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Employment related practices (EPL) claims are among the largest and most catastrophic claims facing public entities today. Verdicts can be virtually unlimited due to the fact that most claims can be filed as Federal, Section 1983 claims, effectively eliminating any state tort statutes. Due to the severe nature of these claims, Global Intermediaries is always searching for new and unique ways to manage them. We regularly interview and research the techniques of public entities around the U.S. in the hopes of finding a way to eventually eliminate (or at least greatly reduce) EPL claims altogether. On a recent business trip we may have uncovered a useful technique for all entities when it comes to handling EPL grievances before they reach the claim stage.

EPL related claims can be sleepers in the world of insurance. One day everything is running smoothly and the next you’re looking at possible losses in the millions! Along with their financial impact, EPL claims are very time intensive; multiple departments are involved, HR, attorneys… sooner or later the whole entity is involved in one way or another.

On a recent business trip I visited a public entity who utilizes a bipartisan Civil Service (or Joint Labor/Union) Board to review EPL grievances. It appeared that this neutral board has allowed the public entity to save both time and money in the management of their EPL related claims. If Civil Service Boards work for this public entity, why aren’t others using them? Could a neutral board, combined with a technique called “intent based focus” (forged out of the collective bargaining world) represent the next wave in loss control for the public entity world

I’ve just started my research, but I’ve uncovered a lot of the grievance process commonalities among public entities. Most public entities utilize a tested, but money and time consuming method:

• An employee contacts their attorney or union representative and has them file a complaint with the HR department.
• HR receives the complaint, reviews, and then contacts their attorney… From here, the battle is on.
• Some of the grievances end up in lawsuits, which add even more cost to the already laborious process.

In my interviews with public entities that use bipartisan boards, I’ve found that the grievance process is managed much differently.

• Employees are required to bring their grievance up in front of a board compiled of their peers and others from their employer.
• The board then looks at a broad view of the issue at hand, making sure that the employee’s full voice is heard and understood.
• This process can quell any wrongdoings by the entity, overturn bad employment decisions by managers, and it can dissolve any misunderstandings by the employee filing the grievance.
• Overall, the process serves as a neutral step that must be done before anything further takes place. It appears that most grievances can be quickly solved with this process, although some still end up in court.

Over the next month I’ll be continuing to research Civil Service (Joint Labor/Union) Boards to find some concrete answers and to discover their true power. I’ll also be including an in depth look on two related claims and how they were handled. One case involves a new Sheriff who fired most of the old senior staff, resulting in $10MM in lawsuits. The other situation involves a bus driver union that caused tensions for over two years before a bipartisan board was implemented.

Overall, it is my goal to help provide you with new information to help control costs and solve problems well before any insurance company is put on notice. If my theories and research pans out, a Civil Service Board might be one of those items!

Global Intermediaries just worked on a large county in the Northeast where the expiring carrier came back with a 33% increase due to loss activity. We eventually stimulated competition and brought the increase down to 17%, but it was still an increase. On the other hand, one of our recent Northwest accounts received an unsolicited quote from a newer market that didn’t even receive a submission!

The difference here is simple. Both public entities had different account profiles, specifically the loss ratios and the tort environments. It appears that the markets are gaining intelligence and cherry picking the “select”, loss free, accounts and going after them with gusto, whereas loss laden accounts are seeing increases. This new approach is a departure from our old thoughts of risk diversion and adverse selection, where markets applied the same rate to similar accounts, independent of loss ratios.

What does this mean for public entity insurance?

With the help of GIE, public entities and their brokers will need to determine if they fall into a “Select” program or a “loss laden” program. Select accounts will be largely loss free and will benefit from great coverage and a premium decrease. Loss laden accounts will have to work harder, with a more creative approach to the marketplace. No matter where your account stands, Global Intermediaries is here to help you and your agent plan the best marketing strategy; be it Select or Not So Select.

***One of the new items we’re working on is a stable rate product for Select accounts.  If you would be interested in such a product, please contact us and we’ll include your thoughts in our market approach.

In today’s volatile public entity insurance marketplace I find myself regularly answering this question. Everyone jumps to “stability”, and public entities believe stability means grabbing hold of your SIR and not letting go.

As insurance markets start to raise the self-insured retentions of large public entities, due to loss activity or the economy, many entities fight to keep their current SIR by sacrificing higher policy limits. At the same time, lawsuits are increasing in size and number in all coverage areas (View Settlements PDF). Many public entities are maintaining lower policy limits when the threat of high dollar lawsuits is actually increasing! Now here’s the kicker… Private equity firms are now financing these high dollar lawsuits in the hopes of receiving better investment returns. (Source Article) This information, recent inflation fears, and a possible turn in the insurance market make me wonder whether we should be fighting for the low SIR or a higher limit.

So What Can You Do?

First, determine the correct SIR for your account; it’s usually above the working (or frequency) layer. Positioning the SIR allows for the most cost effective transfer of risk, enabling you to keep premiums at a minimum while still achieving your goal of protection from market swings. SIR’s should be set to handle one large claim every 5 to 6 years.  If your current SIR is above or below that level, it may need to be reset. If you don’t know if your SIR is correctly positioned, call us, we analyze SIRs and loss histories for a living.

Second, determine what policy limits you might need. Many public entities in states with strong tort law buy lower limits as they feel comfortable with the tort protection. However, even in tort protected states, these entities are NOT protected from the Federal Claims found in Section 1983 and the claims associated with violating those laws. These claims are mostly EPLI and law enforcement related, so be sure to weigh your exposure in those areas. Keep in mind that tort statutes have been broken across the country. If your local tort statute is broken you’ll be vulnerable to all negligence based claims and that tort protection will no longer exist.

Odds are that your public entity can likely absorb an additional $500k to $1 million due to an increase in the SIR, but if your limits are too low can you handle another $10 million from a lawsuit gone bad? Imagine having to pay $5-$10 million in this economy because you didn’t take the time to consider the changing marketplace and the possibility of a large claim. Ultimately, the decision is up to you, but if you’re sacrificing limits for a lower SIR, then you may need to reconsider your choice!

“Placement Facility” is a term I hear all the time from brokerage firms these days. Some brokerages seem to think that wholesalers are only good for transacting business and correctly processing quotes, binders, and policies. What they’re missing is the expertise a niche wholesaler such as GIE provides; like the ability to help set retentions, identify problem areas, and then design solutions for those exposures. Our specialized focus allows us to design the perfect program for each public entity to solicit and present to the correct carrier. Add to that GIE’s constant drive for program creation and dedicated R & D and you’ll find that we’re more than just a “Placement Facility”. In fact, GIE would be one of the few players around if we could have patented all the coverage advances we’ve created or held captive all the companies we’ve introduced to the market. Instead, we released those into the marketplace to benefit public entities and their agents. This allows us to retain our independent status and true wholesale stance, proving our dedication to our agents and their accounts.

What gives Global Intermediaries this strong ability to push the public entity industry along is our robust history. We started as SIRPRO, an MGA for liability in 1993 and rapidly grew into a national powerhouse for self insured public entities. Over the hard market of 1999, we made a strategic decision to become a wholesaler, offering excess liability, excess workers compensation, med/mal, police professional, and property coverage for all companies to all agents. Since then, we’ve brought over 10 companies into the excess liability market and created many significant endorsements and coverage’s commonly used in this sector today.

So instead of using a “placement facility”, give GIE a call and allow us to help push your public entity programs forward!