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Businesses seek to limit exposure

Walking a fine line on liability

A company contracted a temporary staffing service to hire a receptionist. While on the job, she was asked to deliver and pick up legal briefs, errands the staffing service was not aware of. When she was involved in a car accident on the job, a workers’ compensation claim was filed. The insurance company initially resisted covering the claim because the employee was not classified as a delivery person, which carries a higher rate.

A few years ago, two company sales representatives took a break from a trade show to eat dinner. They drank a couple of glasses of wine and returned to the trade show slightly tipsy.

“Nothing happened in the trade show incidence,” said Mark A. Smith, president of Columbus-based The CPI Group, a full-service human resources and staffing company. “But it could have. The burden is solely placed on the employer. In the case of the receptionist, the claim was eventually paid.”

Danny Avery, senior resident consultant of The CPI Group, described conducting business today “like trying to navigate a minefield without a map.”

“Or without a mine detector,” added Smith, who served in the military. “At least we had different tools at our disposal. In the business

world, we wonder ‘what`s it gonna be today?'”

With society in general becoming more litigious, and Mississippi`s lingering reputation as “tort hell” despite recently passed tort reform legislation, businesses are scrambling to make sure they are shielded from libelous situations, which run the gamut from retail “slip-and-fall” events to situations that take place in gregarious settings like office parties.

“When you are dealing with a sales force that travels – maybe they go to a trade show, get in a bar and do something horrendous, or try to get a co-worker to go to their room – the company can be held liable for employees’ behavior in certain cases because they are considered agents of the company,” said Avery, who recently led a series of refresher training seminars on sexual harassment. “There are all kinds of workplace situations that create liability, certainly under the horrible tort laws we have in Mississippi.”

To reduce liability, an employer could opt for basic general liability insurance, errors and omissions-type insurance coverage and workers’ compensation insurance for physical injuries, said Avery.

“Employers should make sure they have adequate business liability coverage, with an umbrella policy above their GL (general liability),” he said. “The umbrella policy is relatively inexpensive because if you’re carrying $2-million or $3-million GL, you may have an umbrella policy up to $10 million with a $2-million or $3-million deductible.”

Having an umbrella policy fill in the balance sounds right, said Ken Barlow, president of The DelKen Group, a Ridgeland-based full-service human resources company.

“More companies are trying to protect themselves from being sued,” he said. “By doing those split policies, they get the money to pay the initial problem if it`s only $1 million or $1.5 million, but the umbrella policy kicks in if it`s $5 million or $6 million. It`s almost like a bridge plan or gap policy that many companies are going to for health insurance.”

Liability insurance isn`t cheap. Since terrorists attacked the continental U.S. on Sept. 11, 2001, workers’ compensation and general liability insurance have increased more than 50%, said Smith.

“It`s very difficult for us to maintain a level of profitability that we’re used to and still deliver the service our clients expect,” he said. “Insurance is probably our number one challenge. In the last five years, we’ve had to considerably raise the amount of coverage for our general liability, especially regarding getting and maintaining larger accounts. Several years ago, we decided to be pro-active and began acquiring policies on E&O, primarily because of our consulting division. We strongly suggest employment practices liability to everyone because it covers you in some areas GL will not.”

Also, companies must have policies and procedures in writing – signed by employees – that clearly state zero tolerance for harassment, discrimination and other matters, and they must provide training and refresher training on a regular basis, said Avery.

“If a company can show these steps have been done, the employer can say there`s no reason this incident should have taken place,” he said. “Then many times, the courts will refuse to hear a case against an

employer.”

Despite the best planning practices, companies sometimes are financially responsible for an incident even when they are not at fault.

“We had an employee at a construction site who was walking across the yard when another subcontractor, who wasn`t affiliated with us, ran over his leg and broke it,” said Smith. “We realized that the subcontractor was not covered appropriately enough to even be on the job site, and their insurance didn`t cover the incident. Our comp had to pick it up.”

After sales representatives imbibed wine at a trade show, the company adopted a strict no-alcohol policy, said Smith.

“Alcohol has been a primary source of some of the issues that arise,” he said.

Because a company-sponsored event is considered company business, and is usually held on company property, more businesses are taking pro-active measures, such as adopting a no-alcohol policy, designating drivers or implementing a program for local taxis to take people home who might have consumed too much alcohol, said Barlow.

“If a company has done all that it can, then the company is in a better position to defend itself if it can prove everything possible was done to stop a situation from happening, and that the company was unaware of a problem until an incident occurred,” he said.

Contact MBJ contributing writer Lynne W. Jeter at mbj@thewritingdesk.com.

About Lynne W. Jeter

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