American Association of Insurance Management Consultants

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“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. … “

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“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.”

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“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.”

Frederick J Fisher, J.D., CCP

President
Fisher Consulting Group, Inc.

“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”

Frederick J Fisher, J.D., CCP

President
Fisher Consulting Group, Inc.

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From the Spring 2018 issue of the CPCU CLEW Interest Group newsletter.

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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.

Lee Hoffman

President
Lee M. Hoffman & Associates, LLC

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.

Bruce Heffner

Corporate Counsel / Attorney at Law
Boomerang Recoveries, LLC, Inmedex, LLC & Law Office of Bruce P. Heffner,

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.

Bruce Heffner

Corporate Counsel / Attorney at Law
Boomerang Recoveries, LLC, Inmedex, LLC & Law Office of Bruce P. Heffner,

Personal observations have demonstrated to me that some insurance companies have some very serious misunderstandings about the attorneys that they hire.

Bruce Heffner

Corporate Counsel / Attorney at Law
Boomerang Recoveries, LLC, Inmedex, LLC & Law Office of Bruce P. Heffner,

Insurance Companies need to strive for competent officers and directors.

Bruce Heffner

Corporate Counsel / Attorney at Law
Boomerang Recoveries, LLC, Inmedex, LLC & Law Office of Bruce P. Heffner,

A hair-weaving certificate requires 300 hours of training. An individual selling reinsurance needs zero education and faces zero testing.

Bruce Heffner

Corporate Counsel / Attorney at Law
Boomerang Recoveries, LLC, Inmedex, LLC & Law Office of Bruce P. Heffner,

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.

Lee Hoffman

President
Lee M. Hoffman & Associates, LLC

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.

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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.

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