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These articles by Bart Jackson, Pete Mladineo, and Barbara Fox were prepared for the June 2, 2004 edition of U.S. 1 Newspaper. All rights reserved.
The Self-Insurance Option
Next time you stroll into a major insurance company’s headquarters, with its opulent architecture and lush interiors, you may find yourself asking, “Who pays for all this?” While insurers cry poverty due to fraud, they have been somehow able to bankroll entire South American governments since the early ‘80s with your premiums. And during the national health care debates, the annoying little statistic kept surfacing that the government planned to administer health insurance for one twelfth of what private companies were charging. Granted, health care insuring is a profitable trade; the question is, how much should you really have to contribute?
Fifty million Americans currently have chosen the thriftier path of self-insuring, a roadway that is mapped out in “Lowering Your Health Insurance Costs — Let Me Count the Ways,” a panel discussion on Thursday, June 3, at 8:30 a.m. at the Hilton Garden Inn in Edison. Cost: $50 (www.NJTC.com).
Sponsored by the New Jersey Technology Council, the panel will include moderator Richard Maloy, founder of Maloy Risk Services and Insure HiTech at Forrestal Village; Bill Hutchinson of NMG Inc.; Barbara Davis, director of client services for National Benefit Administrators; Sam Stettler, CEO of the Stettler Group and Mary Ann Egan, also of the Stettler Group. The panel will describe several self-insuring plans for companies with 25 to 50 employees, and set up a working model that can be adapted.
By age 18, young Maloy knew more about insurance than most executives in the trade receiving gold watches. He couldn’t help it. He was the fifth generation of Maloys to broker insurance. His great-great grandfather, Joseph Maloy, began selling policies in 1872 and the knowledge snowballed. As a boy in Matawan, Rick Maloy hung around his father’s office, listened to the nightly dinner table discussions and as a teen was his dad’s employee.
Having been steeped in such rich tradition may have stained many inheritors of a family business with a hidebound, petrified view of the field. Not Maloy. After his education at North Carolina’s Wake Forest College, Maloy saw the future of technology. With an equity investment from J.P. Morgan, Maloy created an operating platform that streamlines the workflow of an insurance brokerage. He launched Insure HiTech at the height of the dotcom boom (see article on page 49). Recovering, he has transformed that into an insurance wholesaler, while spinning off the retail trade into Maloy Risk Services.
The insurance world’s actuarial tables are legends of precision. Taking the whole population, they can foretell the exact number of folks who will get heart attacks, pregnancies, leprosy, you name it. And based on that, they can very exactingly determine a corporation’s overall premium. The trouble is, your business may not reflect the whole population. Technology companies, in particular, typically have the majority of employees in the 25 to 45 age group. Young and healthy, they still pay the same high premiums applied to an older population. In short, they get less service return for their health care dollar. For such a firm, Maloy points out, self-insuring is a process certainly worth studying.
Traditional coverage. Health insurance is a quasi state-regulated industry in New Jersey, as in most states. Smaller companies with fewer than 50 employees answer no health-related questions when they buy a policy. In fact, the regulations are so set that only a handful of major companies find it profitable to work within the required framework, leaving smaller Garden State companies with only six plans from which to choose.
While these plans have definitely become more accommodating throughout the years, they still fit like a beautiful, custom tailored suit — designed for somebody else. Each year policies change, and thus each year, you may be seduced into the hassle of switching carriers and plans.
Self-Insuring. No, it is not simplicity itself, and no, it does not mean that you just toss money into an account and are ever after free from dealing with any insurance company again. Maloy explains that insuring yourself entails taking fiscal responsibility for yourself, with all the calculating entailed in any business venture. The first step is to sit down with a self-insuring agent who helps you design a coverage plan, including a minimum and maximum loss potential. “Your maximum outlay will probably match what you would pay in the traditional plan, and if you have a good plan you will save money.”
Based on the plan, the agent will study your company’s claims history and work out the maximum amount that you would during the year. (If it is more than your current premiums, retrace your steps to the traditional coverage.)
The third party administrator bills you each month for the health bills processed. Once you reach the pay-out limit you have set, all claims over that amount will be handled by a chosen re-insurance company.
The nice part here is the flexibility to adjust. Items like chiropractic or eye care can be included, depending on this total bill and copayment. You can even hold shop meetings to discuss it.
The Savings. “Self-insuring is definitely not for the short term,” notes Maloy. He suggests at least a five-year trial. Typically the agent handling your account charges $10 to $15 per employee plus the cost of the backup re-insurance premium.
Additionally, if you have a light claims year, you can expect a 20 to 25 per cent savings in pay outs, compared with traditional premiums. Thus the $200,000 insurance escrow account may have $40,000 left in the annual balance. “It is not unusual for self insurers to get five years’ insurance for the price of four,” says Maloy.
Being on your own. Beyond the financial savings, self-insuring brings the blessing of independence. The mid-size shop filled with young married women can adjust the pregnancy compensations accordingly. Dental coverage may be deemed more important than low copayment or physical checkups.
Additionally, because the employer is no longer switching carriers to get the lowest cost, employees get to keep long-term relationships with their medical providers. This means that those with chronic problems don’t have to change doctors.
For many mid-size companies, standing up and wresting your own insurance into your own hands, may prove both profitable and help lighten the load a little.
— Bart Jackson
Contrary to conventional wisdom, seeing is not quite believing in the eyes of the courts — especially when it comes to having your expert witness flip on a television and roll some tape. If you’re intending to stick in front of the jury a taped reenactment of a murder scene with some splices and somewhat relevant circumstances, think again.
“You can’t just make up an animation and say, ‘Thank-you folks, that’s what happened.’ It’s a long exacting process and then again you’ve got to reach the threshold criteria of substantial similarity,” says Lawrence N. Lavigne, a partner in the law firm of Norris McLaughlin & Marcus in Bridgewater.
“The cornerstone to all evidence is relevance. Once you show relevance, then you have to show that there’s some probative value that this is going to assist the jury to decide. You’ve got to also show that the video tape or movie accurately depicts what it is you’re offering it for,” he adds.
Lavigne speaks about the use of videos and digital visuals as evidence in product liability cases on Thursday, June 3, at 6:30 p.m. at the New Jersey Law Center in New Brunswick. Cost: $21. Call 732-249-5000 for more information.
In an age when visual evidence is almost compulsory, and courtrooms have become erstwhile audio-visual labs, the standards of expert testimony via videotape, film, or DVD, have risen considerably since New Jersey state courts first began allowing them to be used as evidence in 1972.
Today DVDs and animated simulations have largely replaced film and videotape and are used as an essential tool of the expert witness in everything from murder trials to product liability cases.
“Product liability cases tend to boil down to expert witnesses,” Lavigne says. “Most trial lawyers use a lot of demonstrative evidence. We live in the television age, we get our info from soundbites. Experienced trial lawyers know you’ve got to give a jury something visual to grab onto.”
The key for the visual is “substantial similarity.” Says Lavigne: “If your injury is carpal tunnel, you can’t come in showing a video of open heart surgery. You’d have to show that the operation in the video is substantially similar to what the plaintiff went through.”
And the quality of the tape has to be good. The adversary will pounce at irregularities on the tape. “Generally what happens is the (other) party will file a motion to try to preclude admission of that videotape,” says Lavigne. “They have a number of arguments that might be made. They could argue that the tape is full of starts and stops, that it hasn’t been properly edited. The proponent of the evidence has got to be able to argue against all that and show the evidence.” To prevail, he had better be prepared to present a top quality tape.
One challenge for lawyers is a lack of existing case law over what courts will allow in terms of tape or digital visuals. The field is wide open for interpretation. “There are very few rulings over the last 30 years pertaining to the admissibility of videotape or DVD in terms of proving a defect or defining against a defect. In this day and age of demonstrative evidence in trials — which is so critical — there’s not a lot of guidance. I’ve had diametrically different results from different judges,” Lavigne says.
Another key point is that the side preparing a tape has to allow its adversary to monitor the making of that tape.
The landmark case on this matter was Balian vs. General Motors, a ruling handed down in 1972. A driver had suffered an accident after losing control of his car. He sued GM for selling him a car with a defect in its steering system. GM countered by taking a red-eye back to Michigan, disabling the suspect component in the steering system, and then filming a recreation of a GM car without the suspect steering component having an accident. Essentially, the film proved the accident could not have happened the way the plaintiff said it did.
However, GM’s defense fell apart at the appellate level after the court ruled the tape was not admissible because the auto maker did not give the plaintiff a chance to monitor its creation. “Everybody looks to Balian for guidance,” Lavigne says. “Balian really only talks about whether you’re doing a recreation of the accident. If you’re doing an experiment, Balian doesn’t require a motion to monitor. But some judges read it much more broadly than that.”
Lavigne got his J.D. from Seton Hall in 1982 and his B.A. from Franklin & Marshall in 1979. He specializes in liability defense, employment litigation, lemon law defense, insurance coverage, and commercial litigation.
In product liability cases he defends manufacturers across a wide array of industries. “There’s a significant number of product liability cases — toxins tort, consumer products, a lot of automobile accidents — and the manufacturers tend to be targeted defendants,” he says. “There has always been a very steady stream of those cases.”
— Pete Mladineo
In the movie “The Rain Man” Tom Cruise brings his autistic brother Raymond (played by Dustin Hoffman) to a small town psychiatrist to find out about Raymond’s unusual behavior. Raymond is constantly rocking. But when the psychiatrist asks him to multiply two four-digit numbers, Raymond is distracted by the number problem, slows his rocking, and instantly comes up with the difficult calculation. That scene is one of the most genuine scenes in the movie, says Ruth Christ Sullivan. The scene came directly from her experience with her 44-year-old autistic son.
Sullivan has devoted her professional career to research on autism and help for the autistic. She is founder and executive director of Autism Services Center in Huntington, West Virginia, one of the few agencies in the U.S. to offer comprehensive lifespan autism services in a “community integrated” setting. A graduate of Columbia University, Class of 1952, she went back to Ohio State for her PhD in the 1980s, when there was little research on autism; she taught the first class on the subject at that university.
She will speak at the 10th annual Eden Institute Foundation’s Princeton Lecture Series on Autism on Friday, June 4, at 8:15 a.m. at Princeton University’s Reynolds Auditorium. Entitled “Affecting the Research and Service Agenda,” this day-long conference is co-sponsored by Princeton University’s Department of Physics with support from the Asch Foundation for Funding Education and Research in Autism and the Puzio Family Charitable Trust. Cost: $130 including lunch. Call 609-987-0099.
The 29-year-old nonprofit organization, Eden Family of Services, offers lifespan services for children and adults with autism as well as support and assistance for their families. Among its programs are year-round educational services, early intervention, parent training, respite care, outreach services, community-based residential services, and employment opportunities.
The conference also features Simon Baron-Cohen, a professor at the University of Cambridge and director of the Autism Research Center there, and Bernard Rimland, founder of the Autism Society of America and of the Autism Research Institute in San Diego. Like Sullivan, Rimland was a consultant on the “Rain Main” movie.
The Raymond character in the movie has Asperger’s Syndrome, which represents the high functioning end of autism, says Sullivan. “At first they seem normal, and sometimes they have good language skills. Their main problem is social skills. They can’t quite put themselves in other people’s minds as any two-year-old would do. They have a much harder time reading the cues. They have to learn interactional skills as we would learn Chinese or Greek. You know something is different about them, but you can’t describe it in two or three words.”
In child development, says Sullivan, dramatic changes take place at 18 months, 5 1/2 years, and 18 years. “At 18 months something happens,” she says, “and I wouldn’t be surprised if the onset of autism is connected to that growth spurt.” Her own autistic son, like many who have autism, looked like a normal toddler, was agile, and had excellent motor skills. When he was barely a toddler, she found him putting together a puzzle of the United States. She turned over the puzzle pieces to the blank side and he did it again.
“But at 18 months it was almost as if he had turned a page,” she says. “He had been precocious, but now he was not speaking, was screaming all night, was extremely hyperactive, and was not interested in human interaction.”
Like Eden Institute, Sullivan’s Autism Services Center offers group homes for adults with autism. Like Eden, the West Virginia clients of Sullivan’s nonprofit organization have one-on-one job coaches so that they can find meaningful employment. This support from business is important, but monies are scarce. Most services are paid for by a Medicaid waiver program, “and, like Eden, we have a hard time making ends meet,” says Sullivan.
“There is a national crisis in adult residential services for autism. There is an upsurge in autism,” she says, “and there is no mandate for care.” People with autism have a right to education until they are age 22, but after that age there is only a “mandate,” and mandates are subject to the availability of funds.
A sad example: A girl with extremely difficult behavior is going to have to graduate from Sullivan’s program. She has improved. She doesn’t do “tissue damage” or damage to the furniture worth $1,000, so she no longer qualifies for services. “But without services she will revert to her previous behavior. By then there will be no more funding, because someone else will have taken her place,” says Sullivan.
Sullivan is grateful for the publicity that “Rain Man” gave to the autism cause. “It was a worldwide inservice training and is still going on,” she says. The movie almost did not get made; it went through four directors, including Steven Spielberg, who rejected the idea of a main character who didn’t talk. Barry Levinson, the fourth director, hired research assistant Gail Mutrx, who found Sullivan, who referred the movie crew to two public television documentaries that had been made about her son, including “Portrait of an Autistic Young Man.”
The “Rain Man” incident less true to life is the elevator scene, where Dustin Hoffman’s love interest gives him a kiss and his only response is to say “It’s wet.”
Says Sullivan: “If a girl had wanted to do that, I don’t think my son would have allowed her to even touch him.”
— Barbara Fox
Networking, after all, is merely being human. Ever since the first homo sapiens discovered another of his kind across the bush, he blundered over to meet him and began chattering. Today, in more binding clothing and with a smug sense of being “civilized,” we still follow that same urge — and coincidentally find knowing all these other folk to be a very helpful thing.
Exactly how to spin a friendly, personal web is on the agenda of Diane Bach’s day-long program, “Networking for Success,” on Wednesday, June 9, at 9:30 a.m. at the Learning Key in Washington Crossing, Pennsylvania. Cost: $190. Call 215-393-3435 or visit www.TheLearningKey.com. As director of assessments for the Learning Key, Bach has developed a specialized training expertise in guiding scientific and technical professionals gently through the Byzantine protocols of business.
“Unfortunately,” notes Bach, “back in the ‘80s, the term networking got a sleazy reputation — insincere contacts levered for unfair advantage.” And for the past 20 years, she has fought diligently to polish up networking’s tarnished image. Bach was born in Bucks County and currently lives in Lansdale. She attended Pennsylvania’s Muhlenberg College, graduating with a B.S. in chemistry.
As she took a successive series of sales and marketing jobs with various chemical and pharmaceutical firms, she recalls that “I really saw the need for technical types to communicate better with their business counterparts.” For the past decade she has worked strictly in training, currently celebrating her first anniversary with the Learning Key.
Here’s how Bach can help. You have finally landed a place in the room with the big boys. All those players you have been dying to meet are standing around, arranged in exclusive clusters, sipping drinks, making what seems to be idle chit-chat. Fixing your tie, you hope they won’t notice that you really don’t belong. Then, grabbing some innocuous drink, (beer? — no too blue-collar; champagne? — no, too eager; sparkling water? — nah, don’t want to seem a wimp. White wine, that’s it!) you take aim at the stately banker chortling in a group across the way. What to say first?
“Whoa!” responds Bach. “Your networking expedition should have begun long before you ever made it to the foot of that mountain.” Bach breaks her networking program into three time frames: initial homework, making the meet, and the follow up.
Homework. What networks have you already spun? The church, your professional organization, that charity board you keep forgetting to attend, your fellow soccer moms, the guys in your biking club — each of these forms one segment of your existing social web, where probably you know many members, but would benefit by knowing more. Bach suggests you list these extant networks and then list other individuals and organizations that you should actively seek to include in your personal Rolodex. (Remember that certain individuals are natural linkers who can connect you to others more readily than can any organization.)
In 1813, when George IV, Prince of Wales, was led across the hall by poet Lord George Byron toward the infamous dandy Beau Brummel, England’s best dressed man turned to her best poet and broke out with the court-stopping “Oh, Gordy, who’s your fat friend?” While this risky bit of repartee definitely ranks among history’s most remembered introductions, it may not prove the ideal way of getting close to one’s future king — or one’s potential venture backer. It certainly spelled disaster for the wisecracking Brummel.
Instead of praying for some inspired piece of repartee on the spot, Bach suggests that you work out a series of openers and speeches; then say (or write) them and study their effect. Create about a dozen openers that can be used for varied occasions. Also, design a five-second hook — a commercial for yourself that can be slipped in, after the conversation gets going, to make you seem like someone worth knowing. By having these pat phrases memorized, you will avoid blunders and sentences filled with “umms.”
Making the meet. “Never sell short the mundane,” advises Bach. “Too many people are scared that they will be judged as banal if the first sentence out of their mouths is about the weather, but more often, it is better than slamming someone with a challenge statement.”
Before you approach, and as you begin to speak, take continual stock of the individual with whom you chat. Remember, the person is an individual first and a banker or human resources director second. Seek a personal commonality before plunging right into grilling him about his business.
Inquire, rather than advertise. Everybody loves to talk about themselves. Give them a chance, fish around for some activity they enjoy and try to learn about their involvement and interest. You may want to eventually cement a tie with this person through this activity, but now is not the time to rush in with the big “I.” If the venture backer announces himself a mountaineer and proudly tells how he summitted Mount Marcy in the Adirondacks last August, now is not the time to brag about your winter assault on the Matterhorn. Rather, tell him how much you have enjoyed the beauty of the Adirondack trails through the seasons. Let him be impressed later by how high you have climbed and how well you keep silent.
Following up. Experience proves that the best follow ups are casual and indefinite. If you want to discuss business, ask if your new contact would mind if you called or came around to his office “some time, at his convenience.” Don’t try to pin him to a definite date. Phone calls typically are seen as least threatening; no one likes pests panting at their door.
Ongoing exercises. Bach insists that if you can see all your networks as part of the natural exchanges of life and business, and if you do not let the web die of neglect, you will become richer in many ways.
— Bart Jackson
More than a century after Scottish entrepreneur Michael Nairn expanded his family sailcloth business to include the manufacture of new painted floorcloths, vinyl flooring heavyweight Congoleum is turning again to diversification and R&D to help revive a brand challenged by other hard surface makers and a recent Chapter 11.
The company, a sprawling giant atop the resilient flooring industry, is struggling like several others in its market to get out of bankruptcy, caused at least in part by pay-outs in asbestos suits. Meanwhile, it is facing heavy competition from manufacturers pushing other — more trendy — indoor flooring options. Congoleum is countering with new tactics, as well as a lot of emphasis on new kinds of kitchen floors (sans asbestos).
“We’ve taken the road of new product development,” says Patrick Buckley, vice president of strategic analysis and planning for Congoleum. “What we’re facing is huge growth in other hard-surface categories — ceramic tiles, wood, and also laminate products. We have made a huge initiative on the R&D side of developing new and unique products to take into marketplace.”
Buckley speaks at NJ CAMA’s full-day Marketing Expo 2004, titled “Listen, Learn, and Connect,” on Thursday, June 10, at 9:15 a.m. at Sarnoff. The event, which begins at 8:15 a.m., is held in conjunction with the Jersey Shore Public Relations and Advertising Association. Other speakers include Scott Williams of Starwood Hotels, Chuck Fishman of Wall Street Journal Radio; and Daniel Day of the Associated Press. Cost: $95. Call 609-799-4900 for more information.
Buckley’s topic is “The Backstage of Corporate Branding,” a talk that encompasses not only the firm’s struggles to reposition after Chapter 11 and its efforts to diversify amid mounting competition in a slow-growth industry, but also its problems in coordinating branding efforts.
“We have looked at how we as a company have to gone to market with all of our print, our advertising. I think we were very fragmented. We developed a product literature and it really didn’t have a consistent look,” says Buckley. “Unless everyone is on the same page, the results are not always as successful as they could be.”
The Nairns relocated in the 1880s from Kirkcaldy, Scotland, to Kearny. By the 1920s the firm had a new partner that bought its materials from the Belgian Congo — and the company had a new name, Congoleum-Nairn. The company invented linoleum, and made a mint from selling the durable flooring. Nowadays Congoleum is a publicly-owned vinyl and resilient flooring manufacturer majority owned by American Biltrite. The company has a 513,000 square-foot manufacturing plant and distribution facility at 3500 Quakerbridge Road.
Congoleum is one of the two biggest players in what Buckley calls “a very mature market,” with lots of relative newcomers selling other hard-surface products.
The company is stung by the legacy of asbestos. Vinyl floors used to include asbestos as a key ingredient because it was fire-resistant and added moisture to the sheet vinyl. Years later asbestos was found to cause the fatal lung disease mesothelioma and recently became the subject of class action lawsuits by high-powered law firms across a variety of industries.
Congoleum, like its main competitor, Armstrong, has had to file bankruptcy to cover the asbestos-related liabilities. Congoleum filed a “pre-packaged” Chapter 11 in which past liabilities have already been settled by insurance payouts while future liabilities will be handled through the reorganization.
“We still had ample insurance coverage that takes care of all our current asbestos liability,” says Buckley. “In order to eliminate all of our future asbestos liability we’ve gone through the bankruptcy proceedings and things are moving along pretty well at this point. Once we emerge from the bankruptcy we can focus on our business and not have the whole asbestos liability issue.” The company expects to emerge from Chapter 11 later this year.
Congoleum is seeing a turnaround of sorts — posting a $400,000 net loss in the first quarter of this year compared to a $2.6 million shortfall in the same period of 2003. Company officials have said it was the best first-quarter bottom line in years. It hopes to bridge the gap further with its new product line, which carries such flashy monikers as “high-performance flooring” and “upper-end resilient sheets,” and which is aimed at competing with the wood, stone, and tile that is cutting into the vinyl flooring’s old domain. Congoleum’s chairman, Roger S. Marcus, was quoted by the company as saying a new product line, due out in the third quarter, will help the bottom line this year and add “significant benefit in 2005 and beyond.”
Buckley, 52, has spent 22 years in the vinyl and resilient flooring industry, and holds both a bachelor’s and a master’s degree from Illinois State. He says that another big challenge for flooring companies is that most consumers know next to nothing about vinyl and even less about the brands.
After years on the sales floor, he knows intimately just how oblivious the average buyer is to the brand name on a roll of vinyl. “We’d have people coming in and asking for ‘that Armstrong/Congoleum stuff,’” he says. “In many cases they really didn’t know the difference, but they knew they heard of one of the other names and oftentimes, ironically, they’d use them interchangeably.”
But someone has to get excited about the brand, so Congoleum focuses on the salespeople. “Consumers do a lot of research today prior to coming in to make purchase, but they really know very little about floor covering,” he says. “They’re influenced strongly by what they’re told in the retail store.”
Bring on “spiffing” — where the manufacturer offers a cash incentive, in Congoleum’s case, $50 per sale — to sell its products over those of its competitors. This idea has taken off in the industry over the last decade. “Cash seems to work,” Buckley says.
— Pete Mladineo
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