Tag: Business Strategies

Getting Rid of Consumer Report Information with the Disposal Rule

Businesses commonly use consumer reports when deciding whether to make a job offer or extend a line of credit. In the wrong hands, consumer reports may also be used to commit fraud and identity theft. This is why the Federal Trade Commission (FTC) enacted the Disposal Rule.

The authority for the Disposal Rule comes from the Fair and Accurate Credit Transactions Act (FACTA), which requires proper disposal methods by those who use consumer information from consumer reports for business purposes. As required by FACTA, the FTC’s Disposal Rule requires the use of reasonable disposal measures to protect against unauthorized access to or use of consumer information. Individuals and businesses of any size that use consumer reports for business purposes must comply with this rule

The Disposal Rule applies to consumer reports or information that comes from consumer reports. Under the Fair Credit Reporting Act, consumer reports include information obtained from a consumer reporting company that is used or expected to be used for various reasons, such as establishing a consumer’s eligibility for credit, employment or insurance. Credit reports and credit scores are consumer reports. Reports with information relating to employment, check writing history, insurance claims, residential or tenant history and medical history are also consumer reports.

The Disposal Rule, which simply requires reasonable disposal measures to prevent unauthorized access to or use of consumer information, is designed to be flexible. The rule allows organizations and individuals to determine what measures are reasonable by considering the sensitivity of the information, the costs and benefits of different disposal methods and changes in technology.

Under the rule, reasonable measures may include:

  • burning, pulverizing or shredding of papers containing consumer information so that the information cannot practicably be read or reconstructed.
  • destroying or erasing electronic media containing consumer information so that the information cannot practicably be read or reconstructed.
  • after due diligence, hiring a third party to properly dispose the consumer information. Due diligence could include reviewing an independent audit of the disposal company’s operations and/or its compliance with this rule, checking references, requiring certification by a recognized trade association or taking other appropriate measures to determine the competency and integrity of the disposal company.

According to the FTC, these examples are illustrative only and are not exclusive or exhaustive methods for complying with the Disposal Rule.

The Disposal Rule is but one aspect of protecting against a data security breach. Organizational protective measures should cover everything from the wireless network to the copy machine, and should also include insurance.

Various cyber liability products are available to protect against privacy injuries, such as identity theft, and to cover the cost of complying with various data breach notice laws. Given their complexity, an experienced insurance agent should be consulted to ensure that adequate coverage is obtained.

If you would like to learn more about insuring against data security breaches, contact us.

If you would like to learn more about preventing data security breaches, take our online course Information Risk Management: Strategies for Preventing and Mitigating Information Security Breaches.

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IRS Modifies “Use-or-Lose” Rule for Flexible Spending Accounts (FSAs)

On October 31, 2013, the Internal Revenue Service (IRS) modified the longstanding cafeteria plan “use-or-lose” rule for health Flexible Spending Accounts/Arrangements (FSAs). Under this rule, unused FSA account balances are forfeited at the end of the plan year. Now, up to $500 of unused money may be carried over to the next plan year.

A cafeteria plan FSA, which is offered with other employer-established benefits, reimburses employees for qualified medical expenses. FSAs are usually funded by employees through voluntary salary reductions of up to $2,500 per year, though employers may also contribute. FSA contributions are not included in an employee’s income and reimbursements for qualified medical expenses are not taxed.

For nearly 30 years, FSAs have been subject to the “use-or-lose” rule. However, last year the IRS asked whether the rule should be modified to provide greater flexibility. The overwhelming response was yes. The reasons for increased flexibility include:

  • Difficulties in predicting future medical expenditures
  • Minimizing incentives for unnecessary spending to avoid forfeiture
  • The possibility that lower paid employees are reluctant to participate in FSAs because even modest forfeitures can be significant
  • Easing and simplifying the administration of FSAs

Under the new rule for cafeteria plan FSAs, employers may allow employees to carryover up to $500 of unused FSA money to the next plan year. Any amounts carried over may be used to pay or reimburse medical expenses incurred during that entire plan year. Employers have the option, not the obligation, to let employees carryover unused FSA money. And, since $500 is the maximum amount that can be carried over, employers may choose a lower amount.

Currently, cafeteria plans are allowed to have a “grace period” of up to two months and 15 days after the plan year during which participants may use remaining FSA money from the previous plan year to pay expenses incurred during the grace period. Since this is a popular feature among many plans, it is important to note that plans may provide employees with a carryover option OR a grace period. A health FSA cannot have both.

Employers wishing to utilize the new carryover option must amend their cafeteria plan. The amendment must be adopted on or before the last day of the plan year and may, in some cases, be effective retroactively to the first day of that plan year. Plans must also be amended to eliminate any grace period by no later than the end of that plan year, though the IRS notes that this may be subject to “non-code legal constraints.”

Given the complexity of providing and managing cafeteria plans, as well as the liability for getting it wrong, employers should consult with appropriate professionals to make sure their plans meet their minimum needs and provide maximum benefits.

If you have any questions or would like to speak with one of our Risk Management Professionals, please contact us.

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Data Security Breaches Can Happen to You

When it comes to data security breaches, many organizations say, “That could never happen to us.” Unfortunately, the increasing frequency of data security breaches means that many of these organizations are wrong. Don’t believe it? Let’s take a look at a few recent security breaches.

Hacking

In October 2013, the multi-billion dollar company, Adobe Systems, Inc., suffered a data security breach that compromised nearly 3 million records. Hackers were able to access customers’ IDs, encrypted passwords, names, encrypted credit or debit card numbers, expiration dates and other information related to their orders.

Laptop Computer

In October 2013, a Wisconsin hospital suffered a data breach when a laptop computer with unencrypted data was stolen out of an employee’s car. As a result, patients may have had their names, dates of birth, medical record and account numbers, providers, departments of service, bed and room numbers, dates and times of services, visit histories, complaints, diagnoses, procedures, test results, vaccines and medications exposed.

Employee Theft

In September 2013, a dishonest hospital employee in Florida accessed patient names, social security numbers, dates of birth and addresses. Even though the employee was fired and will be facing criminal prosecution, this information may have been used to file fraudulent tax returns.

Email Error

In September 2013, Columbia University Medical Center suffered a data security breach when an Excel file containing sensitive medical student information was accidentally attached to an email that was sent to students, faculty and staff.

Programming Error

In September 2013, a financial services firm suffered a data breach when a programming error allowed customers’ names, social security numbers and addresses to be viewed on the firm’s unrestricted website.

These recent incidents show that data security breaches can happen to any organization. This means that every organization must be proactive in protecting against data security breaches. Though protective measures should cover everything from the wireless network to the copy machine, organizations should also consider protecting against data security breaches with insurance.

Various cyber liability products are available to protect against privacy injuries, such as identity theft, and to cover the cost of complying with various data breach notice laws. Given the complexity of the risk, an experienced insurance agent should be consulted to ensure that adequate coverage is obtained. If you would like to learn more about insuring against data security breaches, contact us.

If you would like to learn more about preventing data security breaches, take our online course Information Risk Management: Strategies for Preventing and Mitigating Information Security Breaches.

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Self Storage Facilities: Protecting the Bottom Line

Most businesses rely on their facilities to manufacture products or provide services. In the self storage industry, the facilities typically are the product. If property loss or damage is not fixed quickly, the business may fail. Though most believe their self storage facilities are adequately insured against property loss or damage, many overlook Ordinance and Law coverage. This oversight can be the downfall of any self storage facility.

Ordinance and Law insurance is designed to pay the extra expense of rebuilding to comply with ordinances or laws, such as building codes, which did not exist when the building was originally constructed. Since the costs of improving a structure to bring it up to code are specifically excluded under most property policies, this coverage can be quite valuable.

An insured’s obligation to rebuild according to current and stricter codes is often triggered when an insured building experiences a covered loss, such as a fire or hurricane. Unfortunately, many insureds first learn of this additional obligation and expense after they experience a property loss. To avoid the burden of these additional rebuilding costs, self storage facilities can add Ordinance and Law coverage to their current property insurance policies. Doing so will generally cover:

  • Loss to the undamaged portion of the building;
  • Increased demolition costs; and
  • Increased costs of construction.

Since rebuilding according to current building codes may suspend operations for an extended period of time, self storage facilities can purchase Business Interruption insurance to cover reductions in net income caused by an inability to continue business operations. Since payroll, mortgage/rent payments, money owed to suppliers, taxes, and other continuing expenses must be met, Business Interruption insurance may provide badly needed capital when operations are suspended.

Combining Ordinance and Law coverage with Business Interruption coverage, self storage facilities increase the likelihood of surviving not only the initial property loss, but a protracted suspension of operations resulting from the obligation to rebuild in accordance with current building codes.

While the decision to obtain Ordinance and Law and Business Interruption coverage should be easy, understanding specific policy provisions and terms can be difficult. Since there may be variations among different policy forms, it is important that you consult with an experienced insurance agent to discuss your options.

If you would like more information about protecting your self storage facility or obtaining Ordinance and Law and Business Interruption insurance coverage, please contact us.

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No Penalty for Noncompliance with ACA’s Notice of Coverage Options

On September 11, 2013, the United States Department of Labor announced that employers will not be fined or penalized under the Affordable Care Act for failing to provide employees with notice about coverage options available through the ACA’s Health Insurance Marketplace (Exchanges). This comes just weeks before the October 1, 2013 deadline for employers to begin providing the notice to their employees.

The announcement, which was posted on the DOL’s website as a “FAQ on Notice of Coverage Options,” states:

Q: Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?

  1. No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

A day later, the U.S. Small Business Administration posted similar information on its website.

This announcement comes as a surprise to those who assumed that noncompliance would be met with a fine or penalty. Though the ACA’s employer notice requirement does not contain a specific penalty provision, many assumed that the ACA’s general penalty of $100 per day would apply. And, since news of the DOL’s position came informally through its website rather than the formal regulatory process, some believe that fines or penalties for noncompliance remain a possibility in the future.

This new development has understandably left many employers unsure about how to deal with the ACA’s employer notice requirement. Though it is still the law, the DOL’s announcement has undoubtedly left many wondering whether a requirement can really exist without consequences.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care reform landscape. Check back with us periodically for future informational updates about the Affordable Care Act.

If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, view our health product page.

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What is a Certificate of Insurance?

Certificates of Insurance are documents provided by Agents to verify the existence of insurance coverage. They are commonly used when an agreement or contract requires a party to maintain specific types of insurance. For example, a Certificate of Insurance can be used when:

  • A general contractor wants to verify that its subcontractor has the statutorily required workers’ compensation insurance;
  • A mortgage lender wants to verify that the homeowner has sufficient property insurance;
  • A commercial landlord wants to verify that its tenant has all the insurance coverage required by the lease; or
  • A homeowner wants to verify that its lawn service company has general liability insurance.

Certificates of Insurance are issued to the certificate holder—the person or entity that needs to verify insurance coverage. Though common and relatively straightforward, there is quite a bit of confusion about what Certificates of Insurance do, and more importantly, do not do.

A Certificate of Insurance provides a superficial snapshot of insurance coverage that is in place at the time it is created. Contrary to what many believe, Certificates of Insurance:

  • Are NOT insurance policies.
  • Do NOT provide certificate holders with any rights under the insured’s policies. This means certificate holders cannot file a claim or request a defense under the insured’s policies.
  • Do NOT amend, extend or alter the coverage provided by the insured’s policies. This can only be accomplished with an endorsement, rider or amendment to the policy.
  • Do NOT create a contract between the insurance company and the certificate holder.
  • Do NOT guarantee that insurance coverages listed on a Certificate of Insurance will continue in the future. A Certificate of Insurance issued today may not be accurate tomorrow.
  • Are provided for informational purposes ONLY.

Though there are various Certificate of Insurance forms, those developed by ACORD (Association for Cooperative Operations Research and Development) are widely used to provide specific information about existing insurance coverage, such as:

  • the insurance companies issuing the policy
  • the policy numbers
  • effective dates
  • types of insurance (ex. general liability, automobile, workers’ compensation, property)
  • policy limits

These forms also provide a space to add additional comments or conditions. This is where problems may arise if an insured or certificate holder wants to add specific language to their Certificates of Insurance. For example, a certificate holder may want to state that there is an additional insured under the policy, or an insured may want the certificate to state that any obligation to indemnify the certificate holder is covered by the policy.

If such statements happen to be true, it is not because they were typed on the certificate. Remember that Certificates of Insurance do not affect, extend, or change the insurance policy, so any incorrect or contradictory statements are meaningless to the insurance company. They can, however, be grounds for a costly lawsuit, so an experienced insurance agent should be used when issuing or receiving Certificates of Insurance.

If you would like to learn more about dealing with Certificates of Insurance or how we can help, please contact us.

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Preventing Data Security Breaches

Every business must be able to identify the likeliest source of a data security breach so that they can also identify how to prevent it. Is it an executive’s laptop computer, the copy machine or the office’s wireless network? Could it be something else? Since the first step to preventing a data security breach is understanding the risk, it’s time to learn more about your business’s sensitive data.

Effective data security starts by assessing the kind of information a business has and identifying who has access to it. Evaluating data security vulnerabilities requires an understanding of how sensitive data moves into, through, and out of a business, and who has or could have access to it. Here are some tips from the Federal Trade Commission.

Take Inventory

Take an inventory of all devices and equipment capable of storing sensitive data, such as laptop computers, mobile devices, flash drives, off-site servers, disks and digital copiers. Do employees work from home? If so, add their home computers to the list.

The type and location of sensitive data should also be inventoried. Don’t stop with the office’s filing cabinets and computer systems. Sensitive data may also be received from other sources, such as websites, contractors or call centers. Every possible source and destination for sensitive data must be considered.

Track Sensitive Data

It is important to know how the business obtains, stores, shares and disposes of sensitive data. Every department should be consulted, including sales, information technology, human resources and accounting. Don’t forget about contractors and other third-party service providers.

This process should provide a business with a thorough understanding of:

  • Who provides sen­sitive data? Does it come from customers, credit card companies, banks or other financial institutions, credit bureaus, job applicants, contractors, third-party service providers?
  • How is sensitive data received? Does it come via phone, fax, mail or email? Is there a website designed to request and receive sensitive data? Are there any other possible entry points?
  • What kind of sensitive data is collected? Do business operations require or permit collecting financial information (credit cards, bank accounts, credit reports), personally identifying information (drivers’ licenses, social security numbers) or medical information?
  • Where is sensitive data stored? Is it kept on disks, tapes, laptops, smartphones, tablets or other mobile devices? Employees’ personal computers or mobile devices? Where are data backups and copies stored?
  • Who can access sensitive data? Is access to sensitive data limited to only those who need it? Are there security measures in place? Is sensitive data protected against unauthorized access by contractors or other third-party service providers?

Throughout this process, pay particular attention to certain kinds of sensitive data. Identity thieves typically look for social security numbers, credit card and other financial information.

Organizations should also consider protecting against data security breaches with insurance.Various cyber liability products are available to protect against privacy injuries, such as identity theft, and to cover the cost of complying with various data breach notice laws. Given the complexity of the risk, an experienced insurance agent should be consulted to ensure that adequate coverage is obtained. If you would like to learn more about insuring against data security breaches, contact us.

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What is a Third Party Over Action?

Assume an employee suffers an accidental workplace injury. After collecting benefits under his employer’s workers’ compensation insurance policy, the employee tries to get more money by filing a negligence lawsuit. Can the employer be required to pay the employee for his negligence damages? Maybe. Would the employer’s commercial general liability insurance policy cover this? Maybe not.

Workers’ compensation laws are basically a trade-off. On one hand, employees enjoy the benefit of what is essentially a no-fault compensation system that provides benefits for workplace injuries. In exchange, employees generally give up the right to sue their employers for negligence. So, if our employer is immune from the employee’s negligence lawsuit, what is there to worry about? A Third Party Over action.

A Third Party Over action is a type of action in which an injured employee collects workers’ compensation benefits from the employer and also sues a third party for causing or contributing to the employee’s injury. Then, because of some type of contractual relationship between the third party and the employer, the liability for the employee’s lawsuit is passed back to the employer. Here is an example of a typical Third Party Over action.

John, an employee of Acme, trips on a broken floor tile while at work. Despite collecting benefits under Acme’s workers’ compensation insurance policy, John also sues the owner of the building where Acme’s offices are located because it negligently failed to repair the broken tile. Under Acme’s lease, Acme is contractually required to indemnify the building owner for any claims brought by Acme’s employees. Upon being sued by John, the building owner demands indemnification from Acme pursuant to the lease, and essentially passes the liability for John’s negligence lawsuit back to Acme.

Though state statutes and judicial decisions may provide employers with limited protection in certain situations, Third Party Over actions still pose a significant risk. Employers that have agreed to indemnify a third party for its employees’ lawsuits must find out whether they are insured against the risk. This can be very difficult.

Claims involving injured employees are typically not covered by commercial general liability (CGL) insurance policies. However, a Third Party Over action may be covered by some CGL policies if the employer’s indemnification agreement with the third party meets the policy’s requirements. Other CGL policies may exclude Third Party Over actions altogether. This is why it is important to read both the policy form and the third party indemnification contract very carefully.

Given the complexity of Third Party Over actions, a reputable insurance agent with substantial experience in evaluating and insuring against Third Party Over actions should be consulted.

If you would like to learn more about protecting your organization against Third Party Over actions, please contact us.

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Condominium Association 2013 Legislative Update

The 2013 legislative session saw relatively little activity involving Florida’s Condominium Act. Nevertheless, laws have changed, and that’s always important. Here is a brief summary of some of the statutory amendments.

Insurance

The Condominium Act identifies property that must be insured by the association and property that is the responsibility of each unit owner. Unfortunately, the statute was not clear in distinguishing insurance obligations from regular maintenance and repair obligations. As a result, unit owners often believed that their association had an obligation to repair property (usually air conditioning units) because it was covered by the association’s insurance.

The 2013 amendment clarifies that the association is responsible for property covered by the association’s insurance policy if it was damaged by an insurable event, as opposed to regular wear and tear.

Financial Reporting

Condominium associations have annual financial reporting requirements. The type of financial statement an association must prepare depends on its total annual revenues. The 2013 amendment made the following changes to the statutory revenue thresholds used to determine an association’s financial reporting requirement:

  • Report of Cash Receipts and Expenditures: total annual revenues are less than $150,000 (was $100,000)
  • Compiled Financial Statement: total annual revenues are $150,000 or more, but less than $300,000 (was $100,000 – $200,000)
  • Reviewed Financial Statement: total annual revenues are $300,000 or more, but less than $500,000 (was $200,000 – $400,000)
  • Audited Financial Statement: total annual revenues are $500,000 or more (was $400,000)

Associations operating fewer than 50 units, regardless of annual revenues, must prepare a report of cash receipts and expenditures. Under the old law, this requirement applied to associations operating fewer than 75 units.

Official Records

Unit owners have a right to inspect and copy the association’s official records. Associations are now required to let unit owners make electronic copies of these records with portable devices, including smartphones, tablets, portable scanners or any other technology capable of scanning or taking photographs.

Member Directories

The Condominium Act prohibits associations from disclosing unit owners’ personally identifying information. However, associations are now allowed to publish and distribute to unit owners a directory containing the name, address and telephone number of each unit owner. Unit owners can exclude their telephone number from the directory by making a written request to the association.

Elevator Safety

Condominiums covered by Florida’s Elevator Safety Act were exempt from having to comply with Elevator Safety Code updates until either July 1, 2015 or until the elevator is replaced or requires major modification, whichever occurs first. The 2013 amendment removed the July 1, 2015 deadline. Accordingly, covered condominiums will not have to comply with all updated provisions of the Elevator Safety Code until their elevators require major modification or are replaced.

Some of the other 2013 amendments address board member terms, suspensions from using common elements and board member recalls. It is important for those serving on their condominium board to become familiar with all of the 2013 statutory amendments.

To learn more about your obligations as a board member, take our affiliate’s recently updated online course Condominium Operations: A Primer for Board Members, which has been approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

If you would like to discuss how Setnor Byer Insurance & Risk can serve you and your association, please contact us. Clients of Setnor Byer’s Condominium Program enjoy access to various risk management services, such as Setnor Byer’s Risk Management Group and Unit Owners’ Report Line, as well as our affiliate’s Board Member Education Certification,

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Affordable Care Act’s Employer Mandate Delayed Until 2015

Shortly before the July 4th holiday, the U.S. Department of the Treasury announced that enforcement of the Employer Shared Responsibility requirement under the Affordable Care Act (Act) will be delayed until 2015. The employer mandate, which generally requires employers with at least 50 full-time or full-time equivalent employees to offer health care benefits or pay a penalty, was scheduled to go into effect on January 1, 2014.

Through a dialogue with businesses about the Act’s employer and insurer reporting requirements, the administration learned of concerns about the complexity of the requirements and the need for more time to implement them effectively. As a result, the administration decided to delay the Act’s mandatory employer and insurer reporting requirements.

According to the announcement, this delay is designed to:

  • Provide the administration more time to consider ways to simplify the new reporting requirements consistent with the law.
  • Provide more time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.

The administration recognized that delaying the Act’s mandatory employer and insurer reporting requirements will make it impractical to determine which employers owe shared responsibility payments for 2014. As a result, the administration decided to also delay enforcement of the employer mandate, stating that “these payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.”

The Treasury says it will be publishing formal guidance regarding the delayed enforcement soon and that proposed rules will be published this summer. Once these rules have been issued, the administration says it will work with employers, insurers and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015.

So what should employers be doing now? The Employer Shared Responsibility provision is still the law, it just isn’t being enforced. Not surprisingly, talking heads are making predictions and debating whether it’s really speeding if nobody can pull you over. Unfortunately, the manner in which employer’s will be affected by the delay will not be known until additional guidance is issued.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the changing health care reform landscape. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

If you’d like to subscribe to our weekly newsletters please click here.