What duties does your business owe to the employee of a customer or vendor? This may not be a question many companies have considered. They have contractual relationships with their customers and vendors that spell out the duties each owes to the other. Furthermore, that contract may require that each party obtain workers compensation insurance specifically to recompense any employee injured on the job.
No one wants to be sued, businesses especially. They particularly do not want to be sued by their customers or vendors. Many companies invest significant resources into policies and procedures designed specifically to avoid lawsuits. Unfortunately, some organizations choose to view lawsuits as the primary means of resolving disputes with others.
The Americans with Disability Act generally forbids businesses from discriminating against people with disabilities. A key tenet of the law focuses on the concept of accessibility. People normally think of things like wheelchair ramps within this context, but the explosion of online commerce has opened up new concerns relating to the ADA and the ability of disabled people to access commercial sites.
Wire transfer fraud claims resulting from cyber attacks have increased dramatically over recent years, and companies are losing millions of dollars in these attacks. As is common when a new business risk develops, organizations look to their insurance policies to help cover their losses. As we have shared in previous examples, the coverage is not always adequate.
The extent of coverage for a company that has been a victimized may be sparse, and the costs of any breach are ongoing. Consequences of a fraudulent wire transfer depend not just on the specific wording in the policies a business has purchased, but as seen in the following instances, also being upheld differently in different states.
In claims handling and litigation, a little creativity with definitions can help advance a case forward. Occasionally, though, that creativity gets pushed a little too far. Fireman’s Fund recently won a declaratory judgment ruling they did not owe coverage to a luxury apartment building. The case hinged on the interpretation of a relatively simple word in the insurance policy - “vehicle.”
Insurance lawsuits often turn on the definitions of words. This confusion results in extensive litigation over words that seem to have commonly understood meanings – words like loss or occurrence for example. With millions of dollars on the line, the exact definition of a single term within a policy can make or break a business. This highlights the need for companies to understand to the best of their ability what their insurance coverage provides and what it does, keeping a particular eye on what exclusions may apply.
In 2016, the same law firm started twelve different lawsuits against twelve different universities alleging violations of federal retirement law. Schlichter, Bogard, and Denton is often credited with starting the trend of filing lawsuits over excessive fees charged to retirement plans and has apparently moved on to 403(b) plans offered by nonprofit organizations. The university lawsuits alleged similar violations of the Employee Retirement Income Security Act (“ERISA”), claiming that the universities violated their obligation to their employees by failing to take steps to keep fees low while maximizing returns. The trouble for these organizations is that 403(b) plans and 401(k) plans have the same obligations under ERISA. The naming distinction comes from how such plans are treated under the tax code.
In September of 2017, Republicans gained a majority of seats on the National Labor Relations Board. After several months spent relatively quietly, the National Labor Relations Board overturned or reversed a host of decisions and regulations in the first few weeks of December. All the reversals focused on Obama-era policies only in place for a few years.
Whether to purchase cyber risk insurance remains a big question for many companies. Recent studies have shown that only a quarter of U.S. companies currently have cyber risk insurance despite more than half of companies stating they expect to suffer a breach within the next year. These positions seem inapposite, but they appear to stem from doubts about the effectiveness and the extent of cyber coverage given its price.
An emerging area of cyber liability for small businesses centers around the concept of third party risk. Third party risk means damages resulting from the security breach of a connected party - normally vendors or customers. Small businesses can face third party cyber risk on a number of fronts. They can face liability from a breach of their own systems infecting a vendor; they can also face damages caused when the breach of a vendor causes a breach of their own systems. Franchisee relationships have also caused increasing concerns of cyber risk.