Tuesday, June 24, 2014

Employers – Are You Protected From Slander and Libel Lawsuits?

It’s a scenario that every business owner is familiar with. An employee who has worked with a business for years, and learned all the ropes, quits and starts a competing business of his own. The parting of ways can be pleasant, cold and business like, or acrimonious. In the first two instances, the employer finds replacements and carries on, taking legitimate steps to protect his business from the new competitors who know his way of working and trade secrets inside out. But when the parting turns into a fight, things can get ugly very soon.

Defamation and Other Claims

In a recent case a California wealth adviser was ordered to pay over $3.5 million to 2 ex-employees for defaming them. The ex-employees in their suit claimed that the former employer had had made defamatory comments and accusations against them after they left him and started their own financial advisory services.

The claim was that the old employer has made accusations of fraud, planted false evidence and pressurized one of his clients to manipulate Google’s search results so that negative comments and defamatory accusation were a major component of the results. The case came up before the Financial Industry Regulatory Authority. There were 3 arbitrators, all ‘public arbitrators’ with no connections to the securities industry. This may have been a good thing as they would not, in theory, have been subjected to pressure or attempts to influence them unfairly. On the other hand, they had no hands-on knowledge of the working of the industry and the ground realities. The ruling was in favor of the ex-employees who were awarded $2.5 million in punitive damages. In addition, compensatory damages of $800,000 were levied. The ex-employer also had to pay for the opposing sides’ attorney fees which came to almost $340,000.

The ruling is going to be appealed. One of the grounds is that the arbitrators had no knowledge of the industry and were thus not component to make any ruling in the matter.

Ignore the Merits of the Claim

In cases like this it is always difficult to evaluate the merits of the claim made by either side. Often there are no clear cut blacks and whites – just shades of gray. The competency (or the lack of it) of the arbitrators is also often open to debate. What is important is the financial blow that the employer suffered. It is the sort of thing that can happen to any business owner. The owners may have done nothing wrong but the ruling goes against him. Or he may have inadvertently said or done something that he should not have. Either way, the loss from this kind of situation can cripple or even destroy a business.

This is where having the right kind of business insurance coverage becomes critical. Claims and counter claims are a part of business and losing this kind of case will not necessarily harm the ex-employer who should be able to recover from the loss of two employees quickly. But the financial loss is another matter. The right kind of business insurance coverage will protect against the financial loss. In many cases a general liability business insurance policy will offer coverage in these types of circumstances. If you are a business owner or employer, you should check your coverage to see if you are adequately protected from being sued for slander, libel or defamation. Wherever the fault lies or even if there is no fault and the whole thing is just a misunderstanding, the cost of losing can massive. And even if you win, the legal fees you have incurred can be huge. With the right type of insurance, the financial cost of being sued is something you do not have to worry about.

Contact Insurance by Allied Brokers with your questions about business insurance, safeguarding your business against unexpected future risks and potential financial losses. Call us (650) 328-1000 or visit us at http://www.alliedbrokers.com/

If Your Fire Insurance is Canceled

When the Cocos fire was raging a San Diego resident whose home was in danger was surprised and happy you receive a phone call from his insurance company. The company representative told him that the company had a mitigation team in the vicinity and that it offered a free service wherein they try to protect the homes of their policy holders. The fire did not damage the resident’s home, but he was happy and thankful that the insurance company had been so proactive in protecting the interests of its policy holders.

What happened next was a shock to the man. A week later, he received another phone call from the insurance company. The representative told him that his home was classified as being in a wildfire area and because of this the company had decided not to renew his insurance policy. The homeowner, who in the past 10 years had never filed a claim on either his home or car insurance policies, felt let down. He felt that after accepting premiums totaling about $25,000 over the 10 year period, the company dropped him like a hot potato.

It’s Legal

According to the State Department of Insurance, what the insurance company did is not unusual. When an area is designated as a high fire danger region, insurance companies, especially those with a lot of exposure in these areas, move to limit the number of policies they issue. Like all businesses, insurance companies cannot survive without making profits. And one way of doing this is by reducing the risks and the possibilities of huge payouts. No one can argue with this logic.

But there’s more to it than logic. The homeowner was never told earlier that his home was in a high risk area. The company took his money for 10 years without hesitation. He was never told why things had suddenly changed. And worst of all was the timing of the news. It came just one week after the first phone call saying that the insurance company was going the extra mile to protect him. The decision not to renew the policy is legal and from the insurance company’s point of view, makes sense. But is it fair?

If it Happens to You

The relationship between an insurance company and its policy holder is a business one with the company wanting to make a profit from the policy and the policy holder expecting protection from loss. For the policy holder there is also the feeling of security that comes from being insured, a feeling that grows as renewals come and go without a hitch. To have it suddenly withdrawn can leave the homeowner feeling very vulnerable. If this happens to you, there are some things you can do about it.

You can take steps to reduce the fire risk and then appeal to the insurance company to reconsider this decision. The insurer may change its mind and renew the policy. If not, there are other insurance companies that you can contact. The best thing to do is to talk to an insurance broker that represents a number of insurance companies. This will allow you to get expert advice and compare coverage options to find the policy that best suits you.

And if you think that your policy has been wrongfully canceled, you can call the State Department of Insurance and the agency will investigate to see if the insurer has followed the correct procedure in the matter.

Insurance by Allied Brokers has been functioning in the industry for over 50 years and we work with a wide selection of major carriers across California. If you have questions about your insurance policy, don’t hesitate to call us at (650) 328-1000 or visit us at http://www.alliedbrokers.com/