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Link to Lloyd's Newsletter
May 2009
In this issue
Liquor liability in Illinois – the Dram Shop Act
Focus on basics to weather economic storm, says Lloyd's chairman
Illinois Department of Insurance producer ID numbers
Climate change severe threat to US coastlines, says report
Feature article
Family Medical Leave Act – David Holmes provides an in-depth look
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Liquor liability in Illinois – the Dram Shop Act
By Trevor Gaddis, Donald Gaddis Company
It’s a busy night at Joe’s Tavern and Joe is scrambling to keep up with all the orders. Light beer here, whiskey shot over there, appletini... wait... apple-tini at Joe’s? "Get outta here," he thinks to himself. Anyway, Joe fails to notice that the patron ordering the whiskey shot just happens to be on his eighth one, meaning he is well on his way to complete inebriation. The patron knocks back the shot, throws his money on the bar and stumbles out to his car. A few minutes later, the worst happens – he runs a red light and crashes into another car, leaving himself and the other driver seriously injured.
Since Joe’s Tavern is located in Illinois, Joe can be held responsible for this accident.
Illinois allows victims of injury and/or damage resulting from the actions of an intoxicated individual to bring suit against those licensed purveyors who provided alcohol to the intoxicated person. A property owner that simply allows consumption on their licensed premises can also be drawn in on these claims. The victim must prove that the purveyor caused the intoxication and awards are limited to specific maximums (note that only a victim can sue/collect, not the intoxicated person or their family).
This is commonly known as the Dram Shop Act. The available limit is divided into three subcategories and the limits under the Act are adjusted annually in accordance with a Consumer Price Index Formula. The current limits are
- $71,686.18 for recovery for either loss of society or means of support (but not both). The term "loss of society" includes loss of love, affection and companionship
- $58,652.33 for recovery for bodily injury
- $58,652.33 for recovery for property damage
These award amounts are relatively low and seem to indicate that low limit policies would be adequate. However, one accident can give rise to multiple claims. In our Joe’s Tavern example, the intoxicated driver could have struck a vehicle with more occupants, or a third car could have been involved in the accident. The intoxicated driver also could have had a passenger who was injured. In all of those scenarios, the available awards would be multiplied by the number of injured parties. So even with the limit caps listed above, an accident involving multiple parties could cause a low limit policy to be used up quickly, leaving the insured to make up the difference.
The Lloyd’s solution
Obviously, the Dram Shop Act necessitates that all liquor establishments in Illinois have proper insurance coverage in place to address possible claims. Lloyd’s has been writing liquor liability in Illinois since the law’s inception in 1934 and remains one of the top carriers today.
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Focus on basics to weather economic storm, says Lloyd's Chairman
lloyds.com May 18, 2009
Lloyd’s Chairman Lord Levene visited Germany last week to speak with insurance and business leaders, as well as the media, on topics ranging from the threat posed by Swine flu to insurance strategies during the global downturn.
Bloomberg
While in Munich he spoke to Bloomberg about a global economic recovery, the outlook for the insurance industry, emerging risks—such as swine flu—and the strength of Lloyd’s.
Strategies for the downturn
In his speech at Munich University’s Chair of Insurance Services, entitled ‘Key challenges for the insurance and reinsurance sector in a difficult economic climate’, he analysed the insurance sector’s position relative to the economic crisis, and spoke about the risks posed by climate change, terrorism, political instability, and corporate liability.
“The insurance industry is in good shape, despite the shadow of recession, and Lloyd’s remains stable and secure,” he said but sounded a note of caution to be prepared for “more bad news before things get better”.
“Redundancies, cutbacks, insolvencies – this is hardly our golden age,” he said and outlined the priorities for the next few years: the industry must ‘get back to basics’ and get regulation right.
“The whole financial sector is not some house of cards destined to fall, and the insurance industry is relatively well placed to weather recession,” he reiterated, underlining that “insurance is an economic necessity, not a discretionary purchase.”
Read Lord Levene's speech
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Illinois Department of Insurance producer ID numbers
The Illinois Department of Insurance has begun the transition from using SSN numbers to identify licensed producers to the NPN (National Producer Number) which all producers have thru NIPR - the National Producer Registry.
Starting January 7, 2008 all new producers are issued the NPN and since October 1, 2008 all renewals will be issued using the NPN. However, the DOI will still request and producers will have to submit SSN's since all state licenses have to be cross-checked for delinquent child support and income taxes. The DOI estimates that the transition will take two years.
ALB uses the producer number to file continuing education credits for seminar attendees. All records are shredded once the filings have been confirmed.
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Family Medical Leave Act – the Final Rule
By David Holmes, Wilson Elser
The Family and Medical Leave Act (FMLA) has now been in existence for 16 years and it has often been a very difficult law for employers to follow because of its varying interpretations by the courts. To address some of these issues, the Department of Labor enacted the FMLA Final Rule, which went into effect January 16, 2009.
This article provides an overview of the FMLA and reviews some of the changes brought by the FMLA Final Rule. It also takes a closer look at whether these changes help clarify two issues that have been made more confusing by the courts: (1) what an employee must do to trigger FMLA leave and (2) what an employer must consider in determining whether an employee has a “serious health condition” entitling that employee to FMLA leave.
FMLA overview
The FMLA was signed into law by President Bill Clinton in 1993 in response to greater tension between the needs of families and corporate America. It provides a safeguard for employees in the event of serious illness - their own or an immediate family member’s - or when a child is born or adopted. The FMLA allows eligible workers up to 12 weeks of unpaid leave each year to deal with these challenging life events. As originally enacted, The FMLA allowed eligible employees to take unpaid leave for up to a total of 12 work weeks in any one year because of a birth of a child, because of the placement of a child with the employee for adoption or foster care, because the employee is needed to care for a family member with a serious health condition, or because the employee’s own serious health condition makes the employee unable to perform the functions of his or her job. 19 C.F.R. 825.100(a). An employee on FMLA leave is entitled to have health benefits maintained provided the employee continues to pay his or her share during the leave period. An employee returning to work after leave has the right to return to the same position or an equivalent position with equivalent pay and benefits. 29 C.F.R. 825.100(c).
A private employer is covered by FMLA if it employs 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or proceeding calendar year. 29 C.F.R. 825.104. To be entitled to FMLA leave, an employee must have been employed for 12 months and for at lease 1,250 hours of service during the 12 month period. 29 C.F.R. 825.110. An employee must give its employer notice that it needs to take leave, although in the case of certain illnesses an employee need not state specifically that he or she is seeking FMLA leave.
The FMLA allows an employer to require that a request for leave by an employee be supported by a certification from the employee’s healthcare provider. 29 U.S.C.A. § 2613(a). The employer may require, among other things, that the certification include “appropriate medical facts” regarding the condition. Id. § 2613(b)(3). If an employer doubts the validity of a certification, it may require the employee to obtain a second opinion at the employer’s expense. Id. §2613(c)(1).
The FMLA provides a private cause of action to an employee whose request for FMLA leave has been improperly denied. 29 U.S.C.A. § 2617(a). A prevailing employee may be awarded damages, liquidated damages, and equity relief such as reinstatement. Id. § 2617(a)(1). In addition, the court may award attorney fees and costs to a prevailing plaintiff. Id. § 2617(a)(3). With the threat of a private cause of action, employers face difficult and potentially expensive decisions when determining whether an employee is entitled to FMLA leave.
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The Final Rule
The Department of Labor issued its Final Rule on the FMLA in late 2008 to address the first ever amendments to the FMLA enacted in January 2008 and to update certain of its regulations. The Final Rule implements the amendment to the FMLA that provides for military family leave, affording eligible employees who are family members of covered military service members up to 26 workweeks of leave to care for a service member with a serious illness or injury incurred in the line of duty. Another amendment provides an opportunity for families of members of the National Guard or Reserves to take up to 12 weeks of leave for various “exigencies” including military events, childcare, financial and legal arrangements, counseling, rest and recuperation, and post-deployment activities.
Other aspects of the Final Rule include changes made in an attempt at clarifying rules that had been interpreted differently by the courts. One important clarification took issue with two court decisions that had held that an employee assigned to light duty work uses up his or her FMLA leave when on light duty. The Final Rule makes clear that light duty does not count against an employee’s right to up to 12 weeks of FMLA leave. The Final Rule also provides rules related to medical certifications to be submitted to employers and provides rules about who from the employer may be privy to this information. This rule takes into account the Health Insurance Portability and Accountability Act (HIPAA). The rule now provides that the employer’s representative contacting a health care provider must be a health care provider, human resource professional, a leave administrator, or a management official, but in no case may it be the employee’s direct supervisor. The new rule also provides that if an employer finds a medical certification to be deficient, it must specify in writing what is lacking and give the employee seven days to cure the deficiency.
Two other changes are discussed in more detail below.
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What is adequate employee notice?
The FMLA provides that an employee must where possible provide the employer with at least 30 days’ notice for planned medical treatment, but where treatment must begin in less than 30 days or the leave was unforeseeable, an employee must notify the employer as soon as practicable. 29 U.S.C. § 2612(e)(1). As soon as practicable “ordinarily would mean at least verbal notification to the employer within one or two business days of when the need of leave becomes known to the employee.” 29 C.F.R. § 825.302(b). The one or two business day notice provision had been interpreted to mean that employees could take up to two days after an absence to provide notice that it was seeking FMLA leave. This created problems for employers because employees were relying on this interpretation to avoid following the company’s normal procedures for calling in ahead of time if an employee was to miss a work shift. The Final Rule provides that an employee must still follow the employer’s usual and customary call in procedures for reporting an absence, absent an unusual circumstance. This is a welcome change to the FMLA notice procedure.
While this is a welcome change, the Final Rule does not appear to sufficiently address an issue that has caused employers significantly problems, and that is determining whether an employee is actually seeking FMLA leave or not. An issue that often arises is whether the employee has adequately communicated that he or she is seeking leave under the Act. An employee need not expressly assert rights under the FMLA or even mention the FMLA when requesting leave for the first time, but instead need only state that leave is needed. 29 C.F.R. 825.303(b). The regulation provides that an employee shall provide sufficient information for an employer to reasonably determine whether the FMLA may apply. According to one court, employers “should be able to figure out for themselves the legal rules governing leave, once they know that a serious medical condition or family situation is ongoing.” Collins v. NTN-Bower Corp., 272 F.3d 1006, 1008 (7th Cir. 2001).
An issue that often arises is whether an employee who did not specifically assert that she was taking FMLA leave gave adequate notice. The rule now provides that calling in sick without providing more information will not be considered sufficient notice to trigger an employer’s obligations under FMLA. 29 C.F.R. 825.303(b). This would appear to address an argument raised in one case by an employee who argued that calling in stating that she was sick was sufficient notice. The employee, according to her physician, suffered from depression and was incapacitated between 10 to 20 percent of the time. The Seventh Circuit Court of Appeals held that an employee who called in sick for two days did not give her employer adequate notice that she was seeking leave under the FMLA. This did not, the court held, suggest to the employer that the medical condition might be serious or that the FMLA otherwise would be applicable. Collins v. NTN-Bower Corp., 272 F.3d 1006 (7th Cir. 2001). If the facts of this case were changed slightly, such that the employee had stated that she would be out sick because she was suffering from depression, or that she had previously advised her employer of her condition, then perhaps the court may have viewed this case differently. For instance, in Miller v. GB Sales & Service, Inc., 275 F. Supp.2d 823 (E.D. Mich. 2003), the court found that an employer’s awareness of an employee’s diabetes mellitus and depression was enough to trigger an obligation of the employer to inquire whether the employee was asserting FMLA leave. In this case, the employee had repeated absences from her conditions, and she called in repeatedly to let her employer know she would not be coming to work. At not time did she ever tell her employer that she was requesting leave under FMLA. The court ruled that because the employer had knowledge of the employee’s conditions that the burden shifted to the employer to inquire further to determine whether FMLA leave is being sought. Id. at 829.
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What is a serious health condition?
The Final Rule has attempted to add some clarity to the issue of whether an employee has a serious health condition that qualifies for FMLA leave. Determining whether an employee has a serious health condition that qualifies for leave is not always a simple matter for an employer. Employers must turn to the language of the FMLA, the regulations from the Department of Labor, and case law from the courts to determine whether an employee has a serious health condition.
The employer should first start with the FMLA statute itself. The FMLA provides that leave may be taken “because of a serious health condition that makes the employee unable to perform the functions of the position of such employee.” 29 U.S.C. 2612(a)(1)(D). A serious health condition is defined by the statute to mean “an illness, injury, impairment, or physical or mental condition that involves - (A) inpatient care in a hospital, hospice, or residential medical care facility; or (B) continuing treatment by a healthcare provider.” Id. 2611(11). “Continuing treatment by a healthcare provider” is not defined by the statute, but the Department of Labor regulation clarified this to mean, prior to the enactment of the Final Rule, that “continuing treatment by a healthcare provider” included three full calendar days of incapacity plus two visits to a healthcare provider. 29 C.F.R. 825.114(a)(2)(i).
The courts offered different interpretations of this rule, with one court holding that the two visits to a health care provider had to occur within the days of incapacity, see Jones v. Denver Public Schools, 427 F.3d 1315 (10th Cir. 2005), whereas another court held that the second treatment did not have to be during the time that the employee was incapacitated, see Summerville v. ESCO Co., Ltd. P/ship, 52 F.Supp.2d 804 (W.D. Mich. 1999).
The Final Rule has added some needed clarity to this issue. The regulation now provides that the two visits must occur within 30 days of the beginning of the period of incapacity and the first visit to the health care provider must take place within seven days of the first days of incapacity. 29 C.F.R. 825.115. While adding clarity, the Final Rule also broadens the scope of who would qualify for a serious health condition that would entitle an employee to leave.
The Final Rule provides some welcome clarification to interpretations of the FMLA, but it is likely that emerging issues will give rise to continued differing interpretations by the courts that will pose continued challenges to employers. Employers must endeavor to keep up with all of the latest changes and interpretations and should consider retaining counsel if ever in doubt of how to proceed under the FMLA.
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Climate change severe threat to US coastlines, says report
lloyds.com May 15, 2009
With Americans bracing themselves for what is forecast to be another active hurricane season this year, a coalition of insurers, academics, investment managers and conservation groups have backed proposals that could slash the cost of storms and rising sea levels along US coastlines.
The United States is one of the countries most exposed to the effects of climate change, which is set to bring more frequent and more intense storms and will see sea levels rise.
Some scientists and insurers argue that the effects of climate change are already being felt, citing as evidence the fact that 2008 was one of the most expensive years for disasters on record for insurers.
US coastlines under threat, says report
Over half the US population lives along the Gulf and Atlantic coastlines and almost half the nation’s GDP—around $4.5 trillion—is generated there.
But according to Resilient Coasts Blueprint, a report directed by The Heinz Center and Ceres, the United States has not taken steps to counter the threat posed to its coastline.
“These are areas we cannot afford to lose. Yet all the signs are that they will be severely threatened,” Sharlene Leurig, Manager of the Insurance Program at Ceres, says.
Measures to protect against the growing risk of global warming are simple but cost effective, says the Blueprint.
It cites the example of 500 corporate clients of insurer FM Global, who had 85% less damage from Hurricane Katrina than other properties in similar areas, because they had taken measures to protect their sites against severe storms.
Adaptation is critical
If new properties were built to stronger standards and existing houses retro-fitted to withstand severe hurricanes, then the cost of major storms could be slashed. By doing so, homeowners in Florida could cut losses from a big hurricane by 61%, or about $51 billion.
If these kinds of measures had been taken more widely then the bill from Katrina could have been cut from $41 billion to just over $16 billion, says the report.
The Blueprint says that every dollar spent to minimise the impact of natural disasters such as earthquakes, floods, and storms, can yield more than four dollars of benefit.
Efforts should be made to protect the wetlands, which provide a vital buffer against storm surge and flooding, but which are being eaten away by development and the effects of climate change.
Fine tune risk models
Work should be done to fine-tune risk models so planners can improve their decision-making and understand what the local impact will be of climate change.
They should also consider the impact of natural hazards when making planning decisions.
The question of further development of these coastlines is a controversial issue. “The fact that insurers are pulling out of coastal areas is a sign that what we’re doing along the coastlines is unsustainable,” Leurig says. “If policymakers were better informed about the risks they might be more reluctant to move into those areas.”
Ensuring market is critical
The coalition, a unique grouping comprising 23 organisations including Arup, F&C Investments, National Wildlife Federation, Wharton Risk Center and Lloyd’s among others, said it is critical to ensure a private insurance market.
“An empowered and stable private insurance market will help ensure that unaffected taxpayers will not bear the burden of catastrophic loss. It will also provide the right price signals and incentives for risk mitigation,” says the Blueprint.
With around $9 trillion of insured coastal property at risk, asset managers and banks should understand how exposed to climate change their investments are and work that into their investing and lending decisions, the Blueprint concludes.
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Views expressed in this newsletter do not necessarily reflect the opinion of Lloyd's. While every effort has been made to ensure that the information given is accurate, no responsibility (legal or otherwise) is accepted by Lloyd's for any errors or omissions.
Copyright © 2009 Association of Lloyd's Brokers |
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