more likely in those states, but the likelihood of catastrophic verdicts is also significantly higher. Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000, most state employment statutes impose no damages ceilings. Consequently, employers in high-risk states must ensure that their workforces are adequately trained regarding workplace discrimination, harassment and retaliation and that policies forbidding such conduct are strictly enforced.”

For more on the study, click here.

Skiing The Slippery Slope Of Employment Practices Liability In The Nonprofit Sector

One of your employees has been out on disability with a workers’ compensation injury and you have been getting great advice and service from your workers’ compensation carrier regarding managing the employee while out on leave. Ultimately, you are advised that it has been determined in the workers’ compensation case that the employee has reached maximum medical improvement (known as permanent and stationary in some states) and cannot return to her job due to a permanent disability. With regret, you terminate the employee since she is now receiving workers’ compensation vocational rehabilitation benefits and you have heard that workers’ compensation is the exclusive legal remedy for employees suffering workplace injuries.

Not so fast! If an employer has 15 or more employees, it is subject to the Americans with Disabilities Act (ADA) and/or a state disability accommodation law with a different threshold for applicability. In this instance, even though you acted appropriately in terms of not discriminating based on a work-related injury in violation of workers’ compensation law, you have violated the Americans with Disabilities Act for failing to engage in the interactive process to determine if there is any reasonable accommodation that would have allowed the employee to return to work for you — perhaps in a different job. Failing to engage in the interactive process prior to terminating a disabled employee is a violation of the Americans with Disabilities Act and would subject you to legal liability resulting from the termination.

Okay, so maybe you knew about that issue. But what about the other employment law moguls out there just waiting for you? Let’s explore some of the common — and maybe not so common — employment practices law issues that face nonprofits, how to guard against mistakes, what it can cost if you do err, and how insurance fits into the picture.

Timing Really Is Everything
Culled from the claims files of the Nonprofits’ Insurance Alliance of California (NIAC) and the Alliance of Nonprofits for Insurance (ANI), member companies in the Nonprofits Insurance Alliance Group (NIA Group) that insures over 11,500 nonprofits around the country, here are just a few examples of seemingly appropriate terminations by 501(c)(3) nonprofits that failed to withstand scrutiny because of their timing.

  • A couple of disruptive employees whose paychecks had been withheld for failure to have reports done on time filed a complaint about not being paid and were then terminated. (Two strikes on this one!) First, most states prohibit withholding paychecks just for poor performance. Second, terminating these two employees after they complained resulted in valid claims under the state’s “whistleblower” laws.
  • A poorly performing employee complained of sexual harassment. A thorough investigation concluded no harassment had taken place. The employee was then terminated on performance grounds alone. Problem — no contemporaneous documentation of the alleged poor performance existed, so it appeared to the state administrative agency that the termination was a result of the harassment allegation because it followed closely behind the report of it.
  • A long-term employee of an elder daycare facility, who was a “mandatory reporter” under state law, filed a report with the state about inadequate staffing at the facility when an elderly client was left unattended and was found wandering around in traffic. She was terminated for not following “internal reporting procedures” (in this case a warning was the appropriate remedy, not immediate termination).

So What’s An Employer To Do?
Let’s start with the exposures under Employment Practices Liability (EPL) that give rise to liability claims. Both federal — and most state — laws proscribe the most commonly known unfair employment practices of wrongful termination, sexual harassment, discrimination and ADA violations. Embedded in each of those categories, however, are some lesser known prohibitions and strict liabilities.

By now most everyone knows that in most jurisdictions you can’t terminate someone based on age, race, gender, or sexual preference. But what if a poor performing employee is the only one working for your nonprofit that’s in a protected category? Termination here may have the appearance of discrimination sufficient to subject you to administrative or civil exposure.

You know that sexual harassment is illegal and that procedures need to be in place to train supervisory and management personnel about its ins and outs. But what if you’re in a state that imposes strict liability on an employer, even if the employer didn’t know the harassment was occurring? Or what about a delivery person that’s been making inappropriate suggestions to your receptionist, or if the delivery person believes that one of your employees has been harassing him or her? That can get you into as much trouble as the typical case.

So, what to do? Defense of Employment Practices Liability claims starts with your agency having documented procedures in place that you and your counsel can use to demonstrate to an administrative agency or a court that you intended to be — and were — in compliance. This is best accomplished from the beginning with a robust personnel handbook that includes policy statements and procedures around at least 12 key subjects.

Twelve Components of a Model Personnel Handbook

Following are twelve components that we recommend all personnel handbooks contain:

  • Introductory Statements
  • Nondiscrimination and Sexual Harassment
  • Organization and Structure
  • Training and Orientation
  • Employee Classifications and Categories
  • Employment Policies, Including Wage and Hour Regulations
  • Benefits Disclaimer
  • Leaves of Absence and Time Off
  • Standards of Performance
  • Workplace Violence Prevention and Safety
  • Search and Inspection
  • Drug-Free Workplace

At a minimum, the handbook should include statements regarding at-will employment, probationary, introductory or benefit waiting periods, and examples of disciplinary offenses (always prefaced with “including, but not limited to” language). Always have employees sign a written acknowledgment that they have read and understand the policies, or you might as well not have created them in the first place.

Next comes training and adherence. Regardless of size, every nonprofit needs to train its management personnel about the employment laws relevant to their jurisdiction and the policies and procedures the agency has adopted. Include here any state mandates such as sexual harassment training for supervisory personnel. Then, walk the talk! Follow those policies and procedures diligently — every day. Oh, and did you remember to include your board members in the training? They are at risk as much as the Executive Director because they are ultimately responsible for the agency’s overall management.

The Old “Ounce Of Prevention”
The last, and most overlooked, step in Employment Practices Liability claim prevention is checking in with experienced employment counsel before taking a significant personnel action. A poorly drafted employment offer letter can bind you for a lot more than you thought. So can the improperly announced new personnel policy or procedure — even if it’s meant to be a “positive” for employees.

More than anything else, however, is every Employment Practices Liability defense lawyer’s wish that you consult counsel before termination. There would be obvious questions about clear documentation of performance issues, protected classes of employees, and compliance with your own policies and procedures, but some circumstances might require some “drill down” inquiry. Suppose a health issue, disclosed or not, is involved. Is the employee perhaps entitled to an ADA accommodation? What about Family and Medical Leave Act entitlement, or workers’ compensation benefits?

Always, always, check with counsel experienced in employment law. Some are available on a pro bono basis — check with your local bar association. A number of Directors and Officers and Employment Practices Liability insurance carriers provide this service to their policyholders, although sometimes on a limited basis. So ask them if they do. If they don’t, ask them for a referral. At ANI-RRG and NIAC, we feel so strongly about the importance of our members getting good advice before they take an important employment action that we have three experienced labor law attorneys dedicated solely to providing preventative advice on this subject to our member-insureds.

And The New “Pound of Flesh”
If you haven’t heard or read about it, employment practices law is one of the latest and greatest fertile fields for aggressive plaintiff’s attorneys. It matters not that you are a charitable nonprofit (particularly if you have good insurance limits). Six-figure jury verdicts have become more frequent, particularly in metropolitan areas where the majority of the nonprofit sector does its work. Need convincing? Think about this data from ten recent years of our closed claim files:

  • One out of every 100 nonprofits (regardless of size) will have an EPL claim this year
  • 97% of all claims against directors’ and officers’ policies are in the EPL category
  • The average cost to defend when a claim has some merit is $29,000 and the average loss on those claims is $44,000 — a combined average of $73,000
  • 40% of EPL claims have some merit and when they do, one in ten will cost more than $100,000
  • When claims do not have merit, the average cost to defend is only $5,000, thanks to early intervention by our experienced employment defense counsel
  • The two largest claims cost $1 million and $400,000 respectively

Did You Say Something About Insurance?
Unless you have tens or even hundreds of thousands of dollars just sitting around, you probably want to think about how your agency can protect itself in this vulnerable area and one other that directors and officers should be concerned about.

When Employment Practices Liability claims first came into vogue years ago, the insurance industry’s “knee jerk” reaction was to find a way to exclude the exposure. Smarter heads prevailed, fortunately, so that today EPL coverage is readily available. But like many things, it comes in different shapes and sizes, and not always where you think it is.

Let’s talk first about Employment Practices Liability as a stand-alone coverage. It’s available and commonly protects the nonprofit from damages claimed as a result of an adverse employment action. The defense component provides for payment of attorney fees and costs, and the indemnification component provides for payment of actual damages, if any. There are exclusions as discussed below.

It is more common, however, to find EPL coverage as either an attachment to, or embedded in, the nonprofit’s Directors and Officers (D&O) coverage. The components are generally the same as described above. Key issues to consider are detailed below, but look out for some tricky provisions such as the one that requires your consent before the carrier settles a claim, but makes you responsible for all the ongoing legal expenses if you don’t accept the carrier’s recommendation.

Typical exclusions include fines, penalties and sanctions (these are uninsurable risks), back wages, multiplied damages and plaintiff’s attorney’s fees. Wage and hour claims are one of the biggest uncovered liabilities that a nonprofit faces. Properly classifying an employee as exempt from the overtime requirements of the Fair Standards Labor Act (or similar state laws) can be tricky business and sometimes requires extra sensory powers of hindsight. To be properly classified as exempt, an employee must make a threshold salary as defined by federal and state law and pass the duties test of either the professional, executive or administrative exemptions. While most insurance policies do not cover payment of back wages and penalties, a few at least provide some defense costs to cover wage and hour claims.

So what are the key EPL components of a good D&O policy? At a minimum, expect the following:

Adequate policy limits

  • $1 million is generally adequate for small to mid-size nonprofits. Larger agencies should consider higher limits or an umbrella policy.

Broad definition of who is an insured

  • Is the nonprofit agency itself insured in addition to its directors and officers?
  • What about prior directors and officers?
  • Committee members?
  • Employees and volunteers? (Volunteers don’t have all the federal or state immunities you may think.)

Broad coverage for employment practices liability

  • Either by endorsement or imbedded in the D&O policy itself

Duty to defend

  • Does it extend to administrative proceedings (where most EPL claims start) or just to suits in civil courts?

Advancing of defense costs

  • The carrier should pay for defense costs as incurred, not after the nonprofit has paid for them and is seeking reimbursement

Anything Else?
Make sure that you understand your policy before you need to use it. For example, be sure that you understand when you need to report facts that may result in employment practices liability. For example, you may decide not to report to the insurer an employee grievance filed with your Human Resources Department pertaining to the employee’s termination, perhaps thinking that a legal claim may not develop from it. Unbeknownst to you, your policy may require you to report potential claims, including grievances filed with your HR Department. By the time the terminated employee files a legal complaint with the district court, the reporting period has passed and your insurer may deny coverage.

Don’t be disappointed if your insurance carrier insists on using defense counsel of its own choosing. It has the right to do so and generally has developed over time a panel of attorneys experienced in employment law defense who understand the nonprofit sector better than most.

While not directly EPL-related, make sure your Directors & Officers policy also protects you for fiduciary liability claims such as failure to properly account for grant funds.

If unsure about the nature and extent of your Employment Practices Liability coverage, by all means consult with your insurance agent or broker. They are usually paid commissions when they place your coverage, and providing appropriate advice is part of what they are paid for — and a service you have a right to expect.

Happy skiing!

Outlook For The Private Directors & Officers Marketplace

Private Directors and Officers Liability (D&O) policies are generally combined policies including D&O and Employment Practices Liability (EPL). Although they are typically marketed as Directors & Officers policies, and there are definitely D&O claims, claims frequently come from the Employment Practices Liability side of the form. Private Directors & Officers carriers find it challenging to cope with the high frequency of Employment Practices Liability claims that come with this line of business.

The premiums associated with these policies have been creeping up over the past few years, and now is an appropriate time to investigate and report on the causes. Rather than give you generalities that claims are frequent, here is some of the data that supports what the insurers are telling us.

2012 EEOC Complaints
Top Five States Total Complaints Percent Change Since 2010 2010 Total Complaints Total Population 2010*
Texas 8,929 -4.1% 9,310 25.1 million
Florida 7,940 2.1% 7,779 18.8 million
California 7,399 3.3% 7,161 37.3 million
Georgia 5,903 2.3% 5,771 9.7 million
Illinois 5,490 3.8% 5,288 12.8 million
Year Total Total Complaints – All 50 States
2012 99,412
2011 99,947
2010 99,992
2009 93,277
2008 95,402

* The population totals are included to show that the highest volume of claims generally come from the largest states.

The Equal Employment Opportunity Commission (EEOC) isn't the only regulatory body bringing employment actions against employers — state agencies like the California Department of Fair Employment and Housing (DFEH) are filing cases as well. In its 2010 annual report, the California DFEH notes that they filed between 17,500 and 20,000 cases each year between 2007 and 2010 (2011 and 2012 numbers are not yet available). The department also estimates that the average post-accusation case settled for more than $40,000.

Let's put this into perspective. The Betterley Report: Employment Practices Liability Insurance Market Survey 2012 (December 2012) estimates the total Employment Practices Liability market at around $1.6 billion in premium. Just for discussion purposes, let's assume that the Department of Fair Employment and Housing estimate is applied to all claims. At $1.6 billion in total premiums collected, the insurance marketplace could handle 40,000 claims and break even (40,000 claims X $40,000 average settlements = $1.6 billion). Considering we know there are more than two times that many EEOC complaints, plus tens of thousands of other state agency claims, we know that the volume of insured claims exceeds 40,000 per year.

Since we know that there are more than 40,000 claims a year, the second half of the debate is what these claims cost. The Department of Fair Employment and Housing has their estimate for out of court settlements at over $40,000. Jury Verdict Research, a publication that puts out jury trial settlement trend data, indicated in its 2011 report titled, “Employment Practices Liability: Jury Award Trends and Statistics,” that the average awards range from $600,000 for discrimination claims to as much as $790,000 for wrongful termination claims. Their median award range is from $200,000 to $260,000 based upon their research. This data implies that the average claims are going to be far greater than $40,000 to settle on a nationwide basis. These reports only show us awards, which do not include the defense costs paid to get to the award stage.

If we take this one step further and assume that the average claim will cost approximately $120,000 — though the Jury Verdict data tells us it's higher — then the amount of claims the insurers could handle in a year, and possibly break even, is more like 13,333 claims per year ($1.6 billion total annual premium divided by $120,000). If we factor in underwriting expenses and other transactional costs, then even less money is available for defense costs and settlements.

So, what's the bottom line? The insurers have been struggling to make a profit on this line of business for many years. While competition for market share has continually lowered the premiums they could charge and still write business, we've gotten to a crossroads and blown right through the stop sign. The pricing has been creeping up over the past three to four years, and we are still far from a corrected market. The dilemma for insurers has been how to adjust their pricing and terms in a way that still provides a valuable policy for insureds. The responses have varied from insurers pulling out of a specific region (like southern California), gradual elevation of retentions, increasing premiums, reducing limits available and declining risks with specific employee count ranges.

Bertrand Spunberg, Senior Vice President, Hiscox USA: “We have strived to maintain 'sustainable underwriting' since we opened up in 2009, even when the market was still very soft. That discipline is now starting to pay off as other insurers are adjusting their rates and retentions up to a point that's more comparable to what we have been all along. We are seeing some insurers revising their appetites or pulling out of jurisdictions and segments altogether. Other carriers are taking a portfolio view of the business, making them more prone to declining rather than underwriting around account-specific exposures. This creates an environment that is increasingly difficult to navigate for both insureds and brokers. EPL claims have been leading the way, but we are also seeing D&O claims arising from financial issues, such as bankruptcy. In response to that, we have seen insurers indicate that they would be looking to limit or even remove entity coverage.”

Mr. Spunberg's comments should serve as a warning to all brokers. While pricing and retention changes are typically obvious changes to renewal terms, you need to pay extra attention to any other changes in coverage terms. On some policy forms, the inclusion of entity coverage may only be signified by an “X” in a box on a declarations page or quote letter. It could be easy to miss the removal of this subtle notation. Also watch out for changes in endorsement numbers and titles. You may find an insurer substituting an endorsement with the same title as previous years but adding a new clause that removes or restricts coverage from what you've come to expect.

Steven Dyson, Executive Vice President, ERisk Services, LLC: “We track a lot of data on our insureds and claim performance. Rather than penalize all insureds in every state, we have evaluated where our claims are coming from and adjusted our rates in a targeted fashion. Difficult venues like southern California, Illinois, southern Florida and metro New York, are getting more rate adjustments than less litigious parts of the country. We drill down to the county level when evaluating the performance of our book and adjust accordingly.”

As brokers, we appreciate ERisk's targeted approach. As insurance professionals, it can be a difficult message to give to insureds that an underwriter is penalizing them for the poor performance of another risk, or that the underwriters may have misunderstood the risks of the businesses they underwrite.

No insured likes to see their premiums rising. It helps when underwriters are doing their best to stabilize the marketplace and articulate the logic behind rate changes.

Joseph Casey, President, ACE Westchester: “At Westchester, we have seen a significant increase in the number of Private Company D&O submissions, apparently based in part by some markets reacting to an increase in Employment Practice Liability claims. The increase in EPL litigation and the corresponding rise in defense costs require, more than ever, greater underwriting discipline. However, the right carrier, with an expertise in EPL and a flexible approach, has the ability to look at the type of company, the jurisdictions in play and other factors unique to the insured, and provide suitable coverage.”

Our wholesale-dedicated markets like ACE Westchester and ERisk are less prone to some of the broad brush underwriting approaches taken by many of the standard markets. The wholesale markets are always looking for a way to differentiate and uncover risks that are neglected or underserved by the standard markets. When the retail-focused markets head out the door, our markets are usually running in; that appears to be what we are currently experiencing. We've had a sustained period of underpricing in the private D&O/EPL area as insurers compete for market share. With the loss frequency where it is and expenses rising, it is indeed time to reevaluate. While the wholesale markets are noticeably more competitive in a challenging market, they also do a great job when things are going smoothly.

Navigating School Board And Educators Legal Liability Policies

Brokers who place School Board and Educators Legal Liability insurance are beginning to notice that the marketplace has gotten more difficult. Layoffs from budget cuts have triggered an increase in Employment Practices Liability (EPL) claims, while the tough job market has led to an increased amount of “failure to educate” claims.

The very public proceedings involving Penn State University have recently reminded us that sexual abuse and molestation are critical claim issues for schools. Any article written about a class of business that touches Personally Identifiable Information (PII) and doesn't mention Cyberliability fails to address another major source of trouble.

Based on these and other factors, insurers are either non-renewing business or re-underwriting their book, which leads to a restriction in terms.

The typical School Board or Educators Legal Liability policy is designed to protect not only teachers, but also school board members, administrators, volunteers, student teachers and various other members of the educational staff. In a standard policy, the definition of “Wrongful Act” includes coverage for an actual or alleged breach of duty, neglect, misleading statement and other errors or omissions of an insured educator in their capacity or scope of employment on behalf of the educational institution. Most policies also include coverage for Employment Practices Liability (EPL) claims, which tend to be the most frequent cause of loss.

Typical allegations found in claims include:

  • Failure to educate
  • Failure to supervise a classroom
  • Loss of accreditation
  • Employment-related lawsuits claiming sexual harassment, wrongful termination or discrimination
  • Misstatements, misleading statements, breaches of duty, neglect, errors or omissions made by a paid or volunteer board member who assists the school in making critical decisions about operations and economic survival
  • Failure to respond to or prevent bullying activities of the students

Market Commentary
Below are examples of the additional claim scenarios that insurers are seeing in this class of business.

“We are seeing the severity of educators' claims increase dramatically.” — Stephanie Gardner, RSUI

“The biggest issue that we have seen regarding Educators Legal Liability is on the EPL side. This has historically been a frequency-driven class and we have seen an even larger increase in frequency. We have also seen frequency develop into severity, which we had not seen to this extent before. There doesn't seem to be any new trend in the type of EPL claims, just more of them. I believe a lot of this is just a function of the economy and the pressure on school districts to reduce their budgets.” — Matthew Cibulskas, Westchester Specialty

“Bullying claims are being litigated under a 'failure to supervise' accusation. The financial damages to the parents are that they had to pay private school tuition because they had to leave the public school system after nothing was done to stop the bullying. And redistricting claims — many institutions have budget issues and, as a result, are closing schools and consolidating. This has triggered a lot of claims against the school boards.” — Steve Krusko, AIG

“I have seen issues with the for-profit educational segment regarding the federal tuition funding (loans/scholarships) as well as issues with dismal graduation rates and failure to educate allegations.” — Roy Huelsebusch, Crum & Forster

“Unfair competition and misrepresentation during the admissions process, as well as admissions to programs that don't have full accreditation yet (nursing programs seem to be frequent offenders here). Regulatory interest — a high percentage of tuition comes from Pell Grants so state Attorneys General have been pursuing litigation for unfair/deceptive trade practices.” — Rob Faber, AIG

If there was just one area of concern, underwriters could manage that risk with exclusions, sublimits, higher retentions or other means of mitigation. However, with severity increasing and claims coming from many directions, the marketplace has to respond. Underwriters can either withdraw from the marketplace or attempt to work around the hot spots. As mentioned earlier in this article, many insurers have moved away from this class while others are indeed revising their pricing, retentions and coverage terms.

With many schools having renewals on or around July 1, now is the time to formulate your renewal strategy, communicate the conditions of the market to your insured, and begin discussions with your current and prospective insurers.

Social Media And The Insurance Implications

Most marketing and communication departments know all too well that social media and social networking sites are a treasure trove of opportunity for elevating your personal or corporate brand. Employees use social media for personal use, but also use it as a forum to talk about their boss, their company, their products, their problems and whatever else is on their mind. There are 200 plus social media sites in English alone, Facebook recently reached one billion users, and Twitter puts out more than 170 million tweets per day. That is a lot of free advertising!

However, what many businesses fail to remember is that, despite all of the positive aspects social media brings to a firm's marketing, communication, and sales efforts, it's also ripe with opportunity to damage their brand and cause a financial loss. While it's free marketing, it's also a lot of unedited content being published online that could be about your business, about your products, or attributed to you. Could a competitor feel that your employees are slandering their people or products? Could a competitor gain inside information about your organization? Could an employee divulge information that could get them fired? Could you or your employees inadvertently offend prospects and clients? In short, yes. As social media use continues to evolve and grow, it's important to consider this exposure to your organization.

Using Social Media To Generate Business Leads
All of this can be scary, but you can't ignore the great opportunities created by social media. Any organization not taking advantage of social media sites is signaling that it is not evolving with the times, and there is nothing close to matching the immediacy of broadcasting your news through social networking sites. A well-crafted social media strategy can generate a lot of interest in your product or services and drive traffic to your website where more specific information can be provided.

“In time, the proper execution of a focused social media strategy is an efficient means of staying in front of prospects. When the prospect has a business problem, your positioning as a credible, knowledgeable resource can help you get in the door and, hopefully, close the deal,” says Randy Stoloff, Director of Marketing and Social Media at AmWINS Group Benefits in Warwick, Rhode Island.

It is critical to have all content reviewed by someone within your organization that can be responsible for stopping improper content from being released. It's also important to review applicable insurance policies such as a website media policy or cyberliability policy to be sure social media activities are covered.

Using Social Media For Crisis Response
Imagine a time down the road when your best customers follow your social media feed and you need to get news out in a hurry about something that could cause your most prized customers harm. Assuming you have or hire qualified public relations professionals that can help you craft the proper way to phrase the announcement, you can get important news out immediately to show your concern for your customers and for transparency. Social media provides the most immediate way to communicate to your target audience. There are many insurance products currently available that assist with handling the public relations aspect of a crisis response. Having your social media presence established prior to a crisis will help you deal with the crisis in a targeted fashion.

Can Social Media Sites Be A Network Security Risk?
Besides the potential for hackers to use employee information on social media sites to figure out passwords, the sites can also be used to transmit computer viruses and other dangerous malware. As a result, many corporations block employee access to social networking sites. If the corporation has a cyberliability insurance policy in place, be sure it addresses security issues emanating from social media. The coverage may be limited to networks owned or controlled by the corporation.

Should I Address Social Media In My Employee Handbook?
This is a topic that requires legal counsel with experience in employment law as well as social media. It makes sense as a business owner to establish a guideline on what social media activities are permissible for employees, but it must be carefully worded. The National Labor Relations Board has published guidelines that may help. Most companies work very hard to establish a professional image and reputation. Employees often mistakenly think that commenting in social networking sites is somehow exempt from personal responsibility. The press is full of examples of disgruntled employees commenting on working conditions, complaining about their managers or coworkers, or commenting on confidential internal activities. Employees have been terminated for their conduct and they've sued for wrongful termination. You are likely to find coverage for the wrongful termination claims on your employment practices liability (EPL) insurance policy. Working with a professional is critical for navigating this minefield. You may not be able to avoid the litigation, but you can lay the groundwork for an effective defense.

Do I Need A Social Media Component In My Employment Contracts For My Executives?
Your top executives can also make mistakes using social media. Sensitive information can be leaked out accidentally by people who see the most sensitive information. Similar to non-executive employees, managers who have been terminated due to their social media activities have sued their employers for wrongful termination. Again, look to an EPL policy for coverage for that type of claim.

Should I Review The Social Media Content Posted By Job Applicants?
Many states have enacted laws barring employers from requesting full access to an applicant's social media profile. We have all heard stories about a prospective employer seeing improper pictures or comments by the applicant which influence the decision to hire or not hire them. Some employers have taken it one step further and requested login credentials from job applicants in order to see all the content they have posted. It seems like an obvious invasion of privacy, so laws are being written to protect the rights of job seekers. The claims that can arise from this scenario could have coverage apply under the “wrongful failure to hire” coverage on an employment practices policy, as well as an “invasion of privacy” policy as part of a cyberliability policy.

Scared Yet?
There are reasons to be concerned, but the opportunities need to be investigated with a proper foundation of preparation. It is also important to remember that there are insurance products available to help protect you after missteps. If you have an employment practices liability policy, you likely have some protection from wrongful termination claims and invasion of privacy claims brought by your employees. If you have an internet media or cyberliability policy, you could have remedies for allegations of libel, slander, defamation and invasion of privacy claims brought by other parties. A strong cyberliability policy will have protection from breach of security claims if hackers use social media to access your computer network for malicious purposes. It's possible that other insurance products can offer assistance as well. AmWINS represents multiple insurers with all of these insurance products and can help you select the proper coverage for you and your clients.