Rising Tort Costs May Mean Your Business is at Risk
According to a number of major insurance carriers and other experts, tort costs – those costs associated with defending and paying liability claims – are on the rise.
Here are just a few of the latest concerns for business owners.
- The United States Liability Insurance Group (USLI) states the average cost to defend an employment claim is $150,000, with an average jury award of $250,000.
- Approximately 75 percent of all corporate litigation is employment related, according to the USLI.
- Jury Verdict Research reports that the average jury verdict for an employment lawsuit in 2010 was $317,032.
- The cost to defend a class-action suit can range from $5 million to $100 million, according to Marsh USA, one of the world’s largest insurance brokerages.
- According to a 2010 study by the US Chamber of Commerce, businesses pay 33 percent of tort costs out of pocket. No insurance coverage will reimburse you for staff time lost in administering a claim or a lawsuit, or for a product line that you don’t bring to market for fear of litigation.
- Claims alleging negligence in maintaining buildings and parking lots, plus failure to provide adequate security, are on the rise.
- Product liability cases also continue to increase.
No longer is purchasing liability coverage a one-size-fits-all endeavor. To find the product that’s right for you, contact your advisor, who has years of experience in helping businesses adjust to changing environments, such as rising tort costs.
Hotels: Your Office Away From the Office
Hotel lobbies, with comfy seats, cozy nooks and free Wi-Fi, are great places for business travelers to catch up on work, chat with clients, or hold impromptu meetings. Lobbies have effectively become business homes-away-from-home and, as a result, hotels have revamped their lobby areas with computer-friendly tables and side rooms designed for business gatherings.
Now, some hotels are going a step further, creating designated work and meeting spaces that can be reserved by the hour. By booking in advance, business guests can be assured that their space is available. And, in addition to comfort and convenience, spaces also offer complete privacy for confidential discussions.
Reservations may be made up to 48 hours in advance, and the cost can range from free (for a lobby table or alcove) to $50 an hour or $200 a half day (for an enclosed space with all the tech comforts of the office.) Fees are considerably less than typical meeting room rentals, but the hotels make up for it when business travelers patronize hotel restaurants, cafes and bars before, during, and after work.
LiquidSpace, which has carved out a niche offering short-term work spaces to business people through online reservations, notes that hotel space represents some 10 percent of its inventory; and the category is growing.
Hotels that offer the service are located primarily in large urban centers. But that said, many are endearing themselves to the locals by starting to offer area business people the opportunity to conduct business or catch up on emails in a nearby office-away-from-the-office.
HOT BIZ TRENDS
Policies Needed When Kids Come to the Workplace
There’s a new wrinkle around that North American institution, “take-your-child-to-work-day”. Many companies are concerned because employees are now bringing their children to work all year round. And as a result, there’s a need for corporate guidelines around kids at work.
Although parents don’t have a legal right to bring their children into the workplace against their employers’ wishes, many organizations are making accommodations for parents as part of their efforts to retain quality employees.
Hundreds of large companies have formal policies about children at work. Now, small businesses are pondering similar standards. Business owners are looking at creating policies that will cover children of all ages who are spending time in their parents’ workplaces.
Policies should cover eventualities such as sick nannies and school closures, and include establishing comfortable areas where mothers can breastfeed and cuddle babies, and change and dispose of diapers.
Liability issues arise with older children who are more mobile. Some companies are designating restricted areas where confidential information is present, and manufacturing facilities and laboratories concerned about physical safety typically facilitate daycare with either onsite service or affiliation with offsite operators.
Flexible schedules and subsidized daycare costs are the norm for many companies. For parents with school-age children, employers are also considering shorter workweeks during the summer instead of consecutive vacation days.
Of course, many of these ideas may not be right – or needed – in small businesses. But as larger organizations have found, a happy employee is a productive employee; establishing some guidelines may benefit both employer and employee.
Contractor or Employee? The Difference is Critical
In what has been called “The New Agent Economy,” more and more employers are opting to use contractors – or “agents” – to outsource any number of tasks that formerly were performed by employees.
For employers, this can be a real money-saver: By using outsourced labor, companies pay less payroll tax, unemployment insurance, and workers’ compensation premiums. However, in this era of increased regulatory scrutiny, it is critical that you correctly categorize your independent contractors to avoid a long list of potential problems.
Problems relating to on-the-job injuries
What many employers fail to realize is that a contractor who is hurt while working on their behalf can make a negligence claim. While it’s easy to assume an independent contractor does not fall under workers’ compensation rules, it may not be so.
It’s important that employers recognize the real costs of losing the protective shield that workers’ comp provides to employers against such lawsuits.
To start defining your employer-employee relationship, one great place to start is with the IRS rules established to classify contractors.
Note, however, that you cannot rely solely on the IRS rules to shield you from a workers’ compensation claim filed by a contractor.
State industrial commissions have been liberal in determining whether a contractor is an employee or not when that worker is injured.
Additionally, the federal government and many states are cracking down on companies’ use of the independent contractor status.
Guidelines to determine status
Here are some guidelines to use when determining the status of a worker. In general, the more “yes” answers, the more likely it is that your worker is an independent contractor.
- Is your worker employed by another company, or his or her own business entity?
- Does the worker generally set his or her own hours and supply his or her own tools to complete the job?
- Is the worker licensed or has he or she devoted significant time and expense to learning the trade?
- Does the worker advertise or offer his or her services to other companies, as well as to your organization?
- If the worker makes mistakes, is he or she is responsible for fixing the problem or paying for any damages resulting from the problem?
- Do you pay the worker on commission or on a per-job basis?
- Does the worker make or lose money from the work he or she does for your company?
Whether to classify employees as contractors is not always an easy decision.
In most states, if contractors do not have their own coverage, anyone who uses their services can be charged for workers’ compensation exposure on their business policy if the carrier discovers the contractor payment; calling someone a contractor may prove wrong on audit and create problems in other areas.
If you determine you have workers who are independent contractors, ask them to furnish their current certificate of insurance so that you are not charged additional premiums at audit.
Taking the time initially to correctly classify your “agents” will save you money and heartache later.