Library of Articles
We’re asked frequently how to form a successful insurance agency. And while the answer seems painfully obvious that the number one thing you need is sales, that’s only part of the overall picture.
Brokers are supposed to be independent to represent the insured, rather than the insurer; yet, the law in many states still requires insurers to appoint a broker as an agent actually to transact insurance with the insurer. This dual agency creates well…
“An insurer’s knee-jerk denial letter cannot be saved from triggering the penalties [of bad faith] merely because the insurer’s lawyer is able to construct a post-hoc justification for denying coverage. “[I]nsurers that unreasonably delay the evaluation of the insureds’ claims [can be found liable for bad faith], even if the insurer’s ultimate assessment of the claim proves to be correct ‘”Holding otherwise could potentially result in insurers taking the gamble that a denial based on a cursory review will be rescued by a clever trial lawyer.”
Social media claims against individuals are increasing, yet insurance coverage for individuals for such claims is rarely available unless the insured has a personal injury endorsement to the standard homeowners policy or the insured has an umbrella policy, or the rare company-specific insurer includes such coverage. This suggests a market opportunity to provide this coverage. Underwriting this exposure will likely require examining social media as a new rate factor. Obtaining relevant information on this and showing predictive indicators is one challenge, particularly where social media use liability might be correlated with other factors, including other external data. Such factors will have to be approved by state insurance regulators and shown to be reliable and not unfairly discriminatory. This will likely open these factors to underwrite other coverages and policies, even if not approved or reliable. Some social media use might actually be a business pursuit, thus requiring this added coverage. A media liability policy crafted for the new exposure might be more effective to provide coverage if underwriting the factors can be regulated.
Last year I wrote a commentary, “To Dress or Not—Is Professional Attire Outdated?,” on whether or not students should be expected to dress professionally for interviews and career fairs. I asked for feedback and encouraged responses. I’m pleased to say I got a lot of thoughtful responses from a wide range of readers. Executives, claims adjusters, independent agents, corporate trainers, and many others chimed in.
To any students reading this—it’s time to show your very best, not your very bare minimum! Remember, what you do online is now all we have to grade you on. Sure, you completed half the semester before spring break, but there’s still this second half, and we can only grade what you actually do during it. Poor performance, even under these dire circumstances, will not only impact grades (yes, we still have to issue those), but it will also impact the references your professors give for you when employers call.
Remember the people who waste a lot of time bouncing up and down the halls, chitchatting at the water cooler and otherwise not working? They’re about to be found out. There’s no hiding a lack of output anymore. I’m seeing this in my students. I’m seeing who is taking responsibilities seriously and who isn’t. It’s as plain as the screen in front of my face.
I write this smiling at the memory of three of the greatest mentors a gal could ever ask for. They were my guidance system in my early career. I got valuable advice from all three of them, and when they all passed away over the years, I found myself somewhat lost.
This article discusses some of the physical risks adjusters face in fieldwork and the emotional risks they face in an increasingly stressful claims arena. It offers tips and solutions for both adjusters and those who manage a claims team.
Being PROACTIVE means doing “something” (anything) is better and will get better results than doing nothing and worrying about your fate.
Many agents would love to acquire an agency’s book of business and get hundreds or thousands of clients at once with support staff to take care of those clients. But when someone comes to us with an offer to sell there’s usually something that we don’t know about the agency and the transaction. This article will make you aware of why agents sell their businesses so you can analyze your potential and risks.
Sometimes you have to step back from chopping wood and look at trees. And sometimes you have to step away and look at the forest, itself. Here are a few interesting statistics about the insurance industry results in 2020.
It has always been the opinion of Agency Consulting Group that evaluations are important ONLY as a development tool for an employee. Further, one should only evaluate performance that can be controlled by the employees. This requires the standards of…
“IN 2010, I authored an article on the dangers of absolute exclusions.1 That article was prompted by an appellate decision in Florida, James River Ins. Co. v. Ground Down Eng’g, 540 F.3d 1270 (11th Cir. 2008). In that case, an engineering firm that was providing consulting services on whether land had become polluted found that its errors and omissions (E&O) policy, which covered it as an environmental consultant, didn’t cover pollution!”
“What are some of the additional problems raised however by following the concept of being only an order taker? You have a customer that comes in your office who says I have a business and I need insurance. What do you recommend? How does in the insurance agent or broker therein not give advice by answering the question. Are they supposed to say “what is it you’re worried about? We have numerous commercial policies we could provide , then we could confirm we will provide it depending on what your needs are and as you know, you must have Worker’s Comp. Perhaps you might consider should insuring your property, or consider insuring your business for liability. What are your concerns and what are your needs? “ I can’t imagine any consumer of any kind would want to do business with a broker that would fail to advise them as to what might be needed. But let’s take it a step further. I don’t know any Insurance Broker that would advertise that they have no duty to advise, guide or direct clients as to the appropriate types of insurance coverages for its business operations. But there is another reality that is ignored. That is, your average insurance agent or broker with five years experience in any line, whether it be Personal Lines, like homeowners and auto, or Commercial lines knows more about the ins and outs and extensions to coverage of the insurance policy and what may be needed by an Insured than any Insured regardless of sophistication.”
“In addition to data systems, is the internal structure and organization of the brokerage. As mentioned above, no doubt the policyholder was quite impressed that an Executive Vice President was being provided to handle the account. Of course, was that person really a corporate officer? It is not uncommon for many brokerage firms, whether retail or wholesale, to provide titles to individuals based solely on the amount of revenue they produce. Thus, it is not uncommon for someone to have the title of Executive Vice President simply because they generate $1 million in revenue. The same would be true of a Senior Vice President. Determining how titles are provided, and whether they truly represent a corporate officer or simply someone who really provides revenue is important to note.
The Special Relationship is infused in policyholder litigation and no doubt will be used even more frequently in light of the current Covid 19 pandemic. Once the suits against the insurers are exhausted, the second wave no doubt will be aimed at the a…
During this unprecedented time of state-mandated business shutdowns and stay-at-home orders, you cannot afford to risk errors and omissions claims against your agency. An ounce of prevention now could be worth a pound of E&O cure in the future.
From the Spring 2020 issue of the CPCU Society’s CLEW Interest Group Newsletter. This article contains practical tips for taking your deposition skills to the next level!
6. The insurance application process now requires more attention. There was a time, in the not too distant past, when most applications for property and casualty insurance did not require the signature of the insurance buyer. Agents routinely completed applications and underwriters readily accepted them without anyone’s signature on the application. This custom and practice is no more. Insurance applications have become more than just tools to gather underwriting information to determine the eligibility of the applicant for coverage and for premium determination purposes. The necessity for thoroughness and precision has greatly increased. It is more than appropriate and appreciated by the underwriter for the applicant to provide supplemental answers and explanations along with the standardized application. These relatively recent changes in the usual and customary practices of making an application for insurance can make the difference between having a claim covered and not having it covered. An ambiguity or misunderstanding can become an allegation of misrepresentation, which can lead to no coverage at all, rather than just a possible increase in premiums. Policy rescission and voiding policies ab initio are on the rise, along with underwriters using application information as “Warrants” thereby making the application a part of the policy (which has always been the case with life insurance policy applications). These developments make providing accurate information to underwriters more than just important. Accurate information becomes the basis for the existence of the contract itself and adds an increased threshold to the concept of “utmost good-¬‐faith” which is the traditional basis of all insurance relationships. However, “utmost good-¬‐faith” is a two-¬‐way street. Insurance companies sometimes attempt to deny coverage based on conditions and exclusions that are not, and never were intended, appropriate to the situation or the claim at hand. Some prohibitions were intended to exclude coverage because the hazard is better transferred by another type of policy, not to be used to exclude an otherwise covered claim. This type of unfair claims settlement practice is rare and usually caused by poor attention to detail in the filing of a claim and/or inexperienced claims adjusters. The insurance buyer needs to be equally diligent and vigilant as to the accuracy of applications of insurance and in the filing of a claim under an insurance policy. Lesson: Insurance applications are more important than they once were. Plan and prepare in a careful, thorough manner before submitting an application for insurance or filing a claim.
Cyber Risk & Insurance While cyber threats have been a concern for more than a decade, the last eighteen months have been marked by a number of large-scale cyber breaches. These breaches caused companies and insurers to expend considerable financial resources to recover from the breach and mend their damaged public images. As a result of the increase in cyber threats, public and private entities are scrambling to ensure the security of their systems and the information and data these systems store. As part of the risk management analysis presented by cyber threats, companies of all sizes are evaluating their existing insurance policies to understand what, if anything, traditional insurance policies will cover with respect to cyber claims. In most instances, obtaining additional cyber coverage, either through special endorsement to existing policies or through a stand-alone cyber liability policy, is necessary.
MANDY CONNELL: We are dealing with significant brush fires, we’re going to have a really bad fire season, we have that here in Colorado and I thought it would be timely to bring someone on to talk about what a homeowner should do before the possibility of disaster strikes because we’re in a situation if a brush fire pops up near your home when you are at work you may not be able to go home again depending on the severity of the fire and its movements and things of that nature, so what kind of guidance can you give us in terms of preparing for a natural disaster before it happens? DAVID STEGALL: The best thing to do is it go through your mind and imagine that it’s already happening. You want to have a plan before you have to deal with it, and the Colorado authorities, the national forest service and there is a number of things, has all sorts of things on their websites as to the best way to protect your property from a physical standpoint, but the best thing to do from an insurance standpoint is to make sure you’re “insured to value” which means that you have enough insurance on your house to pay for it when it burns down and this is a serious problem, this is where more of acrimony between policyholders and insurance companies happen on any other issue, it’s the value of the dwelling and a lot of people are confused on this issue. They think “oh well the mortgage company told me I have a mortgage of a $180,000 and so that’s what I want the insurance for.
Dad Faith: Breaching the usual and customary practices of, and/or failing to maintain the standards of care required by, the insurance (and Risk Management) industry based on the concept of “Utmost Good-Faith”
It is often said that the police and firemen run towards the danger when others are running away from the danger. Thing is, the danger is generally a known danger, not an unknown one.
Your responsibility to not breach your fiduciary duties to the principal (insurer) are a large part of your professional /ethical responsibilities and the reason for your E&O coverage as an insurance agent… and here you thought the Insurers demanded that you to carried E&O was only for the policyholde’s protection.
•Wrongful Designation by Thomas M. Braniff, JD, CPCU and Robert P. Gaddis, JD; •The Essential Bookshelf for Expert Witnesses by Kevin Quinley, CPCU, ARM, AIC; •The 411 on Becoming an Expert Witnesses by Elise M. Farnham, CPCU, ARM, AIM, CPIW; •Working as an Expert Witnesses by Douglas R. Emerick; and •“Be Careful What You DON’T Ask For” By Bill Wilson, CPCU, ARM, AIM, AAM.
In today’s business climate more focus is placed on lean operations. This trend is becoming increasingly more commonplace as corporations are divesting of business lines and returning to core competencies. As decentralization continues to grow and corporations are relying on supply and sales agreements with non-related parties, the impact of a supplier or customer’s loss on a business’ operations increases substantially.
Maintaining client relationships is critical for insurance brokers and agencies, especially given the fact that developing new commercial clients involves a significant time investment to understand the client’s business and risks and to implement solutions for risk transfer. Once insurance coverage is in place and policies are issued, the focus of the agency switches to servicing the account. The agency is happy. The client is happy. But what happens when your client experiences a significant property loss?
Preparing business interruption claims takes thoughtful planning and insightful analysis, clearly communicated to all of the parties involved in the claims process. One of the most important factors is the breadth and depth of analyzing relevant financial information related to interrupted business operations. Although this may seem like an intuitive step, there is often a gap between the internally prepared financial information and the analysis to determine lost profits. Application of due diligence results in a smooth claim process, quicker payment from the insurer and a fair and equitable recovery.
THE CLAIMS JOURNAL interviewed AAIMCo member Kevin Quinley on claim ramifications of the 2018 Keodalah v. Allstate decision, allowing adjusters to be added as individual defendants in bad faith lawsuits.
“Since its creation, “claims made” wording’s use has expanded outside of the “profession” and professional liability realm, finding use in diverse liability coverages. But the roots of “claims made” wording, and its most common use still, is found in covering the exposures created by a “professional’s” activities. As seen by the list of true “professions,” professionals are individuals who provide a service to society which, if done poorly, could cause extreme or irreparable personal or financial harm. … The expansion of claims made policy forms beyond “professions” caused the basic “claims made” concept to diverge and evolve into two distinct forms. One evolutionary branch commenced in professional liability coverages (known also as “errors and omissions” coverages in this series) and the second branch grew out of the financial services industry and the need for directors and officers liability protection, fiduciary liability and employment practices liability (referred throughout this series as “executive liability” coverages). Although both branches attach to the tree at the same point; greatly different “claims made triggers” have resulted. Additionally, coverage terms, conditions and definitions differ between the two branches.”
“Lawyers are advocates, and as such try to paint the best picture of the facts for their clients. It’s a good strategy in front of a jury or arbitrator, but not with an expert. The non-confidential information about the case that the other side is going to learn anyway should not be kept from an expert. Otherwise, a strongly favorable expert opinion can tumble like a house of cards on crossexamination. It can ruin your whole day, not to mention the case. Sometimes, your expert can do you an immense favor (if hired early) by identifying a truly hopeless case—one that should be settled before the other side realizes just how good their case is. But he or she can only do that with an accurate knowledge of the facts. A caveat: the attorney’s opinions about the case and confidential communications with the client should not be given to an expert, or they may become discoverable. There are ways to get damaging information to an expert without breaching the attorney‐client or work‐product privileges”
“To the uninformed, “a claim is a claim is a claim.” To some extent this is true. Any type of liability claim requires proof that the insured owed a duty to another person or entity, that the insured breached this duty, and that the breach was the proximate cause of quantitatively measurable damages suffered by the person or entity to whom the duty was owed. Thereafter, it becomes a matter of determining whether or not there are any defenses such as comparative or contributory negligence on the part of the claimant. Finally, there is the question of coverage—the issue of whether or not the policy will respond to the claim. …. There are significant differences between managing professional liability claims, compared to those arising out of more standardized coverages. …”
“Diminishing limits policies create a host of potential problems for insurance company claim departments. As is well known the insurance industry has long been plagued with “nuisance” claims. While in some instances insurance companies make quick settlements of nuisance claims to avoid defense cost expenditures, in others, insurers will attempt to resist such claims to avoid setting a precedent, thereby sending a message to the plaintiff’s bar that nuisance claims will not be honored. Considering that defense costs are deducted from the policy’s aggregate limits, either course of action places an insurance company in a difficult position. … “
The claims audit is the anathema of day-to-day claim operations. Nothing is more disruptive. Yet, if properly defined, nothing is more informative and helpful in improving a claim management program. This article will examine the need for a regular auditing program and provide a recipe for a three-dimensional approach to the process in order to maximize the accuracy of the audit results. The need to conduct regular claims audits has already been widely discussed. With the magnitude of self-insured claims programs (including self-funded programs) and the millions of dollars spent on claim administration fees, what better way to verify whether the money spent has been justified or wasted? In essence, an audit of closed and open claims should accomplish several things.
“Directors and officers liability policies have long been issued on a “pure claims-made” basis (a phrase this writer first coined in 1990). That is, they were written with no prior act date (also known as a retroactive date). As a result, wrongful acts of the directors and officers dating back to corporate formation were covered as long as the claim was first made against the insured during the policy term. To minimize the singular risk D&O insurers were taking (i.e., “what probability exists that a claim will be first made against the insured during the policy term?”), they began using a “continuity date” and/or a “prior/pending litigation exclusionary” date that was the same as the inception date of the first policy issued. The date the insured first obtained coverage thus became known as the “first coverage date” so the “continuity date” could be honored at renewal. This was reinforced by a warranty within the application for coverage stating that the insured was or was not aware of facts, incidents, or circumstances that could give rise to a claim in the future.”
Kevin extracts insights from HBO’s popular series and sees implications for how claim professionals approach the challenges in their work.
This article derives from involvement with several insurer-reinsurer-insured disputes where the intent of the pollution exclusion was at issue. Included is testimony where several insurance executives admitted that it was overdrafted -that the actual…
SHINING A LIGHT ON INSURANCE MARKETING MALPRACTICE ©By Frederick C. “Rick” Berry, Jr., J.D., C.P.C.U., C.L.U. 1951 W. Camelback Rd. #200, Phoenix, AZ 85015; 602-274-5700; Frederick.C.Berry@gmail.com Summary When there is not enough i…
From the Spring 2018 issue of the CPCU CLEW Interest Group newsletter.
A uniform law proposed by the National Association of Insurance Commissioners (NAIC) is currently working its way through state legislatures. The Corporate Governance Annual Disclosure Model Act[i] would require American insurers to disclose a wide range of information relating to their governance, performance evaluation systems, compensation and incentive plans, Enterprise Risk Management (“ERM”) plans and codes of ethics and conduct. This article will highlight some of the important features of the NAIC’s model act and illuminate how they are designed to cloak insurer disclosures in secrecy, but at the same time provide compelling evidence of information whose existence insurers have long denied. Discarding the secrecy mandated by the model act and allowing access to the disclosed information will help discourage insurer misconduct long hidden from the insuring public. [i] http://www.naic.org/store/free/MDL-305.pdf.
Whether defending or litigating, success with Insurance Agent E&O cases can hinge on the discovery process and avoiding the paper blizzard that often comes with generic production requests. Produce too many documents and it is a waste of your valuable time. Produce too little and you might not find what you need. Since most insurance agents no longer utilize paper files, knowing exactly what to extract out of a computer system could make or break your case.
This is a monthly column in which agents can pose questions related to E&O (Errors & Omissions) risk management and loss control as it relates to sales, service and operations. This month’s column focuses on using professional designations in advertising and whether doing so can create a higher expectation from the customer.
I do not truly understand the rationale in suing the company adjuster in a lawsuit against the Insurance Company, since he has no independent duties apart from those of the Insurance Company. However, Directors and Officers of corporations owe fiduciary duties to corporate stockholders and to the Corporate business entity itself.
Mary LaPorte was interviewed for this article which was included in Erie Insurance’s June 7, 2017 publication of The Bulletin which is distributed to their agency force. In this interview, Mary disucsses the key reasons many agencies fail to reach optimum productivity and the benefits gained by making necessary improvements.
I was often amazed at what I could only discern as an argument by a Plaintiff’s attorney concerning an insurance claim where he had never bothered to read the policy or have a true of understanding of insurance.
Corporate Counsel is not properly the attorney to specifically respond for the Insurance Company to a suit against the Insurance Company.
Insurance Companies need to strive for competent officers and directors.
If learning is not part of the process, and all that an insurance company is interested in is a decision, any decision, no matter how subjective, then insurers need to have an intercompany coin toss agreement.
On the one hand Insurance Companies invest a lot of money parcing court dicta to discover what the policy might have said in order to change the outcome of the decision, yet on the other hand believes the trial is some sort of Wild West side show and must be avoided at all costs
As insurance professionals, we are often so busy serving our clients that our writing and publishing take a back seat to our practice. Consistent publication keeps us in the public eye and allows us to rank higher on Google.
Ever wonder why you couldn’t go the wrong way on a one-way street if your eventual goal lies at the other end? It may be the shortest route from point A to point B, but the dangers of this direct route usually outweigh the risks.
Partnerships are a “funny” thing. They make so much sense when you are young, eager to expand and enjoy working with each other. They are a natural outcome of mergers and of new, professional, growth oriented additions to an agency.
For many years when we asked agency owners what made them “different” from their competitors they often claimed that their “service” to clients differentiated them from their competitors.
Lead-In – How does Obamacare affect the value of health insurance agencies being bought, sold or perpetuated? Read this innovative method of transacting health insurance businesses.
One of our missions is to bring you, the PIPELINE reader, the cutting edge tools to allow you to grow your agencies and to earn a fair profit on your labors. The insurance industry and the world are changing at a rapid rate in front of our eyes. If we’re not agile and always changing with the times, we will be left behind and find our agencies disappearing.
One of the best ways of building client relationships is through testimonials from other satisfied customers.
Lead In — You can’t BEAT the IRS but you can use strategies and tactics to avoid paying more taxes than you must in an agency transaction… Link here to see two of many ways to move agency ownership/management without severe tax ramifications.
Using Goodwill to benefit you in the event of a divorce situation…link here to find out if you can do so and how….
One of an agency’s greatest struggles is to determine how many and what size prospects are right for its producers and projecting the goals of prospecting.
Do you want to be different than your competitors or do you want to sell a commodity? Click here to see the difference and how competition can be healthy for you.
Hiring sales professionals is something that we have in common with the Travel Industry. Link here to see how we can learn from their successes – and failures.
One of the most common situations we encounter in agencies across the country is the struggle to hire, train and manage successful producers. One of the key differences between Producers and Service Staff is the nature of their personalities. This article explains that choosing the right personality will move your producers and your agency to succeed.
This article explores the nuances of the special relationship and provides a template for the producer, the policyholder and their respective attorneys to follow by illustrating the circumstances that give rise to the special relationship between the producer and the policyholder/insured.
As of April 2013 Attorneys, NOT INSURANCE AGENTS, will determine what protection their clients receive as an “Additional Insured”. In short, they will receive NO protection unless the contract or agreement containing the additional insured requirement qualifies and quantifies the request. This is a major change.
How to calculate and manage your TNW to a level that is sufficient to meet your business’ capital needs for growth.
It appears that the recent change in The State of Michigan workers compensation act extends Michigan’s jurisdiction to all Michigan Residents no matter where in the US (or the World) the resident is hired, works or is injured.
For plaintiff lawyers, discovering what reinsurance has been purchased will not get you directly into the pocket of the reinsurer, but it will give you insights into what the insurance company was thinking as it handled your client’s claim.
Service Center must not be unilateral. In order for Service Center to make sense they must save more money than they cost for BOTH agent and carrier.
Many agencies split contingency income among owners, producers, offices, cluster partners, VIA (Virtual Insurance Agency) partners, etc. Most do so solely based on volume. While this is simple (def. easy), it could also be simple (def. not very intelligent) because it is often over-simplified and does an injustice to one or more people or entities while benefitting others beyond their deserved share.
The Glass Ceilings are not just a condition – they are mental attitudes that stop agency owners from growing their businesses. Learn how to identify them and how to defeat them to “crack” the limitations on your business through this article.
This article appeared in the Forensic Expert Witness Association Newsletter for the First Quarter of 2012.
This article was originally published on line. With the near collapse of AIG, the world’s largest insurance company many people were asking questions about the financial soundness of a variety of insurance companies.
In this White Paper summary, Mr. Underdown explains that the fact that a broker has a contingency-type producers contract with a specific insurance company can be of great value to the insured resulting in a lower price for the insured, under the right circumstances. Therefore, contingency commissions are not inherently bad for the ultimate consumer. He states the real issue is one of full disclosure.
Mr. Underdown advises the claims adjuster about assisting their attorney’s in qualifying the insurance experts used in their litigated files. He indicates that it is best that the expert you select has provided testimony for both plaintiff and defense cases so as to avoid a charge of bias that may occur when using an expert who always testifies for one side.
Mr. Underdown explains that the best time to bid your insurance is when the market is soft. The next best time is when the market is hard. In addition, he explains a system that assures the optimal pricing based on the competitive bid design.
Mr Underdown states that the best time to use structured settlements (annuity-based settlements) to settle insurance claims is when interest rates are high, and the next best time is when rates are low.
This article was published in the January 2009 edition of the AZ CPA Journal. Mr. Underdown indicates the idea for the article arose over coffee with an attorney friend who was active in the M&A industry.
I don’t care if your producer is your husband, wife or child (or someone as close). Every agent seems to get much smarter about what to do if a producer leaves the agency and takes business AFTER it has happened to them. Link here to learn from others instead of waiting for it to happen to you…
If you distribute Profit Sharing monies (Contingency Income) to various people/entities within your agency/cluster/Virtual Insurance Agency you know that volume-only calculations for distribution is unfair to the most profitable entity and overly generous to those who may have high loss ratios. Read about the Fair Share Contingency Distribution Program here that calculates Profitability Relativity as well as volume relativity when distributing contingency income.
The special relationship doctrine can create an overwhelming burden for the unsuspecting insurance agent or broker by imposing a duty to provide advice to a policyholder concerning all possible coverages and in some instances a responsibility to give advice as to what limits to purchase and whether such limits are “adequate.” This article explores the nuances of the special relationship and provides a template for the producer, the policyholder and their respective attorneys to follow by illustrating the circumstances that give rise to the special relationship between the producer and the policyholder/insured.
The Affinity business is a $100B+ market in the United States with a long history in the life and health arena. Despite that track record it is often misunderstood in the broader market. This paper provides background for any entity interested in getting into that space or already active in it.
For many small to mid-sized companies there is the overriding element of misplaced trust in the broker and a gross misunderstanding of their own duties.
I have not figured out why reinsurance is not fully regulated, as is insurance. I have heard the logic that the parties to the contract are equally sophisticated, and therefor no regulation is necessary. The problem with that logic is that it assumes a premise that is false. Many of the parties do not have equal bargaining power; they are not equally qualified to enter into the transaction and there are no real arms length negotiations. Many small companies spend more on reinsurance each year then they could possibly receive from the sale of the building they occupy.
This is a monthly column in which agents can pose quetions related to E&O (Errors & Omissions) risk management and loss control as it relates to sales, service and operations. This month’s column focuses on using professional designations in advertising and whether doing so can create a higher expectation from the customer.
INSURANCE INDEMNIFICATION AND HOLD HARMLESS AGREEMENTS – The Purchase Order Agreement addresses the importance of using a purchase order agreement and provides a sample document attorneys can modify to meet the needs of their client. Indemnification and insurance language has been carefully selected in order to maximize any available insurance. The purchase order agreement is a business to business contract that is seldom thought of as a rsik management tool. In fact, with the advent of the internet it is rarely used. When purchase orders printed on paper were used the purchase order was on the front of the document and the purchase order agreement (contract) printed on the back. Attorneys should urge their clients to return to the use of purchase order agreements. In our ever increasing litigious society when something goes wrong, someone gets sued. While a purchase order agreement can’t stop litigation, it can create the rules of the game. Relying on Tort alone is not advisable in any situation – especially the business to business transaction.
When insurance is intended to be the primary assurance that indemnification agreements are properly funded, it is critical that contract language is written in such a way that insurance policies are able to respond. Crafting insurance and indemnification agreements is an art that involves understanding the nature of risks transferred, the nature of risks assumed and how to best protect a client from the legal and financial implications of those risks. It also requires an understanding of insurance policies and the type of coverage they can or cannot provide. This article explores the issues and problems related to drafting insurance, indemnification and hold harmless agreements.
Over the years the members of the American Association of Insurance Management Consultants (AAIMCo) have experienced — primarily from those who are not intimately familiar with our industry — many misconceptions about appraising insurance agencies. Therefore, one of the primary purposes of publishing these Standards & Guidelines is to establish consistent procedures that can be recognized formally and legally by the courts and higher authorities.