Insurance Programs – Page 8 – Setnor Byer Insurance & Risk

The Health Care Reform Act: Unintended Consequences?

The health care reform act is officially upon us. On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act, and on March 30th the President signed the Health Care & Education Reconciliation Act. Together, these two bills make up the highly-publicized health care reform act.

At the outset, it is significant to note that the Act does not necessarily address the cost of health care by establishing guidelines or limits. Rather, the Act addresses access to health care. The Act generally operates to require all individuals not covered by Medicare or Medicaid to either obtain health insurance or pay a penalty.

The Act, which consists of over 2,500 pages of text and which is soon to be supplemented by thousands of pages of guidance and regulations, has been the subject of countless media discussions and debates. The fanfare, information, and disinformation have made it difficult for the average person to understand precisely how the Act will impact them. Unfortunately, much of how the Act will impact the health insurance landscape is yet to be determined. Nevertheless, here are some of the Act’s general provisions, some of which are effective immediately, with others having delayed effective dates:

Prohibition of lifetime benefits limits based on dollar amounts.
Prohibition of coverage rescissions or cancellations, except in cases of fraud or intentional misrepresentation.
Mandating that dependent insurance coverage up to the age of 26.
Prohibition of pre-existing condition exclusions for dependent children under the age of 19.
Requirement that employers report the value of health care benefits on employee’s W-2 tax statements.
Limitation on medical expense contributions to flexible spending accounts to $2,500 per year.
Establishment by each state of an insurance exchange where individuals who are not covered under their employer’s health insurance plan can shop for health insurance at competitive rates.

While many of the Act’s provisions appear straightforward, some of the provisions may bring about unintended consequences. For example, the Act provides that effective 2014, employers with more than 50 employees must provide health insurance or pay a fine of $2,000 per worker each year if any worker receives federal subsidies to purchase health insurance.

Clearly, the Act’s intent is to encourage such employers to provide health insurance to their workforce. However, employers focusing on the bottom line may discover that it is cheaper to pay the fine than it is to provide health insurance. In such cases, employees may be left without insurance coverage and employers may end up benefitting financially despite the fine.

Another possible avenue for manipulation involves the manner in which the Act deals with tax credits for small employers. Since the amount of the tax is dependent on the size of the employer and the average annual wage of its workforce, it is possible that some employers may let the tax credit dictate its hiring activities and the manner in which the employer determines the wages of its workforce. Since some of the tax credits are based in part on the average annual wage of an employer’s workforce, employers may choose to keep salaries within the range in order to preserve the tax credit. Moreover, employers may elect to use the services of independent contractors, rather than employees, in order to preserve the maximum tax credit.

Additionally, the Act includes an excise tax on employer sponsored health insurance plans that offer policies with generous levels of coverage. This so-called “Cadillac tax,” which becomes effective in 2018, imposes a 40% tax for any health insurance plan with an annual premium in excess of an inflation adjusted $10,200 for individuals and $27,500 for families. Unfortunately, the practical consequence of this tax may be the elimination of higher quality insurance for executive or key employees.

Regardless of one’s views of the Act’s provisions or the manner in which an employer may elect to operate in light of its terms, it is important for businesses to maneuver through the new law and stay ahead of any changes. By understanding the Act’s implications, it is possible to ensure future success under the new health insurance landscape.

At Setnor Byer Insurance & Risk, we are committed to helping our clients navigate the coming changes and to provide our clients with complimentary answers to their questions. If any of our clients have any questions regarding the Act, contact us.

Did You Know? January 2010

Did you know that the need for spoilage coverage extends beyond food-based risks? If your business has any stock that would be destroyed or rendered unusable due to an extended loss of power, then you would be wise to consider coverage that protects this perishable stock.

Spoilage coverage is designed for any business that processes, stores, or sells perishable items that must be maintained under controlled conditions to avoid damage. This insurance applies to both properties owned by you and the property of others that is in your care, custody, or control (as long as the property is located at the insured’s premises).

There are two coverage options, both or either of which may be obtained:

breakdown of equipment and contamination; and
power outage.

The breakdown or contamination option covers spoilage caused by the breakdown of refrigeration, cooling, or humidity control equipment, as well as damage from refrigerant contamination. The power outage option covers interruption of power, whether the source of the outage is on or off the premises.

Property covered under this insurance is valued using the same valuation method that applies to personal property in a commercial property policy. However, insureds can opt for another method that uses the “selling price” of the product for valuation purposes. This option assigns value to the stock based on the amount for which the insured was selling the product, less any applicable discounts and usual expenses.

If a refrigeration maintenance agreement is in place, an insured can receive a rate credit on the breakdown/contamination coverage. However, the agreement must be maintained in full force throughout the policy term for the rate credit to apply.

Businesses that may have a spoilage exposure include:

Restaurants, bakeries, and ice cream operations
Fruit and vegetable retailers
Grocery stores, convenience stores, and butchers
Florists, nurseries, and greenhouses
Pharmaceutical operations
Cigar stores
Exotic fish stores
Candy stores
Blood banks
Laboratories
Cold storage warehouses

If your business is vulnerable to the risks covered by a spoilage policy, you need to protect it from the potentially devastating losses that can occur should such an event occur. To talk to a Setnor Byer Risk Management professional about spoilage coverage, or any particular risk that your business is vulnerable to, please contact our office, and a member of our team will be happy to assist you.

All in the Family: A Parent’s Liability for Torts Committed by the Child

The relationship between parent and child is one of devotion and responsibility. Even in the most extreme circumstances, there is little that a parent would not voluntarily do for his or her child. However, what would a parent do for the person who was injured or who suffered property damage at the hands of the child? In such a case, the answer may not necessarily be up to the parent.

Historically, common law tradition asserted the premise that a mere parent-child relationship was not sufficient grounds to impose liability upon the parents for the torts committed by the child. However, despite the long-standing common law, some states, including Florida, California, and Texas, have enacted statutes that impose liability on the parents for the tortious acts of the child.

These parental liability laws were presumably enacted in an effort to compensate the victims of torts committed by children, but perhaps also to encourage parents to better discipline their children. While the latter justification may be disputed, the result remains the same in states that have enacted such laws—parents may be held liable for the torts committed by their children.

Similar in form to the vicarious liability of an employer for the acts of the employee, the parents are held legally responsible for the harmful conduct of their children despite having played no active role in the tortious behavior. Moreover, these laws apply to acts committed by children living with their parents who have not yet reached the age of majority, which is 18 years old in most states.

In order for the parental liability laws to be implicated, the minor children must generally engage in conduct which is more egregious than mere negligence. For example, under California’s parental liability law, the minor child must commit an act of “willful misconduct.” A child must act maliciously or willfully in order to trigger the parental liability statutes in Arkansas and Florida, while the Oregon statute requires an intentional or reckless act.

Parental liability laws also tend to differ from state to state in terms of what type of damage or harm must occur before the potential for parental liability is implicated. The laws typically differentiate between damage to property and injury to people. For example, the Florida, Texas, and Arkansas statutes operate to impose liability upon the parent in the event of damage to property, whereas the California and Oregon statutes apply in cases of damage to person or property.

Another area where these statutes tend to differ is in the actual amount of liability which may be imposed upon the parent. While Florida’s statute does not contain an express limit on the amount of damages which can be recovered against the parent, other statutes do. The statutes in Texas and California, for example, provide that the liability of the parent shall not exceed $25,000. Oregon limits the liability of the parent to $7,500, while Arkansas caps the amount at $5,000.

While many of the parental liability statutes share some traits, some of the statutes have unique characteristics. For example, in order for a Texas parent to be held liable for their child’s willful and malicious conduct, the child must be at least 10 years of age but less than 18 years of age. In Oregon, the parental liability statute expressly does not apply to foster parents. And in California, the statute makes the parent jointly and severally liable along with the minor child. Thus, although parental liability statutes tend to be similar in purpose, they vary, sometime significantly, in specific applicability. Therefore each state’s statute must be examined in order to determine the precise implications in any given jurisdiction.

It is important to note the distinction between the vicarious liability of a parent under a parental liability law and the direct liability of a parent in the absence of such a statute. Under a vicarious liability theory, the parent is found liable on the basis of the relationship alone rather than on the culpability of the parent’s behavior. Under a direct liability theory, the parent is liable to the extent his or her own actions contributed to the damage, such as in the case of a parent who lets an intoxicated child drive the family automobile. Parental liability laws do not generally impact the possibility of a parent’s direct liability under a traditional negligence theory, which means that a parent may still be found liable for his or her own actions even if the applicable state law does not contain a parental liability statute.

While it can be fairly assumed that parents will always try to prevent their minor child from causing injury to person or property, even in the absence of a parental liability law, it is important for the parents to understand to potential risk exposure that may result from the actions of their children. By knowing the risk, parents can adjust their behaviors, as well as their protections, accordingly. One such adjustment may be insuring against the potential liability. In some cases, a homeowner’s insurance policy may cover claims resulting from a child’s acts even if the act took place away from the residence.

To learn more about the possibility of insuring against damages resulting from the acts of a minor child, contact us.

Oh No, I Have Been Served! – Unlawful Discrimination Lawsuit

The day was progressing like any other – putting out fires, monitoring production, cultivating new business – until the receptionist announced the presence of an unexpected visitor. The hand you held out for an introductory shake was met with a bundle of paperwork. The confusion created by the unanticipated delivery was momentarily clarified when the visitor mumbled a few parting words: “You’ve been served.”

A brief scan of the documents revealed that a former employee filed a lawsuit in federal court alleging unlawful discrimination. The expected stream of emotions soon followed: bewilderment, denial, fear, anger, and finally pragmatism. Something needs to be done, and since an answer to the complaint must be filed within 20 days, contacting an attorney must be near the top of the list.

Unfortunately, defense attorneys do not typically handle cases on a contingency-fee basis. Rather, they bill their time hourly, and while many attorneys provide a complimentary phone call, the meter typically starts running shortly thereafter. Clients are ordinarily expected to cut a substantial retainer check before any steps are taken to mount a defense.

Needless to say, defending against an employment practices lawsuit, such as one alleging discrimination or harassment, is a costly proposition. Even if the employer wins the lawsuit, the outcome of the experience will likely be viewed as a loss. The bill for attorneys’ fees alone will invariably cause financial harm to an organization. For those already struggling through difficult economic times, the harm may be irreversible.

The employer in this hypothetical situation has no choice but to deal with the imminent present since nothing can be done to change the past. However, for those cringing at the thought of personally experiencing this situation in the future, there is one thing that can be done to alter the experience – obtain employment practices liability insurance (EPLI).

EPLI protects employers in the event of such workplace claims as discrimination, wrongful termination, and sexual harassment, as well as other civil wrongdoings, such as wrongful demotion, failure to promote and discrimination by third parties (i.e., clients). Generally, a policy covers eligible losses stemming from such causes of action, as well as associated litigation costs, including attorneys’ fees. And the insurance company will provide the services of attorneys who specialize in defending against such claims, thereby significantly increasing the likelihood that employers will prevail in the event litigation does occur.

Yet, despite these obvious and valuable benefits, many organizations choose to forego purchasing EPLI. Those responsible for protecting their organization from the risk of loss have plenty of reasons for deciding not to purchase EPLI. However, upon closer examination, it is clear that the security afforded by these reasons is illusory. Let’s take a look at a few.

None of my employees would ever sue me. Let’s assume that this is true (although we know it isn’t). Did you know that several equal employment opportunity laws, such as Title VII and the Americans with Disabilities Act, also protect applicants? While some organizations may take comfort in the belief that their employees would never sue, such a perception does not address, much less protect against, the possibility of an employment practices lawsuit being filed by an applicant. Needless to say, those relying on the charity of strangers for security have a significant hole in their risk management umbrella.

Our organization complies with all employment laws. There is little doubt that most organizations have every intention of complying with applicable employment laws, and that they, in fact, make a good faith effort to do so. Unfortunately, this reasoning incorrectly assumes that lawsuits are only filed by those who were actually victims of an unlawful employment practice. In reality, many employers are ultimately found to have not violated the law, yet they were still required to defend their actions in court. Undertaking a defense is expensive, and from a purely economic standpoint, vindication through the judicial system is rarely worth the price of admission.

It can’t happen to me. Clearly, this age-old rationalization is as wrong in this context as it is in everyday life. According to the Equal Employment Opportunity Commission, the number of employment related claims is on the rise. Hence, it is not only happening, but it is happening in greater numbers. While this increase in claims may be attributed to several factors, including a struggling economy or corporate cutbacks in HR training and monitoring, there is good reason to believe that the increase will continue well into the future.

Consider that the ADA Amendments Act broadened the scope and applicability of the Americans with Disabilities Act. Since more people qualify as disabled under the amended law, more people will be entitled to the ADA’s protection. In practice, this signals the existence of a new and significant risk exposure – an ADA lawsuit – that may not have previously existed. Therefore, the likelihood of falling victim to an employment practices lawsuit is greater now than it was then.

We are a small operation so we don’t have to worry about employee lawsuits. While employee lawsuits brought against large companies make the headlines, smaller operations should be equally concerned about being sued for an unlawful employment practice. Compared to large corporations, many smaller organizations operate casually and informally. While a collegial atmosphere can make for a more relaxed workplace, it may increase the likelihood that behaviors are not properly monitored or that policies are non-existent or loosely applied. Moreover, smaller organizations often do not have the budget or infrastructure to ensure the proper handling of human resources. Since these factors almost invariably lead to lawsuits, smaller organizations are prime candidates for EPLI.

We have an excellent HR department that ensures compliance with all equal employment opportunity laws. While placing an emphasis on human resources can go a long way toward reducing the risk of being sued for an unlawful employment practice, it is by no means a guarantee. Two things merit discussion on this point. First, unlawful employment practices occur despite top-notch HR departments. Consider that a well-known, publicly traded clothing retailer paid approximately $50 million to settle a class-action discrimination lawsuit despite what was surely a well-qualified HR department. Furthermore, it is important to acknowledge that efforts of the HR department do not always filter down to the entire workforce.

Second, in some situations, the risk of violating an equal employment opportunity law cannot be reduced by the HR department. The recent amendments to the Family & Medical Leave Act’s regulations provide a good example. Until the precise scope and applicability of the regulations are determined by the courts, employers are operating with their best guess as to what the regulations actually require. Unfortunately, this means that some employers, regardless of the quality of their HR department, must defend their actions in court, often at great expense. This reality underscores the importance of EPLI.

There is no room in the budget for EPLI. Certainly, budgetary constraints are always a valid consideration. While many view the premium for EPLI as the budgetary figure worthy of consideration, the real figure is the amount that will have to be paid out in the event a lawsuit is filed. How do the attorney’s fees and the plaintiff’s judgment fit into the budget? A realistic approach to the budget should consider the potential cost of not obtaining EPLI rather than the cost of the premium. When such a calculation is undertaken, purchasing EPLI is almost always considered a smart investment.

Although there are many reasons for not purchasing EPLI, once a lawsuit is filed, all of those reasons lose whatever merit they may have once had. There is a world of difference between personally dealing with (and paying for) the defense of an employment practices lawsuit versus forwarding the papers to the insurance company. One option is not only cheaper, but it provides a peace-of-mind that allows the organization’s focus to remain on the continued successful operation of the business. Needless to say, the alternative is much, much worse.

If you would like more information about EPLI, please contact us.

Dangerous Shallows: Using Credit Insurance to Protect Your Assets

John F. Kennedy once said that “a rising tide lifts all boats” to illustrate the idea that everyone benefits from a strong economy. Although the accuracy of this macroeconomic view may be challenged, its optimism cannot. However, if this premise is correct, then the opposite must also hold true – a falling tide lowers all boats. Unfortunately, since the economy appears to be in the midst of the lowest tide in distant memory, this could prove disastrous for many businesses.

During difficult economic times – low tides, if you will – many consumers shift into survival mode by cutting costs to the absolute minimum and stretching dollars to the absolute maximum. Despite their best efforts, however, many are left insolvent and unable to pay their bills. If one of these commercial consumer’s bills happens to be one of your accounts receivable, then you may find your boat sinking along with the rest; a victim of the falling tide.

The importance of protecting commercial accounts receivable during a struggling economy cannot be overstated. An account receivable is money owed by a customer for products or services that were provided on credit. It represents dollars a company does not have at its disposal to pay its obligations, reinvest in inventory, or finance growth. And, since accounts receivable are treated as a current asset on a balance sheet, the loss of receivables can jeopardize a company’s financial stability on multiple levels, from making payroll to obtaining financing.

The most effective method of protecting accounts receivable is to only do business with financially strong commercial customers. Unfortunately, the increasing difficulty of locating such customers has left many businesses considering the option of eliminating the practice of providing goods or services on credit, thereby foregoing the maintenance of accounts receivable altogether. However, the extent to which sales on credit are embedded as an ordinary business-to-business practice in many industries renders this option unrealistic.

Yet, there is another way businesses can protect their accounts receivable – credit insurance. Credit insurance, sometimes called accounts receivable insurance, provides protection against the commercial risk created by customers who fail to pay, or delay in paying, their open accounts. For instance, credit insurance can protect against the loss created by a customer with an open account who files bankruptcy, struggles with cash flow issues, or lacks sufficient insurance to withstand an adverse liability judgment.

Credit insurance is not new (it has generally been available in some form for over 100 years), but the ever-increasing number of customers defaulting on their open accounts has recently brought more attention to this risk management product. Hence, more and more businesses are considering whether credit insurance is for them.

Other than the obvious benefit of satisfying a defaulting customer’s open account, credit insurance may offer other benefits as well, including the reduction of collection costs, the reduction of bad-debt reserves, and an overall strengthening of the balance sheet. Moreover, credit insurance may serve to enhance a company’s financing relationships since insured accounts receivable are considered stronger collateral than non-insured or mature receivables. Lending institutions may consider the insured receivables when calculating a business’s borrowing base, thereby allowing the business to achieve more favorable financing to fund growth. By strengthening the balance sheet, credit insurance may also serve to increase the value of the business in the eyes of prospective purchasers.

Although credit insurance may not be necessary for every business, those sharing certain characteristics may want to consider giving the prospect of purchasing such coverage a closer look. If the following statements represent your business, then you may be a good candidate for credit insurance:

Does your company provide commercial goods or services on credit?
Would the non-payment of one or more of your large commercial accounts jeopardize your company’s ability to continue as a going concern?
Does a small percentage of your commercial customer base make up a significant portion of your accounts receivable?

There is an additional factor that should be considered – sales in foreign markets. Several credit insurance products also protect against foreign political risks that may prevent or delay payment, such as a war in the customer’s country, cancellation of a contract by the government of the customer’s country, or adverse regulations imposed by the government of customer’s country which prevent or restrict consummation of the transaction.

During any time, but especially during difficult economic times, risk-free ventures are virtually impossible to come by. However, as with any insurance product, the goal is to reduce the risk to a manageable level so the focus can optimistically remain on the upside potential of a business venture rather than the debilitating downside.

So, if one or more of these conditions apply to your business, raising the option of obtaining credit insurance may not be a bad idea. Let us know if you would like to discuss your risk management options.

Did You Know? November 2008

Did you know that your business equipment is exposed to a unique set of risks not common to other types of property? When your equipment suffers a sudden, accidental breakdown, as a result of an event like an electrical short circuit or a power surge, your business operations and income flow may stop just as quickly. Standard property insurance does not provide protection against the unique risks associated with the breakdown of equipment. Equipment Breakdown Insurance, also referred to as Boiler and Machinery Insurance, covers accidents involving electrical equipment; air-conditioning and refrigeration systems; boilers and pressure vessels, computers and communications equipment; and mechanical equipment. This insurance will pay the cost of repairing and replacing damaged equipment covered under the policy, costs that often greatly exceed the policy’s premium. Any resulting losses in business income, as well as additional costs incurred in trying to restore operations quickly, may also be covered under such a policy.

Virtually every business needs equipment to operate. If you use electricity; heat, cool, or refrigerate your premises; or manufacture goods on machines, then you do rely on some type of equipment to generate revenue for your business. When that equipment stops, so does your business.

Don’t take that chance. For more information regarding Equipment Breakdown Insurance, please contact us today.

Did You Know? October 2008

Did you know that in the event of a disaster, business interruption insurance can be just as vital to the survival of your business as coverage for your building and its contents?

While many business owners are concerned about property damage and the accompanying financial loss that can result from a disaster, they often neglect to protect themselves against the impact such damage could have on their revenue stream. That’s why they should consider acquiring business interruption insurance, which covers reductions in net income and provides an organization with the funds needed to pay normal operating expenses. Remember that a forced temporary closure of your business does not mean that your expenses stop. Payroll, mortgage/rent payments, money owed to suppliers, taxes, and even your own salary draw are all necessary expenses that you must meet. Business interruption insurance will keep needed capital flowing when you need it the most.

Extra expense insurance is also available to cover those expenses over and above normal operating costs that your company may incur as a result of maintaining operations during the repair/reconstruction period. Extra expenses are those that would not have been incurred had there been no loss or damage to your property, including the costs associated with relocating your business, such as renting space in a temporary location, advertising the new location, and obtaining additional equipment and supplies to sustain operations.

You have worked hard to establish your business and make it profitable. Being forced to suspend operations because of a fire, hurricane, or any other disaster has the potential to cause severe financial hardship. Adding business interruption coverage to your current insurance program is a prudent measure that can ensure that your company remains operational in the most difficult of circumstances – the times when the value of having the right insurance coverage becomes immeasurable.

Is Crime On Your Menu? If So, Take It Off

You’ve often heard that crime doesn’t pay, but you should be aware that it can be quite costly when it occurs at your place of business.

According to the Federal Bureau of Investigation, approximately 1.5 million violent crimes occurred in the United States in 2007. Usually, it is the criminal justice system that metes out punishment to perpetrators, most often in the form of incarceration; occasionally, however, a victim may file a civil lawsuit to recover money damages from a perpetrator. In any event, it might seem that violent crimes generally involve only victims and assailants.

But that is not necessarily so. The dynamic may be significantly altered if the crime takes place on the premises of a food service establishment. Why? Because food service establishments, as possessors of land, owe a duty to their patrons to protect them from hazardous conditions, including the risk of suffering a criminal attack, on their premises. In fact, under certain circumstances, a food service establishment may be held liable to a victim of a crime that occurs at their establishment if it is determined that the establishment has failed to protect victims from perpetrator[s].

Notwithstanding jurisdictional variations, it is generally the case that a possessor of land who holds it open to the public for a business purpose may be held liable to those members of the public for physical harm that is caused by a third person’s intentional, harmful act when that act takes place while individuals are upon the land for a business purpose. In other words, a food service establishment may be held liable for harm that is inflicted on patrons during a crime that takes place on the establishment’s premises.

An establishment’s liability could be triggered when a patron suffers physical harm during a crime if the harm is caused by the failure of the food service establishment to exercise reasonable care:

To discover that such harmful acts are being done or are likely to be done; or
To give a warning adequate to enable the patrons to avoid the harm, or otherwise to protect them from it.

In interpreting this duty, courts have noted that since a possessor of land is not necessarily an insurer of its patrons’ safety, the possessor of land is ordinarily under no duty to exercise any care until it knows or has reason to know that the criminal acts of a third person are occurring or are about to occur. In other words, a possessor of land has a duty to take reasonable precautions to protect patrons from foreseeable criminal attacks. Whether or not a criminal attack is foreseeable often turns on the frequency with which crimes have occurred at an establishment.

One method of establishing foreseeability is to prove that the possessor of land had actual or constructive knowledge of a particular assailant’s inclination toward violence. Another method is to prove that the possessor had actual or constructive knowledge of a dangerous condition on the premises that was likely to cause harm to a patron. If the place or character of the business, or its experience with crime on the premises, is such that the establishment should reasonably anticipate criminal conduct on the part of third persons, either generally or at some particular time, the establishment may be under a duty to take precautions against it, and to provide reasonably sufficient personnel to afford reasonable protection to patrons. Simply put, if a criminal attack on a patron is foreseeable, then the food service establishment has a duty to protect its patrons.

It is also important to note that this duty to protect has often been extended to ensuring the safety of the parking area and to providing a safe and suitable means of ingress and egress. In appropriate circumstances, this duty may require the implementation of safety and security measures that include employing on-site security personnel, installing video surveillance equipment, and erecting a fence to protect the parking and the entrance areas. Whether an establishment’s protective measures are deemed “reasonable” will depend to a significant degree on the circumstances.

The statistics prove that anyone can be a victim of crime. Nevertheless, people often believe that it happens only to someone else. While this perception may provide some level of comfort as you go about your everyday life, such thinking does not reflect sound business judgment. In the event you fail to do everything in your power to mitigate patrons’ risk of being victims of crime on your premises, you may find that you have also been the victim of a crime – even though it really did happen to someone else.

Ordinance and Law Coverage

Did you know that, following a major disaster, some of your rebuilding expenses may not be covered by your property insurance? The costs of demolishing an undamaged portion of a building or of improving a structure to bring it up to code are specifically excluded under most property policies. Yet often, building codes and ordinances require that such measures be taken to bring a building into compliance with current law.

Buildings are constructed to meet or exceed the codes in effect at the time of their construction. But as buildings age, those codes often become obsolete as construction standards change in an ongoing effort to improve the fire safety, structural integrity, and energy efficiency of buildings. Enforcement of these new standards is triggered when an insured building experiences a covered loss, such as a fire or hurricane, and the structure must be rebuilt according to current, and stricter, codes. So how do you protect yourself from the burden of financing the additional costs of bringing your structure up to code? By adding Ordinance and Law Coverage to your current property insurance. Ordinance and Law insurance consists of three separate coverages: 1) loss to the undamaged portion of the building; 2) increased demolition costs; and 3) increased costs of construction. To learn more about Ordinance and Law Coverage and the benefits of adding this valuable coverage to your current property policy, please contact our office.

When Duty Calls, How Should Your Establishment Respond?

The Saturday night crowd in the popular restaurant is larger than usual. Guests are enjoying cocktails and conversations at the bar while waiting for a table. Food preparers are busy, but activity in the back of the house is going smoothly. Suddenly, a diner, in obvious distress, clutches his throat, seemingly unable to breathe. After a few tense moments, another member of the choking victim’s party gives his companion a few sharp blows to the upper back, dislodging the food that had caused the obstruction. Suffering from nothing more than some residual anxiety and a minor case of embarrassment, the diner appears no worse for wear.

The proprietor and staff breathe a collective sigh of relief, thankful that a calm, quick-thinking patron prevented what could have been a tragedy. Nevertheless, the incident raises an important question that all restaurant owners and operators must answer: What duty does a restaurant have to help a choking patron?

Generally speaking, the duty one individual owes to assist is necessarily relational. In other words, determining whether or not a duty is owed typically depends on the relationship between the individuals in question. For example, moral obligations aside, an individual who randomly comes across a stranger in need of assistance is generally under no legal obligation to render assistance to the distressed individual. However, if the law determines that a relationship does exist between the actors, then it may find that there is a legal duty to provide assistance.

In the restaurant context, a legal relationship does exist between the restaurant and its patrons because patrons are specifically invited to enter the restaurant’s premises for a purpose – buying and eating food – that is directly related to the restaurant’s business. Legally, this makes restaurant patrons invitees of the restaurant, as opposed to licensees (e.g., social guests) or trespassers. Once the relationship between the parties has been established, the duty a restaurant owes to its patrons can be determined.

Generally, a proprietor, a restaurant in this instance, is under an ordinary duty of care to render aid to an invitee after the proprietor knows or has reason to know that the invitee is ill or injured. In the context of choking patrons, courts have held that a restaurant must summon medical assistance within a reasonable time upon learning that a patron is choking.

Additionally, in the context of rendering first aid, courts have generally held that a restaurant is not under a duty to provide advanced first-aid, such as the Heimlich maneuver, to a choking patron. However, it is important to note that several states have enacted statutory provisions that may add to, or change, a restaurant’s obligations to choking patrons.

For example, Georgia’s statute requires the state’s Department of Human Resources to print and distribute notices explaining the proper procedure to be taken to assist or aid persons who are choking. Food service establishments are required to post and maintain these notices in conspicuous places on the premises. Like many other such statutes, Georgia’s provides immunity to any person who renders good faith emergency aid, without any charge, to persons who are choking.

Florida’s statute provides that a food service establishment must post a sign illustrating and describing the Heimlich maneuver. Additionally, the statute makes each food service establishment responsible for familiarizing its employees with the method of rendering such assistance. However, the statute expressly states that it does not impose a legal duty to render emergency assistance to a choking individual. Florida’s statute, like Georgia’s, also provides immunity to those who choose to render aid.

Oregon goes one step further by requiring food service employees in restaurants to be trained, within a reasonable time after hire, to administer emergency first aid to relieve any person choking on food particles. The Oregon statute contains an immunity provision similar to that found in the Georgia and Florida statutes.

The importance of being intimately familiar with any and all applicable state statutes or local regulations regarding choking patrons cannot be overstated. Owners and operators of restaurants should consult with a licensed attorney in every jurisdiction where their establishments operate to ensure strict compliance with the law.

Regrettably, the benefits of such compliance may become evident all too soon because, when it comes to choking, a situation can turn tragic in the blink of an eye. However, by making every effort the law demands, you not only decrease the likelihood of legal liability, but you also increase the likelihood that your patrons will enjoy pleasant and safe dining experiences.