Category: Uncategorized

Executive Action: Obama’s Legacy and 2016 Predictions (Part 2 of 2)

As promised in our previous post, today we conclude our predictions on President Obama’s 2016 executive activity.  While we believe the President’s final executive orders will target immigration and perhaps even corporate political expenditures, we predict executive agency action will cover a broad range of pressing labor and employment issues.  With federal legislative gridlock expected to continue through 2016, employers should prepare themselves for a barrage of agency activity, especially from the Equal Employment Opportunity Commission (“EEOC”), National Labor Relations Board (“NLRB”), and Department of Labor (“DOL”).  Our summary is below.

Expected Agency Activity of 2016

Based on the 2015 Supreme Court decisions in Young v. UPS and EEOC v. Abercrombie & Fitch Stores, Inc. and the EEOC’s interest in systematic discrimination in the workplace, we predict the EEOC will focus heavily on companies’ policies regarding pregnancy and religious discrimination and accommodation in 2016.  As a refresher, in Young the Court held a genuine factual dispute existed as to whether UPS provided more favorable treatment to at least some employees whose situation “cannot reasonably be distinguished” from Ms. Young’s —e.g., workers unable to lift up to 70 pounds due to reasons other than pregnancy limitations such as a workplace injury or a recognized disability.  In Abercrombie (blogged about here) the Court concluded an employer violates Title VII by rejecting an applicant in order to avoid making a religious accommodation, even if the employer only has an “unsubstantiated suspicion” that the applicant may eventually request an accommodation.

Along with discrimination/accommodation policies, we predict the EEOC and NLRB will focus on company-wide social media policies in 2016. While the NLRB has been hounding employers on social media policies since 2010, the EEOC did not really begin gathering information on the issue until 2014.   We believe 2016 will be the year the EEOC begins targeting employers’ social media policies to evidence discrimination.  We also predict the EEOC’s focus on gender identity discrimination and the NLRB’s focus on FLSA class action settlements will continue with full force into 2016.

With the DOL’s Final Rule on overtime exemption updates expected to roll out this year, we predict the agency will focus on wage-hour reform and that employers will be expected to get into compliance sooner rather than later. Although Solicitor of Labor Patricia Smith stated in November 2015 that final guidelines will not likely be issued until “late 2016,” we believe the DOL will push them out before November’s presidential election.  Employers should expect the Final Rule to increase the minimum salary exemption requirement from $455/week to $970/week.  We would not be surprised if the DOL also finalizes revisions to the duties test, which is a factor along with salary level used to determine whether an employee qualifies under a white collar exemption to minimum wage and overtime rules.

Although the 2016 federal legislation horizon looks bleak, President Obama and his executive agencies are poised for a busy final year. Stay tuned for further developments.

Article By Kristine M. Woliver of Squire Patton Boggs (US) LLP
© Copyright 2015 Squire Patton Boggs (US) LLP

Executive Action: Obama’s Legacy and 2016 Predictions (Part 1 of 2)

Federal legislation in 2015 was plagued by the same congressional gridlock that President Obama has faced throughout most of his presidency. The President has therefore turned to executive action to achieve many of his goals over the past seven years and we expect this trend to continue with gusto in 2016.  Below is a summary of our predictions for 2016’s executive orders and agency action.

Expected Action: Executive Orders in 2016

On January 5, President Obama announced several executive orders seeking to expand background checks and place new licensing requirements on gun show and online gun dealers. During the State of the Union address on January 12, the President expressed his frustrations with stalled immigration reform and corporate influence in politics.  Throughout the remainder of his term, the President might take action on a variety of issues affecting employers nationwide, including:

  • Implementing 2014 Immigration Orders extending work permits to certain undocumented workers. The Fifth Circuit held [pdf] in November 2015 that a federal district court properly blocked the Department of Homeland Security from implementing Obama’s immigration plan, opening the door for Supreme Court review. If the High Court grants the Obama Administration’s certiorari petition and reverses the injunction order, the President will be able to substantively implement a sizable chunk of his long-stalled immigration reform.

  • Improving job portability for beneficiaries of employment-based visa petitions. President Obama’s Department of Homeland Security announced proposed changes to its regulations on this immigration issue, among others, on December 31, 2015. The comment period for the Proposed Rule extends through February 29.

  • Restricting Citizens United and its progeny by requiring contractors to disclose certain political contributions. President Obama has a longstanding and vocal opposition to this case and its effect on corporate political expenditures. The President stated on January 12 during the State of the Union address that he has had a difficult time working with republicans “making sure the system’s not rigged in favor of the wealthiest and biggest corporations.”

It is likely the President’s policies will extend beyond his own executive orders to the federal agencies under his administration, our predictions to be summarized tomorrow in Part 2.

Article By Kristine M. Woliver of Squire Patton Boggs (US) LLP
© Copyright 2015 Squire Patton Boggs (US) LLP

Amazon to Control Delivery by Drone?

People are talking about and news organizations are covering Amazon’s announced plans to deliver goods by drone in the not-too-distant future.  However, fewer are talking about or covering Amazon’s effort to be the only company that can autonomously deliver goods by drone.  On March 25, 2014, Amazon filed a United States patent application directed to aspects of a drone delivery system.  Pursuant to current patent law, the application was published on October 1, 2015, roughly 18 months after the application was filed.  While the application is still pending and not yet an issued patent, it provides an interesting look at the scope of protection Amazon is seeking for its drone delivery system.

Under current proposed FAA regulations, drones cannot be flown outside of the line of sight of the operator.  A much greater range will be needed for an effective drone delivery network.  Amazon is proposing to send its drones as far as 15 miles from a regional fulfillment center.  The drones would take off vertically from a warehouse floor, fly at low altitude over a suburban landscape and then descend into the backyards of their destination points.  There they would lay the package on the lawn before lifting off to return to the warehouse for another run.  The success of such a system will depend upon receiving FAA approval.  FAA approval of such a system is likely to be contingent upon demonstrating that the system can be operated without causing a hazard.  In other words, the drones will need to be equipped  with “sense and avoid” technology that prevents them from crashing into things.

Amazon’s pending patent application, Pub. No. US 2015/0277440 A1, contains claims that are broadly directed to a propeller driven automated mobile vehicle having a laser based rangefinder configured to determine a distance to an object, to a distance determining system for an automated mobile vehicle having a distance determining element positioned to emit a laser signal that reflects off a reflective exterior surface of a motor, and to an automated mobile vehicle having a plurality of motors where the alignment axis of at least two of the motors are not parallel and each motor has a distance determining element.  These claims have not yet been examined by the Patent Office.  Upon examination, the scope of the claims will likely have to be narrowed to distinguish them from prior art.  However, it seems clear that Amazon is interested in pursuing broad protection for “drones” having a distance determining element, which is likely to be a necessary component of any “sense and avoid” technology.  Thus, the potential exists that Amazon will obtain patent protection broadly covering drone delivery systems.

The way the Amazon patent application is written, it seeks to avoid the need for human involvement to ensure that vehicles do not collide with other drones, manned aircraft, or other objects or structures on the ground.  It also discusses a system for automatically sensing and avoiding objects.  Thus, the “automated mobile vehicles” of the application and recited in the claims appear to be directed to autonomous drones.  However, at this stage it is not yet clear whether the claims in any patent that issues will be limited to autonomous drones, but might also cover remotely-piloted drones.  It remains to be seen whether the examination process will push Amazon into limiting the claims to autonomous operation.

The Amazon patent application also discusses the distance determining elements being used to detect the presence of objects and to then cause the automated mobile vehicle to alter its path to avoid the object.  Thus, the distance determining elements seem to be used not only for unloading positioning, but also for sense and avoid in flight.  While in a remotely piloted context, a sense and avoid system may not need to actually determine distances to other objects.  The remote pilot could rely on visual displays of the surrounding environment of the drone to avoid collisions.  However, in an autonomous operation, it is difficult to envision any sense and avoid system that would not need to know at least the distance from the drone to surrounding objects to function.  Amazon appears to be using this need to know such distances in the autonomous context to preempt the field.  In other words, a patent covering any autonomous drone that determines distance to surrounding objects might preclude any other drones from being able to have a functioning sense and avoid capability.

The broadest claims in the Amazon patent application just recite a “distance determining element.”  In a narrower claim, the application specifies “the distance determining element is at least one of an ultrasonic ranging module, a laser rangefinder, a radar distance measurement module, stadiametric based rangefinder, a parallax based rangefinder, a coincidence based rangefinder, a Lidar based rangefinder, Sonar based rangefinder, or a time-of-flight based rangefinder.”  Thus, at this stage, Amazon is trying to cover all of the named techniques, any combination of those techniques, as well as anything else that could broadly be considered a distance determining element.

As noted, the Amazon patent application is still just pending and has yet to be examined.  Amazon may have other patent applications pending that have not yet been published, and therefore are not yet open to review by the public.  FAA regulations are also still developing.  Thus, much remains to be determined even as it relates to Amazon itself.  Other entities may also be working on drone delivery systems and/or have pending patent applications that have not yet been published.  Domino’s Pizza is said to have tested delivering pizzas by drone.  Skype’s co-founders have set up Starship Technologies to develop a ground-based drone that would be able to deliver groceries to customer’s homes.  It will be very interesting to see how the intellectual property protection for drone delivery systems plays out.

Article By Thomas J. Daly of Lewis Roca Rothgerber LLP

©2015 All Rights Reserved. Lewis Roca Rothgerber LLP

HHS Issues Final Rule on HIPAA and Firearm Background Check Reporting

On January 6, as part of President Obama’s executive action to combat gun violence, HHS promulgated a final regulation modifying the HIPAA Privacy Rule to allow certain HIPAA covered entities to disclose limited information to the National Instant Criminal Background Check System (NICS).

Background:  The NICS, maintained by the Federal Bureau of Investigation (FBI), is the national database used to conduct background checks on persons who may be disqualified from receiving firearms based on federal or state law.  Federal law identifies several categories of potential disqualifiers, known as “prohibitors” including a federal mental health prohibitor.  By statute, the federal mental health prohibitor applies to individuals who have been committed to a mental institution or adjudicated as a mental defective.  The Department of Justice has promulgated regulations that defines these categories to include the following individuals:

  • individuals committed to a mental institution for reasons such as mental illness or drug use;

  • individuals found incompetent to stand trial or not guilty by reason of insanity, or

  • individuals who have been otherwise determined by a court, board, commission, or other lawful authority to be a danger to themselves or others or to lack the mental capacity to contract or manage their own affairs as a result of marked subnormal intelligence or mental illness, incompetency, condition, or disease.

However, there is currently no federal law that requires state agencies to report data to the NICS, including the identity of individuals who are subject to the mental health prohibitor.  HHS believes that HIPAA poses a potential barrier to such reporting. Under current law, HIPAA only permits covered entities (e.g., state mental health agencies) to disclose such information to the NICS in limited circumstances: when the entity is a “hybrid” entity under HIPAA (and the Privacy Rule does not apply to these functions) or when state law otherwise requires disclosure, and thus disclosure is permitted under HIPAA’s “required by law” category.

Final Rule:  HHS finalized its proposed rule without any substantive changes. Under the final rule, a new section 164.512(k)(7) of the HIPAA Privacy Rule expressly permits certain covered entities to disclose information relevant to the federal mental health prohibitor to the NICS.

The permitted disclosure applies only to those covered entities that function as repositories of information relevant to the federal mental health prohibitor on behalf of a State or are responsible for ordering the involuntary commitments or the adjudications that would make someone subject to the prohibitor.  Thus, most treating providers may not disclose protected health information about their own patients to the NICS, unless otherwise permitted by the HIPAA Privacy Rule.  HHS also clarifies that individuals who seek voluntary treatment are not subject to the prohibitor.

The rule limits disclosure only to the NICS or an entity designated by the State to report data to the NICS.  And only that information that is “needed for purposes of reporting to the NICS” may be disclosed, though HHS gives States the flexibility to determine which data elements are “needed” to create a NICS record (consistent with requirements of the FBI, which maintains the NICS).  At present, the required data elements for the NICS are: name; date of birth; sex; and codes identifying the relevant prohibitor, the submitting state agency, and the supporting record.  The NICS also allows disclosure of certain optional data elements (e.g., social security number and identifying characteristics).  HHS notes that applicable covered entities may disclose such optional data elements “to the extent necessary to exclude false matches.”

HHS declined many commenters’ suggestion to expand the rule to permit the disclosure of information about individuals who are subject to state-only mental health prohibitors. HHS fears that expanding the scope of the permitted disclosure would disrupt the careful balance between public safety and encouraging patients to seek mental health care.

Finally, in the preamble, HHS defended its statutory authority to make this change, despite the fact that Congress did not address HIPAA in recent legislation to strengthen the NICS.  HHS explained that the “HIPAA statute confers broad authority on the Department to specify the permitted uses and disclosures of PHI by HIPAA covered entities.”

Article By Dena Feldman of Covington & Burling LLP

© 2015 Covington & Burling LLP

Supreme Court Poised to Strike Down Union Agency Fees for Public Employees?

The U.S. Supreme Court, in argument on Jan. 11, from all accounts appears poised to strike down its prior decision in Abood v. Detroit Board of Education and conclude that mandatory agency fees paid by public employees to unions that represent them are unconstitutional.Classroom Supreme Court teachers decision

​In Friedrichs v. California Teachers Association, the petitioners contend that mandatory fair share dues to cover the cost of collective bargaining and other representational activities violate the free-speech rights of nonunion workers.  Chief Justice John Roberts summarized the issue similarly: “The problem that’s before us is whether or not individuals can be compelled to support political views that they disagree with.”

The case, which poses a significant threat to the funding of public employee unions in the 20 states that allow so-called fair share fees, has generated substantial interest and coverage. The SCOTUS Blog is an excellent stepping off point to review coverage of the case.

Court watchers are suggesting that Friedrichs will overturn Abood not only because of the tone of the questioning during argument but in large part because of the Court’s 2014 decision in Harris v. Quinn in which the Court’s 5-4 majority wrote of Abood and its “questionable foundations.”

Article By Gerald F. Lutkus of Barnes & Thornburg LLP
© 2015 BARNES & THORNBURG LLP

Covered Contractors Take Note of Changes in 2016

Pay transparency final rule is in effect

Executive Order 13665 (EO 13665), the Final Rule promoting pay transparency protection, took effect on January 11, 2016. The executive order covers employees and job applicants of companies with over $10,000 in federal contracts/subcontracts entered into or modified on or after January 11, 2016.

If covered by the law, employers must:

  • Disseminate the Pay Transparency Statement, as prescribed and made available by the OFCCP on its website, by either electronic posting OR by posting a copy of the provision in conspicuous places available to employees and applicants for employment; and

  • Incorporate the Pay Transparency Statement into existing employee manuals or handbooks; and

  • Update your equal employment opportunity clause in covered federal contracts/subcontracts and purchase orders to include a prohibition from discharging, or in any manner discriminating against any employee or applicant for employment because the employee or applicant inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. If you are currently only incorporating the nondiscrimination obligation by reference to 41 CFR 60-1.4, you may continue to do so.

It is important to note that the pay transparency nondiscrimination provision is required to be posted in addition to the required “EEO is the Law” posting. Once the “EEO is the Law” poster is updated to reflect the new pay transparency nondiscrimination provision, it will be made available on the OFCCP’s and EEOC’s website. In the meantime, however, you can place the supplement to the “EEO is the Law” poster alongside the “EEO is the Law” poster. You can find the supplement on the OFCCP’s website.

Minimum wage increases for covered contractors

Effective as of January 1, 2016, the minimum wage for certain employees of covered federal contractors will increase by five cents to $10.15 per hour, and the minimum cash wage for tipped employees working on or in connection with covered federal contracts will increase to $5.85 per hour.

Covered contracts include those contracts resulting from solicitation issues on or after January 1, 2015, and contracts awarded outside of the solicitation process on or after January 1, 2015. Significantly, not all federal contractors are subject to this new requirement. As a practical matter, most “supply” contractors, or those providing goods (and not services) to the federal government should not be covered by this new Executive Order.

Article By Margaret R. Kurlinski & Deborah  Rehorst of Godfrey & Kahn S.C.

Copyright © 2015 Godfrey & Kahn S.C.

2015 FDA Wrap-Up and 2016 Regulatory Priorities

Happy New Year! This article will revisit and update the status of significant regulatory issues in 2015 and assess 2016 FDA priorities in the food area.

2015 Overview

  • Office of Dietary Supplement Programs

    On December 21, 2015, the FDA announced the creation of the Office of Dietary Supplement Programs (ODSP).1 The program was formerly a division under the Office of Nutrition Labeling and Dietary Supplements, now known as the Office of Nutrition and Food Labeling. The Department of Justice brought a significant number of civil and criminal cases against the makers of dietary supplements in 2015. The creation of ODSP supports the mission of monitoring the safety of dietary supplements and taking action against entities that present a risk of harm to the consumer.

  • “Natural” Label Claims

    In 2015, the FDA received three Citizen Petitions asking that the agency define the term “natural” for use in food labeling. The term “natural” has been the subject of many food labeling lawsuits. In direct response to requests from the public, the FDA has extended the comment period on the use of the term “natural” in food labeling to May 10, 2016.2 The Morgan Lewis FDA team is currently working on an analysis of the comments submitted to date. Please contact the FDA team if you are interested in submitting a comment.

  • Food Safety and Modernization Act (FSMA) Regulations

    As discussed in our November 16 post, in late 2015, the FDA published three final rules under FSMA: the Standards for Growing, Harvesting, Packing, and Holding of Produce for Human Consumption (Produce Safety rule),3 the Foreign Supplier Verification Programs for Importers of Food for Humans and Animals (FSVP rule),4 and the Accreditation of Third-Party Certification Bodies to Conduct Food Safety Audits and to Issue Certifications (Accredited Third-Party Certification rule).5 These rules implement sections of FSMA geared toward protecting the US food supply. As discussed below, the FDA plans to take further action to implement sections of FSMA in 2016.

  • Menu Labeling Requirements

    As discussed in our post July 13, 2015, FDA released its final rule on menu labeling in restaurants on December 1, 2014, and later extended the date for compliance from December 1, 2015 to December 1, 2016. The rule will require restaurants and similar retail food establishments that (1) sell “restaurant-type food,” (2) are part of a chain of 20 or more locations, (3) do business under the same name or slight variations of each other, and (4) offer for sale substantially the same menu items as the other business locations, to disclose calorie information on menus and menu boards.

  • New York Sodium Warning

    AThe New York City Department of Health and Mental Hygiene Board of Health (Board of Health) Sodium Warning Label Rule went into effect on December 1, 2015. The Rule requires food service establishments in New York City with 15 or more locations nationwide to provide a warning for menu items that contain 2,300 mg or more of sodium. New York City is the first city in the United States to require chain restaurants to include sodium warnings on menus or menu boards. Chains with 15 or more locations have 90 days to comply with the new rule before they face a $200 fine. The rule elicited responses from the National Salt Institute and the National Restaurant Association. The National Restaurant Association filed suit against the Board of Health, claiming that it did not have the authority to require such a warning. We will monitor this lawsuit and provide updates in 2016.

2016 FDA Regulatory Publication Agenda

On December 15, 2015, the FDA released its Semiannual Regulatory Agenda.6 The Agenda outlines the following outstanding proposed and final rules for 2016 with respect to food:

  • Food Labeling; Gluten-Free Labeling of Fermented, Hydrolyzed, or Distilled Foods:7

    This proposed rule was published in late 2015. It would establish requirements concerning compliance for using a ‘‘gluten-free’’ labeling claim for those foods for which there is no scientifically valid analytical method available that can reliably detect and accurately quantify the presence of 20 parts per million gluten in the food. FDA has acknowledged that it is difficult to scientifically detect gluten in fermented and hydrolyzed foods.8 Accordingly, the rule would require manufacturers to make and keep records to show that (1) the food meets the definition for “gluten-free” in 21 C.F.R. 101.91(a)(3), including that the food had less than 20 ppm gluten, before fermentation or hydrolysis; (2) the manufacturer adequately evaluated the processing for any potential for gluten cross-contact; and (3) where a potential for gluten cross-contact has been identified, the manufacturer has implemented measures to prevent the introduction of gluten into the food during the manufacturing process. FDA is accepting comments until February 16, 2016.

  • Food Labeling: Revision of the Nutrition and Supplement Facts Labels:9

    Under the Food, Drug and Cosmetic Act (FD&C Act), this final rule would amend the labeling regulations for conventional foods and dietary supplements to provide updated nutrition information on the label to assist consumers in maintaining healthy dietary practices. The rule would modernize the nutrition information found on the Nutrition Facts label, as well as the format and appearance of the label. The FDA reopened the comment period for this final rule in October 2015, and anticipates issuing a final rule in March 2016.10

  • Food Labeling: Serving Sizes of Foods That Can Reasonably Be Consumed At One Eating Occasion; Dual-Column Labeling; Updating, Modifying, and Establishing Certain Reference Amounts Customarily Consumed (RACCS):11

    Under the Nutrition Labeling and Education Act of 1990 and the FD&C Act, this final rule would modify labeling regulations for foods to provide updated RACCs for certain food categories to assist consumers in maintaining healthy dietary practices. The rule would also amend the definition of single-serving containers; the label serving size for breath mints; and provide for dual-column labeling, which would provide nutrition information per serving and per container or unit, as appropriate. The FDA anticipates releasing the final rule in March 2016.12

  • Focused Mitigation Strategies to Protect Food Against Intentional Adulteration:13

    Under FSMA, the final rule would require domestic and foreign food facilities that are required to register with the FDA to address hazards that may be intentionally introduced by acts of terrorism. Food facilities would be required to identify and implement focused mitigation strategies to significantly minimize or prevent significant vulnerabilities identified at actionable process steps in a food operation. The FDA anticipates releasing the final rule in June 2016.14

  • Sanitary Transportation of Human and Animal Food:15

    Under the 2005 Sanitary Food Transportation Act and FSMA, this final rule would establish requirements for parties and receivers engaged in the transportation of food, including food for animals, to use sanitary transportation practices to ensure that food is not transported under conditions that may render the food adulterated. The FDA anticipates publication of the final rule in April 2016.

Article By Robert G. Hibbert & Heather A. Dorsey of Morgan, Lewis & Bockius LLP

Copyright © 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

1 U.S. Food & Drug Admin., FDA Creates the Office of Dietary Supplement Programs and Announces New Nutrition Office Leadership (Dec. 21, 2015) http://www.fda.gov/Food/NewsEvents/ConstituentUpdates/ucm478303.htm.
2 80 Fed. Reg. 80178 (Dec. 28, 2015) https://www.gpo.gov/fdsys/pkg/FR-2015-12-28/pdf/2015-32471.pdf; 80 Fed. Reg. 69905 (Nov. 12, 2015) https://www.gpo.gov/fdsys/pkg/FR-2015-11-12/pdf/2015-28779.pdf.
3 80 Fed. Reg. 74354 (Nov. 27, 2015) https://www.gpo.gov/fdsys/pkg/FR-2015-11-27/pdf/2015-28159.pdf.
4 80 Fed. Reg. 74226 (Nov. 27, 2015) https://www.gpo.gov/fdsys/pkg/FR-2015-11-27/pdf/2015-28158.pdf.
5 80 Fed. Reg. 74570 (Nov. 27, 2015) https://www.gpo.gov/fdsys/pkg/FR-2015-11-27/pdf/2015-28160.pdf.
6 80 Fed. Reg. 77960 (Dec. 15, 2015).
7 Id. at 77963; 80 Fed. Reg. 71990 (Nov. 18, 2015) https://www.gpo.gov/fdsys/pkg/FR-2015-11-18/pdf/2015-29292.pdf.
8 78 Fed. Reg. 47154.
9 80 Fed. Reg. 77764, 77965 (Dec. 15, 2015).
10 Id. at 77764.
11 80 Fed. Reg. 77765, 77965 (Dec. 15, 2015).
12 Id. at 77765.
13 Id. at 77768.
14 Id.
15 Id. at 77771.

Drones: Insurance Coverage Issues

With new regulations for unmanned aerial vehicles (UAVs, or drones) and a seemingly never-ending expansion of use cases and attendant sources of liability, drone operators and those concerned about damage caused by drones need to carefully consider the role of insurance. As in other contexts, insurance—if carefully tailored and negotiated—can be an effective risk-transfer tool.

Insurance that potentially covers loss related to drones is in flux, but generally falls into three categories:

1. Specialty Aircraft Insurance: While specialty products related aircraft, including for unmanned aircrafts, have been on the market for a number of years, use of those products historically has been limited to individuals, companies and enterprises whose core business relates to aircrafts. This type of insurance is not always tailored to drones with cameras, which raise additional potential liability (e.g., invasion of privacy).

2. Commercial General Liability (CGL) Insurance: Most other insureds rely on a commercial general liability (CGL) policy to provide protection. But earlier this year, the Insurance Services Office (ISO), which proposes and makes changes to the standard CGL form used by most insurers, revised the provisions that might apply to drone-related liability. Some of these revisions purport to exclude coverage for liability related to drones that, for example, might arise from subcontractors’ or independent contractors’ operations for which the insured might be vicariously liable. Other changes to the CGL policy form require detailed attention to specific drones and projects or to whether violations of privacy might occur. The ISO changes warrant careful consideration, both when considering the purchase of insurance, as well as during contract negotiations where risk transfer is a significant issue.

3. Homeowners’ Insurance: Finally, for non-commercial insureds hoping to rely on their homeowners’ insurance policies, many insurers are seeking to include exclusions for drone-related liability in their new policies. Spend the time to learn whether or not your policy provides adequate coverage.

Purchasing insurance for drone-related liability is only the first step. Claims related to damage caused by drones are on the rise and will only continue to rise in the future. When faced with insurance claims, expect insurers to examine closely whether the insured complied with all applicable regulations, industry standards with respect to training, policies or procedures outlined in the application for insurance, and others.

In short, insurance can be an effective risk-transfer tool for commercial drone operators or those concerned about drone-related liability. The recent changes in policy terms and a rapidly-changing marketplace for insurance require diligence and specialized knowledge of how the offered insurance policy fits the insured’s potential liability.

Article By Eric G. Barber & Steven L. Ritt of Michael Best & Friedrich LLP

© MICHAEL BEST & FRIEDRICH LLP

Gun Control: HIPAA Final Rule Targets Background Checks and Mental Health Reporting

President Obama has announced plans to tighten gun control regulations, including applying the background check requirement to dealers at gun shows and on websites.  Federal law already requires that those “engaged in the business” of selling guns must have a Federal Firearms License (FFL) and conduct background checks at the time of every purchase.  Some sellers assert they are not gun dealers but collectors or hobbyists who do not sell regularly and, therefore, are not “engaged in the business” of selling firearms and not required to have a FFL and conduct background checks.  The Obama administration has clarified that people who claim to be hobbyists may be engaged in the business if, for example, they operate an online gun store, frequently sell guns in their original packaging, or pass out business cards.  The Bureau of Alcohol, Tobacco and Firearms (“ATF”) issued Guidance to help individuals understand when a FFL is required.

Consistent with this initiative, the Office for Civil Rights (“OCR”) released a Final Rule modifying the Health Insurance Portability and Accountability Act (“HIPAA”) Privacy Rule to permit certain covered entities to disclose identifying information on persons subject to a “Federal mental health prohibitor “ to the National Instant Criminal Background Check System (“NICS”).

Intersection of NICS and HIPAA

As background, the NICS is a national system mandated by the Brady Handgun Violence Prevention Act of 1993.  Maintained by the FBI since November 1998, NICS is used by Federal Firearms Licensees to instantly determine whether an individual seeking to buy firearms is eligible to do so.  Federal law provides that it is unlawful for certain categories of persons to ship, transport, possess, or receive a firearm.  These categories are referred to as “prohibitors.” Among them  are the following mental health prohibitors, which provide that it is unlawful for the following individuals to possess a firearm:

  • individuals who have been involuntarily committed to a mental institution, for reasons such as mental illness or drug use;

  • individuals found incompetent to stand trial or not guilty by reason of insanity; or

  • those otherwise determined by a court, board, commission or other lawful authority to be a danger to themselves or unable to manage their own affairs as a result of marked subnormal intelligence, or mental illness, incompetency, condition or disease.

Many of the records qualifying an individual for a Federal mental health prohibitor are maintained by the criminal justice system, which does not generally include HIPAA covered entities.  However, some qualifying information may be housed within HIPAA covered entities that are either (i) involved in involuntary commitments or mental health adjudications; or (ii) have been designated by states to serve as repositories to collect applicable mental health data and report it to the NICS.

In balancing individuals’ privacy with public safety, the Final Rule modifies HIPAA to permit the disclosure of select demographic information to the NICS by covered entities that either (i) function as repositories of information relevant to the Federal mental health prohibitor on behalf of the state; or (ii) are responsible for ordering the involuntary commitments or other adjudications.  The Final Rule limits disclosure to demographic and other information needed for purposes of reporting to the NICS, and disclosure of diagnostic or clinical information is not permitted.

Potential Impact on Mental Health Legislation

This Final Rule is one aspect of a multi-faceted approach the Obama administration is taking on gun control.  An open question remains as to whether Congress will act with respect to gun control and mental health, and if so, how?  Certain Republicans are already looking for ways to halt President Obama’s actions, while, others in Congress do not believe that the actions go far enough and seek additional gun control measures.

At a minimum, the President’s decision to take action related to gun controls is certain to have an impact on mental health legislation.  Congressional Republicans have been discussing improving the nation’s mental health system since 2013.  Many see this focus on mental health as an effort to redirect the conversation away from gun control.  As such, the President’s recent actions propose adding $500 million to increase access to mental health care.

The combination of Republicans seeking to dismantle the recent executive actions, while redirecting the conversation to mental health may place Senate Democrats in a tough position.  The President’s action increases the likelihood that gun control measures may be attached to mental health legislation.  The issue is whether Senate Democrats are willing to filibuster mental health legislation in order to keep the focus on gun control and prevent the unraveling of some of the President’s executive actions.

Article By Lauren M. Moldawer, M. Daria Niewenhous & Rodney L. Whitlock of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Auto Industry Record Breaking Sales Close Out 2015

The automotive industry ended 2015 with a bang, breaking the record with nearly 17.5 million sales of cars and light trucks. This tops the previous record of 17.35 million cars in 2000. In all, American consumers spent $570 billion on new cars. This is a significant comeback from the low of 10.4 million cars consumers purchased in 2009.

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Trucks, SUVs, and crossover vehicles had the strongest overall sales in 2015, with an increase in 13% over 2014. The Ford F-150 remained the top selling vehicle in the US. The industry also saw a significant increase in leasing, totaling 29% of new retail sales. Merely 10 years ago, leases accounted for only 16.6% of new retail sales.

As we previously noted on the blog, low fuel prices and easier access to credit, among other factors, drove sales over the past year. Gas prices should remain low in the near term, and although interest rates are slowly increasing, analysts expect a continued upward trend with 2016 predicted to be another record year in the auto industry.

Article By Lauren M. Loew of Foley & Lardner LLP

© 2015 Foley & Lardner LLP