All posts tagged claim

Respond quickly and effectively to harassment, discrimination complaints

A businesswoman shouts through a megaphone and points up towards a much larger businessman who is standing over her.

Employers need to respond swiftly when employees complain about discrimination or harassment and the response must be effective, a U.S. District appeals court has held.

When a company addresses workplace it is responsible for ensuring that its solution will stave off further harassment or discrimination, a court of appeals has held in a case of a father and son who were eventually fired after complaining about harassment.

The case illustrates the need for an employer to not only act swiftly to respond and investigate claims of harassment or discrimination, but also to ensure that any remedies that are put in place are effective. Barring that and if the harassment or discrimination resumes, an employer could be opening itself up to a possible lawsuit.

In the case of Efrain Reynaga v. Roseburg Forest Products, the 9th District Circuit Court of Appeals held that a Hispanic millwright’s discrimination case against his former employer should go to trial and the court overturned a motion for summary judgment.


What happened

The case involved a father and son who worked as millwrights for Roseburg Forest Products and they were reportedly the only Hispanics working at the site.

The father claims they were regularly subjected to verbal abuse and derogatory comments from the lead millwright and harassed them, including comments like “minorities are taking over the country” and asking if “all Mexican women are fat.”

They also say they were regularly assigned dirtier, harder and more dangerous jobs than their white counterparts. When hostile work environment worsened, the father complained.

The company took action and rearranged the supervisor’s schedule so that he would not work the same shifts as the father and son.

But one day when they showed up to their shift, their old supervisor was there they immediately left the premises. They told their new supervisor they would not work with their old boss and they were promptly suspended and the father was later fired.

Reynaga sued Roseburg for hostile work environment, disparate treatment, and retaliation. The lower court granted the employer’s motion for summary judgment and threw out the case, but the appeal’s court decision reversed that decision, which means the case can go to trial.


The decision and why it’s important

The appellate court, in making its decision, said that a jury could find the termination retaliatory, saying that the termination for missing one-and-a-half shifts was widely out of proportion to the company’s “benign treatment of [the supervisor].”

“Efrain’s prima facie case is strong, particularly in light of the timing of the termination. Efrain had worked at Roseburg for more than five years, yet he was fired barely one month after making a formal written complaint. Proof of a causal link between Efrain’s complaint and his termination-as evidenced by temporal proximity-is certainly relevant to an evaluation of pretext.”


The takeaway

If you have had an employee legitimately complain about a hostile work environment, harassment and discrimination, you should:

  • Move quickly to investigate and address the issue if you find the complaint to be valid.
  • Ensure that the action you take is effective.
  • Don’t retaliate against employees for complaining about harassment or discrimination.


Remember, harassment and discrimination cases that go to trial can be costly in terms of litigation expenses, but also any potential judgments and penalties. The final level of protection is employment practices liability insurance.

Talk to us if you want to know more about this coverage.

Filing Late and Other Ways to Have Your Claim Rejected


One of the biggest mistakes you can make if you incur damage to your business premises is to wait too long before filing the claim with your insurer.

The owners of Dallas Plaza Hotel learned this the hard way last month when a U.S. Circuit Court of Appeals held that the business had waited too long to file a claim with its insurer after suffering hail damage in July 2009.

The court ruled that because the hotel had waited more than 19 months to file the claim, it was impossible for the insurer, American Insurance Co., to ascertain exactly when the damage had occurred.

The hotel’s property policy required that the insured make “prompt notice” of any claims.

American Insurance rejected the claim when it received it in October 2011, saying that there had been so many hailstorms in the area before and after July 2009 that it could not determine what caused the damage or when the damage occurred and, specifically, whether it had occurred within the policy period, which expired in September 2009.

Believe it or not, this is a common problem for businesses and the lesson from this case is that you should inform the insurer as soon as possible after incurring damage that may be covered by your insurance policy.

It is one of many mistakes business owners make in filing claims. The following are surefire ways to risk having your claim denied or disputed by your insurance company:


  1. Not contacting your insurer immediately. Many business owners fail to contact the insurer on time and risk a situation similar to that experienced by the hotel in Dallas.
  2. Failing to document the damage. Take pictures and itemize everything that was damaged. Often, you will have to make repairs immediately to prevent additional damage, or move machinery to a new location. If so, be sure to photograph the original scene to document how it was before you started your clean-up effort. Also take photos of any repairs you make.
  3. Not keeping damaged goods. If your business clean-up includes removal of items such as water-damaged merchandise, flooring or insulation, keep it all, even if it has to pile up in the parking lot. The damaged materials are all evidence of the impact of the disaster on your business.
  4. Not appealing an insurer’s low estimate of damage. After the claims adjuster inspects the damage the insurance company will give you a damage estimate. If you think it’s too low, you can appeal. We can help you if you feel the estimate is too low.
    Some businesses will hire an outside adjuster to make a second estimate and then the claim will go to mediation for a final resolution.
  5. Not reading your policy. You should understand exactly what your policy covers. For the most part, commercial property policies will not cover flooding or earthquake damage. That kind of coverage will often require a separate policy or rider.
  6. Not being prepared. If your business has suffered damage, you’ll be better off if you know what to do in advance. Some advance steps you can take are:
  • Reviewing your policy to make sure you have adequate coverage.
  • Knowing where your insurance policy is kept.
  • Keeping an extra copy of the policy off premises or in a safety deposit box.
  • Having our telephone number and e-mail address in the contacts on your smart phone, so you can call us immediately if you suffer a claim.

How to Avoid Having Your Cyber Claim Denied


You no doubt have seen our admonitions about the need for businesses to secure cyber insurance policies that can help defray the costs of an attack on your network or a theft of your employees’ or clients’ personally identifiable information.

Businesses are faced with increasing threats and cyber criminals are constantly working to devise new ways to infiltrate organizations’ databases and extract information or find some way to monetize their hacks.

Cyber insurance can help your business recover from these events, but as with all insurance, there are risks that are covered and those that aren’t – and you often will have a certain amount of time to file a claim once you’ve incurred damage.

Your claim may be denied if you file too late, don’t understand your coverage, don’t understand your exclusions or don’t get the insurance company involved early enough, according to the insurance news website PropertyCasualty 360.

In order to best ensure that your claim gets paid, you should do the following:


  1. File your claim on time

Most cyber policies are written on a “claims made” basis, meaning they will only cover claims that are made when the policy is in effect. If someone files a claim against your company after the policy expiration, it would likely be rejected.

Some policies may include language that allows claims to be made for a few months after the policy expires, but not all policies contain this language.

Also, if your organization experiences a cyber event that may eventually lead to a claim, it’s important that you notify your insurer during the policy period. This is really important because if you fail to alert the insurer about it early in the process, they may deny the claim.

You need to communicate to your staff (particularly any information technology personnel) that they need to alert management about any suspicious activity on your networks. Make sure that you create a policy for staff to report all suspicious activity so that it can be investigated further to see if it merits reporting it.


  1. Understand the depth of your coverage

Because cyber policies are a relatively new phenomenon and continuously evolving, coverage will often vary from insurer to insurer.

It’s important that when purchasing a policy that you sit down with us to discuss your exposures (such as if you store client credit card information on your servers). This can help us find the right coverage for your organization.

Coverage will vary depending on the type of business you are running, the technology you are using and what data or company intellectual property you want to protect.

Some policies will also require that you have specific protocols and software in place to reduce the chances of your data being hacked. For example, policies will require that the policyholder applies security patches, uses encryption technology and has a secure-socket layer to protect credit card data.

If you fail to have this in place when your policy is in effect, the insurer may reject your claim if your systems are breached.

Other areas that cyber policies will often differ on include:

  • Paying for any potential legal costs after a breach.
  • Paying for tools to remediate any exposure.


  1. Understand what’s not covered

All insurance policies have exclusions, and cyber policies are no different. There are many exclusions in cyber policies, but again, they vary from insurer to insurer. Examples of exclusions include:

  • If your data is compromised when sharing it with a vendor, such as a payroll provider.
  • If you have a system pipeline into a client’s network and the network is hacked.
  • Fraudulent entry into certain parts of your network systems.
  • Patent or copyright infringement.


Again, it’s crucial that you read your policy before signing and that you evaluate whether any existing or future contracts with vendors or clients fall outside the policy’s coverage area.


Two of the major areas of coverage you may want to look for in exclusions are:

  • Will the policy cover data that is stored outside of your network, either on the cloud or on a vendor’s network?
  • Will externally generated data be covered if a breach occurs within your system?


  1. Get the insurer involved early

When in doubt, reach out to us or the insurance carrier if you think you’ve had a breach. Even if it’s just asking questions or trying to clear up your uncertainty, it’s better to contact the insurance company so that the event rises to its radar.

It’s better to reach out early because it will give the insurer a chance to investigate the matter and determine if there has been any exposure.

This will give you peace of mind that you will be protected should the matter rise to the level of a genuine claim.

The worst thing you can do is to wait until after you’ve started receiving complaints from customers, vendors or regulators. At that point your insurer will have a much more difficult task on its hands.

Getting the insurer involved early will let it get ahead of the claim, which makes managing it easier – and it can limit the amount of fallout.

Run FMLA Concurrently with Workers’ Comp for Long-term Absences


Employers that run federal Family and Medical Leave Act benefits at the same time as workers’ comp benefits give themselves more leeway when employees are off work for workplace injuries for an extended period of time, a state supreme court has ruled.

In the case of Kings Aire Inc. vs. Jorge Melendez, the Texas Supreme Court ruled that an employer who laid an employee off who had been out on workers’ comp concurrently with FMLA, but had exceeded the 12 weeks away that is allowed by the law, was entitled to do so.

But regardless of the outcome of this case, employers need to be careful about terminating any workers that are out on workers’ comp.


The case

Here are the facts of the case:

Jorge Melendez filed a workers’ comp claim after he injured his wrist in July 2009, cutting two tendons and the median nerve.

His employer informed him that while he was out on workers’ comp, it would concurrently place him on FMLA leave, which allows eligible employees who cannot perform their jobs due to a serious health condition, to take up to 12 weeks of job-protected leave per year.

After 12 weeks, Melendez was unable to return to work and his employer sent him a termination letter. He later sued, accusing the heating and air company of retaliating against him for filing the workers’ comp claim.

A local court and appeals court sided with Melendez, but the Texas Supreme Court reversed those decisions, saying that the evidence did not support the allegation that he had been fired for the workers’ comp claim. Instead, the employer had rightfully signed him up for FMLA leave and he was fired under the company’s policy, which the employer had enforced equally in four other circumstances before Melendez’s termination.


The lesson

If you foresee an employee missing a long period from work, it is not a bad idea for you to also put them out on FMLA leave to protect your interests, employment law attorneys say. And regardless, employers that fail to provide FMLA protections risk running afoul of the law.

If you do not offer FMLA leave while they are out on workers’ comp, your employee will still have those 12 weeks to use for other potential FMLA-approved leaves.

The two laws have some intersections, as well. For example, where provisions of both laws are running concurrently, an employee may turn down light duty under workers’ compensation.

If that happens, the employee may lose benefits under workers’ compensation, but would retain FMLA rights to a continuation of job-protected leave.

If an employee returns to work in a light-duty capacity under workers’ compensation, employers typically may pay a lower wage than that of the worker’s normal position.

Under the FMLA, if an employee is transferred to an alternate position which better accommodates recurring periods of leave than does their regular position, such a position must have equivalent pay and benefits. However, light duty is generally not an alternative position.


Note of caution

But be aware of the following issues. According to the Department of Labor:

  • If an employee is collecting workers’ compensation in relation to something which is also a serious health condition under the FMLA, the employer cannot require the employee to substitute any paid vacation, personal, or medical or sick leave, for any part of the absence that is covered by the payments under workers’ comp.
  • Similarly, an employee is precluded from relying upon FMLA’s substitution provision to insist upon receiving workers’ compensation and accrued paid leave benefits during such an absence. However, the employer and employee may be able to agree to paid leave to supplement the workers’ compensation replacement income.


How to Avoid Inheriting an Old Workers’ Comp Claim

One of the biggest shocks for an employer is to find out that a workplace incident aggravated a pre-existing injury that was sustained at one of the worker’s prior employers.

Some people are serial workers’ comp claimants who may or may not be involved in filing fraudulent claims or malingering (stretching an injury claim out long after they can return to work).

And some people, who have been injured at work while employed elsewhere, can re-injure that same injury, forcing your workers’ comp coverage to pay for an injury that may not have been sustained by someone who had not had an earlier injury.

Fortunately, there are steps you can take if you don’t want to inherit a claim that someone incurred at another employer, or an injury that they may risk aggravating while working for you.

Here are five innovative best practices that you can implement to avoid hiring individuals who may be more likely to file a workers’ comp claim.


Pre-work screenings: Pre-work screenings help weed out applicants who physically cannot perform the job. This includes subjecting prospective hirees to a pre-employment test to identify their ability to perform the specific physical demands of the job for which they are applying.

Screenings should especially be used for high-risk jobs, those which cost your business the most in workers’ comp costs due to their inherently higher injury rates.

There are two types of screenings:

  • Pre-offer screening: A pre-offer pre-employment screen identifies applicants who are physically able to safely complete the essential job functions of the position for which they are applying. It also will give you a baseline assessment of their physical abilities. If they do sustain an injury at work, this is the baseline physical ability to which they will be rehabilitated, too.
  • A post-offer pre-employment screen measures the same functions, but you can also require a medical examination at this stage. This can help you identify any disability, including whether they are under orders from a doctor to limit certain types of physical activity.


Drug screenings and background checks: Drug testing and background checks allow you to identify the integrity of an individual prior to hiring. Drug tests can determine if there is a history of drug use, and, if so, indicate the types of drugs in the system.

Meanwhile, background checks probe the criminal and financial records of an applicant.

If any applicant shows negative incidents on a drug or background check, he or she could be a candidate for future fraudulent activity.


On-site ergonomic solutions: Utilize physical therapists or ergonomists before injuries occur (not just after occurrences) to work with employees, supervisors and management to understand workflow and all job task requirements.

Physical therapists and ergonomists are able to recommend optimum positions, ergonomic strategies and proper physical movements required at workstations to reduce the chances of employees sustaining musculoskeletal injuries, either sudden or from repetitive work.


Employee education: Encourage managers to educate employees on how to use workers’ compensation legitimately, and to understand the implications of it being used illegitimately. Explain the damage to the employer from malingering and fraud by illustrating how claims affect the premium employers pay.

Information should also be shared about penalties and fines that could be incurred with fraudulent claims. Educating employees on a consistent basis can make the difference between having a fraudulent claim on your watch or not.


Prompt injury reporting: Train and engage employees to report any health concerns as soon as they notice any discomfort. This is important, because many workplace injuries are not sudden. Injuries can develop over time in many jobs when they are executed using improper or ergonomically incorrect motions.

Examples of jobs with repetitive motions are machinists that are using the same motion over and again to produce a product, or anyone that types on a keyboard for a living.

So, if an employer raises concerns about discomfort to a supervisor, it should be given serious attention. That way the supervisor, the worker and inside or outside specialists can address the issue. This can be done through observations and evaluations of the work pattern of the worker, and comparison to those of others in the department.

The worker should also be sent for medical diagnosis or medical care to treat the discomfort before it becomes a bigger problem.




Many Small Businesses Can’t ID Workers’ Comp Fraud

Fraud eats away at workers’ comp costs for all businesses, but it hits small businesses the hardest as they may not have the resources to identify bogus claims.

According to a new study by workers’ comp insurer Employers Holdings Inc., about 20% of small-business owners are not sufficiently prepared to identify workers’ compensation fraud. It’s estimated that at least 10% of claims are fraudulent, so identifying those illicit claims would keep your workers’ comp claims in check and reduce your workers’ comp premiums.

Claims fraud happens when an employee tries to gain workers’ comp benefits by falsely stating that an injury or illness occurred at work, or by exaggerating an existing injury or illness.

“Workers’ compensation fraud is a serious crime that can strain business operations, lead to higher insurance costs for businesses, and even undermine honest workers who are legitimately injured on the job,” said Ranney Pageler, vice president of fraud investigations at Employers Holdings.

The company found:

  • 13% of small-business owners are concerned that one of their employees would commit workers’ comp fraud by faking an injury or illness to collect benefits.
  • 21% are unsure of their ability to identify workers’ comp fraud.
  • 24% of small-business owners have installed surveillance cameras to monitor employees on the job.


The strongest indicators of potential claims fraud noted by survey respondents include:

  • The employee has a history of claims (58%).
  • There were no witnesses to the incident (52%).
  • The employee did not report the injury or illness in a timely manner (52%).
  • The reported incident coincides with a change in employment status (51%).



What you can do

Pageler recommends that small-business owners look for the following warning signs:

  • Monday morning (or start of shift) injury reports. The alleged injury occurs first thing on Monday morning, or late on Friday afternoon but is not reported until Monday.
  • Employment changes. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work.
  • Suspicious providers. An employee’s medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
  • No witnesses. There are no witnesses to the accident and the employee’s own description does not logically support the cause of the injury.
  • Conflicting descriptions. The employee’s description of the accident conflicts with the medical history or injury report.
  • History of claims. The claimant has a history of suspicious or litigated claims.
  • Refusal of treatment. The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.
  • Late reporting. The employee delays reporting the claim without a reasonable explanation.
  • Claimant is hard to reach. The allegedly disabled claimant is hard to reach at home and does not respond promptly to messages.
  • Frequent changes. The claimant has a history of frequently changing physicians, addresses or jobs.


It should be noted that one of these indicators on its own may not be indicative of fraud, so don’t jump to conclusions.

Employers who suspect a worker may be committing claims fraud should first alert the special investigations unit or fraud unit within their insurance company’s claims department.

The appropriate law enforcement authorities will likely be brought into the investigation, as well, if the insurer deems that the claim may be fraudulent. But that will only happen after the insurance company has conducted its own investigation.


Bureau Considers Better X-Mod Calculation Regimen

Last year the Workers’ Compensation Insurance Rating Bureau of California instituted new rules that limited to 25 percentage points the amount an X-Mod can change due to a single claim.

Now it’s considering additional regulations to further improve the way X-Mods are calculated. The goal is to ensure that X-Mods better reflect the true claims history and costs of employers, and to eliminate the X-Mod spike for smaller employers who experience just one claim.

The issue of one claim sending an X-Mod spiraling has been a thorn in the side of many smaller employers. Sometimes the insurer may increase reserves for a claim because it expects costs to mount quickly. When those reserves are placed on a claim, it will be reflected in your loss reports when it comes to calculating your X-Mod.

Currently, the Rating Bureau uses a single split point for dividing primary and excess losses. The new system it’s mulling would use 90 or more different thresholds based on the size of any given employer.

The goal of this possible change is to make California’s current X-Mod system a better predictor of an employer’s likelihood to suffer a compensable workplace injury.

As currently drafted, the multiple split point formula would essentially use just an employer’s actual primary losses, plus their expected excess losses divided by their expected losses, to determine their X-Mod.

Primary losses are the costs that the insurer would expect to pay for a given workplace injury, and excess losses are those that go above and beyond those initial primary losses. Excess losses are driven by the severity of the injury and the worker’s ability to recover from the injury and return to work.

This process is in its early stages and the proposed effective date is not until 2017, according to press reports.

Currently, the experience rating plan uses a single split point set at $7,000 for all employers, which critics say unfairly affects smaller risks and is not as responsive for larger employers.

Any claims incurred up to the split point value are included in an employer’s X-Mod calculation at full value, while the rating formula only considers a portion of the claims dollars over that amount.

The Rating Bureau has resisted raising the split point (last year it entertained a recommendation that it be raised to $9,000) because of the negative impact it would have on smaller employers, and has been exploring alternatives to the single split point system.