Liquor Liability - 6

Here are a couple more comments on the standard of care of a tavern/bar to monitor alcohol consumption of its patrons:

"I recognize that it is not often possible for an establishment to assess whether a patron is intoxicated and, in many cases where there is not heavy consumption of alcohol in the establishment nor symptoms of intoxication, it would be unreasonable to expect an establishment to make that determination. On the other hand, service to a patron of the equivalent of between 16 1/4 and 19 1/2 fluid ounces of rye for his own consumption over a two-hour period carries obvious risks, and I am of the opinion that organization of service of alcoholic beverages, in the circumstances of this case, in a fashion which eliminated the opportunity to monitor the plaintiff's consumption constituted contributory negligence on the part of the hotel to the extent of five percent. Hotels are in the business of serving alcohol for a profit and it is not unreasonable for it to bear a portion of the risk caused by gross over-consumption." Goudge v. Three Top Investment Holdings Inc., [1994] O.J. No. 751 (Gen. Div.) at para. 52.

And here is comment from another case:

"I feel that they are liable both under the Liquor License Act and at common law. There is a high standard of care imposed on a tavern and its staff. The Squire Tavern people were oblivious to their duty. They knew these people were driving. They knew or should have known that they were intoxicated. They added to the level of intoxication by serving them more. I think that the standard maintained by the Squire was too low. Drinks would only be refused if the person was "too loud, starting arguments, knocking over drinks or falling down". Sambell v. Hudago Enterprises Ltd., [1990] O.J. No. 2494 (Gen. Div.).

Superior Court discusses "arising out of"

My first foray into insurance coverage issues was when, as a young insurance defense associate, I argued the meaning of the phrase "arising out of" in an insurance policy to the First Circuit Court of Appeals. I convinced the court that the phrase denoted intermediate causation--more than causation-in-fact but less than proximate cause--such that a construction site accident injuring the employee of the insured subcontractor "arose out of" the subcontractor's work even though the subcontractor did not proximately cause the accident.

Mike Tracy of Rudolph Friedmann LLP has sent me over the latest foray into "arising out of."

In Massachusetts Property Ins. Underwriting Ass'n v. Gallagher, 2009 WL 2568547, 18 year old Stephen McMaster died in an apparent suicide after ingesting an overdose of propoxyphene. Gallagher's mother sued Scaduto, alleging that Scaduto had negligently left the drug in a place in his home accessible to McMaster, despite knowing of McMaster's fragile emotional state. At issue in the Massachusetts Superior Court was whether Scaduto was covered by his homeowner's policy.

The policy excluded bodily injury "arising out of the use, sale, manufacture, delivery, transfer or possession by any person of [] Controlled Substance(s). . . . However, this exclusion does not apply to the legitimate use of prescription drugs by a person following the orders of a licensed physician."

The court noted that the phrase "arising out of" suggests causation analogous to "but for" causation.

It rejected Gallagher's argument that McMaster's death came within the exception to the exclusion because it "arose out of" Scaduto's legitimate prescription use of the drug.

The court held that there was a "separate and independent" application of the exclusion to McMaster's own use of the drug. McMaster's use of the drug came within the exclusion and did not fall within the exception. There was therefore no coverage under the policy.

Mental Health Parity is the Law on October 3, 2009

In about a month federal law (actually ERISA) will require parity in health insurance benefits for mental health issues in group insurance and self insured plans. Talk with your plan administrator or insurance company about when your plan is required to comply.

Read the bill here.

Judicial Review of Municipal By-Laws: Courts are not to interfere based on reasonableness

In a recent decision, Marsh v. Chatham-Kent, [2009] O.J. No. 3314, Leitch J. reviewed the law on the jurisdiction and scope of judicial review of municipal by-laws.

The application was for an order declaring a by-law invalid on procedural irregularities or alternatively void on the basis that its provisions are discriminating, arbitrary, unfair, vague and uncertain.

Leitch J. dismissed the application.

The case arose after a rural Ontario municipal counsel, after some deliberation and input, decided to proceed with installing a new sewage system. The application against the by-law was perhaps not surprising given that participation was made mandatory and for most owners the tax bill is $15,500.

Leitch J. reviewed section 273(1) of the Municipal Act, 2001, which sets forth the jurisdiction of the court on this application by providing as follows: Upon the application of any person, the Superior Court of Justice may quash a by-law of a municipality in whole or in part for illegality. However, it is important to note that the reasonableness of the By-law cannot be the issue before the court. Section 272 of the Municipal Act provides as follows: A by-law passed in good faith under any Act shall not be quashed or open to review in whole or in part by any court because of the unreasonableness or supposed unreasonableness of the by-law.

Leitch J. cited the Supreme Court of Canada in Nanaimo (City) v. Rascal Trucking Ltd., [2000] 1 S.C.R. 342 at para. 36, quoting McLachlin J., as she then was, in Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231: Recent commentary suggests an emerging consensus that courts must respect the responsibility of elected municipal bodies to serve the people who elected them and exercise caution to avoid substituting their views of what is best for the citizens for those of municipal councils. Barring clear demonstration that a municipal decision was beyond its powers, courts should not so hold. In cases where powers are not expressly conferred but may be implied, courts must be prepared to adopt the "benevolent construction" ... Whatever rules of construction are applied, they must not be used to usurp the legitimate role of municipal bodies as community representatives. [Emphasis added]

Mutual or publically owned: Which is best insurance company for you?

By GAIL LIBERMAN
Special to the Daily News

Saturday, August 22, 2009

Are you better off buying life insurance from a "mutual" insurance company or a publicly owned one?

Mutual insurance companies are owned by policyholders. Publicly owned insurance companies are owned by stockholders.

Stock-owned insurance companies showed higher growth rates and better earnings than mutuals at the turn of the decade, according to an August report by Moody's Investors Services.

However, mutual insurance companies experienced less severe credit downgrades than stock-owned companies during the latest recession. Mutuals, the report says, are better capitalized, have a less risky business focus and are not as subject to the investor panics created by newspaper headlines.

"Mutual insurers are typically more focused on life insurance and other protection products, which tend to stay in force for long periods and have a very stable earnings profile with a low degree of risk," the report says.

One great thing about mutual insurance companies is they pay life insurance policyholders dividends, which are excess profits. Dividends are not taxed because the IRS considers them a return of your premiums.

You can reinvest your dividends in the cash value or savings account portion of your policy. Or you can take them in cash. You also can use them to buy more insurance or help pay premiums.

Today, mutual insurance companies are paying dividends of more than 5 percent. The board of trustees of Northwestern Mutual Life Insurance Company, for example, approved an estimated dividend payout of $4.6 billion for participating policy owners in 2009.

You generally buy insurance of mutual insurance companies via their own insurance agents. By contrast, stock-owned insurance may be sold by an agent who deals with a variety of companies.

The downside of mutual insurers: If they do need cash, they don't have as much access to the capital markets as stock-owned companies.

Moody's says stock companies focus on higher-risk and higher-return insurance, like variable annuities and universal variable life insurance. These let you invest in mutual funds for growth.

Insurance offered by stock-owned companies also may come with "aggressive guarantees." Variable annuities, for example, may have guaranteed lifetime withdrawal benefits, and their universal variable life insurance carries no lapse guarantees.

The bottom line:

* Stick with the financially strongest companies, rated A to A++ by A.M. Best.

* Deal with an experienced insurance agent who has an insurance license and is a Certified Financial Planner or Certified Life Underwriter and Chartered Financial Consultant.

* Seek companies that provide good customer service and offer the most benefits at the most attractive price.

* Check claims-paying history by searching the company online. The site www.naic.org also has a database of consumer complaints.

The largest mutual insurance companies include TIAA-CREF Group, New York Life, Northwestern Mutual, Mass Mutual, Pacific Life Insurance Group and State Farm.

The largest stock-owned insurance companies include: Metropolitan Group, Prudential of America, American International Group, Hartford Fire and Casualty Group, John Hancock Group, AEGON USA Group, ING America Insurance Holdings Group, Lincoln National Group and AXA Insurance Group.

Let's make a deal - on your life-insurance policy

By Robert Powell

MarketWatch (MCT)

BOSTON - Of all the products ever engineered by the financial-services industry for sale to unsuspecting seniors and others, none seem quite as insidious as life settlements.

Life settlements are schemes in which you sell your life-insurance policy to a third party for some cents on the dollar, usually more than the policy's cash value but less than the death benefit. They're appealing to people who are strapped for cash and need the money. Or you might do it because you're unable to keep paying the policy premium. Or because an insurance salesman has convinced you this is a good deal.

But before you let someone you don't know become the owner and beneficiary of your insurance policy, consider the following recent goings-on in the industry.

In July, the Financial Industry Regulatory Authority "reminded" brokerage firms that they must comply with the rules governing variable life policy sales when participating in the life-settlement business. Now what would possess the agency that regulates the brokerage industry to issue such a reminder? Is it because salesmen are following the rules to a T? Highly unlikely, I say.

In fact, in Regulatory Notice 09-42, Finra said it is "concerned about variable life settlements because they involve materially different factors and raise materially different issues than more widely held securities such as stocks or bonds." What's more, Finra said firms' marketing of variable life settlements is directed almost exclusively toward senior investors who, concerned about current economic conditions and retirement, may consider selling their variable life insurance policies without fully appreciating the risks and costs of variable life settlements.

Meanwhile, more states are putting in place laws and regulations designed to protect seniors from unscrupulous life-settlement salesmen. Some, though not all and not nearly enough, states have put in place bonding requirements, licensing provisions, restrictions on policy use in the first five years, and commission constraints, among other actions. Vermont, for instance, will later this year prohibit brokers from earning more than 2 percent of the amount paid by a life-settlement company to the policy owner, according to the Life Insurance Settlement Association, the lobbying group for the life settlement business.

Not surprisingly, about half of the life-settlement firms have stopped doing business in those states that have beefed up their laws and regulations. If what these firms did was so right, why would they stop selling their products in these states?

And then there are the PR campaigns. There's one that purports to educate consumers about life settlements and another aims to recruit salesmen. First the latter: Here's a recent post I chanced upon on one of the social network sites: "Life settlements are a great way to generate capital during these tough economic times," Ellis Largent of Opulen Capital wrote. "Feel free to contact me to see if a life settlement is right for your clients." OK, we'll get right on that one.

And then there's the consumer-focused campaign: "In an effort to better educate seniors on the benefits and important considerations of selling their unwanted or unneeded life-insurance policies through a life-settlement transaction, LifeBack, a direct-to-consumer life-settlement program to launch later this year, has introduced a new guidebook to help consumers objectively evaluate the appropriateness of a life settlement for their retirement needs." The book is called "Is a Life Settlement Right for You?"

If you decide to read the booklet, be sure to read Finra's investor alert on the subject too. You want both sides of the story, eh?

To be sure, there some good stuff to be said about life settlements. Apparently, they make for a good investment. "As investors seek safer, shorter windows for returns, life-settlement securitizations are becoming increasingly popular," according to a Reuters report. The securities, which are backed by life- insurance policies and sold on the asset-backed market, are in demand because they are "solely tied to mortality, a natural-occurring phenomenon," Jan Buckler, an analyst at Dominion Bond Rating Service, is quoted as saying in the report. And Ron D'Vari, chief executive of NewOak Capital is quoted as saying: "Life-settlement securitizations should be attractive to investors as they are uncorrelated to everything else as far as the underlying expected cash flows are concerned."

I guess, but it sure doesn't seem quite right now. I mean, what's next - life-settlement securitization on our pets?

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services.

Increasingly, seniors realizing nest egg in life insurance policies

12:00 AM CDT on Monday, August 24, 2009
By BOB MOOS / The Dallas Morning News
bmoos@dallasnews.com

Seniors battered by the tough economy are selling their life insurance policies to replenish their retirement nest eggs.

Unlike younger investors, older adults may not have the time to wait for the market to recover all of their losses, so they're turning to this previously overlooked asset to see whether they should sell it and use the money to pay medical bills or other expenses.

Seniors sold life insurance policies with a face value of $11.8 billion last year, almost double the value of policies sold just two years earlier, according to the U.S. Senate's special committee on aging, which recently held a hearing on such transactions.

A "life settlement," as a sale is called, may be an attractive option for seniors who determine they no longer need their life insurance policy, said Doug Head, executive director of the Life Insurance Settlement Association, an industry group.

Policyholders typically sell their insurance through life settlement brokers to investment companies for lump sums that are usually several times greater than they would receive if they surrendered the policies to the insurance companies, he said.

The new owners pay the remaining premiums on the policies and become the beneficiaries when the original policyholders die.

But a life settlement doesn't always make sense, insurance experts caution, and seniors considering such a sale should consult with an independent financial adviser to figure out whether it's the best move for their particular circumstances.

"If you're thinking about selling your life insurance mostly because you're strapped for cash, there may be other ways to tap the value of your policy without losing your coverage," said Houston lawyer and insurance expert David McDowell.

"You may be able to take out a loan against your policy or receive a partial payout through an accelerated death benefit," he said. "It's worth visiting with your life insurance agent and exploring the options before sacrificing your coverage."

Life settlements are also ripe for questionable business practices, so prospective sellers need to work with licensed brokers screened or monitored by state regulators, said Susan Voss of the National Association of Insurance Commissioners.

Started in AIDS crisis

The life settlement business grew out of the AIDS crisis of the 1980s. In what were called viatical settlements, people living with AIDS sold their unwanted life insurance policies for cash they often used to cover medications or treatments.

As medical breakthroughs extended the lives of many people with AIDS, the industry shifted its focus from the terminally ill and toward seniors in their mid-60s or older, said Scott Gibson of Lewis and Ellis, an actuarial consulting firm in Richardson.

"The best candidates for a life settlement are now people in their 70s or older who have a life insurance policy valued at $500,000 or more that they no longer need, perhaps because their spouses have passed away," Gibson said.

The industry hit a bump earlier this year as capital dried up. But now that investors are returning to the market, buyers' offers for policies have improved, said Russel Dorsett, co-managing director of the Select Life Settlement Corp. in Houston.

Though the amount that seniors receive for their life insurance will vary depending on their age, gender and overall state of health, the average payout today is slightly less than 20 percent of the policy's death benefit, he said.

"That's still three or four times more than they'd get if they simply surrendered their policies to the insurer," Dorsett said.

Bill Clark, managing director of the Clark Financial Group in Frisco, said he sees a number of circumstances in which older policyholders may want to consider a life settlement as part of their retirement and estate planning.

"A policy may not be needed anymore," he said. "The beneficiaries may have become financially independent and aren't counting on the policy's proceeds, or the policyholder determines the estate no longer needs life insurance to pay death taxes."

Complex transaction

As more people become aware of life settlements through financial planners, Clark said, more policyholders will at least check out the price they could get for an asset they once regarded as virtually untouchable until death.

Still, selling a life insurance policy is often a complex transaction involving time and paperwork, so consumers should turn to financial advisers who know the risks, said Ana Smith-Daley, a deputy insurance commissioner for Texas.

"An independent adviser can help you decide whether selling your policy is in your best interest," she said. "If it is, the adviser will probably call on a broker to shop around your policy to determine what kind of price it will fetch."

Seniors also need to understand that their medical records will be examined as part of the sales and that the buyers of their policies will occasionally check on them to determine when to collect the death benefits, she said.

"In this buyers' market, investors are looking for the individuals most likely to die," said Stephan Leimberg, editor of Tools and Techniques of Life Settlement Planning. "They want you old and ripe. That way, they'll pay the fewest premiums and get the best return on their investment."

Smith-Daley said sellers may also pay taxes on the proceeds from a life settlement and lose their eligibility for Medicaid or other government benefits, so anyone contemplating a sale should consult a tax adviser or lawyer.

But even with those considerations, industry officials expect life settlements to exceed $100 billion over the next couple of decades as boomers convert unwanted or unneeded life insurance to cash to bolster their lagging savings.

"Under the right circumstances, it's a viable and valuable option that will only become more popular," Gibson said.

The answer to a nagging duty to defend issue

As I discussed here, the duty of an insurer to defend an insured is determined by the "eight corners test." Under that test, "if the allegations of the complaint are 'reasonably susceptible' of an interpretation that they state or adumbrate a claim covered by the policy terms, the insurer has a duty to defend." (The "eight corners" comes from comparing the four corners of the complaint to the four corners of the insurance policy.)

But what about when the allegations of the underlying complaint are silent as to an issue that is important for determining coverage? For example, what if the insurance policy provides coverage for all blue cars owned by Lucy Smith? Smith is sued following a motor vehicle accident. The underlying complaint will probably allege the make and model of the car Smith was driving, but it is unlikely to state the color of the car because the color is irrelevant to Smith's liability. Can the insurer refuse to defend because its investigation reveals that the car Smith was driving at the time of the accident was yellow, and so not covered by the "blue car policy"?

Yes. In Farm Family Mut. Ins. Co. v. Whelpley, 54 Mass. App. Ct. 743, 747 (2002), the court held that there is an exception to the eight corners test for "the existence of an undisputed extrinsic fact that takes the case outside the coverage and that will not be litigated at trial of the underlying action."

Water Detection Devises

Water damage from plumbing systems is a major cause of property losses. Pipes break, toilets overflow and keep going. Cold weather causes freeze-ups and spurting water when it thaws.

Several companies manufacture water detection devices that monitor water flow and shut the water off at the source when a leak is detected.

For home and commercial properties...

Flo-Guard

FloLogic

Leak Defense System

WaterCop

Some insurers offer discounts on property policies for this type of installation.

Thank you to Veterans - Blanket of security

"I have slept under a blanket of security in America,

A quilt made of patches of young men who grew up too fast

And many who died far, far too early,

Sewn with stitches and sutures and bloody gauze."   

 

I have never contributed to this blanket. 

Not a patch. Not a wound. Not a stitch.

Every night I pull up this security blanket and tuck in my three kids,

because men and women leave their families for years at a time.

If I said thank you everyday for the rest of my days, 

It would never be enough.

But, To all Veterans and their families.....

Thank you,

David B. Peel

Liquor Liability - 5

Establishments that serve alcohol have a positive duty to intervene to limit alcohol consumption or risk liability.

Here is the classic formulation:

"I agree that establishments which serve alcohol must either intervene in appropriate circumstances or risk liability, and that this liability cannot be avoided where the establishment has intentionally structured the environment in such a way as to make it impossible to know whether intervention is necessary. Such was the situation in Canada Trust Co. v. Porter where the alcohol was served from behind a bar and it was impossible for the establishment either to monitor the amount consumed or to determine whether intervention was necessary. A similar situation arose in Gouge v. Three Top Investment Holdings Inc., [1994] O.J. No. 751 (Ont. Ct. (Gen. Div.), where the plaintiff attended a company Christmas party which had a "cash bar", over-indulged, and then was involved in an accident. In such circumstances, it would not be open to the establishment to claim that they could not foresee the risk created when the inability to foresee the risk was the direct result of the way the serving environment was structured."

Stewart v. Pettie, [1995] 1 S.C.R. 131 at para. 56.

Massachusetts Appeals Court holds that misrepresentation on bond application that insured had internal auditor does not void coverage

In my last post I began discussing Hanover Ins. Co. v. Treasurer and Receiver General, 74 Mass. App. Ct. 725 (2009), in which the Massachusetts Appeals Court discussed when misrepresentations on a bond application can void coverage.

Hanover argued that coverage was voided because the Massachusetts Treasury Department stated on its application that an internal audit was conducted by the State Auditor, but that in fact there was no internal auditor.

The accounting firm of Deloitte & Touche conducted annual independent audits of the state government departments, and sent its reports to the State Auditor. The State Auditor also conducted reviews of the Department every three or four years. The Deloitte & Touche audits were "external" audits while the audits of the State Auditor were "internal" audits.

Hanover never inquired about the frequency of internal audits and never informed the department that they must be done annually.

The court held that the inaccurate representation that there was an internal auditor was not material.

Never Shade The Facts on Your Insurance Application

A discussion group currently includes a question about an application where the age of the roof was misrepresented. The agent asked if such could void coverage.

The answer is, "Of course it can!"

Insurance companies issue policies based upon the information they are provided. If that information is materially wrong there is an impact on the desirability of the risk and the price charged.

You can not guess or lie on an insurance application (I can't believe I have to actually write this).

Of course if you say the roof is 8 years old and it is really 10 the claims adjuster will have a tough time justifying a denial of coverage. However, the difference between a 15 year old roof and a 22 year old roof is substantial.

Massachusetts Appeals Court holds that de minimis departure from representation on bond application does not void coverage

In Hanover Ins. Co. v. Treasurer and Receiver Gen., 74 Mass. App. Ct. 725 (2009) Hanover issued employee dishonesty bonds from 1993 to 1999 to the Massachusetts Treasurer's Department. The bonds covered losses caused by the dishonesty of any department employee.

In February, 1999, the Attorney General's office began an investigation that determined that a Treasury department employee, Trischitta, had stolen $6.5 million from the department's unpaid check fund ("UCF"). The department recovered the full amount of the stolen funds, plus interest.

With Trischitta's cooperation the department discovered that he was not the only department employee stealing money from the UCF. The department gave notice to Hanover of the claim on March 19, 1999. Hanover refused to make payment on the bonds, and filed a declaratory judgment action.

Hanover first argued that the department made misrepresentations in its bond applications that (1) there was independent reconciliation of bank accounts; (2) it had an internal auditor; and (3) there was a voucher system in place to prevent the unauthorized issuance of checks.

The court noted that pursuant to Mass. Gen. Laws ch. 175 § 186, an insurer may not refuse to pay a claim on the grounds of misrepresentation in a policy application unless the misrepresentation "is made with actual intent to deceive, or unless the matter misrepresented or made a warranty increased the risk of loss."

The court held that Hanover had the burden of proof on those issues.

In determining whether a misrepresentation increased a risk of loss, "a fact must be regarded as material, the knowledge or ignorance of which would naturally influence the judgment of the underwriter in making the contract at all, or in estimating the degree and character of the risk or in fixing the rate of the premium."

The department had stated on its application that bank accounts were reconciled monthly by someone not authorized to deposit or withdraw funds. The trial judge had found that the department's contract with a bank to provide bank reconciliations services satisfied the department's representation on the applications. Hanover argued that the reconciliation service did not include checks issued by the UCF, demonstrating lack of substantial compliance.

The Appeals Court disagreed with Hanover, noting that no one in the department with appropriate authority was aware that the UCF was not included in the bank's reconciliation services, and that the number of checks not reconciled was de minimis (one tenth of one percent) compared to the total number of checks. The court held that the representation was therefore substantially true and the department was in substantial compliance with its representation.

Liquor Liability - 4

More on liability for alcohol providers. This blog contribution authored by Tara Pollitt.

An alcohol provider owes a duty of care to patrons and may be required to prevent an intoxicated patron from driving where it is apparent he intends to drive. The Supreme Court held that the duty of care that is owed to patrons is also owed to third parties:

It is a logical step to move from finding that a duty of care is owed to patrons of the bar to finding that a duty is also owed to third parties who might reasonably be expected to come into contact with the patron, and to whom the patron may pose some risk. It is clear that a bar owes a duty of care to patrons, and as a result, may be required to prevent an intoxicated patron from driving where it is apparent that he intends to drive. Equally such a duty is owed, in that situation, to third parties who may be using the highways. In fact, it is the same problem which creates the risk to the third parties as creates the risk to the patron. If the patron drives while intoxicated and is involved in an accident, it is only chance which results in the patron being injured rather than a third party. The risk to third parties from the patron's intoxicated driving is real and foreseeable. Stewart v. Pettie, [1995] 1 S.C.R. 131 at para. 28.


Commercial providers of alcohol are expected to monitor consumption of alcohol as part of the commercial transaction and are expected to possess special knowledge of intoxication. The Supreme Court has held that not only is that expected, but also relatively easy for the commercial host:

First, commercial hosts enjoy an important advantage over social hosts in their capacity to monitor alcohol consumption. As a result, not only is monitoring relatively easy for a commercial host, but it is also expected by the host, patrons and members of the public. In fact, commercial hosts have a special incentive to monitor consumption because they are being paid for service. Patrons expect that the number of drinks they consume will be monitored, if only to ensure that they are asked to pay for them. Furthermore, regulators can require that servers undertake training to ensure that they understand the risks of over-service and the signs of intoxication (see, e.g., R.R.O. 1990, Reg. 719). This means that not only is monitoring inherently part of the commercial transaction, but that servers can generally be expected to possess special knowledge about intoxication. Childs v. Desmoreaux, [2006] 1 S.C.R. 643 at para. 18.

Liability for servers of alcohol has been expanded to include establishments that serve patrons already inebriated on arrival. In Schmidt v. Sharpe, the tavern was held liable even though it did not have actual knowledge of the patrons’ intoxication. Schmidt v. Sharpe, [1983] O.J. No. 418 (Ont. H.C.)

The appropriate standard by which to assess providers of alcohol is the Smart Serve Program, or its predecessor, the Server Intervention Program (“SIP”). SIP requires the following actions of servers of alcohol: “Stop trouble at the door”, “Interview and assess”, and “Provide low risk options”. SIP provides reasonable and prudent steps to be taken by alcohol providers:
· stop trouble at the door;
· check for underage patrons;
· interview and assess for prior drinking;
· provide low risk options, serve and monitor service;
· check for driving; and
· arrange for safe transportation.

Anti-Harassment Policy

Every employer should have a written Anti-Harassment policy.

New hires should get a copy. All employees should get a copy annually.

FindLaw.com has suggested language. Your employment law attorney should review any statement or employee policies.

This is also a good time to review your employment practices liability insurance (EPLI) coverage with your insurance adviser. If you have not purchased EPLI, check out the premiums. The cost has come down dramatically over the last few years.

How Do You Manage the Risk of Misused Time?

It's time to declare war on Time Poverty.

Join me for a free 45 minute Time Management Teleseminar on Sept 17 at Noon Eastern time.

Gain productivity - Work easier - Be more effective - Reach your business and personal objectives.

Details - www.insurance-coveragelaw.com/time

Liquour Liability - 3

Further to my past post on the liability that can be imposed on taverns (bars, restaurants, etc.), he is the relevant statute and regulations.

The Liquor Licence Act, R.S.O. 1990, c. L.19, states:

29. No person shall sell or supply liquor or permit liquor to be sold or supplied to any person who is or appears to be intoxicated.

39. The following rules apply if a person or an agent or employee of a person sells liquor to or for a person whose condition is such that the consumption of liquor would apparently intoxicate the person or increase the person’s intoxication so that he or she would be in danger of causing injury to himself or herself or injury or damage to another person or the property of another person:
1. If the person to or for whom the liquor is sold commits suicide or meets death by accident while so intoxicated, an action under Part V of the Family Law Act lies against the person who or whose employee or agent sold the liquor.
2. If the person to or for whom the liquor is sold causes injury or damage to another person or the property of another person while so intoxicated, the other person is entitled to recover an amount as compensation for the injury or damage from the person who or whose employee or agent sold the liquor.

The regulations under this statute include:

A licence holder must not engage in or permit practices which may tend to encourage patrons’ immoderate alcohol consumption.

A licence holder must inspect an item of identification before serving liquor to a person apparently under the age of nineteen years.

A licence holder must not permit drunkenness, or riotous, quarrelsome, violent or disorderly conduct to occur on the licenced premises or in the adjacent washrooms, liquor and food preparation areas and storage areas.

U.S. District Court explains difference between liability and indemnity policies

In my last couple of posts I have been writing about Mut. Ins. Co. v. Murphy, in which the United States District Court for the District of Massachusetts held that an insurer that did not exercise control over defense and settlement of a claim could not be liable for unfair claim settlement practices.

The decision contains an interesting discussion about the difference between liability policies and indemnity policies. A liability policy confers the right to settle and defend any claims on the insurer. An indemnity policy leaves the duty to settle and defend on the insured.

The court described the Mutual policy at issue, which I described in detail in my last post, as a "hybrid" because the insurer could associate with defense and settlement of claims but the insured was not excluded from participating in the defense and indemnity.

Insurance Success Tip #8 - Check Your Work Comp Payrolls

The payrolls declared on your workers' compensation policy determines your estimated premium.

At the end of the policy year you are asked to report your actual payroll. The audit results in an adjustment to and the final settle-up of premium.

Review your payrolls to avoid a large audit additional premium or a large return premium. Think of it like your income tax - you pay estimated taxes and settle at the end of the year. You don't want a big bill or a big return.

U.S. District Court holds that insurer that did not control defense could not be liable for unfair claims settlement practices

In my last post I discussed the decision of the United States District Court for the District of Massachusetts in Mut. Ins. Co. v. Murphy, in which the court dismissed Judge Murphy's claim against the Boston Herald's insurer for unfair claims settlement practices. The reason for that decision was that the insurer did not have control over defense or settlement of the claims.

The Herald was insured under a "media insurance policy" issued by Mutual Insurance Co. for damages arising out of libel. The policy had a $50,000 self-insured retention (similar to a deductible). After the first $50,000, the Herald would continue to pay twenty percent of defense expenses up to $500,000.

Under the policy the Herald had s duty to retain its own counsel for the defense or settlement of a claim, although choice of counsel was subject to the approval of Mutual. The Herald was also obligated to advise Mutual of the likelihood of success or failure, provide an initial estimate of legal costs, and advise it of offers of settlement and other information pertinent to a claim. The Herald was also required to notify Mutual when it became clear that a claim was like to exceed $50,000, and regularly to update it as to expenses.

As to Mutual's obligations, the policy stated, "The company shall not be called upon to assume charge of the settlement, or the defense of any claim made, or suit brought, or proceeding instituted against the insured."

Under the policy Mutual had the right to associate with the Herald in defense and control of any claim which appears likely to involve payment by Mutual, in which event the Herald and Mutual were required to cooperate in defense or settlement of the claim; or, if Mutual was dissatisfied with the Herald's choice of counsel, to suggest replacement with new counsel to be jointly approved by Mutual and the Herald. No settlement could be made without Mutual's consent, but Mutual could not unreasonably deny consent. If judgment entered against the Herald and the Herald chose not to appeal, Mutual could appeal the judgment.

The court held that those policy clauses did not give Mutual control over defense or settlement sufficient to make it liable for unfair claims settlement practices.

Worker's Compensation - 4

An issue which has arisen in previous years is whether the Tribunal has jurisdiction to determine a section 31 application where the worker has received statutory accident benefits (SABs) under the Insurance Act but no court action has been commenced. While early cases found there was no jurisdiction, two decisions in 2007 considered more extensive submissions and found that the Tribunal has jurisdiction. Decision No. 1288/08, 2008 ONWSIAT 2572, agreed with the more recent cases that the Tribunal has jurisdiction to consider a SABs insurer’s section 31 application. Decision No. 1288/08 applied the reasoning in Decision No. 14/06, 2007 ONWSIAT 339, 81 W.S.I.A.T.R. (online), in finding that the insurer had standing to bring an application under section 31(1)(a). The phrase in section 31(1)(a) “right to commence an action”, includes situations in which the right has been conferred but has not been acted upon or triggered. (from WSIAT news website)

Insurance Success Tip #7 - Review Your Business Interuption Insurance

Business interruption insurance protects your profits and pays those expenses that continue after an insured loss.



Your store burns. It will take 4 months to rebuild. Business interruption insurance (extra expense coverage) pays to rent a temporary location and to advertise that you are still open for business. It pays your lost profit and those expenses that continue beyond what you are able earn in your temporary location.



Meet with your insurance adviser to be sure you have enough business interruption insurance and that it is properly designed to meet your unique needs.

Insurance Success Tip #6 - Buy Employee Dishonesty Insurance

Half of all theft in the US is perpetrated by employees. Don't tell me how honest your employees are. Everyone who has been hurt by embezzlement said the same thing the week before they found that they had been taken.

$250,000 of coverage is a minimum for any business. More if your exposures warrant. The coverage is usually cheap too.

U.S. District Court rules on Judge Ernest Murphy's claim against Boston Herald's insurer

Another chapter in the long, sometimes strange story of former Massachusetts Superior Court Judge Ernest Murphy's libel suit against the Boston Herald:

The Boston Herald published a story claiming that Judge Murphy had told a 14year old rape victim to "get over it." Judge Murphy sued the Herald for libel and won. He then sent somewhat threatening letters directly to the Herald (rather than its attorneys) on trial court stationery demanding that it drop its appeal. (Contrary to what you might sometimes see on TV, parties in a lawsuit are forbidden from communicating directly with each other; they may communicate only through their attorneys. And judges are forbidden from communicating personal business on court stationery.)

The judge subsequently asserted that he suffered from post-traumatic stress syndrome as a result of the Herald's articles and entered into an agreement with the Superior Court by which he agreed that he is permanently disabled from performing his judicial duties.

The most recent chapter in this case is Judge Murphy's lawsuit against the Herald's insurer, in which he sought damages for the insurer's failure to promptly settle his libel claim. The United States District Court for the District of Massachusetts has dismissed his claim in Mut. Ins. Co. v. Murphy, on the grounds that the Herald rather than the insurer exercised control over the defense.

Severance Agreements

My friend Rick Dacri is an HR consultant. His latest newsletter included some comments on the EEOC's latest guidance for employees on severance agreements and employment practices claims.

Important reading for all employers who use severance agreements in layoffs or terminations.

Thanks Rick.

Worker's Compensation - 3

The WSIA and earlier Workers’ Compensation Acts are based on the “historic trade-off” in which workers gave up the right to sue in exchange for statutory no-fault benefits. The Tribunal has the exclusive jurisdiction to decide whether a worker’s right to sue has been removed by the Act. Right to sue applications may raise complicated legal issues, such as the interaction between the WSIA and other statutory schemes.

Decision No. 2126/07, 2007 ONWSIAT 2689, 84 W.S.I.A.T.R. (online), illustrates the type of disputes which the Tribunal may be called on to resolve under section 31 of the WSIA. While receiving treatment in hospital for a compensable condition, a worker fainted and sustained injuries to different parts of his body. Tribunal decisions have generally found that, where further injury results from negligent medical treatment, the additional injury is generally foreseeable; the worker is entitled to compensation and the right of action is removed. Decision No. 2126/07 held that the arguments that the new areas of injury were remote from the original injury and that the hospital was negligent in failing to warn the worker and supervise him following treatment, did not distinguish the case from prior Tribunal cases. (from WSIAT news website)

Court of Appeals holds that insurers who issued claims-made policies are not required to show prejudice as a result of late notice of claim

This is my last post on Gargano v. Liberty Int'l Underwriters, Inc., in which the United States Court of Appeals held that insurers could under claims-made policies claims that were not both made and reported during the policy period.

The plaintiff argued that the insurers must demonstrate prejudice from his untimely notice in order to escape their coverage obligations. Although with occurrence based policies it is the rule in Massachusetts that an insurer must show prejudice from late notice, the court held that the same is not true of claims-made policies. To do so "would defeat the fundamental concept on which claims-made polices are premised."