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Insurance coverage for joint employers a moving target

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NEW YORK — The joint employer concept is an ongoing hot-button issue that is going to continue to be of concern to private and nonprofit employers.

“A lot of carriers are staying away” from the issue for that reason, said Michael Borghesi, Chicago-based senior vice president and managing director, professional lines at AmWINS Brokerage of Illinois, a unit of AmWINS Group Inc., speaking Thursday at the Professional Liability Underwriting Society’s 2016 D&O Symposium in New York.

The U.S. Labor Department said in guidance issued last week that more U.S. companies could be classified as joint employers of workers employed by staffing agencies or contractors and held liable for labor violations tied to those staff.

Mr. Borghesi said the concept of whether “the corporate umbrella comes down to a franchisor, or possibly a general contractor who has a subcontractor,” is one that employers in the construction area in particular need to pay attention to.

Also discussed during the session was the National Labor Relations Board’s 3-2 decision on Aug. 27, in which it ruled that Browning Ferris Industries of California Inc. is a joint employer with Leadpoint Business Services, a Phoenix staffing agency hired to supply workers for one of its recycling plants.

The question, said Mr. Borghesi, is how do you structure a policy — do you do it all under one policy, or do you try and separate out those with those types of issues?

“It behooves us to look at combining them under one policy. That’s probably the safer way to go,” he said.

However, from an underwriting standpoint, a franchisor may have 300 employees, but if the insurer is also picking up 5,000 to 6,000 franchisee employees, “it’s very difficult to write that, and it’s difficult to know what exposure you’re picking up,” said Maura D. Verrone, Atlanta-based vice president for Berkshire Hathaway Specialty Insurance Co., who also spoke on the panel.

“The test at this point is such a mess,” said Eric J. Marler, Itasca, Illinois-based assistant vice president, management liability claims at the Hanover Insurance Group Inc.

“It used to be relatively straightforward,” Mr. Marler said. The plaintiff bar is going to plead this issue “in an artful manner to try and trigger coverage,” he said. They know about insurance, and understand that in many situations insurers represent “deep pockets,” said Mr. Marler.

This goes beyond the franchisor-franchisee relationship and extends to anyone who might have a contractor, he said.

Another issue discussed during the session, which arose during other sessions at the conference as well, was of late notice and at what point policyholders should inform their insurers of a potential claim.

“As a broker, it’s our biggest challenge,” said Mr. Borghesi. The key is to really educate your employees “to make sure those are handled properly,” he said.

“For whatever reason, there seems to be this fear, or misconception that people get hit for reporting” claims, said Mr. Marler. “People are afraid that ‘if we turn this in our rates are going to go up,’” but “that’s not how it works,” Mr. Marler said. “If you know about something, just turn it in,” he said.

This leads to healthier management and controls at the company, said Jonathan S. Ziss, a partner at Goldberg Segalla L.L.P. in Philadelphia, who moderated the session.