In recent years considerable attention has been paid to the large settlements and awards that have been made against governmental agencies. Historically, claims in excess of $1 million dollars were quite rare. Today, they are occurring with greater frequency.
These large liability claims have a significant impact to the cost of risk to most governmental entities, who at one time enjoyed relatively inexpensive insurance program costs. In recent years, these premiums have grown in relationship to the higher risk of large liability losses.
Recent data from the American Property Casualty Insurance Association highlights that large liability claims are occurring more frequently with an increasing average cost. In their report they state, “Median jury awards for personal injury lawsuits increased over 300 percent between 2010 to 2017. Mega or nuclear verdicts amounting to greater than $5 million have increased by 60%.”
These findings are consistent with other publications, which express an exponential growth curve from the 1980’s where few claims were settled in excess of $1 million, to today where they are more frequent and severe.
This has impacted the availability and the cost of excess liability insurance, and many carriers have either withdrawn, limited or repriced their coverage offerings. In a recent Risk Conference webcast, David Lund from the Utah Attorney General’s office shared the State of Utah’s experience involving large liability claims, and the availability and cost of their excess liability insurance program. The claims at the state level have increased significantly over the past few years, as is the cost of the State’s excess liability insurance program.
There are many reasons for the increased cost of excess liability insurance. Chief among them is Social Inflation, which is a term coined to reflect many different social trends that impact the number of claims and the severity of claims that arise against local government entities. Social Inflation has many causes, which are drivers in this profound societal change.
Juror Paradigm Shift
Historically, juries were inclined to rely upon community values, firmly grounded in the legal liability as defined in the law. The jury awards for many years were based on an outlook of what is best for the community and the individuals that may be aggrieved by the actions or failure of another. Recent jury verdicts are more motivated by social justice and may be inclined to send a message with a large award. This is particularly evident against large corporations, state and local governments, religious organizations, and other cultural institutions.
When large jury verdicts occur, the jurors are questioned on their motivations for the award that was made. At times, they want to send a message to the offending party. They have also stated that they would like to punish those that are responsible, where clear negligence is found. In a survey of the top jury verdicts of 2019, 42% of jurors said they would decide a case based on what they believe is fair, and not based on the law.
In many cases juries award based on the hardship or economic conditions that may be felt by those who suffered injuries. Even with little or no comparative negligence, awards may be made, simply because economic hardship is evident, and the defendant is able to satisfy the destitution that may result, such as a lifetime disability.
An example of a recent large award occurred in Texas, where a pickup truck driver lost control of his vehicle in icy conditions. The truck crossed the median and struck an oncoming commercial truck, which killed one child in the pickup, paralyzed another and severely injured two others in the pickup. The commercial hauler had been traveling in control and below the speed limit. The jury found against the commercial hauling company in the amount of $90 million, which is currently being reviewed on appeal.
Pursuing a major claim through litigation can be a very expense process, with attorney time, court costs, expert witnesses, depositions, and other forms of discovery. The pretrial costs can go well into the hundreds of thousands of dollars, and the cost of taking a claim through trial are several multiples greater. It is not unusual for several million dollars to be spent taking an action through trial.
Most law firms do not have the financial resources to take claims that are complex and sizable on contingency, where they front the cost and share the final award or settlement. Many firms would rather work toward a resolution of the claim in pretrial settlement. A claim may be pursued to the point of pretrial motions, to assure that the defense council with the defendants and their insurers are motivated to bring closure through settlement.
A new form of funding has arisen in recent years, where outside investors with deep pockets agree to fund the litigation for a promised sizeable share of the final awards that may be achieved. The investors assess the potential merits of the case, including the potential for sizeable jury verdicts.
Litigation funding has a powerful incentive to bring actions to a jury, where jury sympathy may weigh heavily on the financial outcome.
Elimination or Reduction in Statutory protections
In the interest of protecting the ability of local governments to deliver essential services, statutory protections have been in place to reduce the possibility of some types of claims, and to set caps on other types of claims.
Over time, the protection afforded from these statutes, has been eroded. Claims may arise in certain types of federal actions, which do not have any damage cap. Claims that are made in state courts may only have caps apply for the services and activities that are wholly unique and can only be provided by government.
Plaintiffs’ Bar and Advertising
Historically, attorneys relied upon their professional reputation to be referred by satisfied clients for future legal work.
In the present environment attorneys advertise their services, as well as engender a demand for those services through social media, targeted class advertising, and profiling of those in the action and potential jury demographics. They share strategy with their peers in conferences and seminars. The plaintiffs bar is well organized and uses technology and sophisticated resources to find and pursue actions to a successful conclusion.
Social inflation is an ever-present threat that needs to be addressed through effective risk management planning and progressive insurance program design. The impact of social inflation is a factor to be considered when setting liability limits, and in the way in which organizations understand and approach their major risks.
Over the past few months, the world has changed as elected and administrative officials have addressed the impacts of COVID-19. This includes the loss of economic activity, reductions in revenue, and civil disturbance.
A featured coverage in most public sector insurance programs is public officials’ errors & omissions or management liability. This is a type of professional liability coverage is designed to protect against potential claims that may arise alleging wrongful acts, and errors or omissions on the part of elected or appointed officials, or administrative personnel.
Historically, this coverage has primarily responded when an elected or appointed official acts contrary to sound governmental practices.
The most common claims against public officials have arisen in six areas:
In each of these areas, significant claims have arisen, which in many circumstances are costly to defend and settle. The average public officials claim takes 3.5 years to close and has defense costs, exclusive of settlements, that average $470,000.
Fortunately, an emphasis has been placed on disclosing conflicts of interest before key decisions are made, and not overextending promises to groups and individuals. Many organizations seek legal input or review prior to key decisions, to ensure that those decisions are not in violation of any local, state, or federal laws.
As we continue to move into increasingly unfamiliar terrain, and organizational decisions are impacted by the effects of COVID-19, it will be worthwhile to review a few key points to help in avoiding public officials or management liability claims.
In uncertain times, there may be outside factors that contribute to the difficulty of coming to a consensus with various groups. Many may experience additional pressure from the loss of revenue, demands for resources and services or to further political agendas. There may also be a great deal of misinformation or public outcry by those who seek to influence decisions, especially when there are heated emotions.
When decisions are made in these circumstances, crucial steps may be missed in in the decision-making process. This may result in decisions that are not in the best interest of the greater community and contrary to sound judgement. This process can be made more difficult as many organizations are meeting electronically, which may not easily allow for input from all interested parties.
During periods with challenging circumstances, it is crucial to allow expression from those that may have a different point of view, not just those that may be speaking the loudest or demanding the most. Since decisions may impact the organization beyond the current budget period, a broad cross section of community engagement allows for enhanced perspective and better overall decisions.
The final point to consider is essential leadership. The COVID-19 pandemic causes many to feel the weight of an uncertain future.
Winston Churchill faced his fair share of challenging moments during some of the darkest times in World War II, when the outcome was less than certain. He quoted Herodotus, the Greek Philosopher.
“Adversity has the effect of drawing out strength and qualities of a man (woman) that otherwise would have lain dormant in its absence”.
Public officials provide the leadership that will allow for our return to a more normal society, enriched by experience and greater understanding. Essential leadership guides individuals to strive to their higher selves in the interest of their communities and those that surround them.
With the arrival of warmer weather, many organizations have transitioned to summer operations, including the maintenance of parks and public corridors, opening of seasonal recreation facilities, roadway maintenance and other capital related projects.
Often, much of the work to be completed is assigned to temporary or part-time seasonal employees that may not have extensive experience performing the tasks assigned or be familiar with the equipment to be used. In addition, while the summer season provides a welcome respite from cooler weather, there is often a tendency to sacrifice the use of proper personal protective equipment (PPE) for the sake of comfort when working in the heat.
The risks associated with seasonal work can be significant. There are a few key areas to review, that will improve the safety of our employees:
Safe operation of landscaping equipment
Thousands of people are injured each year while using landscaping equipment, as highlighted in the graph below.
The vast majority of these injuries are preventable, if we follow a few basic steps:
Manage heat exposure to avoid heat-related illness
It is easy to lose track of time while working in the sun and heat. As the temperature climbs, so does the risk of heat-related illness, which includes heat stroke, heat exhaustion, heat cramps and heat rash. OSHA’s ‘Water. Rest. Shade.’ campaign provides useful tools to help identify and mitigate the risks to employees from heat exposure. The impact of hot weather is magnified when working around large equipment, which can generate significant heat, and roadways. OSHA recommends the following best practices:
Be alert and aware of your surroundings
Working outdoors all day does present some unique risks, which include:
Having a plan in place to mitigate these situations, can greatly improve the safety of employees while working outdoors.
As we prepare to reopen our public facilities, there are crucial steps to assure the safety of employees, patrons and the public.
A preliminary step is to be current with the pronouncements of the local civil and health authority, and to review the most recent CDC guidelines on cleanliness and sanitation at our facilities.
After these steps are taken, carefully crafted plans should be established, providing the highest assurance that all possible steps are being taken to minimize the risk of disease transmission, including COVID-19, within our facilities. Elements of the plan may include:
With many staff members returning after a prolonged time period, it is a good idea to provide a general reorientation training for all employees, as well as specific training for those employees in specialized areas, including lifeguards, certified pool operators, maintenance technicians, etc.
The procedures and training should also include recognition of those that may present symptoms of COVID-19, and how to respond if a facility patron should appear to exhibit symptoms.
The earthquake that occurred in Magna, Utah on March 18th served as a wakeup call for many of us that we live in a seismically active region of the world. While many organizations have response and recovery plans in place, often these plans remain largely untested. With the Great Utah Shakeout occurring this week, it is an excellent time to reassess our emergency response plans and identify areas for improvement that will help our organizations be more resilient and increase our capability to respond and recover to a major earthquake.
In addition to all of the excellent material available on preparing for an earthquake, there are two considerations we would like to review, which often remain overlooked.
There are several factors that improve the safety and reduce the likelihood of major damage of our facilities during a major earthquake, some of these include:
It is important to understand how your property insurance policy will respond in the event of a major earthquake. Insurance coverage in this area may be provided on the standard property policy, or on a separate earthquake policy, or a combination of the two. There are a few areas you will want to evaluate:
Appearance and Premises Security
A building that has been actively used for business pursuits should continue to have the appearance that normal operations are occurring within the building. The overall appearance of the building may be the best deterrence to unwanted squatting or crime in the facility.
Before closing the building, ensure that the exterior doors are locked. All doors should be physically tested, including delivery areas, employee entrances and the main doors intended for the public. The keys to the building should be collected, except for maintenance and security personnel. All others should be advised that access to the building is limited for only essential functions.
Consideration should be given to adding extra interior reinforcement to high-risk doors and windows at ground level. Broken doors and windows can make easy entry to the facility for criminals, vandals or squatters. Perimeter gates should be locked. Exterior lighting should be maintained and kept on at night to give the appearance of occupancy.
The facility’s video surveillance systems should be monitored, either by staff or contracted security services. The local law enforcement agency should be notified of the change in building status, so that they can coordinate regular patrols and be aware of unusual activity at the building. The local law enforcement agency should also be given the contact information if something unusual happens, or if a break in occurs at the building.
Consideration may also be given to increasing the frequency of security patrols. Security patrols should include a check list of items to review on each visit, which may include daily or twice daily exterior premises, facility entry points, windows, and the general appearance of the building, grounds, and parking lot. It is also recommended that private security patrols inspect in the interior of the building on a weekly basis to ensure that there are no squatters, mechanical or equipment failures, water leaks, rodent infestations or other non-functioning essential facility systems. On a monthly basis, the roof should also be inspected to ensure no damage from wind or weather has occurred.
Housekeeping and Grounds
Mail and newspaper deliveries should be suspended to prevent the accumulation of paper outside of the facility and to reduce clutter which can be a fire hazard or give the appearance of unoccupancy. Refuse should be removed from the facility, dumpsters should be emptied and locked to minimize illegal dumping, which could result in potential environmental contamination.
Landscaping should be maintained for general safety and for the appearance of occupancy. This includes tree trimming, lawn care, exterior sprinkler systems and parking lot weed abatement. All storm drains should be checked to make sure that they are clear of silt or debris. In winter months parking lots and walking paths should be cleared of ice and snow, to maintain the appearance of occupancy. Consideration should also be given to emptying any swimming pools and spas during the duration of the closure, to avoid the spread of bacteria and algae in your facilities.
During the closure, routine maintenance should be completed. Often this is an excellent time to paint, replace fixtures or carpet, or complete the servicing of HVAC and other systems. Even though human activity on the site is a deterrent to crime, this should be kept to essential functions, such as maintenance and security. All other deliveries to the site should be cancelled or diverted to another location.
Contractors that need to complete regular maintenance at facilities, such as for elevators, fire alarm and sprinkler systems or other services, should be notified that they will need to schedule all site visits in advance, and be escorted by facility maintenance staff.
During inspections or after receiving reports from security, if maintenance issues arise, (e.g. graffiti, broken windows, litter/trash, broken lights, etc.) ensure that there is a secure building perimeter, and emergency repairs are completed quickly. Ensure all flammable liquids continue to be secured when not in use in fireproof cabinets.
Kitchen / Catering
All perishable food at the facility should be removed. Compost bins should be emptied and used cooking oil should be collected and removed before closing. Ensure future food deliveries are suspended. Ensure non-perishable food supplies are well secured to prevent potential contamination by rodents or insects.
Water Supply / Water Damage
The water supply valves which provide culinary to the facility should be closed, to avoid potential damage during the closure. Water supply lines feeding the fire sprinkler system lines should always be kept open. If the facility has an irrigation system, this should be kept on during the irrigating season for facility landscaping and inspected on a daily basis for leaks and other potential issues. If a facility closure occurs during the non-irrigating season, ensure the irrigation water system is winterized with valves closed.
Maintain Essential Systems
Decommission all non-essential equipment and pressure vessels which can greatly reduce the potential for loss and save energy. Essential systems should not be decommissioned, which include, HVAC, fire sprinklers, fire alarms, video surveillance systems, intrusion alarms, natural gas pilots, and backup generators. Ensure that the HVAC operating systems maintain the building climate at a safe temperature to prevent potential freezing damage.
Property insurance policies treat temporary closure differently. Please consult your property policy to ensure you are satisfying any requirements to maintain property insurance cover on your facility.
The COVID-19 pandemic has disrupted every element of society and impacted public entities and their employees. One of the largest concerns is for the well being and safety of the general public and those that provide essential services.
When essential services are provided there is an ever-present risk to the first responders that may be involved in an accident or impacted by a disease. Workers compensation is designed as a resource to cover an injury or an occupational disease. This includes the direct medical costs, compensation for the lost time from the workplace, and benefits to families in the event of a work-related fatality.
One of the largest questions to arise from an outbreak of a virus, such as COVID-19, is will first responders be covered by workers compensation, if they become infected during their work? A brief summary of the defining statues is helpful to provide clarity to the question.
The Utah State Code under 43A-3-103 defines a work-related injury to include an occupational disease. The code defines “a compensable occupational disease”, to include “any disease or illness that arises out of and in the course of employment and is medically caused or aggravated by that employment”. Historically this has referred to diseases that arise or are caused during employment, such as black lung disease which occurred from work in coal mines or asbestosis from those that have had prolonged exposure to asbestos.
In recent years, the intent of the statute has been clarified regarding presumption of injury for specific types of exposure. Utah State Code 34A-2-901 states:
“An emergency medical services provider who claims to have contracted a disease, as defined… as a result of a significant exposure in the performance of his duties as an emergency medical services provider, is presumed to have contracted the disease by accident during the course of his duties as an emergency medical services provider”
The Utah State code defines the applicable diseases as “Human Immunodeficiency Virus infection, acute or chronic Hepatitis B infection, Hepatitis C infection, and any other infectious disease specifically designated by the Labor Commission, in consultation with the Department of Health, for the purposes of this part.
At this point we are not aware of any cases, where first responders have been or potentially have been infected by COVID19. If such were to arise, we would suggest that they be reported as injuries to you workers compensation carrier.
The largest writer of workers compensation coverage in Utah is WCF, which states that if a COVID19 claim were to arise that such claim will be based on an, “investigation of the facts and a review of the state of the disease at the time and place of the alleged exposure. Medical evidence is key to determining compensability in any occupational-disease claim and in the case of COVID19 that evidence must include the most up to date epidemiological information.” Most other insurance companies will take similar positions regarding possible claims related to exposure from COVID19.
The impact of COVID19 has been significant, and the response of local government has been remarkable. The first responders are on the front lines of an event which continues to evolve. We Hope they are safe during their work to help and support others during this event. Workers compensation continues to be a strong backstop to protect the interest of those providing these crucial services.
The ongoing circumstances related to COVID-19 and the Coronavirus have necessitated many of us to implement sweeping changes throughout our organizations. One of the most significant changes many are grappling with, is how to navigate the risks associated with employees that are now working primarily or exclusively remotely from their own homes.
In this blog post, we’ll review four keys risks that each of us may face when requiring employees to work from home and the steps we can take to mitigate and manage the risks involved.
The cyber risks associated with having the majority of your office workforce working remotely can be significant. A few best practices that can mitigate the risks involved in this area:
Providing employees with the right equipment needed for the job can greatly reduce your risks by ensuring all equipment provided to the employee has the appropriate security measures installed, including virtual private networks, endpoint protection, password managers and multi-factor authentication.
Use of Company Vehicles
Many organizations are permitting or even requiring employees to drive home company owned vehicles. This ensures greater responsiveness for on call employees and mitigates the potential exposure that employees would have by going to a central fleet location where employees could congregate. It is important that even with these exigent circumstances that you follow the same fleet procedures you would ordinarily follow for any employee taking a vehicle home. Some of these include:
Remote employees are entitled to workers compensation benefits, if they become injured in the course and scope of their employment. Here are some tips to help you establish effective policies and best practices for your remote workforce.
By having a clear telecommuting policy and ensuring remote employee agreements are in place, you’ll be able to mitigate the risk and uncertainty associated with your off-site staff.