Sunday, August 30, 2015

Elk, Fairfield and Upper Pittsgrove penalized by their insurer for not complying with loss prevention measures.

Upper Pittsgrove Township
Municipal Building
The Gloucester, Salem, Cumberland Counties Municipal Joint Insurance Fund (i.e. the Trico JIF) has produced a table showing that three of its thirty-six member municipalities are being penalized for being out of compliance with the JIF's rules. The report, which is dated July 6, 2015, is the most recent report available.  I called Paul Forlenza, the JIF's Deputy Executive Director to find out what that means.  Here's what I learned.
The JIF offers its municipal members different types of insurance coverage. Among them is Employment Practice Liability (EPL) insurance that covers towns sued by an employees for wrongful termination, sexual harassment, discrimination, invasion of privacy or similar claims.

EPL claims can be very costly because many of those claims are brought under statutes that allow or require employers, including municipal employers, to pay the attorney fees of successful claimants.  For example, N.J.S.A. 34:19-5(e) invites courts to make employers pay their employees's attorney fees in successful Conscientious Employee Protection Act (Whistleblower) lawsuits.

The standard deal that the JIF's municipal clients receive on their EPL coverage is a $20,000 deductible and a 20% coinsurance requirement for the first $250,000 of a claim that exceeds the deductible.  Under this plan, a municipality which suffers a $2,000,000 EPL covered loss will have to contribute $20,000 plus 20% of $250,000 for a total of $70,000 toward the $2,000,000 with insurance covering the rest.

But, non-complaint municipal members (i.e. Fairfield Township in Cumberland County, Upper Pittsgrove Township in Salem County and Elk Township in Gloucester County) are penalized with a $100,000 deductible and  20% coinsurance requirement for the next $2,000,000 of a claim. This means that a non-compliant municipality which suffers a $2,000,000 EPL claim must contribute $100,000 plus 20% of $2,000,000 for a total of $500,000 with insurance covering the rest.

Taxpayers clearly should want their town to be complaint with the JIF's rules because non-compliance could cost them up to $500,000 in deductibles and coinsurance for each major EPL lawsuit instead the the $70,000 exposure faced by compliant towns.

So, what would it take for Fairfield, Upper Pittsgrove and Elk to become complaint?  According to the JIF's rules (actually they're the rules of the Municipal Excess Liability Fund (MEL)), every two years each insured municipality must submit a checklist showing that it has adopted and updated written policies governing matters such as sexual harassment, employee complaint investigations and conflicts of interest. It also must distribute a handbook to its employees and provide training for managerial and supervisory personnel.  The MEL believes that clear, written policies and mandatory training helps towns avoid expensive EPL lawsuits.

According to Mr. Forlenza, the JIF and MEL stand ready to lower their deductibles and coinsurance requirements and to also help them with the process.  The checklist that Fairfield, Upper Pittsgrove and Elk would have to complete to be recognized as compliant is on-line here.  Many of written policies that these towns would have to adopt are set forth within the MEL's "Model Employee Handbook" or elsewhere on the MEL's website.



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