The Law

Legal Spotlight

A look at the latest decisions impacting the industry.
By: | November 1, 2013 • 6 min read

Carrier Liable for Agent’s Action

Insurance companies in Washington State may find themselves liable for the actions of their agents and brokers, according to a recent ruling by the state’s Supreme Court.

Although the case involved a title insurance company and agent, the ruling might apply to any type of insurance.

In this case, Chicago Title Insurance Co. appointed Land Title Insurance Co. its agent in the state. After a 10-month investigation, the Office of the Insurance Commissioner (OIC) accused Land Title of “widespread and pervasive” violations of state laws that restrict inducements to purchase insurance to no more than $25.

OIC accused Land Title of spending thousands to gain favor with mortgage lenders — from co-advertisements as low as $100 to purchasing 26 seats at a Seattle Seahawks game for $2,400 and hosting receptions and hospitality suites at $13,000, according to court documents.

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In November 2007, OIC approached Chicago Title Insurance Co. with a consent order that stipulated the inducement violation; fined it $114,500 and required a compliance plan.

Chicago Title refused to agree to the consent order, arguing that Land Title’s marketing activities were outside of the scope of the agency relationship and outside of the carrier’s control.

An administrative law judge agreed with its request to dismiss the action. After appeals, the state’s high court agreed with OIC that the insurer was vicariously liable for the agent’s actions.

“When the statute forbids the insurer or its agent from certain conduct, it means that the insurer may not do indirectly — through its agent — what it may not do directly,” according to the opinion.

Scorecard: Chicago Title Insurance Co. was fined $114,500 by the state Office of Insurance Commissioner.

Takeaway: Insurers of any line may find themselves held liable for their agents’ “wining and dining” activities in Washington.

Insurers Reimbursed for Riot Damage

A U.K. judge ruled that the government —not insurers — is liable for damages when damage is caused by riots.

112013LegalSpotlightFireThe ruling means London police must reimburse insurance companies for millions of dollars in losses after a Sony Corp. warehouse was looted and destroyed by fire during riots in 2011, following a police shooting in the city.

Mitsui Sumitomo Insurance Co. Europe Ltd. and Tokio Marine Europe Insurance Ltd. claimed losses of about $79 million, while Royal & Sun Alliance Insurance PLC suffered losses of about $15 million.

Justice Julian Flaux ruled the London police must repay the insurance companies based on the 1886 Riot Act, which says the government is liable for damages when it results from “persons riotously and tumultuously assembled together.”

The police were obliged to compensate victims of the riots because they “ought notionally to have been aware of it and to have prevented it,” he ruled.

In this incident, individuals angry about a police shooting smashed into the warehouse, looted it and then threw gasoline bombs inside. The fire burned for about 10 days, destroying the plant, equipment and goods inside.

It was unclear how much compensation the carriers would receive, as the judge ruled they were entitled to compensation only for physical damage, not for related damages such as loss of profit.

Scorecard: Insurance companies could be reimbursed up to $94 million by the London police for damage caused in a riot.

Takeaway: The ruling will aid insurance companies in the future, as the judge ruled it was irrelevant whether police actually could have prevented the damage, only that they ought to have prevented it.

Ruling Widens Employer Liability

By requiring an employee to use her personal vehicle for work-related errands, Marsh USA was found responsible for an automobile accident she was involved in.

The Sept. 17 ruling of a California appeals court reversed a lower court ruling. The appeals court found that the employee’s planned stops for a frozen yogurt and attendance at a yoga class were “a foreseeable, minor deviation” from the worker’s commute.

The brokerage had argued Judy Bamberger, a salesperson in Los Angeles, was not acting within the scope of her employment when she hit a motorcyclist when making a left turn to get to the frozen yogurt shop.

“Because112013LegalSpotlightCar the employer required the employee to use her personal vehicle to travel to and from the office and make other work-related trips during the day, the employee was acting within the scope of her employment when she was commuting to and from work,” according to the ruling of the Second Appellate Division of the California Court of Appeal.

“The planned stops for frozen yogurt and a yoga class on the way home did not change the incidental benefit to the employer of having the employee use her personal vehicle to travel to and from the office and other destinations,” according to the ruling.

Scorecard: The insurance brokerage will be responsible for damage and injuries to the motorcyclist who was involved in the accident.

Takeaway: Companies may want to consider using company-owned vehicles or cabs for workers who need transportation during the day instead of requiring them to use their personal vehicles.

$50 Million Claim Need Not Be Paid

The U.S. District Court for the Southern District of Texas ruled in favor of four insurers that provided excess liability coverage to an energy company.

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The insurers offered excess coverage to W&T Offshore Inc., which had an interest in more than 150 offshore platforms that were damaged on Sept. 12, 2008, when Hurricane Ike struck the Gulf of Mexico, according to court documents.

W&T had five insurance policies that provided $150 million in coverage above a $10 million self-insured retention. In addition, W&T had four excess liability policies that aggregated $75 million coverage per occurrence in excess of the retained limit.

Indemnity Insurance Co. of North America, Liberty Mutual Insurance Co., New York Marine and General Insurance Co., Navigators Insurance Co., XL Specialty Insurance Co., and National Liability and Fire Insurance Co. all had various percentages of the four excess liability policies.

When W&T learned that removal of the wreck and debris and related claims would exhaust its primary insurance, it notified the excess insurers that it would be submitting claims.

The excess insurers sought a summary judgment, arguing that coverage was not triggered “because the retained limit of those [primary] policies has not been exhausted.” They contended that “because W&T’s physical damage and operators extra expense claims are not insured by the excess liability policies, they cannot be used to exhaust the underlying insurance.”

W&T argued, on the other hand, the policy limits should be triggered “without regard to the nature of the costs that resulted in the depletion” of the retained limit.

The court ruled that “since the property damage and operators extra expense claims that are paid pursuant to the underlying policies are not the types of claims that are also ‘insured’ by the excess liability policies, they cannot be used to exhaust the retained limits of the excess liability policies.”

Scorecard: Insurers were not required to pay $50 million in excess liability claims.

Takeaway: Coverage for excess liability claims are triggered when the underlying retained limit is satisfied by claims that also would receive coverage under those excess liability policies.

The late Anne Freedman is former managing editor of Risk & Insurance. Comments or questions about this article can be addressed to [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]