Category: Professional Liability

New AI-specific insurance exclusions underscore risks associated with generative artificial intelligence

Anita Byer

Generative Artificial Intelligence (GAI) is a type of artificial intelligence that creates new content (text, images, audio, video) in response to basic user prompts. Many organizations are now exploring ways to leverage this transformative technology to advance operational and business objectives. But despite its seemingly limitless upside, the operational use of GAI introduces new, potentially significant liability exposures. The consequences of failing to control organizational risks associated with GAI are underscored by the fact that insurance companies are beginning to include AI-specific coverage exclusions in their commercial general liability policies.

The operational use of GAI can expand existing and generate new liability exposures. According to Verisk, a data and analytics company, these exposures may include the following.

Copyright infringement and invasion of privacy. If the datasets used to train a GAI model contain copyrighted or sensitive information (many do), such information may end up in the new content generated by GAI. This could result in claims of copyright infringement and privacy invasions.

Professional errors & omissions. AI models are increasingly being trained to dispense expert-level professional advice, but their output continues to include mistakes or “hallucinations.” If the professional guidance provided by an AI chatbot is flawed or incorrect, the organization may be exposed to claims of professional malpractice.

Products liability. GAI is increasingly being used in design and product manufacturing applications. With its current limitations, GAI may create or produce defective or poorly designed products capable of causing serious damage or injury to those who use or are otherwise exposed to them.

Bias and discrimination. AI tools have been known to recreate patterns of bias and discrimination that are present in their training datasets. GAI output that includes biased or discriminatory components may result in claims of unlawful discrimination.

Compliance and regulatory risks. GAI is increasingly being used to assist with critical compliance and regulatory functions. But as we know, GAI’s output can be flawed or incorrect. If, for example, a public company submits a false or misleading document created by GAI to the SEC, the lack of due diligence could expose the organization to D&O and professional liability claims.

Importantly, the Insurance Services Office (ISO), an advisory organization that provides standard policy forms and rating information to insurers, recently introduced Generative Artificial Intelligence exclusions for commercial general liability policies. Under these exclusions, claims for bodily injury, property damage, and personal advertising injury that arise out of GAI are not covered by insurance.

These exclusions may present a big problem for many organizations because they apply broadly to all claims arising out of “generative artificial intelligence,” which is defined as a machine-based learning system or model that is trained on data with the ability to create content or responses, including but not limited to text, images, audio, video or code. Many anticipate that general liability policies will increasingly include AI-specific coverage exclusions going forward. Organizations using generative artificial intelligence operationally must ensure that their insurance covers the new and expanded liability exposures created by GAI.

Florida’s Minimum Wage Increasing to $10 Per Hour on September 30

By Anita Byer, Setnor Byer Insurance & Risk

The largest minimum wage increase in Florida history is just weeks away! On September 30th, Florida’s minimum wage will increase to $10 per hour. That’s $1.35 more per hour than the current minimum wage and $1.44 more than last year’s minimum wage. A quick peak at the calendar confirms that employers have plenty of very little time left to prepare for this historic wage increase.

The upcoming increase is required by the $15 Minimum Wage Ballot Initiative (Amendment 2), which was approved by Florida voters in November 2020. Amendment 2 increases Florida’s minimum wage incrementally over a period of years until it reaches $15 per hour. The first (and largest) increase will occur September 30, 2021. It will then increase annually on September 30th per the following schedule.

2021                       $10.00

2022                       $11.00

2023                       $12.00

2024                       $13.00

2025                       $14.00

2026                       $15.00

2027                       Annual adjustments for inflation resume.

As of September 30, 2021, a minimum wage employee working full-time will need to be paid an additional $54 per week. Depending on the workforce make-up, the resulting increase in payroll expense may be minimal for some and substantial for others. Nevertheless, all employers must plan and prepare beforehand to avoid unintentional, unnecessary and costly violations. Employers should also look beyond this year’s record-breaking increase when budgeting for payroll. There will be five more increases under Amendment 2, each of which is large enough to tie the current record for largest single increase in Florida history.

To reduce the likelihood of costly mistakes, employers should provide wage and hour training to managers and supervisors. Employers should also carry Employment Practices Liability Insurance with limited coverage for wage and hour claims. Contact us to learn more about protecting your business with Employment Practices Liability Insurance.

Business Insurance 101: What is a BOP?

By Anita Byer, Setnor Byer Insurance & Risk

A Business Owner’s Policy (BOP) is a pre-packaged bundle of insurance coverages that are available to eligible small- and medium-sized businesses. BOPs are designed to provide a number of essential insurance coverages in a convenient and cost-effective manner. BOPs typically provide:

  • property insurance to cover damage to buildings and contents;
  • business income (business interruption) insurance to cover the loss of income resulting from a covered loss that disrupts business operations; and
  • liability insurance to protect against liability claims for bodily injury and property damage occurring on a business’s premises or arising out of its operations.

Depending on the insurance company, additional coverages may be included in a BOP, or added for an additional premium, such as:

BOP eligibility requirements can vary significantly among insurance companies, but they are typically reserved for small- and medium-sized businesses, which generally have fewer than 100 employees and annual revenues of less than $5 million. BOPs may also not be available to businesses operating in specific industries or those with highly specialized or high-risk operations.

It’s worth noting that BOPs may not be the best option for some businesses, regardless of eligibility. Some businesses, for example, may need higher limits or broader coverages than those available in a BOP. There are also a number of coverages that BOPs do not provide, such as workers compensation, commercial automobile and professional liability insurance. Even with a BOP, additional insurance policies may still be necessary.

Since BOPs are customized insurance products, coverage options (limits, exclusions, etc.) can vary significantly among insurers. This can make it difficult to understand and compare various BOP options. Businesses should work with an experienced insurance agent. Contact us to learn how a BOP can provide an effective and affordable insurance solution for your business.

This Is What Businesses Need To Know About Florida’s COVID-19 Liability Protection Law

Florida’s COVID-19 liability protection law should help businesses avoid baseless coronavirus-related liability claims. After all, COVID-19 taught us that it’s virtually impossible to avoid a highly-contagious virus in the midst of a global pandemic. Virus-free zones are an illusion. The risk of exposure and infection can be reduced with preventative measures, but not eliminated. Nevertheless, a growing number of businesses are being sued by plaintiffs seeking compensation for personal injuries resulting from alleged exposure to COVID-19. In response, the Florida Legislature enacted a law that provides business establishments heightened legal protections against COVID-related liability.

The law seeks to deter unfounded claims against individuals and business while allowing meritorious cases to proceed. It does this by imposing heightened proof and pleading standards on plaintiffs filing COVID-19-related claims. The statute broadly defines a “COVID-19-related claim” to include civil liability claims against a person or business entity for damages, injury or death that arise from or are related to COVID-19, regardless of how the claim is denominated or presented. (A separate statute generally applies to COVID-19 claims against health care providers.)

Under this new law, COVID-19-related claims must be commenced within one year after the cause of action accrues. If the cause of action accrued prior to March 29, 2021, the plaintiff’s deadline to file a complaint is March 29, 2022. The complaint must be pled with particularity. Specific facts and details, as opposed to general statements and conclusory allegations, are required. The plaintiff must also submit a Florida-licensed physician’s affidavit attesting, within a reasonable degree of medical certainty, that the plaintiff’s COVID-19-related damages, injury or death occurred as a result of the defendant’s acts or omissions. If the plaintiff fails to comply with either of these requirements, the case will be dismissed without prejudice, which means they will be given another opportunity to comply.

Once these requirements are satisfied, the court will determine whether the defendant was making a good faith effort to substantially comply with any authoritative or controlling government-issued health standards or guidance at the time of plaintiff’s alleged exposure to COVID-19. This would include guidance issued by the CDC, the Florida Department of Health, counties, cities, etc. If the court finds a good faith effort, the defendant will not be liable for any act or omission associated with the COVID-19-related claim; otherwise, the plaintiff’s case will be allowed to proceed. But to win, the plaintiff must prove by clear and convincing evidence that the defendant’s conduct was grossly negligent, meaning that the likelihood of injury was known by the defendant to be imminent. Otherwise, the plaintiff will lose and the defendant will not be liable.

The broadest protections afforded by this law are reserved for those making a good faith effort to substantially comply with authoritative COVID-19 guidance. This should encourage businesses to implement reasonable and recommended preventative measures to reduce the risk of exposure and infection. Remember, businesses are not immune from COVID-19-related claims. If a plaintiff can satisfy the statute’s heightened pleading requirement (particularity), elevated burden of proof (clear and convincing evidence) and stricter standard or care (gross negligence), your business may be held liable.

Please contact us for more information about risk management measures and insurance to protect your business against COVID-19-related liability claims.

Business Insurance 101: Certificates of Insurance

Certificates of Insurance make the business world go round and round. General contractors demand them from subcontractors. Commercial lenders request them from borrowers. Landlords require them from tenants. Virtually every business will request or will be asked to provide a Certificate of Insurance at one time or another, which raises an important question. What’s a Certificate of Insurance?

Certificates of Insurance (COIs) are used to verify insurance coverage. They are issued by insurance companies and agents to provide proof of insurance to the person or entity needing verification—the certificate holder. COIs provide specific information about existing insurance coverage, such as:

It’s important to know what COIs are, but so is knowing what they are not. Certificates of Insurance:

  • Are NOT insurance policies.
  • Do NOT provide certificate holders with any rights under the insured’s policy.
  • Do NOT extend or modify the coverage provided by the insured’s policies.
  • Do NOT create a contract between the insurance company and the certificate holder.

COIs are provided for informational purposes only. They offer a superficial snapshot of insurance coverage that is in place at the time it is created. Nothing more. In fact, a COI issued today may be out of date tomorrow. The only way to truly evaluate insurance coverage is by reading the policy itself. Nevertheless, as long as you understand their limitations, Certificates of Insurance provide a quick, easy and efficient way to request or provide proof of insurance coverage.

Please contact us to learn how Setnor Byer Insurance & Risk can help manage your Certificates of Insurance.

COVID-19 Update: FFCRA’s Mandatory Paid Leave Provisions Expiring December 31st; Tax Credits Extended Until March 31, 2021

Setnor Byer Insurance & Risk

On December 27, 2020, the second major coronavirus stimulus package was signed into law. The COVID-Related Tax Relief Act of 2020 includes a number of relief measures to address the health and economic impacts of the COVID-19 pandemic. But, what about the Families First Coronavirus Response Act’s mandatory paid leave requirements? Have they been extended or will they expire on the last day of the year? Congress, it seems, agreed to compromise. Although the final bill did not extend the FFCRA’s mandatory paid leave requirements, it did extend the payroll tax credit for employers opting to voluntarily provide paid COVID-19 leave until March 31, 2021.

The FFCRA’s two paid sick leave laws—the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act–generally require employers with fewer than 500 employees to provide paid leave to employees who are unable to work for qualifying reasons related to COVID-19. Eligible employees may receive up to 80 hours of paid sick leave and up to 10 weeks of paid family and medical leave. To offset the cost of providing paid COVID-19 leave, the FFCRA includes a payroll tax credit equal to 100 percent of the qualifying wages paid by employers to eligible employees.

As of January 1, 2021, the FFCRA’s paid leave provisions will be voluntary, not mandatory. Employers, however, have been given an incentive in the form of dollar-for-dollar payroll tax credits to continue providing paid leave pursuant to the FFCRA until March 31, 2021.

Employers considering this option must note that the extended tax credits are only available for paid leave that meets all the requirements of the FFCRA. Employers, for example, cannot claim tax credits for paid leave that is given for reasons other than those allowed under the FFCRA or that exceeds the limits set forth in the FFCRA (amount, duration, etc.). Additionally, the final bill does not refresh or replenish the amount of paid leave an employee can take under the FFCRA, so employers cannot claim tax credits for wages paid to an employee in excess of 80 hours or 10 weeks.

It’s unclear whether interpretive regulations will be issued in the near future. Nevertheless, employers must now decide whether to continue providing paid COVID-19 leave under the FFCRA beyond December 31, 2020. As always, employers should proceed cautiously to avoid harmful and costly errors. Employers should also have Employment Practices Liability Insurance to protect against various employment-related claims. Please contact us to learn more about EPLI coverage.

Can Employers Make the COVID-19 Vaccine Mandatory for Employees Under the Americans with Disabilities Act?

Setnor Byer Insurance & Risk

The COVID-19 vaccines provide a glimmer of hope as new cases surge nationwide. It also raises some interesting questions for employers. How, for example, will the vaccine’s increasing availability be viewed in the context of the Americans with Disabilities Act (ADA)? Can employees be required to provide proof of vaccination? Can employers make COVID-19 vaccines mandatory for employees? Fortunately, the Equal Employment Opportunity Commission issued updated guidance to help employers answer some COVID-19 vaccine-related questions that are likely to arise in the near future.

Is asking or requiring an employee to show proof of COVID-19 vaccination a disability-related inquiry under the ADA? According to the EEOC, no. Simply requesting proof of vaccination is not likely to elicit disability-related information, so it’s not a disability-related inquiry. However, the EEOC cautions that subsequent questions (Why didn’t you get vaccinated?) may elicit information about a disability and would need to be job-related and consistent with business necessity. The EEOC recommends warning employees not to provide any medical information as part of the proof in order to avoid implicating the ADA.

How should employers respond to employees who are unable to get vaccinated because of a disability? The ADA allows employers to protect against direct threats to workplace health or safety. However, if a COVID-19 vaccination requirement screens out or tends to screen out individuals with disabilities, the employer must show that an unvaccinated employee would pose a direct threat due to a significant risk of substantial harm that cannot be eliminated or reduced to an acceptable level by reasonable accommodation. Managers and supervisors responsible for communicating an employer’s COVID-19 vaccination requirement should know how to recognize and respond to accommodation requests. The EEOC urges employers and employees to engage in a flexible, interactive process to identify accommodations that do not constitute an undue hardship (significant difficulty or expense).

Though employers may rely on CDC recommendations when evaluating reasonable accommodations, the EEOC concedes that an accommodation may not be possible in some situations. If that’s the case, the employer may exclude the employee from physically entering the workplace, but the employee should not be automatically terminated. According to the EEOC, employers must first determine whether the employee is protected under any other provision of the ADA or other any other applicable federal, state or local law before taking any adverse action.

Determining if a direct threat exists and whether it can be eliminated or reduced with a reasonable accommodation generally requires an individualized assessment. Some situations may be black or white, but most will be different shades of gray. Employers may need to consult with counsel throughout the process to avoid unintentional, yet costly mistakes.

Please contact us for additional information about protecting your business during the COVID-19 pandemic.

Florida’s Workers’ Compensation Insurance Rates Expected to Decrease in 2021

Florida employers may see lower workers’ compensation insurance premiums in 2021. The National Council on Compensation Insurance is proposing a statewide average rate decrease of 5.7 percent for 2021. NCCI is a licensed rating organization authorized to submit workers’ compensation rate filings on behalf of insurance companies in Florida. NCCI’s proposed rate decrease, which must be approved by Florida’s Office of Insurance Regulation, would apply to new and renewal policies effective January 1, 2021.

Why are rates going down? According to NCCI, the workers compensation system is experiencing unprecedented results nationwide. The frequency of claims continues to decrease due to technology, safer workplaces and improved risk management. NCCI also credits the combination of underwriting discipline, moderating severity, declining frequency and adequate reserves for controlling loss ratios.

It’s worth noting that the data used to calculate the proposed rate decrease does not include claims from coronavirus disease 2019 (COVID-19). NCCI is gathering and reviewing data, but it’s too soon to know how COVID-19 may directly or indirectly impact claims frequency, severity or duration. While it’s possible that COVID-19 could result in significant claims and deteriorating loss ratios, NCCI notes that the pandemic’s overall impact on system costs may be small. An increase in compensable claims for frontline workers, for example, may be offset by a decrease in workers’ compensation claims due to the increased number of employees working remotely due to the pandemic. Again, it’s too soon to know for sure.

Florida’s Office of Insurance Regulation is currently reviewing NCCI’s rate filing to ensure the proposed rates are not excessive, inadequate or unfairly discriminatory. The OIR is also evaluating potential effects on the insurance marketplace and on employers required by law to carry workers’ compensation insurance. Once the proposed voluntary rate level change is determined, NCCI separately determines rates for each workers compensation job classification (class code).

Please contact us if you have any questions about employee classification codes or want to discuss ways to lower your workers’ compensation insurance premiums.

Experts Are Predicting a Surge in Employment-Related COVID-19 Lawsuits

Employers have endured a parade of challenges since the coronavirus disease 2019 (COVID-19) pandemic began. The parade, it seems, is far from over.  According to a recent white paper co-sponsored by Liberty Mutual Insurance Company, there is early evidence that employment-related COVID-19 claims are on the rise. The white paper identifies various types of COVID-19-related employment claims that employers can expect to see in the near future.

Denial of Paid Leave. The Families First Coronavirus Response Act’s new paid sick leave and expanded family and medical leave requirements are expected to be the source of many COVID-19 cases. Claims may be based on various aspects of the law, including the denial of leave, the calculation of leave, requests for substantiating documentation and retaliation.

Discrimination. COVID-19-related characteristics have become yet another way to separate us from them (COVID positive or negative, real or hoax, facemask or freedom). The polarization of COVID-19 provides fertile ground for claims of discrimination.

Breach of Employment Contracts. Extreme measures are being taken to survive COVID-19’s unprecedented impact on the global economy, including layoffs, furloughs, reduced hours and reduced pay. Employers can expect breach of contract claims if any such remedial measures violate the terms of any employment agreements.

WARN Act. The federal Worker Adjustment and Retraining Notification Act generally requires employers with 100 or more full-time employees (not counting those on the job for fewer than six months) to provide at least 60 calendar days advance written notice of worksite closings or mass layoffs affecting 50 or more employees. COVID-19’s sudden and devastating impact made this impossible in many cases. Lawsuits are nevertheless expected. They will likely focus on the Act’s “unforeseeable business circumstances” exception to the 60-day notice requirements.

Wage & Hour Violations. Employers may see wage and hour claims from employees working remotely during the pandemic. Claims are likely to include allegations that employers failed to properly monitor, track or pay remote employees for all hours worked and that employers failed to reimburse employees for work-related expenses incurred while working remotely.

These are but a few examples of COVID-19-related claims that employers can expect to see. To reduce the likelihood of claims, employers should proceed cautiously when presented with any COVID-19-related matter. This may include seeking counsel from a licensed professional. Please contact us for additional information about protecting your business during the COVID-19 pandemic.

COVID-19 Paid Leave: When Does the Small Business Exemption Apply?

The Families First Coronavirus Response Act (FFCRA) requires paid sick leave and expanded family and medical leave for employees who miss work for specific reasons related to coronavirus disease 2019 (COVID-19). These requirements generally apply to private employers with fewer than 500 employees, but there is an exemption for employers with fewer than 50 employees. As you will see, this exemption is narrow and limited to very specific circumstances.

An employer with fewer than 50 employees is exempt from the FFCRA’s mandated paid sick leave or expanded family and medical leave requirements ONLY IF:

If both conditions are satisfied, the employer may claim the exemption for the requested leave, but ONLY IF an authorized officer of the business has determined that:

1. The requested leave would cause the business’s expenses and financial obligations to exceed its business revenues and would cause the small business to cease operating at a minimal capacity;

2. The absence of the employee requesting such leave would entail a substantial risk to the financial health or operational capabilities of the business because of employee’s specialized skills, knowledge of the business or responsibilities; OR

3. There are not sufficient workers who are able, willing and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee who is requesting such leave, and such labor or services are needed for the small business to operate at a minimal capacity.

To elect the exemption, the employer must document the fact that the required determination has been properly made. This documentation must be retained in the employer’s files and should not be sent to the Department of Labor. Employers have relatively broad discretion to determine whether providing the required paid leave would jeopardize the viability of their business as a going concern. However, the Department of Labor encourages employers and employees to collaborate to reach the best solution for maintaining the business and ensuring employee safety.

To avoid costly violations of the FFCRA, employers should proceed cautiously when interpreting and applying the law’s exemptions. Employers should also consider Employment Practices Liability Insurance to protect against various employment-related claims. Please contact us to learn more about EPLI coverage.