PLUS: More Cooperation, Knowing Labor Laws and Better Underwriting Measures Needed to Stop Lawsuits

June 25, 2004

Effective litigation, cooperation, greater understanding of labor laws and meaningful communication are reportedly the keys to preventing lawsuits. Underwriters need to find out if HR understands state labor laws, whether they have outside counsel to help them and should seek labor employment specialists, according to panelists who spoke at the recent PLUS Employment and Fiduciary Issues Symposium.

“There needs to be effective litigation management,” said Sharmila Mahendra, employment practices claims manager, Zurich North America. “Insurers are more likely to send cases if they are resolved in a timely and efficient manner. The law firm should assign one lawyer to the case. The tasks that are assigned within the defense of each case are the level of expertise, and tasks should be assigned on that level of expertise and experience.”

According to Mahendra, there needs to be litigation management guidelines. “A list of things we expect to receive including an initial assignment letter that outlines the case,” she said. “State your impressions of the case. But the initial case analysis should not be set in stone. It should be modified with the filing of the litigation plan. This plan should identify what the discovery and motions are likely to be filed by the other side. The last report is a liability analysis. This should be done throughout the life of the case.”

Mahendra noted that as cases develop, it is important to get status results. “A quick e-mail or phone call that says there’s been no development is very helpful. Don’t hold on to facts. We like to make sure we’ve completed our analysis before we go to trial so we evaluate how the evidence is being presented and what the case law is in that jurisdiction,” she said, adding, “information should be shared between counsel, insured and insurer and flow in all directions. Communication is a significant part of the rules of professional conduct. We expect to know an analysis of the credibility of witnesses, how their disposition affects the outcome of the case.”

Jacqueline Gallagher, attorney, Obermayer Rebmann Maxwell & Hippel LLP, said that the U.S. Supreme Court has narrowed the Americans with Disability Act’s (ADA) definition of “disability” and some federal courts have rejected the ADA and the Family and Medical Leave Act (FMLA) regulations where more and more employees are finding protection under local law.

She noted five misconceptions under ADA and FMLA. “From an underwriting process, you need to know the law, but apply it in a common way. With regard to FMLA, a serious health condition may or may not be a disability under the ADA. If you have a serious health condition and take FMLA leave, you have up to 12 weeks leave. You can not force an employee to return to work if protected under ADA. When evaluating an employee if they have an FMLA policy, who is interpreting the policy? You need to evaluate if it’s an ADA and engage in the interactive process and work with professionals to see if it’s under the act. Determine what accommodation is necessary if you are required to do it under the law,” Gallagher said.

Looking at length of leave, she said, “you need to closely look at state statues. It is important to understand the jurisdiction you are working with.” Gallagher noted that as an underwriter, you need to ask HR if they understand state laws. “Who is making the decision, HR on their own or do they have outside counsel to help them with it, and if so, it should be a labor employment specialist,” she said. “Having an FMLA policy is not enough. Does HR understand the distinctions?”

Panelists noted that the various disciplines responsible for absence and disability must work together more closely.

Employers should reportedly establish disability and health management committees with representatives from human resources, legal, risk management, as well as insurance representatives to audit and manage the employee on leave. This will improve a company’s compliance with federal, state and local laws.

Paul Siegel, partner, Jackson Lewis, LLP, and the panel moderator, said “employers must know the difference between state and federal laws. Some states are different than others. You need to know your clients and approach them and understand how they administer ADA and FMLA. Do they engage in the process? Put that question in the questionnaire. Do you consult with outside counsel or are they labor? Send out notice on a timely basis.”

Siegel noted that FMLA suits increase with retaliation claims. “The employee somehow gets wind they are on shaky ground; that they’re going to get fired. So they go out on leave to protect themselves. That’s why employers need to document problem employees. If it isn’t in writing, it didn’t happen. Employers need to establish a paper trail. Some of the worst claims documentation performance problems come up just before tenure comes up.”

Siegel explained that there are all sorts of claims pending now where they have sued employers because their workers comp claims were denied. However you are dealing with this statue, it is the new way to sue; it’s the newest thing to bring to the table.

“The U.S. Dept of Labor has changed of over time,” he added. “Punitive damages are covered. They have given some huge awards to punish companies.”

From an underwriting perspective, Siegel said that having an employee handbook is critical. “Ask everyone for their input. For example, how often is the problem of sexual harassment brought up to supervisors and how? Is it written, oral or both? The supervisor should sign off on this every year and it should go in everyone’s files. Educate, reinforce, and train. Have them put in a harassment policy phrase: If I’ve made a complaint and haven’t heard a response in five days, I’ll report to the president or senior level management.”

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