Library of Articles
The insurance industry has always been cyclical, going through periods of “soft” and “hard” market conditions that can last several years. Today’s agents have been thrust into what the insurance industry has historically called a “hard market.” However, this market cycle seems a bit different than those in the past and perhaps may not soften as quickly as we’ve seen in some cycles.
Nancy Germond
Executive Director, Risk Management and Education
Independent Insurance Agents & Brokers Association
“This number (224) likely represents just a small fraction of the notice-based denials that never make their way to a courtroom. More must bedone to educate policyholders on how to comply with their policies’ claims-made reporting requirements. How did notice-based denials under claimsmade forms become so common? To understand how the industry has arrived at this point, it is important to explore the history and evolution of the claims-made form. There are six main reasons for these denials. 1.Late reporting of a claim after policy expiration 2.Failure to disclose known claims or potential facts and circumstances that could give rise to claims later on an application (and not reporting same under the notice of potential claim provisions) 3.Failure to identify that the current claim being reported is related to a prior claim reported to a previous insurer or previous policy with the same insurer 4.Failure to disclose prior-pending claims made on an insurance application 5.Reporting the claim in a manner that is not as directed by the policy language itself 6.Claims denied for not reporting “as soon as practicable” The main driver of denials is that the policyholder reported the claim after the policy expired, as represented by 101 denials upheld by the courts. Not too far behind that category is the situation where the insured knew of a claim or wrongful act before the inception of a policy. Here is a breakdown of the six categories. … “
“Overall, many of the more common issues were explored in previous articles. That is not to say, however, that these are complete solutions. I have long been of the belief that extended reporting provisions, when invoked, are an incomplete solution for long-term protection. That is because one is taking a limit of liability and stretching it across at least one year and sometimes six years or more. The limits, thus, are never refreshed. So, if there are any claims during the extended reporting term, policy limits are being eroded. This could mean that policy limits could be extinguished by claim frequency, and the benefit of runoff would be lost when that happens before the term had even run out.”
“There are inherent dangers when a company is acquired, not only for the selling company, but for the acquiring company. It is not uncommon for the buyer to require the seller purchase several years of extended reporting coverage. This is because the buyer, when either acquiring the assets or the stock transaction, wants no exposure to any known or unknow liabilities created by activities before the acquisition. We’ve all seen companies get acquired, with the seller invoking whatever extended reporting coverage they can acquire, sometimes at a significant price. But that is not the only problem, and this is where the approach and analysis become important. Asking the right questions is thus necessary to provide the appropriate financial protection to those involved, with the avoidance of any error and omission claim that might be made against the broker, despite whether they are simply following an “order take” standard or not.”
“laims made insurance policies have existed for a long time. For specialty line insurance policies, such as directors and officers liability, professional liability, cyber liability etc., they are the most common type of policy issued. They are complex, and depending on the definition of claim, as well as whether or not it’s a claims made and reported form, the policies can be extremely dangerous. What follows is the first installment of a three-part series on the complexities involved in securing extended reporting coverage in conjunction with claims made policies. I have written numerous articles on claims made trigger problems, prior act problems, prior pending claim exclusions, etc. These only make the problems more dangerous for insureds and for insurance producers. However, and unfortunately, one important aspect of the policy that I’ve somewhat been lax to review in depth is the complexity of the extended reporting provision (ERP) and the ability to buy optional extended reporting period coverage, also known as runoff coverage and/or retirement coverage. Even my own article, The Dangers that May Lurk in All Claims Made Policies, raises extended reporting provisions, but not in depth.”
When an agency is marketed to the right potential buyers, with a strategic fit that maximizes—not just value—but carriers and culture, “value” takes on a whole new meaning.
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…
The shorter version of a lengthier article which I can post in a month
“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.
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.
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.
Bruce Heffner, Esq.
Independent Company Legal Consulting / Attorney at Law
Law Office of Bruce P. Heffner, My 911
•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.
Scott E. Bushnell
Principal Owner - Executive Forensic Accountant
Business Interruption Consulting, LLC
“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.”
Akos Swierkiewicz
Principal
Insurance & Reinsurance Consulting & Outsourcing Services ("IRCOS, LLC")
The advantages and disadvantages of joining an Agency Network…and the issues to be considered in selecting a suitable Agency Network.
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.
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.
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.
Nancy Germond
Executive Director, Risk Management and Education
Independent Insurance Agents & Brokers Association
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.
Stanley Lipshultz
Stanley L. Lipshultz, JD, CPCU
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.
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.
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.
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.