Insurance Tracking Software

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In today’s world, companies are expected to do the required legwork needed to ensure that their vendors, tenants, or borrowers are properly insured. This is to protect themselves from potential lawsuits that may occur as a result of incidents that incur financial loss. That said, actually following through with this task is easier said than done. There are often complex legal requirements that must be met and a variety of specific documentation that is needed in order to ensure contractual insurance compliance for each third-party that a company might be involved with. For larger organizations, such as international real estate or hotel enterprises, this is a massive amount of data and would require an extreme amount of diligence to maintain. Due to the fact that it is unlikely that such a process could be done manually, the concept of insurance tracking software was devised.

What does insurance tracking software do?

Insurance tracking software allows for the easy collection, storage, and monitoring of all types of insurance related documentation and key data points related to insurance requirements. Not only does this software simplify the process of organizing pieces of documentation, but it also allows companies to easily retrieve global metrics related to all of their associated third-party entities. Companies can easily see how many of these entities meet their contract requirements, view detailed data for each, and update or delete information quickly.

Why is insurance tracking software necessary?

While it is theoretically possible to do this work by hand, it is not at all realistic. Storing physical copies of all required documentation would be a secretarial nightmare, and would require a large amount of space. Many companies end up tracking millions of individual documents; storing these digitally on a secure server makes much more sense than buying a few warehouses to fill with paper documents. In addition, many insurance tracking software packages are equipped to programmatically determine compliance for each document based on a pre-set array of flexible requirements. This automates the task of marking certain entities as compliant, and limits the amount of potential human error involved in the process.

Minimizing Risk

The bottom line is that in today’s extremely competitive business environment, minimizing potential risk is of the utmost importance. It is not uncommon for a single incident to sideline a business’s operational capability for a long period of time, if not forever. The only way to reliably and efficiently meet the demands of risk management in a fast-moving global economy is to leverage technology in order to streamline and automate much of the process. Many large corporations continually rely on insurance tracking software to effectively centralize and manage the ever-increasing amount of insurance related data and documentation that they must ensure meets their particular contractual requirements. This software makes the business world a better place by ensuring that those who experience loss have that loss recuperated, and those who are responsible for the incident are properly protected.

BCS Certus™

Business Credentialing Services (BCS) gives its clients access to one of the industry’s premier insurance tracking software packages: Certus™. This proprietary software is a flexible database customized to display a range of key data points including but not limited to vendor certificates of insurance, associated data, documents, and detailed compliance metrics. BCS also provides its clients with the CERTUS™ API, which is a web service that gives programmatic access to all client data, including files and metrics. With the API, clients can work with their internal IT department and automatically retrieve and organize CERTUS™ data through their existing systems seamlessly. These extremely valuable pieces of technology are made even better when coupled with the abundance of insurance expertise and professional customer service that is provided on a daily basis by the insurance experts at BCS.

Terrorism Risk Insurance Act

In the wake of the 9/11 terrorist attacks in New York City, nearly all commercial reinsurance contracts that renewed by the summer of 2002 included exclusions in coverage for acts of terrorism. Domestic insurers then in turn passed these exclusions onto their insureds, leaving a giant gap in coverage for many real estate owners, developers, sports teams, and entertainment venues. While under pressure from a variety of sources, namely the banking industry, Congress enacted the Terrorism Risk Insurance Act (TRIA) to serve as a “backstop” against losses arising from acts of terrorism.

TRIA essentially dissolved all legal ambiguity regarding the distribution of public and private compensation for insured losses due to acts of terrorism. The act, signed into law in 2002 by President George W. Bush, was extended twice in 2005 and 2007 and was set to expire once again on December 31st 2014. With TRIA in place, the markets were calmed and the terrorism based exclusions from insurance coverage were effectively eliminated.

Recently, the House of Representatives amended and passed the bill S. 2244 (Schumer, D-NY) which would have extended the effects of the TRIA for another seven years. There were multiple stipulations attached to the bill however which included:

  • Incrementally increased the program trigger from $100 million to $200 million
  • Incrementally increased the insurer copay from 15% to 20%
  • Increased the recuperation of government expenditures from $27.5 million to $37.5 million
  • Established the National Association of Registered Agents and Brokers, commonly known as NARAB II. This is a nonprofit board that would allow insurance agents and brokers to obtain certification to operate on a multistate basis.

The bill S. 2244 was then passed along to the Senate, which had to pass the bill in order for the TRIA not to expire. While there were some objections to agent provisions amended to the bill in the House, S. 2244 successfully passed in a 93-4 vote.

Many industries, namely banking, insurance, and construction, have praised the TRIA noting that it provides important stability and provides insurers with coverage that they would normally not be able to receive from private insurers otherwise. Jimi Grande, Senior Vice President of federal affairs for the National Associated of Mutual Insurance Companies, celebrated the TRIA decision noting “Before TRIA, the risk of terrorism and the lack of available coverage ground commercial development almost to a halt, costing billions of dollars and thousands of lost jobs.” Today, more than 60 percent of companies in the United States have terrorism coverage in place, allowing major construction and development projects to continue to occur nationwide.

TRIA is and continues to be an important factor in maintaining a stable United States economic climate. It will now be firmly intact through the year 2020, which should ease the fears of key markets. The obvious importance of a bill such as S. 2244 emphasizes the amount of influence that changes trends in the insurance industry have on the overall health and productivity of the United State economy.

The 3 Questions to Ask About Your Vendor Risk Program

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Risk consulting firm Proviti recently highlighted questions a company should ask itself to determine if its risk management program was on track. Several stand out as being very relevant to establishing a vendor risk program that actually works.

The main focus of each is on moving beyond vague long-term goals and instead focusing on achievable objectives and accountability. Whether you are establishing a vendor auditing program or a supplier financial screening initiative, the following questions are key in determining if your risk program is on track.

1. Does our risk profile reflect the risks we face currently?

This seems like an obvious question but one which is easy to lose track of. Have the risks your organization faces increased or decreased over the last year? Clearly not all risks can be forecasted, but at the very least a comparison should be made between known risk exposure along with an honest assessment of whether you are better prepared to deal with them now versus one year ago. For example, by analyzing how many of your vendors are compliant with your terms and conditions today vs one year ago, you gain a sense of whether your overall vendor risk management approach is moving in the right or wrong direction.

2. Are directors and executive management on the same page in terms of risk appetite?

There must be a cohesive vision in place to work towards in executing a winning risk program. One approach is replacing overly vague company mission statements regarding risk with more granular, achievable objectives, and then revisit those objectives in 6 months to ask whether real progress is being made. Stagnation in executing a risk program often stems from setting overly lofty goals at the outset, and then having directors or operations managers not focusing on the same barometers of success over time, leaving nobody ultimately accountable.

To do this there must be accountability. Companies that succeed in executing a risk program usually find ways to eliminate redundant oversight of the program. Does a single person in your company have responsibility for owning a particular problem or program and reporting on its progress? As Proviti reports in their findings, the more institutional overlap an organization has with multiple people or departments sharing responsibility for the execution of a risk program and reporting on its success, the less likely that program is to succeed.

3. Is our risk culture encouraging the right behaviors? 

This is key. If you go to the trouble of auditing every single vendor who works on site at a facility, requiring them to submit updated COIs, endorsements, etc., that means nothing if nobody checks that info at the gate and lets them in regardless. Vendor standards for risk compliance must be enforced, otherwise it becomes very hard to continue enforcing standards, especially in today’s environment of fast traveling information where a non-essential exemption for one vendor can quickly lead to other vendors requesting similar exemptions.

The key to a comprehensive risk management program must include ensuring vendors are safe, compliant, insured and financially stable. This is critical to minimizing potential loss. If your vendor risk management program cannot satisfy the above 3 questions, now is the time to evaluate what needs to change.

Business Credentialing Services can help you analyze whether your risk program is passing or failing the above three questions.

US Companies are terrified of Reputational Risk, but Too Afraid to Do Anything About It

In its annual board of directors risk survey report, EisnerAmpner found a surprising disconnect among risk managers at publicly traded companies in the US.

Aside from financial risk, the top risk area companies are most concerned with is risk to reputation, far ahead of other top responses.

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However, despite so many companies being worried about reputational risk, the survey found that nearly 30% of companies were doing nothing to address the concern, despite many respondents also stating that implementing a risk program fell under their purview at their respective company.

One of the main reasons for the disconnect between companies worried about risk to reputation and a willingness to act on the risk is that many board members are unfamiliar with cybersecurity and social media, two large vectors of reputational risk. Because of their unfamiliarity, they are apprehensive to engage resources or spend time or money to address a risk that they may not fully understand.

This tension has the end result of companies operating with large gaps in their risk programs. Companies want to address reputational risk and cyber security, but lack of familiarity makes it easy to put off for yet another year.  As a result, less than 40% of the survey respondent publicly traded companies even have a fully implemented risk management program in place. Companies end up operating in a permanent quicksand of risk preparedness, a knowledge that something needs to be done to get out of the mess, but afraid to move in the wrong direction out of fear of sinking further.

This unfortunately misses a broad point of risk planning, which is that risk is interconnected. Whether it is risk to reputation, cyber security, supply chain, or vendors; a proactive and thoughtful risk program is preferable to none.

Contractor Focus – Florida Workers’ Comp Statute Declared Unconstitutional

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A court in Miami-Dade County, Florida found Section 440.11 of Florida’s Workers’ Compensation Act unconstitutional, ruling that it does not provide adequate medical care for injured workers or dollars to replace lost wages. Section 440.11 makes the Act the “exclusive” remedy available to injured Florida workers and their families for injuries or death incurred on the job.

 The court held that under US Supreme Court precedent, workers’ comp benefits must be “significant” if they are the only remedy available to the worker. Additionally, under a Florida Supreme Court ruling, Florida workers have a “fundamental right” to workers’ compensation benefits, meaning that statutes which impinge or discriminate on those benefits are subject to strict scrutiny under the 14th Amendment equal protection and due process clauses. In other words, because the Florida Constitution says workers’ comp benefits are a fundamental right, the legislature is not allowed to tinker with those rights without strict scrutiny and review from the courts.

The court reasoned that in 1968 when Florida enacted the Workers’ Comp act, making it the exclusive remedy for workers and their families, the act provided a total of 12 years possible benefits available to injured workers or deceased workers’ estates. However by 2003 that had been reduced to only 2 years worth of total possible benefits, along with some other impairment benefits available through the State and little else.

The court held that the 2003 law last modifying the Workers’ Compensation Act was unconstitutional as an exclusive remedy because it “is no longer an adequate exclusive replacement remedy in place of common law tort as required by the 14th Amendment to the U. S. Constitution or by the Florida Constitution.” 

The decision will likely be appealed, but has immediate short-term impact for employers and additional insureds currently operating in Florida.

Tracy Morgan Sues Wal-Mart for Negligence after Car Accident

Retailer Wal-mart is being sued by actor and comedian Tracy Morgan for negligence after the actor was seriously injured in an auto accident on June 7th, after a Wal-Mart truck struck the vehicle the actor and several others were passengers in.

In the civil complaint, lawyers for Mr. Morgan allege that Wal-Mart was negligent for, among other things, not factoring in their driver’s commute times to and from work in assiging routes for Wal-Mart drivers, with the result being sleep deprived drivers, and Wal-Mart possibly in violation of laws regulating how long commercial truckers may be behind the wheel.

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The driver, Kevin Roper, began his shift after a 700-mile commute from his home to a Wal-Mart facility.

The lawsuit, filed July 10 in U.S. District Court in Trenton, New Jersey. The case raises interesting issues of negligence on the part of companies that employ drivers and whether or not a driver’s commute to or from their home to work to begin a driving shift contributes in whole or in part to the negligence of a driver. 

 

You Could Face Tort Liability For Your Independent Contracts

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Companies typically assume they will not be held liable for tort claims arising from the work performed by independent contractors they hire. However, as tort law continues to change this is less and less true.

The general rule of non-liability of an employer for torts committed by independent contractors has been eroded to the point that some legal experts now argue that “the rule is now primarily important as a preamble to the catalog of exceptions.” 41 Am. Jur. 2d Independent Contractors § 27

The Restatement of Torts has gone so far as to say that the many exceptions have eroded the “general rule” to the point that the rule can now be said to be “general” only in the sense that it is applied where no good reason is found for departing from it. (REST 2d TORTS § 409). In other words, just because you hire an independent contractor does not mean you should assume you will not be held liable for the work they perform.

The reality is that corporations face many liability issues when dealing with independent contractors and suppliers. Inserting boilerplate waiver-of-liability language and indemnification clauses in an independent contractor’s contract is no guarantee that the hiring party will not be held liable for contribution in tort actions filed by third parties against the independent contractor, or in actions filed by an injured third party directly against the company who hired the independent contractor.

The general rule regarding independent contractors states that a person who hires an independent contractor cannot be held vicariously liable for the wrongdoing of the independent contractor. (NYPRAC-TORTS § 9:17). Because the work they perform is independent from your supervision or direction, and the contractor is not your employee, the general rule is that you cannot be held liable for their actions. However, there are exceptions to this rule.

Under the legal doctrine respondeat superior, an employer is liable for the tortious acts committed by employees and agents ‘that are committed within the scope of their employment.’ (Black’s Law Dictionary, 8 Ed., 2004).

An employee is acting within the scope of her employment for purposes of respondeat superior liability if her tortious act that gave rise to a claim was “reasonably foreseeable” by the employer / hiring party. Bussard v. Minimed, 129 Cal. Rptr. 2d 675 (Ct. App. 2003). The question then becomes, is this person who committed this tort an employee of the company that hired them, or merely an independent contractor.

The primary basis for determining whether someone is an employee or independent contractor for purposes of attaching vicarious liability to the employer is whether the employer has the right to control the manner in which the employee performs their job. Id. So, even if a company hires what it thinks is an independent contractor, the reality is that if the hiring party can control and direct the work being done by the contractor to a certain level, then that person no longer is an independent contractor and instead will be treated as an employee of the hiring company.

Even if company X hires contractor Y to perform a job and disclaims liability in the employment contract, the court may disregard the label ‘independent contractor,’ and could assign liability to the hiring party under Respondeat superior if the hiring party has the right to control the manner in which the contractor performs their job.

Assuming the contracting party does not retain the right to control the manner in which the independent contractor performs their job, there are still three broad exceptions to the non-liability rule which may still lead a court to decide that the contractor is actually an employee of the hiring party, and thus the company is liable for the claims arising from the contractor’s work.

If a hiring party falls within one of these three broad exceptions, they will in some circumstances be liable for the torts of their independent contractor, even if they did not control the manner in which the contractor performed their job. (REST 2d TORTS § 409).

 [1] If the employer is negligent in selecting, instructing, or supervising the contractor, they may be liable for torts committed by the contractor. Id.

In a Wyoming case involving this first exception, an oil company hired an independent contractor to repair a well. An employee of the independent contractor was injured while working on the well, and brought a negligence action against the oil well owner. The trial court and appellate court both agreed that the oil company was liable for the injuries sustained by the employee of the independent contractor.

The appellate court found that “by directing… the manner of the independent contractor’s performance, defendant (oil company) abandoned the protection of the “independent contractor” rule… and owed plaintiff a duty of reasonable care.” Natural Gas Processing Co. v. Hull, 886 P.2d 1181. Despite having a contractual relationship with the contractor limiting liability, because the oil company directed the manner in which the contractor performed it’s work, the oil company fell outside of the safe harbor of tort immunity, and the court decided the contractor was actually the employee of the hiring company.

Similarly, in a Utah case involving an employee of an independent contractor hired to build a an LDS church building, the court had to determine whether the LDS Church had fallen within the first exception to independent contractor tort liability, by directing the explicit manner in which the contractor performed their work. During construction of a church building, a wall fell on a worker employed by the independent contractor, killing him. His estate filed suit, naming the hiring-party church as defendant. In examining the hiring party’s liability, the court examined the doctrine of retained-control, which states that if the hiring party retains an active participation in an injury-causing activity’s method or operative detail, the hiring party would be liable for torts committed by the independent contractor. Thompson v. Jess, 979 P.2d 322.

 [2] Employer has a non-delegable duty, arising out of some obligation to the public. (REST 2d TORTS § 409).

 Courts may also decide a contractor is actually an employee if the work being performed by the contractor is a type of work which the hiring party has a duty to the community to be ultimately responsible for the safe completion of. In a Texas case, an independent contractor repairman was injured when fixing a cement truck tire. The appellate court affirmed the trial court’s finding that the company who owned the truck was liable to the repairman, despite his independent contractor status. The appellate court held that “under the circumstances of this case, defendant owed plaintiff a duty of care, even though plaintiff was an independent contractor, since defendant was in the better position to identify, minimize, and administer the risks involved.” Alamo Lumber Co. v. Pena, 972 S.W.2d 800, 805. The court held that under the second exception, public policy dictates that there are certain non-delegable duties of safety and care that a party cannot simply externalize to other injured parties via indemnity clauses. To allow so would open the floodgates of negligent behavior by allowing companies to hide behind indemnity clauses and pass on the costs of injury to others.

[3] Inherently Dangerous Activity

 And finally, if the work being done by the contractor is inherently dangerous, for public policy reasons a company in some cases cannot simply absolve itself of liability for that work by passing it onto a contractor. In a Michigan case, an independent contractor was hired by landowners to fell timber on the landowner’s property. An employee of the independent contractor was injured when a felled tree crushed his leg. The employee named the property owners in the negligence suit, claiming tree logging was an inherently dangerous activity, and as such, was an exception to the no liability rule for independent contractor employees. The trial court granted summary judgment against plaintiff, but the appellate court reversed, holding that logging could be an inherently dangerous activity. DeShambo v. Nielsen, 471 Mich. 27, 684 N.W.2d 332 Mich., 2004.

The Michigan Supreme Court decided that for purposes of this exception, work is inherently dangerous “If the thing to be done is in itself unlawful, or if it is per se a nuisance, or if it cannot be done without doing damage…” Rogers v. Parker, 159 Mich. 278, 123 N.W. 1109 (1909).

Generally speaking, then, if the work cannot be done without doing some kind of damage or committing some kind of nuisance, such as controlled detonations, leveling buildings in a crowded city, etc., then the work is inherently dangerous, and the person who hires an independent contractor to perform the work is as much liable for damages caused by the work to third persons as is the independent contractor. Rogers, 159 Mich. 278.

These kinds of exceptions to the rule of non-liability for companies that hire independent contractors are real, and are happening more and more often. It is more important than ever that companies know with certainty that the contractors they hire are safe, licensed, insured and financially stable. The time to verify whether you are working with reliable, insured contractors is before contracting with them, not after a claim arises.

 

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