Delaware Primary Agent - April 2017

CA IN SE CO ST M UD Pa PLI I E S ge AN 31 CE

APRIL 2017 | DELAWARE

COVERAGE

CONSEQUENCES TECH TO IMPROVE WORKFLOWS FLSA: COMPENSABLE TIME NON-ADA-COMPLIANT WEBSITES

THERE’S more FOR YOU AT MILLERS.

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Part of our deep expertise in habitational comes from immersing ourselves in the apartment associations world.

We believe that the best way to give you greater value in property & casualty coverage and creative underwriting solutions for habitational properties is to immerse ourselves in that world. The more we learn from property owners and managers the more insight and product enhancements we can use and share with you and your customers.

Ad We’re proud to be active members of the Central and East Chapters of PAA.

Have Questions?

Contact your underwriter or call Millers Mutual’s Jonah Mull (717.237.7273) or Scott Billett (717.237.7202).

800.745.4555 millersinsurance.com Rated A- (Excellent) by A.M. Best Rated A Prime (Unsurpassed) with Demotech ©2017, Millers Mutual Group, Harrisburg, PA

B US IN E S S OW N ER S PO L I C Y | C O MMER C I A L A UT O | COMME RCI AL UMBRE L L A | L E SSORS RI SK | BUI L DE RS RISK

IN THIS

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BUILDING “VACANCY” AND CONSEQUENCES Jerry Milton looks at the coverage gaps (and resulting E&O traps) associated with ISO’s definition of “vacant” in the Commercial Property and Businessowners policies.

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OVERCOMING CHALLENGES WITH TECHNOLOGY Three Mid-Atlantic agencies share how technology improved their workflow and customer service.

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DO I HAVE TO PAY FOR THAT? Determining “compensable time” under the FLSA is not as simple as it sounds. Our HR consultant looks at various work circumstances and explains when overtime pay is due.

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CASE STUDIES IN FLSA COMPLIANCE Learn how two agencies approached compliance.

IN EVERY ISSUE

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Chairman of the Board’s Message Ask Our Experts Preventing Errors & Omissions Coverage Corner State News IA&B Partners Advertiser’s Index My Events Classified Ads

Periodical postage paid at Mechanicsburg, Pa. and at additional mailing offices.

Postmaster: Send address changes to Insurance Agents & Brokers, 5050 Ritter Road, Mechanicsburg, PA 17055.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2017-4, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

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Copyright 2017. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and/or other professional advisors concerning specific matters before making any decisions. We disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

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CHAIRMAN OF THE BOARD’S MESSAGE

BREAK OUT THE DUSTPAN ...

INSURANCE AGENTS & BROKERS 5050 Ritter Road | Mechanicsburg, PA 17055 800-998-9644 | IABforME.com

OFFICERS

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Chair of the Board

t’s April – the month of rain showers, baseball (let’s go, Bucs!) and yes … spring cleaning. I’m not talking about scrubbing the office kitchen. I mean, it’s time to dust off your agency procedures manual, clean up your producer agreements and throw away your outdated HR forms.

Now is the time to prioritize those agency management tasks you’ve been avoiding.

Before you’re dealing with the next renewal season. Or covering for staff on summer vacations. Or … you get the point.

If you’re overwhelmed, you’re not alone. But you’re not on your own to tackle these tasks either. That’s where your IA&B membership comes into play.

Michael F. McGroarty Sr Vice Chair of the Board

John B. Hollister

Immediate Past Chair of the Board

Robert S. Klinger, LUTCF, CPIA

MEMBERS Emory Stephen Burnett, CIC, ARM Wilmington, Del.

Richard F. Corroon, CPCU Wilmington, Del.

Michael P. Ertel Sr.+ Columbia, Md.

G. Greg Gunn, CIC* Lemoyne, Pa.

From a sample agency procedures manual to a template employee handbook, a producer agreement toolkit to record retention guidelines, your agents’ association has resources available for you. Visit IABforME.com/resources to learn more.

Or – if you just don’t have the time or the inclination to delve into these housekeeping issues – check out Independent Agency Solutions. The new offshoot of IA&B offers one-on-one consultative services. My agency recently worked with Independent Agency Solutions to become compliant with Department of Labor regulations. The entire process was conducted professionally and quickly, and it got us up to speed without requiring me or my staff to become proficient on the issue.

Independent Agency Solutions is expanding its offerings this month, so visit IABforME.com/IAS to learn how the firm may be able to help your agency with some spring cleaning of sorts. n

Bryan C. Hanes, JD Hagerstown, Md.

David C. King Lancaster, Pa.

Lisa A. Leach Goth, CIC New Bethlehem , Pa.

Douglas A. Loesel, CPCU Erie, Pa.

Crag S. Mader Crofton, Md.

Elizabeth H. Martin, CIC Millersville, Pa.

Mark J. Monroe

West Chester, Pa.

Joseph R. Pastor, CPCU, AAI Oil City, Pa.

Richard M. Rankin, CIC Lancaster, Pa.

April E. Ressler, CIC Altoona, Pa.

Until next time,

Scott C. Rogers, CPIA York, Pa.

Glenn R. Strachan

Ft. Washington, Md.

Bryan S. Willey

Michael “Mike” F. McGroarty Sr. Chairman of the Board

Dover, Del.

Lawrence A. Wilson, CIC, CPIA, CPCU, ARM** Newark, Del.

J. Marshall Wolff, CIC, CPCU Easton, Pa.

* Pa. IIABA National Director ** Del. IIABA National Director + Md. PIA National Director

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APRIL 2017

Ask Our Experts Don Bankus, our legal affairs manager, provided this month’s answer.

Question: Can my producers sign applications and related documents on behalf of our insureds?

Answer:

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ome concepts seem like nobrainers … one of them being that an insurance producer should never, ever, sign an application (or any other insurance-related document for that matter) on behalf of a customer. “What’s all the fuss? It makes life easier for me and the customer,” you may say.

All the fuss is … that expensive claim you weren’t expecting – the one that your customer just called to tell you about … those no-longer-valid limits your customer chose but you signed for … that no-longer-enforceable election to waive UM/UIM and stacking that you signed off on.

You can see where this is going – to court. You don’t really want to go there, do you?

WHY ALL THE WORRY? Short of having a customer grant you Power of Attorney, verbal authorization from the customer for you to sign documents on his or her behalf is not sufficient. Never was. Likely never will be. After a loss occurs and a claim is filed, the customer may disavow having granted you authorization.

In such a case, the first thing a good attorney will do is ask the customer, “Is that your signature on the application?”

As soon as the customer says “no,” the who, what, how and when as to why you – as the producer – signed the documents on the customer’s behalf becomes immaterial. It simply becomes extremely difficult to hold the customer responsible for the contents.

ARE THERE OTHER POSSIBLE REPERCUSSIONS? I’m glad you asked, because yes there likely are – and some serious ones at that – such as:

related to committing fraudulent acts and violating state insurance laws or regulations • Possible criminal charges and the costs and stigma associating with defending them THE BOTTOM LINE Because you, as the producer, are not a party to your insured’s contract of insurance, you should never, ever sign documents on a customer’s behalf – even if they ask you to. If they ask why you can’t or won’t sign, just mention some of the above. n

• A likely E&O claim filed by the carrier against you and/or the agency • Possible suspension, revocation or non-renewal of your (resident and, perhaps, non-resident) license, fines, etc. because “forging” another person’s signature on insurance documents is an express violation of the state’s producer licensing act • Potential agency termination by the affected carrier due to agency agreement provisions

Have a question? Ask our experts!

Rely on our experts to answer your most perplexing questions. Visit the Ask Our Experts section of IABforME.com (find the link in the website footer) to submit your question and review answers to other frequently asked questions. Or email your question to us at IAB@IABforME.com.

We look forward to hearing from you.

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PREVENTING ERRORS & OMISSIONS

CYBERSECURITY RISKS AND EMPLOYEE LAWSUITS Dos and don’ts to protect your agency

By Thomas Casella, Esq., MBA, SCLA and Terese L. Palumbo, Esq., CCLA

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OW TO PROTECT YOUR AGENCY FROM CYBERSECURITY RISKS “Every minute, we are seeing about half a million attack attempts that are happening in cyber space.” — Derek Manky, Fortinet Global Security Strategist1

Cybersecurity risks are increasing exponentially in both frequency and variety. Protecting customers’ personally identifiable information (PII) is becoming a greater concern for small- to mid-sized companies, including insurance agencies. Research indicates that 59 to 70 percent of breaches involve

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small companies2. However, breaches can be prevented through proper training and appropriate protocols.

• Use anti-virus software and regularly update no less than every 30 days.

Following these dos and don’ts can help shield your agency against claims for cybersecurity breaches and loss or theft of PII.

• Maintain firewalls on your computer system.

DO • B ecome familiar with the various types of scams that are trending in cyber-attacks, such as phishing, whaling, personal engineering, ransomware, denial of service attacks, etc.

APRIL 2017

• Back up servers and hard drives.

• Use strong encryption on mobile devices and email transmissions.

• Double-check email recipients and attachments before sending.

• Keep your software and operating systems up to date with the latest patches.

• Train your staff on safety protocols regarding email and internet usage.

DON’T • Release funds or information without verifying with the recipient through non-electronic channels.

• Click on unknown attachments or links in emails or on websites.

• Allow unauthorized access to your computer system or network.

• Send PII through unencrypted emails or portals.

• Use Wi-Fi networks that are unsecure.

While these tips can help reduce the chance of a cyber-attack affecting your business and your customers, you must remain vigilant and be aware of who accesses information on your computer system. If a breach happens, notify your cyber liability insurance carrier immediately so that the proper precautions can be taken and the appropriate remedy enacted to minimize potential damage.

HOW TO PROTECT YOUR AGENCY FROM EMPLOYEE LAWSUITS Smaller employers like insurance agencies may find themselves defending against accusations of wrongful termination, discrimination and/or harassment from employees who they once considered to be like family. While it may not be possible to avoid employment-related practices claims entirely, the following dos and don’ts may help your agency be better prepared if an employmentpractices liability claim is filed against you or your agency.

DO • Conduct regular performance evaluations.

- Include goals for employees to achieve by the next review.

- Allow for discussion and the opportunity to comment on each review and/or goal.

- Document the evaluations in writing and have them signed by the employee and their supervisor.

• Maintain a current employee handbook.

- Set forth the agency’s procedures for employment-related complaints. For example, complaints can be made verbally or in writing to an employee’s direct supervisor, management and/or the Human Resources Department; a one-on-one meeting will follow within a reasonable amount of time to discuss the specifics of an employee’s complaint; and the agency will provide a formal response to the complaint.

• Implement employment-related training annually and for all new hires on what constitutes harassment in the workplace. This can be done through guest speakers or webinars.

• Document all work-related issues with each employee, regardless of their position within the agency (e.g., tardiness, unexcused or excessive absences, poor performance, insubordination, complaints from co-workers and/or customers).

- Allow your employee to acknowledge and/or respond to the issue brought to their attention • Clearly set forth grounds for termination of employment including violations that may result in immediate termination, such as criminal behavior, and/or the number of warnings allowed for violations that may result in termination of employment.

• Address or investigate complaints involving employment-related practices or accommodations by your employees.

DON’T • Engage in, encourage, or ignore questionably offensive behavior such as sexist or racist remarks.

• Rely on verbal conversations regarding any aspect of an employee’s job such as salary, bonuses, or mistakes. This includes making promises concerning the term or length of employment.

• Assume your employees are already aware of, or will remain current on, acceptable work conduct and behavior in today’s changing and diverse workforce.

The above dos and don’ts are only a few suggestions to assist in the review of your agency’s employment procedures. Any additional precautionary efforts that might reasonably protect the agency from future employment-related practices claims can also be implemented. n Taylor, H. (2015). Huge cybersecurity threats coming in 2016. Retrieved July 28, 2016, from http://www.cnbc.com/2015/12/28/biggestcybersecurity-threats-in-2016.html

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Pollack, M. (2016, July). Cyber Education — 10 Facts That Sell Cyber Insurance | Gen Re. Retrieved July 28, 2016, from http://www.genre.com/

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knowledge/publications/iinapccyber1606-en.html

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

Thomas Casella, Esq., MBA, SCLA and Terese L. Palumbo, Esq., CCLA provided this content on behalf of Utica National Insurance Group. IA&B’s My Agency is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania.

For questions regarding this article or your E&O coverage, contact IA&B at 800-998-9644 or IAB@IABforME.com.

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COVERAGE CORNER

WEBSITE ACCESSIBILITY AND THE ADA

By Jerry M. Milton, CIC

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ou use your company’s website to promote or sell a product or a service. Who can access your website? The answer to that question is, “Anybody.” Your company’s IT, legal and risk management folks are constantly working on and upgrading security measures – data encryption, privacy policies and firewalls.

But what about Title III of the Americans with Disabilities Act (ADA)? If your company is like most, it is unlikely that anyone has considered your website’s accessibility to individuals with disabilities. For example, the sight-

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impaired and the hearing-impaired. What is the potential liability exposure?

Title III of the ADA prohibits discrimination on the basis of disability in public places and requires those places be designed in compliance with the accessibility standards established by law. Last year a California state court was the first to rule a company violated ADA because its website was not accessible to individuals with disabilities.

The court ordered $4,000 in statutory damages, injunctive relief and plaintiff’s attorneys’ fees.

APRIL 2017

Thus far, several courts have held a website is a place of public accommodation subject to ADA accessibility requirements.

There are no laws specifically setting forth website accessibility standards for a place of public accommodation. Currently the U.S. Department of Justice (DOJ) is focused on regulating state and local government websites under Title III of the ADA, which prohibits discrimination on the basis of disability by public entities.

Although Title III is still in its early stages, it is clear the DOJ believes the Web Content Accessibility Guidelines 2.0 is the appropriate standard. And

plaintiffs’ attorneys appear to agree.

Currently these guidelines are voluntary.

However, plaintiffs’ attorneys are searching the Internet looking for alleged violations by retailers, financial institutions, restaurants, homebuilders, utilities and others.

Plaintiffs’ attorneys are issuing demand letters and filing lawsuits alleging their clients with disabilities are denied equal access to a website because of their impairment. In an April 2016 ruling in Melissa J. Earll v. EBay, Inc., the 9th U.S. Circuit Court of Appeals in San Francisco held that online-only companies are not subject to the ADA. A place of public accommodation, subject to the ADA, requires some connection between the goods or service on the company’s website and an actual physical place.

No clear judicial consensus on this issue of website accessibility for Internet-only companies has emerged. The DOJ has delayed issuing regulations under Title III of the ADA, and this issue may wind up before the U.S. Supreme Court.

In the meantime, attorneys and risk managers recommend companies move now to make their websites accessible to the disabled. This includes turning printed information into audio for people who are blind and adding closed captions to audio for the deaf.

The cost for adapting a website for the disabled can range from a relatively small amount to hundreds of thousands of dollars, depending upon the complexity of the website.

The unique nature of ADA website claims and the lack of precedent in determining which insurance policy, if any, will cover these claims present insurers and insurance agents a challenge.

The allegation will be “discrimination.”

Forget the Commercial General Liability (CGL) policy. This is not bodily injury or personal injury.

Take a close look at your Employment Practices Liability (EPL) policy and/ or Directors And Officers Liability (D&O) policy. Consider the following recommendations: • Ensure your EPL or D&O policy provides coverage for third-party discrimination claims. Typically, the plaintiff will be a nonemployee.

• Make certain the definition of “Loss” includes civil fines and penalties where insurable by law.

• Check to make sure the definition of “Claim” includes written demands for non-monetary awards and injunctive relief; e.g, demanding changes to the website.

• Will the policy respond to privacy claims?

• Does your Cyber policy cover discrimination or privacy breaches?

• Don’t forget your Errors And Omissions (E&O) policy.

Do you provide services through your website?

Website accessibility litigation is on the rise. Because these claims are relatively new, it remains to be seen how substantial the liability exposure may be.

Y’all take care! n Jerry M. Milton, CIC, teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages. He also serves as our education consultant, working with our CISR, CIC and continuing education programs. Catch him at one of our upcoming seminars: IABforME.com/MyTraining.

MORE FROM MILTON COVERAGES EXPERT – and monthly Primary Agent contributor – Jerry Milton will make the rounds later this year to present “Insuring Contractors.” The eight credit seminar will get attendees up to speed on CGL and Commercial Property coverages, including revisions brought forth by case law and ISO changes.

May 11 – Wilmington, Del. June 15 – Mechanicsburg, Pa. Aug. 16 – Baltimore, Md.

Aug. 29 – Pittsburgh, Pa. Oct. 4 – Philadelphia, Pa.

IABforME.com/MyTraining

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STATE NEWS

DCRB TO REALIGN RATING EFFECTIVE DATES Delaware has joined the countrywide initiative to eliminate the concept of anniversary rating date (ARD). The change will take effect May 1, 2017.

We reached out to our contacts at DCRB for an explanation of and rationale for the change. Here’s what they had to say:

ALERT COLLEGE-BOUND STUDENTS TO OUR $1,500 JOANN SCOTT SCHOLARSHIPS Now is the time to reach out to Delaware families with college-bound kids to inform them of the two $1,500 scholarships available through the Delaware Association of Insurance Agents & Brokers (IA&B). These annual scholarships are awarded to deserving students in memory of Joann Scott who is fondly remembered for her dedication to our association and her profession.

Candidates have until April 15 to apply, so members are encouraged to get the word out now. Please direct customers and coworkers to IABforME.com/scholarship for information and an application.

Winners will be invited to attend our Annual Awards Luncheon on June 1 (day two of our 60th Annual Convention) in Rehoboth Beach.

Elimination of the ARD approach will allow rules, classifications and carrier rates to be applied on the effective date of the policy and remain constant throughout the policy period.

Although elimination of the ARD rule may prompt cancellation of policies mid-term, consideration should always be given before cancelling and changing an employer’s policy effective date.

For those employers eligible for experience rating, changes to the policy effective date potentially may impact the rating effective date. The rating effective date is the earliest date that a specific experience rating or merit rating adjustment is applied to a policy. In most cases, the rating effective date will be the same as the policy effective date. Unlike the policy effective date, the rating effective date determines a risk’s experience period to be used in the calculation of an experience rating modification.

WELCOME NEW MEMBERS DOWNES INSURANCE ASSOCIATES INC. Milford, Del.

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The original intent of using an ARD to price workers’ compensation was to ensure that no policy of insurance was cancelled, rewritten or extended to avoid or take advantage of any changes in rules or rates.

Under the ARD provision, if a policy cancelled mid-term, the rewritten policy would use the carrier rating values approved for the insurer on the ARD, not the new policy effective date. Anniversary rating has long been a source of confusion to employers and agents and is a concept that does not exist in other types of insurance.

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The DCRB will publish additional information at dcrb.com. In the meantime, direct specific questions regarding the elimination of the anniversary rating date to DCRB Rating Rules and Policy Reporting by calling 302-654-1435 ext. 4421 or by emailing Robin StraussSchneider at rstrauss@pcrb.com.

insurance carriers, agents/brokers, trade associations and industry partners now support the collective effort to spread awareness to young people that insurance is the “career trifecta: stable, rewarding and limitless.”

MAKING STRIDES Here in the Mid-Atlantic region, we continue to look for ways to engage and support young agents through our IA&B Futures Program. Most recently, we appointed a dozen young agents to serve on a task force to drive the program’s next steps.

Already nearly 200 young agents connect and collaborate in the IA&B Futures Program Facebook group, and more than 80 attended our inaugural Futures Conference in September 2016.

Ashley Fitzsimmons (left) – seen here with Matt Dishner and Sarah Brown at our Inaugural Futures Conference – received recognition for her essay.

YOUNG AGENTS INVIGORATE THE INDUSTRY, TOUT #CAREERTRIFECTA The future of the industry looks bright.

February 2017 marked the second annual Insurance Careers Month, and with it came the announcement that one of our founding IA&B Futures Program members – Ashley Fitzsimmons, CISR, of Fitzsimmons Insurance Agency – was recognized for her narrative on why young professionals should explore a career in insurance.

SPREADING AWARENESS Following a successful inaugural Insurance Careers Month in February 2016, the initiative transitioned into a year-round campaign coined the Insurance Careers Movement. Over 600

MEASURING SATISFACTION In December 2016 the Insurance Careers Movement held a virtual town hall that drew 1,600 attendees from across the globe. The town hall included a survey of young insurance professionals, with respondents reporting that: • 73 percent had taken some action to convince peers to join the insurance industry • 93 percent reported that they are proud to work in the insurance industry IABforME.com/Futures

IA&B Senior Director of Advocacy Claire Pantaloni, CIC, CISR meets with Nathan Troutman, CIC, CWCA, AAI, of Deibler, Straub and Troutman, during an agency visit.

#IABVISITS COMING YOUR WAY We’re continuing our campaign to connect with member agents. If we haven’t visited your agency yet, watch in the months ahead for an IA&B staffer or two to knock on your door. Our goals are simply to thank you for your membership and to ask if there’s anything else that IA&B can do for you.

To the approximately 600 member agencies we already visited throughout Pennsylvania, Maryland and Delaware: Thank you for welcoming us into your offices and spending time with our team.

As always, we welcome you to follow along in Agent Headlines and on Twitter (#IABvisits) as we document our trek through the region.

As always, we welcome you to follow along in Agent Headlines and on Twitter (#IABvisits) as we document our trek through the region.

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PLATINUM PROFILE

WHAT’S IMPORTANT TO YOU IS IMPORATANT TO US

Insurance Agents & Brokers proudly recognizes Nationwide as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

STRONG. STABLE. COMMITTED TO YOU.

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ationwide was founded in 1926 to help farmers insure their vehicles, but our members’ needs quickly evolved — as they continue to evolve today. Over the past 90 years, our company has grown into one of the largest insurance companies in the country. What hasn’t changed?

Our commitment to one fundamental principle: that we can do more together than we can do alone.

As we’ve grown, we’ve taken a thoughtful approach to building relationships, focusing on offering the right level of consultation, compensation and benefits to agencies. These strong relationships empower you to grow your business with Nationwide — and to be rewarded for success.

Today, we have come together as One Nationwide — which has expanded even further our ability to offer a broad portfolio of flexible options so our agency partners can solve for a wide range of customer needs.

Today, we’re so much more than automobile insurance. We’re a diversified insurance and financial services organization serving consumers and businesses from coast-to-coast. n

FEATURED PARTNER Nationwide HEADQUARTERS Columbus, Ohio A.M. BEST RATING A+ WEBSITE nationwide.com

To learn more about our strong commitment to consumers and businesses and our breadth of products to support your agency, contact Todd Bevington bevingt@ nationwide.com in Pennsylvania or Mike Lewis at lewism11@nationwide.com in Maryland and Delaware.

REGIONAL VICE PRESIDENT Cathy Allocco

¹ Fortune Magazine, 2015; ² A.M. Best, 2015; ³ Nationwide Annual Report, 2015; 4 A.M. Best, 2015 DWP. Based on premiums written; 5 Connning, 2014. Conning Strategic Study: The Small Business Sector for Property-Casualty Insurance: Market Shift Coming

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APRIL 2017

Products underwritten by Nationwide Mutual Insurance Company and Affiliated Companies. Columbus, Ohio.

Nationwide, the Nationwide N and Eagle, Nationwide is on your side and We Put Members First are service marks of Nationwide Mutual Insurance Company. © 2017 Nationwide NPO-0732M2.1 (02/17)

PARTNERS PROGRAM

Listed below are those companies that strongly support the independent agency system and Insurance Agents & Brokers.

Thank you for your continued sponsorship.

WHAT IS IA&B PARTNERS? The IA&B Partners program gives company and allied businesses the opportunity to demonstrate their commitment of support to independent agents and receive maximum market exposure. As an IA&B Partner, you will also realize the benefits of IA&B membership to help you succeed in the insurance industry.

PLATINUM LEVEL

BRONZE LEVEL

ACUITY

Aegis Security Insurance Co.

Amerisafe

Agency Insurance Company

Berkley Mid-Atlantic Group

AmWINS Program Underwriters Inc

Donegal Insurance Group Erie Insurance Group Insurance Agents & Brokers Service Group Inc Liberty Mutual Insurance MAPFRE Insurance

Auto-Owners Insurance Company Bailey Special Risks Inc Berkshire Hathaway GUARD Insurance Companies Brethren Mutual Insurance Company Briar Creek Mutual Insurance Company Conemaugh Valley Mutual Insurance Co

MMG Insurance Company

Countryway Insurance Company

Millers Mutual Group

Encompass Insurance

Mutual Benefit Group

GMI Insurance

Nationwide

Goodville Mutual Casualty Company

Penn National Insurance

Grinnell Mutual Reins Company

Swiss Re

Insurance Alliance of Central PA Inc

The Main Street America Group

Insurance House

DO YOU SEE YOUR NAME?

United Fire Group

To become an IA&B Partner, choose the sponsorship package that matches your commitment of support.

Contact the Member Sales Center at 800-998-9644, 717-795-9100 or visit us online at IABforME.com to get started.

Utica National Insurance Group

Insurance Placement Facility of PA Lackawanna Insurance Group Lebanon Valley Insurance Company

GOLD LEVEL

Merchants Insurance Group

Progressive

Mercury Casualty

Universal Property & Casualty Insurance Company

Millville Mutual Insurance Co

Westfield Insurance

PennPRIME Municipal Insurance Reamstown Mutual Insurance Company

SILVER LEVEL

Rockwood Casualty Insurance

CM Regent Insurance Company

State Auto Mutual Insurance Company

Cumberland Insurance Group

Strategic Comp

Farmers Mutual Insurance Company of Western Pennsylvania

TAPCO Underwriters Inc The Motorists Insurance Group

Frederick Mutual Insurance Co

The Mutual Service Office Inc

Juniata Mutual Insurance Co

Travelers

Keystone Insurers Group Inc Selective

Tuscarora Wayne Group of Companies Zenith Insurance

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WHEN IS A BUILDING “VACANT” AND WHAT ARE THE CONSEQUENCES?

By Jerry M. Milton, CIC S PACE LE B AVAILA

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When is a “vacant” building not “vacant”? This is no riddle; this is reality thanks to the insurance industry’s uniquely defined terms and increasingly complex policies.

On the following pages, Jerry Milton looks at the coverage gaps (and resulting E&O traps) associated with ISO’s definition of “vacant” in the Commercial Property and Businessowners policies.

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I

’m an old man. I’ve been around a long time. Some folks probably think too long. I’ve seen a lot of changes. Especially in our insurance policies. Some of you may remember back in the 1970s and 1980s when the Insurance Services Office (ISO) was busy revising all their policies. Homeowners, Personal Auto, Commercial Property, CGL, Business Auto – you name it. They called it “simplification.” Don’t you believe it!

type of vacancy limitation or exclusion. The following is an example: We do not insure for loss caused by vandalism and malicious mischief and any ensuing loss caused by any intentional and wrongful act committed in the course of the vandalism or malicious mischief if the building has been vacant for more than 60 consecutive days immediately before the loss.

In my opinion the policies we write today are far more complex than they were prior to these changes. One reason I believe they are more complex is because we have taken words and given them our own definitions. Our definition of a word often contradicts the commonly accepted definition. Our definition of a word frequently differs from the definition of that word in various dictionaries, such as Black’s Law Dictionary, Webster’s Dictionary and American Heritage Dictionary. An example of us applying our own definition is the word “vacant.”

Some insurers also applied the above exclusion to buildings that were unoccupied. However, most importantly, we did not define “vacant.” We used the commonly accepted definition. We used the definition found in our dictionaries. We knew what “vacant” meant. Not anymore. In their 1985 revisions of the Commercial Property and Businessowners policies, ISO decided to include their definition of “vacant.” This definition totally contradicts everything we thought we knew. Today a building does not have to be “vacant” to be “vacant.” Confused? You should be. How about our insureds?

Black’s Law Dictionary defines “vacant” as follows: Empty; unoccupied; as a “vacant” office or parcel of land.

Deprived of contents, without inanimate objects. It implies entire abandonment, non-occupancy for any purpose.

Absolutely free, unclaimed and unoccupied.

“Vacant” and “unoccupied” as used together in a rider to a fire policy have different meanings; term “vacant” meaning “empty,” while the term “unoccupied” means lack of habitual presence of human beings.

Life was simple. “Vacant” meant nothing was there. “Unoccupied” meant that nobody was there. That was then, this is now. It’s just not that simple anymore.

Insurers have never liked vacant properties. Prior to 1985, all of our property policies, both commercial and personal, had some

ISO’s definition of “vacant” in their Commercial Property and Businessowners policies … is one of the biggest E&O traps in the insurance industry.

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ISO’s definition of “vacant” in their Commercial Property and Businessowners policies reads as follows: 6. Vacancy a. Description Of Terms (1) As used in this Vacancy Condition, the term building and the term vacant have the meanings set forth in (1)(a) and (1) (b) below: (a) When this policy is issued to a tenant, and with respect to that tenant’s interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations. (b) When this policy is issued to the owner or general lessee of a building, building means the entire building.

Such building is vacant unless at least 31% of its total square footage is: (i) Rented to a lessee or sublessee and used by the lessee or sublessee to conduct its customary operations; and/or (ii) Used by the building owner to conduct customary operations.

(2) Buildings under construction or renovation are not considered vacant. b. Vacancy Provisions If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs: (1) We will not pay for any loss or damage caused by any of the following, even if they are Covered Causes of Loss: (a) Vandalism;

APRIL 2017

(b) Sprinkler leakage, unless you have protected the system against freezing; (c) Building glass breakage; (d) Water damage;

(e) Theft; or

(f) Attempted theft.

(2) With respect to Covered Causes of Loss other than those listed in b.(1)(a) through b.(1)(f) above, we will reduce the amount we would otherwise pay for the loss or damage by 15%.

I think this provision is one of the biggest E&O traps in the insurance industry. Let me ask you a few questions.

Are you insuring any buildings that are “vacant,” but you don’t know they’re “vacant”? I think most of you would have to answer, “I don’t know.”

Have you renewed the policy on a building that has been “vacant” for the past three months? Possibly. Will the insured have the covered causes of loss and limits shown in the policy?

No. Did you charge the full premium or give them a discount for the reduction in coverage? What a stupid question – you charged the full premium. What could be the consequences? I’ll let you decide the answer to that question.

If you ask a prospect or a client if they have any vacant buildings, most of them will say, “No.” Will they still say “no” if their building is only 25 percent occupied? Yes, they will, because, to them, that building is not “vacant.” They think like most folks think. If the building is being used, it’s not “vacant.”

To be “vacant,” it has to be empty. If that building is occupied and is being used, it’s not “vacant.” But we insurance people know better.

A few suggestions if your insurer is using the ISO or similar forms: • Don’t ask the prospect or client, “Is the building vacant?”

Ask, “Is the building less than 31 percent occupied?” After they look at you like you’re crazy, they may answer “yes” to that question. Now you have a problem. You have a “vacant” building.

• Advise your insureds in writing that if any of their buildings are or become less than 31 percent occupied, they must notify you at once.

• Notify your insurer at once. Ask them to endorse the policy. You have two options:

GET YOUR FILL OF KNOWLEDGE ON VACANCIES TWO OF our upcoming live CE webinars tackle vacant property concerns (among other hot topics).

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Tricks to Fix: Closing Coverage Gaps in Home, Work and Auto Thursday, April 27, 9 a.m.–noon Wednesday, June 28, 9 a.m.–noon IABforME.com/webinars

COMMUNICATING ABOUT COVERAGES WHAT CUSTOMERS don’t know can hurt them (coverage gaps) … and you (E&O exposure). Their understanding – or lack thereof – of insurance policies’ vacancy provisions is a prime example.

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o Vacancy Changes (CP 04 60): Used to change the percentage of customary operations from 31 percent to another percentage.

WHAT’S AHEAD FOR PRIMARY AGENT

o Vacancy Permit (CP 04 50): Schedule certain locations with a vacancy permit period; e.g., 120 days. Vandalism and sprinkler leakage can be included or excluded.

THE MAY Primary Agent magazine is dedicated to E&O. Look for Jerry Milton’s Coverage Corner column, where he’ll address another significant E&O exposure: how a homeowners’ policy can lose all coverage in certain vacancy conditions.

Also coming next month: • A comprehensive look at agency E&O prevention

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Unfortunately, you may get a non-renewal notice instead of an endorsement. Insurers just do not like “vacant” buildings. The hazard increases. None of us can argue that.

• Don’t forget about your Homeowners and Dwelling policies. Although this 31 percent requirement has not been incorporated in those policies, they still exclude vandalism (and with some insurers, maybe other causes of loss) if the dwelling has been vacant for more than 60 consecutive days. Tenant-occupied dwellings can be a real problem. I know that to be a fact! At least the Homeowners and Dwelling “vacant” is the same “vacant” that most folks think it to be.

However, if you think HO and DP vacancy issues are easy, think again. If not handled properly, your insured may continued on page 18

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APRIL 2017

have no coverage at all, without even triggering a single exclusion. How so?

More on this in next month’s issue of Primary Agent*....

One final thought. A Builders Risk policy is written on a vacant building. Occupancy voids a Builders Risk. Go figure. We charge you an additional premium under the Builders Risk policy if you move in (Occupancy Permit endorsement), and we charge you an additional premium under a Commercial Property policy if you move out (Vacancy Permit endorsement), We, the insurance industry, need to decide: Do we want an occupied building or a vacant building?

One final, final thought. Be careful when writing a Builders Risk on a renovation project or a project making an addition to an existing building. The building is probably occupied.

Good luck!

Y’all take care! n * Editor’s note: Be sure to read Jerry Milton’s standard Coverage Corner column in the May 2017 issue of Primary Agent. He will tackle how a homeowner’s policy can lose all coverage in certain vacancy conditions, not just vandalism and malicious mischief. This is another significant E&O exposure that greatly hinges on how your carriers have worded their policies and are handling the issue.

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APRIL 2017

PLATINUM PROFILE

Insurance Agents & Brokers proudly recognizes Erie Insurance as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

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t’s the rare individual who is motivated by a genuine desire to help others.

And it’s the rare company that puts that principle into practice.

At Erie Insurance, we’ve been helping people make things right since 1925, working side-by-side with the best independent agents in the business.

Our agents and employees are energized by a clear sense of purpose, performing to the best of their ability, because they know the work they do benefits millions of customers’ families and businesses.

It’s part of being Above all in SERVICE® and it’s why we’re so committed to the independent ERIE agents who live and work in the communities they serve.

On the strength of these relationships, Erie Insurance has risen to become one of the nation’s most respected property/ casualty and life insurers.

Insurance Agents and Brokers proudly recognizes Erie Insurance as one of its Platinum Partners. IA&B PlatinumPartners dedicate the highest level of sponsorship to our organization.

Today, we’re a FORTUNE 500® company operating in 12 states and the District of Columbia. ERIE has more than 5 million policies in force. We’re the 15th largest property/casualty insurer in the United States, based on total lines net

premiums written, and the 10th largest home insurer and 12th largest auto insurer based on direct premiums written.

A.M. Best Company rates Erie Insurance A+ Superior.

Erie Insurance Group is a Barron’s 500 company and has been recognized

by Confirmit with an Achievement in Customer Excellence Award in the Voice of the Customer category for claims service. Erie Insurance’s founding principle is: “To provide our policyholders with as near perfect protection, as near perfect service as is humanly possible, and to do so at the lowest possible cost.” That same principle guides us today.

We still adhere to disciplined underwriting, fair pricing and a prudent investment philosophy. We still practice the Golden Rule–treating others as we want to be treated.

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We still thrive on the ERIE family spirit, employees and agents working together as a team for the good of our customers and the communities we serve.

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20

D I G ITAL S OLUTI ON S

OVERCOMING CHALLENGES WITH TECHNOLOGY

By David Richwine

The efficiencies provided by emerging technologies are more important than ever as independent agents and brokers face mounting pressures and competition. On the following pages, three Mid-Atlantic agencies share how technology improved their workflow and customer service.

D

oing business today has become complicated — especially for insurance agents. They handle multiple challenges: an increased volume of work, greater requirements for managing data, the expectations of customers, and many more. To overcome these pitfalls and streamline their operations, brokers have increasingly turned to technology.

The stories of three brokers in our region illustrate how adopting emerging technologies or web-based tools can help overcome the critical challenges of an increasingly complex business world. These brokers embraced high-tech solutions that boosted efficiency, saved time and money, and eliminated frustrating tasks.

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EHD Simpler, faster web-based health quoting with Benefix EHD is a full-service insurance broker with four regional offices and a staff of more than 100. Within the firm, the Employee Benefit Services division manages approximately $110 million in health insurance premiums, or premium equivalent volume, so its employee benefits team is responsible for compiling a sizable number of quotes on behalf of clients.

Health insurance quoting was tedious and frustrating for the EHD team — especially for the small group market of employers with 2-50 employees, notes Tara Dombach, account executive with EHD. That changed when EHD discovered a recently introduced web-based solution: Benefix.

Every agent knows the hassle involved in developing a health insurance quote for a client: gathering census data from the client, uploading that information to multiple insurers on multiple platforms, and then compiling the information from the various portals into a common platform for presentation to the client.

22

In 2016, EHD began using Benefix, a quoting platform that speeds and simplifies the quoting process. Benefix is a Web-based tool developed exclusively for brokers that provides data from thousands of plans offered by major carriers in Pennsylvania.

Now, the EHD team can develop a quote in minutes from a simple-to-use interface.

“We’ve never had a solution quite like Benefix,” Dombach said.

“Benefix gave us the efficiency to go into one website to get all of those proposals, which is a huge timesaver.”

The EHD team ramped up its use of Benefix as the fourth quarter got underway—its busiest time of the year—taking full advantage of Benefix to manage renewals, prospect for new business and generate hundreds of quotes: • Cutting quoting time by half • Providing real-time updates from multiple insurers to a quote during a meeting or call with a client • Filtering quotes to make them easier for clients to understand and analyze

APRIL 2017

The future looks much simpler for EHD, too. Because Benefix maintains the census data for each EHD client, future quotes will only require updates for new or departing employees in a single database. Dombach notes that Benefix has brought speed and simplicity to what once was a stressful, time-consuming process.

LOESEL-SCHAAF INSURANCE AGENCY Streamlining operations with SaaS Erie, Pa.-based Loesel-Schaaf Insurance Agency has always tried to differentiate itself from its competition by handling as many details as possible for its clients. The multi-line agency’s staff coordinates dozens of administrative operations for hundreds of business clients, which range in size from two to nearly 1,000 employees. From adding new hires to making demographic changes and terminations, the agency has always gone out of its way to take care of tasks of all kinds.

But in 2008, as a result of that commitment to service and the addition of new clients, Loesel-Schaaf began to experience sharp challenges in keeping ahead of the administrative end of their work. The business of handling so many tasks for so many clients was overwhelming. The agency was processing a blizzard of paper requests and reports.

Different computers had been assigned to house different databases. It was not unusual for multiple people, databases, computers and filing protocols to be involved with each paper request that came into the office.

“We were at a decision point,” says Kathy Aranyos, vice president and manager of the Employee Benefits Department.

“We would either have to cut back what tasks we could do for clients, or add additional staff.”

Fortunately, Loesel-Schaaf discovered a third option: They turned to a cloud-based, software-as-a-service (SaaS) strategy that centralized not only the administrative tasks, but also benefits administration and client communications. Loesel-Schaaf began using this approach with its larger clients, but soon recognized that it could be an asset to everyone they worked with.

Aranyos said that, among other benefits of the new system, it: • Decreased the number of people touching each request • Streamlined the paper trail that followed each request • Shrank the overall volume of paper and multiple records dramatically

Loesel-Schaaf even uses the system to send their clients the most current notifications on compliance issues, regulatory changes and other timely information.

“Automation and the utilization of SaaS saved us money and a great deal of extra work – not to mention filing cabinet space,” Aranyos says. “Moving this part of our operations to ‘the cloud’ has enabled us to grow, ease the burden on our staff, and maintain the high level of service our customers expect.”

BLUE MARSH INSURANCE Going paperless — and gaining efficiency — with HawkSoft Blue Marsh Insurance is an independent agency with two locations in southeastern Pennsylvania that serve some 4,000 people and businesses. Because of the variety of insurance lines the company sells, they use HawkSoft, an agency management system that allows them to electronically streamline their recordkeeping and communications activities.

CONSIDERING SAAS? ACCORDING TO Agents Council for Technology: When it comes to the software-as-a-service model, the name essentially implies what users will be getting from their provider, as it delivers software via the Internet that can be used for a variety of business applications.

SaaS applications maintain all of the information in their own databases, which is accessed by users – who typically pay a monthly or yearly subscription – and is delivered to the customer via their web browser.

The customer owns the software for as long as they are paying the subscription fee.

Read more about the considerations for cloudcomputing – including SaaS and DaaS – in last month’s Primary Agent magazine. The March issue includes industry tech gurus’ answers to independent agency owners’ common questions.

IABforME.com/news

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“We’ve been using HawkSoft for years,” says Erika Ruhle, a Blue Marsh agent specializing in health insurance. “We’re able to log in prospects, track applications, set reminders, and essentially keep tabs on multiple group and individual health applications with a click of a button.”

But in April of 2016, Erika truly learned to appreciate the efficiencies of their software when her agency merged with a firm that managed all of their transactions on paper.

Prior to the merger, Blue Marsh’s new partner maintained large hard copy files and filing cabinets to track clients and client transactions. They also used paper logs, faxes, sticky notes and other paper means for daily reminders, communications and updates. All of this required a great deal of physical storage space and took time to navigate, especially when trying to track down a particular piece of information.

By contrast, Blue Marsh’s agency management system arranged all of those tasks — large and small —digitally, which saved on space, time and resources. The paper-reliant system soon gave way to Blue Marsh’s HawkSoft system, and the newly formed agency, despite having a greater number of people and clients, ran quickly and efficiently.

CONCLUSION Different agencies, different applications -- but the end goal is the same: to increase efficiencies in the already complex process of procuring insurance information. The use of technology is helping to accomplish this, as well as ease the stress on agents and grow agencies’ business. n David Richwine, with Beeler Communications in York, Pa., submitted this article.

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APRIL 2017

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HR HEADQUARTERS

DO I HAVE

TO PAY FOR THAT?

By Karen DiGioia

26

Determining “compensable time” under the FLSA is not as simple as it sounds. On the following pages, our HR consultant looks at various work circumstances – from travel time to meal breaks – and explains when overtime pay is due.

A

t this point, you should have a pretty good sense of which employees at your agency qualify for exemption under the Fair Labor Standards Act (FLSA) and which don’t.

You also know that those employees who don’t qualify for exemption – your non-exempt or hourly employees – must, by law, be paid time and a half for any hours worked in a workweek over 40 and also must receive at least the minimum wage.

But … do you know what counts as hours “worked” and what doesn’t?

I’m going to work from the assumption that the answer to this question is, at best, “maybe” and spend some time talking about what counts as “compensable time” under the FLSA. On the surface, it sounds simple. Work time is time when an employee works, right? But what about rest and meal times?

Time worked that you didn’t approve? On-call time? Time waiting to work? Travel time?

Let’s start with a quiz. I’ll present each of the areas that will be covered later in this article. You indicate whether or not you think you are required to pay an employee for the time. After you finish the quiz, continue reading and see how you did. (No cheating!)

Time Spent

Yes

Time worked but not approved Meal Time Break Time On-call Time Waiting Time ectures, Meetings L and Training Programs Travel Time Sleeping Time

No

Maybe

TIME WORKED THAT WASN’T APPROVED: YES We’ve covered this before in previous articles, but it bears repeating. An employee who works, even without approval, must be paid for the time. You can have a policy that states that employees are not to work overtime (or even regular time) without management approval, but if they work, you must pay them. This can be handled as a performance issue – but you still must pay for the time!

MEAL TIME: NO Meal periods (mostly commonly 30 minutes or longer) during which an employee is completely relieved of duty does not require compensation. Be careful, though. If an employee is performing any work duties while having his or her meal, either actively (like filing papers while eating lunch) or inactively (like waiting at the phone in case calls come in), the time must be paid.

BREAK OR REST TIME: YES Rest or break times of 20 minutes or less must be counted as hours worked. Generally, breaks are not required but are considered good practice which increase the efficiency of employees.

ON-CALL TIME: MAYBE It depends on how employees can spend their time when “on call.” If they must remain at the worksite while on call, the time must be paid. If they are able to spend their on-call time freely – leaving home but able to be reached if necessary – it is not considered work time (until they actually receive a call at which point they then are working) and does not require pay. However, if employees have constraints on how they can spend the on-call time (for example: must stay at home where they have access to their computer), they must be compensated.

WAITING TIME: MAYBE According to the FLSA, it depends on whether an employee is “engaged to wait” or “waiting to be engaged.”

(Honestly, I don’t make this stuff up.) Some examples of employees who are “engaged to wait” would be an administrative assistant who is reading a book while waiting for a letter that he or she will type and send or a customer service representative who is checking personal email while waiting for customer calls to come in. In both of these cases, the time spent reading or on email must be paid. While it’s always best to have other work available for employees to do while they are “waiting,” if you don’t, you still need to pay them.

Time away at multi-day seminar

27

In the case of an employee who is “waiting to be engaged,” compensation is not required. To meet this definition: 1. The employee must have been fully relieved of his or her duties and be free to use the time as they choose; 2. The employee must have been told in advance;

during the employee’s normal work hours. If the travel time is before or after “normal” work hours, then the time does not have to be paid (unless the employee is doing work while travelling, like making work phone calls, writing or reviewing reports, preparing presentations, etc.).

If an employee travels on a non-workday (generally a weekend), the travel time must be paid if the hours fall between the times that he or she normally would work on a normal workday.

This mean that if an employee who usually works Monday

3. The employee must know when he or she needs to next show up for work; and 4. The break in time needs to be long enough for the employee to be able to effectively use it for his or her own purposes.

continued on page 30

If all these requirements are met, the employee is “waiting to be engaged,” and the time would not need to be paid.

LECTURES, MEETINGS AND TRAINING PROGRAMS: MAYBE Yes, “maybe” again. All these “maybes” is what makes this such a complex topic. If four criteria are met, the time doesn’t need to be paid: • Outside of normal work hours • Voluntary • Not job related

CLASSIFYING EMPLOYEES as exempt or nonexempt – and therefore knowing whether they are eligible for overtime pay – is more complicated than simply assessing their salary. For most independent agencies, it is the primary duties test, not the salary threshold, that is the key test for exemption.

As an IA&B member, you have access to our complimentary do-it-yourself resources, including:

• No other work is performed at the same time

• An industry-specific overview of the FLSA

If all four criteria aren’t met, the time must be paid.

TRAVEL TIME: SOME YES AND SOME NO Home-to-work travel: no This one is clear and straight forward. You do not need to pay your employees for time they spend getting to work and going back home.

Travel that all falls into a day’s work: yes If an employee is traveling between job sites, is working in another city for the day and then returning home the same day or going out in the middle of the day to pick up supplies or deliver something to a customer, this is time worked and must be paid.

Travel away from home: yes and no If an employee travels away from home and that travel time covers more than one work day, travel time counts toward hours work if the time spent traveling (by car, plane, etc.) occurs

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HELP WITH FLSA COMPLIANCE

APRIL 2017

• Sample employee communications which explain and outline the FLSA and how it may apply to that staff member • Insurance-specific job description templates IABforME.com/EmpMgmt

IN ADDITION, we offer one-on-one, overtime compliance support through Independent Agency Solutions. The company utilizes the knowledge and experience of IA&B to develop customized solutions for agencies. Services are priced according to the level of our involvement.

IABforME.com/IAS

SAVE IT FOR A RAINY DAY

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29

through Friday from 8:30 a.m. – 5 p.m. is travelling between 10 a.m. and 2 p.m. on Saturday, that time must be paid.

If the travel time covers the entire normal workday time period (8:30 a.m. – 5 p.m.), the full time would be paid but time normally given for meal breaks could be deducted.

If an employee is traveling to Chicago in a train headed westbound going 75 mph and another employee is leaving Chicago at the same time heading eastbound in another train….

Oops. Sorry about that.

SLEEPING TIME: MAYBE (YES, THAT ANSWER AGAIN) If employees are required to stay “on duty” for less than 24 hours but is, for some reason, permitted to sleep when they are not busy, they are considered to be working and must be paid. The only exception is for “on duty” periods in excess of 24 hours for which an employer has an agreement with the employee that sleep time (which must be in excess of five hours) will be unpaid and for which adequate sleeping facilities are provided by the employer so that the employee can actually have an uninterrupted night’s sleep. While this is unlikely to apply to IA&B members, it’s possible that, in the event of an upcoming bad weather event, an employee might be asked to sleep on site so that the agency could open the next day. If that happens, you now know the pay implications of this situation.

TIME AWAY AT A MULTI-DAY SEMINAR: YES AND NO “What,” you may ask, “about a situation that combines many of the above categories? What if a non-exempt employee attends a multi-day seminar, such as a CIC Institute? What do I have to pay for then?”

If we apply many of the sections above, the employee would be paid for any time travelling that cuts across the regular workday (or corresponding work hours during a nonworking day) and for all time worked, while he or she is away, including time in the seminar and other related “work” activities.

You are not required to pay him or her for time spent at the hotel (unless he or she is also working while at the hotel), time at restaurants, time sleeping, time at the pool, time at the hotel gym – you get the idea.

thing is to realize that, when stepping outside normal “work” definitions, you should always check it to determine if you have to “pay for that.”

When in doubt, the U. S. Department of Labor website provides many resources which can answer your questions and, as always, as part of your IA&B membership, support from me is only a phone call or email away. You can reach me at 610-779-3870 or Karen@mostellerhr.com. And you won’t have to pay for that! n

Karen H. DiGioia provided this article on behalf of Mosteller & Associates, IA&B’s contracted human resources consulting firm. Reach out to Karen for more information on conducting classifying workers or with other human resources questions.

IA&B’s HR Solution© is a compilation of products and services – available exclusively for our member agencies – that simplifies establishing or improving your human resources program. It includes base-level consultation and discounted professional services from Mosteller & Associates. Learn more at IABforME.com/emp_mgmt.

So … how did you do on the quiz? Hopefully this article has made you aware that the answers to the question “Do I have to pay for that?” are not always clear. While it’s possible that you are more confused now than you were before, the important

30

APRIL 2017

Case studies in FLSA compliance WHEN A GOOD-FAITH EFFORT DOESN’T GO FAR ENOUGH Classifying employees as exempt or non-exempt under the Fair Labor Standards Act (FLSA) is more complicated than simply assessing their salary. For most independent agencies, it is the primary duties test – not the salary threshold – that is the key determination for exemption.

Agency seeks input from firm familiar with the industry

While many agencies have made a good-faith effort to comply with FLSA rules, misconceptions are commonplace and can lead to non-compliance. And thanks to the insurance industry’s place in the highly regulated financial services industry, insurance agencies may be subject to increased scrutiny (read: an audit by the U.S. Department of Labor).

Contracted for a base-level consultation, the Independent Agency Solutions staff:

WHERE TO TURN FOR COMPLIANCE SUPPORT IA&B members have access to complimentary, do-it-yourself resources, including: an industry-specific overview of the FLSA, an extensive Q&A, sample employee communications, and insurance-specific job description templates.

• Updated the employee handbook to account for emerging issues (e.g. when non-exempt employees respond to workrelated inquiries from home)

Or, those who prefer can secure one-on-one compliance support through Independent Agency Solutions – an off-shoot of IA&B that offers affordable consultation from the experts on independent agencies.

This family-owned independent agency employs seven staff – four service personnel and three administrators – to meet a variety of commercial clients’ insurance and employee benefit needs. While the owners had an employee manual and job descriptions in place, they wanted an independent third party to review their employee classifications.

• Reviewed the FLSA with the agency’s management team • Enhanced the agency’s job descriptions • Offered alternative timesheets

“We chose Independent Agency Solutions because the firm already had a thorough understanding of the FLSA and of how independent agencies operate.” – agency principal Access FLSA compliance resources at IABforME.com/ EmpMgmt, or learn more about Independent Agency Solutions’ consultation services at IABforME.com/IAS. n

HOW TWO AGENCIES APPROACHED COMPLIANCE Agency seeks compliance check-up, peace of mind after DOL audit

Editor’s note: Agency names were withheld due to the sensitive nature of compliance issues.

With roots tracing back 100 years, this independent agency boasts 41 staff and three office locations. The U.S. Department of Labor audited the agency about a decade ago, so when Independent Agency Solutions launched, the agency principal decided it was time for a compliance check-up.

COMMON PITFALLS IN AGENCY FLSA COMPLIANCE

Hired for a “premium-level” consultation, Independent Agency Solutions staff:

• Unclassified (exempt vs. non-exempt) staff

• Reviewed every position and evaluated each one’s primary duties

• Misinterpretation of primary duties

• Refined the job descriptions to better align with employees’ day-to-day functions • Clearly identified each position’s classification status • Provided the agency’s management team with individual communication to share with each employee (regardless of whether his or her position’s classification changed) “The DOL audit was a very positive experience. We implemented eight or nine changes as a result and are now confident that we’re compliant.” – agency principal

• Classification based on salary/compensation alone • Misunderstanding of “professional exemption” • Misunderstanding of “administrative exemption” • Improper, “blanket” determination of job classifications • Non-existent or outdated job descriptions • Non-existent or outdated employee manual • Lack or misuse of time sheets • Improper “comping” within pay period • Confusion between hourly and non-exempt

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My Events

CLASSIFIED A DV E R TI S E M E N TS SOUTHEAST PA PRODUCERS & AGENCIES

DATE TOPIC

LOCATION

APRIL 2017 3 Webinar: Insuring the Building Project: Builders Risk & Installation Coverage 1 – 4 p.m.

4 CISR Commercial Casualty I Philadelphia, Pa. 4-6 Property & Casualty Licensing Study Course Mechanicsburg, Pa. 5 10 Ways to Get Sued (E&O) Ellicott City, Md. 5-8 CIC Commercial Casualty Institute Allentown, Pa. 10-11 James K. Ruble Graduate Seminar Pittsburgh, Pa. Webinar: The Things Kids Get Us Into 1 – 4 p.m.

11 11 E&O Risk Management: Meeting the Challenge of Change Mechanicsburg, Pa. William T. Hold: Commercial Lines Challenges Altoona, Pa. 12 12 E&O Risk Management: Meeting the Challenge of Change Philadelphia, Pa. CISR Agency Operations Waldorf, Md. 12 13 Insuring Truckers Mechanicsburg, Pa. 18 CISR Commercial Casualty I Baltimore, Md. 19 CISR Personal Auto Hagerstown, Md. 19 CISR Commercial Property Mechanicsburg, Pa. 20 CISR Commercial Property Wilkes-Barre, Pa. 25 Webinar: Weather Stripping the CGL: Drafts, Gaps, Forms & Fixes 1 – 4 p.m.

25 CISR Commercial Casualty I Bethlehem, Pa. 26 Insuring Truckers Philadelphia, Pa. 27 Webinar: Tricks to Fix: Closing Coverage Gaps in Home, Work & Auto 9 a.m. – Noon 27 Webinar: Cyber Liability – The 31st Century Peril 1 – 4 p.m.

28 Webinar: Construction Defects: Property Damage & the ISO CGL 9 a.m. – Noon MAY 2017 2-4 P&C Licensing Study Course 3 CISR Life & Health Essentials 3 CISR Personal Auto 4 Webinar: Contracts, Hold Harmless, Additional Insureds & Other Stuff 3-5 National Legislative Conference 4 E&O Risk Management: Meeting the Challenge of Change 9 CISR Commercial Property 9 Webinar: Leases & Contracts 9-10 James K. Ruble Graduate Seminar 10 CISR commercial Property 10 Webinar: Certificates & Additional Insureds: Navigating the Maze 11 E&O Risk Management: Meeting the Challenge of Change 11 Insuring Contractors 15-18 CIC Commercial Multilines 16-18 P&C Licensing Study Course 22 Webinar: Time Element for Commercial Risks 23 CISR Personal Residential 23 CISR Agency Operations 23 Webinar: Commercial Property Claims That Cause Problems 24 William T. Hold: Protect Your Client, Protect Yourself CISR Personal Lines Miscellaneous 24

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Philadelphia, Pa. Mechanicsburg, Pa. Salisbury, Md. 1 – 4 p.m.

Washington, D.C. Dover, Del. Lancaster, Pa. 9 a.m. – Noon King of Prussia, Pa. Frederick, Md. 1 – 4 p.m.

Pittsburgh, Pa. Newark, Del. Hunt Valley, Md. Pittsburgh, Pa. 1 – 4 p.m.

Erie, Pa. Indiana, Pa. 1 – 4 p.m.

Pittsburgh, Pa. State College, Pa.

25

CISR Personal Lines Miscellaneous

Pittsburgh, Pa.

31

William T. Hold: Commercial Lines

Mechanicsburg, Pa.

APRIL 2017

Professional agency since 1926 located in Feasterville, Bucks County, Pa. Call for confidential information and a review of our services.

Contact Ray Reinard at 215-357-8600, Ext. 119.

If you would like to place a classified advertisement, please contact Laura Gaenzle at Laura.gaenzle@theygsgroup.com or (717) 430-2351.

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