What We Hear on the Street: The cost & risk of basic business decisions is rising—Are you ready to counter?

What We Hear on the Street: The cost & risk of basic business decisions is rising—Are you ready to counter?Last week I met with an insurance broker to finalize details of a commercial real estate liability insurance policy. While we were talking about the business climate in general, he told me that he had recently experienced a series of claims from employees of his clients unlike anything he had ever seen before. During the last six weeks he had seen two claims where former employees were asking a court or government commission for damages for an “unwarranted” or “improper” discharge and another by a current employee for the maintenance of a “harassing” workplace environment. In all cases the claimants were asking over $10,000 in damages.

In the two discharge complaints, it was believed both employees (from different companies) had been discharged in an appropriate manner (within company policy and known employment guidelines) because of a diminution of work. They sounded like routine downsizing actions.

In the other case, a current employee was claiming that the company had created an environment where the employee could not effectively do the job. Consequently, the employee was claiming financial damages.

We all know that these types of claims can be filed with little or no merit, but will routinely be settled by some insurance carriers to get them off the books. Further in this economic environment, employees (both current and former) are looking for ways to generate additional income—and the court, a hearing agency or insurance company can be seen to be a soft touch.

Are you ready to avoid or face these type problems? We recommend two actions for you to take—

  • Make sure your human resources (and labor) professionals create the cleanest discharge procedure and process possible—audit it yourself if in doubt.
  • Contact your risk-management advisor or manager and be sure that—if something does go wrong—your firm has appropriate and adequate insurance coverage for either real or contrived claims.

But, do not misread my above comments. Run your business as it needs to be run to increase its value, and do not spend your valuable time trying to avoid risk. Just exercise a bit of due caution and preparation—and manage your risk. There is a big difference.

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