Employment practices liability insurance, which is known as EPLI, is an important coverage for any business with employers, or that is about to hire employees to have because it covers claims related to employment. EPLI policies will cover employees who are both full time and part time, seasonal employees, independent contractors, any former employee of any type as well as potential employees. Employment-related lawsuits are expensive, with defense costs that can be high, and judgments are often over $100,000. These claims are excluded by General Liability policies so a company without this coverage will need to pay these costs out of pocket. Security guard businesses, both large and small, have an exposure to being sued by an employee or a former employee. EPLI coverage used to only be purchased by larger companies but as lawsuits are becoming more commonplace, small companies are finding themselves fighting claims in court and costs add up to defend claims of this nature. Frederick Yohn of MarketStance stated that out of all the companies with 500 employees or more, at least 1/3 carry EPLI insurance. He also stated that for companies with less than 50 employees, less than 4% have coverage. Carriers are seeing a trend in the increase of EPLI claims. The Equal Employment Opportunity Commission (EEOC) reported 2,118 more claims in 2016 than had been reported in 2015. The EPLI market has an expected growth of $2.7 billion by the year 2019. One of the reasons could very well be the increased media coverage of discrimination lawsuits, and a bigger awareness of these types of claims in general. This is bringing an often overlooked coverage to the spotlight. Because of this, more and more companies are purchasing this important coverage. What is Covered by EPLI?  EPLI covers a variety of types of claims that related to the relationship between an employee and the employer. EPLI covers claims that allege there has been an instance of discrimination (religion, color, nationality, age, sex, and race). In 2016 and 2015, the EEOC reported that the top five categories or discrimination claims were retaliation, race, disability, sex, and age. Retaliation claims comprised 46% of the total number of discrimination claims.  That is a staggering number. Other types of EPLI claims include sexual harassment, negligent or malicious evaluation, wrongful termination, wrongful discipline (which is usually closely tied to discrimination), failure to promote, violation of leave laws, breach of employment contract, failure to hire, emotional distress, hostile work environment or willful deprivation of a career opportunity. What about Wage and Hour Laws? Wage and hour laws are another aspect of EPLI claims but not every policy covers them. Wage and hour laws are complicated because of the variety of local, state and federal laws. There are five types of wage and hour claims. The five types are: misclassifying employees (exempt or non-exempt from overtime pay), overtime wages, extra time off, meal breaks, independent contractors vs employees. Security guards are usually paid an hourly wage and depending on how your company schedules shifts and overtime, these claims can be costly to your company to defend unless your EPLI policy covers these claims. Ensuring that you have wage and hour law coverage is necessary for security guard business owners as claims of these types are on the rise. Third Party Claims  For security guards, who are often stationed at various locations and deal with a wide variety of people, third-party claims coverage is important. With a third party claim, the claim or lawsuit comes from somebody who is not an employee, such a client or customer, or somebody else at a client site (such as a customer of the client).  It is easy for somebody to say something without malice, but have it taken the wrong way and it can trigger a lawsuit. With so many employees off-site at other locations, and with a high degree of interaction with the customers of clients, third-party coverage is necessary to have on any EPLI policy for security guard businesses. Another type of third-party claim that is gaining traction is website accessibility lawsuits. These are lawsuits that allege that the ADA requirements for physical locations can be applied to a company’s website. By claiming that a website is not accessible to a disabled person, they can claim that they are being discriminated against. While the number of claims is low, they are being seen more and more, with companies such as Bed, Bath and Beyond and Ace Hardware being named in lawsuits. To prevent this type of claim, companies can provide audible captions on pictures and consider providing audible text for the website content. This is a type of claim that is being watched carefully. How can we Prevent EPLI Claims? One of the best ways to prevent claims is to have clearly written policies in the employee manual regarding discrimination, harassment, and conduct. Employees should sign a copy and return it to their employer. The managing director of MarketStance, Frederick Yohn, has said that when it comes to having written policies regarding discrimination and sexual harassment, only 41% of the companies with over 1,000 employees had a plan or procedures in place. Even a small company needs to have an employee manual that addresses this issue. Your company should have written procedures and guidelines for hiring, promotion, performance reviews, discipline and termination that all managers, supervisors, and owners must consistently follow. Each job position should have a written description of the exact job duties and expectations about the job. This is important for security guard companies because there is a physical aspect of the job. Job postings should clearly list what the physical requirements are. For preventing wage and hour claims, there are a few steps that you can take such as:

• Have a written policy regarding overtime hours and getting approval prior to working overtime
• Comply with all local, state and federal wage laws and rest/meal periods
• Keep employee records including their classification and duties and a written description of their duties that is consistent to their classification

  Preventing claims by having clearly defined job roles and descriptions, following written procedures for discipline, hiring, and termination and documenting everything are all necessary for minimizing the chances of having an EPLI claim. Security companies need to stay protected and their policy should include coverage for third-party claims and wage and hour law claims as well.

The severity and frequency of Workers’ Compensation claims has a direct bearing on the policy premium. The WCIRB uses both of these factors to determine the Xmod, and frequent small claims are a cost driver. Too many claims, or large claim amounts, can result in an XMod that increases the premium.  Having a good claims history can result in an Xmod that reduced the premium. This is an incentive for businesses to provide a safe place of business and to help reduce or prevent claims. As a business, how can you administer claim to keep the claim cost minimized? Many companies do not have any procedures in place for workplace injuries or incidents. Small to medium size businesses often erroneously think that only large businesses need to have incident reporting plans and set procedures. No matter what size business you have, having a plan in place before any injuries occur is how businesses can effectively manage their claims. What are the action steps for a Workers’ Compensation Claim? All injuries, even minor ones, should be reported to the appropriate person. This can be a manager, a supervisor or the owner. An injury reporting plan is your first defense against managing claim severity and frequency. Untreated injuries can turn in to larger claims later, which is why all injuries need to be reported to the appropriate person to be assessed, treated and documented. Your injury reporting plan should clearly define what an injured employee, or other employee, should do if another employee is injured. First aid stations or kits should be easily accessible. It is your duty to provide immediate medical treatment in the event of an injury. If no first aid is required at the time of the injury, the injury still needs to be reported and documented fully for your records. Documentation is vitally important in the management of Workers’ Compensation claims. Not only should the time and nature of the injury be listed, but what the employee was doing at the time of the injury and what factors contributed to it. If possible, document the injury and the area where it happened with photos. In addition to having the employee complete the incident or injury report, any witnesses should also provide their written statement relating to what happened. Statements should be taken as soon as possible and documented fully. This helps not only to provide a clear idea of what happened, but can help protect your business from fraudulent claims. If the injury is severe, or the medical issue is beyond the scope of basic first aid, make sure that the employee is seen by a medical professional. Emergencies should necessitate a call to 911 without delay. If the employee needs to see a doctor, but it does not require an ambulance, have a plan in place to get them to a hospital or clinic. Your injury procedures should include a plan of how to determine the severity and scope of the injury in order to easily determine if 911 should be called or if they employee should be taken to a clinic or emergency room, or if they are okay to take themselves. Some states require that there is a designated doctor for injuries and illnesses that are work related. This information should be posted in a visible area along with the required postings for Workers Compensation that the states require. If the injury requires further attention, the employee needs to specify when they are seen that it is a work related injury when they arrive at the clinic, doctor or emergency room. Usually, the sooner medical help is received, the better the treatment outcome and the claim costs are lower. Delaying getting medical help can increase claim costs in the long run. If an injured employee refuses medical help, make sure that refusal is documented as well. Claims should be reported as soon as possible to your Workers’ Compensation carrier. Prompt reporting helps to mitigate the total cost of the claim. Carriers would like that all claims be reported but with claim frequency having an impact on the Xmod, it is a management call if first aid claims get reported or just documented. If you do not report a minor first aid claim to the Workers’ Compensation carrier, one of your written procedures should be to follow up with the employee and document the follow up. If you do report a first aid claim, make sure that it is reported specifically as a first aid claim. First aid claims are usually closed quickly with only medical costs being reported and paid directly to the clinic. Once you report the claim, give as much information as you have regarding the incident, first aid steps taken and where the employee was treated. All of the incident documentation should be sent along with the first notice of claim. Your Workers’ Compensation policy will have details on claims reporting. What happens after I report a claim? Once you report a claim, you can still take steps to minimize the total claim costs. To minimize time off work employers should have a back to work plan to accommodate injured employees. Light duty (modified duty) programs help lower overall claim costs by eliminating total disability payments. Make sure that the employee is medically cleared for light or modified duty before allowing them back to work. Stay in contact with your employee to stay on top of their progress. You can establish procedures to check in with them weekly, or every few days, to find out how they are doing. Communication is a great tool, and employees should feel like they have an open line of communication with management. The goal is not to pressure them to come back to work, but to make sure they know that they are valued as an employee and their wellbeing matters. Work with them to establish a return to work timeline and what work restrictions to expect when they come back. This will help you create a light duty plan to accommodate their injury or illness. Make sure that they get their medical restrictions in writing so you can have documentation for the file. As with any type of claim, documentation is important. With Workers’ Compensation claims, not only are their immediate medical costs, but they involve reserve amounts that are set aside. By taking steps to minimize injuries, and to immediately handle them, companies can help claims cost be lowered by having clear lines of communication to get their employees back to work, even with light duty. In addition to having an injury reporting plan, it is also recommended to have an accident investigation plan. In the event of an accident, it should be investigated as to what caused, or contributed to the injury, and what steps can be made to prevent it from happening again.    

Last week we spoke about the importance of Assault & Battery coverage and how it is commonly overlooked. We also gave some examples of when this coverage comes into play. To stay with that theme we will be reviewing some of the most overlooked coverages important to your business.   Care, Custody & Control This coverage is applicable when you or one of your employees is guarding a location where you might be in charge of protecting equipment or property. If some of your client’s property or equipment is damaged as a result of your negligence, this coverage will then come in to play.   Below is a claim example of Care, Custody & Control. A fire started on the middle floor of a building and caused $200,000 in damage.  There was a delay in the officer on duty calling the Fire Department.  Ultimately, our insured was found negligent and assigned $100,000 in damages.  The property damage was covered under the Care, Custody & Control.  A secondary claim was brought onto insured through E&O for lack of hiring and training.

While having the proper limits on your insurance policy is important, what is included and excluded takes an even higher precedence. I review multiple policies daily and am surprised at the amount of Security Guard Companies that are not properly insured. I was reviewing a prospective clients’ policy when I was shocked to see Assault & Battery was completely excluded from his policy. When I advised him of this exclusion he said he was under the impression he did not need this coverage since his guards did not “touch” anyone. Insurance defines Assault & Battery as the following: “A threatening act, physical and/or verbal, which causes a person to reasonably fear for life and safety, the unlawful application of force to another person, physically striking another person without permission”. As the owner of a Security Guard business, I’m sure you can see why Assault & Battery is such an important coverage after reading that definition. No matter the type of contract, low-risk or high-risk, if a claim is brought against you due to a security guard assaulting someone, you want to make sure you and your business is properly insured. This coverage is here for a reason, and that reason being sometimes you can’t control the unexpected. Find some examples of Assault & Battery below: Example 1: There were shots fired in a club and the victim was running to the exit when he was grabbed by four security guards and escorted out. The victim claimed that the security had beaten him violently in the act of escorting. Example 2: Incident reports two patrons were escorted when they refused to pay for a drink. One of the patrons resisted, requiring him to be restrained and escorted out of the bar where Police took over. Patron claimed he was assaulted in the act. Example 3: Claimant was waiting in line when she asked if she could use the restroom. The security granted her entry to use the restroom, after which she refused to return to line. She was escorted out and claims she was jumped by the staff.

On most general liability insurance policies there is a nightclub, bar and/or lounge exclusion. This means that there is no coverage for any general liability claim brought against a security guard company with this specific work exclusion. If you’re a security guard company and your general liability policy has bar/nightclub exclusion, you need to find out how the carrier defines what constitutes a bar or nightclub. What if you have a restaurant contract and the restaurant has a bar inside the location? Or a hotel  that has a bar/lounge inside the location? Will the general liability insurance carrier cover claims for these types of locations? The only way to find out if a possible claim will be covered is to confirm with your insurance carrier. Insurance carriers have their own criteria to determine if a particular location is a bar, nightclub or lounge. Do not wait until after a claim is filed to find out if the location you are securing is covered. Have your insurance broker do their research to see if the insurance carrier is classifying it as a bar or nightclub. If you do obtain a security guard contract with a bar/nightclub there are general liability policies available that will provide coverage for these types of locations. The minimum premiums for the general liability policies that coverage security operations/bouncers at bars is much higher when compared to standard policies. Typically the minimum general liability policy premiums start at $20,000 to $25,000. The range in minimum premium will vary depending on amount of payroll, number of locations, and prior losses. Be aware, most general liability policies that cover bars do have a sub-limit for assault and battery coverage. I have seen the assault and battery sub-limit range between $100,000 to $250,000. Most security guard companies I speak with are unaware of the additional general liability cost to properly insure the business against claims resulting from work at a bar/nightclub. If incurring the general liability premium cost makes sense, we can obtain quotes from our markets for security guards/bouncers at bars/nightclubs. Once we have the information needed to present to our markets we can begin the quoting process.

At least once a week, I receive a phone call from a security guard company wanting to replace their current general liability insurance policy. Typically, they find out that their current policy excludes a large portion of their operations and contracts. The call I received this week, was from a guard company that had 100% armed guard/low-income housing contracts. When the insured took a closer look at his policy, he noticed the exclusion for low-income housing. I asked him to email me his policy so I could review his policy further. Upon reviewing the policy the exclusion clearly states that there is no liability coverage provided for Low Income, subsidized or affordable housing. Furthermore, the policy also had an exclusion for firearms! I was able to obtain and provide the insured with alternative liability quotes that included coverage for his low-income housing and firearms exposures. The premium to properly insure this security guard company’s exposure went up, but now this insured is paying for a policy that may actually defend him in the event of a general liability claim.

Unfortunately, these phone calls occur too often. When purchasing a general liability policy, the decision maker must look beyond the premium page. I would strongly recommend asking for policy forms of all exclusions. This will allow you to read the exclusions so you can make the determination if the exclusion leaves the company liability to a claim that will not be covered. Of course, the best case scenario would be to have a trusted insurance broker that can properly explain to you the limitations of a general liability policy and the possible ramifications of the exclusions. 

My advice to security guard insurance decision makers is to take advantage of an insurance broker that specializes in your industry. There are a handful of us that deal solely with security guards and there are a limited number of insurance programs providing coverage.

Of course, obtaining a most competitive premium is important to any business. However, you don’t want to save a little on premium at inception that ultimately leaves your company vulnerable to lose thousands of dollars in possible claim’s cost due to gaps in the liability policy.

A Loss Run Report is a necessary item in the world of insurance when it comes to obtaining quotes. I am often asked why they are required, even if the company has not experienced any losses. Think of a Loss Run Report similar to a Credit Score. If you have experienced losses, this will show on the report and will most likely effect your premium in a negative way. On the other hand, if you have showed no losses, for an extended period of time, this will ensure you get the best premium pricing available.

When obtaining quote for new clients, I always ask for 4 years of currently valued loss runs. Now, if you’ve only been in business carrying insurance for two years, I would only need those two. These loss run reports can be obtained through your current broker and requested over the phone or via email. It is important to note the loss runs need to be Currently Valued, meaning the report was generated in the last 30 days, giving the most accurate information.

If your business is experiencing a high volume of losses and causing an increase in premium, contact one of our agents so we can discuss our Loss Control programs the help prevent future incidents and repair current losses.

An insurance company that has been approved by the state’s insurance department is “admitted”. '

The qualifications a carrier must meet to be qualified are the following:

• The insurance company must comply with all state regulations regarding insurance (which are established and overseen by the National Association of Insurance Commissioners).
• In the event that the insurance company fails financially, the state will step in to make payments on claims as necessary.

From a business owners standpoint this is good for two major reasons:

• You don’t have to pay various fees and taxes when you purchase a policy because the company’s status makes those expenses unnecessary.
• If the company fails for some reason (e.g., claims after a natural disaster deplete its reserve of funds), you have a guarantee that the state will step in and cover your claims.

As a “non-admitted” insurance carrier, has not been approved by the state’s insurance department. A few things to be aware of:

• The insurance company does not necessarily comply with state insurance regulations.
• If the insurance company becomes insolvent, there is no guarantee that your claims will be paid, even if your case is active at the time of the bankruptcy or financial failure.
• If a policyholder thinks his or her case was handled improperly, he or she cannot appeal to the state insurance department.

Although an “admitted” carrier seems like the solid choice between the two, keep in mind the financial stability of the insurance carrier you choose. A “nonadmitted” carrier with a financial rating of (A+) might be a better bet than an “admitted” carrier with a rating of (C).