KEEP YOUR GUARD UP: Daily Business Practices to Limit Your Liability Exposure By: Eugene M. LaFlamme Offices in Milwaukee, Chicago, Portland and Albuquerque.
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KEEP YOUR GUARD UP:Daily Business Practices to Limit Your
Liability Exposure
By: Eugene M. LaFlamme
Offices in Milwaukee, Chicago, Portland and Albuquerque
• Civil litigation costs are equivalent to about 2% of the U.S.’s GDP.
• Current U.S. GDP is approximately $16.8 trillion.
• Litigation Cost = $336 billion.• Estimated 2.5 million jobs.
*Legal Ethics and Reform: The Indirect Cost of Civil Lawsuits to
the U.S. Economy
IMPACT OF LITIGATION?
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• The U.S. has the world’s costliest legal system.
• It is double the costs in the UK, triple the costs in France and five times higher than the costs in Japan.
• Civil tort claims cost the U.S. economy about $264 billion per year.
*Institute for Legal Reform: Lawsuit Abuse Impact
IMPACT OF LITIGATION?
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• America's tort system imposes a total cost on the U.S. economy of $865 billion per year.
• This constitutes an annual "tort tax" of $9,827 on a family of four.
* The Tort Tax, by Lawrence J. Mcquillan and Hovannes
Abramyan, Commentary, WSJ
IMPACT OF LITIGATION?
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• Suits filed per year (per 100,000):• U.S. – 5,806• U.K. – 3,681• France – 2,416• Japan – 1,768
• Number of lawyers (per 100,000):• U.S. – 391• U.K. - 251• France – 72• Japan - 23
Source: Are American More Litigious? Some Quantitative Evidence (2010)
LITIGATION STATISTICS
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What are the costs associated with litigation?• Attorneys• Experts• Business interruption/inconvenience• Business reputation• Insurance• Damages – compensatory and punitive• Indirect Costs
COSTS OF CIVIL LITIGATION?
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The American Rule• Each side pays there own attorney fees and
costs.• Contingency fee cases.
Lawyer Advertising• Study showed 79% of those polled thought
lawyer advertising encouraged people to sue.Source: American Association for Justice, also known as the Association of Trial Lawyers of America
PROSPECTIVE PLAINTIFFS’ INCENTIVE TO LITIGATE
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• 92% of U.S. companies polled predict that litigation will either rise or remain the same in the next 12 months.
• Litigation is still the most preferred avenue to resolve disputes.
* 2011 Fulbright Litigation Trends Survey.
FUTURE OF LITIGATION?
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CURRENT ISSUES AFFECTING THE HEARTH AND CHIMNEY INDUSTRY
• Proposed Changes to NFPA 211 (2016 edition): Use of After Market Parts• NFPA 211 technical met in March 2015, heard
public comments, and seem to be moving forward with amendment. • The Second Draft Report is supposed
to be posted no later than July 17, 2015.• 2015 Fall Meeting is when final decision will be
made.
• Potential issues????
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CURRENT ISSUES AFFECTING THE HEARTH AND CHIMNEY INDUSTRY
•Glass front barrier screens• Requirement took effect January 1, 2015.• Issue with glass fronts was identified by industry a number
of years ago.
• What should an HPBA business do if it services a glass front that does not have a barrier screen?
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INSPECTIONS•NFPA 211
Level IReadily accessible
Level IIAccessible
Level IIIConcealed areas
• Inspection required depends on work performed.
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NOTICE OF CLAIM OR INSPECTION
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NOTICE OF CLAIM OR INSPECTION
• DO NOT IGNORE THE LETTER.
• Immediately Notify your Insurer Insurer has a duty to provide you
with a defense.
• Institute a litigation hold.
RESPONSE TO NOTICE
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WHEN TO NOTIFY YOUR INSURER
• Insured’s Duty to Notify.• Potential implications of failing to
notify your insurer. Loss of coverage. Spoliation issues. Defense team gets a delayed start.
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LITIGATION HOLD
• Work and/or service records.• Contracts related to insured’s work .• Training records and certificates for
insured’s employees that worked at site.
• Personnel files for employees that worked at site.
• Warranty documents.• Warning documents.• Product decals.• Information received from wholesaler
or manufacturer.
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OTHER THIRD PARTIES TO NOTIFY
• Manufacturer• Wholesaler• Distributor• Other Contractors• Gas Company• Suppliers
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• Have relevant documents ready.• Identify individuals from company
that should be involved. Typically a manager and the technician
that worked in the field.• Meeting will involve your attorney
and expert.
PRE-INSPECTION MEETING
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• Goal is to determine the origin and cause of the fire.
• Most inspections last at least a full day.
• Multiple parties will be in attendance. Each party has a different agenda and
interest.• Attorney and expert role.
SITE INSPECTION
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INSPECTION EXAMPLES – WHAT’S WRONG HERE?
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INSPECTION EXAMPLES – WHAT’S WRONG HERE?
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INSPECTION EXAMPLES – WHAT’S WRONG HERE?
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INSPECTION EXAMPLES – WHAT’S WRONG HERE?
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• Evidence from the inspection will likely be examined further.
• Claimant will identify target defendants. May try to settle claim pre-suit; orWill simply file a lawsuit.
WHAT HAPPENS AFTER THE INSPECTION
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The identification, assessment, and prioritization of risks followed by a coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of risk events.
WHAT IS RISK MANAGEMENT?
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MANAGE RISK: INSURANCE
• Insurance policies provide companies with protection should an accident occur.
• Allows companies to spread the risk of loss amongst each other to reduce exposure.
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1ST PARTY v. 3RD PARTY COVERAGE
• 1ST Party Coverage Coverage for accident, injury, or
loss whether caused by itself or someone else (third party).
• 3RD Party Coverage Coverage for claims brought by a
third party. Commercial General Liability
policies.
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CGL POLICIES – WHAT ARE THEY?
• Typically Occurrence based. Occurrence v. Claims made policies.
• Designed to protect businesses from liability to 3rd parties.
• Claims usually involve bodily injury or property damage.
• Professional liability, contractually assumed liability, warranty, and faulty workmanship claims are usually not covered.
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PRIMARY BENEFITS OF CGL COVERAGE
• Indemnity Will pay benefits for a covered loss
up to the insurance policy’s limits.
• Duty to Defend If a claim or lawsuit is filed against
a policy holder, the insurer has a duty to defend the insured against the claims.
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DUTY TO DEFEND
• Outside Key Players. Insurance Adjuster or Claims
Handler Attorney Experts/Investigators
• Internal Key Players. Point of contact at company Corporate counsel Risk manager
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LEVELS OF INSURANCE
• Primary Insurance Attaches immediately upon the
loss or an event giving rise to liability.
• Excess Insurance Provides coverage above the
primary insurance levels.• Umbrella Insurance
Generally similar to excess insurance except that it can also provide coverage for areas in which there is a gap of coverage in the primary policy.www.mlllaw.com
POLICY LIMIT CONSIDERATIONS
• Premium Cost.• Size and nature of
business.• Types of risks the business
may face. For the sweep and
hearth/fireplace industries this includes fires, explosions, death, burn injuries, other personal injuries, and property damage.
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HOW MUCH IS ENOUGH?• Too Much Insurance v. Not Enough.• State liability laws vary greatly.
Joint and several liability. Pure comparative. Modified comparative. Contributory negligence.
• NE, N.D. – 50%; WI, IA, MN – 51%; S.D. – barred if more than “slightly negligent.”
• Protect business and individual assets.
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TENDERING DEFENSE FOR OTHER INSURANCE
• Additional Insured.
• Vendor’s Endorsement.
• Indemnity. By contract between parties. By insurance.
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SELECTION OF COUNSEL
• Familiarity With Product or Service
• Specialists v. General Litigator • Past Relationships with Experts• Past Relationships with Insured• Panel Counsel
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SELECTION OF EXPERTS
• Type of Claim. Complex fire/explosion accident or
general car accident. Potential damages at issue. Company’s estimated risk.
• Company’s involvement in selecting certain experts.
• In-house v. Outside Experts.
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MANAGE RISK: TRAINING
NFI Certifications – Gas, pellet and wood.
• NFPA 211.• In house training.• Manufacturer training programs.
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MANAGE RISK: TRAINING
• Customer Education Product manuals Instructions Pamphlets/decals Communication
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MANAGE RISK: DOCUMENTATION
• Inspection and Service records Notes on inspection
• Training records• Personnel files• Product information• Photographs
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PHOTOGRAPHS
VS.
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IMPACT OF BAD LOSS ON BUSINESS
• Lawsuit damages• Increased insurance premiums• Loss of insurance coverage• Negative media coverage• Civil fines• Criminal exposure• Loss or sale of business
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HOW TO REDUCE RISK OF BAD LOSS
• Focus on Safety.• Proper employee training.• Record Keeping.• Inform and educate customers.
Warnings Customer contact and relations
• Product development.• Compliance with federal, state and
local regulations.
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QUESTIONS?
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