8 Questions Employers Should Ask About Reopening

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In early March, when we published our HBR article “8 Questions Employers Should Ask About Coronavirus,” there were fewer than 100,000 cases and 4,000 deaths globally. Now, not quite three months later, infections exceed 5.5 million and employers face a whole new set of questions as they consider how to reopen the workplace after weeks or months of restrictions. As always, employers must remain nimble, and play close attention to local conditions and changing guidelines and practices. Here are eight questions they must now address.

  1. When is the right time for employees to return?

According to a survey of 854 U.S. employers we completed in early April, 42% reported that the majority of their workforce could work remotely — compared to just 14% before the pandemic. Employers now want to know when and how to bring many of their remote employees back.

The World Health Organization recommends that nonessential workers return when there is a sustained decrease in community transmission, a decreased rate of positive tests, sufficient testing available to detect new outbreaks, and adequate local hospital capacity to accommodate a surge of new cases should that occur.

Companies should be prepared to adopt different timetables for different geographies depending on local circumstances. They will do well to prioritize opening workplaces where work cannot be sustainably performed remotely, where there is high demand for the workplaces’ output, and where redesigning the space to allow for physical (social) distancing requires few changes.

  1. Who should return to the workplace?

Not everyone, and not all at once.

It’s best to have workers return gradually, which allows for lower density, making physical distancing less of a challenge. Maintaining a partially remote workforce also facilitates stress-testing physical or workflow changes to minimize disruption as more employees return to the workplace over subsequent weeks and months.

We suggest that workers at highest risk for complications of Covid-19 — those over 60 and those who are obese, have chronic lung or heart disease, diabetes or kidney disease — remain remote where possible until the amount of community transmission is very low. We also suggest that employees with children at home and who lack alternative child care, and employees for whom transport could pose a significant risk of exposure, should be encouraged to continue to work remotely if possible.

One option which can help avoid discrimination is for employers to simply allow employees to state they are uncomfortable returning to the workplace, without asking whether this is due to age, chronic disease, transportation concerns or child care.

  1. How can we protect employees who come to work?

The most important protection in the workplace is to effectively exclude those at highest risk of transmitting the disease. Forty-five percent of employers in our survey reported using thermal scanning to identify employees with fevers and exclude them. In the U.S., the Equal Opportunity Employment Commission (EEOC) has determined that during the pandemic employers may require employee temperature checks or testing without violating the Americans with Disabilities Act. Since most people do not have a fever when they first get sick with Covid-19, it is essential to couple scanning with questioning of returning employees, e.g., asking them whether they have a known exposure, a sick family member at home, or other symptoms including cough, shortness of breath, chills, muscle pain, sore throat, or new loss of taste and smell. Many companies will restrict visitor access to the workplace to reduce the potential for exposure.

Some employers are using a mobile app or web form to ask these questions; others use signage in the workplace. Employers can exclude employees who answer affirmatively at their discretion, and we recommend opting for more rather than less exclusion in the early days of reopening. Bear in mind that that employees with paid sick leave are less likely than those without it to come to work when they are ill. While sick-leave policies may be expensive, the cost of inadvertently allowing infected employees into the workplace may well be higher.

The Centers for Disease Control and Prevention recommends cloth masks for those who will come within six feet of others, and we recommend that employers require and provide masks for returning workers. Masks can be uncomfortable and must be removed for eating or drinking, but they provide some protection against spread of respiratory disease. Employers should explain that the mask is not to protect the wearer, but rather to protect co-workers. Handshakes are not coming back any time soon, and even elbow bumps don’t allow for the recommended physical distancing.

The workplace — whether it’s cubicles, an open workspace or an assembly line — should be arranged so that employees can remain at least six feet apart. Standing in lines should be abolished where possible; if a line is required such as at a cafeteria cash register, mark out 6-foot intervals to avoid crowding. (In the cafeteria, salad bars and finger food could promote spread of the virus; individually wrapped foods are safer.) More employees will eat at their desks, and companies can use sign-up sheets to decrease congestion in shared kitchens. Companies should continue to encourage hand-washing.

Companies should set capacity limits on conference rooms to allow six-foot spacing; if a meeting is too large for the available room, some participants should call in even if they are in the building. Plexiglass dividers can help prevent coronavirus spread in manufacturing, lobby, and retail settings.

Ninety-seven percent of companies in our survey reported enhancing their cleaning and disinfection, as well as increasing access to hand and surface sanitizers. While there is new evidence that the risk of virus transmission from surfaces is low, employees or cleaning staff should use disinfectant wipes regularly on shared surfaces such as vending machines or drink dispensers or shared printers, and employees should not share office equipment such as keyboards or phone headsets. Water fountains and ice machines can spread virus and should be turned off. Companies should also disable jet driers in bathrooms, which may disperse virus particles, and supply paper towels instead.

Finally, if an employee in the workplace is found to have Covid-19, companies must inform those who might have been exposed to him or her at work during the two days prior to symptoms. Those coworkers will need to be excluded from the workplace and self-quarantine. Employers must also maintain the infected employee’s confidentiality by not sharing their name.

  1. What role can testing play in making workplaces safer?

Testing can currently play only a small role in ensuring a safe return to the workplace. Right now, tests are expensive, in short supply and not accurate enough. Tests for current infection have low sensitivity rates (that is, they yield false negatives), so a negative test alone isn’t adequate to ensure that a worker is not contagious. However, testing can be useful in helping to identify asymptomatic coworkers at workplaces where there has been a known exposure. Point of care machines that yield “rapid” results can only process a handful of tests an hour, and nasal swabbing in the workplace could itself cause disease spread. Antibody tests, which require a blood sample, have a high rate of false negatives for current infection, and false positives for past infection. Further, after a person recovers from infection, it’s not clear that a positive antibody test indicates that they will be immune from future infection.

  1. What should we do if we discover an infected employee in the workplace?

Many have few or no symptoms early in a Covid-19 infection, and it’s likely that many workplaces will have an exposure despite the employer’s best efforts. As discussed, an employee or visitor with suspected Covid-19 should immediately leave the workplace and be advised to seek testing or medical attention. Areas used by the ill person for prolonged periods in the last week should be cordoned off and disinfected after allowing 24 hours for respiratory droplets to settle. Increasing air exchanges or opening windows can also reduce risk.

Employers should identify any employee who spent more than 10 minutes within six feet of the infected person during the two days before symptoms began, and those employees should also leave the workplace, self-quarantine, and monitor for symptoms until 14 days after their last exposure. Employees who have had passing contact, such as in a hall or an elevator, need not self-quarantine. Some exposed critical infrastructure workers such as transportation and health workers can return to work after exposure using masks and physical distancing along with heightened disinfection of their workspaces.

  1. When can employees return to business travel?

International business travel is unlikely to rebound until after this pandemic has receded. Many countries, if they allow international arrivals, require 14 days of quarantine, and business travelers might be quarantined again on return home. International business will continue to use teleconferences and videoconferences for many months to come, and travel will only resume substantially when there is a vaccine, effective treatment, or herd immunity.

Domestic travel will also remain limited in the coming months. Local areas that have new outbreaks will likely restrict movement, and a business traveler to such a region could be stranded there for weeks or months. Travel by personal car will come back first as this does not involve risk of exposure to others. Travel by train, bus, and airplane will take longer to return, and when it does business travelers are likely to encounter limited schedules that could increase travel time. When necessary, travelers can stay in hotels as most have ramped up their cleaning and disinfection; however, it’s still wise to use disinfectants on surfaces. Business leaders must clearly communicate and enforce company travel guidelines as they evolve.

  1. How can we meet employees’ growing mental and emotional health needs?

Many have suffered profound losses during the pandemic and have not had sufficient opportunity to grieve. Almost all of us have experienced loneliness. There will be more cases of anxiety and depression, and some survivors and their families will have post-traumatic stress syndrome. Access to mental health services was often poor before the pandemic, and needs will be greater now. Employers must step up to this challenge.

Most employers in our survey (58%) report increasing access to tele-behavioral health such as audio or video therapy sessions, while 83% report increasing communication about Employee Assistance Programs. Some types of cognitive behavioral therapy can be effectively delivered via mobile app, and we anticipate increased used of digital solutions to address some mental health needs. Some employees benefit from mindfulness and mediation programs, and the value of online programs has increased.

Employers can also establish virtual social networks to address isolation, and train supervisors to identify employee mental health needs in the remote workforce and make appropriate referrals. Consideration of family and child care responsibilities and encouraging exercise and time away from work also helps support employees’ emotional health.

  1. How should we communicate around return to the workplace?

False and unfounded rumors can spread as fast as a virus, and companies need to earn the trust of their employees through frequent and accurate communications. Companies should address employee concerns about the safety of returning by focusing communications on the actions being taken to protect them, including workplace cleaning, screening policies, and changes being made to allow social distancing. This information should be shared in regular pushed communications such as email, as well as through the company intranet and human resources sites.

Visual communication about appropriate behavior is also important. Companies should retire stock photos of employees who are clustered tightly together. They should also avoid images of people wearing medical-grade protective gear such as face-shields or N95 masks in non-clinical workplace surroundings as these remain in short supply and are not recommended.

Finally, because pandemics can incite xenophobia, bias and stigma, leaders should be alert to the potential for some groups or individuals to be stigmatized, and speak out against it. Hate crimes against Asians, for example, have increased with the current pandemic, much as African Americans were wrongly blamed for spread of the 1918 influenza pandemic. Our survey showed that 47% of companies are currently taking actions to reduce stigma during this pandemic, and 21% are planning to take such actions; still, almost a third of respondents have no such plans. Unconscious bias and anti-discrimination communication and training are key elements of diversity and inclusion strategies, and their importance is even greater now.

Covid-19 is a fast-moving virus and its impact on organizations and the world has been strong and swift. The practices outlined above will not only help protect employees, the community and company reputation, but also position companies for a smoother transition as they arrange return to the workplace.

If our free content helps you to contend with these challenges, please consider subscribing to HBR. A subscription purchase is the best way to support the creation of these resources.

Jeff Levin-Scherz, MD, MBA, is a managing director and co-leader of the North American Health Management practice at Willis Towers Watson. Jeff trained as primary care physician, and has played leadership roles in provider organizations and a health plan. He is an Assistant Professor at the Harvard TH Chan School of Public Health.

Deana Allen RN, MBA, is a senior vice president of the North America Healthcare Industry practice and serves as the Intellectual Capital and Operations Excellence leader at Willis Towers Watson. In addition to work as a clinician she has served as a health system corporate director of risk and insurance and healthcare consultant.

Functioning in the capacity of an employer of others has always held its challenges.  Excelling in this roll during a global pandemic brings a whole new layer of complexity.  During this time, your Employment Practices can define you.

To hear more about the impact on Employment Practices Liability due to COVID-19, please join NAPEO’s EPLI Webinar, this Thursday July 16th, 12pm ET. Libertate’s own President, Paul Hughes, will be moderating. To register, click here.

Beazley Speaks on EPL Changes for Businesses Affected by COVID-19

There has been a lot of discussion as of late regarding the impact of COVID-19 on Workers’ Compensation, Business Interruption, Health Benefits, etc., but what about Employment Practices Liability?  Below is a great overview of the ever changing landscape of EPL due to COVID from our friends at Beazley.

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Around the world, governments responded to the COVID-19 pandemic in March 2020 by implementing various restrictions on the movement of people through quarantines, lock-downs, stay at home orders, and other similar measures.  Businesses, particularly those in the service and retail industries, were most affected by these measures.  People were staying home, which meant no customers:  No diners at restaurants.  No shoppers in the malls.  Nobody getting haircuts, manicures, pedicures, or massages.  Many of the affected businesses have either announced permanent or indefinite closures or reduced service, and consequently, have had to furlough, layoff, or permanently terminate the employment of hundreds of thousands of employees.

 

Many businesses with financial difficulties are Client Companies of PEOs.  As a result, with both new and old Claims, Beazley has noticed an increase in Client Companies unwilling or unable to pay amounts for defense or indemnity within their SIR.  For Client Companies facing an uncertain financial future, they are unwilling to engage in settlement negotiations or mediation.  Rather than committing their limited resources to settlement, Client Companies want to preserve or use those funds to keep their businesses running by paying employees and other overhead expenses that remain despite reduced business income.  Unfortunately, there are also some Client Companies whose businesses will not survive; and they are simply unable to fund amounts of settlements within their SIRs.  There is no one size fits all solution.  All Insureds have differing limitations; and Beazley has been working collaboratively with its PEOs and Client Companies Insureds to strategize the best approach to resolving each claim in this COVID-19 environment.

 

Moving forward, Beazley anticipates more COVID-19 related claims including:

 

  • Claims for violations of the Family Medical Leave Act (FMLA) and/or the Families First Coronavirus Response Act (FFCRA) for discrimination, retaliation, wrongful termination, or failure to rehire for voicing concerns or making requests regarding COVID-19, missing work to recover from (or care for another with) COVID-19, etc.
  • General notices of mass layoffs or reductions in force.  (Note:  Typically, coverage is unavailable, but in certain circumstances, an Employment Event sublimit coverage may be available.)
  • Third Party Discrimination against persons of Asian descent.

 

As part of the renewal process, Beazley is considering PEOs and Staffing Firms’ strategies to addressing COVID-19 and the COVID-19 induced recession.  Some of Beazley’s questions are:

 

  1. Does the PEO work with their Client Companies to ensure they have an effective Business Continuity Plan for COVID-19?
  2. What protocols do the PEO and their Client Companies have if worksite employees are or were infected with COVID-19?
  3. Are Client Companies required to consult with the PEO before any terminations, and layoffs, reductions in force, or downsizing?
  4. What support does the PEO provide their Client Companies with to comply with employment laws, including the FMLA and FFCRA?
  5. Does the PEO offer advice to their Client Companies regarding worksite employees working from home?

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To hear more about the impact on Employment Practices Liability due to COVID-19, please join NAPEO’s EPLI Webinar, this Thursday July 16th, 12pm ET. Libertate’s own President, Paul Hughes, will be moderating.

https://www.napeo.org/events/events-calendar/town-hall-series

The New Normal….Pandemic Insurance Products

It was only a matter of time before insurers began to develop products to cover pandemics.  The products range from traffic monitor apps that pay insureds based on a minimum threshold to relapse coverage that protects businesses forced to shut down a second time.  The complete article from Reuters is below.

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Insurers are creating products for a world where virus outbreaks could become the new normal after many businesses were left out in the cold during the COVID-19 crisis.

While new pandemic-proof policies might not be cheap, they offer businesses from restaurants to film production companies to e-commerce retailers ways of insuring against disruptions and losses if another virus strikes.

The providers include big insurers and brokers adding new products to existing coverage, as well as niche players that see an opportunity in filling the void left by mainstream firms that categorize virus outbreaks like wars or nuclear explosions.

Tech firm Machine Cover, for example, aims to offer policies next year that would give relief during lockdowns. Using apps and other data sources, the Boston-based company measures traffic levels around businesses such as restaurants, department stores, hairdressers and car dealers.

If traffic drops below a certain level, it pays out, whatever the reason.

“This is the type of coverage which … businesses thought they had paid for when they bought their current business interruption policies before the coronavirus pandemic,” the company’s founder Inder-Jeet Gujral told Reuters.

“I believe this will be a major opportunity because post-COVID, it would be as irresponsible to not buy insurance against pandemics as it would be to not buy insurance against fire.”

The company is backed by insurer Hiscox and individual investors, mostly from the insurance and private equity world.

Restaurants in Florida’s Miami-Dade County, where Mayor Carlos Gimenez on Monday ordered dining to shut down soon after reopening, are now reeling, said Andrew Giambarba, a broker for Insurance Office of America in Doral, Florida.

“It’s been like they made it to the ninth round of the fight and were holding on when this punch came out of nowhere,” said Giambarba, whose clients include restaurants that did not get payouts under their business interruption coverage.

“Every niche that is dealing with insurance that is affected by business interruption needs every new product they can have.”

Filling the Void

Pandemic exemptions have helped some insurers emerge relatively unscathed and the sector has largely resisted pressure to provide more virus cover. Indeed, some insurers that paid out for event cancellations and other losses have removed pandemics from their coverage.

British risk managers association Airmic said last week that the pandemic had contributed to a lack of adequate insurance at an affordable price and most of its members were looking at other ways to reduce risk.

To help fill the void in a locked-down world, Lloyd’s of London insurer Beazley Plc, started selling a contingency policy last month to insure organizers of streamed music, cultural and business events against technical glitches.

“These events are completely reliant on the technology working and a failure can be financially crippling,” said Mark Symons, contingency underwriter at Beazley.

Marsh, the world’s biggest insurance broker, has teamed up with AXA XL, part of France’s AXA, and data firm Arity, which is part of Allstate, to help businesses such as U.S. supermarket chains, restaurants and e-commerce retailers cope with the challenges of social distancing.

With home deliveries surging, firms have hired individual drivers to meet demand, but commercial auto liability insurance for “gig” contractors with their own vehicles is hard to find.

Marsh and its partners devised a policy based on usage with a price-by-mile insurance, which can be cheaper than typical commercial auto cover as delivering a pizza doesn’t have the same risks as driving people around.

“Even when the pandemic is over, we believe last-mile delivery will continue to grow,” said Robert Bauer, head of Marsh’s U.S. sharing economy and mobility practice.

A report by consultants Capgemini showed that demand for usage-based insurance has skyrocketed since COVID-19 first broke out and more than 50% of the customers it surveyed wanted it.

However, only half of the insurers interviewed by Capgemini for its World Insurance Report said they offered it.

Bespoke Cover

Since businesses are only now learning how outbreaks can affect them, some new products are effectively custom-made.

Elite Risk Insurance in Newport Beach, California, has been offering “COVID outbreak relapse coverage” since May for businesses forced to shut down a second time, its founder Jeff Kleid said.

The policies are crafted around specific businesses and only pay out when certain conditions are met, Kleid said.

For film and television production companies that could be when a cast member contracts the virus, forcing them to stop shooting. Another client, which raises livestock for restaurants, is covered for a scenario in which it would be impossible to get animal feed.

Such policies do not come cheap. A $1 million policy could cost between about $80,000 to $100,000 depending on the terms.

“The insurance … is costly because it covers a risk that does not have a historical basis for calculating the price,” Kleid says.

And in March, when COVID-19 ravaged northern Italy, Generali’s Europ Assistance offered medical help, financial support and teleconsultations for sufferers when discharged from hospital, on top of regular health insurance.

It sold 1.5 million policies in just two weeks and now has 3 million customers in Europe and United States.

Some insurers are also working on changes to employee compensation and health insurance schemes. With millions of workers not expected to return to offices anytime soon, some large insurers in Asia are preparing coverage to account for that, according to people familiar with those efforts.

At least one Japanese insurer has started work on a product to cover employees for injury while working at home, they said.

“Working from home will be the new normal for years to come. That would make the scope of the employee compensation scheme meaningless if a person suffers an injury while at home,” said a Hong Kong-based senior executive at a European insurer.

(Reporting by Noor Zainab Hussain in Bengaluru, Suzanne Barlyn in Washington Crossing, Pennsylvania, Carolyn Cohn in London and Sumeet Chatterjee in Hong Kong; additional reporting by Muvija M; Editing by Tomasz Janowski and David Clarke)

https://www.insurancejournal.com/news/international/2020/07/10/575081.htm

 

As COVID-19 Spreads, Beware of EPL Risks

As businesses of all sizes strive to protect their employees and preserve cash flow during the coronavirus pandemic, likely the last thing on most of their minds is employment practices liability (EPL) exposures. But EPL risks are higher during pandemics and other periods when employers are more likely to furlough, lay off or ask employees to work from home.

Despite federal legislation aimed at relieving financial burdens on workers and their employers, many businesses face difficult choices – and more complicated record keeping.

The Families First Coronavirus Response Act (FFCRA), which takes effect April 1, permits workers to take paid public health emergency leave to care for themselves or their children through the end of 2020. The law requires employers with fewer than 500 employees to provide up to 12 weeks of paid leave for employees who cannot work due to the closure of their children’s school or child-care provider during the public health emergency. The law generally requires employers to restore the employee to his or her former job after leave, unless the employer has 25 or fewer workers, or the position no longer exists due to economic conditions resulting from the public health emergency (source 12).

Several EPL risks for businesses can arise from the current coronavirus (COVID-19) outbreak. These include:

Wage-and-hour issues. Employers should carefully track employees’ working time, especially in work-from- home arrangements, as well as during a furlough. Work hours are common tipping points for eligibility under an employer’s employee benefits plan.

“A lot of employment issues arise from COVID-19. Frequent questions I get from employers concern furloughs, layoffs, and working from home,” said Kunal Shah, Of Counsel at Wilson Elser Moskowitz Edelman & Dicker LLP in Dallas. “If a business temporarily closes its doors, or significantly reduces its staff and hours, how do we navigate employee compensation and benefits? Insureds need to be mindful that furloughs, if not handled properly, can lead to significant wage-and-hour claims.”

If an employer requires employees to take unpaid leave through furlough, problems can arise if employees are asked to spend even a little bit of that time working, Shah cautioned. “An employer can furlough an exempt employee, but if the employee does one second of work, he or she is entitled to full pay for the entire pay period under the Fair Labor Standards Act,” he said.

“Employers need to be mindful of local and state ordinances, too. Employees of businesses that are deemed non- essential should not be working if they are under a shelter-in-place order,” Shah said.

Hours spent working matter, to workers and their employers. “Benefit plans may no longer provide benefits if hours fall below a certain threshold,” Shah explained. “For example, if a full-time employee goes below a certain hours minimum required for benefits under their group health plan, he or she may trigger coverage under COBRA,” or the Consolidated Omnibus Budget Reconciliation Act, a federal law that allows workers to obtain group health insurance temporarily, usually for up to 18 months.

“The reverse can also happen, where an employee works more hours than agreed upon, thus making him or her eligible for certain benefits otherwise not agreed to. For these reasons, timekeeping and logging hours are important steps for every employer, especially in a working-from-home arrangement,” Shah advised. Relying on employees to track their own time can be risky. “Asking employees to report their hours daily, even in an e-mail, is a good way to document work time if an employer lacks a logging system for remote workers,” Shah suggested.

“Also, employees who are on unpaid leave or working less hours due to furlough can still apply for unemployment benefits. An employer must be mindful of these sorts of situations to avoid wage-and-hour claims,” Shah advised.

Wrongful termination. Reductions in force (RIFs) are an unfortunate fact during economic downturns, such as the one that is occurring due to COVID-19. RIFs often lead to wrongful termination claims, and potentially even class-action lawsuits.

Because the coronavirus so far poses greater health risks to people over age 65, people with obesity and underlying uncontrolled health conditions such as diabetes or liver disease, and pregnant women, employers must proceed carefully with terminations. The Centers for Disease Control & Prevention offers information resources to help business and employers slow the spread of COVID-19 (source).

It might seem logical to some employers to lay off workers at greater risk of contracting COVID-19, but that is problematic and could invite lawsuits alleging discrimination and wrongful termination.

Americans With Disabilities Act (ADA) issues. The U.S. Equal Employment Opportunity Commission enforces anti- discrimination laws, including the ADA and the Rehabilitation Act. With the stress and anxiety over COVID-19, employees with disabilities might make more requests for reasonable accommodations under the ADA. Employers should consider any accommodation requests during the pandemic in the same manner in which they otherwise would. The EEOC also has published guidance for employers on COVID-19 (source).

The ADA allows employers to seek certain information about employees’ health and disabilities, insofar as such information is job-related and consistent with “business necessity,” but employers must remain aware of their obligations to apply it consistently and keep information confidential.

“Because we are dealing with a pandemic, it is now OK for employers to take employees’ temperatures or send an employee home if he or she is exhibiting COVID-19 symptoms, but any information an employer collects about an employee’s health must be treated as a confidential medical record,” Shah said. “During a pandemic like COVID-19, employees exhibiting symptoms consistent with the virus post a direct threat under the ADA, warranting an employer’s questions out of business necessity. Employers should remember that all other aspects of the ADA remain in effect. There is still the potential for retaliation claims under the ADA and other laws.”

Third-party discrimination. Another form of EPL exposure is third-party discrimination. Such claims may come from customers or others. For example, refusal of service or preferential treatment could be construed as third-party discrimination.

“Businesses all over the United States have been mandated to practice social distancing and not put their employees or customers in jeopardy. Businesses can’t prevent claims, but they may have lots of meritorious defenses,” Shah said.

Original article posted by CRC Group Wholesale & Specialty

Pandemic Roiling D&O Marketplace

As the coronavirus pandemic continues to grow, the directors and officers of public and private organizations are facing risks on two fronts: the economic impacts of COVID-19 and litigation. Adding to the challenge is a hardening insurance marketplace.

D&O liability insurance was already undergoing a market correction before the pandemic, after years of poor results and growth in claims. The uncertainties that COVID-19 is bringing to all sectors of the economy will undoubtedly lead to further changes – not only in the form of higher rates, but also tighter terms and conditions, as well as additional exclusions.

These trends will make navigating a complex line of coverage even more challenging, but they are not unprecedented. D&O insurers similarly tightened their underwriting during the financial crisis in 2008, then eased coverage restrictions after the global recession ended.

Times of crisis historically make directors and officers more frequent targets of litigation, as plaintiffs scrutinize organizations’ decisions. Generally, D&O allegations tend to fall into three categories: disclosures, particularly for public companies; mismanagement, especially when companies post results or their share prices drop precipitously; and insolvency. Even when a lawsuit is found to have no merit, organizations still must defend it, and those expenses can quickly mount.

D&O LAWSUITS OVER COVID-19

The Securities and Exchange Commission has encouraged public companies to disclose the impact of the coronavirus on their operations and financial condition, even as the SEC notes the future impact is uncertain. But public statements can get companies into hot water, as recent litigation shows.

Several lawsuits naming organizations and their directors and officers have already been filed with allegations relating directly to the coronavirus pandemic.1 A sampling of lawsuits include class actions against:

  • Norwegian Cruise Line Holdings Ltd. In March, plaintiffs filed a federal securities lawsuit alleging, among other things, that the cruise line made false and misleading statements about the impact of COVID-19 on the company’s operations and business prospects. The lawsuit also cited media reports of leaked internal memos directing the cruise line’s sales staff to lie about the coronavirus.2
  • Inovio Pharmaceuticals Inc. Also in March, plaintiffs filed a securities lawsuit alleging the biotechnology company made false and misleading statements that it had designed a vaccine for COVID-19 in three hours. A research firm called on the Securities and Exchange Commission to investigate Inovio’s statement, suggesting it was “ludicrous and dangerous.”3

Article originally posted on CRC Group Wholesale & Specialty Group 

Commercial Lines Prices Rose +6% During Q1

According to a survey conducted by Willis Towers Watson, Property and Casualty premiums increased by over 6% in aggregate during Q1 which marks the 2nd quarter in a row for such an increase.   As has been the trend for years, Workers’ Compensation was the only line to experience consistent rate reductions during the same time period. However, many presume there is a hard market ahead for comp as well. Time will tell.

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U.S. commercial insurance prices climbed more than 6 percent in aggregate during the 2020 first quarter compared to the year, Willis Towers Watson’s pricing survey for the sector.

Price increases surpassed 6 percent in aggregate for the second quarter in a row, Willis Towers Watson said.

Once again, nearly all commercial lines saw price hikes. Some saw double-digit increases: Directors and Officers liability, excess/umbrella, commercial auto and property.

For most other lines, however, Willis Towers Watson said price changes trended higher at a similar rate to the previous quarter.

Price increases were more muted for small commercial accounts and higher across mid-market accounts, with large accounts nearing double digits, Willis Towers Watson said.

Workers’ compensation continued to be a notable exception with many carriers reporting rate reductions, Alejandra Nolibos, senior director, Insurance Consulting and Technology for Willis Towers Watson, said in prepared remarks.

As well, Nolibos said that the statistics don’t yet reflect reactions to short and midterm impacts of COVID-19, “among them changes in task and employment mix and the economic situation.” He said that continued analysis of emerging data will track those effects for future premium trends.

Willis Towers Watson’s CLIPS survey is a retrospective look at historical changes in commercial property/casualty insurance (P&C) prices and claim cost inflation.

Source: Willis Towers Watson

https://www.insurancejournal.com/news/national/2020/06/09/571470.htm

 

COVID-19 Impact to Insurance Programs and Carriers

I hope this post finds you safe and well in our new world.

As you may be aware, the most credible association in regards to insurance projections is the Casualty Actuarial Society (“CAS”) casact.org.  This is the fellowship of the “mathematical prophets”.

The below link is a very timely white paper that addresses the lines of insurance that will be most impacted due to this pandemic.  Specifically:

-Health Insurance

-Workers’ Compensation

-Liability (general and specialty casualty)

-Cyber

-Event cancellation

-Property

The full report can be accessed by clicking here.

I think that some of these lines of insurance are directly impacted, especially health, workers’ comp and event cancellation.  What that impact will be has yet to be understood as the cost of medical and timeline of indemnity unknown. Other lines have the potential to be impacted such as cyber and liability.  Property should have the least impact unless the feds step in.  If they force the issue and do not subsidize, the money is not there to cover the claims.

Our prayers to you and yours –

 

 

Department of Labor Issues Final Rule to Allow Associations and PEOs to Sponsor Retirement Plans

REIT
Final rule defines a PEO as an employer under ERISA and clarifies rules for PEOs to offer retirement benefits

On July 29, 2019, the Department of Labor (the “Department”) issued a final rule to facilitate and expand the availability of multiple employer defined contribution plans (“MEPs”). The final rule provides clarity regarding the types of “bona fide” groups or associations of employers as well as professional employer organizations (“PEOs”) that are permitted to sponsor retirement plans.

NAPEO supports the rule, as it is another step in in formalizing the legal framework for PEOs to provide benefits for their client’s shared employees. This action, along with the passage of the Small Business Efficiency Act contained in the Tax Increase Prevention Act (H.R. 5771, Public Law 113‐295) which created the voluntary IRS PEO Certification Program, demonstrates the federal government’s recognition of the PEO industry and the important role it plays in supporting our nation’s small businesses.

With respect to PEOs, the final rule does two things. First, it states that a “bona fide” PEO is capable of establishing a MEP. The rule then creates a safe harbor criteria for determining whether a PEO that sponsors a MEP is performing essential employment functions.

A copy of the final rule can be found here.

A summary of the final rule can be found here.

A detailed analysis on this issue from the Groom Law Group can be found here.

A recording of a NAPEO-sponsored webinar on this issue can be found here.

A copy of NAPEO’s comments on the proposed rule can be found here.
NAPEO Article can be found:

https://www.napeo.org/advocacy/what-we-advocate/federal-government-affairs/peos-retirement-regulation/dol-meps-finalrule