Antitrust Exclusion & Private Company – Sketchers Settlement

Posted on May 17, 2012 by blogger| Leave a comment

By Rodney Choo, National Venture Capital Association
Management Liability Program Manager

Skechers has reached settlement with the FTC Bureau of Consumer Protection for $40M concerning allegations of deceptive advertising (see http://www.washingtonpost.com/business/economy/skechers-to-pay-40-million-to-settle-charges-over-unsupported-claims/2012/05/16/gIQA0MY0TU_story.html?tid=pm_business_pop). Specifically, that simply wearing those shoes will NOT actually make you look like some of the celebrity “figures” they’ve touted in their ad campaigns. Nothing particularly novel about this situation, but it is a good case study to put the “Antitrust Exclusion” in private company Directors & Officers (D&O) liability policies into context and why it actually does matter.

The misconception that we often find is a focus on the potential for antitrust liability as everyone understand it, and by that we mean a general concern over federal antitrust issues (e.g., price fixing, collusion). To be more accurate, we should be referring this to as the “unfair business practices” exclusion, which goes far beyond traditional antitrust and is largely a state law – and more importantly a class action – driven issue.

Virtually very state has an “unfair business practices” statute that is usually so broad as to drive a truck through it straight plaintiffs’ lawyer nirvana. Many define as unfair business practices “false and deceptive advertising” and this is usually an incredibly broad definition and was the basis for the many of the consumer class actions filed against Skechers. Even worse, these statutes usually have “Private Attorneys General” provisions that allow individuals to bring class actions on behalf of the public good.

TechAssure has always drawn distinctions between insurers that have or do not have an Antitrust Exclusion in their policy forms, and it has been a critical part of our program for portfolio company D&O. This is a legitimate point to highlight, particularly as more and more carriers are seeking to add it back in, as this has been a significant source of the recent negative claims experience that has led, at least in part, to the firming up of the D&O market.

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Posted in Business Insurance, D&O

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Are Niche Policies Right For Your Company?

Posted on May 14, 2012 by blogger| Leave a comment

Every business has risks, whether the business is a venture capital firm or a company in the technology, clean tech or life science industry. These risks are often handled by commercial insurance. Different types of insurance cover many aspects of operating a business. Yet, it is sometimes difficult for businessowners to make the right choices about insurance, especially when there are so many insurance products, including specialty or niche products.

Niche insurance policies exist, in most instances, as a way to simplify insurance decisions for insurance companies and their customers. A custom policy is usually designed for a large operation that has enough special coverage needs and offers enough potential premium revenue to justify specialized service. A niche product is often a policy that offers a combination of coverages that meet the needs of a defined market.

Niche insurance products are attractive because they may offer proper coverage at an affordable cost. However, insurers and buyers must be cautious in choosing these niche policies .Niche products are designed for the average bundle of exposures in a given market. Business owners and key decision-makers may be attracted to buying a niche product assuming that it will take care of everything. That’s dangerous because a particular business may have issues that won’t be fully handled by the policy.

Consider a niche product as a starting point and make use of a Mason & Mason insurance professional. Together we will evaluate your operation and determine your coverage needs, what issues can be handled by insurance, what type of insurance would best handle the need and what amount of insurance can affordably be purchased. Another key discussion point is how an operation may be altered or run differently to reduce chances of loss that can’t be handled by insurance. Remember, a niche product is a sensible choice only when it fits a customer’s needs. Mason & Mason is knowledgeable about niche insurance products and we can help you decide if these types of policies are right for your business.

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Umbrella or Excess Coverage?

Posted on May 10, 2012 by blogger| Leave a comment

When choosing the perfect insurance policy, Mason & Mason understands that protecting your business assets can be confusing and a huge responsibility. Technology, Life Sciences and Clean Tech companies have many options for liability policies that will protect against losses or injuries that a business may inflict on other (third) parties. But what happens when that primary layer of insurance isn’t enough to cover a major loss? Should you purchase Umbrella or Excess Liability Coverage?

There are many risks in the technology, life sciences, and clean tech industries that may lead to a catastrophic loss. For example: one of your employee drivers is transporting equipment, materials, and products back to your building. The road is icy and the driver crashes, causing extensive damage to the vehicle, the equipment and products in the truck, himself and another motorist. Your company’s business auto, inland marine, and workers compensation policies will cover the limits stated on your form, but because the medical payments were high and the equipment damaged was especially expensive the primary layers of these policies can not completely cover the cost. Possible solutions for these types of losses are purchasing Umbrella or Excess Liability coverage.

Umbrella coverage and excess coverage have similarities. However, there is an important distinction between these forms. Both commercial umbrella and commercial excess coverage provide an additional level of protection. Both policies can provide this level over a wide variety of primary or underlying forms. This coverage is triggered when the primary policy’s limits have been breached.

An umbrella, theoretically, supplements its excess coverage with a different coverage. It also provides coverage for miscellaneous and unidentified loss exposures. Since there isn’t a source of primary protection for these exposures, a form of high deductible, called a self-insured retention, is applied to such losses.

An excess policy does NOT provide broader coverage; it only supplements whatever coverage exists in the primary layer. Further, it is becoming increasingly common that such coverage is provided on a “Following Form” basis. These forms are written so that it tracks precisely with the coverage and exclusion provisions of the underlying policies.

So, if you seek additional coverage, be sure to pay attention to what is stated in the form. The term umbrella is used even when the form does not provide true umbrella coverage. Mason & Mason will assist you in understanding what form of additional liability protection is best for your company.

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Posted in Business Insurance, Umbrella Policy

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Insuring Clinical Trials

Posted on May 7, 2012 by blogger| Leave a comment

Mason & Mason specializes in insurance for life science companies. Our expertise goes beyond the traditional insurance model to provide superior risk management services and create a comprehensive policy. For life science companies this may include clinical trial insurance.

Clinical Trial Insurance is an important coverage for life science companies because clinical trials are often rife with risks. If the drug or medical device being tested proves unsafe at this stage in the research, the health of volunteers and the ability of your company to bounce back are at stake. It’s important that you be aware of the consequences of a botched clinical trial and consider how the proper insurance could play an important role.

Common results of a clinical trial gone bad are costly and include medical payment expenses for the volunteers, personal injury and Errors and Omissions lawsuits, increased scrutiny from the public and regulators, damaged reputation of the life science company and even criminal indictments, difficulty in recruiting for future clinical trials, trial interruption, delays in product launch, increased insurance rates and/or difficulty obtaining coverage. The damage could go beyond financial cost and could severely hinder your life science company’s ability to perform operations.

At Mason & Mason we understand all of the risks that go along with conducting clinical trials, and are experts in insuring life science companies. We can craft a clinical trial policy specific to your life science company that protects you in the event of a bad trial. We also take the time to mitigate the risks involved to reduce the chance of a dangerous trial before it happens.

If you have any questions about Clinical Trial Insurance, or would like to better understand how Mason & Mason can help manage and cover risks for your life science company contact us today.

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Posted in Life Sciences

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Loss Control: The First Step in Risk Management

Posted on May 3, 2012 by blogger| Leave a comment
At Mason & Mason we have many tools for managing our client’s losses and risks. We strive to help our clients understand their policies and teach them how to avoid potential losses. One practice we highly encourage is loss control. Loss control is the process of identifying and acting upon situations that may lead to loss.
Loss control may involve both simple and complex ways to reduce the likelihood of facing a loss. Besides insurance, you can choose to use protective devices, oral or written contracts to shift the responsibility for a loss to someone else, avoid ownership of items that may cause a loss, avoid dangerous practices and activities, or change your environment. Below are ways in which you can control losses for your business.
Loss Control – Business Automobile
  • Have employees take a courses on defensive or advanced driving skills, and require that they practice newly acquired skills
  • Obey traffic laws while driving business automobiles
  • Avoid driving distractions such as texting, phone calls, or eating while driving
  • Adjust driving habits according to weather or road conditions
  • Install security alarm and/or other anti-theft devices in business autos
  • Properly maintain the owned vehicles, especially safety devices such as brakes
  • Purchase or use cars that have higher safety ratings
  • Do not allow uninsured motorists to drive business autos
  • Keep an emergency and first aid kit in all business vehicles
Loss Control – Business Property
  • Keep your premises and surrounding access ways in good repair
  • Properly store and label flammable liquids, cleaning supplies and dangerous chemicals
  • Install security alarm and/or other anti-theft devices
  • Warn visitors about any known hazards in or around your premises
  • Take precautions when your premises includes attractive nuisances such as statues or signs
  • Take care with heating, electrical devices and other systems within your building
  • Keep a first aid kit available to all employees and visitors
  • Have a fire escape plan, including any needed safety devices such as escape ladders from second floor exits
Loss Control – Miscellaneous
  • Store important papers in a secure, fire-resistant location
  • Keep original documents of valuable papers and records, so they can be reproduced
  • Make digital recordings of business property as documentation of company possessions
  • Be sure to carefully read contracts or agreements before accepting them
  • Arrange to exchange and keep important papers and records with trusted business partners so they’re easier to access in the event of a loss
Your Mason & Mason insurance agent is an invaluable and helpful source for reviewing any actions you’re considering to reduce your chances of facing a loss. Contact us today for a risk profile that can help identify your company’s most common risk areas and ways to control your losses.

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Posted in General

Valuable Papers and Records Coverage

Posted on April 30, 2012 by blogger| Leave a comment
At Mason & Mason we’ve found that businesses can be quite different from one another. Whether the business is a technology or biotech company, or a venture capital or private equity firm, they have one thing in common; they all have important papers and records.
Often documents, print or electronic, are routine and their loss would not create a problem. In other cases, the loss of certain papers and records can be disastrous, affecting a given organization’s ability to continue operations. If your company has a wide array of important documents, it may be necessary to arrange for special protection, such as Valuable Papers and Records (VPR) Coverage. This protection may be included as a supplement to other types of policies or it may exist as a separate policy. In either case, it protects the following items:
  • inscribed, printed or written documents
  • manuscripts
  • records and abstracts
  • books
  • deeds
  • drawings
  • films
  • maps
  • mortgages
VPR coverage assists with the expense of replacing valuable papers, such as the research necessary to rebuild customer account and billing information or to replace important loan information or documents that prove ownership of property. In some cases, a business may have to severely curtail or stop its operations until such replacements are made. Loss of valuable papers and records can easily result in loss of income and customers. Valuable Papers and Records coverage provides a vital source of important protection.
If you are concerned about the impact losing valuable records could have on your business, contact your Mason & Mason insurance agent. They’ll help you decide if VPR coverage is right for your business, discuss other areas in which your company may be vulnerable to valuable information loss, and describe how VPR coverage may change in the future.

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Posted in Business Insurance, General, Technology

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Protecting Employee Benefit Plan Fiduciaries

Posted on April 26, 2012 by blogger| Leave a comment

There are a number of liability insurance policies that companies may consider as part of their overall risk management plan. One of these that is inexpensive is Fiduciary Liability – which provides very important coverage to key people in your management team. All companies in Massachusetts should review their need for Fiduciary Liability insurance, as explained below.

Federal law requires fiduciaries to be appointed for certain employee benefit plans. This increases the importance of the fiduciaries making informed, objective decisions – because they may be personally liable for damages incurred by employees that result from mistakes or poor judgment in the administration of benefit plans. Being able to be held personally liable is a sobering situation and relatively rare compared to most other situations in which executives carry out their duties to the company.

An example of a situation in which a fiduciary could be held liable is as follows. Mary is the CFO of Acme Corp. Acme needs to take on a private equity investment to expand their plant. They are approached by Smith Advisers who offer to make the necessary equity investment but would also like another division of Smith Advisors to manage the 401(k) plan of Acme Corp. As it turns out, the retirement plan division of Smith Advisers lacked the experience and staff skill to provide a consistent, competent level of service to the employees of Acme. Mistakes and delays occurred which caused employees of Acme to lose value in their individual retirement accounts.

Mary is also a fiduciary of the 401(k) plan and ultimately is named as a defendant in a suit brought on behalf of employees. The suit alleges she failed in her due diligence and breached her fiduciary duty to make a choice of administrators of the 401(k) plan that were competent – instead, she selected Smith because they had agreed to make a private equity investment in Acme.

Luckily, Mary received good advice from her insurance agent several years before and Acme purchased a Fiduciary Liability policy. A $2 million dollar limit cost Acme only $3,800 in annual premium. $1 million dollar limits are usually priced in the range of $1,500 to $3,200. The cost of legal defense is included within the limit of insurance – meaning it will erode the limit available to pay damages if, ultimately, damages are awarded by the court of agreed to in a settlement.

Without Fiduciary Liability insurance Mary would have been stuck funding her own defense and worrying about the cost of damages that might be awarded to employees. Considering the relatively low premiums and the fact it is a coverage that provides personal liability protection for executives who serve as fiduciaries, the vast majority of businesses purchase Fiduciary Liability coverage.

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Contract Liability versus Insurance Coverage

Posted on April 23, 2012 by blogger| Leave a comment

Two years ago a representative of your company signed a contract with a customer in which your company agreed to be financially responsible for damages incurred by the customer resulting from a negligent act committed during performance by your company (its employees, etc.). Now, you’ve just learned that one of your employees failed to do something correctly and 3rd parties have suffered damages and are holding your original customer accountable – and that customer is turning to you per the terms of the contract.

The nature of contractual liability between businesses is that a lot of time is spent creating obligations, but too little thought is given to whether or not those obligations will be met by the company itself or its insurance company. In other words, just because your company agrees to be financially liable to a third party – is your insurance company also obligated? One of the most critical services provided by our agency is helping you review existing contractual obligations and then identifying if/how/when your insurance policies will be able to help you fund those obligations.

Most often the insurance policies that need to be reviewed are your General Liability, Umbrella, and Professional Liability coverages. However, contractual obligations may also touch Workers Compensation, Auto Liability, Cyber Liability, Property and Business Interruption insurance. It’s critical to have one qualified source for advice across all of your insurance portfolio – a major reason behind choosing one agent and not trying to coordinate among 2 or more independent agencies at a time. It’s too easy to have something slip through the cracks when analyzing insurance coverage on contractual obligations.

If you are not already in the habit of regularly talking with your agent about contractual terms and conditions, as you negotiate and develop them, it’s like creating time bombs and hoping for the best. Contact Mason & Mason today to discuss our approach to enterprise risk management and our ongoing services and support that can dramatically reduce your exposure to financial loss.

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Posted in Business Insurance

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Curbing Cell Phones and Managing Risks

Posted on April 19, 2012 by blogger| Leave a comment

At Mason & Mason we care about our clients and do everything we can to make sure their businesses are safe and insured. Insurance is vital for business autos and can protect your business property, but training your employees on safe driving practices is even more important when managing risks. Training and informing drivers on the dangers of distracted driving, particularly cell phone use will significantly decrease your company’s chance of a vehicle accident.

Besides interrupting work and creating loss of business property, accidents also cause serious damage to public and private property and, more significantly, can create injuries or even fatalities. Therefore, it is important that persons who drive business vehicles do so safely.

Distracted driving is becoming a major problem for roadways everywhere, and any activity that takes the focus off driving qualifies as a distraction. Among the most dangerous is the use of cell phones. According to a study done by the U.S. Department of Transportation and the National Highway Traffic Safety Administration, a simple phone call quadruples the chance of an injury causing accident, and the chances of an accident are 23 times higher if the driver is sending a text message or reading emails.

It’s important that you inform your employees of the impact distracted driving has on your community and business. It also doesn’t hurt to inform them that in New York it is illegal to operate a hand-held cellular phone while driving. Your employee drivers should have no problem putting away their phones when they learn of the damage they can cause.

At Mason & Mason we want all of our clients to be aware of the dangers of distracted driving and the impact it can have on your business. If you have any questions feel free to contact us today.

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Posted in Business Auto, Business Insurance

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Valuable Papers and Records Coverage

Posted on April 16, 2012 by blogger| Leave a comment

At Mason & Mason we’ve found that businesses can be quite different from one another. Whether the business is a technology or biotech company, or a venture capital or private equity firm, they have one thing in common; they all have important papers and records.

Often documents, print or electronic, are routine and their loss would not create a problem. In other cases, the loss of certain papers and records can be disastrous, affecting a given organization’s ability to continue operations. If your company has a wide array of important documents, it may be necessary to arrange for special protection, such as Valuable Papers and Records (VPR) Coverage. This protection may be included as a supplement to other types of policies or it may exist as a separate policy. In either case, it protects the following items:

  • inscribed, printed or written documents
  • manuscripts
  • records and abstracts
  • books
  • deeds
  • drawings
  • films
  • maps
  • mortgages

VPR coverage assists with the expense of replacing valuable papers, such as the research necessary to rebuild customer account and billing information or to replace important loan information or documents that prove ownership of property. In some cases, a business may have to severely curtail or stop its operations until such replacements are made. Loss of valuable papers and records can easily result in loss of income and customers. Valuable Papers and Records coverage provides a vital source of important protection.

If you are concerned about the impact losing valuable records could have on your business, contact your Mason & Mason insurance agent. They’ll help you decide if VPR coverage is right for your business, discuss other areas in which your company may be vulnerable to valuable information loss, and describe how VPR coverage may change in the future.

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Posted in Disaster Recovery, General

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