KEEP YOUR GUARD UP: Daily Business Practices to Limit Your Liability Exposure By: Eugene M. LaFlamme Offices in Milwaukee, Chicago, Portland and Albuquerque.

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?

www.mlllaw.com

• 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?

www.mlllaw.com

• 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?

www.mlllaw.com

• 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

www.mlllaw.com

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?

www.mlllaw.com

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

www.mlllaw.com

• 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?

www.mlllaw.com

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????

www.mlllaw.com

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?

www.mlllaw.com

INSPECTIONS•NFPA 211

Level IReadily accessible

Level IIAccessible

Level IIIConcealed areas

• Inspection required depends on work performed.

www.mlllaw.com

NOTICE OF CLAIM OR INSPECTION

www.mlllaw.com

www.mlllaw.com

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

www.mlllaw.com

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.

www.mlllaw.com

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.

www.mlllaw.com

OTHER THIRD PARTIES TO NOTIFY

• Manufacturer• Wholesaler• Distributor• Other Contractors• Gas Company• Suppliers

www.mlllaw.com

• 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

www.mlllaw.com

• 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

www.mlllaw.com

INSPECTION EXAMPLES – WHAT’S WRONG HERE?

www.mlllaw.com

INSPECTION EXAMPLES – WHAT’S WRONG HERE?

www.mlllaw.com

INSPECTION EXAMPLES – WHAT’S WRONG HERE?

www.mlllaw.com

INSPECTION EXAMPLES – WHAT’S WRONG HERE?

www.mlllaw.com

• 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

www.mlllaw.com

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?

www.mlllaw.com

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.

www.mlllaw.com

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.

www.mlllaw.com

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.

www.mlllaw.com

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.

www.mlllaw.com

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

www.mlllaw.com

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.

www.mlllaw.com

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.

www.mlllaw.com

TENDERING DEFENSE FOR OTHER INSURANCE

• Additional Insured.

• Vendor’s Endorsement.

• Indemnity. By contract between parties. By insurance.

www.mlllaw.com

SELECTION OF COUNSEL

• Familiarity With Product or Service

• Specialists v. General Litigator • Past Relationships with Experts• Past Relationships with Insured• Panel Counsel

www.mlllaw.com

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.

www.mlllaw.com

MANAGE RISK: TRAINING

NFI Certifications – Gas, pellet and wood.

• NFPA 211.• In house training.• Manufacturer training programs.

www.mlllaw.com

MANAGE RISK: TRAINING

• Customer Education Product manuals Instructions Pamphlets/decals Communication

www.mlllaw.com

MANAGE RISK: DOCUMENTATION

• Inspection and Service records Notes on inspection

• Training records• Personnel files• Product information• Photographs

www.mlllaw.com

PHOTOGRAPHS

VS.

www.mlllaw.com

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

www.mlllaw.com

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.

www.mlllaw.com

www.mlllaw.com

QUESTIONS?