Protecting your organization against financial loss due to management liability issues can be viewed from three perspectives: fiduciary liability, employment practices liability, and directors and officers (D&O) liability. Professional organizations, such as accounting firms, law firms, and healthcare providers should add “professional liability” risks to the mix, but that’s a discussion for a future column.

Fiduciary Liability Insurance

Any organization that exercises discretionary authority over an employee benefit plan such as a retirement, profit-sharing, or health plan is a fiduciary. As a fiduciary, you are liable to your employees, and possibly their dependents, for failing to act in their best interests.

The risk exposures confronting fiduciaries grow more diverse, complex, and costly every year. The risks associated with 401(k) and managed healthcare plans are just the tip of the exposure iceberg. In 2010, healthcare reform legislation brought with it a whole new array of liabilities. Employers now face penalties, as well as litigation from employees, for failing to comply with the minimum standards for healthcare plans as defined in this massive legislation.

Fiduciaries can also be held liable for the errors and omissions of third-party service providers such as actuaries, attorneys, accountants, and investment advisers.

Fiduciary liability insurance provides protection against legal liability arising out of the management of employee benefit plans, including the cost of defending against such claims. Some insurers offer a single policy addressing the risk exposures created by both retirement plans and health plans. Other insurers offer separate policies for each risk exposure. For employers that do not provide retirement plan benefits, “employee benefits liability” coverage may be sufficient. This narrower form of insurance protects against claims arising out of the administration of a benefit plan, including the failure to enroll an employee in the plan; however, it specifically does not provide coverage for the imprudent investment of funds.

Employment Practices Insurance

Every employer, regardless of size or ownership structure, is a potential target of legal action from past, present and prospective employees. Recent studies estimate that three out of five firms will be sued by an employee. These suits can originate at any point, from the pre-hiring process to the exit interview, even from individuals who were never hired, or only with the company for a few days.

Employment Practices Liability Insurance (EPLI) was designed in response to the above trend and is a relatively new form of liability insurance. It covers discrimination (age, sex, race, disability, etc.), wrongful termination, sexual harassment, and other employment-related allegations.

While an employment lawsuit may be groundless, simply defending your organization against such a claim can be financially crippling. When reviewing EPLI proposals, determine whether defense costs are in addition to or included in the policy limit. In most cases, policies where defense costs are “in addition to” policy limits are more advantageous for the insured.

Directors & Officers Liability Insurance

A third component of the management liability discussion is Directors and Officers (D&O) liability insurance. D&O insurance protects corporate directors and officers in the event they are personally sued for management related actions. This insurance typically covers legal fees, settlements, and other costs.

Virtually all public companies purchase D&O insurance as it is almost impossible to attract investors and directors without this coverage. However, such is not the case with private companies.

Many owners of closely held companies, particularly family owned companies, do not purchase D&O insurance under the belief it is unlikely they will be involved in a D&O lawsuit because “we have too few shareholders”, “we’re all family here” or “we’re covered”.

Unfortunately, this perspective overlooks the fact that D&O claims frequently originate from a much broader base: customers, vendors, competitors, suppliers, employees, government regulators, creditors, etc. It also incorrectly assumes directors and officers are covered by general liability, fiduciary liability and employment practices liability policies, which in most cases, they are not.

One recent survey indicated the cost to settle and/or litigate a D&O case averaged more than $225,000 and losses on the high end approached $5 million.

For small and middle-market organizations, the incremental cost to obtain D&O coverage can be almost nominal if you are already purchasing other forms of management liability insurance.

Conclusion

While this is a simplified review of management liability risk exposures and the insurance coverages that can protect against financial loss (or ruin), it should help you assess your own risk management strategies. When assessing insurance options, some management liability policies may include coverage for additional risks such as privacy/cyber liability (identity theft), crime and kidnap/ransom. Talk to a qualified insurance broker to develop a comprehensive protection plan for your organization.

This notice is provided as information only and should not be considered a legal opinion. If you have questions, contact Seacrest Partners at 912-544-1900.

Savannah, Ga. — January 23, 2012 – -

Hundreds of companies from across the United States were nominated for this distinction and the top 100 finalists were selected based on a three-year compounded annual growth rate of revenues and other qualifying criteria.

Seacrest Partners was founded in 2006 by seven Savannah insurance professionals. Today, the firm employs 38 associates, nine of whom are UGA graduates.  Cindy Robinett, CPCU, CIC (UGA Class of 1989), managing partner of the firm’s property-casualty operations, and Cliff McCurry, CPCU, (UGA Class of 1971), vice-chairman, accepted the award on behalf of Seacrest Partners.

“It is an honor to be recognized by the UGA Alumni Association as a ‘Bulldog 100’ member,” said David Paddison, president of Seacrest Partners.  “Our success is, in no small part, attributable to those Seacrest employees who graduated from UGA’s Terry College Risk Management & Insurance program, one of the top schools of its kind in the nation. Seacrest Partners will look to UGA for future employees as our firm continues to grow and expand.”

UGA graduates employed by Seacrest include:

• Cindy Robinett, CPCU, CIC / Managing Partner
• Cliff McCurry, CPCU / Chairman
• Michael Butler, CPCU / Partner
• Susan White / Partner
• David Greene / Client Executive
• Matt Stinchcomb / Client Executive
• Matt Cail / Account Manager
• Thomas Odom / Account Manager
• Leslie Stroop / Account Manager

A privately-held firm with offices in Savannah and Atlanta, Seacrest Partners provides property-casualty insurance brokerage services, risk management consulting, and employee benefits consulting to clients throughout the Southeast. The firm also offers personal insurance services for the affluent sector.

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Savannah is a unique community from a variety of perspectives. For tourists, we offer pedestrian-friendly green squares and architectural wonders dating back to the 1700s; for college-bound students, Savannah has a growing number of higher education institutions; for commerce and industry, our fair city is home to one of the largest and busiest ports in the nation.

From an insurance and risk management perspective, Savannah offers just about as many unique twists and turns when it comes to properly insuring residential, commercial and institutional properties. A 200 year old home in the Historic District requires different insurance con-sideration than a five bedroom home on the Islands. A turn-of-the-century commercial building on Bay Street poses different “what if” scenarios in the event of a fire loss than a 50 year old manufacturing facility on Savannah’s west side.

In Savannah, one of the most common issues facing owners of high value historic properties is how to determine appropriate limits for property insurance purposes.

Property Valuation Methods

Whether the structure is residential or commercial, there are three common valua-tion methods: Actual Cash Value (ACV), Replacement Cost (RC) and Functional Replacement Cost. Each valuation method serves a specific purpose for the prop-erty owner as well as the insurance company.

Actual Cash Value is essentially the property’s construction cost less physical depreciation (wear and tear). Some commercial property owners use this valuation as a means of controlling insurance costs for non-critical structures. Conversely, insuring a primary residence under ACV terms is rarely recommended as the insured limit would mostly likely not be sufficient to rebuild the home to pre-loss condition.

Replacement Cost, in general terms, is the amount required to re-build the structure to its original condition before the damage. Some insurance policies pay up to the policy limit to replace damaged structures while others may actually pay 120% to 140% more than the insured limit due to increased construction and material costs.

Functional Replacement Cost is a third valuation option.

In Savannah, this coverage form is used quite frequently (or should be) by owners of high value historic properties, both residential and commercial. This valuation method allows for replacement of expensive and obsolete items with less expensive and more modern state-of-the-art work.

Functional Replacement Cost also eliminates the coinsurance clause and the Ordinance or Law exclusion, two important insurance considerations for all policy holders, particularly those with older buildings.

For older structures with expensive, ornate or obsolete construction features, coverage to replace these with “like, kind, and quality” can be exorbitantly expensive. Insuring a 174 year old bed and breakfast inn at current construction costs and methods may seem reasonable to the property owner; however, without the functional replacement cost endorsement, the insurance company may consider the true replacement cost to be the much higher (outrageously higher) in the event of a major loss.

If the policy is issued on a replacement cost basis and contains a coinsurance clause, the higher property valuation could result in a dramatically lower settlement offer than the inn keeper is expecting.

Functional Replacement Cost can make property insurance affordable, but it requires the policy holder to understand what will occur in the event of a major loss. While replacing lathe and plaster walls with wallboard or plywood may actually be a positive outcome, removing elaborate woodwork or replacing ornamental gargoyle drainage systems with aluminum drains and gutters may be less than desirable. Using composite shingles in lieu of expensive roof tile may be totally unacceptable.

Determining When Functional Replacement Cost Is Appropriate

The key to determining if Functional Replacement Cost is an appropriate option for your property is to work out the re-construction details before a loss. Essentially the policy holder, broker and insurance company will need to determine, in advance, a value for the property based on specific re-construction assumptions which are agreeable to all parties.

Conclusion

While the above discussion was a superficial explanation of property insurance valuation options, it provides a good foundation for additional discussions with your insurance broker. Whether you are a homeowner, a business owner, a real estate investor or a commercial property developer, understand-ing the unique “risk profile” of your property will help you make informed insurance decisions.

• in business at least five years
• verifiable revenues of at least $100,000 for the 2008 calendar year
• a UGA alumnus owns at least 50 percent of the company or serves as CEO, president, or managing partner
• operate in a manner consistent with the University of Georgia’s “Pillars of the Arch” character statement of Wisdom, Justice, and Moderation

Seacrest Partners was founded in 2005 by seven Savannah insurance professionals. Today, the firm employs 38 associates, nine of whom are UGA graduates. Cindy Parker Robinett, CPCU, ARM (UGA Class of 1989) serves as managing partner of the firm’s property-casualty operations.

A privately-held firm with offices in Savannah and Atlanta, Seacrest Partners provides property-casualty insurance brokerage services, risk management consulting, and employee benefits consulting to clients throughout the Southeast. The firm also offers personal insurance services for the affluent sector.

The announcement of the 2012 Bulldog 100 will be celebrated at a special event hosted by the UGA Alumni Association on January 21, 2012 at the Marriott Marquis in downtown Atlanta.

Ramsey has more than 29 years experience in the employee benefits consulting field. Prior to joining Seacrest, Ramsey was a senior vice president with AON Consulting / AON Hewitt where he served as a health and welfare client leader in the firm’s Atlanta office. He joined AON in 1988 and served as the lead consultant for regional, national and international corporations in a variety of industry sectors.

“We are pleased with Mr. Ramsey’s decision to join our firm. His commitment to clients, his leadership skills and an extensive knowledge of benefit plan design strategies makes him an invaluable asset to our growing organization,” stated Frank Beard, managing director of Seacrest’s Atlanta operations.

In his new position with Seacrest Partners, Ramsey will be responsible for designing comprehensive employee benefit programs for middle-market and large employer groups throughout the Southeast. With more than 29 years experience in the benefits consulting sector, he has developed specialized expertise in the areas of managed care, flexible benefits, strategic welfare benefits plan design and vendor selection.

“Woody’s experience in designing innovative solutions for large employers aligns well with Seacrest’s current client base and provides us with additional resources to attract new clients in our market area,” said Steve Eagle, managing director of Seacrest’s employee benefits practice.

Ramsey holds a Bachelor of Arts in History from Lynchburg College (Lynchburg, Virginia) and has earned the professional designations of Certified Employee Benefits Specialists (CEBS) and Health Insurance Association of America (HIAA).

Woody Ramsey can be reached at 404-602-5663 or woody.ramsey@seacrestpartners.com.

About Seacrest Partners

Seacrest Partners, Inc. was established in 2005 in Savannah, Georgia by seven insurance professionals. Today the firm employs 39 associates and operates offices in Savannah and Atlanta. The privately-held firm offers employee benefits consulting, property-casualty insurance brokerage services, risk management consulting, and personal insurance services for the affluent sector. The firm established an office in Atlanta in 2009 and acquired Atlanta-based Corporate Insurance Services in 2010.

Overview

Workers compensation insurance, for many businesses, represents the largest segment of their total commercial insurance budget. Unlike other coverages such as property or general liability, workers compensation expenses have been increasing steadily for many employers. The two main drivers behind rising workers compensation expenses are healthcare costs and disability payments. While most employers have limited options when it comes to controlling healthcare expenses of injured workers, they can have a major impact on the disability expenses associated with such incidents.

If you are not concerned with claims expenses paid by your workers compensation provider, you should be. Every time an insurer pays a medical expense or disability payment to an injured employee, that expense counts against your claims experience. At some point, your “experience modifier” will change from neutral to a factor that results in higher premiums. Conversely, if you run a safe operation, have no serious injuries and minimal claim frequency, your experience modifier will drop below 1.0 and your workers compensation premiums will decrease.

Safety First

Focusing on job safety is the most effective means of controlling your workers compensation costs. However, even the safest business has the potential for employees becoming seriously injured: retail workers can sprain backs, construction workers can fall from heights, and manufacturing workers can sustain repetitive motion trauma.

From a post-injury perspective, one of the most effective cost control strategies your business can implement is a formal return-to-work program. This strategy is a viable option for every business, regardless of size or operations. These programs can be implemented with little or no cost. It just requires planning and proper coordination.

Philosophy of Return-To-Work Programs

The philosophy of a return-to-work program is to control the effects of disability and absenteeism in the work place. Employees are your most valuable resource and any injury/illness can interrupt work activities. Small businesses are especially hard hit when an employee’s injury keeps him or her away from work.

The goal of return-to-work programs is the safe and timely return of employees to transitional or regular employment. Medical research has shown that people recover more quickly if they remain active and return to their normal routine as soon as possible. The longer an injured employee stays away from work, the greater the chance for permanent disability and increased claim costs. An effective return-to-work program also shows your employees that you are committed to their well-being.

Return-To-Work Options

Before offering an employee return-to-work duties, employers should first assess the injured employee’s position in terms of three potential return-to-work alternatives: Modified Work, Transitional Work and Alternate Work. These options should then be discussed with and approved by the injured employee’s medical provider.

In a Modified Work situation, the employee returns to his/her original job, but with duties modified to confirm to restrictions placed on the job by the medical care provider. Restrictions may include reducing the amount of work time and/or restricting certain activities such as bending or lifting.

In a Transitional Work situation, the employee returns to work, but because the original job cannot be modified to confirm the physician’s restrictions, the employee performs another job temporarily that accommodates the injured employee’s physical limitations.

The third alternative is Alternate Work. The employee is reassigned to another position or different type of work that accommodates current abilities.

Many transitional positions incorporate lower wage scales. Workers compensation disability payments may cover the differential between the pre- and post loss wage scale subject to state statutory limits.

First Things First:  Develop Your Written Policy

To implement a return-to-work program, employers should first develop written return-to-work policies and procedures and communicate to all employees. The next step is to create job descriptions of transitional duties for employees unable to perform their regular jobs subject to restrictions/limitations or “modified” duty. When an employee is injured, management should assess the employee’s options, identify appropriate transitional duty, then provide the injured employee with a written offer of modified or transitional duty work. The offer should include a beginning date, time, duties, wage, weekly hours and supervisor name and be sent via certified mail.

Formal return-to-work policies and procedures also protect an employer. In many states, if the employee quits or employment is terminated for reasons unrelated to the injury while released to modified or transitional duty, the insurance company must continue to pay lost time benefits unless the company can prove a valid offer of modified or transitional duty was made to the employee. Employers can minimize claims expenses in these situations by having the attending physician’s approval for the transitional duty, a written offer letter and formal return-to-work procedures.

Conclusion

Return-to-work programs can turn unfortunate incidents into win-win situations for employers and employees alike. Ask your insurance broker or workers compensation provider for assistance in setting up a return-to-work program for your company before someone gets injured.

This notice is provided as information only and should not be considered a legal opinion. If you have questions, contact Seacrest Partners at 912-544-1900.

Overview

As the world continues to grow as a global marketplace, the needs of the globally mobile workforce continue to develop as well. Some of your employees may be abroad for a few weeks, while others may relocate for years. No matter the length of stay or location, employers need to understand the difference between “domestic” health insurance coverage and those plans designed for the “expatriate” employees in your firm.

Domestic Policies & International Challenges

Often, employers operate under the assumption that their domestic health care coverage will provide the same level of benefits for their international employee population. However, covering the global workforce presents new challenges and obstacles that domestic carriers are ill-equipped to handle, such as cultural expectations, language barriers, transportation to U.S. health care centers, plan administration, and currency exchanges.

In addition to offering solutions for these potential complications, an international health insurer can also work with your employees to keep them healthy while on assignment through wellness programs that address chronic conditions, pharmacy management, and international employee assistance.

A domestic plan abroad may not only provide insufficient benefits, but may not comply with local laws and regulations due to the unique nature of each country.

For example, there has been an increasing trend in complications for such regions as the Middle East, which subjects international employees to host country laws regarding health care benefits. A domestic insurer’s benefits plan in these countries would not only be non-compliant, but may increase the risk of penalties and fines for the employer. Penalties for non-compliance vary and may include criminal imprisonment, as well as corporate and personal fines.

Bridging Cultural Differences

Understanding the cultural differences in a country of assignment also plays an important role in the success of an international employee.

For example, in the domestic health care market, co-payments and deductibles are widely accepted, yet doctors and hospitals in other countries are not accustomed to such a system of payment from patients and insurance companies. Working with an international health insurer to protect employees while abroad will ultimately contribute to the success of the assignment.

Before Going Global…

Before sending employees abroad while insured under a domestic benefits plan, employers should ask the following questions:

• Can employees access a global network of preferred doctors and hospitals?
  
• Is the benefits plan compliant with host country regulations?
  
• Does the benefits plan maintain an alliance with reputable insurance carriers throughout the world?
  
• Do employees have 24/7/365 toll-free access to multilingual, trained and in-house staff?
  
• Can claims be settled directly with international doctors or hospitals?
  
• Do employees have access to online, multilingual claim forms?
  
• Can claims be reimbursed in multiple currencies?

If you answer “no” to any of these questions or are unsure of the answer, consult with an employee benefits advisor experienced in coverage plans for expatriate employees.

Overview

On April 14, 2011, the President signed the Comprehensive 1099 Taxpayer Protection Act, followed by the Continuing Appropriations Act, which was signed into law the next day. Of note to employers and other sponsors of group health plans, these Acts repealed two key provisions of the Affordable Care Act, the expanded Form 1099 reporting requirement and the free choice voucher program.

Repeal Of Expanded Form 1099 Reporting Requirement

The expanded Form 1099 reporting requirement was seemingly unrelated to health reform; however, it was included as part of the Affordable Care Act to raise approximately $20 billion in tax revenue to offset part of the cost of health reform.

Prior to its repeal, the provision would have been effective January 1, 2012, and required employers to issue a Form 1099 to any vendor from whom the employer purchased $600 or more of goods or services in a calendar year. A similar rule already applies to employers who make payments in excess of $600 to any individual in a calendar year (i.e., an independent contractor), which remains unchanged. Small employers had voiced concerns that the expanded Form 1099 requirement would add significantly to the cost of tax reporting.

The Comprehensive 1099 Taxpayer Protection Act includes a provision to offset the loss of tax revenue due to the repeal of the Form 1099 requirement. Individuals who receive a federal premium subsidy (generally those whose household income is less than 400% of the federal poverty level) will be required to return part of the subsidy if their income exceeds certain levels. Repayments are based on a sliding scale, with those earning in excess of 400% required to repay the entire subsidy amount. These changes are a considerable increase from those initially established under the Affordable Care Act. 

Repeal of the Free Choice Voucher

Prior to its repeal, the free choice voucher provision would have required employers to offer certain employees a free choice voucher to opt out of the employer’s health plan and enroll in coverage through an exchange. To be eligible for a voucher, an employee’s premium contributions had to be between 8% and 9.8% of household income, which could not exceed 400% of the federal poverty level. The voucher would have equaled the employer’s contribution to the plan for which the employer pays the largest portion of the cost of the plan. Employees eligible for vouchers would have been able to use the voucher to obtain health coverage through an exchange and keep any remaining voucher amount as taxable in-come.

Employers expressed concern that younger, healthier employees who fit the voucher’s parameters would purchase coverage in an exchange in order to keep the remainder of the voucher. This would not only be an additional cost to the employer, but could increase adverse selection in the employer’s group health plan.

Although repeal of the free choice voucher may seem like a victory for employers, it removes an employer’s ability to avoid a nondeductible penalty under the Af-fordable Care Act (for failure to offer affordable coverage) by providing a free choice voucher, which would have been deductible by the employer.

This notice is provided as information only and should not be considered a legal opinion. If you have questions, contact Seacrest Partners at 912-544-1900.

Produced in conjunction with Proskauer Rose law firm.

SAVANNAH, Ga. (May 11, 2011) – - Seacrest Partners, Inc. has joined Benefit Advisors Network, a national network of more than 40 employee benefit brokerage and consulting firms.

Member firms share their knowledge and expertise with non-competing firms as a means of staying abreast of new industry tools, technology, and emerging insurance products.

By sharing their knowledge and experiences, member firms are better positioned to deliver optimum results to their employee benefit clients. Each new member adds to the network’s combined intellectual capital thereby building the strength of BAN member agencies.

Prospective members are closely screened to ensure they distinguish themselves through industry knowledge, ethical approach, business acumen, and strategic vision. Finalists are deemed the most progressive and innovative employee benefit consultants and brokers in their respective regions.

Seacrest Partners serves as the employee benefits broker for a number of Savannah’s largest employers. The firm was founded in 2005 with seven partners; today, the five year old firm employs 38 associates and has offices in Savannah and Atlanta. In addition to employee benefits consulting, Seacrest Partners also provides commercial property-casualty and personal insurance brokerage services.

For more information regarding Benefit Advisors Network, visit www.WhySmartPartners.com or contact Steve Eagle, managing partner of Seacrest Partners’ employee benefits practice.

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