The National Law Review is pleased to bring you information about the upcoming ABA Winter CLE Institutes:
ABA National Institutes
Learn and network at these live in-person seminars that draw lawyers from across the nation. January National Institutes include the 2013 E-Discovery and Information Governance, January 23-25 in Tampa, FL. February National Institutes include the 2013 Gaming Law Minefield, February 14-15 in Las Vegas, NV.
The National Law Review recently published an article by Ari G. Burd of Giordano, Halleran & Ciesla, P.C., Posting By Employer Regarding Pending Legal Action Can Violate CEPA:
In Flecker v Statue Cruises, LLC, the plaintiff filed an action against his employer alleging violations of the New Jersey Wage and Hour Law. In response, the employer posted a memorandum directed to all employees informing them of the suit. The memo specifically identified plaintiff as the party responsible for filing the suit and advised employees that as a result, no employees would be scheduled for overtime. Immediately thereafter, plaintiff was confronted, threatened and harassed by coworkers. Eventually the harassment became so great that plaintiff resigned. Plaintiff then filed a claim of retaliation under the Conscientious Employee Protection Act (CEPA), New Jersey’s whistle-blower statute.
The trial court entered summary judgment in favor of the employer and the case was dismissed. However, on November 14, 2012, the Appellate Division reversed this ruling and reinstated the case, noting there was sufficient evidence for a reasonable jury to conclude that the employer knew or should have known its memorandum would incite the plaintiff’s co-workers and that such action could ultimately force the plaintiff to resign. This is yet another example to show that CEPA is far-reaching, and protects workers from a wide assortment of retaliatory conduct far greater than mere discharge, suspension or demotion.
The National Law Review is pleased to bring you information about the upcoming Global Financial Markets – Operational and Technical Changes for FACTA Compliance:
FATCA is amongst the biggest topics of debate in financial institutions across the globe. The effect that it will have on these institutions cannot be underestimated and its operational impact on the existing systems is set to be both time consuming and costly. The ability to successfully align all key stakeholders, including operations, technology, risk, legal and tax, will determine the ultimate cost of FATCA compliance. Moving on from mere interpretive matters, this GFMI conference will not only address key FATCA requirements but also discuss the practical impacts of IGAs and strategies for achieving operational and infrastructural efficiency.
The Operational and Technical Changes for FATCA Compliance Conference will be a two and half day, industry focused event, specific to Senior Executives working in Banks, Insurance and Asset Management Companies. Attendees will address key FATCA requirements, while discussing the practical implications of IGAs and strategies for achieving operational and infrastructural efficiency.
Key Themes of the Operational and Technical Changes for FATCA Compliance Conference Include:
1. Challenges of FATCA regulations and prospects for the final regulation
2. Achieving operational and infrastructural efficiency
3. Coordinating existing AML/KYC procedures with FATCA compliance
4. FATCA from the FFI’s perspective 5. Beyond banking: the challenges of FATCA implementation
6. Coping with the withholding obligation under FATCA
This is not a trade show; our conference series is targeted at a focused group of senior level executives to maintain an intimate atmosphere for the delegates and speakers. Since we are not a vendor driven conference, the higher level focus allows delegates to network with their industry peers.
The National Law Review recently published an article, Congress Continues to Examine Data Brokers’ Practices, written by Michelle Cohen of Ifrah Law:
The chairmen of the Congressional Bipartisan Privacy Caucus just released the responses they received from nine major data brokers whom they queried in July about how each broker collects, assembles and sells consumer information to third parties. In their responses, the nine companies — Acxiom, Epsilon, Equifax, Experian, Harte-Hanks, Intelius, Fair Isaac, Merkle and Meredith Corp. – generally asserted that they were not data brokers. Some companies claimed they analyze data rather than broker it. Copies of the brokers’ responses and the original letters can be found here.
Interestingly, several of the brokers acknowledged obtaining their data from social networks such as LinkedIn and Facebook, in addition to telephone directories, government agencies, and financial institutions.
The legislators issued a joint statement in which they noted shortcomings in the brokers’ answers, stating that “many questions about how these data brokers operate have been left unanswered, particularly how they analyze personal information to categorize and rate consumers.”
Members of Congress have indicated that they will continue to scrutinize the data brokerage industry. Issues of particular concern for the legislators include: the sale of personal information to third parties for targeted advertising, the gathering and selling of information relating to children and teenagers, and the lack of transparency in data brokers’ practices and available information. The Privacy Caucus has expressed concern that many Americans do not know how the industry operates and that controls may be lacking for individuals over their own information.
The FTC has already called on Congress to address data brokers’ practices through legislation. In March, the FTC advocated for legislation to “address the invisibility of, and consumers’ lack of control over, data brokers’ collection and use of consumer information.” We anticipate continued review of data brokers by Congress and federal agencies including the FTC. Companies in the data compilation business should continue to monitor ongoing proceedings.
It should be noted, however, that not all companies that gather personal information actually “broker” it in a manner that raises concern. Some companies compile information and remove identifying data before providing it to third parties; other companies gather information under contract for a business with whom a consumer has an existing business relationship – as a means to promote better customer service by tailoring offerings that will be of interest to consumers generally or to a particular consumer. Many consumers have indicated a willingness to receive these types of tailored offerings.
© 2012 Ifrah PLLC
The National Law Review is pleased to bring you information about the upcoming Law Firm Marketing Boot Camp:
Have you ever gone to a seminar that left you feeling motivated, but you walked out with little more than a good feeling? Or taken a workshop that was great on style, but short on substance?
Ever been to an event that was nothing more than a “pitch fest” that left a bad taste in your mouth? We know exactly how you feel. We have all been to those kinds of events and we hate all those things too. Let me tell you right up front this is not a “pitch fest” where speaker after speaker gets up only trying to sell you something.
We have designed this 2 day intensive workshop to be content rich, loaded with practical content.
We are so confident you will love the Rainmaker Retreat that we offer a 100% unconditional money-back guarantee! At the end of the first day of the Rainmaker Retreat if you don’t believe you have already received your money’s worth, simply tell one of the staff, return your 70-page workbook and the CD set you received and we will issue you a 100% refund.
We understand making the decision to attend an intensive 2-day workshop is a tough decision. Not only do you have to take a day off work (all Rainmaker Retreats are offered only on a Friday-Saturday), but in many cases you have to travel to the event. As a business owner you want to be sure this is a worthwhile investment of your time and money.
Partners at Small Law Firms (less than 25 attorneys) Solo Practitioners and Of Counsel attorneys who are committed to growing their firm. Benefits you will receive:
Solo practitioners who need to find more clients fast on a shoe-string budget. In addition to all the above benefits, solo attorneys will receive these massive benefits:
Law Firm Business Managers and Internal Legal Marketing Staff who are either responsible for marketing the law firm or manage the team who handles the law firm’s marketing. In addition to all the above benefits, Law Firm Business Managers and Internal Legal Marketing Staff will also receive these benefits:
Of Counsel Attorneys who are paid on an “eat what you kill” basis. In addition to all the above benefits, Of Counsel attorneys will also receive these benefits:
Associates who are either looking to grow their book of new clients in the next 6-12 months or want to launch their own private practice. In addition to all the above benefits, Associates will also receive these benefits:
With winter closing in, the possibility of bad weather brings potential attendance issues to the forefront of our minds. Icy roads and snow storms in Kentucky often cause delays and closings of not only schools but also businesses. Of course safety is the primary concern for everyone in extreme weather conditions, but employers must think beyond the logistics of employees getting to work or staying home. Absences due to bad weather impact the productivity of a business, and raise questions regarding the calculation of pay and how an employee’s time should be tracked. These issues are further complicated when dealing with a mix of exempt and non-exempt employees; however the U.S. Department of Labor (DOL) does offer some guidelines to assist an employer in determining their rights and responsibilities when bad weather impacts employee attendance.
Let’s consider several scenarios:
The business decides to close due to bad weather and sends non-exempt employees home: Employers are required to pay hourly employees only for the hours worked. Under the Fair Labor Standards Act (FLSA), an employer is not obligated to pay for hours not worked. Therefore, non-exempt employees when unable to attend work, or sent home due to weather do not have to be compensated for the time off. This is a fairly straightforward and uncomplicated practice, unlike dealing with the complex nature of exempt employees.
The business is open, but an exempt employee chooses not to come in: An exempt employee almost always has to be paid, in any circumstance. Under the FLSA an employer is prohibited from docking the pay of an exempt employee who chooses not to come into work for inclement weather. In this position as well, any business that decides to close due to weather is required to pay exempt employees their regular salaries. The only instance in which an employer can deduct pay from a salaried exempt employee is if the facility is closed for more than a week. Another point to note is that the FLSA does not require that an employer provide vacation or leave time. Therefore there is nothing to prevent the employer from deducting the inclement weather days off from the employees’ paid time off or vacation to cover the missed work. This sounds on its surface like a positive solution to the problem. However, complications arise when an employee has not accrued enough time off or when they have already scheduled and been approved to take their remaining time off at a later date. In both cases, an employer is still restricted from deducting the difference from the employees’ salary. The days off can be deducted from future earned leave. However, serious consideration should be given to instituting this practice as it complicates the employee/employer relationship and cause morale issues which can lead to a decline in productivity or a loss of good employees.
Employer’s Plan: An inclement weather policy should be a standard document in all employee handbooks. Now is the time to review that policy and consider whether it covers all of the issues that need to be addressed to protect both the employees and the employer. Several points to consider when reviewing the policy both for its applicability and validity are as follows:
Whatever the forecast this winter, with proper planning, understanding the legal obligations and a clear and concise policy an employer can reduce the likelihood of confusion created by weather-related absences. So plan now for Jack Frost, and you’ll be able to enjoy the winter wonderland without the stress of the question “to pay or not to pay.”
The National Law Review is pleased tobring you information regarding the upcoming 2nd Annual Canadian & Global Anti-Corruption Compliance Conference:
Event Focus
Given the escalating pressure from the global community for the Royal Canadian Mounted Police (RCMP) to strengthen their bribery and anti-corruption enforcement, it is key for any cross-border Canadian company to ensure full compliance with both Canadian and global laws.
The marcus evans 2nd Annual Canadian & Global Anti-Corruption Compliance Conference will build upon the inaugural through expanding on issues of Canadian and global anti-corruption enforcement.
By attending this second annual conference, delegates will be able to avoid the risk of fines and investigations through implementing critical bribery and anti-corruption internal controls as well as implement effective compliance programs and improve ongoing employee training. Attendees will walk away from this conference with an improved understanding of risk and how to streamline internal processes and procedures to ensure compliance within companies expanding business both in Canada and globally.
Attending This Conference Will Enable You To:
1. Review the regulatory environment and enforcement trends
2. Develop policies for internal controls for anti-corruption
3. Assess areas of risk within an organization
4. Deal with internal and governmental investigations
Industry leaders attending this conference will benefit from a dynamic presentation format consisting of workshops, panel discussions, and industry-specific case studies that provide accurate, real-world knowledge. Attendees will experience highly interactive conference sessions, 10-15 minutes of Q&A time after each presentation, 4+ hours of networking, and exclusive online access to materials post-event.
The National Law Review recently featured an article by Michael J. Canning of Giordano, Halleran & Ciesla, P.C. regarding Insurance Claims for Superstorm Sandy:
Superstorm Sandy has devastated the New Jersey Shore and other parts of New Jersey, causing untold damages to personal residences and businesses. For those individuals and businesses fortunate enough to have insurance coverage, particularly flood insurance coverage, steps should be taken immediately to protect your rights under your insurance policies. The first step in the process is to identify what insurance policies you may have which may respond to the loss. Individuals should look to their homeowner’s policies for damage to their home and to their automobile policies for damage to their automobiles. Businesses should look primarily to their business owners or commercial property policies. Both businesses and individuals should examine any excess or umbrella insurance policies they may have.
Once policies are identified, claims should immediately be reported to your insurers. The fastest and simplest way of providing notice is through your insurance broker, which should be done in writing with the request that your broker provide notice to your insurer. You should request that your broker provide you with a copy of the notice it provides to the insurer. Most insurance agents are extremely helpful in processing claims and assisting insureds with their claims. Notice can also be given directly to your insurer and many insurers are setting up mobile claim units at which claims can be reported.
There are different coverages available under different types of policies as discussed below. While many policies contain standard terms and conditions, each policy has its own language and must be carefully reviewed to determine the specific coverage provided under that specific policy. The discussion of insurance policies below is based on fairly standard language which appears in many policies but it must be emphasized that you need to review the specific language in your policy which may significantly increase or decrease the coverage provided to you.
Sandy has caused incalculable damage to businesses. These damages include damage to a company’s real property, its personal property and its loss of business. There may be coverage for such losses under a company’s business owner’s policy or commercial property policy. Business owner’s policies or commercial property policies should be carefully reviewed to determine what coverages are provided and what limits of coverage are available.
There are generally two types of coverages provided under business owners or commercial property policies. The first is “all risk” coverage which provides coverage to the insured’s property for all risks of direct physical loss or damage. This is a broader form of coverage and typically is more expensive to obtain. Under an all risk policy, there will be coverage for direct physical loss or damage to the insured’s property irrespective of the cause of loss, subject to the exclusions in the policy.
The second form of coverage is “named” peril coverage. This provides more narrow protection than the all risk coverage and provides coverage for risk of direct physical loss or damage caused only by specifically listed perils in the policy. Under this more limited coverage, there is coverage for direct physical loss or damage only if caused by the listed peril in the policy. As in an all risk policy, the coverage provided is subject to the policy’s exclusions.
The most significant exclusion for Sandy-related claims will be the flood exclusion. A typical flood exclusion defines flood to mean a general and temporary condition of partial or complete inundation of normally dry land areas due to: (a) flood, surface water, rising water, waves, tides, tidal water, storm surge, tsunami, overflow of any body of water or their spray, all whether wind driven or not; or (b) water that backs up from any sewer or drain, or water that leaks or flows from below the surface of the ground. Where a policy contains a flood exclusion, damage caused solely by the flood, as defined in the policy, may be excluded.
However, there is a critical distinction between damage caused by wind, which is normally covered under an all risk policy or a named peril policy, and damage caused by flood. A storm such as Superstorm Sandy may have damages caused by both flood and wind. To the extent the damage to the insured’s property is caused by wind, there should be coverage under the policy, subject to other exclusions, even if a flood causes additional or separate damage. By way of example, the wind may knock a tree down onto the insured’s property causing physical damage to the property. Rain may penetrate the property as a result of the damage caused by the tree. This damage would likely be covered as wind is a covered cause of loss and the damage to the property, including the water damages, resulted from the wind. However, if during the same storm a tidal surge caused water to flood other portions of the property, that damage may not be covered if there is a flood exclusion.
If a dispute arises between you and your insurer as to whether damage to your property is caused by wind or flood, it may be necessary to retain an expert in the area of cause and origin of insurance losses to determine what damage was caused by wind compared to damage caused by flood. Additionally, eyewitness testimony will be helpful so you should speak with any of your neighbors, employees or other persons who may have witnessed how your business property has been damaged. The same applies to individuals seeking coverage under their homeowner’s or flood policies.
Business owner’s policies and commercial property policies typically contain coverages for damage to buildings, for business personal property, and for business income / extra expense. Other additional coverages may also be provided and the policy must be carefully reviewed for such additional coverages.
The declarations page of the policy will identify which buildings owned by the insured are covered under the policy. Values are normally provided for the buildings. The policies may provide coverage for either the replacement cost of the structure or for the actual cash value of the structure. The policy should be reviewed carefully to determine what type of coverage is provided for damage to the property. If there is a covered loss, the insurer will pay the claim up to the policy limits for building coverage identified on the declarations page. Photographs or videotape should be taken of all damage to the structure.
Most business owners or commercial property policies provide coverage for personal property owned by the insured. The amount of coverage for such personal property is normally identified in the declarations page. Upon a covered loss, the insured should carefully document and inventory all the personal property which it has lost for which it will be submitting a claim. The insured will be required to submit a sworn proof of loss in which the insured must identify under oath all of the property it claims to have been damaged for which it is seeking insurance coverage. Photographs or videotapes should be taken of all damaged personal property. Unless required to do so for safety or health reasons, the damaged personal property should not be discarded until the adjuster appointed by the insurer has come to inspect your property. If you discard any damaged property for which a claim is submitted, the insurer may disclaim coverage. In New York policyholders can submit photographs of damaged property as proof of loss of the property.
This coverage protects the insured against loss of income resulting from damage to the insured property. Business interruption coverage is often subject to complex deductibles and co-insurance provisions which must be carefully reviewed. The insured should work carefully with its attorney and broker in presenting the business interruption claim. Outside professionals, including accountants or professional adjusters, may be of assistance in presenting such a claim to the insurer. Some of the costs incurred in calculating the business interruption loss by professionals such as accountants may be recoverable under the policy, but fees for attorneys and public adjusters typically will not be covered.
As an incentive to insureds to move quickly to restore the insured property so that business operations can commence as soon as possible, insurers will normally pay the insured’s reasonable expense to restore operations.
If there is no direct physical damage to the insured’s property, then the business interruption coverage may not apply. However, some policies provide coverage for a business interruption loss resulting from damage to a utility service caused by a covered cause of loss. Many businesses lost power and were unable to conduct business without sustaining any physical damage to their property. If the business owners or commercial property policy includes a utility service – direct damage endorsement, or similar type of endorsement, there may be limited coverage for a business interruption loss caused by damage to a power supply service, including utility-generating plants, switching stations, substations, transformers and transmission lines, by wind damage. The policy must be reviewed to determine if such coverage exists and in what amount. Typically the amount is less than the coverage provided where there is direct physical damage to the insured’s property.
Some policies provide this coverage which provides that when a covered cause of loss causes damage to property other than the insured’s property, the insurer will pay the loss of business income and extra expense caused by action of civil authority that prohibits access to the insured’s premises. This coverage, if it is provided in the policy, may require that: (1) access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage and the insured’s property is within that area but not more than five miles from the damaged property; and (2) the action of civil authorities is taken in response to dangerous physical conditions resulting from the damage or continuation of the covered cause of loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.
Many policies provide additional coverage for debris removal in which the insurer agrees to pay the reasonable expenses incurred to remove debris from the covered property caused by a covered cause of loss. Typically there will be sub limits of coverage for this additional coverage which will be identified on the declarations page or a separate endorsement to the policy. This may be a very significant coverage as a result of the substantial debris generated from Sandy’s destruction.
Many businesses may have excess or umbrella property insurance coverage. These policies should be carefully reviewed to determine whether they provide additional coverage beyond the coverage provided in the primary policy in addition to the increased limits of coverage which may be provided in the umbrella and excess policies. The umbrella and excess policies typically “follow form” to the primary policy, which means they are normally subject to the same terms and conditions as the primary policy. However, some excess or umbrella policies may contain additional exclusions which may not be excluded from the primary policy, including an exclusion for flood. Both the primary and excess and umbrella policies should be carefully reviewed in this regard.
Individuals who have suffered damage to their homes and personal property will look primarily to their homeowner’s policies and flood policies, if they have such coverage. For damage to your automobile, you should examine your automobile policy to determine if you have comprehensive insurance coverage.
A standard homeowner’s policy typically covers damage to the insured dwelling up to the policy limits identified in the policy. The declarations page of the policy should be reviewed to determine the limits of coverage available. This coverage insures the residence premises identified in the declarations page and may include materials and supplies located on or next to the residence premises used to construct, alter or repair the dwelling. There is typically no coverage for land, including the land on which the dwelling is located.
There may be coverage under your homeowner’s policy for other structures which are set apart from the residence premises. The declarations page will identify such other structures as well as the limits of coverage.
A typical homeowner’s policy provides insurance coverage for personal property owned or used by an insured. This coverage may include damage to property owned by others while the property is on the residence premises occupied by an insured. There also may be limited coverage for an insured’s personal property located at an insured’s residence other than the residence premises listed in the declarations page. However, this is a limited coverage which may be 10% of the limit of liability for the personal property coverage or $1,000, whichever is greater. The declarations page must be reviewed for the limits of coverage. There may be endorsements issued to the policy providing for greater limits of coverage for certain specified property such as specific scheduled jewelry. Certain property, such as non-scheduled jewelry, furs, money, securities, watercraft, trailers, and certain portable electronic equipment may have special limits of liability, typically in amounts of $2,500 or less.
Standard homeowner’s policies provide coverage for loss of use. The declarations page must be reviewed to determine whether such coverage is provided and, if so, in what limits. The loss of use coverage includes the following coverages:
(a) Additional Living Expense. If the residence premises where you reside is not fit to live in as a result of a covered loss, the insurer will cover any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living. Payment will usually be for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere.
(b) Fair Rental Value. If a portion of the residence premises is rented to others and is not fit to live in as a result of a covered loss, the policy may cover the fair rental value of such premises plus any expenses that do not continue while it is not fit to live in.
(c) Civil Authority Prohibits Use. If a civil authority prohibits you from use of the residence premises as a result of direct damage to neighboring premises by a peril insured against, there may be limited coverage. This coverage may include additional living expense and fair rental value described above, but for no more than two weeks.
Many standard homeowner’s policies provide for additional coverages which must be identified on the declarations page, an endorsement or specifically provided for in the policy. These additional coverages include:
(a) Debris Removal. The homeowner’s insurer will normally pay the reasonable expense for the removal of debris of covered property if a peril insured against that applies to the damaged property causes the loss. This expense is included in the limit of liability that applies to the damaged property. However, if the amount paid for the actual damage to the property plus the debris removal expense is more than the limit of liability for the damaged property, an additional 5% of that limit may be available for such expense under some policies.
In addition, some policies provide for payment of the reasonable expense, up to $1,000, for the removal from the residence premises of trees on the residence premises, or a neighbor’s trees which fell on the neighbor’s premises, provided there is damage to a covered structure or the trees block the driveway which prevent the use of a motor vehicle from entering or leaving the residence premises.
(b) Reasonable Repairs. If this additional coverage is listed on the declarations page, the insurer may pay the reasonable cost incurred by you for the necessary measures taken solely to protect covered property that is damaged by an insured peril from further damage. However, this coverage does not increase the limit of liability that applies to the covered property.
As in a business owner’s or commercial property policy, the coverage provided under a homeowner’s policy may be on an “all risk” basis, which provides broad coverage for damage caused by any peril, subject to specific exclusions, or the more narrow “named peril” coverage, which provides coverage for loss caused by certain listed perils. Normally damage from wind storm but not from flood are covered. However, the coverage provided under the homeowner’s policy is subject to certain exclusions. Unfortunately for Superstorm Sandy-related claims, many homeowners’ policies will exclude coverage for water or flood damage. A typical exclusion in a homeowner’s policy will provide that the insurer does not insure for loss caused directly or indirectly by: “Flood, surface water, waves, including tidal wave and tsunami, tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind, including storm surge.” Alternatively a named peril policy may not list flood as a covered peril. As with commercial policies, a careful distinction must be drawn between damages caused by water or flood, which may be subject to the above exclusion, and damages caused by wind. As in the example above, homes which have had basements or other portions of the residence premises flooded by the storm surge may be subject to the water or flood exclusion if the storm surge was the sole cause of the damages. However, if a tree was not knocked down by the winds and caused damage to the structure, then there would likely be coverage for the wind-caused damage.
Flood insurance may be obtained for certain homes. Most flood policies are offered through the National Flood Insurance Program (“NFIP”). However, private insurers may offer flood coverage which may provide more coverage with higher limits than provided for in policies issued through NFIP. These policies provided coverage for damage to the residence premises and certain personal property caused by flood. The coverage for damage to personal property may be more limited than that provided in a homeowner’s policy. Where an insured owns a separate flood policy in addition to a homeowner’s policy, notice of claim should be given to both insurers as there may be wind-covered loss covered under the homeowner’s policy and flood-covered loss covered under the flood policy.
The coverage provided by the homeowner’s policies may be subject to certain deductibles which will be identified on the declarations page. Most significantly with regard to Sandy, most policies contain a hurricane deductible which is typically in the amount of 2% of the limits of coverage. However, Governor Christie has issued a proclamation that the storm was not a hurricane as defined in the policies and that therefore the hurricane deductibles will not apply. This is a very favorable proclamation for insureds in New Jersey. The governors in New York and Connecticut have issued similar proclamations.
Unfortunately, many victims of Sandy have had their automobiles damaged or destroyed. Automobile liability insurance is mandatory in the State of New Jersey so all insureds should have liability coverage which protects them in the event they cause injury to another person or property. However there are other coverages available under an automobile policy which protect the insured for damage to their own vehicle. These are separate coverages which are not mandatory and which must be purchased from the insurer. These coverages include comprehensive insurance coverage which covers damage to an insured vehicle. The declarations page of the automobile policy should be reviewed to verify that such comprehensive insurance coverage has been purchased and if so in what amount. A deductible will likely apply. If you have such comprehensive automobile insurance coverage and your automobile was damaged or destroyed, notice of the claim should immediately be reported to your automobile insurer.
Umbrella and excess insurance coverage is generally coverage which is provided above the insurance coverage provided in a primary insurance policy. These policies normally insure the same risk as the primary policy but provide greater limits of coverage. However, these policies may also provide additional coverage beyond that provided in the primary policy. Such umbrella and excess policies should be carefully reviewed to determine if there is additional coverage provided beyond that available in the primary homeowner’s policy, flood and automobile policies.
Many individuals and businesses have lost their policies in the storm. In that event you should contact your insurance broker who should have some record of your insurance coverage.
In the event a homeowner or business owner either has no insurance coverage, or the insurance coverage does not provide flood coverage, you may be able to obtain the benefits provided by FEMA. A memorandum which details the FEMA process can be viewed at www.ghclaw.com. It is important that anyone seeking FEMA benefits immediately register with FEMA in order that a FEMA inspector can come to your property and determine whether you are eligible for FEMA benefits.
The National Law Review is pleased to bring you information regarding the upcoming FATCA Compliance Conference December 4-5, 2012 in New York City:
Implementing FATCA compliance standards will come with challenges for financial institutions across the globe. It is imperative that organizations and individuals, who oversee FATCA compliance regulations adequately prepare, understand and comply with the standards of the new regulations. The marcus evans FATCA Compliance Conference, December 4-5, 2012 in New York, NY will focus on the main concerns and issues with the upcoming compliance expectations under FATCA and analyze the existing requirements and how financial organizations can adequately comply.
Join industry leading experts, including key speakers:
Attending this premiere marcus evans conference will enable you to:
Attendees will benefit from a dynamic peer-to-peer presentation format consisting of workshops, interactive panel discussions and case studies. Each network and interactive session will be followed by 10-15 minutes of Q&A affording all in attendance an opportunity to get the answers to questions affecting their business. Moreover, 4+ hours of networking opportunities will supply attendees with benchmarking and best practices.
For more information, please contact Michele Westergaard at 312-540-3000 ext. 6625 or Michelew@marcusevansch.com.
For a full list speakers and topics, visit http://www.marcusevans-conferences-Northamerican.com/FATCA_NLRB
The National Law Review recently published an article, Recent Case Suggests How Private Equity Funds Can Protect Against Unfunded Pension Liabilities of Portfolio Companies, written by Joseph S. Adams, Laurence R. Bronska, Nancy S. Gerrie, Andrew C. Liazos, and Maureen O’Brien of McDermott Will & Emery:
A significant objective for a private equity (PE) fund when making an investment is to avoid exposing itself to portfolio company liabilities. Generally, corporate law would protect the purchaser of a controlling interest in an acquired corporation against portfolio company liabilities as long as the acquired company is operated independently of the purchaser. However, special considerations apply under theEmployee Retirement Income Security Act (ERISA), the federal law that governs employee benefit plans. ERISA makes all members of a controlled group liable on a joint and several basis for any pension-related liabilities of single employer and multi-employer pension plans. The Pension Benefit Guaranty Corporation (PBGC), the federal agency responsible for overseeing these pension plans, has been aggressive in broadly interpreting what is a “controlled group” for this purpose and in pursuing PE funds for pension liabilities incurred by portfolio companies. But a recent case out of the U.S. District Court for the District of Massachusetts signals that courts may not agree with the PBGC’s broad assessment of pension liability for PE funds.
In a recently decided case, Sun Capital Partners III L.P. v. New England Teamsters and Trucking Industry Pension Fund, D. Mass., No. 1:10-cv-10921-DPW, 10/18/12, the U.S. District Court for the District of Massachusetts became the first court to reject a multi-employer pension plan’s attempt to rely on PBGC precedent to assess a PE fund with a portfolio company’s unfunded pension liabilities. While this likely is not the last word on this subject, the Sun Capital Partners case offers a roadmap for how a PE fund may take a position to avoid controlled group liability for single employer and multi-employer pension liability.
Title IV of ERISA imposes joint and several liability with respect to a broad array of pension liabilities, including an employer’s minimum funding contributions to a single employer pension plan, unfunded pension liabilities upon plan termination, PBGC premium payments and withdrawal liability under a multi-employer pension plan. Under ERISA, joint and several liability applies to any entity under common control with the employer sponsoring the pension plan.
In 2007, the PBGC issued an opinion (PBGC Appeals Board opinion dated September 26, 2007) finding that a PE fund was engaged in a trade or business. According to the PBGC, the PE fund subject to the opinion was engaged in a “trade or business” because it had a stated purpose of creating a profit; provided investment services; and had a general partner that received management fees, a carried interest and consulting fees (i.e., the PE funds did not receive just investment income as a passive investor similar to an individual investor). The PBGC stated that this activity was regular and continuous because of the size of the PE fund and its profits.
In the Sun Capital Partners case, the court determined that the one-time investment of capital by a PE fund into a portfolio company was a passive investment and did not result in the PE funds engaging in a trade or business. The investment was structured such that the portfolio company was owned by two PE funds in a 70/30 split. Each PE fund had a general partner, and each general partner had a management company that performed consulting and advisory services. The PE funds, as shareholders, could appoint members of the board of directors of the portfolio company.
In its decision, the court determined that receipt of non-investment compensation in the form of consulting, management or advisory fees and carried interest by the management companies and the general partners could not be attributable to the PE funds. The non-investment income was a result of a contractual relationship between the management companies, the general partners and the portfolio company. The court found that the receipt of this non-investment income did not mean that the PE funds themselves were engaged in the full range of the general partners’ activities. The PE funds themselves did not perform any consulting, advising or management services, and did not have employees, own any office space, or make or sell any goods. In fact, on tax returns, the PE funds reported only capital gains and dividends, both sources of investment income. Further, the court held that the ability of the PE funds to appoint the board of directors of the portfolio company did not mean that the funds were engaged in a trade or business, because such appointments were made in the PE funds’ capacity as shareholders of the portfolio company. The court also noted that the fact that the same persons signed the management agreements representing both sides of the contract was not persuasive evidence of engaging in a trade or business, since officers of different entities can sign in different capacities.
The court in the Sun Capital Partners case expressly considered and declined to rely on the 2007 PBGC opinion. Importantly, the court held that the 2007 PBGC opinion had misapplied the theory of agency and incorrectly imputed the management companies’ or general partners’ actions to the PE funds. In addition, the court held that, as a matter of law, the PBGC had misapplied the Groetzinger test and other relevant tax law precedent.
Finally, the court determined that the structuring of the PE funds’ investment in the portfolio company (using multiple funds each owning less than 80 percent of the portfolio company) did not violate ERISA provisions allowing certain transactions to be undone if they were undertaken to evade or avoid ERISA liabilities. Although the PE funds admitted that one of the reasons that the investment was structured to be two funds with a 70/30 split was in order to minimize pension liability risk, the court found that ERISA’s evade-or-avoid provisions did not apply in this context, because such provisions were meant to apply to sellers rather than first-time investors. Indeed, as the court noted, if the investment was undone and the controlled group determined without regard to the investment as contemplated under ERISA, the PE funds would still not be liable. Thus, application of the evade-or-avoid provisions did not make sense in this context.
Most importantly, this decision provides support for the widely held position that a PE fund is not engaged in trade or business and cannot be determined to be under common control with its portfolio companies under Code Section 414. Under this interpretation, no PE fund could be held liable for withdrawal liability under a multi-employer pension plan, or unfunded benefits liabilities upon termination of a single employer plan (or minimum funding or contractually required ongoing contributions to such plans), because PE funds are not engaged in a trade or business. Further, if the PE fund cannot be held liable, then the chain of ownership between portfolio companies held by the same private equity fund is also broken. This decision also provides significant leverage to negotiate with the PBGC or a multi-employer pension fund should a PE fund be defending itself against the PBGC or multi-employer pension fund for pension liability claims.
In order to avail themselves of the benefits of this decision, PE funds should evaluate their operations and contractual relationships to determine if such operations and relationships are comparable to those outlined by the court in the Sun Capital Partners case. In addition, PE funds may wish, when possible, to structure future investments across multiple funds with each fund owning less than 80 percent of the portfolio company in order to minimize risk of pension liability.
On November 2, 2012, the multi-employer pension fund appealed the decision in the Sun Capital Partners case to the U.S. Court of Appeals for the First Circuit.
© 2012 McDermott Will & Emery
