Third Quarter 2007 In This EditionVICARIOUS LIABILITY COVERAGE FOR INTENTIONAL/CRIMINAL ACTS AVOIDING THIRD PARTY OVER SUITS GOOD NEWS FOR THE ALARM INDUSTRY! EX-IT EMPLOYEE SUES PROVIDENCE HEALTH FOR WRONGFUL TERMINATION |
THE BESTGUARD NEWSLETTER
VICARIOUS LIABILITY COVERAGE FOR INTENTIONAL/CRIMINAL ACTSWhat is Vicarious Liability Coverage? It protects the insured/owner/employer against intentional/criminal acts committed by their employees.
And most of the customized liability policies on the market today that are specifically designed to cover private security agencies don’t do much better when it comes to intentional/criminal acts committed by their own employees. Some modify their wording to cover Assault & Battery even if it is intentional, but they still don’t provide any coverage for other types of intentional BI including rape & sexual molestation or intentional damage to property including arson, malicious mischief & employee theft. Some of these policies purport to provide some coverage to the insured company under their Professional Liability cover. However, the majority of these Professional Liability or Errors & Omissions coverage extensions don’t include coverage for ‘bodily injury” or “property damage” and some even exclude intentional and/or criminal acts committed by the insured’s employees. What a private security or investigation company needs with respect to intentional/criminal acts is a specific endorsement in their liability policy that provides coverage not for the employee that commits the intentional/criminal act, but for the company itself. That coverage is called Vicarious Liability coverage and every private security company in the U.S. today should insist on this coverage in their policy. Because we all unfortunately know that private security guards and private investigators sometimes commit horrific intentional/criminal acts. Don’t buy a policy without it! (We are pleased to advise that our new General/Professional Liability Insurance Program with the Lexington Insurance Company (AIG) includes Vicarious Liability coverage.)
AVOIDING THIRD PARTY OVER SUITSA third party over suit oftentimes results when an employee of a private security company is injured on the property of a client of the security company. The security company employee sues the client and the client in turn brings a third party suit against the security company based upon an indemnification (hold harmless) agreement signed between the parties. The net result is that the security company ends up paying under their General Liability insurance for a claim that was already paid under their Workers Compensation insurance. It is called a third party over suit in insurance parlance. To avoid these type claims, we would suggest adding a short paragraph to your Employment Agreement that states to the effect the following: “In consideration of assignments to work on property of security company’s clients, Employee hereby waives any and all causes of action which Employee may have against such clients arising out of or connection with such assignments.” (Excerpted with permission from the employment agreement of the Schaad Detective Agency, Inc.) We would, of course, strongly recommend that you review this suggested wording with your legal counsel.
GOOD NEWS FOR THE ALARM INDUSTRY!On July 13th, the Superior Court of New Jersey, appellate division, reversed a lower court decision in the ADT v. Synnex case. In a decision that is being hailed as a major victory for the Alarm Industry, the court reversed a $4.1 million decision against ADT and dismissed the case. The lawsuit stemmed from a burglary at a Synnex computer facility in New Jersey in which $8 million worth of computer equipment was stolen. Synnex filed an insurance claim and was paid $7.1 million. Their insurance company then subrogated against ADT in an attempt to recoup their loss. The primary question to be resolved in the appeal was “whether an exculpatory clause in a contract for the sale of a burglar alarm system, which requires the buyer to rely solely on its own insurance for any loss from theft, is contrary to public policy”. The court ruled that the exculpatory clause is “not contrary to public policy because it simply allocates responsibility to the buyer of an alarm system to maintain insurance coverage and the buyer is in the best position to know the value of its property and to insure against any loss.” Hooray for the alarm industry! If only the security guard industry could get away with the airtight contracts that the alarm industry uses with great success as this court decision affirms.
EX-IT EMPLOYEE SUES PROVIDENCE HEALTH FOR WRONGFUL TERMINATIONIn December 2005, a thief broke into Steven Shields' car at his Oregon home and walked off with computer disks and tapes containing unencrypted personal information on 365,000 patients at Portland's Providence Health Systems. The breach was the largest of its kind in Oregon history and resulted in a class-action lawsuit against the health care provider and a nine-month-long investigation by the state attorney general. That probe ended with a $95,000 settlement paid out by Providence Health. Now, in a new twist in the case, Shields -- a former IT worker for the health care agency -- has filed a wrongful termination lawsuit against Providence Health, claiming he was fired in February 2006 simply because he reported the theft to local law enforcement officials. The lawsuit, filed at the Multnomah County Circuit Court on Aug. 28, seeks $1 million in damages for lost wages and what Shields' attorney said was the emotional distress caused by the firing. In addition to anxiety, depression and humiliation, the firing also caused anger, lost sleep and skin disorders, the lawsuit said. "Steve was a 10-year employee with a good record," said Kevin Keaney, the attorney representing Shields in the suit. "Steve was fired because he made a report on the stolen media to the sheriff," Keaney said. According to Keaney, prior to Shields' reporting the data theft to law enforcement, there was nothing in his employment history at Providence to suggest he would be fired.
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It might surprise you to know that none of the standard General Liability Insurance policies and most of the customized General/Professional Liability Insurance policies specially offered to private security agencies today cover intentional and/or criminal acts by security, investigative or alarm employees. Standard General Liability policies specifically exclude “Bodily Injury” or “Property Damage” expected or intended from the standpoint of the insured and then modify the wording to cover “bodily injury resulting from the use of reasonable force to protect persons or property.” However, this modification would not provide coverage for intentional assaults, homicides, rapes, sexual molestation, false threats, etc by security personnel. And this modification does not address intentional damage to property, such as malicious mischief, arson, theft, etc. committed by security personnel. 