The Americans with Disabilities Act, more commonly known as the ADA, was signed into law by then-President Bush on July 26, 1990 with overwhelming support from the House and Senate. All of the sections of this landmark civil rights legislation were put into effect as of July 26, 1994, confronting the insurance industry with the significant issues of federal compliance, professional responsibility, and financial impact.
The complexity, vagueness, and cross-over requirements of the Act are well known, and general consensus from the onset has been that much of the ADA's interpretation will be determined in the courts. The Civil Rights Act of 1991, which opens the door for ADA lawsuits seeking compensatory and punitive damages, has dramatically increased the likelihood of litigation. This potential gold mine is already gaining the attention of lawyers who shunned such suits because of the limited relief and fines originally intended by ADA.
One of the first federal lawsuits, filed against the New York State Board of Law Examiners on February 13, 1994, charged discrimination for failure to provide special state bar exam accommodations for a Stanford Law School graduate suffering from dyslexia and attention-deficit disorder. Although the accommodations issue was settled, Randi Rosenthal's lawyers are continuing their claim for $550,000 in compensatory and punitive damages.
Recently, the Bar/Bri bar review course agreed to pay $53,000 to settle an ADA claim that it failed to provide (1) a sign language interpreter in the classroom for deaf students, and (2) braille transcripts of its classes for blind students. The agreement came on the heels of a virtually identical settlement with a Southern California company that provides CPA test review courses. Ironically, Bar/Bri had been giving written transcripts to deaf students and audiotapes to blind students-but that was not enough to meet ADA requirements, according to the Justice Department. Neither of these companies were Fortune 500 operations; they were typical small businesses that suddenly found themselves embroiled in federal litigation.
Businesses are not subject to inspectors arriving at their door, as with many federal and state regulations. ADA violations are actually policed by customers, employees, and job applicants. The public has been appointed as the designated watchdog.
Advocacy groups, such as The Disability Rights Education and Defense Fund (DREDF), are instructing the disabled about their rights under ADA. DREDF, which monitors current litigation and provides technical assistance, has trained 5,000 disabled people to assist in their communities' compliance efforts and provide support for businesses trying to comply with the ADA, reserving litigation for a last resort. Other groups are advertising 800 numbers in major metropolitan areas to advise the disabled of their rights.
A Double-Edged Sword
Insurance is the industry most affected by the multifaceted requirements and implications of the ADA. Like other businesses, insurance companies and agencies are required to comply with ADA provisions relating to Employment (Title 1) and Accommodating the Public (Title 3). Unlike other businesses, the insurance industry must also come to terms with: (1) informing clients as to the effect of insurance coverage on ADA-related claims and lawsuits; (2) assessing the impact of ADA on Workers' Compensation, Health, and Disability claims; (3) assigning specific ADA responsibilities to company and agency; and (4) investigating the viability of providing ADA insurance coverage.
To evaluate the ADA properly, first understand the law. Then review the issues specific to the insurance industry. Through understanding, one may come to see the ADA as an opportunity for growth rather than a reason for despair.
Title 3: Accommodating the Public
Every insurance company and agency, regardless of its number of employees, must enforce Title 3's requirements to accommodate the public (its customers).
In general, reasonable accommodations must be made in policies, practices, and procedures to prevent discrimination against disabled individuals. Effective communications must be ensured for hearing-, vision-, and speech-impaired individuals through the use of auxiliary aids and services. Physical barriers must be removed if 'readily achievable,' or through alternative measures. New construction and facilities undergoing alteration must be made accessible.
Title 1: Employment
All insurance companies, brokerages, and agencies with 15 or more employees are subject to the Title 1 employment requirements, which are totally separate from, and independent of, Title 3.
In general, Title 1 prohibits discrimination against employees or qualified applicants because of a disability. Employers must reasonably accommodate the disabilities of employees and qualified applicants. As with Title 3, providing equal access also means ensuring effective communications, removal of physical barriers, and accessibility of new construction and alterations.
The Meaning of Compliance
The ADA's stated intent is to protect the civil rights of disabled individuals, allowing them equal opportunity to participate in, or benefit from, the services offered to the public. On the employment side, the ADA protects a disabled employee's civil right to the same opportunities, benefits, and services available to the non-disabled employee.
Insurance companies, brokerages, and agencies must implement their own compliance with ADA requirements under Titles 1 and 3 before going on to provide insurance to the public and employers. Elemental to this compliance is the term 'equal access,' which includes physical access to and within a facility, as well as to information, benefits, and services.
Facility 'access,' applicable to both titles, is the easiest to understand because specific architectural guidelines and standards are in place, running the gamut from restrooms, elevators, and ramps to door openings, curb heights, and parking space widths. Accommodating the physical needs of a specific employee, particularly in relation to that employee's workplace or station, may require a more creative solution with technological adaptations.
Equal access to information can be considerably more difficult to address owing to the nature of the insurance industry. Compliance requires reviewing for accessibility every existing method of communication, for hearing-, vision-, and speech-impaired employees, customers, and job applicants. Determining the necessary auxiliary aids and services as well as policy and procedural changes is crucial to ADA compliance.
Here's an example. Review accessibility to printed policies for the visually impaired. Consider application forms, billing, policy changes, loan agreements, marketing material, and claims forms. Then consider the complicated nature of verbal communication that takes place in selling a policy to and telephoning the visually impaired in the course of normal customer services.
On the employment side, access to information requires review of such items as employee handbooks and manuals, internal notifications, signs, newsletters, training and educational programs and materials, computers, public-address systems, meeting rooms, evacuation procedures, telephone usage (inbound, outbound, internal), and-lest we forget-insurance benefit policies.
Compliance Starts with Education
Education must form the first step in dealing with the ADA's impact on the insurance industry. You will need to decide on a particular course of action. Self-driven education requires considerable time researching the law, regulations, and educational material provided by the various federal agencies-and will generally require expensive professional legal advice along the way. On the other hand, professional consultation could be even more costly because it would have to cover architecture, communications, transportation, human resources, legal matters, and finances.
Your best bet is to invest in prepared compliance manuals, workbooks, and seminars. The cost of such material is relatively minor, considering that they have sorted through the quagmire to provide specific directions and concise analysis. As with consultants, though, beware of the publication or seminar that claims to meet all your needs. The best resources will target individual categories within the ADA: employment discrimination, effective communications, facility access, etc. (As a Silver Member, you already have access to the ADA Compliance Manual on this CD-ROM disc, and Equal Information Access provides a general review of the ADA, specifically targeting the communication issues.)
Always remember that undereducation, like ignorance, is never a valid defense in court.
Professional Responsibility
While learning about the ADA and developing compliance programs for public and employee accommodations, insurance companies and agents have a professional responsibility to carry the ADA message to the businesses they insure. Many insureds probably feel that they are covered for ADA-inspired lawsuits by General Liability insurance. Since most policies exclude coverage for violations of federal law, agents and companies need to clarify this issue with their clients.
Aside from minimizing your E&O exposures, educating and assisting your clients in proper ADA risk management can foster a 'service difference' that instills client loyalty-and thus retains accounts. The best way to educate your clients is to recommend specific compliance materials. A letter explaining the ramifications of the ADA and suggesting material for them to purchase will suffice for many accounts. Companies and agencies may want to go a step further for larger accounts by supplying ADA manuals and materials or even to arrange seminars and workshops for clients (and prospects).
The magnitude of the ADA dictates that neither agencies nor companies can expect each other to bear the full burden of responsibility. A dialogue should be developed between a company and its representative agencies to work together to comply with the ADA.
The Business Side
In view of the innovative nature of the insurance industry in identifying risks and developing applicable insurance coverage, the question of ADA insurance comes to mind. Under the original intent of the law, with fines set at maximums of $50,000 (first offense) and $100,000 (subsequent offenses), the risk seemed manageable.
However, the effects of 1991's Civil Rights Act in opening the door to compensatory and punitive damages dramatically increases the risk of major ADA claims. Regardless, some insurers are already offering ADA Liability coverage with limits as high as $10 million. Premiums are steep; one starts at $10,000 for $1 million in coverage, with deductibles ranging upwards from $10,000.
Many insurers are limiting their market to major corporations with top-flight Human Resources departments. Expect ADA policies to be very precise in delineating named perils, and limited as to costs of litigation, accommodation, and compensatory awards. Punitive damages and fines for violations are not generally covered. Most existing policies are limited to employment coverages, not public accommodations. (The Company Programs section of your CD-ROM disc will advise you of available coverages, including public accommodations risks.)
One question still arises: Will the existence of insurance coverage promulgate even more litigation? On the underwriting side, the ADA poses a number of questions that only time and experience will resolve. There are two schools of thought concerning the impact of ADA on Workers' Compensation, Health, and Disability coverages. Some experts hold that ADA will be good for business; others maintain that the ADA will be harmful.
Primary concerns center on the questions employers can and can't ask job applicants and new hires regarding prior health history and existing disabilities. Once a job is offered, such questions may be asked, but they do not create grounds for withdrawing the offer unless they reveal a condition that poses safety problems or prevents performance of essential duties. Note that withdrawing a job offer because of an inability to perform essential duties must take into account that the employer is required to provide reasonable accommodation.
Some experts fear that this requirement will have a negative effect on Workers' Compensation insurance because of the potential for both legitimate and fraudulent claims resulting from alterations to current screening policies. Similarly, since disabled employees must be afforded the same insurance coverages, great concern exists over increased outlay for medical claims. Although preexisting conditions can be exempted from Health coverage, such a policy must apply to all employees. A smaller segment feels that Disability insurance may be affected by the hiring of disabled workers who may later qualify for Disability compensation.
Without discounting these concerns, there is a more positive viewpoint. The goal of the ADA is to provide the disabled an opportunity to enter or return to the workplace, to be contributing members of society. Many companies that have historically hired such individuals maintain that their work performance and safety records are above average. Even if Workers' Compensation claims increase, long-term financial outlay could experience a net decrease as companies reintegrate injured workers into the workplace. Disability insurers may also find more workers returning to work sooner, which will shorten the payment periods. Disability insurers may even find it beneficial to underwrite some of the costs of educating businesses about the ADA and helping companies to make workplace accommodations.
The Health insurance issue is more complex. The inclusion of AIDS under Disability definitions poses a significant financial risk, especially for self-insureds who may be prevented from placing caps on AIDS coverages. However, with or without the ADA, major changes are on the horizon as Health insurance has been 'elevated' to the political agenda. Bottom line:
Individuals and businesses will be absorbing higher costs for Health insurance, through either increased premiums or government taxation. The ADA is not the cause of change, merely a possible catalyst for it.
The Intent
Congress intended a wide range of individual factors to determine appropriate actions for ADA compliance. There is no intention of forcing businesses to undergo significant difficulty and expense to accommodate individuals with disabilities. However, the burden of proving that an accommodation is unreasonable, that an alteration is difficult to achieve, or that compliance would create an undue burden is placed on the business. Proof will be drawn from prior analysis and evaluation, and the decision based on substantial facts according to the specific factors. In other words, don't assume that this is a 'loophole' that can be easily defended. Documentation of your review will be critical.
The tax credit ruling for small businesses may provide some guidance. For any tax year, the IRS will allow a business tax credit equal to 50% of eligible public accommodation access expenditures starting at $250 but not exceeding $10,250.
To qualify for the credits, a small business must have had gross receipts for the preceding tax year of less that $1 million, or had fewer than 30 full-time employees. Using the proportion of $10,000 expense to receipts of $1 million and the 50% tax credit as standards, you could draw the conclusion that an overall expense of one-half of 1% of gross for total accommodation expenditures is reasonable, at least to the IRS. However, this is only hypothetical, and the courts will probably be making the final determinations.
The ADA is a reality. It will lead to major changes in the insurance business as we move into the 21st century. Viewed positively rather than begrudgingly, the ADA can catalyze the progress of any company's or agency's overall operations. Properly implemented, with a complete evaluation of existing policies, practices, and procedures, the result will be better service, a broader marketplace, and increased retention-a formula that traditionally equals greater profits.