Business Briefs

• The California Supreme Court heard a case recently that could put businesses in an unusual position of having to decide between following state law or federal law. The case involves a plaintiff who was fired after testing positive for marijuana during a pre-employment drug screening. The man says he was taking the drug under a doctor’s supervision for a back problem and that firing him violated California’s employment and discrimination laws. The state’s voters legalized the use of medical marijuana in 1996. His employer countered that companies have a right to drug test their employees and that the use of marijuana violates federal law. Eleven other states have medical marijuana laws similar to California. They are: Alaska, Colorado, Hawaii, Maine, Montana, Nevada, New Mexico, Oregon, Rhode Island, Vermont and Washington. A decision in the case is expected early in 2008.
• The label on a small tractor that reads “Danger: Avoid Death” has won Michigan Lawsuit Abuse Watch’s 11th annual “Wacky Warning Label” contest. In second place was a T-shirt label that reads “Do not iron while wearing shirt.” And in third place was a warning on a baby stroller with a small pouch that advises: “Do not put child in bag.” The group uses the annual contest to highlight what they see as lawsuits, and the fear of lawsuits, run amok. “The real issue is not the obvious warning labels, but the billions of dollars in litigation costs passed on to consumers -- a kind of a ‘lawsuit tax’ we all pay,” said Dorigo Jones the president of the group.
• If you’re planning on using vehicle safety tests to help you pick company cars, that’s fine. But if you’re weighing your choice using the ratings for trucks, you may want to think again. New data from Virginia Commonwealth University show that safety ratings from the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety only are predictive in real-world crashes involving cars. The ratings for trucks don’t seem to show how safe those vehicles are on the road. “If you're thinking about buying a passenger car, then the crash test scores can be useful to you,” said study co-author David Harless, professor of economics in the university’s school of business. “But if you are thinking of buying a truck, we have no evidence that the tests are meaningful in terms of real-world performance in serious crashes.”

Getting a handle on an aging workforce

The U.S. population is living longer, staying healthy longer and working longer. That’s the good news.

The bad news is that elderly workers are much more likely to make workers compensation claims and potentially create a burden for companies that are not prepared to accommodate an aging workforce.

The U.S. Department of Labor shows that the percentage of workers between the ages of 65 and 69 still in the workforce has grown about 30 percent since 1998. The growth is even more pronounced for those between the ages of 70 and 74. An increase in life expectancy is partially behind this trend, but more important is a decrease in the number of older Americans with disabilities.

A recent article by Kenneth G. Manton, XiLiang Gu, and Vicki L. Lamb in the Proceedings of the National Academy of Sciences showed just how much healthier today’s elderly population is than in previous years. The percentage of those older than 65 who suffered from some sort of disability dropped from about 26 percent in 1982 to just 19 percent in 2005. And the older the age group, the more dramatic the numbers. About 32 percent fewer Americans older than 85 suffered from a disability in 2005 when compared to 1982.

Steven Weisbart, vice president and chief economist of the Insurance Information Institute, recently highlighted this trend at the Executive Conference for the Property/Casualty Insurance Industry of New York. Weisbart said he expects this number of older employees to grow even higher as many workers discover that they cannot afford to retire at the traditional retirement age of 65.

And all these older workers can create a strain on the workers compensation system. The median days away from work for those older than 65 is twice the amount for those in their twenties, according to the Labor Department. The fatality rate for workers older than 65 is triple that of workers 35 to 44, Weisbart said.

The bottom line for businesses is that they need to prepare for this avalanche of older workers. That could mean redesigning workplaces to accommodate the number of older workers who remain on the job or preparing to deal with workers who may be partially covered by Medicare. Any employer facing a rapidly graying workforce might also consider talking to their insurance representative to find out if there are any steps they can take to minimize their risks.

The added risk of climate change

With all the attention global warming has gotten in the last few years, it sometimes has been difficult to separate the hype from the real risks climate change poses to people and physical assets. A recent report from the Organization for Economic Co-operation and Development, Risk Management Solutions and several leading researchers attempts to do just that.

They looked at the dangers posed by coastal flooding to key cities throughout the world and how shifts in population and climate could increase those risks. While most of the worst-off cities are confined to developing countries in Asia, rich Western countries, including the United States, could be affected.

The report predicted that property and infrastructure exposure will increase from $3 trillion today, or 5 percent of global GDP, to $35 trillion in the 2070s, or 9 percent of the projected global GDP. Miami is projected to have the highest property and infrastructure exposure by the 2070s, with more than $3.5 trillion of exposed assets. New York came in third with $2.1 trillion. New Orleans and Virginia Beach also made the top 20 list of most vulnerable cities.

“These findings deliver a clear message to businesses that invest, or are planning to invest, in highly exposed cities to start implementing pro-active risk management strategies that consider how risks will evolve over time,” said Dr. Celine Herweijer, principal scientist of future climate at RMS. “Crucially, rising hazard does not have to translate into increased risk if the right measures are taken.”

So what measures can be taken?

Well, on the personal and business level the most important thing to do is know the risks and plan for them. Before you invest or expand in areas that could be more prone to flooding in the future, calculate the added risk into your plans. Be aware of city flood defenses and any steps being taken to strengthen them. And make sure your insurance keeps pace with any rising hazards.

On the city level, the report advocates encouraging building away from flood zones and urges improvements in flood warning and evacuation procedures. It also encourages improving city defenses, but those improvements can take time to build. It points out that projects like the Thames Barrier in England can sometimes take more than 30 years. To buy that kind of time the report also advocates an increase in global mitigation efforts to slow or stop climate change.

Litigation down in 2007

It appears American business is losing a bit of its taste for litigation – at least for now. The latest litigation trends survey from the law firm Fulbright & Jaworski finds that the number of lawsuits filed both by companies and against them was down in the last year.

The survey was based on interviews with 250 major U.S. corporations. It shows about 50 percent more companies reported having no lawsuits filed against them and slightly more companies reporting that they initiated no lawsuits against anyone else. Those surveyed also were more optimistic than last year that they would see less litigation in the coming year. Even government regulatory proceedings brought against the companies surveyed were down.

“The data this year point to a pronounced drop in new case filings – both against, and by American companies, a reversal of the upward trajectory in the number of new lawsuits from our previous three surveys,” said Stephen C. Dillard, chair of Fulbright & Jaworski’s global litigation practice.

But it isn’t all good news. While the survey suggests a dip in securities and bankruptcy disputes, patent cases and lawsuits stemming from product liability are on the rise. And 40 percent of the companies surveyed say they were hit with at least one suit in the past year with more than $20 million at issue.

Hurricane forecasters miss the mark, again

Another hurricane season has come to an end, and for the third year in a row forecasters were off the mark on how severe the season would be.

In 2005, the year of Hurricanes Katrina and Rita, forecasters’ predictions were too low. In 2006 and 2007 they were too high. Just before the start of the hurricane season, the Tropical Meteorology Project, headed by Colorado State University’s William Gray, predicted 17 named storms, nine of which would develop into hurricanes. They predicted that five of those storms would be categorized as “intense” hurricanes, or hurricanes of category 3 or higher. This would have been an above-average hurricane season. But the season turned out to be only average. There were only 14 named storms of which only six were hurricanes. And only two of those hurricanes became intense storms. The National Oceanic and Atmospheric Administration’s predictions were somewhat better, but still overestimated the intensity of the season.

The forecasters, taking into account the trouble they’ve had in recent years, have released preliminary estimates for the 2008 season. The Tropical Meteorology Project is forecasting an above-average season next year with 13 named storms, seven of which they expect to turn into hurricanes. They predict that three of those storms will be intense storms.

Despite the trouble with storm prediction from year to year, it is important to remember that it only takes one hurricane to affect your business. Some experts are worrying that two relatively quiet hurricane seasons will lull people into a false sense of security. So, if you live in a hurricane-prone section of the United States, it is a good idea to check with your insurance representative to make sure you have adequate coverage before the season starts.

Wellness programs booming

As more companies have come to recognize the value of employee wellness programs, more have begun offering financial incentives to reward workers who adopt healthy lifestyles.

A survey of 355 large businesses by the consulting firm Watson Wyatt and the National Business Group on Health found that 46 percent of them offer financial incentives to encourage workers to monitor and improve their health or plan to offer incentives next year. By 2009, that number is expected to surpass 70 percent.

“With few options left, companies are putting significant emphasis on improving the health and productivity of their workforce” said Shelly Wolff, national practice leader for health and productivity at Watson Wyatt. “Global competition and pressure for greater efficiency are causing employers to seek new ways to help manage benefit costs and increase worker output. Increasingly, companies are looking at the health of their workers as the new growth engine to stave off health care inflation and keep employees on the job and productive.”

The numbers show that employers who use such programs are doing better than their competitors. They achieve 20 percent more revenue per employee, have cost increases that are five times lower for sick leave; four and a half times lower for long-term disability; four times lower for short-term disability; and three and a half times lower for general health coverage. It is unclear from the survey if these results are caused by the wellness programs or if they are simply correlated. Either way, they should be encouraging for any business thinking of instituting such programs.