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Expediting Your Loan – Insurance Proofs Demystified

Published on: July 8, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

You have a commitment from your Lender; certainly you should be able to close in one week, Right? Wrong. When closing a loan, there are many areas that can derail you from a timely closing. One area of particular concern and which often delays closing, is with respect to the Lender’s insurance requirements. To reduce discrepancies or issues leading up to closing, and to ensure that closing occurs as expeditiously as possible, it is important to understand the Lender’s insurance expectations and requirements at the outset; specifically, as set forth in the Lender’s commitment letter.

For commercial mortgage transactions, Lenders typically require a) property insurance on a “special form of loss” policy, previously referred to as an “all risk” policy, and b) commercial general liability insurance. For the property insurance, the lender will require the property to be insured at least in the amount of the loan and it will require a standard mortgage clause that names it as the mortgagee. Prudent lenders also typically require that the policy must be endorsed as “lender’s loss payable,” which gives the lender the right to receive the loss payment on a claim even if the insured has failed to comply with certain terms of the policy or because the loss was occasioned by the insured’s wrongful acts. The liability insurance policy should name the Lender as an additional insured and should waive all rights of subrogation against the mortgage lender. Often times, an insurance broker will claim that the lender has no insurable interest, and therefore cannot be added as an additional insured on the commercial general liability policy. The lender is concerned that if its borrower suffers an uninsured loss that is beyond its ability to absorb, the borrower’s continued viability is at stake. Furthermore, even though the likelihood of a claim against a mortgagee for injuries incurred at the mortgaged property is small, the lender wants to reduce its chance that its own insurance will be required to pay a claim that would be covered by the borrower’s required insurance. As an additional insured, the lender is entitled to the benefits of the policy but is not charged with the obligations of the named insured, moreover, the insurer cannot exercise subrogation rights against its own insured.

To prove you have the correct insurance in place, the Lender typically requires specific types of insurance proofs to be produced and approved prior to closing. In the past, certificates of insurance were provided to Lenders in the form of an ACORD 27 (for residential property) or ACORD 28 (for commercial property) as evidence of property insurance, and an ACORD 25, as evidence of commercial general liability insurance. In 2006, the ACORDs were revised to indicate that they do not grant any rights in coverage to the policy holder or to the mortgagee, additional insured, certificate holder, lender, etc. Essentially, these certificates are often prepared by insurance brokers as a summary of what coverage is purported to exist, but they do not prove that there is coverage under a particular policy and they do not grant coverage. This essentially makes these certificates or evidences of insurance ineffective in the risk management arena. They are merely for informational purposes only and their validity and accuracy cannot be verified without the underlying policy documents. As a result, many lenders now require, in addition to the ACORD forms, that as part of the normal due diligence process, a copy of the policy be produced and reviewed by the lender and the lender’s insurance advisor. In order to avoid delays, the ACORD forms and policy documents should be provided to the lender well in advance of closing so that the lender has sufficient time to process and review the insurance.

Department of Justice Hitches Environmental Crimes to Worker Safety Violations

Published on: July 7, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

THE FOURTH QUARTER OF 2015 saw two striking pronouncements on criminal prosecutions and civil actions against individuals. The first, referred to unofficially as the “Yates Memo,” came in the form of new guidance to the Department of Justice (DOJ) and all United States attorneys on individual accountability. The second came in the form of a memorandum of understanding (MOU) between the DOJ and the Department of Labor (DOL). The MOU was designed to bolster the environmental side of worker safety violations, by scrutinizing environmental records.

Armed with two new tools, prosecutors are now equipped to examine violations involving worker safety using criminal environmental statutes. Thus, if the government accuses a company of worker safety violations, the company may expect a close analysis of their environmental record. The MOU itself is the next logical step of the DOJ’s strengthening its enforcement cases involving worker safety violations under environmental statutes. With the new understanding between the DOJ and the DOL, civil division attorneys are to share information with criminal division attorneys. Moreover, the MOU requires that criminal division attorneys explain to a supervisor why they did not seek charges against an individual company wrongdoer.

What circumstances brought about the new push?

Unmanned Aerial Vehicles and the Construction Industry

Published on: March 22, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Lindabury Construction law attorney Chloe Mickel authored an article for the American Bar Association’s Forum on Construction Law which examined the beneficial uses unmanned aerial vehicles (“drones”) can provide.

While drones are rapidly becoming more commonplace in both the consumer and business markets, the construction industry has been slow to integrate them into their day-to-day operations. The benefits drone technology provides to those in the construction field include the faster completion of site surveys; the ability to monitor construction progress in real time and the capture of high quality, unique images for site marketing.

Read Chloe’s article, Despite Clear Benefits, the Construction Industry is Slow to Integrate Unmanned Aerial Vehicles into Projects, which was published in the Spring 2016 edition of the Forum’s newsletter, Under Construction.

Pressing an Employee About Retirement Can be Evidence of Age Discrimination

Published on: March 12, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Employers are often tempted to make inquiries to older employees about their retirement plans. At times these inquiries are motivated by a desire to be prepared for future staffing needs in the event of a retirement, but at others they are driven by a desire to rid the workplace of “dead wood” to make room for “fresh talent.” However, federal and state law prohibit age discrimination in employment and employers must tread carefully when making any inquiries about an employee’s retirement plans. Although an employer is permitted to make proper inquires under certain circumstances, one employer found out how easily these inquires can bu used as evidence of age discrimination.

Recently, the District Court of New Jersey denied Defendants, Wildwood Beach Patrol and two individual employees, summary judgment on Plaintiff Louis Cirelli’s age discrimination claim, on the basis that Plaintiff offered sufficient evidence of discriminatory animus. Along with a reduction in Plaintiff’s duties and responsibilities, the court noted that Defendants’ questions to Plaintiff regarding how long Plaintiff, who was 66 years old, intended to work for the Wildwood Beach Patrol was evidence of unlawful discriminatory treatment constituting a discriminatory animus sufficient to deny Defendants’ motion for summary judgment.

Facts: Plaintiff Louis Cirelli, age 66, was employed by the Wildwood Beach Patrol for 48 years. According to Cirelli, in 2011 the Commissioner of Public Safety and Cirelli’s immediate supervisor asked him when he was going to retire, told him to concentrate on his administrative duties, and delegated his operational duties to the Captain of the Beach Patrol who was 20 years younger. At a 2012 meeting the Captain asked Cirelli “just how long are you going to be hanging around here?” According to Cirelli, at that same meeting the Captain presented him with a list of “Best Practices” for the Beach Patrol. Finally, Cirelli maintained that his name was not included on the Beach Patrol website and on training information and forms provided to new lifeguards. Cirelli had net been subject to any prior reprimands or discipline.

Second Circuit Backs NLRB: Facebook “Like” May Be Protected Concerted Activity Under Section 7 of the NLRA

Published on: March 9, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Section 7 of the National Labor Relations Act guarantees that “employees shall have the right to self-organization, to form, join, or assist labor organizations….and to engage in other concerted activities for the purpose of…..mutual aid or protection….”. The National Labor Relations Board (the “NLRB” or “Board”) has increasingly expanded the protections accorded to employee electronic communications under Section 7, even when electronic communication on social media includes disparaging and obscene comments about the employer. When social media posts touch upon the subject of employee wages, discipline or other terms and conditions of employment, these exchanges may constitute “concerted activity” protected by the NLRA.

Recently, the United States Court of Appeals for the Second Circuit upheld the NLRB’s decision in Triple Play Sports Bar and Grille (Triple Play) (2014), that the termination of two employees supporting a former employee’s obscenity-laced Facebook post disparaging Triple Play’s management was protected speech. While many employers believe that public disparagement and obscenities are a legitimate basis for termination, this decision illustrates the risks facing employers who take action against employees who increasingly resort to social media to complain about work-related matters.

Facts: LaFrance, a former employee of Triple Play, posted an update on her Facebook page criticizing Triple Play’s failure to properly complete tax withholding paperwork, causing her to owe the state money. The post stated “maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money…Wtf???” Spinella, a cook at Triple Play, clicked the “Like” button accompanying LaFrance’s post. Sanzone, a waitress at Triple Play, posted “I owe too. Such an asshole.” Several customers of Triple Play viewed the Facebook activity and Triple Play was eventually notified of the Facebook activity and in turn terminated the employees.

National Labor Relations Board Continues to Invalidate Arbitration Agreements Containing Class Action Waivers, Backing Federal Court Rulings

Published on: February 23, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

In its recent decision in Murphy Oil USA, Inc., the National Labor Relations Board (NLRB) reaffirmed its earlier decision in D.R. Horton, Inc., that requiring employees as a condition of employment to waive their right to bring class, collective or joint actions violate the National Labor Relations Act (NLRA). The NLRB’s ruling is at direct odds with a ruling from the Fifth Circuit Court of Appeals that overruled the D.R. Horton decision and held that class action waivers in arbitration agreements do not violate the NLRA, so long as employees retain the right to bring individual claims. The Second and Eighth Circuits have likewise rejected the NLRB’s reasoning in D.R. Horton.

Facts: Murphy Oil required all job applicants and current employees, as a condition of employment, to sign a “Binding Arbitration Agreement and Waiver of Jury Trial.” The Agreement provided that disputes related to employment shall be resolved by binding arbitration and that the parties “waive their right to commence or be a party to any group, class or collective action claim in arbitration or any other forum.” Sheila Hobson signed this Agreement when she applied for employment with Murphy Oil in 2008. Two years later, Hobson and three other employees filed a federal collective action against Murphy Oil alleging violations of the Fair Labor Standards Act (FLSA). In response, Murphy Oil filed a motion to compel the plaintiffs to arbitrate their claims on an individual basis. That motion was granted by the federal court and the action was stayed pending arbitration of the individual claims.

Subsequently, the NLRB General Counsel issuing a complaint alleging Murphy Oil violated Section 8(1)(a) of the NLRA by maintaining and enforcing a mandatory arbitration agreement prohibiting employees from engaging in protected, concerted activities.

Examining Harassment Under New Jersey’s Prevention of Domestic Violence Act

Published on: February 3, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Examining Harassment Under the PDVA

When does ‘annoying’ or ‘alarming’ behavior warrant protection?

Nearly half of the 65,000 domestic violence complaints reported in New Jersey each year are based on claims of “harassment.” Our judicial system expends extensive time and effort, case by case, to determine which of those claims qualify as true domestic violence under the Prevention of Domestic Violence Act (PDVA). Given the volume of allegations made in the name of harassment, the courts have cautioned litigants against wasting resources and trivializing the plight of genuine victims by asserting frivolous harassment claims.

OSHA Provides Employers with Guidelines on Restroom Access for Transgender Employees

Published on: December 24, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Throughout the years OSHA has promulgated a substantial set of regulations to improve overall health and safety in the workplace, including the requirement that employers provide employees with sexually-segregated sanitary toilet facilities. On June 1, 2015, the Occupational Safety and Health Administration (“OSHA”) issued a best practices guide for employers titled “A Guide to Restroom Access for Transgender Workers.” The publication’s core principle is that all employees, including transgender employees, should have access to restrooms that correspond to their gender identity.

In its publication OSHA acknowledged the potential questions employers will face regarding which facilities a transgender employee should use. According to OSHA, “a person who identifies as a man should be permitted to use the men’s restroom and a person who identifies as a woman should be permitted to use the women’s restroom.” OSHA’s policy is based on the reasoning “that restricting employees to using only restrooms that are not consistent with their gender identify, or requiring them to use gender-neutral or other specific restrooms, singles those employees out and may make them fear for their physical safety.” Additionally, OSHA believes these restrictions can result in employees avoiding the use of restrooms while at work, which can lead to potentially serious physical injury or illness.

OSHA observed that the best employer policies provide various restroom options that the employee may choose, such as single-occupancy gender-neutral facilities and use of multiple-occupant, gender-neutral restroom facilities with lockable single occupant stalls. Moreover, employees cannot be required to use a segregated facility apart from other employees because of their gender identity or transgender status. OSHA’s best practices further advises employers that they cannot ask employees to provide medical or legal documentation of their gender identity.

Unfair Labor Practice Charges Dropped By Employees Allegedly Threatened For Social Media Posts

Published on: November 4, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

As part of a recent labor contract deal between the nurses’ union and Meridian Health in New Jersey, the union agreed to withdraw an unfair labor practice charge filed with the National Labor Relations Board (“NLRB”) alleging Meridian unlawfully threatened nurses who posted social media messages in support of the union’s ongoing contract negotiations with Meridian. Meridian Health had responded to the charges by acknowledging that it maintained “a comprehensive social media policy that outlines exercising good judgment and refraining from communicating patient information or proprietary information of Meridian.”

Although the spat between Meridian and the union was averted by the contract settlement, it serves as yet another illustration of the risks faced by employers who take action against employees for their social media activities. Both union and non-unionized employers must be mindful of the significant protections accorded to employees who engage in work-related social media communications. Section 7 of the National Labor Relations Act (“NLRA”) provides that “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…” In the Meridian case, the union charged that the hospital’s threats against nurses for their pro-union posts ran afoul of these NLRA rights.

Through a series of reports, the NLRB has recognized that employee social media communications may indeed constitute protected concerted activity under Section 7. For employers with a unionized workforce, the NLRB has predictably observed that employee posts pertaining to collective bargaining, strikes or other labor actions are examples of protected activity. Moreover, the NLRB has reaffirmed that Section 7 rights also extend to non-unionized workplaces, and thus employee social media communications addressing disciplinary actions, wages, or any other terms and conditions of employment may likewise be protected under the NLRA. In several recent rulings the NLRB declined to strip employee posts of Section 7 protection even though they were laced with profanities and disrespectful comments about the employer.

Employers Who Implement Effective Sexual Harassment Policies Can Avoid Vicarious Liability

Published on: March 5, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

In its recent landmark decision in, Ilda Aguas v. State of New Jersey, No. A-35-13 (Feb. 11, 2015), the New Jersey Supreme court broke new ground in the law of sexual harassment with an opinion that can be viewed as a victory for both employers and employees. For employers, the Court formally adopted the United State Supreme Court’s affirmative defense analysis, which may now be invoked to shield employers from liability for a supervisor’s sexual harassment. Consistent with the affirmative defense, the Court made clear that the defense is only available to those employers who develop comprehensive and effective sexual harassment programs that include written polices, complaint procedures, employee training and prompt investigation of harassment complaints.

On the employee side, the Court expanded the definition of “supervisor,” thus broadening the scope of employee’s whose conduct can trigger employer liability for workplace sexual harassment.

The Facts: Aguas, a corrections officer at the Department of Corrections (DOC), alleged her male supervisors sexually harassed her over the course of several months, including inappropriate comments and touching. Aguas conceded her supervisors did not take any tangible employment action against her.