Liberty! Fraternity! Liability!
Recent incidents alleging alcohol abuse, sexual assault and other bad behaviors at America’s college fraternities have drawn national attention. Much of the discussion has focused on causes and prevention, but with litigation inevitable in some of these incidents, questions of liability are sure to arise.
Individuals directly involved in such incidents face potential liability, but claims can also extend to the local and national fraternity organizations, to the universities and colleges with which they are affiliated, and even to the local chapters’ officers and their families.
“It all depends on how the claim or the complaint that is filed in court is framed. What are the allegations in that litigation? Who are the named defendants, and what are the circumstances of how it happened and can it be corroborated?” said Michael Liebowitz, senior director of enterprise risk management and insurance at New York University.
The local and national fraternities may face liability for incidents that occur during fraternity events, especially on fraternity premises. Most local chapters have liability coverage purchased by their national organizations through a handful of companies that specialize in insuring fraternities and sororities. The largest of these, James R. Favor & Co., was actually acquired by a group of national fraternity organizations in 2006.
But just because a fraternity has general liability insurance, doesn’t mean a particular incident will be covered.
But just because a fraternity has general liability insurance, doesn’t mean a particular incident will be covered.
“Insurance policies typically exclude any criminal violations. So if it’s considered a crime, the policy is not going to cover it,” said Leta Finch, leader of Aon Risk Solutions’ national higher education practice.
In March 2014, “The Atlantic” reported that most fraternities have stringent, but largely unenforced, alcohol policies in place. The vast majority of fraternity-related injuries, assaults and other incidents involved violations of alcohol policies, which effectively provide liability protection for the fraternities while placing the individual members outside the coverage.
Lisa Zimmaro, assistant vice president for risk management and treasury at Temple University in Philadelphia, said that “fraternity insurance carriers have huge exclusions for alcohol-related events and sexual assault. … If the insurance carrier for the fraternity excludes certain acts, then the victim would have to look elsewhere for compensation for damages.”
One place they might seek compensation is from the university or college with which the fraternity is affiliated — and the nature of that affiliation can help determine what liability the institution might face.
Institutions that provide fraternities with space on campus, security, financial support or other resources could be perceived as having greater liability.
Closer relationships mean greater liability. Institutions that provide fraternities with space on campus, security, financial support or other resources could be perceived as having greater liability. Those with more distant and less structured affiliations would face fewer liability issues.
Institutions should also be aware of exclusions to their coverage.
“If it is excluded on the policy and there is a finding in a civil action, the university would end up paying out of pocket. Just because there is an insurance exclusion doesn’t get them off the hook,” said Zimmaro, who added that institutions should also be aware of sub-limits.
“There maybe sub-limits, even if there’s not an outright exclusion, maybe coverage up to $5 million instead of $25 million. Know the limits of what your policy is going to pay,” she said.
The best way to avoid liability may be to prevent fraternity incidents from occurring, but ironically, codes of conduct and prohibitions on behaviors can increase liability if they lack adequate follow through.
“The minute colleges and universities start to dictate policy on fraternities and sororities, they are vicariously picking up liability, because then they are going to be forced to police it.” — Michael Liebowitz, senior director of enterprise risk management and insurance, New York University
“The minute colleges and universities start to dictate policy on fraternities and sororities, they are vicariously picking up liability, because then they are going to be forced to police it.
“[If] something bad happens because someone broke the rules, then the question is, ‘Why didn’t you have surveillance in place to monitor what was going on?’ So it is very much a double-edged sword,” said Leibowitz.
Finch pointed out that enforcing codes of conduct that lack clear consequences can also leave institutions exposed to liability from violators who feel they have been disciplined unfairly, treated inconsistently or been denied due diligence rights.
Parents of fraternity members can also face liability — and not just the parents of those directly involved in incidents.
Leibowitz said that while primary liability lies with the fraternity member who committed the acts in question, “the rest of it lies with the officers of the chapter, from the president straight on down, because they’re the ones that set the tone, they’re the ones that are supposed to control what goes on. … If you want to be an officer, it comes with responsibility, and responsibility comes with liability.”
Zimmaro agreed. “Families are sued all the time for the acts of their students who are involved in incidents involving any kind of organization where someone gets hurt. An attorney is going to look for a compensation source, and if it’s mom and dad, then it’s mom and dad.”
The Division of Workers’ Compensation announced that any interest or discount provided for in the Texas Workers’ Compensation Act shall be at the rate of 3.77 percent. The rate is effective April 1 through June 30, 2015.
The rate in effect for the previous period of Jan. 1, 2015, through March 31, 2015 was 3.73 percent. For more information regarding calculation of the Discount Rate and Interest Rate, contact Dylan McCoy, Texas Department of Insurance, Financial Services at (512) 676-6195, or visit the website.
Lifetime Income Benefits
The Commissioner of Workers’ Compensation adopted new 28 Texas Administrative Code Section 131.1 regarding Initiation of Lifetime Income Benefits: Notice of Denial. The new rule was published in the Feb. 27 issue of the Texas Register and is available at www.sos.state.tx.us/texreg/index.shtml. The new rule requires that an insurance carrier review an injured employee’s eligibility for lifetime income benefits in a timely fashion, including when an injured employee requests LIBs, and requires that the carrier review all of the statutory criteria. The new rule also outlines the time frames for determining LIBs eligibility in situations where an injured employee requests LIBs in writing, as well as time frames for the payment of LIBs after the insurance carrier reasonably believes the injured employee is eligible. The new rule also helps ensure that if the insurance carrier denies LIBs eligibility, communication between the insurance carrier and the injured employee will be consistent, documented, and that all parties will be informed of their right to initiate dispute resolution. The new rule also retains the statutory eligibility requirements for LIBs. The new rule is effective June 1. The division has amended Form PLN-4, Notice Regarding Eligibility for Lifetime Income Benefits, for use with this rule. The finalized PLN-4 is available online and is also effective June 1.
The Division of Workers’ Compensation’s Medical Advisor approved a Medical Quality Review Annual Audit Plan, which was adopted by the Commissioner of Workers’ Compensation. The purpose of the plan is to promote the delivery of quality health care in a cost-effective manner with emphasis on injured employee safety, ensure that health care providers adhere to medically accepted standards of care, and support return-to-work efforts and avoid unnecessary disability.
The medical quality review process is medical case review initiated from either a written complaint, which may include an internal referral, a plan-based audit, or monitoring resulting from a consent order in accordance with 28 Texas Administrative Code Section 180.68. The Medical Advisor oversees the medical quality review process conducted by the Medical Quality Review Panel.
The Division of Workers’ Compensation announced that, beginning Oct. 1, the Texas workers’ compensation system will transition to the use of the International Classification of Diseases, 10th Edition, Clinical Modification and Procedure Coding System (ICD-10) from the 9th Edition (ICD-9) for medical billing, processing, and reporting in alignment with federal regulations. These federal regulations adopt standard medical data code sets that apply to the Medicare system, which is regulated by the Centers for Medicare and Medicaid Services. Although there have been delays in the implementation of the ICD-10 code sets, the DWC stated that it will follow the time frame set by CMS. The DWC stated that health care providers, insurance carriers, clearinghouses, and billing services that participate in the Texas workers’ compensation system must be prepared to comply with ICD-10. All health care services provided on or after Oct. 1 must be billed with ICD-10 diagnosis codes or ICD-10 procedure codes. This includes medical bills submitted electronically or paper forms. Health care services provided before Oct. 1 must continue to be billed with ICD-9 diagnosis and procedure codes. Practice management systems and bill review management must be able to accommodate both ICD-9 and ICD-10 codes until all medical bills for service dates before Oct. 1, 2015, have been processed.
Medical Billing Data Submissions
The Oregon Workers’ Compensation Division posted a list of insurers and self-insured employers that are required to electronically submit detailed workers’ compensation medical bill and payment data to the Oregon Department of Consumer and Business Services under OAR 436-160-0405. For more information, contact the EDI coordinator by telephone at (503) 947-7742, by email at email@example.com, or visit online.
The Pennsylvania Department of Labor and Industries announced that workers’ compensation insurance rates dropped 5.99 percent, effective April 1.
The rate reduction follows the Insurance Department’s approval of the Pennsylvania Compensation Rating Bureau’s annual loss cost filing. The loss costs are used to determine the premiums businesses pay for workers’ compensation insurance. The department stated that premium savings for an individual employer will vary based on the employer’s risk classification, claims experience, and other factors. Not all employers will see a decrease. This is the fourth consecutive year that workers’ compensation insurance rates have been cut, the department stated.
The Department of Labor and Industries adopted rules that amend the following four specific areas: 1) rules applicable to the classification and reporting of professional sports teams (WAC 296-17-35203(1), 296-17A-6706, 296-17A-6707, 296-17A-6809, and 296-17A-7102); 2) rules applicable to the classification of employers operating spas (WAC 296-17A-6109, 296-17A-6204, and 296-17A-6501); 3) rules applicable to the classification of reforestation employment (WAC 296-17A-1007, 296-17A-5004, and 296-17A-5006); and 4) rules applicable to the classification of farming operations (WAC 296-17A-4802 through 296-17A-4813). The changes will be effective July 1.
Healthcare: The Hardest Job in Risk Management
Radically changing cost and reimbursement models.
Rapidly evolving service delivery approaches.
It is difficult to imagine an industry more complex and uncertain than healthcare. Providers are being forced to lower costs and improve efficiencies on a scale that is almost beyond imagination. At the same time, quality of care must remain high.
After all, this is more than just a business.
The pressure on risk managers, brokers and CFOs is intense. If navigating these challenges wasn’t stress inducing enough, these professionals also need to ensure continued profitability.
“Healthcare companies don’t hide the fact that they’re looking to reduce costs and improve efficiencies in practically every facet of their business. Insurance purchasing and financing are high on that list,” said Leo Carroll, who heads the healthcare professional liability underwriting unit for Berkshire Hathaway Specialty Insurance.
But it’s about a lot more than just price. The complexity of the healthcare system and unique footprint of each provider requires customized solutions that can reduce risk, minimize losses and improve efficiencies.
“Each provider is faced with a different set of challenges. Therefore, our approach is to carefully listen to the needs of each client and respond with a creative proposal that often requires great flexibility on the part of our team,” explained Carroll.
Creativity? Flexibility? Those are not terms often used to describe an insurance carrier. But BHSI Healthcare is a new type of insurer.
The Foundation: Financial Strength
Berkshire Hathaway is synonymous with financial strength. Leveraging the company’s well-capitalized balance sheet provides BHSI with unmatched capabilities to take on substantial risks in a sustainable way.
For one, BHSI is the highest rated paper available to healthcare providers. Given the severity of risks faced by the industry, this is a very important attribute.
But BHSI operationalizes its balance sheet in many ways beyond just strong financial ratings.
For example, BHSI has never relied on reinsurance. Without the need to manage those relationships, BHSI is able to eliminate a significant amount of overhead. The result is an industry leading expense ratio and the ability to pass on savings to clients.
“The impact of operationalizing our balance sheet is remarkable. We don’t impose our business needs on our clients. Our financial strength provides us the freedom to genuinely listen to our clients and propose unique, creative solutions,” Carroll said.
Keeping Things Simple
Healthcare professional liability policy language is often bloated and difficult to decipher. Insurers are attempting to tackle complex, evolving issues and account for a broad range of scenarios and contingencies. The result often confuses and contradicts.
Carroll said BHSI strives to be as simple and straightforward as possible with policy language across all lines of business. It comes down to making it easy and transparent to do business with BHSI.
“Our goal is to be as straightforward as we can and at the same time provide coverage that’s meaningful and addresses the exposures our customers need addressed,” Carroll said.
Claims: More Than an After Thought
Complex litigation is an unfortunate fact of life for large healthcare customers. Carroll, who began his insurance career in medical claims management, understands how important complex claims management is to the BHSI value proposition.
In fact, “claims management is so critical to customers, that BHSI Claims contributes to all aspects of its operations – from product development through risk analysis, servicing and claims resolution,” said Robert Romeo, head of Healthcare and Casualty Claims.
And as part of the focus on building long-term relationships, BHSI has made it a priority to introduce customers to the claims team as early as possible and before a claim is made on a policy.
“Being so closely aligned automatically delivers efficiency and simplicity in the way we work,” explained Carroll. “We have a common understanding of our forms, endorsements and coverage, so there is less opportunity for disagreement or misunderstanding between what our underwriters wrote and how our claims professionals interpret it.”
Responding To Ebola: Creativity + Flexibility
The recent Ebola outbreak provided a prime example of BHSI Healthcare’s customer-centric approach in action.
Almost immediately, many healthcare systems recognized the need to improve their infectious disease management protocols. The urgency intensified after several nurses who treated Ebola patients were themselves infected.
BHSI Healthcare was uniquely positioned to rapidly respond. Carroll and his team approached several of their clients who were widely recognized as the leading infectious disease management institutions. With the help of these institutions, BHSI was able to compile tools, checklists, libraries and other materials.
These best practices were immediately made available to all BHSI Healthcare clients who leveraged the information to improve their operations.
At the same time, healthcare providers were at risk of multiple exposures associated with the evolving Ebola situation. Carroll and his Healthcare team worked with clients from a professional liability and general liability perspective. Concurrently, other BHSI groups worked with the same clients on offerings for business interruption, disinfection and cleaning costs.
Ever vigilant, the BHSI chief underwriting officer, David Fields, created a point of central command to monitor the situation, field client requests and execute the company’s response. The results were highly customized packages designed specifically for several clients. On some programs, net limits exceeded $100 million and covered many exposures underwritten by multiple BHSI groups.
“At the height of the outbreak, there was a lot of fear and panic in the healthcare industry. Our team responded not by pulling back but by leaning in. We demonstrated that we are risk seekers and as an organization we can deploy our substantial resources in times of crisis. The results were creative solutions and very substantial coverage options for our clients,” said Carroll.
It turns out that creativity and flexibly requires both significant financial resources and passionate professionals. That is why no other insurer can match Berkshire Hathaway Specialty Insurance.
To learn more about BHSI Healthcare, please visit www.bhspecialty.com.
Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, and homeowners insurance. It underwrites on the paper of Berkshire Hathaway’s National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway Specialty Insurance has regional underwriting offices in Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, Toronto, Hong Kong, Singapore and New Zealand. For more information, contact firstname.lastname@example.org.
The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.