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Newsletter: Volume
3, 2007
How Do You Handle a Whistleblower?
by Van Butler, Assistant Claims Manager
 How
do you handle a whistleblower? The short answer is very
carefully. Within the last year BancInsure has processed a
claim that demonstrates this very clearly.
The bank hired John (not his real
name) in 1993 as vice president and loan officer. Ten years
later he was promoted to senior vice president of lending.
Shortly after his promotion John began to raise concerns to the
board of directors about certain lending practices being in
violation of the bank’s loan policy and federal banks laws and
regulations. A bank examination during the same time period
reflected John’s concerns. John had named a particular loan
officer as contributing to the loans problems. Approximately
six months later the other loan officer was named branch manager
rather than John. Five months later the branch manager resigned
and John was named as his replacement.
Loan problems continued and John
continued to raise his concerns with bank management and the
bank examiners. The bank president supposedly subjected John’s
loans to strict scrutiny and often reprimanded him concerning
the quality of his loans. Two months after being promoted to
branch manager the bank president recommended to the board of
directors that John be terminated. The board approved and John
received his termination notice. However, the termination was
withdrawn the next month. One month later the president was
terminated. Shortly thereafter a new president was hired. He
set out to “clean-up the bank” and terminated several loans
officers. Although John’s loan portfolio included a number of
problem loans, he was retained because dealing with a major
collection effort and his cooperative spirit. However, a
personality conflict developed between John and the bank
president. Seven months after the arrival of the new president
John was terminated after a heated exchange between them. Eight
months after his termination John filed a lawsuit against the
bank alleging wrongful termination and violation of whistle
blowing statutes.
The matter was settled prior to
going to trial with BancInsure contributing $225,000 to the
settlement and indemnifying defense costs of approximately
$31,000 after applying the self insured retention. To have
fully litigated the case would have been very expensive with an
uncertain outcome.
While this was a very troubled
institution, similar problems can arise in non-troubled
institutions. A number of actions can lessen a bank’s exposure
to claims of wrongful employment acts, including but not limited
to wrongful termination and retaliation. Briefly they are:
1. Have a comprehensive employment
policy.
2. Make sure all employees are
aware of the policy. Document with signed statements from
employees that they have read and understand the policy.
3. Follow policy consistently.
4. Document any personnel actions
taken.
Obviously the above is only a
general outline not intended to address specifics.
As we know there are no
guarantees. A bank can do everything right and still get sued,
but with right preparation defending it can be much easier.
BancInsure’s Extended Professional
Liability Insurance Policy offers protection for a board range
of claims made against directors and officers. It also offers
entity coverage to the bank for certain claims including bankers
errors and omissions, professional services, employment
practices liability, lender liability, trust department errors
and omissions, and mutual funds, insurance and annuity sales.
If you would like to learn more about BancInsure’s Extended
Professional Liability Insurance Policy, please contact your
BancInsure marketing representative.
National Insurer
Responds to California Wild Fires
BancInsure
announced today that it is taking steps in response to the
devastating wild fires in Southern California. As the only
full-line insurance provider specific to banks, BancInsure
provides comprehensive coverage during times of unforeseen
disaster and catastrophes.
“Our goal is to make sure all our
current banks and their customers are out of harms way. We want
them to know that we are fully prepared to assist them with all
their insurance and claims needs,” said Rod Sargent, CEO of
BancInsure.
“Everyone in the BancInsure family
is ready to assist. This includes service center personnel,
claims representatives, underwriting staff and the senior
management team. Our diligence consists of staying with our
customers until every question is answered and every result is
obtained” continued Sargent.
Banks affected by the fire can
reach BancInsure three ways: Contact your local BancInsure
agent, call 800.682.1630 and speak to a claims representative or
visit
www.bancinsure.com/ContactUs/FileAClaim and file on-line.
BancInsure responds to all claims within 24 hours.
BancInsure holds an A- (Excellent)
rating from A.M. Best. They currently insure over 20% of the
community banks in the United States and are licensed in 48
states. Their corporate offices are located in Oklahoma City,
with Service Centers located throughout the US.
Contact:
Amy Walling, Marketing Manager
awalling@bancinsure.com
405.290.5790
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