Big I Washington, Winter 2016

WINTER 2016

Big I Washington is a publication of the Independent Insurance Agents & Brokers of Washington

Standard of Care in Washington E&O Claim Case Studies Washington Joint Conference & Tradeshow Wrapup Revisions to Overtime Standards

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WINTER 2016 Official publication of Independent Insurance Agents & Brokers of Washington 11911 NE 1st St., Suite B103, Bellevue, WA 98005 Ph. (425) 649-0102 Fax: (425) 649-8573 Web: www.wainsurance.org Officers of IIABW President: Kim Krogh, ARM, Fidelity Associates, a Div. of Hub International, Spokane President-elect: Lori Reed, Mitchell Reed & Schmitten Insurance, Inc., Wenatchee Secretary:Rob Tripple, Tripple Tripple & Tripple, Edmonds Treasurer: Dave Merrill, Merrill & Merrill, Seattle IIABA Director: Sue Knobeloch, CIC, CPIW, Association of Risk Managers NW, Tacoma Executive VP: Daniel Holst, IIABW, Bellevue Board of Directors Mike Button, Past President), PayneWest, Richland Craig Field (Chelan/Douglas), Mitchell Reed & Schmitten Insurance, Inc., Cashmere Duane Henson, LUTCF (Skagit/Island), First Insurance, Mt. Vernon Mary Lemon (Spokane), Fidelity Associates, a Div. of Hub International, Spokane Amberlyn McQuary Buratto, CIC (At Large), Stonebraker McQuary, Spokane Dave Merrill (At Large), Merrill & Merrill Insurance, Seattle Melissa Power, ACSR, CIC (At Large), Homestreet Insurance, Spokane Nick Stay (Pierce) American Underwriters Insurance, Tacoma Dave Street (Grant), Martin-Morris Agency, Wenatchee Rob Tripple (Snohomish), Tripple Tripple & Tripple, Edmonds Carissa Veltri (Benton-Franklin), Conover, Tri Cities Staff Daniel Holst, Executive V.P. - dholst@wainsurance.org Susan Scott, AAI, Sr. V.P. of Education - sscott@wainsurance.org Ashley Kuaea, Director of Member Programs - akuaea@wainsurance.org Kathy Gardner, Administrative Assistant - kgardner@wainsurance.org Bill Stauffacher, Stauffacher Communications, Contract Lobbyist - gocougs@billstauffacher.com Advertising

For more information on advertising, contact Jim Aitkins, Blue Water Publishers, LLC 22727 - 161st Avenue SE, Monroe, Washington 98272 360-805-6474, fax: 360-805-6475, jima@bluewaterpublishers.com Big I Washington is the official magazine of the Independent Insurance Agents & Brokers of Washington and is published quarterly. News items from IIABW members are requested. IIABW does not necessarily endorse any of the companies advertising in this publication or the views of its writers.

The publisher cannot assume responsibility for claims made by advertisers, content provided by the editor, or for the opinions expressed by contributing authors.

Advertiser Index Anchor Bay Insurance Managers

29

Anderson & Murison

27

B C E Consulting

27

Burns & Wilcox

11

Continental Western Group

12

Grange Insurance Association

2

Griffin Underwriting

5

Imperial PFS

13

Liberty Mutual

32

Mutual of Enumclaw

17

Preferred Property/JGS

24

Quirk & Co.

22

R-T Specialty, Inc.

9

Risk Placement Services

31

Ron Rothert Insurance Services

25

Vertafore

19

Western National Insurance Group

7

WSRB

29

Worldwide Facilities, Inc.

3

Table of Contents

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6

A Message from Kim Krogh, IIABW President

13 Revisions to Overtime Standards

8

Commissioner Kreidler: Exchange Update

14 IIABW and PIA Joint Conference Wrapup

9

Upcoming IIABW Conferences

23 Agents E&O Standard of Care in Washington

10 Personal Umbrella E&O Claim Case Studies

28 Young Agents Corner

12 IIABW Presented Education Award

30 Big “I” Markets

P&C Underwriting Assistant Gena Glasser

we have something

need!

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P: 866.562.8095 I F: 425.453.8696 submissions@gogus.com Serving over 2,200 agents throughout Washington and Oregon, and a proud supporter of IIABW.

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IIABW President

KIM KROGH

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I am honored and excited to be your association’s new President. I have worked in the insurance industry for over 27 years; I started my career in Seattle with Fred S James and then moved to New York City with Gemblock Assoc (specializing in Jewelers Block Insurance). I eventually moved back to Spokane, and in 1991 opened Jan Krogh Insurance with my mom Jan Krogh. I truly enjoyed working with her in our family owned agency and I appreciate all the knowledge she has shared over the years. In 2001 we sold our agency to Fidelity Associates (now Hub International).

IIABW will continue to provide services to members to help them prepare for the future. As I travel around the state, I hear from agencies – both big and small – about the concerns they have with their future workforce. With over 60% of our industry owners and employees retiring in the next seven years, there are not enough new people coming into our wonderful industry.

EMPLOYEE RECRUITMENT IIABW’s New Talent Recruitment and Development Task Force is in the process of creating tools to help agents grow and perpetuate with the help of new employees. As we have carefully studied the issue we have identified many challenges.

• Our industry is not seen by the general public as the most exciting career • While we offer a lucrative, stable career with possible ownership, we have not been effective at communicating our value proposition.

• Hiring new employees is an expensive endeavor – in both money and time for training and mentoring.

Watch for more information coming out as a result of this task force. If anyone is interested in participating in this important project, please let us know.

After we hire and initially train new producers and CSRs, our job doesn’t stop there. We need to continually guide them through our complicated industry, encourage them during those tough first few years and give them the resources they need to succeed.

YOUNG AGENTS IIABW recognized over 40 years ago that we need to do more to support our industry’s new professionals. The Young Agents brings producers, CSRs, marketing reps and underwriters together to help each other find solutions to challenges they are facing. Over 250 young professionals attend Young Agents 6

quarterly networking events each year.

The Young Agents are not only providing support to each other but they are also improving the image of the industry. This enthusiastic group: • collects over 1500 pounds of food for Northwest Harvest during the holidays each year, • has collected over $25,000 for the Make a Wish nonprofit over the past couple years, and • raises contributions for our political action committees.

I encourage our industry to send their young professionals to Young Agent events to help them find the tools and the contacts to succeed in our industry.

Finally, IIABW will continue to advocate on behalf of agents in Washington D.C., Olympia and with our insurance commissioner. I want to alert you to a regulatory issue that our Insurance Commissioner is focusing more attention on.

Last month a Seattle broker was fined $30,000 for purchasing “sporting event tickets, holiday wreaths, dinners and other items that exceeded the $25 per year per client limit set out in state law between 2012 and 2015.”

REBATING As a reminder, IIABW helped pass a new law that went into effect in July 2015 which: • Increased from $25 to $100 per person per year the rebating and inducement expenditure exemptions; • Created a new $100 per person per year limit for referral ‘thank you’ gifts; • Exempted sponsorships and contributions to nonprofit organizations from these same expenditure limitations.

The OIC is currently working on a new rule which will provide guidance to agents on the anti-rebating law. IIABW will share an analysis of the new rules to our members once they are adopted by the OIC this winter.

IIABW encourages agents to do the following: • Know the rules and laws relating to rebating (RCW 48.30.140 and RCW 48.30.150).

• Keep track of the amount your agency spends on customers and prospectives.

WN-2013FallAd-(IIABWA-(WA)).pdf 1 10/25/2013 8:17:24 AM

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WASHINGTON STATE INSURANCE COMMISSIONER

Mike Kreidler

Consumers must now pay insurers directly for Exchange health plans

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big change began Sept. 24 that requires consumers buying individual or family health plans through Washington Healthplanfinder to pay their premiums directly to the insurer.

The Health Benefit Exchange, which manages Washington Healthplanfinder, and the insurers agreed on direct payment as more efficient for consumers. This ended a process known as premium aggregation in which the Exchange held the payments for a time, then paid insurers.

This change is anticipated to help alleviate issues related to premium payment that many consumers experienced in the past. Monthly deadlines for paying premium will vary so consumers will need to check with their health insurer to make sure they avoid any breaks in coverage.

The Exchange will still calculate the federal subsidy amounts for consumers that are available only through plans bought through Washington Healthplanfinder.

The switch to direct payment shifts about $560 million in premium payments that the Exchange handled in 2015 from all insurers. Although consumers using the Exchange always had the option for direct payment, only about a quarter did so.

The Exchange reported 155,000 enrollees signed up for coverage through Washington Healthplanfinder in 2015 and hopes to attract more enrollees this year. Open enrollment for 2016 began Nov. 1.

A total of 136 individual health plans from 12 insurers will be available for consumers to consider through the Washington Healthplanfinder. Overall, companies requested an average rate change of 5.4 percent, but after our review, an average change of 4.2 percent was approved for 2016.

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IIABW’S 2016 CONFERENCES

All Industry Day at the Capitol January 21, 2016 Washington State Capitol

IIABW/PIA Joint Conference September 14-16, 2016 New Davenport Grand Hotel, Spokane

Young Agents Conference June 9-10, 2016 Clearwater Casino Resort, Poulsbo

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Personal Umbrella E & O Claim

Case Studies

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Personal Umbrella Policy (PUP) is a necessary addition to insurance protection for most insureds.

Are you aware of the importance of this valuable coverage? One of the best ways to understand the need for a personal umbrella is to review actual claims examples.

It is very clear that an incident arising from just normal daily activities can expose all of us to the potential for a large claims suit.

IIABW endorses the RLI PUP policy and administers the program through its for profit subsidiary, IPSC. Listed below are actual RLI PUP claims. These claims show the very real consequences of situations that quickly exhaust underlying liability limits and threaten the net worth of the people involved.

Excess UM/UIM Claim Scenario The Insured was driving legally on a highway when she was rear ended by another driver. The collision caused the Insured’s vehicle to hit a barrier and bounce into a light pole. The other driver attempted to flee the scene on foot but was apprehended.

He was uninsured, does not have a driver’s license, and was cited for numerous violations.

The Insured sustained two broken ribs, three broken teeth, contusions to her lungs, and lacerations to the head. After the insured’s primary insurance company tendered its full Uninsured Motorist limit, the insured was still left with $260,000 in medical expenses. The RLI Personal Umbrella Excess Uninsured Motorist coverage paid the remaining expenses.

Auto Liability Claim Scenario The Insured was driving southbound down the road. The insured passed two orange construction signs, the first saying 10

―Road Work Ahead and the second ―Shoulder Work Ahead.

At this point, the road proceeds uphill and curves slightly to the left. There were then six barricades along the fog line with a construction water truck parked just ahead of the sixth barricade. The insured just missed the sixth barricade and then struck the front bumper of the water truck. She continued on, hit a barricade and then struck the claimant (laborer who had just exited the water truck). After impacting the worker, she struck several other barricades, and corrected back onto the roadway.

The claimant was thrown between 20 to 30 feet and sustained a fractured sternum; and brain and spinal injuries. RLI PUP Policy paid out policy limit of $1 million.

Watercraft Liability Claim Scenario Our insured was operating his ski-boat with 2 friends along as passengers on a lake in Texas. An inner tube attached to a rope was being held down by a cooler at the rear of the boat.

The cooler became dislodged and flew out of the boat. When the insured attempted to turn the boat around to retrieve the cooler, the wind blew the inner tube out of the boat and the rope began to uncoil, catching one of the passengers around the leg, launching him into the air and landing him on the boat deck.

The Passenger’s injuries included complete tears of his right knee ligaments and tendons requiring surgery. In addition, he sustained a substantial injury to his right hip. He was totally disabled for approximately 6 weeks, unable to drive and has additional lost business income. The primary insurance company tendered its full policy limit which was $500,000 short of the total claim amount. However, the insured was also covered by the RLI Personal Umbrella and payment was made for the remaining amount of $500,000.

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Premises Liability Claim Scenario The insured engaged a contractor to replace and install a new dock for the lake behind his house.

After beginning the work, the contractor pointed out to the insured that a tree needed to be removed in order to get the old dock out of the water. The insured had a backhoe and proceeded to knock the tree down, allowing for the dock to be placed on the ground out of the water. As they were leaving the lake, the contractor pointed out another tree that was dead and should be knocked down. The insured told the contractor that he was too close to the landing area and had him move further away to a safer area. While knocking down that tree, a limb hit the contractor on the head and neck. The underlying insurance coverage limits were paid out, but there was still a balance of $800,000 for this claim. The RLI Personal Umbrella ultimately paid the $800,000.

For more information on the RLI Personal Umbrella contact us today at (425) 649-0102!

IIABW Presented

Education Award

IIABW was presented our national association’s top education award at their national conference last month. Susan Scott and Dan Holst accepted the Independent Insurance Agents & Brokers of America’s 2015 Excellence in Insurance Education Diamond Award.

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12/12/14 8:29 AM

Revisions to Overtime Standards

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he Big I is lobbying against the Department of Labor’s (DOL) proposed revisions to federal regulations governing the “white collar” exemptions to the overtime compensation requirements that exist under the Fair Labor Standards Act. Federal law requires non-exempt employees to be compensated at a rate of no less than time-and-one-half their regular salary for time worked over 40 hours in a work week. But under current regulations, employees qualify for white-collar exemptions if they make more than $23,660 per year and meet certain other conditions. If implemented as proposed, the DOL rule would more than double the salary required for an employee to qualify for one of these exemptions to a level of approximately $50,440 in 2016.

The Big I warned that these potential regulatory changes, will force small businesses to cut the base salaries of some workers, reduce or eliminate other benefits, utilize automation and outside vendors to a more significant extent or find other ways to offset the effects of the proposed revisions.

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WRAPUP

CONFERENCE

IIABW and PIA held our fifth successful joint conference at the Tulalip Resort last month which was attended by over 375 people. The Trade Show provided attendees 75 booths to network with in one place as well as excellent educational TiTle SponSor opportunities.

IIABW President Mike Button and PIA TiTle SponSor President Dale Kelley were masters of ceremonies for the conference.

Kayak Point Golf Course is a 20 minute drive west of the Tulalip Resort.

Kayak Point features large immaculately manicured greens and spectacular views. Rated year after year as one of “America’s Top 50 Public Golf Courses” by Golf Digest, awarded a 4-star rating in Golf Digest’s “Places to Play” and selected as a “Must Play” by the Seattle Times.

The tournament begins at 1:00 PM with a shotgun start and ends with a BBQ dinner in the clubhouse afterwards. The tournament is a best ball scramble format with prizes for the top foursomes and contest holes. You can build your own foursome or will be put on a team. Companies can sponsor holes and are encouraged to greet golfers at their hole.

Hotel Reservations Indulge in the luxury and excitement of Tulalip Resort Casino. The AAA Four Diamond Tulalip Resort Casino is among the premier destinations in Washington State offering luxurious accommodations, award winning dining, casino excitement, world class shopping and impeccable service.

Hotel reservations are not included in registration fees and may be made directly with The Tulalip Resort by calling 866-716-7162. Identify yourself as part of the 2015 Washington Joint Conference.

Enjoy a beautiful Fall afternoon on the golf course while networking with your fellow industry professionals. If you have any questions, send an email to dholst@wainsurance.org.

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IIABW INSTALLED OUR NEW OFFICERS:

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THANK YOU TO OUR CONFERENCE SPONSORS FOR THEIR SUPPORT:

COVER PAGE

•

President Kim Krogh is an account executive for Fidelity Associates, a division of HUB International in Spokane.

•

President Elect Lori Reed is a commercial lines agent and the Secretary of Mitchell, Reed, Schmitten in Wenatchee.

•

Secretary Rob Tripple is an owner of Tripple Tripple & Tripple of Edmonds.

•

Treasurer Dave Merrill is an owner of Merrill & Merrill, a member of the Advantage Group, in Seattle

Room rates begin at $149 per night plus tax and resort fee. Room block is open for reservations until Wednesday, August 19, 2015. Once room block is full, rooms are subject to availability. Credit card required at time of reservation.

TITLE SPONSORS • Liberty Mutual Insurance • Safeco Insurance ELITE SPONSORS • Imperial PFS • Progressive Insurance • Travelers Insurance MAJOR SPONSORS • Grange Insurance • Mutual of Enumclaw • Nationwide • Oregon Mutual Insurance • Western National Insurance PARTNER SPONSORS • Capital Premium Financing • Encompass • MAPFRE Insurance SUPPORTING SPONSORS • Berkley NorthPacific • Capital Insurance Group • CHUBB • MetLife CONTRIBUTING SPONSORS • Cochrane & Company • D.W. Ferguson • Foremost Insurance Group • Griffin Underwriting Services • Pacific International Underwriters • Prime Insurance • Red Shield Insurance Company • Superior Underwriters • Tepco Premium Financing

IIABW RECOGNIZED SOME OF ITS MEMBERS BY PRESENTING ITS ANNUAL AWARDS. •

•

IIABW’s top honor, the Don C. Burnam Lifetime Achievement award, was presented to Jim Slaugenhaupt who recently sold his agency for contributions he has made to his community and the insurance industry. He is a third generation leader of IIABW and served as President in 2007.

Neil Muller of Bell Anderson was given the Agent of the year award for the leadership he provided as Government Affairs Chair during a successful legislative session for IIABW.

Jim Slaugenhaupt, Burnam Award, Mike Button, IIABW President

•

Tom Becker of Liberty Mutual was presented the Industry Person of the Year award for the support he has given IIABW and independent agents throughout his career.

•

Mark Smith of Swett & Crawford was recognized for his outstanding contributions to the field of insurance education with the Max Walton Insurance Education Award.

•

Dan Winckoski of Fulcrum Programs was presented the Young Agents of the Year Award for his leadership on the IIABW Young Agent Committee over the past decade.

Tom Becker, Industry Person of the Year, Mike Button

Dale Kelley, PIA President

Kim Krogh, IIABW’s incoming President

Amy Perkins, PIA’s incoming President

Nancy Schultz, Dyan Bates & Barb Kaiser

Dan Winckoski, Young Agent of the Year, Mike Button

Mike Button; Kim Krogh

Shari Lofquist, Katherine Heichel, Laura Jensen & Denise Baker 15

Amy Perkins, Kristie English, Matt Fox

Traci Maurio and Amber Foster

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Daniel Garcia, Heidi Duncan

Craig Field, Reid Ekberg, Melissa Power, Stacy Chatburn

Doug Ferguson, Rick Staten, Cathy Holt, Amy Perkins

Rick Staten, Pam and Brett Kok

Jeff Rounds, Ruthann Miller, Mary Emerson, Tom Becker

Mike & Lori Reed, Rob Tripple

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Mike Arnold, Jillian Fassburg, Craig Field, Johnson Marshall, Chris Garrison

Steve Shoemaker, Brent Schmitten

Alan Sexauer, Cathy Chen, Harry Hu 18

Tracy Skinner

Bob Horn, Kim Krogh, Rich Hawkins, Denis Marsh, Jerry Kelly

Gabe Gonzales, Kristin Swanson

Lucas Hutchinson, Debbie & Ron Sarka

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20

Ashley Kuaea, Claudia McClain

Ashley Kuaea, Coron Polley

Lynn Gregorich, Kim Krogh, Erika Dufenhorst

Robin Goldman, Todd Carter, Brad Neitling

Ashley Kuaea, Reid Ekberg, Tyler Wate

Tom Becker, Chris White, Scott Locker

Alan Sexauer, Ruth Cox, Dana Jeffers

Greta Perales, Molly Saben, Mary Townsend, Andrew Dahlhauser, Chris Strand

Joe Kelly

Annie Dimmitt, Sharon Miller

Kara Moreno, Harmony Wallender

Dan Winckoski, Mike Button, Sue & Jim Slaugenhaupt

Dawn Irwin, Mandy Strange

Todd Carter, Dave Street, Thane Street

Garn Kemp, Duane Henson, Bruce Thompson, Tim Kussie

Jim Brown, Lynn Gregorich, Chris Jones 21

Barb & Pat Otter, Melissa Power, Mary Lemon

Reid Ekberg, Rich Hawkins, Rob Bush, Jarrod Haynes

Stacy Juelfs, Michael Walker, Tyler Wate, Gary Kelley

Steve Milliren, Vince Terlaje, Ken Potts, Jim Antush

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Stability

To gain a deeper understanding of the differing agent duties and standard of care by state, Seattle attorney Tom Stratton wrote this article for the Big “I” Professional Liability Program and Swiss Re Corporate outlining the agents’ standard of care in Washington State, a short summary of the landmark cases and sample case studies emphasizing how legal duties and issues with standard of care affected the outcome.

Agents E&O Standard of Care In Washington

By Thomas C. Stratton Rockey Stratton, P.S., Seattle

T

his risk management information is a value-added service of the Big “I” Professional Liability Program and Swiss Re Corporate Solutions. For more risk management information and tools visit www.iiaba.net/EOHappens. On the specific topic of agents’ standard of care check out this article from the Hassett Law firm, our E&O seminar module, and this risk management webinar. In Washington, an agent has the general duty to procure the coverage requested by a customer. Hellbaum v. Burwell and Morford, 1 Wn. App. 694, 463 P.2d 225 (1969). If the agent does not procure the requested coverage, he must notify the customer so that the coverage can be obtained elsewhere. Bates v. Bowles White & Co., 56 Wn.2d 374, 353 P.2d 663 (1960). The question always arises as to whether the agent also has a duty to investigate, discover and advise the customer as to coverages. The court in American States Ins. Co. v. Breesnee, 49 Wn. App. 642, 745 P.2d 518 (1987), held that in general, a customer has a duty to give his insurance agent “clear, explicit, and positive” instructions regarding the type and scope of coverage requested. If the customer’s instructions are “ambiguous or obscure, and will bear different interpretations, the agent is justified in acting in good faith upon one of two reasonable constructions.”

In American States, Breesnee owned a car lot. His son bought a Trans Am in his own name. Breesnee notified his insurance agent that he wanted the Trans Am added to his commercial car lot policy. He did not tell the agent that the car was in his son’s name. The son wrecked the car and coverage was denied because the son was not a named insured and the Trans Am was not a covered vehicle under the terms of the car lot’s commercial policy.

Breesnee argued that the insurance agent had a duty to make inquiries of him to determine the extent and type of coverage required. The court rejected this argument and concluded that the insured had a duty to specifically tell the agent that he wanted special coverage for a car that was not registered in the name of the car lot. The court explained that an agent does not have a duty “to make further inquiries of the person who placed the insurance order to determine the nature and scope of the insurance required.”

The Washington courts have held that there is a duty to advise when there is a special relationship. A special relationship may arise under two circumstances: first, if an agent holds himself out as an insurance specialist and receives compensation for consultation and advice a part from the premium paid by the customer; or, second, if there 23

is a long-standing relationship and some type of interaction on the question of coverage coupled with the customer’s reliance on the expertise of the insurance agent to the customer’s detriment. For several years, the Washington courts discussed special relationships but did not find one to exist in the cases considered by the Washington courts. See Suter v. Virgil R. Lee & Son, Inc., 51 Wn. App 524, 754 P.2d 155 (1988).

In Suter, plaintiffs did not have sufficient liability insurance to cover an auto accident and argued that an agent has a duty to recommend adequate liability policy limits. The plaintiffs presented the affidavit of an “insurance expert” who testified that an insurance agent had a duty to inquire into an insured’s assets, income, occupation and real estate holdings and to recommend liability coverage adequate to protect the assets.

The court rejected plaintiff’s argument and concluded “the general duty of reasonable care which an insurance agent owes his client does not include the obligation to procure a 2 policy affording the client complete liability protection.” The courtBig alsoI held that there was no special relationship obligating 3285 Washington the agent to give advice because the plaintiffs had never asked 7.675X4.9 anyone from the insurance agency about the adequacy of their Gen Umbrella coverages and the agency had never given them any advice in that regard. See also Shows v. Pemberton, 73 Wn. App. 107, 868 P.2d 164 (1994) (insurance agent not obligated to advise

insured about policy coverages when there had been no request for advice); Gates v. Logan, 71 Wn. App. 673, 862 P.2d 134 (1993) (insurance agent had no duty to advise insured to get higher limits when agent did not procure all client’s insurance); Lipscomb v. Farmers Ins. Co., 142 Wn. App. 20, 174 P.3d 1182 (2007) (special relationship did not exist because there was not sufficient interaction on coverage and no reliance on the agent’s advice.); American Commerce Ins. Co. v. Ensley, 153 Wn. App. 31, 220 P.3d 215 (2009) (multi-year relationship not enough to create a special relationship); McClammy v. Cole, 158 Wn. App. 769, 243 P.3d 932 (2010) (no special relationship or duty to advise when agent did not give advice on the adequacy of coverage.)

In 2003, a case involving bad facts finally led to the Washington courts finding a duty to advise. See AAS-DMP Mgmt., L.P. Liquidating Trust v. Accordia Northwest, Inc., 115 Wn. App. 833, 63 P.3d 860 (2003). Accordia had been AAS’s broker for 10 to 15 years. It collected a fee in addition to its commission.

Accordia prepared an 80 page summary and did not give AAS the policy. Accordia also told AAS that there was no deadline on submitting claims when the policy contained a 2 year suit deadline. AAS submitted a large claim two years after the loss and the insurance carrier denied coverage. AAS could not sue the carrier because the suit deadline had expired. Not

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surprisingly, the court concluded that there was a special relationship and that Accordia had been negligent when it advised that there was no deadline for submitting the claim. See also Shah v. Allstate Ins. Co., 130 Wn. App. 74, 121 P.3d 1204 (2005) (court found duty to advise when agent had procured insurance for years, calculated the replacement cost using the wrong square footage and represented that the policy provided replacement cost coverage); Peterson v. Big Bend Ins. Agency, Inc., 150 Wn. App. 504, 202 P.3d 372 (2009) (court found violation of duty when agent promised to use Boeckh guide, used it incorrectly and misrepresented that the policy limits were determined by the cost guide).

Case Study I A. Line of coverage involved: Contractors discontinued operations policy.

B. Position of person in the agency involved: Broker.

C. Personal or commercial lines: Commercial.

D. Type of coverage involved: Ongoing operations.

E. Procedural or knowledge-based error: Knowledge.

F. Claimant allegation: Broker failed to confirm that ongoing operations would roll into discontinued operations coverage.

G. Settlement or trial: Settlement.

H. Description of alleged error: Broker failed to compare

marketing policy materials to actual policy issued.

I. Tip to avoid claim: Always compare quote materials to actual policy.

J. Summary of case. In the late 1990s, a California broker developed an idea for discontinued operations coverage for construction companies. The policies would provide coverage for buildings that had been completed and sold. The California broker approached a London broker who went to a Lloyd’s syndicate to draft the policy. Lloyd’s attorneys drafted the policy form. The initial 1998 version of the policy did not have an ongoing operations exclusion. Binders were issued for policies under the 1998 version although the actual policies were not delivered. In 2002, Lloyd’s developed a new policy form that still did not have the ongoing operations exclusion. In 2003, a third version of the policy was created with an ongoing operations exclusion. The exclusion provided that there would be no coverage if the units under construction were being worked on or were owned at the time of the discontinued operations policy inception. It was not until 2003, that Lloyds finally starting issuing policies for the coverage that had been bound beginning in 1998. All the policies used the 2003 policy form. No one was told about the change in forms.

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In February 2003, the Washington broker submitted an application which included two construction projects For a competitive E & O quote for Swiss Re and other admitted that were ongoing. The broker was provided a sample or surplus lines companies, contact IIABW’s Ashley Kuaea at policy to review. The sample policy was the 2002 (425) 649-0102 or akuaea@wainsurance.org. version, which did not have the ongoing operations exclusion. The broker ordered the policy believing agent sent the claim letter to the St. Paul underwriter (who was that the two ongoing projects would be covered once the same underwriter on the prior Royal policy). The Royal they were completed. The policy arrived six months later and D & O policy required that a claim be reported to the claims the policy forms were not reviewed. The projects which were Department. The agent’s procedural manual also stated that all ongoing were then completed and sold. There was a later claims should be reported to addresses identified in the policy. construction defect claim and Lloyd’s denied coverage because St. Paul issued a new policy effective June 14, 2003, and the the projects were ongoing and owned at the time of policy underwriter did not forward the claim letter to the claims inception.

Department.

There was clearly a special relationship and the broker On October 20, 2003, the agent asked the underwriter was obligated to give accurate advice. The broker had to about the status of the claim. The underwriter told the agent to concede that the contractor relied on his advice in procuring the submit the claim to the claims department. Nine months later, policy. The broker also acknowledged that if he had reviewed in August 2004, the directors of the Alaskan Native Corporation the policy forms upon receipt of the policy, he would have were sued for $8 million. Royal denied the claim, stating that known that the policy would not provide coverage for the there was late notice because the claim was not turned in to the projects which were owned and under construction at policy claims department prior to the termination of the Royal policy inception. The case was settled with contributions by the on June 14, 2003.

California broker, Lloyd’s and the retail broker. The lesson is The directors filed a lawsuit against Royal and the agent to completely review declaration pages and policy forms to for the lack of coverage. Royal maintained that the agent was document that they are consistent with marketing materials. not Royal’s agent for reporting of claims and that notice to the agent was not notice to Royal. Royal asserted that its agency Case Study II agreement with the agent did not apply because the agent did A. Line of coverage involved: D & O claims made and not place the policy but instead took it over on a broker of reported policy. record letter. Royal eventually settled the claims and then filed B. Position of person in the agency involved: Agent. a claim against the agent alleging that the agent was negligent C. Personal or commercial lines: Commercial. by not promptly reporting the claim to the claims department.

D. Type of coverage involved: D & O claims made and The Court dismissed Royal’s claims against the agent. It reported policy. confirmed that the agent was Royal’s agent even though it took E. Procedural or knowledge-based error: Procedural. over the policy mid-term. The court explained that the agent’s F. Claimant allegation: Agent did not properly report action in only reporting the claim to the underwriter was not claim. the proximate cause of Royal having to pay the claim because G. Settlement or trial: Dismissed on summary judgment. if the claim had been reported prior to termination of the Royal H. Description of alleged error: Agent reported claim to policy, Royal would have paid the claim. underwriter and not claims department.

The claim against the agent could have easily been avoided I. Tip to avoid claim: Report claims to claims address in if the agent would have simply followed its own procedures and policy. reported the claim to the address identified in the policy.

J. Summary of case. An Alaskan Native Corporation purchased a Royal D & O policy. The policy was a claims made and reported policy. During the policy midterm, new agent took over on a broker of record letter. The new agent had an agency contract with Royal. Royal sold the D & O business to St. Paul in early 2003. All underwriters and claims professionals moved from Royal to St. Paul.

On June 9, 2003, the agent was provided with a claim letter against the Alaskan Native Corporation. On June 12, 2003, the 26

Case Study III A. Line of coverage involved: Commercial, mining coverage.

B. Position of person in the agency involved: Agent.

C. Personal or commercial lines: Commercial.

D. Type of coverage involved: Underground property coverage.

E. Procedural or knowledge-based error: Knowledge.

F. Claimant allegation: Agent failed to advise regarding

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lack of underground coverage for property.

G. Settlement or trial: Dismissed on summary judgment.

H. Description of alleged error: Agent failed to advise regarding lack of underground coverage for property.

I. Tip to avoid claim: Send letters and summaries documenting reductions in coverage. Agent should also seriously consider not working with owners who are significantly underinsuring assets.

J. Summary of case. A surface coal mine and production buildings were constructed at a cost of $3.2 million. Initially, the owners insured all of the buildings and equipment. The mine began to have financial difficulties. Gradually, over the years, the coverage was reduced to the point that the owners only covered certain buildings. A lightning strike damaged a transformer. Underground cables from the transformer to the buildings were also damaged. The policy did not provide coverage for underground cables. The owners alleged that they had lost the opportunity to reopen or sell the mine with millions in damages.

The court dismissed the agent on summary judgment. The court held that the owners had a duty to specifically request coverage for underground cables, and that the agent did not have a duty to advise regarding the lack of coverage because all coverages had been significantly reduced over the years. In particular, the owners could not show that they would have procured underground coverage for the cables when the owners were not insuring numerous other assets.

The claim could have been avoided if the agent had recommended that the owners procure their insurance elsewhere when it was obvious that the owners were significantly underinsuring the assets. It would also have been helpful if the summaries or cover letters specifically outlined the reduction in coverage.

Disclaimer: This document is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this document. The information contained or referenced in this document is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice.

B C E Consulting, LLC Our mission is to help you grow your business and improve your bottom line.

Our team of professional and experienced consultants has assisted insurance companies and agencies in achieving their goals and objectives for many years. We focus on the following areas of business development.

• Strategic, succession and contingency planning • Business growth and development • Market feasibility studies • Education, sales training and professional development • Operational efficiency and process improvement For further information or details please see our website: www.bceconsulting.co or contact: Jeff Bronaugh, CPCU, CLU, ChFC, CIC jeff@bceconsulting.co 404 3rd Ave S, Edmonds, WA 98020 (520) 343-4394

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Corner

The IIABW’s Young Agents is an informal group of insurance professionals striving for professional growth through educational achievement, leadership development, legislative involvement, and insurance career perpetuation. While developed for younger insurance professionals or those new to the industry, we encourage all ages to participate in our networking events!!!

By Reid Ekberg

HOLIDAY RECEPTION

MAKE A WISH WALK

Mark your calendar for the Young Agents’ largest event of the year – our holiday Networking Reception which will be held on November 5 at the Wilde Rover Irish Pub in Kirkland. Each year 80 - 100 agents, CSRs, underwriters, marketing reps, etc. attend this event to establish new business contacts and connect with old friends. Each year we also collect 1500 – 2000 pounds of donated food for Northwest Harvest.

The Young Agents also helped raise money for the Make a Wish walk in September.

Over $25,000 has been raised over the last three years for this non-profit organization which grants wishes to children with lifethreatening illnesses.

2016 ANNUAL CONFERENCE The Young Agent’s Annual Conference will be held at the Clearwater Casino Resort right off the ferry near Poulsbo on June 9-10, 2016. 12 hours of CE and two evenings of networking events will be offered. Watch for details.

MARINER’S GAME 40 people attended the Young Agents’ All Industry Networking Event at Safeco Field in August. The evening included a reception at the Pyramid Alehouse, an evening Mariners game and a fireworks show.

FACEBOOK Be sure to visit and ‘like’ our Facebook page at https://www.facebook.com/ IIABW.YoungAgents. It is a great way for Young Agents to communicate with each other. We have been running a weekly TBT (Throw Back Thursday) featuring a different Young Agent each week to help build community.

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DETERMINE DISTANCE TO FIRE STATIONS FIND OUT IF THERE IS A FIRE HYDRANT WITHIN 1,OOO FT.

Visit www.WSRB.com/PropertyEDGE to learn more!

We Haven’t Raised Our Rates in 10 Years...

Restaurant, Bar & Tavern Program Can your current restaurant, bar & tavern market make that claim?

We’ve had a restaurant, bar and tavern program for ten years and right now – today – it is Since 2000, have written program restaurants, barsaccounts, & tavernswe in Alaska, Oregon, morewe competitive thananit exclusive has ever been.

Onon “target” (preferred) have been Washington and, more recently, in Colorado.

We’ve written over 10,000 policies and over $50 consistently able to beat expiring pricing by 20% and more and our bind-to-quote ratio million is morein premiumthan in this class of business.

70%.

We’re stable. We’ve been with the same carrier for over 10 years and our loss and loss expense ratio is the–six priorfor to submitting this advertisement, we have only lost two renewals and right at In 40% so weeks we’re here the long haul. our written premium versus the same period in 2009 has more than doubled. Our application We have great rates. Because we have been so profitable, we haven’t been forced to take the big rate flow is up more than five-fold. Most accounts are quoted within 4 to 48 hours. increases that have plagued our competition.

We haveOur a strong form.

Wenon-admitted are usually silent on policy Assaultform & Battery on the we offer several carrierpolicy is rated A- IX, and our is strong.

ThisCGL is a and package policy other coverage advantages over our competition. that includes Property, General Liability and Liquor Liability. We have a Property broadening dohave not exclude Medical Payments.

Battery is of usually included We are endorsement. growing rapidly.WeWe a very high “hit ratio” and, inAssault the first&six months the year, our written without limitation or sublimit on target accounts.

We offer Food Borne Illness coverage with premium is up almost 40% over last year. We do rushes. sublimit. Our commission level is generally much higher than our competition’s.

Regrettably, we are unable to consider nightclubs, adult entertainment or accounts with liquor serving issues. For No details substandard business program please. and target account eligibility criteria, and an about or thedistressed program, including application, please visit: http://www.surpluslines.com/products/restaurant-bar-tavern.asp

We compete favorably with all the major programs!

Anchor Bay Insurance Managers, Anchor Bay Insurance Managers, Inc.Inc. Post Box Office // Silverdale, 98383 Post Office # Box 2510# 2510 // Silverdale, WAWA 98383 Contact Bill at (360) 649-8969 Phone: (800) 929-9560 // Tanner Fax: (800) 929-9794 www.SurplusLines.com Web: Web: www.SurplusLines.com Email: Info@ SurplusLines.com Email: Info@ SurplusLines.com

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A NAME THAT BUILDS RELATIONSHIPS At Risk Placement Services (RPS), we are committed to building relationships one retail partner at a time. Our stewardship begins by providing you access to the finest markets and top producers in the industry and providing customized solutions to meet your needs by designing, negotiating and tailoring individual risks that help you succeed. It’s a partnership you can count on!

To learn more contact Bud Carter 480.860.5572 or email at Bud_Carter@RPSins.com. www.RPSins.com

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You’re passionate about your clients.

We’re passionate about protecting them.

You have a passion for supporting your clients. Liberty Mutual has a passion for protecting them with coverages like commercial auto, workers compensation, and business owner’s policy (BOP). With regional offices, industry understanding, and comprehensive coverages for businesses of all sizes, we have the local knowledge and national resources to help your clients thrive. Talk to your territory manager today about Liberty Mutual Insurance, or go to libertymutualgroup.com/business.

We are proud to support the Independent Insurance Agents & Brokers of Washington. @LibertyB2B

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by Liberty Mutual Insurance Co., Boston, MA, or its affiliates or subsidiaries.