Page Title

Tort Reform In PA	2
Fine Tuning of Federal Laws	3
Asbestos: The Continuing Insurance Malady	3
Perception vs. Truth (Cont.)	3
Terrorism: Insurance Industry and Government Response	4
Response Key to Juror Poll	4

Text Box: It is a no brainer. The facts are on your side. You feel confident – almost cocky. There is no way that you can lose. Finally, justice will prevail. This is the one to fight tooth and nail on. Only the strong of heart should read farther. Sometimes self-righteousness fueled by heightened emotion can wreak havoc with what would be construed as a reason to provide a strategic defense against an employment-related lawsuit– such as wrongful termination or discrimination. Dispute Dynamics, Inc. conducted research of juror attitudes involving these types of actions. Thousands of jurors were canvassed in this poll. Why not guesstimate the results to the questions below by indicating the % of jurors who indicated YES to the questions? It is more important to see that “justice is done” than to follow the “letter of the law”. _____ In a dispute between an employee and an employer, the average juror tends to believe the employee or employer. _____ Many decision-makers’ promotion decisions are influenced by an employee’s age, sex or race. _____ White and minority employees are treated equally in the workplace. ______ 5. Men and women are treated equally in the workplace. _____ 6. Sexual harassment is a common occurrence in the workplace. _____ 7. Do women report sexual harassment to their employers if it has occurred. _____ 8. Most companies say they strictly enforce their policies against discrimination or harassment in the workplace, but they really don’t. _____ 9. Some companies have so much money that even forcing them to pay hundreds of millions of dollars in damages is not enough to punish them. _____ 10. Typically, executives who have sexually harassed subordinates get nothing more than a “slap on the wrist” by the company. _____ 11. Supervisors who sexually harass their subordinates should be fired. _____ 12. A company is negligent if it does not properly document an employee’s performance problems. _____ 13. I am against punitive damages. ______ 14. A company should pay punitive damages if it acted negligently. _____ Responses to these questions are presented on page 4.

Text Box: This legislation, if ultimately passed, is being hailed by proponents as a wonderful tort reform measure… and so it is. It will not, however, be a panacea.

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Volume 3, Issue 4

Asbestos litigation which had started in the 1970s and caused the insurance industry to unequivocally exclude coverage for this exposure, continues to this day to provide an imposing challenge.

One example is the St. Paul Companies which most recently settled such claims in the amount of $975,000,000. In addition, PPG Industries finalized a settlement on the order of $2.7 billion. Through the years, there have been multiple defendants in asbestos-related actions. A new set of defendants, in recent years, has resulted in further liabilities to the industry.

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Tillinghast, in a 2001 report, estimated that US Insurers would be responsible for up to $65 billion in settlements. In addition, AM Best & Company (an insurance rating organization) increased its industry estimates from $40 billion to $65 billion in recognition of recent legal transactions. AM Best had preliminarily estimated that insurers increased their reserves for asbestos-related liabilities by $2 billion (though a $4 billion increase appeared to be in order).

St. Paul Companies had its AM Best rating reduced from “A+” to “A”.

Hoo boy, more challenges for the insurance industry…

Text Box: Continue from Page 1 Conclusion Often times we speak of the risks associated with a particular activity. There is a risk of lawsuit for wrongful termination. There is a risk of a lawsuit for products liability. There is a risk of attorney representation in a workers compensation case.

Recently, the courts have reviewed and ruled upon several aspects of Federal Law. These include:

· You may recall, in a previous issue, a reference to Chevron USA, Inc. vs. Mario Echazabal. In this case, the 9th US Circuit Court of Appeals ruled that the employer was obligated to provide Mr. Echazabal a position in a refinery – despite the fact that medical evidence showed that such a position would aggravate his liver condition. By this judgment, an employer would be in a “rock or hard place” position. Hiring the individual would place the affected worker (and possibly co-workers) at risk which could lead to a workers compensation or tort action. Not hiring the individual, within these parameters would offer the possibility of a discrimination suit.

The Supreme Court, however, in a June 10th ruling overturned the 9th’s Circuit decision. They reinforced the employer’s position as being sound and an equitable resolution of an apparent conflict of laws. Thus, a victory for employers.

· The Equal Employment Opportunity Commission has formally abandoned its policy of invoking age discrimination charges against employers who provide less advantageous health care benefits to retirees (who are eligible for Medicare) than to younger retirees. The EEOC has issued new

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enforcement guidelines on this point. The designing of a healthcare plan to accommodate a retiree’s Medicare benefits is an efficient and practical measure. Thus, a victory for employers.

· The 3rd US Circuit Court of Appeals, in a May 29th decision, elaborated on “Reasonable Accommodation” in Howard Shapiro vs. Township of Lakewood. In this case, Mr. Shapiro injured his back while working and requested an alternative – lighter duty – position within the company. Lakewood had a traditional practice of mandating that employees need to respond to company job opportunities that are posted. Lakewood indicated that a special accommodation for Mr. Shapiro, which would breach this common practice, was not a reasonable accommodation. This placed a greater emphasis on the need to accommodate an individual versus standing on a neutral, business policy. The court held that the policy infraction would not be construed as an “undue hardship” to the employer. Employers, therefore, needs to partake in an “interactive process” with the employee in discerning the availability of alternative jobs. The ruling does not allow for an employer to automatically stand upon a given business practice. This ruling places more of a responsibility on the employer to fulfill this ADA requirement.

Then, there is the risk associated with the system of justice itself – overall a good system but one with subjectivity. Some of these perspectives are inherent in the prejudices of human nature itself. So, be forewarned – you may get the justice that you want..… but as seen through the eyes of the public.

This poll appeared in Best’s Review in the May, 2002 issue. This was reprinted with the publishers permission

As of mid-June, their remains an open question as to the role of the Federal Government in supporting the insurance industry for the terrorism peril.

The US House had passed a measure in November, 2001 which established a loan mechanism by the Federal Government to the insurance industry in the event that a terrorist loss exceeded a certain threshold.

A more recent bill in the Senate – the Terrorism Risk Insurance Act of 2002 – goes a another step. This bill would charter the Federal Government as a reinsurer to the insurance industry – in other words, accepting part of the risk – in the event of a terroristic calamity. The industry would need to sustain a loss in excess of $10 billion for the reinsurance to be actualized.

Several consumer groups, however, are hoping that the Federal Government does not respond in any way. Their feeling is that

citizen’s taxes should not be used to subsidize a risk which the insurance industry should be capable of accommodating. For example, they point to pollution liability-related claims, in past years, which ultimately was responded to by the insurance industry with the development of a new genre of insurance.

At this point, it is anybody’s guess as to what the Federal Government’s role will be – if any. In the meantime, many carriers are invoking terrorism exclusions on their policies. Such exclusions stipulate that coverage will not apply in the event that property damage exceeds $25,000,000. In addition, under General Liability, coverage would not apply in circumstances where 50 or more individuals are seriously injured or killed.

This latter exclusion is one of the most unusual in the history of insurance.