Statements of fact and opinion in PIA Magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents. Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services.
President and CEO Jeff Parmenter, CPCU, ARM; Executive Director Kelly K. Norris, CAE; Communications Director Katherine Morra; Editor-In-Chief Jaye Czupryna; Magazine Advertising Sales Representative Adam Wolfe; Magazine Layout Designer Nate Voellm; Communications Department contributors: Athena Cancio, David Cayole, Jeana Coleman, Patricia Corlett, Darel Cramer, Matthew McDonough and Damon Whimple.
Postmaster: Send address changes to: Professional Insurance Agents Magazine, 25 Chamberlain St., Glenmont, NY 12077-4835.
“Professional Insurance Agents” (USPS 913-400) is published monthly by PIA Management Services Inc., except for a combined July/August issue. Professional Insurance Agents, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 12077-4835; (518) 434-3111 or toll-free (800) 424-4244; email pia@pia.org; www.pia.org. Periodical postage paid at Glenmont, N.Y., and additional mailing offices.
The legal system and its effects on the price of insurance
Numerous factors contribute to the increase in insurance premiums: inflation, the hard market and carriers withdrawing from markets. However, did you ever consider the role the legal system plays in rising insurance costs?
Four big issues that contribute to legal abuse in the U.S.
1. Third-party funding: When parties that have no ties to the lawsuit contribute funds to the defense to make a profit.
Soaring litigation costs
Nuclear verdicts are rulings against businesses with payouts in the millions. Over the past 10 years, two-thirds of these verdicts occurred in product liability, auto accident and medical liability cases.
They don’t just happen in a vacuum. The plaintiffs’ attorneys usually frame the business’s actions as deeply negligent, dangerous and preventable.
Juries are persuaded of the perceived risk that these businesses pose, and rule that the payouts should be punitive and expensive. These multimillion-dollar damages have the capacity to hollow out and bankrupt companies— eating through their insurance like tissue paper.
The issue isn’t necessarily that these businesses are found guilty. After all, the evidence and arguments prove that they were responsible for wrongdoing.
The issue lies in these payouts, which can destroy smaller businesses that may be vital to the local economy. These payouts also dig deep into the pockets of insurance companies: insurance provides an important safety net for services in society, and eroding it with nuclear verdicts can do long-term damage.
Ultimately, how should businesses protect themselves from these verdicts? Prevention is one of the best steps they can take. They should meet compliance standards, but going the extra mile for safety can help.
• 59% of a survey’s respondents did not know that third parties (e.g., hedge funds or foreign entities) secretly finance litigation in exchange for a part of the jury award or settlement.
2. The “billboard effect ”: Attorneys who spend billions of dollars annually on advertising that hints at big gains for policyholders who retain their services.
• 89% of a survey’s respondents had heard or seen lawyers’ advertising (TV, billboards, social media, radio or on the web).
3. Attorney contingency fees: Policyholders receive smaller portions of a settlement/ judgement as attorneys receive more.
• 47% of a survey’s respondents didn’t know that plaintiffs’ lawyers keep a large stake of the jury award or settlement.
4. Eroding caps on damages:
• According to the U.S. Chamber Institute for Legal Reform: Jury awards and settlements have increased 27.5% between 2010-19.
In 2023, insurers paid out more than $1.10 for every $1 in premium they collected (on average ). When insurance companies need to pay more in jury awards or settlements, they need to raise premium rates to compensate for the losses.
Increased costs for everyone: Average yearly “tort tax” is $3,621 per U.S. household.
Terms to know:
Legal system abuse is when policyholders or plaintiff attorneys take actions that increase the costs and time to settle insurance claims.
Its negative impact on the insurance industry includes:
•An increase in insurance premiums
•Financial strain on insurers and reinsurers
•Weakening of municipal resources
•Lessens the likelihood of insurers that are willing to write harder-to-place business
A glance at damage caps: personal injury
In recent years, juries seem more willing to award higher settlements to plaintiffs, so it’s important to know how your state handles settlements:
States vs. Damages:
In Connecticut, New Hampshire, New Jersey, New York and Vermont, there is no cap on Compensatory Damages.
In Connecticut, New York and Vermont, there is no cap on Punitive Damages.
New Hampshire Punitive Damages are unavailable per statute.
In New Jersey the cap for Punitive Damages is five times the Compensatory Damages or $350,000 (whichever is greater)—except in certain cases (e.g., drunk driving).
Social inflation is how insurers’ claims costs can rise above general economic inflation, and it also includes the shifts in societal preferences over who is best placed to absorb risk. It drives higher insurer claim payouts and loss ratios.
Insurance policies most affected by social inflation:
• Commercial auto
• Medical malpractice
• Directors & officers
• Umbrella
• Excess liability
For example, trucking firms have seen verdicts of $30 million, $50 million or even $100 million.
Tort tax is a figure derived by analyzing insurance data used to estimate the cost of the U.S. tort system.
Compensatory damages:
Sum awarded to plaintiffs to compensate them for losses caused by another party’s actions.
Punitive damages:
Additional sum awarded to plaintiffs in civil lawsuits to punish the defendants for their actions. These damages are awarded when a defendant’s actions are considered to be particularly harmful. Also known as pain-and-suffering damages.
How to avoid cross-liability lawsuits between your insureds
Dan Corbin, director of research, PIA Northeast
Typically, liability insurance policies cover more than one person or entity—there are named insureds, automatically defined insureds and additional insureds. So, it is possible for a policy to indemnify one insured who sues another insured covered by the same policy. Sometimes this makes sense. However, it can be reasonable to be concerned about collusion between insureds—particularly when they are family members. If a person successfully sues a family member, the benefit will likely accrue to both insureds at the expense of the insurer. For this reason, it is taboo to cover cross-liability lawsuits between family members in most personal-lines policies (with a few exceptions). Let’s look at how cross-liability lawsuits can be prevented.
A situation can arise when two related companies are insured under the same policy, and a products liability lawsuit is brought by one company against the other. These intercompany lawsuits are covered by the unendorsed ISO commercial general liability policy. If the companies do not want the coverage, then the Exclusion–Intercompany Products Suits (CG 21 41) endorsement may be added. This may be in the best interest of the family of entities insured on the policy, since using this endorsement will lower the premium by eliminating the intercompany receipts from the rating basis. ISO offers additional exclusion endorsements to prohibit lawsuits between any named insured against another named insured (e.g., commercial general, underground storage tank, owners and contractors protective, pollution, railroad protective, electronic data and liquor).
Coverage for cross-liability lawsuits among commercial insureds can be impacted by several provisions. In the context of the ISO CGL policy, certain provisions indicate that coverage is not prohibited and, in fact, is affirmed. In Item 7, Separation of Insureds of Section IV–Commercial General Liability Conditions, the policy is applied so all insureds enjoy the same coverage they would have had if a separate policy had been issued for each insured (except with respect to the limits). In the absence of other policy provisions, this condition opens the coverage door to all cross-liability lawsuits between insureds.
Who is an insured
Although employees are defined insureds covered for acts within the scope of their employment according to Section II–Who Is An Insured, their status as insureds is qualified when it involves bodily injury or personal injury to the named insured, principals (executive officers, partners or
members) of the named insured and co-employees. This restriction precludes coverage when one employee sues another employee or when a corporation or its executive officer sues an employee. It further eliminates insured status for an employee when it involves loss to property owned, occupied, used, or in the care of the named insured, principals of the named insured, and any employee.
Consequently, the cross-liability door created by the separation-of-insureds condition does not swing open for lawsuits against an employee that are brought by other employees, principals or the named insured. However, there is an exception. The restrictions in the preceding paragraph do not apply to an insured executive officer or an insured manager of a LLC when it involves bodily injury and personal injury lawsuits brought by the named insured, other officers or managers, members or employees. These principals enjoy a higher degree of protection than regular employees. Other insureds are defined in Section II–Who Is An Insured without cross-liability restrictions, which include a real-estate manager, a legal representative of a deceased named insured, and a newly acquired or newly formed organization (other than a joint venture or partnership). Permissive operators of mobile equipment used to be defined as insureds in this section. However, when vehicles requiring registration were removed from the definition of “mobile equipment” in the 2004 policy edition, this category of insured was removed. Permissive operators are only insureds if they are principals or employees of the business.
Employers’ liability exclusion
Since the named insured on a CGL policy is the employer, that makes the employer an insured. Nevertheless, the employers’ liability exclusion (e) of Coverage A–Bodily Injury and Property Damage Liability removes coverage for bodily injury lawsuits by employees against their employer. So, not only are employees restricted as insureds when sued by their employer, the door for cross-liability lawsuits is blocked in the other direction when employers are sued by employees. The workers’ compensation and employers’ liability policy would cover this type of lawsuit.
Includes copyrighted material of Insurance Services Office Inc., with its permission. Copyrighted, ISO, 2006.
This article is adapted from QS90499, found in the PIA QuickSource library. PIA Northeast members can read about volunteer workers, manuscript endorsements and additional insureds.
Brooks Insurance Agency is proud to support Professional Insurance Agents (PIA)
Since its founding in 1991, Brooks Insurance Agency has successfully serviced the standard markets and brokered distressed and complex lines of business. We are here to help agents find the coverage their clients need.
We represent 80+ quality carriers, including several new and exciting markets, across the country. Plus, a broad array of products and services in admitted and non-admitted markets.
MARKET STRENGTHS AND EXPERTISE
• Broad market reach
• High-touch broker specialists
• Easy, online quoting process
• Collective approach to complex insurance needs
Visit our website at www.brooks-ins.com.
Brooks Group Insurance Agency, LLC NJ License 1575143
BROOKS IS YOUR FULL-SERVICE WHOLESALER
How can we help you? Call us at 732.972.0600 or email us at info@brooks-ins.com
STAFFING
ALEX PISANI Chief legal officer, Engage PEO
Why HR legal compliance is critical for employers today
In 2025, small- and mid-sized businesses face a challenging task: maintaining compliance with complex employment laws while developing an engaged and productive workforce. The stakes have never been higher. The upside to compliance isn’t only about avoiding fines or lawsuits; it’s also about attracting and retaining top talent, creating an inclusive culture and fueling your agency’s growth. As the regulatory landscape shifts—particularly with the recent case that overturned the Chevron doctrine—it’s more critical than ever to stay informed.
A wake-up call for employers
Recently, the Supreme Court overturned the Chevron doctrine, a longstanding legal principle that required courts to follow federal agencies’ interpretation of laws that were ambiguous. This signals a major shift in how employment laws might be enforced, resulting in less tolerance for vague compliance. Additionally, courts may hold businesses more accountable for the courts’ interpretations of complex rules, which may conflict with traditional interpretations previously issued by federal agencies.
Accordingly, businesses that have been interpreting the law based on historical practices may find themselves exposed to potential noncompliance and legal challenges. Professional employer organizations play an essential role in helping business owners navigate these changes by providing expert guidance on how to adjust policies considering new rulings and interpretations and how to respond to employee complaints.
Growing complexity of employment laws
Our employment landscape is governed by more than 180 federal Department of Labor regulations—ranging from wage and hour laws, to antidiscrimination statutes. And, when you factor in state and local regulations, the complexity increases exponentially. Just consider that each state has its own Department of Labor and that remote workers may or
may not be governed by the laws in their state versus the state where the employer is located.
While this list is not exhaustive, these are the key categories of federal HR regulations every employer must understand:
Wage and hour laws. The Fair Labor Standards Act governs minimum wage, overtime pay and child-labor standards. Employers must ensure accurate tracking and payment of employee wages to avoid violations. Employers also are required to complete Form I-9 to verify the identity and employment authorization of anyone they hire in the U.S. Antidiscrimination laws. Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act protect employees from discrimination based on race, color, religion, sex, gender, sexual orientation, gender identity, national origin, age and disability.
Family and medical leave. The Family and Medical Leave Act allows employees to take job-protected unpaid leave for specific family and medical reasons. Missteps in administering these leaves can lead to costly legal actions.
Health and safety regulations. The Occupational Safety and Health Act mandates that employers provide safe and healthy working conditions. Violations can lead to severe penalties and operational shutdowns.
Employee benefits laws. The Affordable Care Act and the Employee Retirement Income Security Act regulate the health benefits and retirement plans that businesses offer. Compliance is vital for avoiding significant penalties.
With so many regulations to track and manage, partnering with a PEO provides vital support, ensuring compliance while enhancing the employee experience.
Compliance experts as business partners
Here are some examples of how a PEO helped different businesses in different industry sectors navigate federal regulations:
Wage and hour misclassifications. During the onboarding process and payroll audit, the PEO found that a midsized, multistate professional services client was misclassifying employees based on the job duties. Revising the job classifications to ensure compliance with FLSA standards saved the client over $100,000 in potential fines.
Disability accommodation. A midsized, multistate medical company wanted to terminate an employee with performance issues who requested an ADA accommodation. However, the client had not documented the performance issues properly. The PEO assisted with negotiating an amicable termination including severance, avoiding an Equal Employment Opportunity Commission claim and subsequent litigation. The client saved a minimum of $50,000, and as much as $200,000.
Discrimination complaint. An employee filed a race discrimination complaint at a manufacturing company. The PEO conducted an investigation and concluded that discrimination had occurred. The manager received coaching, but the manager continued the behavior. The PEO guided the client through the termination process for the manager, resolving the issue to the employee’s satisfaction. No EEOC charge was filed, saving the client tens and possibly hundreds of thousands of dollars in damages.
Build a thriving workforce
While the risks of noncompliance— fines, lawsuits and reputational damage—are significant, the benefits of focusing on compliance are equally impactful. When businesses prioritize legal compliance, they also foster a workplace in which employees feel valued and respected.
While the risks of noncompliance —fines, lawsuits and reputational damage—are significant, the benefits of focusing on compliance are equally impactful.
Attracting top talent. In today’s competitive job market, candidates are looking for more than just a paycheck. They want to work for businesses that align with their values and treat employees fairly. A commitment to legal compliance—especially in areas like equal pay, diversity and inclusion—can make your agency stand out from the competition.
Improving
employee engagement. Employees who believe their employer is committed to following the law—particularly in areas like workplace safety, family leave and discrimination—are more likely to be engaged and loyal.
This, in turn, boosts productivity and reduces turnover.
Cultivating an inclusive culture. Compliance with antidiscrimination and ADA laws fosters an inclusive work environment. Inclusive companies attract a broader pool of talent and are more likely to retain diverse employees, fueling innovation and growth.
Stay proactive with HR compliance at your agency
Staying on top of HR legal compliance is crucial for safeguarding a business and building a thriving workforce. The recent changes in the legal landscape, like the overturning of the Chevron doctrine, remind us that complacency is not an option.
Pisani is responsible for legal affairs and strategic business partnerships, including corporate compliance, business development, mergers and acquisitions, and the oversight of human resource services for Engage clients. Prior to joining Engage’s executive team, he held numerous executive roles in the HR outsourcing and PEO industries, managing legal, operational and business divisions. He has counseled clients across industries on compliance, mergers & acquisitions, commercial litigation, and state unemployment tax planning. Pisani earned a Bachelor of Arts from Wesleyan University and a Juris Doctor from the Benjamin N. Cardozo School of Law at Yeshiva University. Currently, he serves on the board of directors of the Florida Association of PEOs.
When a client makes an E&O allegation against an agency
If an agency client had a claim denied by his or her carrier, or for which there were not enough limits to cover the loss, the client may decide to contact your agency and allege that he or she either had the wrong coverage, or that the coverage in place had insufficient limits. If this occurs, there are several things that you need to do, and practices that you should avoid, to ensure that you do not compromise your errors-and-omissions coverage.
What you should do
The steps to take to ensure that you do not compromise your E&O coverage are:
Timely reporting of incidents and claims. Incidents are facts that are made known to you that may result in an E&O claim. An E&O claim is a demand for money or services. To preserve your coverage, it is important that you notify your E&O carrier if there is an incident or claim.
A subpoena for a client’s file should be reported to your E&O carrier. A subpoena for a client’s file is a fact-finding endeavor. Not all such subpoenas result in an E&O claim being pursued, but having legal counsel review the request to ensure that the response is appropriate may prevent additional issues from arising. Subpoenas for client files may be covered by your E&O policy, and defense counsel may be assigned to assist you in the response, if necessary.
When asked, advise your client that the issue has been reported to your carrier. You should not discuss issues pertaining to an open claim with the claimant. You should continue speaking with this client about other insurance matters, and you should provide him or her with the same service you would if there was not a claim.
What you shouldn’t do
The things you should never do when a client makes an allegation of an error or omission concerning, or tenders a claim to, your agency include the following:
Never make any admissions. This includes apologies, which may be construed as an admission. Admissions may be used against you if the matter is litigated. Simply state that you will take the client’s information and report the matter to your E&O carrier for review.
Never make a payment to a client on a claim prior to discussing the matter with your E&O carrier. Making payments—yet another form of admission—may cause you issues if the client intends to pursue you despite the payment and may have serious repercussions under your E&O policy as a breach of policy conditions. If you get a demand for money or services from your client or a third party, report it to your E&O carrier’s claim department immediately so
The potential for claims to escalate is great, and the time it takes to report a claim and discuss the facts with a claim specialist is insignificant when compared to the time and expense of a litigated E&O claim.
the E&O claim specialists can review the matter and provide you with the appropriate assistance.
Never attempt to fix the issue. Similar to making payments, providing services or advice to attempt to fix the issue—without first speaking to an E&O claim specialist—may result in exacer-
bating the situation. Submit the claim or incident, and discuss it with an E&O claim specialist before proceeding.
Do not delay on reporting the matter to your E&O carrier. Failure to report a claim in a timely manner may result in a disclaimer of coverage.
Don’t delay
Do not jeopardize your E&O coverage because you think a claim will be within your deductible or you believe the hassle of reporting the claim will not be worth the effort.
The potential for claims to escalate is great, and the time it takes to report a claim and discuss the facts with a claim specialist is insignificant when compared to the time and expense of a litigated E&O claim.
BRADFORD J. LACHUT, ESQ. Director of government & industry affairs, PIA Northeast
DRAGONS, COURTROOMS & BIG CHANGES AHEAD
The year of the noncompete agreements
According to the Chinese lunisolar calendar, 2024 is the Year of the Dragon—a symbol of power, strength and transformation. However, for those who follow a different kind of calendar—one based on laws, regulations and landmark court cases—2024 stands out as the Year of the Noncompete Agreements. Now, you might be thinking: “This person must be quite a legal nerd,” or perhaps: “Something major must have happened with noncompete agreements.” If you had either thought, you’d be absolutely correct.
For legal enthusiasts like me, 2024 was a pivotal year. It marked a dramatic shift in the regulatory and judicial landscape regarding noncompete agreements—a year when the federal government made its boldest move yet to reshape how these agreements are used across the country. At the same time, the U.S. Supreme Court delivered a landmark ruling that drastically limited the authority of federal agencies to implement sweeping changes—effectively dismantling one of the government’s most powerful tools for systemic reform. These two forces collided in a fascinating (or nerdy) struggle that has left both businesses and workers across America grappling with new realities and uncertainties.
This year wasn’t just about legal paperwork; it was about fundamental changes to how employment contracts are governed, who holds the power to regulate them, and what rights workers have in the face of restrictive covenants. It was a year that saw the ambitious reach of federal authority pushed back, even as efforts to protect employee mobility reached an all-time high. Whether you’re an employer, an employee, or just a curious observer, understanding the events of 2024 is crucial—because the implications of these changes are far-reaching, and they could alter the way we think about employment relationships for years to come.
The basics: What are noncompete agreements?
Before diving into the recent regulatory changes, it’s important to understand what noncompete agreements entail. An NCA is a type of restrictive covenant, a legal tool that limits what one or both parties can do under a contract (For more information on restrictive covenants, see What is a restrictive covenant; why do I care? on PIA Northeast News & Media— blog.pia.org). Restrictive covenants are used in a variety of contracts—from real estate deals to employment agreements—but the focus here is on their use in employment.
In an employment context, an NCA typically restricts an employee from working for competitors or starting a similar business for a specific period and in a specific area after leaving a job.
A century of control: The history and purpose of noncompete agreements
Noncompete agreements have been utilized by employers for centuries. Their original purpose was to prevent highly skilled or key employees from moving to a competitor or launching a competing business in the same geographic area—think preventing executives with deep knowledge of company secrets from leaving for competitors and taking those secrets with them. In recent years, the landscape has shifted, and NCAs often are included in contracts for lower-wage jobs (e.g., those in fast food or personal services).
Employers must be vigilant about the evolving legal landscape ...
This overreach has led lawmakers and courts to question the fairness of NCAs. States began addressing these concerns individually, resulting in a patchwork of slow, incremental changes made through state laws and court decisions.
FTC’s bold move: The nationwide ban
The growing atmosphere of reform led the federal government to propose a single solution for all workers. This effort culminated in a sweeping rule finalized by the FTC in early 2024. The FTC’s approach was more comprehensive and aggressive than any state or court initiative to date—and this was intentional. In justifying the rule, the FTC stated: [T]he purpose of this rulemaking is to address conduct that harms fair competition. Concern about noncompetes dates back centuries, and the evidence of harms has increased substantially in recent years. However, the existing case-by-case and state-by-state approaches to noncompetes have proven insufficient to address the tendency of noncompetes to harm competitive conditions in labor, product, and service markets. The FTC proposed prohibiting noncompetes in any form— whether written, oral or embedded in company policies— across the nation, with limited exceptions. Under the proposed rule, the term “worker” was broadly defined, covering employees, independent contractors, interns, volunteers and more, without exceptions based on employer size or compensation levels.
However, the FTC clarified that the rule would not impact other types of less restrictive covenants that protect trade secrets, such as nonsolicitation or nondisclosure agreements. Businesses still could use these tools to safeguard proprietary information. The rule also allowed for an important exception: NCAs related to the bona fide sale of a business. This means that noncompete clauses still could be used in cases like buying or selling an insurance agency.
Court challenges: The fight begins
As predictable as the sunrise, a regulation as comprehensive as the FTC’s noncompete ban faced immediate legal challenges. One of the most significant cases was Ryan LLC v. Federal Trade Commission, heard in the United States District Court
for the Northern District of Texas. The central question was whether the FTC had the authority under the Federal Trade Commission Act to implement such a sweeping regulation. Ryan LLC, along with several business groups, argued that the FTC had overstepped its authority. The FTC countered that issuing the noncompete ban was within its jurisdiction to prevent unfair competitive practices. Ultimately, the court sided with Ryan, concluding that the FTC did not have the necessary rulemaking authority to enact such an extensive regulation without clear approval from Congress. The court also criticized the FTC’s justification of the rule, calling it “arbitrary and capricious.” It argued that the FTC relied on inconsistent evidence and failed to adequately consider less restrictive alternatives that could have met similar objectives without enforcing a nationwide prohibition.
The Chevron detour: A critical twist
While the FTC is likely to appeal the district court’s decision, there’s a larger challenge at play. In the summer of 2024, the United States Supreme Court delivered a significant ruling that affects cases like Ryan LLC v. FTC, where agency regulations are challenged for being overbroad. The court overturned the landmark case Chevron U.S.A. Inc. v. Natural
Resources Defense Council Inc., effectively ending the Chevron deference, which gave federal agencies considerable leeway in interpreting ambiguous statutes.
In place of Chevron, the court reinstated the Skidmore deference, meaning courts are now less likely to defer to agencies’ interpretations of their statutory authority. This shift is almost certainly a death knell for the FTC’s proposed noncompete ban, as it significantly limits the FTC’s ability to unilaterally implement broad regulatory changes.
Where do we go from here?
The demise of both the FTC’s noncompete ban and the Chevron deference indicates that sweeping, nationwide changes to noncompete laws are unlikely. However, that doesn’t mean change isn’t coming. The movement to limit noncompetes predates the FTC’s efforts, and it’s likely that reform will continue—albeit in a gradual, piecemeal fashion, as individual states take up the issue.
A patchwork of state regulations
With regulation of NCAs falling back to the states, the rules and restrictions vary significantly depending on where an employer and employee are located:
TRAVEL AGENTS AND TOUR OPERATORS
• Brokers - No minimum premium volume requirements to place business in this program
Partner with Aon Today!
45+ years serving the travel industry
• Recognized industry partner with top national travel associations
• Custom policy specifically designed for the travel industry
Includes:
• Travel Agents and Travel Agencies
• Standard Tour Operators
• Student Tour Operators
• Adventure Tour Operators
• Receptive Tour Operators
• Destination Management Companies
• Meeting Planners (Corporate)
• Worldwide Territory
• General Liability
• Errors & Omissions
• Non-owned & Hired Auto
• Personal Injury
• Industry specific endorsements
Enforcement-friendly states. States like Tennessee, Texas and Florida are more likely to uphold noncompete agreements if they serve a legitimate business interest. In fact, Florida has a law that enshrines the enforceability of noncompetes.1 Employers still must adhere to reasonable standards of duration and geographic scope; but courts in these employer-friendly states often consider noncompete agreements reasonable if they last no longer than two years, and they have geographic scopes blocking off large regions of the state.
Restrictive states. On the other end of the spectrum, states like California essentially have banned noncompetes, favoring employee mobility and entrepreneurship. Oregon and Washington have restricted the use of noncompetes—particularly for lower-wage workers—and they have reduced the allowed duration.
NCA: Northeast. In the PIA Northeast footprint, only New Hampshire has successfully addressed this issue legislatively. The Granite State prohibits the use of noncompete agreements for low-wage employees—defined as those making an hourly rate less than or equal to 200% of the federal minimum wage.2 However, they are otherwise permitted in the state. State Legislatures in Connecticut, New Jersey, New York and Vermont have each considered noncompete legislation, but they have yet to implement comprehensive changes. When these states act, it is likely that their noncompete agreement measures will fall somewhere in-between the examples illustrated in this article. The most recent legislation considered in Connecticut, New Jersey and Vermont prohibited noncompete agreements for low-wage employees, but permitted them for high-wage earners, albeit with often significant limitations. New York state passed a near-total noncompete agreement ban in 2023, which ultimately was vetoed by Gov. Kathy Hochul. However, the governor did indicate that she may consider more limited legislation that would permit them for higher-wage workers.
Using NCAs the responsible way
Without a national standard, employers must navigate a complex patchwork of state laws and regulations. It’s crucial for businesses to stay updated on both state and federal developments while reassessing how to protect their interests without relying on restrictive covenants that might not hold up in court.
Given the current scrutiny, employers should ensure NCAs are narrowly tailored, with limited duration and scope. Ideally, NCAs should apply for less than one year and only in regions where the employer has a significant business
presence. This approach will improve their chances of surviving judicial scrutiny.
A common judicial practice
Courts often adjust the terms of noncompete agreements—a practice known as blue penciling. Rather than invalidating an overly restrictive noncompete, a court might modify its terms. For example, if a two-year noncompete agreement is deemed excessive, a judge may shorten it to a more reasonable six months. Employers should anticipate such outcomes and draft agreements accordingly.
Alternative paths: Nonsolicitation and confidentiality agreements
Given the uncertainty surrounding noncompete agreements, a safer approach for employers is to use alternatives such as nonsolicitation and confidentiality agreements. These covenants prevent former employees from soliciting clients or disclosing sensitive information, without restricting employment opportunities—making them more enforceable in many jurisdictions.
Familiar, but uncharted territory
The FTC’s recent actions have reignited the debate about the fairness and utility of restrictive covenants in employment contracts. While the proposed nationwide ban was set aside, the conversation has undeniably shifted. Both employers and employees now are reassessing the role these clauses should play in a fair and competitive labor market.
State regulations will continue to determine the enforceability of noncompetes, leading to significant variability based on location. Employers must be vigilant about the evolving legal landscape and reconsider their reliance on noncompetes. Alternatives like nonsolicitation clauses are likely to take center stage—offering a balance between protecting business interests and respecting employee mobility.
Moving forward, employers will need to draft clearer and more reasonable restrictions, and employees should educate themselves about their rights to ensure a fair balance between career opportunities and legitimate business protections.
Lachut is PIA Northeast’s director of government & industry affairs.
1 Fla. Stat. Section 542.335 (2024)
2 NH Rev Stat Section 275:70-a (2022)
An office with remote workers An office with remote workers
Counter the
Since 2020 and the shutdown caused by COVID-19, there has been a significant rise of employees at insurance agencies and brokerages who seek to work remotely. This movement has transformed the traditional insurance workplace significantly, and this requires owners to offer flexibility and convenience for employees.
However, as businesses embrace this model, it’s crucial to address the potential pitfalls associated with remote work. Understanding these challenges can help you create strategies to mitigate risks and foster a productive, cohesive work environment.
Communication barriers
One of the most significant challenges in a remote work environment is effective communication between producers, account executives and customer services representatives. In-person interactions between these key employees allow for immediate feedback and nonverbal cues that can enhance understanding. When employees are dispersed, miscommunication can become more common, leading to misunderstandings and project delays. Tools like email and virtual meeting platforms, while helpful, often lack the nuance of face-to-face conversations and immediate
pitfalls of a virtual workspace
response, which can lead to frustration among team members and the missing of key issues needed to be addressed for placing or servicing policies for customers. Moreover, these miscommunications, misunderstandings and projects delays can lead to potential errors and omissions—including, but not limited to, what needs to be included in an insured’s policy and getting the policy or endorsement in place in a timely manner.
To combat this issue, you should establish clear communication protocols between all levels of employees. Regularly scheduled video meetings, team check-ins, and collaborative platforms will help ensure that everyone is on the same page. Encouraging an open communication culture in which employees feel comfortable asking questions also can bridge gaps and clarify misunderstandings. Also, documentation becomes more crucial, and this documentation must be clear and concise on what is expected between the employees. Finally, someone on the team—most likely the account executive—must be tasked with confirming timelines and ensuring that they are met. It’s important to have a strong policy and endorsement checklist process to avoid potential E&O exposures that can happen in these remote work settings.
CHRISTOPHER B. WELDON, ESQ. Partner, Winget, Spadafora & Schwartzberg LLP
Isolation and loneliness
Remote work, while offering flexibility, can lead to feelings of isolation and loneliness. Employees who work from home may miss out on the social interactions that occur naturally in an office setting. The loneliness and isolation can affect in-office employees as there are fewer employees in the space. This lack of camaraderie can impact mental health and job satisfaction negatively, leading to decreased productivity and increased turnover rates.
To counteract feelings of isolation, you can facilitate virtual social events, create opportunities for informal interactions, and promote team-building activities. You should mandate that employees come into the office from one to three days a week and at a time when most other employees are in the office. Additionally, encouraging employees to take breaks and engage in social activities outside of work can help foster a sense of community and support, like events in which all levels of employees can volunteer together to provide a social impact for the good of the community.
Difficulty in maintaining work-life balance
One of the appealing aspects of remote work is the ability to integrate work and personal life. However, this also can blur the boundaries between the two, leading to overwork, burnout or lack of productivity. Without a clear separation between work hours and personal time, employees may find themselves working longer hours, struggling to disconnect from their tasks or failing to meet the expected workload. Overworked employees may make mistakes that may lead to errors and omissions.
You may help by promoting a culture that values worklife balance. This may include setting clear expectations around working hours, encouraging employees to unplug after hours, and promoting flexible schedules that allow for personal time. Regular check-ins to discuss workload and stress levels can help identify those at risk of burnout. You may need to require set working hours and breaks to help your employees meet expected goals. This may require a heavy hand and regular checks to verify that employees are at their remote desk when scheduled to be there. You also may need to set strict timelines for completed assignments. This heavy hand may provide assurance that these deadlines are not being missed, which can help to avoid errors and omissions.
Technology dependence
The remote work model relies on technology. While this can enhance productivity, it also introduces potential pitfalls.
Encouraging crossfunctional projects and fostering an inclusive environment can help strengthen connections among team members and clients, regardless of their physical location.
Technical issues, software malfunctions, hardware problems and cyber security threats can disrupt work and create frustration. Additionally, not all employees have the same access to tools or a reliable internet connection, which can lead to disparities in employee performance. Different capabilities manifest different results. If employees are unable to communicate in real time, it could create a possible E&O situation. For example, if one employee is communicating on one platform, and another employee is expecting answers on another platform, it could result in a delay in an insurance policy being issued. Additionally, using various communication platforms can lead to a concern that all the information is not being gathered in a central location where the team can review it, and make uniform decisions on how it should be handled.
You must invest in robust IT support and provide employees with the necessary resources to perform their tasks efficiently. This may require that you require a certain level of internet capabilities before allowing an employee to become a remote worker. Regular training sessions on technology use and cybersecurity best practices can empower employees and minimize disruptions, as well. Protocols must be in place regarding how information is gathered in the central location—like the AMS. You also need to confirm the mode of communication that is used between the team members and the clients. This should allow you to make sure the provided information is collected in that central location to avoid missing information and opening the agency or brokerage to a potential E&O claim.
Challenges in performance management
Business owners are having difficulty in measuring employee performance in a remote environment. Traditional metrics may not translate well to a virtual setting, making it difficult for managers to assess productivity accurately. Additionally, the lack of physical presence may lead to a decrease in oversight, which can impact accountability and clearly lead to errors and omissions that would otherwise be caught when everyone is working in an office together.
To effectively manage performance, you must establish clear goals and metrics that are tailored to remote work, but that also meet the metrics that are set for in-office employees. Regular feedback sessions, performance reviews, and setting specific, measurable objectives will assist to maintain accountability and provide employees with a sense of direction. However, this sometimes requires that management spend more time evaluating the performance and metrics set for the remote employees. Lastly, it may require management to have mandatory days when all employees are in the office during the week or even during the month.
Reduced client cohesion
Building a strong team dynamic is essential for collaboration and innovation with your clients. In a remote setting, the absence of in-person interactions can hinder the development of relationships among team members and clients. This can lead to a lack of trust and cohesion, ultimately impacting team performance and meeting the expectations of the customer. It also can lead to things slipping through cracks and potential E&O claims. Often, the lack of face-toface contact with clients may lead to a client being more willing to go after the agency or brokerage for a simple error or omission that otherwise might have been fixed through simple face-to-face communication.
You can address this by prioritizing team-building activities and creating opportunities for collaboration with the whole team. Encouraging cross-functional projects and fostering an inclusive environment can help strengthen connections among team members, regardless of their physical location. Lastly, owners must require and encourage that the team and the clients meet in-person on a periodic basis as the largest asset the agency or brokerage has is its clients. Faceto-face communication between you and your clients has been proven to create loyalty and a willingness to forgive the small errors or omissions—or at least allow for a chance to fix it before it turns into a lawsuit.
Insurance issues at the remote work location
You must be aware of the potential liabilities that remote workers pose to the agency or brokerage. There are liabilities that may arise at the remote worker’s location that are not covered under your liability policy. Also, it may be difficult to determine whether the remote worker was injured during his or her employment. In addition, you may need to purchase other state workers’ compensation and disability coverage for your remote workers who work out of state from where your office is located.
To avoid these issues, you must put in place protocols that require a safe working environment at the remote work location. You may want to require remote workers to purchase home business coverage on their homeowners policy and agree to indemnify and hold the agency and/or brokerage harmless from any liability that arises in the use of the remote worker’s location. You also need to confirm with your workers’ compensation carrier—and the laws of the state where the remote worker is located—as to whether you need other state coverage for workers’ compensation and disability coverages, and who will bear that extra cost.
Tax issues
You must be aware of the tax issues you face when your remote worker wants to work from a different state from the one in which your office is located. The question arises whether you need to withhold and pay taxes for the remote worker in the state where the remote worker resides and works, or whether you need to withhold and pay taxes for the remote worker in the state where your office is located.
The simple answer to this tax issue is that it depends. Multiple states follow the simple rule that you will withhold income taxes on the remote worker in the state where the remote worker lives.
However, there are states that follow the Convenience of the Employer Rule. Under the rule, a business will withhold and pay taxes for the remote worker to the state where it is located. Arkansas, Delaware, Nebraska, New York and Pennsylvania follow the rule. Connecticut follows the rule if the taxpayer’s state follows the rule, and New Jersey has followed the rule in the event of an audit.
Unlike states that follow the Convenience of the Employer Rule, New Hampshire and Vermont follow the rule that employees are to pay income taxes where they live and work regardless of their domicile. In fact, New Hampshire brought a lawsuit against Massachusetts to ask the U.S. Supreme Court to decide whether Massachusetts could apply the Convenience of the Employer Rule to the Granite State. The U.S. Supreme Court declined to hear the case, and now it is working through the state court—eventually to reach the U.S. Supreme Court again.
In the meantime, New Hampshire passed a statute in 2023 that the Convenience of the Employer Rule would not apply to employees living and working remotely in New Hampshire regardless of whether the employee is domiciled in New Hampshire. Thus, Vermont, New Hampshire and states that do not follow the Convenience of the Employer Rule may cause issues for agencies and brokerages with remote workers in those states, which could face possible double taxation of remote workers’ income.
The best advice for you to follow on this issue is to seek professional advice from your accountant and/or attorney, as running afoul of the tax rules of any one state could lead to double taxation for the agency, brokerage and/or remote worker.1
Conclusion
While remote work presents numerous advantages, it also comes with significant challenges that you must navigate
and address. By recognizing the pitfalls associated with this model, you can implement strategies to foster effective communication both among team members and with clients, promote mental well-being, ensure technological support, maintain team cohesion, shift risk exposure and withhold and pay taxes in the proper state.
Ultimately, a proactive approach to managing the challenges of remote work can lead to a more productive and engaged workforce, ready to thrive in the evolving landscape of remote work for your business.
Winget, Spadafora and Schwartzberg LLP concentrates its practice in representing insurance agents and brokers in all aspects of their business, including but not limited to, defense of E&O claims, E&O loss counsel and education, insurance coverage analysis and litigation, insurance regulatory matters, mergers & acquisitions and drafting of agency, brokerage and producer agreements. Reach Weldon at weldon.c@wssllp.com or by mail to the Main Office of Winget, Spadafora and Schwartzberg, LLP, at 45 Broadway, 32nd Floor, New York, NY 10006, or call (212) 652-2697. The law firm also maintains offices in Jersey City, N.J.; Stamford, Conn.; Boston, Ma.; Philadelphia, Penn.; Miami, Fla.; Houston, Texas; Boulder, Colo.; Chicago, Ill.; and Los Angles, Calif. Copyright 2024 Professional Insurance Association and Winget, Spadafora and Schwartzberg LLP
1 Where the remote worker is an independent contractor and not a W-2 employee, the agency and/or brokerage will report the independent contractor compensation on a 1099 basis in the state residence of the independent contractor.
JOHN CHAPIN President, Complete Selling
SALES
The unvarnished truth: How to be a great salesperson
When I talk about being great in sales, I’m not talking about hitting your sales quota. I’m talking about being the best of the best—and not for a month, or a quarter, or even a year. I’m talking about consistent sales results that would put you in the top 1–2% of most sales organizations over a span of years, and even decades. When you get to this level, you’ll know everything in this article is 100% true.
No easy path
Let me say that most of the information out there from sales gurus regarding what it takes to be successful in sales is wrong. Most of the so-called sales experts haven’t sold successfully and/or consistently over the years. If a guru tells you there’s an easy, stress-free, rejection-free way to sell, in which you don’t need to reach out to or call on anyone—but instead people come running to you in droves and practically beg you to buy—get a firm grip on your wallet, turn 180 degrees, and move as fast as possible away from that person. There are about six or seven people in the sales training world who speak the truth because:
1. they have been top sales reps, so they know what it takes;
2. they are interested in helping people instead of just making money by telling people what they want to hear versus what they need to hear; and
3. they aren’t concerned with what people think about the truths that they speak when it comes to sales. They are interested in making sure salespeople know the truth—even if it’s unpopular.
On this last note, they aren’t concerned with the number of likes they get on social media; in fact, they know that by telling the truth they’re more likely to get fewer likes and more negative comments. So, before you do any training with or take advice from sales gurus, find out what their real-world sales experience looks like.
What makes a top salesperson?
The truth is that sales at the highest levels is far from a 9-to-5 job. It’s not a stress-free, comfortable existence. It requires you to work hard, talk to strangers and face lots of rejection.
It is not hanging out in the same comfortable networking group where you’ve known everyone forever; spending countless hours on social media; hiding behind a bunch of cold, spam emails; or waiting for leads from marketing. It is being proactive and knocking on doors and ringing the phones … of strangers.
It is answering your phone early in the morning, late at night and on weekends. The same goes for emails and texts messages. It’s going above and beyond and delivering more than expected.
What else do the top 1–2% salespeople look like? It’s doing the things that no one else wants to do—that you don’t want to do either—but that you do because you know that’s the only way to the promised land. Biggest among this list is making cold calls, continuing to follow up with people beyond one, two or three tries, and roleplaying sales situations with peers.
It’s also showing up every day with a proactive action plan for exactly what needs to be done to hit your sales goals, and then getting that plan done every day. If you do miss a day, you need to make up for it tomorrow. It’s not allowing excuses, negatives and disempowering beliefs to stop you.
It’s having the right attitude, the perseverance and drive.
It’s being persistent. It’s having thick skin, and it’s being able to take lots of rejection while not taking it personally.
It’s having the same demeanor on the next call whether the last person you spoke to bought from you, or whether he or she swore at you and hung up—the latter of which happens rarely, by the way.
It’s confidence and conviction. It’s believing in yourself and your product. It’s being an effective communicator who is likeable and easy to get along with. It’s making friends easily and putting prospects at ease quickly.
Probably most important, it’s getting good at the basics, which starts by focusing on your most important activities (i.e., prospecting, presenting and closing) and spending the most time possible on those activities while delegating other tasks or doing them off hours. It’s not looking for the easy button, the shortcut—or the hack. It’s sticking
with the tried-and-true method that has worked: the hard work of making lots of calls, talking to strangers and facing rejection. It’s studying sales and continually working on sales skills. It’s learning exactly what to do and say in every sales situation, then committing that to memory.
Great skills are timeless
Understand that little has changed in sales in the past 100 years. Sure, there is better technology and other tools that can make aspects of the job easier, but when it comes to talking to people and selling, there is no new approach. The best salespeople have focused on the relationship and doing what’s right for the customer. They’ve always had—and continue to have—open, honest, direct conversations with prospects and customers. Sure, temporary success happens if people show little regard for the
customer and bombard someone with a product—but that kind of so-called success is short-lived.
Also, the top people are careful about how they use AI and other technology in their businesses. It’s good to use technology where you can—to simplify or off-load certain mundane tasks when human involvement is not necessary—but unless you’re selling a commodity, in volume, at the lowest price possible, it’s important to keep the aspects of selling in place where human involvement is a differentiator. For example, in the insurance industry, it’s important not to replace the trusted adviser with a chatbot on your website. Keep in mind that in any long-term sale, the relationship (i.e., the human connection), is still the trump card. The top salespeople know they are the key differentiator.
Don’t fail to be successful
When I see people failing in sales it’s almost always because they’re failing to do the work that they know they need to do to be successful.
On the flip side, sales success at the highest levels is both doing the work you need to do to be successful, and working harder, and doing more than everyone else. For the most part, it comes down to how badly you want to be great and how committed you are.
Chapin is a motivational sales speaker, coach and trainer. To have him speak at your next event, go to www.completeselling. com. He has over 37 years of sales experience as a No. 1 sales rep and he is the author of the 2010 sales book of the year: Sales Encyclopedia (Axiom Book Awards). Reach him at johnchapin@completeselling.com.
Have a question? Ask PIA at resourcecenter@pia.org
Requested cancellations, tree removals and more
Additional insureds and downstream contractors: Whose policy responds?
Q. Consider the following scenario: A general contractor is named as an additional insured on a subcontractor’s policy. The downstream (sub-sub) contractor has a cross-liability exclusion on his policy. If an employee of the downstream contractor gets injured and sues the general contractor, will the subcontractor’s policy respond in lieu of the downstream contractor’s policy? Does it matter whether the subcontractor also has a cross-liability exclusion on his policy?
A. The subcontractor’s policy will respond even if that policy has a cross-liability exclusion.
The typical additional insured endorsement (e.g., ISO CG 20 10; CG 20 33; CG 20 38) insures the additional insured: with respect to liability for “bodily injury,” “property damage” or “personal and advertising injury” caused, in whole or in part, by:
a. your acts or omissions; or
b. the acts or omissions of those acting on your behalf. If the downstream contractor is performing work on behalf of the subcontractor, the subcontractor’s policy will provide coverage for the general contractor as an additional insured.
In addition, this coverage will not be impaired by a cross-liability exclusion on the subcontractor’s policy. According to SECTION II–WHO IS AN INSURED of the subcontractor’s policy (e.g., ISO CG 00 01), only employees of the named insured (i.e., subcontractors) are defined as insureds, not the downstream contractor’s employees (or employees of any other employer). The cross-liability exclusion is applicable to lawsuits between insureds and the injured employee of the downstream contractor is not an insured.
Of course, there could be other exclusions on the subcontractor’s policy that preclude coverage when employees of downstream contractors are injured; such as an amendment to the e. Employer’s Liability exclusion.—Dan Corbin, CPCU, CIC, LUTC
Eligibility for HO-3; scheduled property
Q. Our client is a divorced woman who continues to live in a house owned by her ex-husband. Can we write an HO-3 policy for her?
A. The ISO rules do not permit you to write an HO-3 policy for someone who is not an owner/occupant—although there are exceptions for life estates, long-term contracts of sale and trusts.
However, she would be eligible for an HO-4 policy.—Helen K. Horn, CIC, CPIA, CISR
Insurance policy cancellation at policyholder’s request–effective date
Q. Is a company required to cancel a policy flat out when the policyholder presents evidence that another policy was obtained for the same risk, which became effective on the date the policyholder wants to cancel?
A. No—not unless there is a policy provision that states so. When an insurance policy is canceled at the behest of the policyholder, the provisions of the policy regarding cancellation govern the transaction.
Normally, an insurance contract provides that the policyholder may cancel an insurance policy by providing advance written notice or returning the policy. When this type of wording is present, the insurer is required to cancel the coverage when the policyholder takes this action. In other words, the contract requires advance notice to the insurer by
the policyholder that the policyholder is canceling it.
Unless specifically stated in the policy (and this would be highly unusual), there is no requirement that a company cancel the policy flat (i.e., backdate the cancellation to the policy’s effective date, effectively nullifying the contract). This is true whether the policyholder produces evidence of a duplicate policy covering the same risk.
As a matter of business practice, most companies do honor requests of this sort (for a limited period of time) when appropriate documentation is furnished showing a duplicate policy. However, they are not legally required to do so. Most policy cancellation provisions provide that it is the company’s prerogative to set the cancellation date on or after the date that it received writ-
ten notice of the policyholder’s decision to cancel.—Theo Alexander
Dwelling policy forms–tree removal provisions
Q. Can you tell me: Do the ISO dwelling policy forms (DP-1, DP-2 or DP-3) provide the same $500 additional coverage for tree removal as the ISO homeowners forms do?
A. No. Unlike the homeowners policy, the dwelling policy does not provide a separate additional coverage for the removal of trees. It covers the cost of tree removal only to the extent that the tree is “covered property” and for an amount included in the limit for the tree.
The tree is not “covered property” unless it is damaged by the limited perils enumerated in the policy, which do
not include windstorm. Even if the tree was damaged by a covered peril, the $500 limit for damage to any one tree includes the costs to remove it.—Dan Corbin, CPCU, CIC, LUTC
Workers’ compensation fines
Q. Can members of a limited liability company or officers of a corporation be held personally responsible for workers’ compensation fines when the employer has failed to comply with the insurance requirements?
A. Generally, principals of the employer entity will be held personally liable for uninsured workers’ compensation violations and penalties. This is true for Connecticut, New Hampshire, New Jersey, New York and Vermont.—Dan Corbin, CPCU, CIC, LUTC
Design+Print
&
12 Agricultural Insurance Management Services
19 AON Affinity Travel Practice
BC Applied Underwriters
7 JENCAP
14-15 Omaha National
26 PIA 401(k)
28 PIA Design & Print
31 PIA E&O Insurance
29 PIA Members’ Choice
30 PIA Northeast Advertising
2 PIA NumberONE Comp Program
13 The Premins Company
8 Venbrook Group
email ads@pia.org, or call (800) 424-4244
Scan to learn more and get a quote.
is here to help you navigate through uncertain times, so let’s make sure you have great errors-and-omissions coverage at a competitive price.
• Our professional liability and cyber liability programs are designed for your agency’s needs and risk exposures
• Critical coverage options—especially important when many agents are working remotely
