Establishing a written Lockout/Tagout policy is an important step for any organization that deals with potentially hazardous energy sources. When servicing or maintaining a machine or equipment an employee faces unexpected energizing, start up, or release of stored energy that could case injury or death.
The preferred safety method is a lockout, which is the placement of a locking device on an energy isolating device that ensures the equipment being controlled can not be operated until the device is removed. Along with a lockout device a warning tag should be placed, which will identify each lock. This tag should not be removed except by the employee who placed it on the equipment at the completion of the work requiring lockout procedure.
A machine or equipment that is not capable of being lockout then a tagout should be utilized. A tagout is the placement of a tag on an energy isolating device to indicate that the device may not be operated until the tagout is removed. If the machine or equipment contains high voltage or pressure two employees should be involved in the process of tagging the device. One employee shall be at the disconnect area, while the other person performs the repair, installation, or testing.
According to OHSA the most critical requirements are:
1. Develop, implement, and enforce an energy control program
2. Use lockout devices for equipment that can be locked out. Tagout devices may be used in lieu of lockout devices only if the tagout program provides employee protection equivalent to that provides through a lockout program.
3. Ensure that new or overhauled equipment is capable of being locked out.
4. Develop, implement, and enforce an effective tagout program if machines or equipment are not capable of being locked out.
5. Document and Evaluate the energy control procedures.
6. Use only lockout/tagout devices authorized for the particular equipment or machinery and ensure that they are durable, standardized, and substantial.
7. Ensure that lockout/tagout devices identify the individual users.
8. Establish a policy that permits only the employee who applied a lockout/tagout device to remove it.
9. Inspect energy control procedures at least annually.
10. Provide effective training as mandated for all employees covered by the standard.
11. Comply with the additional energy control provisions in OHSA standards when machines or equipment must be tested or repositioned when outside contractors work at the site, in group lockout situations, and during shift or personnel changes.
***For further compliance requirements of OHSA standards please refer to Title 29 of the Code of Federal Regulations.***
A sample lockout/tagout policy from the University of Notre Dame can be found here: Sample Policy.
References:
http://www.ohsa.gov/
http://riskmgt.nd.edu/
Wednesday, March 24, 2010
Monday, March 15, 2010
Why Private Company Management Liability is Important
Management liability claims affect all companies, large and small, public and private. Many connect management liability claims with the front page headlines of MCI Worldcom, Enron, General Motors, Chrysler etc. While these public company management liability claims attract the most attention, there are thousands of private company claims made every year which translate to millions of dollars in settlements and jury awards. Many private company directors and officers feel that due to their non-public filing status the likelihood of a claim is not there. However, the fact is that the directors and officers of private companies are exposed to these claims. They are often involved in day-to-day operations and are the decision makers in most circumstances; therefore, private company directors and officers are more likely to be named in lawsuits brought by employees and others. In closely-held private companies, the owner’s personal net worth may be tied to the financial health of the company making costly D&O liability claims even more destructive.
Private companies may be sued by shareholders and customers, as well as creditors, competitors, government bodies and others. The following points demonstrate why the purchase of directors and officers insurance is very important:
1. Company assets can be closely tied to the personal wealth of directors and officers, making protection for claims brought solely against the company vital.
2. When the company cannot by law indemnify its directors and officers in D&O claims, D&O insurance can step in instead.
3. During the bankruptcy wave of the past 4 years there have been a record amount of creditor claims and bankruptcy trustee claims against bankrupt company boards. Lenders have sought restitution at the expense of the individual board members personal assets.
4. Complex claims brought by competitors, such as anti-trust and unfair competition claims against directors and officers, can generate sky-high defense and settlement costs.
5. Investigations by government and regulatory agencies can generate enormous defense costs, even if no wrongdoing is found. When wrongdoing is found, settlement values are often severe.
6. D&O insurance can protect the personal assets of a director’s or officer’s spouse, as well as the assets of a deceased director’s or officer’s estate.
7. Shareholders of private companies frequently sue for inadequate or inaccurate disclosure in financial reports and statements made in private placement materials.
8. With D&O insurance in place, management can focus on managing the company rather than managing protracted litigation
9. D&O insurance from a quality insurer can take private companies through their IPO and into public ownership well protected. Developing a proven track record with a quality insurer provides an insured with an easier transition into the public D&O insurance market. Private companies with a established relationship with a D&O carrier often receive reduced pricing and expansive terms.
The following scenarios, based on actual claims, illustrate the need for D&O and Private Company Liability Insurance.
SHAREHOLDER SEEKS RESTITUTION
A minority shareholder of a closely–held corporation alleges that the board of directors and certain officers conspired to assist the majority shareholder in maintaining majority control of the company when the minority shareholder attempted to purchase a greater controlling interest.
At trial, a jury awarded the minority shareholder $4.2 million in compensatory damages and $445,000 in plaintiff’s attorney fees.
CREDITOR SUES FOR BREACH OF FIDUCIARY DUTY
A creditor of a Mississippi-based private company sues the company, their board of directors, and the controlling private equity group alleging, among other things, breach of fiduciary duty by the board. The creditor further alleges that the private equity group over-leveraged the company in a desperate attempt to compete against more savvy, well-funded competitors. The result was the company filing for Chapter 11under a mountain of debt and laying off hundreds of employees.
The case settled for $18 million. Defense costs were $2.3 million.
Private companies may be sued by shareholders and customers, as well as creditors, competitors, government bodies and others. The following points demonstrate why the purchase of directors and officers insurance is very important:
1. Company assets can be closely tied to the personal wealth of directors and officers, making protection for claims brought solely against the company vital.
2. When the company cannot by law indemnify its directors and officers in D&O claims, D&O insurance can step in instead.
3. During the bankruptcy wave of the past 4 years there have been a record amount of creditor claims and bankruptcy trustee claims against bankrupt company boards. Lenders have sought restitution at the expense of the individual board members personal assets.
4. Complex claims brought by competitors, such as anti-trust and unfair competition claims against directors and officers, can generate sky-high defense and settlement costs.
5. Investigations by government and regulatory agencies can generate enormous defense costs, even if no wrongdoing is found. When wrongdoing is found, settlement values are often severe.
6. D&O insurance can protect the personal assets of a director’s or officer’s spouse, as well as the assets of a deceased director’s or officer’s estate.
7. Shareholders of private companies frequently sue for inadequate or inaccurate disclosure in financial reports and statements made in private placement materials.
8. With D&O insurance in place, management can focus on managing the company rather than managing protracted litigation
9. D&O insurance from a quality insurer can take private companies through their IPO and into public ownership well protected. Developing a proven track record with a quality insurer provides an insured with an easier transition into the public D&O insurance market. Private companies with a established relationship with a D&O carrier often receive reduced pricing and expansive terms.
The following scenarios, based on actual claims, illustrate the need for D&O and Private Company Liability Insurance.
SHAREHOLDER SEEKS RESTITUTION
A minority shareholder of a closely–held corporation alleges that the board of directors and certain officers conspired to assist the majority shareholder in maintaining majority control of the company when the minority shareholder attempted to purchase a greater controlling interest.
At trial, a jury awarded the minority shareholder $4.2 million in compensatory damages and $445,000 in plaintiff’s attorney fees.
CREDITOR SUES FOR BREACH OF FIDUCIARY DUTY
A creditor of a Mississippi-based private company sues the company, their board of directors, and the controlling private equity group alleging, among other things, breach of fiduciary duty by the board. The creditor further alleges that the private equity group over-leveraged the company in a desperate attempt to compete against more savvy, well-funded competitors. The result was the company filing for Chapter 11under a mountain of debt and laying off hundreds of employees.
The case settled for $18 million. Defense costs were $2.3 million.
Thursday, March 11, 2010
Negligent Entrustment Liability
Negligent entrustment is a cause of action in tort law that arises where one party (Company) is held liable for negligence because they negligently provided another party (Employee) with a dangerous instrumentality, and the employee caused injury to a third party with that instrumentality. The cause of action most frequently arises where a company allows employee to drive a company and/or personal automobile.
With regards to commercial auto, negligent entrustment often arise after a collision where the employee was permitted to drive a vehicle without due regard for their qualification/ability to safely operate the vehicle. Although the driver’s own negligence in causing the accident is usually the primary issue, the two main focuses of investigation of a negligent entrustment charge are:
1. Company’s policies
2. Company’s actual practices
In other words is the company "practicing what it's preaching"?
Once a case is brought forth, the third party must prove the following elements:
1. The driver was incompetent
2. The driver was negligent in the collision
3. The employer should or knew of the driver's incompetence
4. The employer allowed the driver to operate the vehicle
Now what can a company do to lower it's exposure of negligent entrustment?
Here are some recommendations:
1. Written Motor Safety Program (with upper management buy-in)
2. Driver recruiting and selection practices
3. Monitor MVR's and implement a scoring system
4. New driver evaluation and orientation
5. Driver reviews and training
6. Post accident reviews
The following link is an example of a formal motor safety program that can be tailored to your needs: Motor Safety Program. As a reminder the most important aspect of implementing a motor safety program is to have upper management buy-in. With buy-in form upper management these programs will be short lived and ineffective.
With regards to commercial auto, negligent entrustment often arise after a collision where the employee was permitted to drive a vehicle without due regard for their qualification/ability to safely operate the vehicle. Although the driver’s own negligence in causing the accident is usually the primary issue, the two main focuses of investigation of a negligent entrustment charge are:
1. Company’s policies
2. Company’s actual practices
In other words is the company "practicing what it's preaching"?
Once a case is brought forth, the third party must prove the following elements:
1. The driver was incompetent
2. The driver was negligent in the collision
3. The employer should or knew of the driver's incompetence
4. The employer allowed the driver to operate the vehicle
Now what can a company do to lower it's exposure of negligent entrustment?
Here are some recommendations:
1. Written Motor Safety Program (with upper management buy-in)
2. Driver recruiting and selection practices
3. Monitor MVR's and implement a scoring system
4. New driver evaluation and orientation
5. Driver reviews and training
6. Post accident reviews
The following link is an example of a formal motor safety program that can be tailored to your needs: Motor Safety Program. As a reminder the most important aspect of implementing a motor safety program is to have upper management buy-in. With buy-in form upper management these programs will be short lived and ineffective.
Friday, March 5, 2010
Mergers and Acquisitions: Uncovered Liabilities
Due to our firm's business model, we deal with mergers and acquistions quite frequently. Therefore, I wanted to touch on the topic that needs some attention:
Acquisition of Liabilities: A company that acquires another company's assets and liabilities may face the liabilities without the benefits of the acquired company's insurance policies. Therefore, it is important to analyze the acquired company's insurance. For example, does the acquired company have sufficient proof of its historic insurance coverage? Has any of that insurance coverage been exhausted? Have any rights under those insurance policies been released? Furthermore, it is important to analyze the retrospective dates on all claims-made policies to ensure that they are correct when replacing coverage. For example, if a company is acquiring a piece of property that was exposed to remediation efforts in the past it is important to ensure that the pollution policy's retrospective date is correct.
Another creative approach to mitigate accrued liabilities from a merger or acquistion is through a "Loss Portfoloio Transfer/Buyout Program". This will transfer accrued liabilities resulting from past or ongoing operations. This will elimate the uncertainty of adverse loss development, reduce previously established reserves, and increase debt capacity.
Contingent Liabilities: This liability comes into play when a company is trying to acquire another company that is currently in litigation with a third party, and the buyer is concerned about potential successor liability presented by this litigation. Contingent liability insurance can insure the company against this potential successor liability if the target company loses the lawsuit, the selling shareholders of the target company do not satisfy the judgment, and the buyer is held liable as successor to the sellers. This type of coverage is normally underwritten on a case by case basis.
There are other concerns that come into play while dealing with a merger or acquistion situation, but acquired and contingent liabilities are the two most common to keep in mind.
Acquisition of Liabilities: A company that acquires another company's assets and liabilities may face the liabilities without the benefits of the acquired company's insurance policies. Therefore, it is important to analyze the acquired company's insurance. For example, does the acquired company have sufficient proof of its historic insurance coverage? Has any of that insurance coverage been exhausted? Have any rights under those insurance policies been released? Furthermore, it is important to analyze the retrospective dates on all claims-made policies to ensure that they are correct when replacing coverage. For example, if a company is acquiring a piece of property that was exposed to remediation efforts in the past it is important to ensure that the pollution policy's retrospective date is correct.
Another creative approach to mitigate accrued liabilities from a merger or acquistion is through a "Loss Portfoloio Transfer/Buyout Program". This will transfer accrued liabilities resulting from past or ongoing operations. This will elimate the uncertainty of adverse loss development, reduce previously established reserves, and increase debt capacity.
Contingent Liabilities: This liability comes into play when a company is trying to acquire another company that is currently in litigation with a third party, and the buyer is concerned about potential successor liability presented by this litigation. Contingent liability insurance can insure the company against this potential successor liability if the target company loses the lawsuit, the selling shareholders of the target company do not satisfy the judgment, and the buyer is held liable as successor to the sellers. This type of coverage is normally underwritten on a case by case basis.
There are other concerns that come into play while dealing with a merger or acquistion situation, but acquired and contingent liabilities are the two most common to keep in mind.
Monday, March 1, 2010
Social Media: What's the Risk?
If ten years ago you mentioned the term social media, people would have looked at you wondering what you were talking about. Today social media is becoming an integral aspect of everyday life. Here are a few staggering statistics as of January 2010:
1. 400m people on Facebook
2. 60m people on Linkedin (average age of 43 with a college degree)
3. 1/3 of all adults have used Twitter
With these statistics in mind, insurance companies have started to examine what exposures a person or business will uncover using social media. The following are some risks that you need to be aware of:
1. Personal injury suits as the result of an unintentional libelous comment on a blog or Web posting.
2. Identity Theft
3. Privacy Liability
4. Theft or Destruction of Data
5. Hacker attachs against Third Parties
6. Crisis Management Expenses
Since 2005, 227 million data records of US residents have been exposed due to security breaches, according to the Privacy Rights Clearinghouse. One high profile case involved TJ Maxx. In January 2007, the US retailer revealed that it had experienced an ‘unauthorised intrusion’ into its computer systems and it later emerged that 46.2 million credit details may have been compromised. Credit card, debit card, check and merchandise return transactions, drivers’ licence numbers, names, and addresses were all exposed in incidents dating back to 2003.
Lloyd’s of London offers the following tips for businesses on how to manage cyber risks:
- Have a formal process in place to update software, firewalls and anti-virus programmes regularly and promptly.
- Safeguard mobile devices that hold sensitive personal data. Encryption is a key tool to do this.
- Safeguard personal information within the workplace, segregating pay information and personal details on a separate part of the network and restricting access to staff on a “least privilege” need to know basis.
- Develop a firm set of operational and procedural guidelines to support security policies and standards that must be followed to maintain security.
- Implement regular staff training on security procedures and employ rigorous staff vetting when hiring.
- Make sure you have a crisis management plan in place which has been rehearsed and can be executed as soon as you detect a potential security breach.
- The first 24 hours of a security breach is critical: implement the crisis plan immediately. Time is of the essence, particularly if regulatory reporting is required.
- Having insurance in place is a big bonus for companies involved in a security breach. In addition to covering many of the major costs, insurers have many of the resources to advise a company on what they need to do, as well as expert contacts to handle the situation expediently.
1. 400m people on Facebook
2. 60m people on Linkedin (average age of 43 with a college degree)
3. 1/3 of all adults have used Twitter
With these statistics in mind, insurance companies have started to examine what exposures a person or business will uncover using social media. The following are some risks that you need to be aware of:
1. Personal injury suits as the result of an unintentional libelous comment on a blog or Web posting.
2. Identity Theft
3. Privacy Liability
4. Theft or Destruction of Data
5. Hacker attachs against Third Parties
6. Crisis Management Expenses
Since 2005, 227 million data records of US residents have been exposed due to security breaches, according to the Privacy Rights Clearinghouse. One high profile case involved TJ Maxx. In January 2007, the US retailer revealed that it had experienced an ‘unauthorised intrusion’ into its computer systems and it later emerged that 46.2 million credit details may have been compromised. Credit card, debit card, check and merchandise return transactions, drivers’ licence numbers, names, and addresses were all exposed in incidents dating back to 2003.
Lloyd’s of London offers the following tips for businesses on how to manage cyber risks:
- Have a formal process in place to update software, firewalls and anti-virus programmes regularly and promptly.
- Safeguard mobile devices that hold sensitive personal data. Encryption is a key tool to do this.
- Safeguard personal information within the workplace, segregating pay information and personal details on a separate part of the network and restricting access to staff on a “least privilege” need to know basis.
- Develop a firm set of operational and procedural guidelines to support security policies and standards that must be followed to maintain security.
- Implement regular staff training on security procedures and employ rigorous staff vetting when hiring.
- Make sure you have a crisis management plan in place which has been rehearsed and can be executed as soon as you detect a potential security breach.
- The first 24 hours of a security breach is critical: implement the crisis plan immediately. Time is of the essence, particularly if regulatory reporting is required.
- Having insurance in place is a big bonus for companies involved in a security breach. In addition to covering many of the major costs, insurers have many of the resources to advise a company on what they need to do, as well as expert contacts to handle the situation expediently.
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