Most Disaster-hit Firms Have Wrong Type of Insurance

A new report by four Federal Reserve Banks found that small businesses affected by large disasters had failed to secure the right type of insurance, and that there was a mismatch between damages suffered and their insurance coverage.

While some businesses suffered actual property damage, the majority that were affected by hurricanes, other major storms, wildfires and flooding suffered uninsured economic damages as a result of having to close or limit operations following such events that struck in 2017.

The study by the Federal Reserve Banks of San Francisco, New York, Richmond and Dallas found that because insurance holdings appeared to be mismatched to the actual damage that occurred, many businesses suffered uncovered losses.

Additionally, affected firms applied for credit financing more than disaster relief, and most of them faced funding gaps.

The concern is that this phenomenon is widespread across the United States, which is experiencing an increasing frequency and severity of natural disasters. And the main area of an insurance mismatch seems to be not in property protection, but in business interruption coverage.

Here were some of the main findings of the report:

  • For affected firms, foregone revenues – not assets – were the largest source of losses.
  • Sixty-five percent of affected firms cited loss of power or utilities as the source of their losses. But, only 17% had business disruption insurance at the time of the disaster.
  • Flood damage (38%) and wind damage (36%) were also common sources of losses, but only 16% of affected firms had specific flood insurance coverage and just 21% had wind insurance.
  • Of the affected businesses, 36% did not lose any assets, 45% had asset losses ranging from $1-$25,000, and only 19% lost more than $25,000.
  • Of the affected firms, only 4% did not have any revenue losses, 61% had revenue losses ranging from $1-$25,000, and 35% lost more than $25,000.
  • Affected firms reported sizable revenue and employment gaps and elevated incidence of financial challenges compared to unaffected firms.
  • Their insurance holdings appeared to be mismatched to the sources of their damages, leaving uncovered losses. For example, 65% of affected firms cited power or utilities issues as the source of their losses, but only 17% had business disruption insurance.
  • After the catastrophes, 48% of affected businesses applied for credit financing and 27% filed for disaster relief (indicating they did not have the correct insurance).

 

The takeaway

In light of the increasing severity and economic cost of natural disasters, it is critical that small businesses secure business interruption coverage to account for the lost revenue from the downtime they suffer post-incident.

Many business owners assume that the property insurance they already own will cover their lost revenue, but they’re wrong. Business interruption insurance is designed to replace revenue losses a firm might suffer in the case of a disaster, be that an equipment breakdown, problems experienced by suppliers, strikes that affect distribution networks or a natural disaster, among others.

While property insurance covers the value of those physical assets, it does not cover the lost revenue potential. In some cases, this has led to businesses losing so much income that they have had to shut down.

Your business may need business interruption coverage if it:

  • Relies heavily on physical assets
  • Has smaller profit margins
  • Operates in areas prone to natural disasters
  • Deals with or handles volatile materials.

 

Call us for more details and to find out if your firm may need coverage.

Workers Who File Claims More Likely to File Subsequent Ones

A new study has found that people who have had workers’ comp claims in the past are more likely to file future claims compared to those who have never suffered an on-the-job injury.

The study – the subject of an article published in the Journal of Occupational and Environmental Medicine – concluded that a past claim is the most predictive factor in determining the likelihood of future workers’ comp claims.

While the findings shed light on a significant driver of workplace injuries, employers are in a difficult position as asking prospective employees about past claims experience is illegal in most jurisdictions.

The main findings of the study, “Reoccurring Injury, Chronic Health Conditions, and Behavior Health: Gender Differences in the Causes of Workers’ Compensation Claims,” are:

  • A higher proportion of both men and women who had filed workers’ comp claims in the past also experienced a subsequent workplace injury.
  • For both genders, a past claim is the most predictive factor in determining the likelihood of filing a future claim.
  • Women who had certain pre-existing behavioral risk factors like depression, poor sleep habits and headaches were more likely to file a subsequent claim if they had already filed one. These same risk factors did not add to the likelihood among men in filing second claims.
  • Future claims are associated with individual workers’ overall health.

 

The takeaway

Besides addressing workplace hazards proactively, anytime you have a workplace injury, you should investigate to determine how the incident occurred. Once you identify what went wrong or broke down in your processes leading to the incident, you can address the problem through new safeguards and training.
Also, if an employee does file a claim, when they are back on the job you should give them additional safety training and attention to reduce the chances of them suffering future workplace incidents.

And what about prospective employees? First off, most states bar employers from asking prospective hirees about any past workers’ comp claims they have filed with previous employers.

The Federal Americans with Disabilities Act, as well as numerous state laws, seeks to protect job seekers from discrimination in hiring as a result of filing valid claims.

The bottom line is that an employer cannot request workers’ compensation records in order to have a policy of not hiring anyone who has made a claim. It is discriminatory to penalize a person who has exercised a lawful right in a lawful way and filed a valid claim.

If you are considering trying to obtain past workers’ comp records, you should consult with a labor lawyer before making any moves.

 

 

When the Customer Is Sexually Harassing One of Your Employees

Society has become increasingly aware of the problem of sexual harassment in the workplace. Several high-profile offenders have seen their careers harmed or ended.

Employers are beginning to realize the harm this behavior among employees can cause. However, the problem might not be the business’s workers; in many cases, it is the customers.

Harassment by customers may occur in any business, but it is especially prevalent in certain industries. In the hospitality sector, some customers – generally male, but not exclusively so – who have been drinking may lose their inhibitions and behave inappropriately toward waitresses, bartenders, casino dealers or housekeeping staff.

Female sales representatives in the financial services sector may be subjected to unwanted attention and language, particularly during client dinners where most of the diners are men. And nurses are regularly subjected to male patients exposing themselves or touching them improperly.

Often, employees are reluctant to report these incidents for fear of losing their jobs. But employers who do learn of these problems have at least a legal responsibility to address them. If a worker brings a complaint about a customer’s behavior to management or the human resources department, the employer should:

 

  • Listen to the employee and take them seriously.
  • Thank them for coming forward.
  • Let them know that the issue will be addressed with the customer.
  • Ask them to report any further incidents that may occur.
  • Do nothing to imply that they will be retaliated against.

 

Some employers, such as restaurants, have a no-questions-asked procedure whereby a server can report to a supervisor that a customer is making them feel uncomfortable and the supervisor will immediately assign someone else to that table.

In addition to nipping a problem in the bud, this policy tells employees that their complaints will be considered legitimate.

After learning of a situation that may potentially be sexual harassment, the employer should:

 

  • Investigate the incident, including discussions with any witnesses.
  • If the customer is from another business, refer the matter to an appropriate person at that company. This should be someone with the authority to take any necessary action.
  • If the customer is an individual, separate the employee and the customer.
  • If the customer persists, issue a warning.
  • As a last resort, ask the customer to leave the premises.

 

The legal implications

Employers cannot afford to ignore these problems. Equal Employment Opportunity Commission regulations hold an employer liable for harassment by non-employees over whom it has control, such as customers on the premises, if it knew, or should have known about the harassment and failed to take prompt and appropriate corrective action.

The EEOC levies penalties of up to six figures for sexual harassment.

In addition, victimized employees may sue their employers for tolerating hostile work environments. Settling these lawsuits can be costly.

If the employers do not carry employment practices liability insurance, settlement costs and attorney and court fees will be paid for out of pocket.

Lastly, the failure to protect employees from harassment can lower workplace morale. This will inevitably lead to increased staff turnover. The employer will lose valuable employees and be faced with the cost of hiring replacements.

Federal law gives employees the right to feel safe at work, free from mistreatment by co-workers, supervisors and non-employees. It is also good business practice to provide a place where people want to work.

Employers must be vigilant about possible mistreatment of staff by customers and vendors. Tolerating this behavior may save a customer in the short run, but it will cost the business dearly in the longer term.

A final thought: Sexual harassment is not the sole preserve of men harassing women. It is also an issue of women harassing men, men harassing men, or one female harassing another.

 

 

 

 

 

 

 

 

 

Keep Injured Workers in the Loop to Reduce Claims Costs

One perennial topic in workplace safety is how to get injured workers back on the job as quickly as possible, and when it is safe to do so.

The key, experts say, is to help the injured employee better engage in the workers’ comp system, so they have a better understanding of the claims process and what they can expect from it.

Employers that have the best success actually advocate for the injured worker, instead of just giving them the standard booklets on what to expect and then leave them until they are healed up enough to go back to work.

That won’t cut it. For many people the workers’ comp system is daunting and when they don’t hear from their claims adjuster or anybody at work about their case for extended periods of time, they get nervous. And if that happens, and they feel adrift, they may seek out legal counsel for their claim, at which point it can spiral out of control for the employer.

The trend among forward-thinking employers is to use a few techniques for improving satisfaction among their injured workers, which in turn usually leads to less missed time from work and lower claims costs.

 

Early treatment

Studies by Rand Corp. back up what industrial medicine doctors have known for some time: Getting an early and accurate diagnosis and putting the injured worker on a treatment plan greatly helps them recover faster – and it prevents the misuse of medicines.

This fast-track – or sports medicine – approach has the added effect of letting the employee know they are valued and that the employer cares about their swift recovery.

One of the most important parts of this early treatment is to get the right diagnosis early, so the doctor can plan a course of treatment.

 

Speak openly

Once an employee is off work for a workers’ comp claim, they can easily start feeling disaffected and lost, particularly if they are left out of the loop about their claim. This is where the employer can step up to show they really care about the worker’s rehabilitation.

If you are at any point planning to discuss the claim, the injured worker should be in on the conversation. This is important because some injured workers mistakenly believe their job is at risk after filing a claim, and they may be feeling disaffected with their workplace.

Unfortunately too, their treating physician and the claims adjusters will often not have the time to sit down and put the injured worker’s concerns to rest.

Your H.R. manager can keep them engaged through education and explaining the processes.

 

Advocacy

Besides advice and someone to listen to for the injured worker, some employers have also taken steps to advocate for their injured employees through the workers’ comp process and representing their interests before the claims adjuster.

Employers who have had the best success sit down with the injured worker as early as possible to lay out the entire process for them, from the first doctor’s visit (which they likely have had already at that point) to what to expect when dealing with the claims adjuster. Companies that explain the process can greatly reduce the potential for litigation.

The main reason injured workers hire attorneys is that they don’t understand what’s going to happen and they don’t understand the workers’ compensation process. Acting as an advocate for the injured worker, and holding their hand through the process, will go a long way to easing their fears.

Third party administrator Sedgwick makes a point of working with injured workers before they undergo surgeries or other medical procedures, in a process they call “prehabilitation.”

They talk to them about what to expect during the recovery process, including the type of pain they may experience and what to do about it.

 

Monitor and explain treatment

The proactive employer will stay in touch during treatment and help the worker monitor their process. If the employer is engaged, the injured worker is more likely to stay on track with the treatment regimens prescribed by the doctor.

This may involve coordination with the treating physician so that any physical rehabilitation is done with their job responsibilities in mind. A good therapist can also explain why certain exercises are necessary for the injured worker.

Also, urge the rehab center and the claims adjuster to ensure that the injured worker sees the same therapist every time.

 

Stay engaged

One way to speed the recovery process along, reduce litigation and lower the chances of the injured worker becoming disaffected is to stay engaged with them. You can communicate with the treating physician, claims adjuster and injured worker about the possibility of the individual coming back to limited or restricted duty.

Just remember, your engagement with the injured worker must be done in a way that best meets the person’s needs.

Also, if there is friction between the worker and a superior, make sure it’s not their superior that’s engaging with them during this process. You don’t want any undue stress on the injured employee during this sensitive and critical period.

Knowing the employer is concerned about their well-being, and is looking forward to their return, can aid recovery.