Second Quarter 2007 In This EditionThe Safety Act of 2002 and Reciprocal Waivers of Subrogation |
THE BESTGUARD NEWSLETTER
Licensed, Bonded And InsuredWe have all seen private security guard company advertisements that say, “Licensed, Bonded & Insured”. When reading these ads, most people would assume that “bonded” means that the security guard company is insured against theft by their guards or that their guards are bonded against theft. In most cases, that is surprisingly not the case. Only about 10% of the security guard companies in the US are actually insured against their guards stealing their client’s property. When the term, “Bonded” is used, it usually is referring to the license bond that the state requires security guard agencies to carry. That license bond protects the State should they be sued for having issued the security guard company a license in the State. It provides absolutely no protection to the guard company or its clients. When the term, “Bonded” is used, it sometimes is referring to a Commercial Blanket Bond that the security guard company carries. However, the standard CBB only protects the security company if their employee steals from them (1st party) and not if their employee steals from their client (3rd party). When the term, “Bonded” is used, it may even refer to a Dishonesty Bond that is sold by at least one or two insurance bonding companies. This bond protects the security guard company if their guard steals from their client, but the bond only pays if the guard is convicted of the alleged theft. This bond is very inexpensive, but you get what your pay for – very little coverage. Because as we all know, convictions are very hard to come by in our legal system. For a security guard company to really be “bonded” (protected against theft by their employees) they need to purchase a Crime Policy or a Commercial Blanket Bond that protects them against their employees (bookkeepers, comptrollers, salesmen, etc.) stealing from them and protects them against their employees (guards) stealing from their clients. In addition to these crime policies or fidelity bonds providing coverage against employee dishonesty, they can also be endorsed to provide forgery or alteration coverage, robbery and safe burglary coverage, computer fraud/wire transfer coverage, ERISA coverage and few other related coverages. Many times when property is stolen from a client, it is assumed that even if the security guard was not directly involved in the theft, he allowed or colluded with the person(s) that stole the property. While fidelity coverage is also provided for this type of “collusion” claim, the bonding company usually requires that the guard be criminally charged by the client for coverage to apply. This eliminates most spurious accusations of guard complicity that have no basis in fact. Third party fidelity coverage is triggered when it can be clearly shown that an identifiable guard stole a verifiable amount of personal property from a client. Bonding companies are a reasonable lot and they are very sensitive to the typical situation wherein the client is extremely upset when the guard that was hired to prevent theft, committed the theft. They pay without undue delay when reasonable proof is provided. Sometimes, however, the proof of a guard’s direct involvement or collusion in a theft is not apparent or easily proven. When questions arise over the validity of a claim, the bonding company may issue a denial or a reservation of rights letter, wherein it reserves its right to deny the claim depending upon whether or not the claim can be proven. Frequently, the client of the guard service sues the guard company for the guard’s alleged theft when this happens. However, third party fidelity bonds do not normally provide legal defense coverage. In such cases, legal defense can sometimes be found in an insured’s liability coverage. Unfortunately, most liability insurance companies specializing in insuring security guard companies exclude this coverage. In conclusion, we would recommend that every security guard company obtain a Crime Policy or a Commercial Blanket Bond that protects against theft by their employees from them as well as from their clients. When purchasing such coverage, we would caution security guard companies not to buy fidelity coverage that contains a conviction clause. Finally, we would recommend that security guard companies obtain liability coverage that includes at the very least legal defense coverage against employee dishonesty claims.
The Safety Act of 2002 and Reciprocal Waivers of SubrogationWe’ve recently received questions regarding the Safety Act of 2002, and the Reciprocal Waivers of Subrogation required by that Act, so we believe that some of our other clients may also be looking for some information on this topic. In researching this issue, the best information we have found includes the following: 1. A copy of the Safety Act “Rules & Regulations” can be found at: www.safetyact.gov Note: It’s a 22-page document which states the following (on pages 1 & 11): II. Discussion of Changes and Comments
2. From https://www.safetyact.gov/ Homeland Security Subtitle G of Title VIII of the Homeland Security Act of 2002 The Support Anti-terrorism by Fostering Effective Technologies Act of 2002 (SAFETY Act) “As part of the Homeland Security Act of 2002, Public Law 107-296, Congress enacted the SAFETY Act to provide “risk management” and “litigation management” protections for Sellers of qualified anti-terrorism technologies and others in the supply and distribution chain. The aim of the Act is to encourage the development and deployment of anti-terrorism technologies that will substantially enhance the protection of the nation.” “Specifically, the SAFETY Act creates certain liability limitations for “claims arising out of, relating to, or resulting from an act of terrorism” where qualified anti-terrorism technologies have been deployed. It also confers other benefits. Although there are many technologies that are important to protecting our homeland, the SAFETY Act “Designation” and “Certification” are designed to support effective technologies aimed at preventing, detecting, identifying, or deterring acts of terrorism, or limiting the harm that such acts might otherwise cause, and which also meet other prescribed criteria.” “If you are a Seller of a potential anti-terrorism technology and wish to be awarded SAFETY Act protections, you must formally apply to the Department using the forms provided by DHS, furnish all of the requisite supporting data and information, and successfully demonstrate compliance with the Act’s specific criteria. DHS will perform a comprehensive evaluation to determine your eligibility for SAFETY Act Designation or Certification. The information required in the Application is necessary for the Department to implement this critical program.” 3. A 2-page pamphlet can be found at: https://www.safetyact.gov/dhs 4. An article by Jacob Pankowski of Nixon Peabody LLP, dated 10/14/03, states: The statute requires the seller to obtain reciprocal waivers of claims by upstream and downstream entities for losses sustained by them or their employees arising from an act of terrorism with respect to which a qualified antiterrorism technology is deployed. Obtaining such waivers is not standard practice, and such waivers may be very difficult, if not impossible, to obtain. There was concern that the inability to obtain such waivers would result in the denial of an application for designation or certification. DHS now recognizes that obtaining reciprocal waivers of the breadth required under the statute may be difficult. The interim rule specifies that a Designation will not be withheld or revoked for failure to obtain one or more required reciprocal waivers, as long as the applicant demonstrates that “it made diligent efforts in good faith to obtain such waivers.” Thus, it is imperative that all applicants demonstrate the extent to which it attempted to obtain the reciprocal waivers required by the statute. 5. And to update Mr. Pankowski’s information, an article in The Procurement Lawyer (American Bar Association, Number 42, Volume 1, Fall 2006) co-authored by John Pavlick, Jr. and Dismas Locaria is available at: http://www.venable.com/docs/pubs/1582.pdf and states: “Reciprocal Waiver of Claims: One of the more confusing aspects of the SAFETY Act implementation is the statutory requirement for all parties that are potentially covered by the act to sign reciprocal waivers of claims covering the other protected parties. “Guidance in the final rule acknowledges that obtaining reciprocal waiver of claims is not standard practice in most industries. Nevertheless, it also notes that such waivers are a statutory requirement. “The final regulation, similar to the interim rule, attempts to strike a balance by requiring that only ‘diligent efforts in good faith’ be made to obtain such waiver and that the requirement is not a condition precedent to maintaining designation or certification status. Absent in the final regulation are some of the particulars of this requirement, including what constitutes ‘diligent efforts in good faith.’ Of course, the major question is whether the department's interpretation will survive judicial scrutiny, as it seems to transform the mandatory language of the statute, ‘shall enter into…’, into an aspirational goal, ‘diligent efforts in good faith’." Our Conclusion & Summary:
Therefore, how this is viewed will depend upon the Insured’s position in this chain: Once it is known whether the Security Company is the Certified company (or not), the Security Company can determine what the proper course of action must be, as respects these Waivers.
Chicago Suit Charges 'Negligent Dancing'A woman is suing her dance partner, claiming he dropped her on her head after flipping her into the air at an office party. Lacey Hindman, 22, was a victim of "negligent dancing," says her lawyer, David M. Baum. In the suit, Hindman claims that during a party at a Chicago bar and restaurant in April 2006, David Prange grabbed her by the forearms and tossed her in the air, and then she crashed to the wood floor. "I was in the air, over him," Hindman said. "I fell hard enough you could hear the impact of me hitting the floor over the sound from the jukebox." Hindman said in the suit, filed in Cook County Circuit Court, that she suffered a fractured skull and brain injuries. She is seeking damages for medical bills and lost wages for time missed from work. Hindman worked for Prange's wife, Kate Prange, at Shop Girl, a women's boutique. Source: Associated Press (04/03/07)
People With Security Clearances Are Hot CommoditiesJob applicants who have U.S. government security clearances are in high demand in the Washington, D.C., area and other regions of the country, according to members of the job-recruitment industry. Members of the military who have security clearances and good IT skills are especially in demand. The Washington area is the biggest market for jobs requiring security clearances, and there are currently 100,000 such positions that are not yet filled, according to online recruiting site ClearanceJobs.com. A recent ClearanceJobs.com survey finds that employees with security clearances earn 25 percent more on average than employees with the same skills who lack clearances. Job candidates in Iraq who have security clearances make an average salary of more than $97,900--top on the list--followed by candidates in Washington, D.C., who average about $78,800. Virginia ($76,100) was No. 4, and Maryland ($74,300), was No. 6. HireStrategy CEO Paul Villella says that having a security clearance is "in many cases better than having an MBA." Source: WTOP Radio (03/26/07)
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