Florida – Page 7 – Setnor Byer Insurance & Risk

The “Intentional Act” Exclusion: A Chink in the Armor of Workers” Compensation Statutes

In addition to increased productivity, the Industrial Revolution brought with it the unwanted consequence of increased workplace injuries. The explosive growth in industry made the workplace increasingly dangerous, and the frequency and severity of workplace injuries soared. As the number of injured workers increased, so too did the number of lawsuits against employers. The result was an inefficient, time-consuming, and costly judicial process that did little to address the problems encountered by employers and their injured employees.

The State of Washington echoed these sentiments in its workers’ compensation statutes by noting that “the common law system governing the remedy of workers against employers for injuries received in employment is inconsistent with modern industrial conditions. In practice, it proves to be economically unwise and unfair…The remedy of the worker has been uncertain, slow and inadequate. Injuries in such works, formerly occasional, have become frequent and inevitable.”

In response to a judicial system that no longer met the needs of those it sought to serve, states began enacting workers’ compensation laws in the early 1900s. The dual goals of providing for injured employees and of reducing employer/employee litigation served as the foundation for many of today’s workers’ compensation statutes.

States achieved these goals by opting for a legislatively mandated allocation of risk that employed a two-pronged approach: compelling employers to provide for injured employees outside of the traditional tort system, and prohibiting injured employees from suing their employers for workplace injuries. Employers and employees were forced to accept this statutory compromise known as the “compensation bargain,” an arrangement based on a mutual renunciation of common law rights and defenses by employers and employees alike.

On one hand, employees enjoy the benefit of what is essentially a no-fault workers’ compensation system that offers prompt medical attention and benefits regardless of any fault on the part of the employee. Consequently, employers are prohibited from asserting any defenses against the injured employee seeking compensation, effectively making employers strictly liable for injuries suffered by their employees.

However, in exchange for providing this no-fault insurance, employers benefit from the statutory removal of injury-based employer/employee lawsuits from the common law tort system. An example of this is illustrated in West Virginia’s workers’ compensation statute, which provides that the “enactment of… the workers’ compensation system in this chapter was and is intended to remove from the common law tort system all disputes between or among employers and employees regarding the compensation to be received for injury or death to an employee… .”

Such a provision theoretically protects an employer from being sued by an injured employee who claims, for example, that the employer’s negligence caused the workplace injury. Recall that under the compensation bargain, the injured employee relinquishes the right to sue for potentially greater, although uncertain, damages via a common law negligence claim in exchange for the right to automatic and prompt workers’ compensation benefits.

The chosen method for removing employee injury claims from the common law was by granting employers immunity from any such lawsuits or, alternatively, by mandating that the benefits provided under a state’s workers’ compensation laws are the exclusive remedy available to an injured employee. Regardless of which method is chosen, the substance and effect are the same, and the benefits of taking such cases out of the traditional common law tort system are realized.

In describing these benefits, one state’s supreme court noted that “in return for accepting vicarious liability for all work-related injuries regardless of fault, and surrendering his traditional defenses and superior resources for litigation, the employer is allowed to treat compensation as a routine cost of doing business which can be budgeted for without fear of any substantial adverse tort judgments. Similarly, the employee trades his tort remedies for a system of compensation without contest, thus sparing him the cost, delay, and uncertainty of a claim in litigation.”

Compliance with the letter and spirit of the compensation bargain is essential to maintaining the benefits both parties enjoy. Many states, recognizing the importance of maintaining this balance, have withdrawn any immunity an employer may have been entitled to if the employer fails to obtain the necessary workers’ compensation coverage, thus freeing the injured employee from his or her obligation to abstain from suing the employer under a traditional common law theory.

However, despite the compensation bargain, injured employees, or their personal representatives in cases involving the employee’s death, have routinely tried to sue their employers by claiming that the employee’s injury or death was the result of an intentional act. If an employee’s cause of action succeeds, then his or her employer will generally lose the immunity it enjoys under the workers’ compensation laws.

This loss of immunity is consistent with the general policy against allowing an individual to insure against the consequences flowing from an intentional act. The concern is that if an individual were permitted to insure against a loss brought about by an intentional act, then there would be no incentive or deterrent to keep that individual from intentionally harming another. In other words, how effective would the prospect of incarceration be if a criminal was able to have another serve his or her prison term? Such is the reasoning that underlies the intentional act exclusion.

Although intentional act exclusions are commonly found in workers’ compensation statutes or state judicial opinions, the precise articulation and application of these provisions can vary. Some states, like Louisiana, provide that “worker’s compensation [is] an employee’s exclusive remedy for a work-related injury caused by a co-employee, except for a suit based on an intentional act…which means the same as an intentional tort.” The statute defines intent to mean that the person who acts either “consciously desires the physical result of his act, whatever the likelihood of that result happening from his conduct, or knows that that result is substantially certain to follow from his conduct, whatever his desire may be as to that result.” Simply stated, intent in Louisiana refers to the consequences of an act rather than to the act itself.

Florida uses a slightly different approach. Like Louisiana, Florida waives workers’ compensation immunity for any injury or death caused by an employer’s intentional tort. The existence of an intentional tort, which must be proven by the heightened standard of clear and convincing evidence, can be established in two ways. The first way simply requires proof that the employer deliberately intended to injure the employee. The second way requires proof that the employer engaged in conduct that the employer knew, based on prior similar accidents or on explicit warnings specifically identifying a known danger, was virtually certain to result in injury or death to the employee. Additionally, there must be proof that the employee was not aware of the risk because the danger was not apparent, and that the employer deliberately concealed or misrepresented the danger so as to prevent the employee from exercising informed judgment about whether to perform the work. This is a significant obstacle to overcoming Florida’s workers’ compensation immunity.

West Virginia’s statute makes overcoming workers’ compensation immunity similarly difficult by requiring an injured employee to prove “deliberate intention,” which is a legal term of art encompassing numerous (and effectively higher) standards of proof that the employee must meet.

The considerable hurdles that stand in the way of overcoming workers’ compensation immunity reflect one of the central aims of the compensation bargain: that workplace accidents be addressed outside of the traditional common law framework, regardless of the severity of the injuries they cause. However, the fact that an employer will not be shielded from liability for “intentionally” injuring an employee, regardless of how that term is defined in a particular state’s statute, should serve to remind employers that their employees are not disposable assets that can be casually placed in harm’s way. Employers should become familiar with the duty of care owed to employees and should abide by that duty to be assured of enjoying the benefits of the compensation bargain.

“Young People Need Not Apply”: The Legality of Adult-Only Condominium Communities

As a country of laws, the United States has gone to great lengths to ferret out and eliminate discrimination, having deemed it antithetical to a free and fair society. Federal and state statutes are replete with anti-discrimination laws that affect virtually every facet of modern life. Interestingly, and perhaps ironically, one such law that was enacted primarily to eliminate discrimination expressly legalizes it against a particular group – the “young.”

Title VIII of the Civil Rights Act of 1968, known as the Federal Fair Housing Act (FHA), protects all citizens from discrimination in housing and real estate-related transactions on the basis of race, color, national origin, religion, sex, handicap, or familial status. The prohibition against discrimination on the basis of familial status, including an exemption for “older” persons, was added to the FHA in 1989. However, unclear drafting of the exemption led to significant confusion regarding its interpretation. In 1995, the confusion surrounding the exemption was addressed by the Housing for Older Persons Act (HOPA). Under the HOPA, the FHA’s prohibition against discrimination on the basis of familial status does not apply with respect to “housing for older persons,” a designation that includes condominiums. As a result, this exemption essentially gives a condominium association the authority to exclude “young people” from living in a community.

The HOPA designates three types of housing communities as eligible for consideration as “housing for older persons,” thereby qualifying them for the exemption from the FHA’s anti-discrimination provisions. The first type includes housing provided under any state or federal program that is specifically designated and operated to assist elderly persons. The second type includes housing that is intended for and solely occupied by, persons 62 years of age or older. The third type is housing for persons 55 years of age or older, the category into which some condominiums fall.

To qualify for the HOPA’s third type of exempt housing, the community must be intended and operated for occupancy by persons 55 years of age or older. The following factors may be considered relevant when determining whether or not a community has exhibited the necessary intent to operate as housing for persons at least 55 years of age:

The manner in which the community is described to prospective residents;
Any advertising designed to attract prospective residents to the community (although phrases such as “adult living” or “adult community” are insufficient to meet this requirement);
Lease provisions;
Written rules, regulations, or covenants adopted by the community;
The maintaining and applying of relevant procedures to community governance;
The community’s actual practices; and
Public postings in the community’s common areas.

This intent must also be evidenced by published policies and procedures to which the community adheres.

In addition to displaying the requisite intent, at least 80% of the occupied units must be occupied by at least one person who is 55 years of age or older. To calculate this figure, the total number of units in the community must be counted. From that number, the following units should be excluded from the calculation of the 80% requirement:

Units that have been continuously occupied by the same residents since September 13, 1998, none of whom are or were 55 years of age or older;
Unoccupied units;
Units occupied by employees of the community who are under the age of 55 and who provide substantial management and maintenance services to the community; and
Units occupied solely by persons who are necessary or essential to provide medical or health and nursing care services as a reasonable accommodation to residents.

From the remaining units, the percentage of units that are occupied by at least one person age 55 or older should be calculated.

The community must also comply with any applicable rules governing the verification of these occupancy requirements. Generally, verification of compliance with the 80% requirement must be done using reliable surveys and affidavits. Additionally, the validity of such information, whether obtained through surveys or other means, must be verified at least once every two years. The HOPA also contains several safe-harbor provisions that protect the designation as “housing for older persons.”

In addition to the HOPA, states have similarly exempted “housing for older persons” from their own anti-retaliation laws. For example, Florida’s Fair Housing Act and Georgia’s Fair Housing laws use language that is virtually identical to the HOPA with regard to exempting housing for older persons. Additionally, those communities that wish to be recognized as exempt “housing for older persons” may need to register with the appropriate state administrative office, such as the state of Florida’s Commission of Human Relations.

Despite its discriminatory effect, the HOPA has survived constitutional challenges because courts have held that Congress acted reasonably in enacting the HOPA to protect the interests “of senior citizens who live in retirement communities,” many of whom may have a particular need for an affordable, safe, and supportive environment. The exemption provided by the HOPA allows these communities to devote more resources to facilities and services for older persons, and fewer if any resources for schools, daycare facilities, and child safety programs. These are but some of the social benefits provided by this unique type of discrimination in the housing context.

Condominiums seeking to implement or maintain a community that provides “housing for older persons” have to jump through many procedural, and, depending on applicable state law, administrative hoops. However, since the HOPA runs contrary to the nation’s deep-rooted egalitarian ideals, such policing measures are certainly appropriate when permitting forms of discrimination not usually tolerated in other contexts.

Hurricane Season 2008: Insureds Hope for the Best, Prepare for the Worst

With two catastrophic hurricane seasons behind us, we’ve all learned that insurance is not something that should be taken lightly. In fact, with the repeating cycle of hurricane seasons, concern over a repeat of 2005’s Wilma has become foremost in our minds, prompting discussion regarding property valuations, the meaning of certain language in policies, the application of deductibles and coinsurance, and a host of other issues.

Hurricane preparation is not unlike the sports philosophy of “the best offense is a good defense,” and Setnor Byer Insurance & Risk is available to assist insureds in their hurricane preparation.

A critical priority of each insured should be an analysis of their real and personal property values, and discussion of level of protection they need or want. The price of materials and labor has increased dramatically in the past few years, and many insureds are finding that their properties are significantly under-insured. Furthermore, due to a common clause in policies known as coinsurance, which restricts reimbursement for property that is underinsured, it is critical that real property be properly valued.

Commercial insureds need to develop mechanisms to recover or avert business interruptions due to storms and other catastrophic events. Clearly, insurance can be prohibitively expensive if an insured looks to transfer all such risks to its carrier. While interruptions attributed to direct damage to insured property are insurable and generally affordable, the cessation of business from damage to other properties (including overhead transmission lines or water and communications systems) are often uninsurable at a reasonable cost.

Deductibles should also be given some attention, particularly deductibles that are expressed as a percentage of Total Insured Values (TIV), which can cause the multiplication of the percentage by anything from all insured locations, whether damaged or not, to a more limited approach of multiplication by the TIV of a particular building or coverage line.

Debris removal, increased costs of construction due to ordinances, and demolition of undamaged premises is not necessarily standard within insurance contracts. These items need to be discussed more fully. Power surges, spoilage of food, and damage to property due to changes in temperature are all risks that need to be addressed, whether insured or not.

And, what about Flood Insurance? There are some insureds that are falsely lulled into a sense of comfort that their property is not prone to flooding, relying on a federal mapping system that is flawed. Although FEMA has undertaken a massive effort to identify and map high flood zones, the existing mapping system is aged and may not accurately reflect flood hazard conditions. Not only does this potentially create a false sense of security but it also places buildings, infrastructures, and individuals at risk because flood hazards are dynamic and may change rapidly due to community development and natural processes in the watershed. Thus, the peril of flood should be seriously considered.

Insureds who fair well after a catastrophe are those that are prepared, understanding when and to what degree insurance can be a reliable instrument, and what other alternatives are available to finance or limit loss. Here at Setnor Byer we are committed to helping you work past what may be another tumultuous hurricane season.

“After Hurricane Wilma, serious thought and numerous sessions with our service staff and clients revealed a few flaws in our catastrophe response, even with a detailed contingency plan that included satellite communication, remote technology systems, and a 24/7 emergency claims facility in Arkansas. For this reason, we’ve dedicated resources to building an alternative response system in our new Baldwin Park, Orlando facility. Now, more than ever, we are prepared to be there after the storm.”

An Independent Agent’s Role In The Aftermath Of Hurricane Wilma

We are an Independent Insurance Agency, and not unlike most of our South Florida neighbors, suffered during the aftermath of Hurricane Wilma. We were left with damaged property, no electricity, an interrupted business, and employees that, each, suffered similar consequences. Yet, we were not permitted the freedom to be unprepared and the time to recover; after all, we were Insurance Agents, and assumed a duty, when we took our client’s premiums, to be there After the Storm.

Our Catastrophe Recovery Plan (CAT Plan), while not perfect, contained elements that served our employees and community, well. Even with our failures, we managed to be available to our community before the storm and after, to discuss recovery and manage claims. This commitment required that we, first, take care of our own so that they, in turn, would be available to take care of our clients.

Our CAT Plan, a sixty page document, included, among other things, strategies for preserving property, redundant resources, data preservation, communications (with satellite telephones), and access to client data. It included systems and methods to reach all personnel, confirm their status and offer assistance, if needed. The Plan included:

Continuity of pay, and provided for flexible work schedules to help each employee cope with their personal “home and health” emergencies;
Gas allowances for anticipated gas shortages;
emergency “cash” loans;
A 24-hour Emergency Claims and Service Line located out of state for service during periods of interruption;
An on-call mobile office with generators, computers, Internet services, and satellite communications;
A 24-hour Employee Resource Line to communicate news and status to employees, including anticipated recovery dates, as well as status of operations and co-workers.

In the days after Hurricane Wilma hit on October 24, 2005, these strategies served us well; however, days of coping turned into weeks. Wilma had slashed across Florida as a Category Two storm, causing 35 deaths, widespread damage estimated in the range of 25 billion and massive devastation to critical infrastructure.

Thanks to our CAT Planning team, however, and a wonderful group of loyal employees, our client services were fully operational. As Independent Agents, we not only insure our clients’ properties and business continuity, but assist them in the development of their own catastrophic recovery planning. We are experts at this, correct? Didn’t our industry, after Hurricane Andrew, develop insight into effective (and ineffective) catastrophe planning and recovery? Well, yes and no. With all our preparation, the greatest value derived was from what went wrong, and the lessons we learned from our failures – lessons we shared with our employees, our clients and our community.

After debriefing, we realized that even though we had taken great steps to prepare for catastrophic situations, more planning was still needed. After discussion, we understood that full (effective) redundancy required a fully staffed facility in another part of Florida (or, was that New Mexico?). We’ve built one in Orange County, Florida. We now operate, solely, with digital data. Our data is contained in-house, and backed up (via the internet) to a secured, off-premises site. Our phone systems are networked, our paper is scanned…

At the threat of another storm, and each storm thereafter, members of our senior staff are prepared to travel to our Orange County location, wait it out, and respond, if needed, on behalf of our South Florida community. We plan to do our part during and after the next storm, share our successes and lessons, and be around to honor our commitments.

Will it Ever End?: An Insurance Perspective on the 2004 Hurricane Season

Charley, Frances, Ivan, Jeanne- Floridians have had to indulge a few unwelcome guests as Mother Nature unleashed one hurricane after another within a two month period. The Sunshine State, to some, has been aptly renamed the Hurricane State. The Hurricane Season has yet to end, and Florida has already seen unprecedented activity and direct insured losses that may very well exceed 20 billion dollars.

Prior to this season, Andrew was the last major hurricane to hit Florida. The costliest natural disaster in U.S. history, Andrew caused $26.5 billion1 in damages, but this season’s hurricanes, adjusting for the time value of money, may get close to that figure. After all, hurricane season is not over yet, and already there are estimates that more than one in five homes in the State have been damaged. The number of claims are expected to hit 2 million, far surpassing Andrew’s 700,000.

Now, new questions arise from within the industry and Insureds, including concerns about the impact on future premiums and market capacity. There is also some uneasiness regarding carrier insolvency. And, most importantly, there is the ultimate uncertainty as to whether our State and citizens can “weather the next storm.”

While there are many issues to contend with, Tom Gallagher, Chief Financial Officer of Florida’s Department of Financial Services, says that the Department is ready to assist residents. “To help Floridians with these disasters, we have ordered insurance companies not to cancel or non-renew homeowners policies through the hurricane season. In addition, no insurance policy may be cancelled solely as a result of claims filed because of these storms.” This is very good news to Florida policyholders. Gallagher further asserts that insurance rates should not go up just because of the storms. He says, “Rates gone up just for rates’ sake because of storms? That is not going to happen.”

Still, others disagree. Bob Hartwig, Chief Economist for the Insurance Information Institute, predicts “there’s going to be pressure on rates in Florida. The industry’s resources need to be bolstered.” Industry experts report, though, that effective and aggressive catastrophic modeling and financing throughout the past decade will leave most of Florida’s insurers financially sound, even after the final numbers are in. Rate increases should be moderate and will largely be due to price increases within the reinsurance marketplace, which offers insurance products to primary insurers to fund losses in excess of specified retained amounts. “Hurricane Andrew was a great industry lesson,” said Karlene Lawrence of Setnor Byer Insurance & Risk, “after 1992, insurers increased rates to rebuild surplus and fund future losses, developed stringent underwriting standards, and built reliable and affordable risk financing programs, in part, due to the formation of the Florida Hurricane Catastrophe Fund, which reimburses insurers for a portion of their hurricane losses.”

It also should be noted that the property and casualty industry has had record performance in the most recent quarters, with a growth in surplus, and 15% return on equity. This recent financial performance is, in part, why the industry has the capacity to pay the losses caused by the storms.

So far, it seems that the insurance companies, although overwhelmed by the volume of losses, are doing their part in financing our State’s recovery. Of course, there are also costs associated with the four disasters and recovery that are either uninsured, or not necessarily a subject of insurance, such as the downturn in a local economy.

The question arises, often, however, as to whether insurance can or should finance a larger percentage of losses. In fact, many insureds are questioning the policies they’ve purchased, concerned with either an uninsured loss, or for those not damaged by the storm, questioning the extent to which their coverage would have responded. Commercial policies are a cumbersome and complicated reading, at best, but a reasonable perspective to advance regarding the extent to which an Insured should rely on insurance for funding a loss, is that if insurance is available, and affordable, it should be considered, and weighed against the probability and severity of a potential loss.

Now, after the storm, people should consider reviewing their insurance choices, and along with their Agent or Consultant, revisit their financing options, and seriously consider alternatives for financing certain risks. For some, affordable alternatives to insurance to finance loss may be a month’s worth of income in reserve. For others, it may be a satellite back-up for communications systems, generators to maintain power, alternative premises to operate from, or redundancy in suppliers or vendors.

Unfortunately, many events, whether precipitated by a storm or other catastrophe, are not covered within the basic structure of most policies, particularly, commercial property policies; and the insurance, if available, is often cost prohibitive, particularly when one considers the number of years of increased premiums one would have to expend for an unknown loss of some unknown magnitude, triggered by any potential number of events.

Although not a comprehensive list, a brief overview of a standard commercial property policy reveals that none of the following are guaranteed, automatic offerings, and each insured should take the time to address recovery systems for dealing with potential loss resulting from : spoilage of perishable stock, whether from off-premises power or water failures, or a machinery accident; profits in finished stock; rising waters (flood); electrical surge; reproduction of electronic data; order by civil authorities that interrupt business when adjacent properties are not damaged; foundations, underground pipes; outdoor or detached properties; demolition; debris removal; and ordinances or laws that direct the destruction of a property or requires a reconstruction to newer code.

Business Interruption Insurance, often viewed as a panacea for income replacement, is actually quite restrictive in most offerings, and when broadened to extend to respond to a broader set of occurrences, can actually become unaffordable. This insurance, in the form generally provided under standard industry policies, requires damage to an insured location or property. Damage to other properties, whether the property of a vendor upon which the insured relies on for supplies, or off-premises utilities, are not automatically included. Additionally, the business interruption form, as generally purchased, provides for little if any payment after a business is repaired. What of the weeks and months to rebuild a customer base? Business Interruption from the breakdown of equipment, whether the breakdown emanates from the machine or an off-premises utility, is not an automatic offering, nor is business interruption from damage to electronic data. A bit overwhelming, yes?

So, before the next Hurricane Season, each Insured should consider requesting a clarification of their policy language, and what operating and recovery alternatives or redundancies they should build into their enterprise in order to guarantee their survival in the event of a catastrophe. For an in-depth analysis of the risks that affect you and your business, whether an Insured or friend of Setnor Byer Insurance & Risk, call our offices at 1-888-253-8498.

Florida Homeowners Insurance Rates

Homeowner’s insurance rates in Florida already are third highest in the country, behind Texas and Louisiana. The primary factor for Florida rates is our huge hurricane risk. Not only does Florida have more exposed coastline than almost any other state, the concentration of population, high rises and other construction in southeast Florida is unmatched.

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