"A government which robs Peter to pay Paul can always depend on the support of Paul." George Bernard Shaw
We are into the Fall and getting ready for the election and then for the 2015 legislative session. Not much is happening except for the NFL scandals and the deteriorating world situation in the Middle-East and Ukraine--all beyond this Blog's subject matter.
I wanted to cover several items which I hope you will never have to think about, but of which you should be aware . Plus, even though your bank is not unionized, the National Labor Relations Board and its chief counsel continue to raise questions about personnel matters that we used to take for granted.
Pac-Man Insurance Policy Language. Your personal automobile and homeowners liability policies cover certain risk associated with your ownership and use of your automobile and home. If you have an accident and are sued by another driver you are protected from an adverse result up to the limits of your policy. Important benefit: your insurance company also pays your attorney fees and costs as an added part of your coverage package. Coverage is not reduced by the attorney fees and costs. What about your bank or company's insurance policies--do they include payment of attorney fees on top of your liability limits? With the exception of automobile and general liability, maybe not. If you have not done so you should check the high risk, high legal cost coverage you have. It is increasingly common for insurance companies writing Directors & Officers insurance , employment insurance, professional liability and errors or omission type coverage to include Pac-Man provisions in those policies, usually without telling the insured. Under the typical Pac-Man type policy the bank's or business' coverage is reduced by attorney fees and costs. Like the Pac-Man game your attorneys gobble up the coverage. For example, you have $1 million in coverage for employment disputes. The EEOC files suit against your bank for sexual harassment and retaliation and claims damages which might result in damages of $1.5 million. Employment litigation is very expensive and attorney fees and costs in excess of $100,000 are common. You may think you have $1 million in coverage to settle or pay an adverse result. You don't. Every dollar of legal expense billed to your insurance company reduces your coverage by an equal amount. New Mexico has a strong insurance commission regulations dealing with Pac-Man type insurance clauses. Arguably the insurance company owes you a complete disclosure of the Pac-Man provisions. However, the N.M. insurance regulations have never been tested in court. You should try to get your insurer to remove the Pac-Man terms so that your attorneys fees in high stakes litigation does not affect your total coverage. If you are unsuccessful consider raising your coverage limits.
Demand Settlement Within Policy Coverage Limits. If you are unfortunate enough to be embroiled in high-stakes litigation of the type described above, you should be aware of the New Mexico case law that may compel your insurance company to settle a dangerous case within policy limits. In the case above, you may have a strong defense case. Your insurance company wants to settle the case for the smallest sum possible and may want to try the case and take the risk. However, the EEOC has made an offer of settlement of $400,000. The insurance company does not want to consider the offer or negotiate starting at that sum. At $1 million coverage your insurance company is risking your financial standing in the event an unpredictable jury finds against your bank after the settlement offer is not pursued. If you have a Pac-Man provision in your policy future attorney fees may reduce your coverage. The attorney representing you and paid by the insurance company may feel that he or she cannot evaluate the case and, if necessary, demand of the insurance company that the insurance company settle the case within the $1 million policy limits--although facts will dictate whether there is a conflict of your interests and the insurance companies', what is your next step? Hire an independent attorney to evaluate the case and recommend settlement within policy limits. You will bear the cost of the advice but you minimize your risk of an adverse result above your policy coverage of $1 million.
The National Labor Relations Board has stepped up its attack on any company policy, handbook or employment agreement which tends to restrict an employee's right to communicate concerning wages or working conditions. Previously this Blog has discussed the NLRB general counsel's position that a company's social media policies can violate the National Labor Relations Act if the policies purport to restrict employee comments on the employee's work or workplace or wages. You don't have to be unionized for the NLRA to apply to you. Bob Tinnin, a leading employment lawyer in New Mexico, has pointed out that the NLRB's restrictive position is now being extended to confidentiality and non-disparagement clauses in handbooks and employment agreements. One prominent mortgage banker's confidentiality and non-disparagement clauses were invalidated in a recent NLRB decision. The EEOC has now joined the fight alleging broad confidentiality and non-disparagement clauses in a severance agreement were an attempt to silence an employee about violations of non-discrimination laws.
Although the chances of your bank or company being involved in high stakes litigation may be remote, prudence requires that you do a review of your D&O, employment and other high risk insurance for their including the Pac-Man provision. If your insurance has such a clause try to get it removed at the next renewal and, if not possible, consider whether your policy coverage limits should be increased. On the duty to settle within policy limits, just remember that your attorney paid by the insurance company may feel that she or he cannot even tell you about this aspect of New Mexico law because of her dual relationship; however, the attorney should tell you to consult independent counsel on the insurance issues. On your employment handbooks and agreements, look for the possibly offending provisions and change them, seeking expert advice if needed.
Do good,
MARSHALL G MARTIN
Tinnin Law Firm
505-228-8506 (cell)
505-768-1500 (office)
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