Most insurance agencies have websites and most of those websites have photographs of some kind. A couple of clients of mine have recently seen what can happen when not enough attention is paid to the source of the photographs used on their websites. It can result in the payment of thousands of dollars to people or companies you may have never heard of to avoid being sued in federal court.
That can happen if the photograph used is copyright protected and the permission of the copyright holder for the use of the photograph on your website was not obtained. Under the federal copyright law, any writing, photograph, video, or other similar item created by someone is automatically protected by that law. As a general rule, the person who created the item owns it and has the right to prevent its use for any purpose by anyone else. Just because that person chooses to put the item on the internet does not mean they have waived their rights under that law. Therefore, you can not assume, as some people do, that anything found on the internet can be used by anyone for any purpose. In fact, to be safe, the opposite assumption, that you cannot use anything you may find on the internet without getting someone’s permission, should be made.
As noted above, the consequences of using a copyright protected item without permission can be significant. The federal copyright law provides minimum statutory penalties for an unauthorized use of a copyright protected item, which penalties will apply even if the user was not aware the item was copyright protected. With respect to a website, they will also apply even if the owner of the website had someone else create it and had nothing to do with the selection of the photograph, video, or other item in question. The statutory penalty starts at $750 and can go as high as $150,000 for a knowing and willful copyright infringement. If the user can prove to the court’s satisfaction that it was not aware and had no reason to believe that its actions infringed on a copyright, the court can reduce the statutory penalty to no less than $200. Any suit for infringement of a copyright can be filed in federal court and if the copyright owner prevails, it will be entitled to recover its attorney fees and other litigation expenses.
From the above, it is clear that a claim of copyright infringement should always be taken seriously. To protect yourself from such a claim, only photographs that are clearly indicated to be in the “public domain”, that is, not copyright protected, or for which a license fee is paid should be used in a website or for any other purpose. Be sure to keep a record of the payment of the license fee and the item for which it was paid. Don’t rely on the seller to do that for you or to accurately report to any copyright enforcement agency it may use that you have paid the fee. If you do receive a cease and desist or demand letter from such an agency, you should immediately take down the offending item, until a resolution of your right to use it is reached. For additional advice on what to do in that situation, click here.
I recently received a call on the Free Legal Service Program (1-800-IIAG911) that I operate for members of IIAG in which the agent complained at some length about the fact that his customers and competitors are either not aware of the recently passed law governing the issuance of insurance certificates or do not care about its requirements. This agent was trying to obey the law, but there were apparently many other agents who were willing to overlook its requirements to get the customer’s business. In doing so, those agents not only risk the taking of disciplinary action by the Insurance Commissioner, which can include a fine of up to $5,000, but they also expose themselves to an E&O claim by the customer or the person to whom the customer provides the certificate due to the fact that an insurance certificate that does not satisfy the requirements of the law is essentially a worthless piece of paper. The new law states that all such certificates are “null and void and of no force and effect.” (Click here for an earlier post on the regulation recently issued by the Insurance Commissioner to implement the new law.)
Pointing out the above fact to your customers may be helpful. For those who are members of the IIAG, I have drafted a letter that can be used to explain the requirements of the new law and regulation to your customers or to third parties who may contact you demanding that an insurance certificate that does not comply with that law and regulation be issued. IIAG members can either contact me or the association’s office to request a copy of the letter.
It may be some consolation that agents in Georgia are not the only ones having the kind of problems that the agent who called me complained about. I participated in a conference call yesterday with six other attorneys, all of whom represent independent insurance agent associations in other states. The first topic brought up for discussion was the status of insurance certificate regulation. It turns out that some other states can not even get a law on that subject passed due to objections expressed primarily by the construction industry and believe it or not, state agencies. In those states where an insurance certificate law had been passed, there was apparently little effort being devoted to enforce it. Sound familiar?
The Insurance Commissioner has stated many times his willingness to go after insurance agents who are not obeying the law. If you want the problems with insurance certificates to be resolved, then the Commissioner’s Office must be informed every time an agent issues an insurance certificate that does not comply with the law or the Commissioner’s regulation or a customer or third party contacts you request the issuance of such a certificate (it is a violation of both to either issue or request the issuance of such a certificate). A few high-profile enforcement actions by the Insurance Commissioner’s Office should go a long way toward convincing insurance agents and their customers that they cannot continue business as usual in this area.
A little over a year ago, I posted a warning about the renewed focus of the IRS and U.S. Department of Labor on the misclassification of workers as independent contractors when they were, in fact, employees. That warning mentioned the tendency of some agencies to classify their producers as independent contractors in order to avoid having to pay FICA and other withholding taxes and provide benefits to them. It referred my readers to an explanation of how the test used by the IRS to determine if a worker is an employee or independent contractor would apply to the typical agency/producer relationship. (Click here for the post and a link to the explanation.)
As pointed out in that post and in a longer article I have written on the subject, the financial penalties that can be imposed by the IRS if it determines that a particular worker is really an employee and not an independent contractor are significant and for a small business could be terminal. A recent decision of the United States Court of Appeals for the Eleventh Circuit, which covers Georgia, points out the risk under the Fair Labor Standards Act of having such a determination made by a court or the Department of Labor. In that case, Scantland v. Jeffry Knight Inc., a class of over 500 cable installers had sued their employer claiming that they were really employees and not independent contractors and were thus, entitled to receive overtime pay for any hours they had worked in excess of 40 hours during any one week. Since most of the installers worked at least 6 days a week, the potential liability of the employer for such pay was substantial, especially in light of the fact that, if they were successful, the installers could ask for overtime pay for the time period up to three years before the lawsuit was filed and that liquidated damages in an amount equal to the overtime pay awarded could be assessed against the employer. In addition, the employer would be liable for the payment of FICA and other required withholding taxes on all the overtime pay awarded.
The test under the Fair Labor Standards Act for determining whether a particular worker is an employee or independent contractor is similar but not identical to the one used by the IRS. It consists of six factors that focus on the control exercised by the employer over the worker’s activities, the ability of the worker to make a profit or loss based on their managerial skill, the type of services being rendered by the worker, and the permanency and duration of the relationship. As with the IRS test, the existence of a written contract that says the worker is an independent contractor is not controlling. The factors will be applied to the relationship as it actually exists with the overall consideration being whether the worker is economically dependent on the employer for their livelihood.
Given the similarity of the factors used by the IRS and the Department of Labor, my analysis of the typical agency/producer relationship using the IRS factors would apply equally to the Fair Labor Standards Act’s factors. As noted, in my previous blog post, in most instances, a typical producer is an employee not an independent contractor. Another similarity between the IRS and Fair Labor Standards Act rules in this regard is the potential for members of the management team of an employer to be held personally liable for the payment of the money owed the workers for overtime pay and any liquidated damages. Whenever an agency owner is considering treating a producer as an independent contractor, he or she needs to ask themselves if they are prepared to assume the risk of doing so.
The company that handles the professional liability program for IIABA, Swiss Re Corporate Solutions, recently distributed a memo to its policyholders reminding them of the need to either learn about the Affordable Care Act or get out of the business of selling health insurance, either individual or group. That’s because, if you aren’t knowledgeable about the provisions of that Act and yet you still offer to assist your customers with their health care insurance needs, you are a malpractice claim waiting to happen. As noted in the title of the memo, procrastination on this subject is not an option for insurance agents.
The memo poses five representative questions about the provisions of the Affordable Care Act related to large employers (i.e., 50 or more full-time equivalent employees) that agents should be able to answer. If you can’t answer those questions now and you want to still be able sell group health insurance coverage without risking your livelihood, you need to take advantage of the many resources available on these and other provisions of the Act. The memo lists some of those resources (click here for a link to it), most of which I have mentioned in my earlier posts on this subject (click here for those posts). The IRS has created a more comprehensive list of online resources provided by the federal government. that anyone interested in this subject should check out.
In addition, the federal agency mentioned in my earlier posts, the Center for Consumer Information & Insurance Oversight (“CCIIO”), will be offering a webinar later this month limited to members of the IIABA on the training and registration requirements that agents will have to meet in order to assist individuals and small businesses in using the health care exchanges that are to be set up for them under the Affordable Care Act. The webinar will be on Friday, August 23, from 1:00-2:30 p.m. Information on how to register for it can be found here.
If you want to get a head start on this subject, the CCIIO has created webinars on the training process that are accessible from the website it has developed to provide agents and brokers with resources to learn about the provisions of the Affordable Care Act and how those provisions relate to the services they perform. While there, you may want to check out the links to the various insurance industry organizations that have created materials to assist agents and brokers in learning about the Act.
Finally, here is a link to a blog post that summarizes the 15 provisions of the Affordable Care Act that will take effect as of January 1, 2014. One of the provisions mentioned, the large employer mandate, was recently postponed until January 1, 2015, but as pointed out in another blog post on the same site, that is no reason for such employers to relax. Although this post is directed at human resource managers for such employers, the advice given about what the delay means for such employers applies equally to insurance agents and brokers whose customer base includes them.