Crain Content Studio: Insurance Market Source Fall 2018 Magazine by Crain's Detroit Business

INSIDE: DO YOUR CLIENTS HAVE A PRODUCT RECALL POLICY? | 10 PROTECTING CLIENTS AGAINST DATA MINING CASES LIKE FACEBOOK. | 14 MARIJUANA INSURANCE IS RAPIDLY EVOLVING. | 16

FALL 2018 | VOL. 28 NO. 1

Trending News is Insurance News Here is how to use it to grow your business.

IN PARTNERSHIP WITH:

INSURANCE MARKET SOURCE | FALL 2018

TABLE OF CONTENTS O4

FROM THE PUBLISHER

Q&A: MANAGING RISK ON THE COURSE

VACANT HOMES AT RISK

255 SICKENED FROM BAD EGGS, ROMAINE

FACEBOOK SHARES DATA OF 87 MILLION USERS

MARIJUANA INSURANCE RAPIDLY EVOLVING

SPECIALTY INSURANCE RISK SNAPSHOT

KIDNAP AND RANSOM COVERAGE

WHAT’S TRENDING

HANDLE WITH CARE

Kaufman and Crain Content Studio have partnered to write a series of articles based on how trending topics in the news relate to insurance products offered.

PGA Pro Webb Simpson, the 2012 U.S Open champion and 2018 Players Championship winner, speaks about overcoming obstacles and staying focused on the golf course.

Vacant properties pose many challenges, including squatters, vandals and theft, structural damage and fraud. A Vacant Dwelling policy can help protect owners and neighbors.

Product Recall Insurance can protect producers, sellers when exposed lettuce and other foods make customers ill.

Cyber and Privacy policy crucial in wake of social media giant’s data mining scandal. How your clients can be mindful of data collection practices.

Cannabis policies can protect against premises and property liability as the United States and Canada allow more recreational use.

A closer look at important numbers and data that can help your business grow and add new clients.

Insurance policy covers individuals, families or employees wherever they go – but also covers a range of expenses from ransom reimbursement and legal costs to medical bills and loss of income.

Group transportation. House parties. Dealership lots. AV technology. Home rentals. Wildfires. A closer look at how to reduce financial risk and liability and ensure proper protection.

A company or organization involved with transporting goods could be exposed to costly repairs and litigation fees that could put the existence of a business in jeopardy.

INSURANCE MARKET SOURCE | FALL 2018

FROM THE PUBLISHER

#TRENDING

Today’s headlines…tomorrow’s new business

e live in an unprecedented time where the typical 24-hour news cycle has been reduced to what feels like half hour increments. This barrage of news across politics, sports, business and entertainment has dramatically altered how we consume information. But in its wake comes an increased need for highly sophisticated and specialized insurance solutions to address the modern risks of doing business. In this edition of Insurance Market Source we explore the complexities arising from a variety of areas, including the advent of driverless technology (page 27) and growth of newly legalized industries (page 16), along with the seemingly endless data privacy issues (page 14) and emerging social movements (page 29). In addition, we provide an analysis on the breadth of products available to guard against the severe aftermath of events that often follow product recalls (page 10), vacant residential property fires (page 8), and even kidnap and ransom incidents (page 21). Finally, we sit down with PGA pro and Burns & Wilcox brand ambassador Webb Simpson (page 6) for a conversation about managing risk between the ropes. The major champion is delivering a front-page worthy performance this year, winning the 2018 Players Championship and securing his spot on the U.S. team in the upcoming Ryder Cup. Simpson shares how he maintains his focus to navigate the endless challenges from changing course conditions and competitors at the top of their game.

FALL 2018 | VOLUME 28, NO. 1 CORPORATE HEADQUARTERS 220 Kaufman Financial Center 30833 Northwestern Highway Farmington Hills, MI 48334 248-932-9000 Attention: Marketing Department info@insurancemarketsource.com insurancemarketsource.com FOUNDER • 1924–2001 Herbert W. Kaufman PUBLISHER Alan Jay Kaufman H.W. Kaufman Group/Burns & Wilcox Chairman, President & CEO ajkaufman@hwkaufman.com ASSOCIATE PUBLISHERS Steven D. Kaufman Director, Marketing sdkaufman@hwkaufman.com Richard Shipley Corporate Vice President, Marketing rwshipley@hwkaufman.com MANAGING EDITOR Kelly Viviano Director, Marketing keviviano@hwkaufman.com © 2018 H.W. Kaufman Group All rights reserved.

With no end in sight to the headlines fighting for our attention, we have tremendous opportunity, as outlined in this edition, to deliver the expertise required to manage evolving risks. This publication was produced in partnership with Crain Content Studio, a division of Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207 CONTRIBUTORS: Kevin Bull, Editor Mike Scott, Writer Addie Mirabella, Design Kristin Bull, Director, Crain Content Studio KBull@crain.com

INSURANCE MARKET SOURCE | FALL 2018

Q&A: WITH WEBB SIMPSON

INSURANCE MARKET SOURCE | FALL 2018

Webb Simpson with his caddy, Paul Tesori.

The Webb Simpson File A North Carolina native and current resident, Webb Simpson, 33, has won five tournaments since joining the PGA Tour in 2008. His resume includes winning two tournaments in 2011, the 2012 U.S. Open and the 2018 Players Championship. FAVORITE CLUB: 5 wood. LOWEST ROUND: 58. FAVORITE GOLF COURSE: Augusta National. GO-TO SNACK: Chips and hummus. HOBBIES: My family and going to the beach, on the boat. VEHICLE OF CHOICE: GMC Yukon.

and waiting for those really low under-par rounds to come because you can’t force those, those just happen.”

MANAGING RISK ON THE COURSE PGA golfer and Burns & Wilcox brand ambassador Webb Simpson, winner of the 2012 U.S. Open and 2018 Players Championship, replays his biggest accomplishments and discusses the importance of a competitive spirit.

ou grew up one of six children in North Carolina. Your parents often dropped you off at 7 a.m. or earlier during the summer so you could play golf until dark each night. Where’d you find your inspiration? Webb Simpson: “My dad got me into the game and he played once or twice a week. He was a pretty good player, and I just loved being out there with him. He let me drive the cart and all that kind of stuff. I just got hooked early on. I would stay out there literally all day.” What motivates you now? W.S.: “I have a goal every year that sits above winning a Ryder Cup or this or that. The goal is to get better than I was at the start of the season.”

You turned pro as a golfer in June 2008. What has been the most challenging moment for you on the PGA Tour? W.S.: “I had a pretty solid first year, finished 70th on the money list. I was happy with it. The second year I missed six cuts in a row in mid-year. That was the lowest moment for me. I felt like my game was struggling. I went to Pinehurst for a couple of days with my dad — went old-school — and he played with me and we just figured it out, and I started playing better again.” How do you evaluate risk on the course? W.S.: “We’re pretty conservative in our play and our approach. But when we get to a par 5, we kind of have a 6 versus 3 rule. So if I can make an eagle, and the worst I can make is a 6, then we think it’s a reasonable opportunity. But I’m a big believer in limiting the stakes

You won your first major in 2012 at age 26. You were the U.S. Open champion at the Olympic Club in San Francisco. Can you take us back to that moment? W.S.: “My caddy asked me actually that week, ‘Hey, if somebody gave you second place right now, would you take it?’ And I said, ‘Yes. I’ve never contended for major championships, so if I finish second, I gain all that experience from being in the mix on Sunday.’ I had to be honest with myself. So I played OK Thursday, Friday. Had a two-under round Saturday, which is great. Got me back into, I think, eighth place and four back, but I still wasn’t thinking a whole lot about winning. I just wanted to have a good solid Sunday. I came out Sunday and got a birdie 6, 7, 8, and 10, and that put me right in the mix. I was a little surprised I won a major at 26, but at the same time, I put together a good 18 months of golf, so I felt pretty comfortable in that position.” Fast forward six years. You won The Players Championship in May of this year, your fifth career win. You dominated with a sevenstroke lead entering the final day. What did that weekend mean to you? W.S.: “That was the most meaningful win I’ve ever had by far because it’d been four years since I won a tournament. I didn’t lose hope in winning again, but you lose confidence in the fact that you haven’t won, and I put together some good tournaments this year, some good finishes, but just hadn’t quite closed the door. It meant a lot for that reason. … Just to be able to do it with my wife there on Sunday, on Mother’s Day; the U.S. Open I won was Father’s Day. It was kind of cool to have all those things happen in the way that they did.” What about the fact that your Burns & Wilcox teammate Jimmy Walker finished second? W.S.: “Jimmy played great and it was a double victory for Burns & Wilcox.” This was your first win since the putting rules changed in 2016. The ban on the anchor stroke technique meant that you had to putt a different way from which you had done for much of your life. Can you talk about overcoming adversity there? W.S.: “It was definitely a really big challenge; one of the biggest in my professional career. But I knew that I was never going to give up

SPORT HE’D PLAY IF IT WEREN’T FOR GOLF: “I’d be a hockey goalie because I have quick hands.”

and I was never going to throw the towel in. I had to just keep going, keep fighting as hard as I could. And it took a while – it took a lot longer than I was hoping it would take. But the most important thing that I told myself each day was no matter how frustrated I got was to stay patient and keep working and I was going to figure it out. And I think that determination just let me hang in there in those tough moments. And then to come out of it and putt well and rebound the way I have has been really cool and satisfying.” You mentioned your relationship with caddy Paul Tesori. You guys have a close relationship. On the course, how much do you depend on your caddy for advice and to manage risk? W.S.: “I rely on him a whole lot, probably more than most guys rely on their caddies. He’s had 20 years of experience, so I trust him. He’s a friend off the golf course, and our friendship comes before our work relationship. That’s got me to a place where I really believe he’s in it for my best interest and not just for himself. That kind of added bonus has I think always helped me develop as a player and as a person.” You’ve made the cut in seven straight majors, set a personal best for your finishes this year in the Masters, British Open, PGA Championship — all Top 20 finishes. How important is a competitive spirit when you are competing against an entire field of pros? W.S.: “It’s super important. To be able to play against the best players in the world in these big environments is so fun as a competitor, because as in any field in life, we’re working really hard to perform at the highest level on the biggest stages. So, yeah, it’s important to play well every week, but it takes a whole new meaning performing well in those major settings. … I just made it a personal goal that I wanted to improve my performance in the bigger event.” What advice or expertise would you give to young golfers who might see you as a role model? W.S.: “I’ve seen a trend in golf the last 15 years that kids seem to take it too serious from an early age. I admire the hard work and dedication, but I would tell them to keep it fun, keep playing other sports through high school if they want — or at least through middle school. It’s not your job when you’re 16 years old to play golf, it’s a hobby. It’s a job once you turn pro and are supporting a family.” ■

INSURANCE MARKET SOURCE | FALL 2018

IN THE NEWS: EXPLOSION AT UNOCCUPIED CLEVELAND HOUSE

Vacant Dwelling WHY YOUR CLIENTS MIGHT NEED: Approximately 23,800 vacant residential property fires are reported to fire departments each year, resulting in $785 million in property losses. Colder climates give rise to water damage claims due to frozen pipes bursting, while coastal homes have heightened risk of wind damage. PROTECTS AGAINST: Financial losses associated with an explosion, fire or other calamity — and also protects against damages caused to neighboring properties. Other posed risks include squatters, vandals and theft, structural damage and fraud. EXPERT OPINION: “A Vacant Dwelling policy is what a homeowner would want when their regular policy expires — since they are not there every day to watch over it. As we have seen, bad things can happen to vacant properties,” said Bill Gatewood, Burns & Wilcox. LEARN MORE ABOUT THIS POLICY: Search “Vacant Homes” at burnsandwilcox.com or burnsandwilcox.ca.

“A vacant house immediately becomes a high risk. With no one present to watch the property, a vacant home is typically more susceptible to vandalism and theft.”

HOME ALONE Vacant Dwelling Insurance Protects Against Calamities, Damages to Neighbors

n explosion at a vacant Cleveland-area home in June ended in tragedy — resulting in the death of one woman, critically injuring a man, causing five nearby residences to be uninhabitable and damaging nearly 100 other homes. Police say four individuals were stealing metal from the home and likely caused a natural gas leak. Over the past 20 years, 306 fatalities, 5,711 significant incidents and more than $8 billion in damages were related to pipeline explosions in the U.S., according to the Pipeline and Hazardous Materials Safety Administration (PHMSA). Significant incidents are defined by the PHMSA as a fatality or injury requiring in-patient hospitalization, $50,000 or more in damages caused and/or an unintentional fire or explosion. Beyond explosions, fires at vacant homes are also common, with media reports of blazes this summer in Oklahoma City; Rockford, Illinois; Bellevue, Pennsylvania; and Stafford, Connecticut. Data for 2013-15 from FEMA shows about 23,800 vacant residential fires are reported each year, resulting in approximately $785 million in property losses. These incidents serve as reminders that a Vacant Dwelling policy

can protect properties in case of an explosion, fire or other calamity — and also protects against damages caused to neighboring properties. Vacant homes pose many challenges, said Bill Gatewood, Corporate Vice President, Director, Personal Insurance, Burns & Wilcox, Corporate Headquarters. Posed risks include squatters, vandals and theft, structural damage and fraud. “A vacant house immediately becomes a high risk,” Gatewood said. “With no one present to watch the property, a vacant home is typically more susceptible to vandalism and theft.” This is especially true if the house has large amounts of copper or other raw materials that vandals can sell, Gatewood added, referring to the Cleveland incident. Vacant Dwelling policies can help cover and limit the financial losses associated with these unique risks.

Specialty coverage for vacant homes Many homeowners policies do not cover homes that have been vacant for a certain number of days, Gatewood said. The number varies with the carrier and the policy — it could range from 30 to 90 days.

– Bill Gatewood, Corporate Vice President, Director, Personal Insurance, Burns & Wilcox, Corporate Headquarters If someone purchases a new home and moves out of his or her existing home, which has not yet sold or is not on the market, the property owner will want to find out how long the homeowners policy will cover this vacant property. At that point, he or she is eligible to cancel the previous standard policy and purchase a specialty insurance policy for vacant properties. Homeowners need coverage for the structure and liability. In the case of an explosion or fire, a Vacant Dwelling policy could cover other costs associated with the fallout, such as legal costs to the property owner. Most importantly, these policies can be customized based on the homeowner’s needs. “There are limitations and restrictions so homeowners should go over the details with their insurance broker or agent,” Gatewood said. “But if a home is vacant, a Vacant Dwelling policy is what a homeowner would want when their regular policy expires—since they are not there every day to watch over it. As we have seen, bad things can happen to vacant properties.”

The impact of damages to neighboring properties The explosion at the Cleveland home blew out windows of neighboring homes and caused structural damages. Typically a homeowner would look to their standard homeowners policy to cover these losses. Most homeowners policies have a subrogation clause that gives

the insurance company the ability to go after the party at-fault to recover losses. Parties at fault may also be forced to pay costs related to an investigation, depending on the situation. “Whenever you have an incident that caused some type of significant damage there will be an effort to determine if there was (one or more third parties at) fault,” said Emmanuel E. Manuelidis, Corporate Vice President, Claims & Litigation, Atain Insurance Companies. “We are always looking to see if there is a cause that can be identified for the damage.” A subrogation claim can benefit the insured parties and help cover out-of-pocket costs not covered by the homeowners policy, including their deductible, Manuelidis said. The liability policy for the at-fault party should cover most of the expenses for structural, window and other damage to all involved parties. As with most insurance products, the Vacant Dwelling policy offers peace of mind. Generally the cost will be higher – even though the coverage is less – just because there is such a risk to a vacant property. Such policies are available for shorter periods of time such as 90-days, six-months or the traditional 12-month policy, depending on the situation. “However, what you get is a lot of flexibility to tailor the coverage to your situation, which can change if you sell the house or have other plans for that property,” Gatewood said. ■

INSURANCE MARKET SOURCE | FALL 2018

IN THE NEWS: 255 SICKENED FROM BAD EGGS, ROMAINE LETTUCE

Product Recall Insurance WHY YOUR CLIENTS MIGHT NEED: Ensures that the expenses associated with a product recall do not cause critical harm to the business. Helps to address costs associated with restoring brand image, public outreach and even future advertising. More than anything it protects an organization’s balance sheet. PROTECTS AGAINST: A range of recall costs, from destruction and replacement of the recalled product, to consultant fees for professionals responsible for identifying the issue, managing public relations, temporary facility costs, employee payroll, loss of revenue and business interruption and more. EXPERT OPINION: “A retail broker or agent can help their client understand their risk by exploring the overall supply chain and how all levels down to the consumer could be impacted should their product fail,” said Nicole Greene, Burns & Wilcox. LEARN MORE ABOUT THIS POLICY: Search “Product Recall Insurance” at burnsandwilcox.com or burnsandwilcox.ca. five deaths, in 36 states. CDC laboratory testing identified the E. coli outbreak strain in water samples taken from a canal in the Yuma growing region. The last shipments of romaine lettuce from that region were harvested in April and the outbreak ended in late June, according to the CDC. Organizations further down the food supply chain such as restaurants, supermarkets or local grocers and bakeries should also have some level of Product Recall Insurance. A foodborne illness policy could help insure the costs associated with a situation of improper food preparation or contamination from an infected food service worker’s communicable disease. Even for smaller food service providers, insurance is recommended. “The minimum cost of a claim relating to foodborne illness for any restaurant is likely to be in the thousands,” Muglia said. “A food service business generating less than $1 million in annual revenue would have difficulty surviving the financial impact of a foodborne illness event, without an insurance policy to protect its assets.” These types of organizations may be reimbursed for their losses by suppliers, distributors or the company found to be liable,

PLATE PROTECTION Product Recall Insurance Covers Producers, Sellers in Case of Exposures

ajor recalls of romaine lettuce and more than 200 million eggs earlier this year impacted millions of U.S. consumers. The financial consequences to the suppliers and distributors involved is expected to be significant depending on the type of Product Recall Insurance in place after the Centers for Disease Control and Prevention (CDC) linked 255 illnesses to outbreaks of E. coli and salmonella. “The liability assigned to organizations involved in food recalls will vary significantly,” said Michael Muglia, Underwriting Manager, Professional and Executive Liability Center of Excellence, Burns & Wilcox. Suppliers and distributors in particular need to have a broad Food and Drink (Product Recall) policy with limits and coverage appropriate to their exposure, due to the potential wide-reaching liability assigned to them. This is particularly true when a “core

ingredient” that is a part of many other food items is contaminated. “One ingredient can cause a massive product exposure,” Muglia said. “There is a tremendous amount of research that goes into verifying an incidence of product contamination and tracing its cause. Once the cause of contamination is confirmed, organizations have to remedy it, issue a public alert to everyone in the supply chain, and they still have to pay their employees while dealing with the continuing public relations fallout.” Product Recall Insurance can help cover a range of recall costs, from destruction and replacement of the recalled product, to consultant fees for professionals responsible for identifying the issue, managing public relations, temporary facility costs, employee payroll, loss of revenue and business interruption and more. Organizations should work with their insurance specialists

to determine the type of coverage required to best protect their interests. “In the wake of a costly recall, Product Recall Insurance helps to address costs associated with restoring brand image, public outreach and even future advertising. More than anything it protects an organization’s balance sheet,” Muglia said.

Recent food recalls could cripple organizations While Product Recall Insurance is available to organizations in a range of industries that provide products to consumers, it is particularly important to those in the food industry. In April, an Indiana company recalled 207 million eggs that came from its North Carolina farm due to salmonella fears. The eggs were sold through numerous retail stores and restaurants. The CDC said the salmonella outbreak led to 45 illnesses in 10 states. The outbreak ended in June. Meanwhile, the CDC identified Arizona-grown romaine lettuce as the cause of an E. coli outbreak linked to 210 illnesses, including

INSURANCE MARKET SOURCE | FALL 2018

Commitment. At Markel, we are committed to being there when our customers need us most. Our goal is long-term relationships and we realize that these are earned by doing the right things . . . over and over again. Keeping our promises . . . that’s the Markel Style.

assuming there is money available, which often depends on the financial state of the larger company, he added.

Lessons from past food recalls The impact of not properly addressing a food contamination can be significant. In 2017, SoyNut Butter filed for bankruptcy and planned to liquidate its assets after some products were recalled because of an E. coli outbreak. Blue Bell, once the nation’s thirdlargest ice cream maker, saw revenue drop from $680 million in 2014 to $228 million in 2017 and cut a third of its staff after Listeria outbreaks in 2015 and 2016. General Mills suffered brand damage in 2016 after a recall of flour products linked to an E. coli infection. In 2015, Chipotle was linked to 60 people from 14 states infected with E. coli. In every case, having comprehensive Product Liability coverage would be paramount to covering costs associated for the affected manufacturers and distributors. “The margin is often very low in the food service industry, so for any of these companies, a change in revenue is significant, and the right insurance coverage can help with some of these costs,” Muglia said. Food service businesses further down the supply chain often require adequate cash flow to pay for next month’s supplies, therefore claims of thousands and tens of thousands of dollars can be crippling, he added. Specific Product Recall policies like restaurant and supermarket contamination should be considered. “Business interruption following a foodborne illness or recall event, can quickly add up,” Muglia said.

Product recalls will remain a hot issue Increased regulations and public awareness, especially over social media channels, make protecting products more important than ever. “Data from the Consumer Product Safety Commission shows a 108 percent increase in recalls (across all industries) in the past decade, which equals more than 3,300 recalled consumer products,” said

“The margin is often very low in the food service industry, so for any of these companies, a change in revenue is significant, and the right insurance coverage can help with some of these costs.” – Michael Muglia, Underwriting Manager, Professional and Executive Liability Center of Excellence, Burns & Wilcox, Detroit/ Farmington Hills, Michigan Nicole Greene, Associate Vice President, Professional and Executive Liability Center of Excellence, Burns & Wilcox. Common Product Recall policies offer first party coverage for loss of profit, rehabilitation expenses and replacement costs. Third party coverage may include the customer’s loss of profit and rehabilitation expense. Greene said that businesses may not consider how their products fit into the overall supply chain. For example, some manufacturers only consider their risks relative to the number of parts they sell or number of customers with whom they have relationships. “When a product is recalled, often there is one piece of the overall manufacturing process to blame,” Greene said. “A retail broker or agent can help their client understand their risk by exploring the overall supply chain and how all levels down to the consumer could be impacted should their product fail. The risk and impact to their business is often much more than they expected.” ■

INSURANCE MARKET SOURCE | FALL 2018

IN THE NEWS: FACEBOOK SHARES DATA OF 87 MILLION USERS

Cyber Risk and Information Privacy Insurance WHY YOUR CLIENTS MIGHT NEED: Any organization that collects “personally identifiable” information is subject to a variety of state and federal privacy laws. Any organization that uses cookies online to track visitors also may be liable since that is considered a form of data collection. PROTECTS AGAINST: Costs associated with cyber threats and privacy violations such as data breaches, business interruption losses, and regulatory fines. It can also address exposures such as social engineering, ransomware, and other perils that come with operating a business in todays connected environment. EXPERT OPINION: “The bottom line is that organizations need to be mindful of their data collection practices. Organizations need to be transparent with clients, identify who they are sharing their data with and know the security policies of those third parties,” said David Derigiotis, Burns & Wilcox. LEARN MORE ABOUT THIS POLICY: Search “Cyber and Privacy” at burnsandwilcox.com or burnsandwilcox.ca.

DEFENDING DIGITAL ASSETS Cyber and Privacy Policy Crucial in Wake of Data Mining Scandal

fter learning that up to 87 million Facebook users unknowingly had personal data from online profiles shared with a data mining firm, consumers are scrambling to review personal information shared on their own social media accounts. The scandal will likely prompt organizations of all sizes to reinvestigate their privacy policies and processes. “Any organization that collects ‘personally identifiable’ information is subject to a variety of state and federal privacy laws,” said David Derigiotis, Certified Information Privacy Professional (CIPP), Corporate Vice President and National Professional Liability Practice Leader, Burns & Wilcox, Detroit/Farmington Hills, Mich. What constitutes personally identifiable information can vary considerably depending on the industry sector of the business and home state or country from which the data of the individual originated. Any organization that uses cookies online to track visitors also may be liable since that is considered a form of data collection. A Cyber Risk and Information Privacy Insurance policy – also known as a Cyber and Privacy policy – can help protect these organizations. This type of policy can cover costs associated with a

potential data breach, including legal fees and even regulatory fines. It also can help limit exposures from hacking, viruses and other perils that come with operating a business or entity in an online environment. “The bottom line is that organizations need to be mindful of their data collection practices,” Derigiotis said. “They need to be transparent with clients, identify who they are sharing their data with and know the security policies of those third parties. If a vendor you chose to share client data with experiences a data breach, it just became yours.” Facebook, which could be fined millions of dollars by the Federal Trade Commission (FTC), shared data it collected with data mining firm Cambridge Analytica, raising questions about the company’s compliance with existing consumer protection laws. Facebook and Cambridge Analytica have publicly debated who is at fault, but Derigiotis said that regardless, companies need to thoroughly vet any organization that they share data with, including whether those organizations have purchased the right insurance or have the financial means and resources to properly manage a data

“If a vendor you chose to share client data with experiences a data breach, it just became yours.” – David Derigiotis, Corporate Vice President and National Professional Liability Practice Leader, Burns & Wilcox, Detroit/Farmington Hills, Michigan

compromise. Facebook CEO Mark Zuckerberg pledged to make security and privacy improvements after investigating third-party companies’ use of its member data.

Venmo, Vtech cases highlight need for coverage Facebook is not the only company facing concerns over security and privacy. In late February, the Federal Trade Commission settled with PayPal about that company’s process of handling privacy disclosures with its own payments app Venmo, as part of a case that goes back two years. In January, electronics company Vtech agreed to pay a $650,000 fine as part of an FTC settlement for a 2015 data breach. The assessment of penalties in such situations will largely depend on whether an organization is deemed intentional and/or deceptive in its privacy practices, Derigiotis said. If deception or intent is found, then Cyber Risk and Information Privacy Insurance can be denied, but generally it requires willful intent rather than ignorance or a lack of proper policies, such as with Vtech’s recent situation. “When it comes to online privacy, you need to do what you say and say what you do,” Derigiotis said. “Increasingly we see organizations that do a better job of protecting data as getting a competitive edge within the marketplace.”

The cost of Cyber and Privacy Insurance is almost negligible when considering the risks, Derigiotis said. He estimated that $1 million in policy coverage can cost about $1,000 for an annual premium for a lower-risk, smaller organization, with costs rising for higher-risk, larger ones. Such policies have the potential to fund costs such as a forensic investigation, access to and costs of experienced lawyers who specialize in privacy law, a call center established to deal with shorter-term customer service response, public relations costs needed to manage brand reputation, business infrastructure losses if IT systems are knocked offline, and any regulatory fines and penalties handed down.

Privacy guidelines must be actively managed Organizations need to make their privacy policies easy to comprehend, Derigiotis said. Such policies can be reviewed by an organization’s legal counsel or an information privacy professional. An insurance specialist can help to assess the type and amount of Cyber and Privacy Liability Insurance needed. The specialist would help to evaluate the regulatory environment within an industry sector and advise where fines and penalties associated with noncompliance are more typical or common. Healthcare organizations, for example, may be particularly vulnerable because of industry rules and regulations surrounding protected health information such as HIPAA, Derigiotis said. ■

INSURANCE MARKET SOURCE | FALL 2018

IN THE NEWS: CANADA LEGALIZES RECREATIONAL-USE MARIJUANA

ongoing operations of dispensaries, grow operations, and extraction facilities while Product Liability protects against bodily injury or property damage caused by the products themselves. It is important to note that few dispensaries in the U.S. can allow cannabis products be consumed onsite. Property coverage can protect a business’s equipment, building, loss of income and more. Additional coverage is available for finished products and crops, although the cost of crop insurance is prohibitive for most businesses, Deneen said. A frequently overlooked exposure is Pollution Liability which can result from the use of pesticides and other chemicals in the production process, as well as the smell emanating from production facilities. While only a few carriers offer insurance policies for businesses in the cannabis industry, the costs of such insurance in some markets is becoming more affordable as those few carriers are competing fiercely to write coverage for the growing industry. “Overall prices have been going down even though competition is relatively limited,” Deneen said. “The market is changing rapidly and there’s not a lot of precedent in terms of claims.”

FROM CROP TO COVERAGE Cannabis Policies Can Protect Against Premises and Property Liability

he Canadian federal government approved legislation in June to legalize the recreational use of marijuana. The law will go into effect in October. The measure legalizes marijuana possession, home growing and sales for adults. The federal government will manage the licensing of producers, while each province will oversee sales, distribution and related regulations. The number of client registrations for medical marijuana in Canada reached nearly 270,000 by the end of 2017. In the U.S., marijuana remains illegal at the federal level, but 29 states and the District of Columbia have legalized the use of medical marijuana and nine states and the District of Columbia allow recreational use. The growth of businesses involved in the cannabis industry points to an increasing need for growers and retailers or dispensaries in each country to have the type of insurance they need to protect against an unforeseen liability that could threaten the existence of the business itself. Liability policies to protect property and products should be in place, while additional policies covering Directors & Officers (D&O) may be recommended. The marijuana industry is highly regulated in both Canada and the U.S., with each country offering their own set of regulations.

Stark differences in the U.S. market Even though the U.S. market is largely tied to medical marijuana, both the medical and recreational use markets are expected to grow

INSURANCE MARKET SOURCE | FALL 2018

as state laws evolve. The U.S. legal cannabis industry is on track to hit $25 billion by 2025, according to the latest forecast from cannabis analytics firm New Frontier Data, published in April. The data included revised industry sales projections, predicting that the $8.3 billion U.S. medical and recreational marijuana industry will grow at a compound annual growth rate of 14.7 percent. “While insurance is available for cannabis growers and dispensaries, the lack of legislation at the federal level has resulted in few carriers that offer such policies,” said John Deneen, Underwriter, Burns & Wilcox, Denver, Colorado. Yet the concern over the federal government cracking down on companies in the cannabis industry is mitigated by the fact that there have been virtually no efforts by federal representatives to act on the federal law. Perhaps the bigger concern in the U.S. has been that carriers may not honor a claim on the grounds of the activity being federally illegal, though that should not be a deterrent for companies getting policies. “Cannabis companies are investing heavily to get up and running and ought to protect those investments,” Deneen said. “A business owner needs to look at how much of a loss they are able to sustain and keep the business going. Most operators in this industry have a high tolerance for risk but they still need to take a realistic look at their ability to remain in business following a property loss or liability claim.” Generally speaking, in the U.S. market, growers or retailers in the marijuana industry should consider Premises and Product Liability policies grouped together, Deneen said. Premises Liability covers the

Cannabis Insurance WHY YOUR CLIENTS MIGHT NEED: Operating regulated dispensaries and nurseries for cannabis presents a special set of challenges, risk and liabilities. Your clients need to be conscious of a range of potential risks from theft and employee dishonesty to equipment and building damages. PROTECTS AGAINST: Risks associated with operating regulated dispensaries and nurseries. The coverage also helps manage risks for building owners and leased facilities. EXPERT OPINION: “The way policies are written may change from month-to-month, and the types of policies made available by insurance carriers evolve regularly as well. Coverage not available six months ago may be available now,” said Paul Clarke, Burns & Wilcox Canada. LEARN MORE ABOUT THIS POLICY: Search “Cannabis Insurance” at burnsandwilcox.com or burnsandwilcox.ca.

How legalized recreational use could affect Canada Based on the expectation of a Canadian federal law legalizing recreational adult use of cannabis, both regulations and investments in the industry have been rising. As a result, growers, retailers and other businesses in Canada that have catered to the legal medical marijuana activity are wondering what is next. This legislation, and the liability associated with it, is expected to impact large and small commercial cannabis growers as well as retail storefronts (dispensaries). Distribution of marijuana items is regulated by the provinces, based off the federal guidelines around the legal use of the substance. “Right now the market here in Canada, for cannabis-related insurance, is in flux,” said Paul Clarke, National Underwriting Director, Burns & Wilcox Canada, Toronto, Ontario. “In fact, the way policies are written may change from month-to-month, and the types of policies made available by insurance carriers evolve regularly as well. Coverage not available six months ago may be available now.” Clarke said the potential for growth in companies that service the market in Canada is extensive. Another expectation is that the development of commercial growers in Canada may push some of the micro cultivators, or smaller, niche growers out of the marketplace. Commercial growers should have Commercial Property and General Liability coverage to cover a wide range of potential liabilities and building costs associated with costly equipment or structural issues that may arise. Commercial Property policies can cover business interruption, stock and biological assets, coinsurance, equipment breakdown and more. D&O coverage should also be in place to protect executive team members for any personal liabilities. The ongoing market dynamics also mean that new products will be developed as demand arises, Clarke said. Ontario, because of the way it distributes and regulates provincially, has made it mandatory for all licensed producers to carry a minimum $15 million limit in Product Recall insurance, Clarke added. “As the industry continues to evolve, we will most likely see other provinces possibly impose the same mandatory provisions for insurance requirements,” Clarke said. Retail outlets or dispensaries require an operating license and Commercial Property insurance that includes much of the coverage available to growers, which also includes crime liability, business interruption, medical marijuana supplemental coverage and more. A high level of security is required, including a monitored security

“We see our role as providing brokers and clients with the education they need to make smart decisions to make sure they do not have an unfunded liability.” – Paul Clarke, National Underwriting Director, Burns & Wilcox Canada, Toronto, Ontario alarm with a certificate required by the government. Limits are typically available up to $15 million for dispensaries. “We anticipate that more products will be coming to the market and we see our role as providing brokers and clients with the education they need to make smart decisions to make sure they don’t have an unfunded liability,” Clarke said. With more use may come the need for higher liability for those companies that service the cannabis market in Canada. “A lot of investment is happening right now in Canada,” Clarke said. “The costs of this insurance will vary depending on the scale of operations and many other factors. The market is drastically different from what it is in the U.S.”

Insurance is still valuable for businesses in the industry Stillwater Brands is a Colorado-based provider of marijuana products such as dissolvable THC, and teas, coffee and more that include marijuana that is legal for medical usage in Colorado. Chief Operating Officer Jeremy Goldstein said that he needs various insurance products, from General Liability and Product Liability insurance that his company has, to protect against costly liabilities that could occur. Stillwater also has a D&O policy. “We have multiple entities to insure and we’re now at a growing stage in our company’s life cycle so our needs and costs will be higher,” Goldstein said. “It’s a tough operating environment. There still aren’t a lot of (insurance) choices out there. It is a myth, though, that you can’t get insured in this industry.” ■

INSURANCE MARKET SOURCE | FALL 2018

PROFESSIONAL

RISK SNAPSHOT SPECIALTY INSURANCE:

MORE THAN $1 TRILLION IS INVESTED IN NEW CONSTRUCTION IN THE U.S. EVERY YEAR. RECENTLY, A 50-UNIT CONDOMINIUM UNDER CONSTRUCTION WAS 1 DESTROYED IN A FIRE WITH DAMAGE ESTIMATED AT $20 MILLION.

$1.7

BILLION IN PROPERTY DAMAGE EACH 2 YEAR AS A RESULT OF HAIL.

64% OF MERGER AND ACQUISITION DEALS FACE LITIGATION.

MEDICAL LIABILITY IT WAS REPORTED THAT THE U.S. GOVERNMENT HAS REPRIMANDED MORE THAN 1,000 NURSING HOMES FOR MISHANDLING OR FAILING TO PREVENT SEXUAL MOLESTATION CASES, WITH

MEDICAL LIABILITY MEDICAL MALPRACTICE PAYMENTS IN THE U.S. AVERAGE MORE THAN

ADDITIONALLY, 25% OF COMPANIES SPEND MORE THAN

$3.8

OF BUSINESS E-MAIL COMPROMISE (BEC)/E-MAIL ACCOUNT COMPROMISE (EAC) ATTACKS, A SOPHISTICATED SCAM TARGETING BOTH BUSINESSES AND INDIVIDUALS PERFORMING WIRE TRANSFER PAYMENTS. THE TOTAL EXPOSED DOLLAR LOSS

TECHNOLOGY, MEDIA & CYBER SECURITY

MORE THAN $75,000 PER CASE.

BILLION

40,000 U.S. VICTIMS

INJURIES, DEATHS AND PROPERTY DAMAGE FROM PRODUCT LIABILITY AND RECALL EXPOSURES COST

MORE THAN $500 BILLION EACH YEAR.

EXCEEDS $2.9 BILLION. 15

ENVIRONMENTAL

OCEAN & COMMERCIAL MARINE

ON AVERAGE, LESS THAN 10 PERCENT OF CLIENTS WITH ENVIRONMENTAL EXPOSURES SEEK OUT COVERAGE, AMOUNTING TO

$202,085

$1 BILLION IN ANNUAL LOSSES INDUSTRY WIDE.

$1.15 MILLION, THE AVERAGE SETTLEMENT IS $355,000, AND ABOUT 98 PERCENT OF INSURED CRIMINAL KIDNAPPING 8 VICTIMS ARE SAFELY RETRIEVED.

THE VALUE OF THE AVERAGE STOLEN CARGO SHIPMENT. TRANSPORTATION TRUCKING IN THE U.S. GENERATES MORE THAN

$700 BILLION IN ANNUAL REVENUE AND IS RESPONSIBLE FOR TRANSPORTING MORE THAN 70% OF THE NATION’S FREIGHT TONNAGE. ONE TRUCKING COMPANY RECENTLY

PAID $602,000 FOR HEAD INJURIES 7

SUSTAINED BY A WOMAN IN A COLLISION.

PERSONAL ARTICLES FLOATER A PRIZED COMIC BOOK RECENTLY SOLD AT AN AUCTION FOR A

PERSONAL

RECORD-SHATTERING

RESIDENTIAL PROPERTY THE AVERAGE FLOOD CLAIM AMOUNTS TO

MORE THAN $46,000. 16

BETWEEN OCTOBER 2013 AND MAY 2018, THERE HAVE BEEN MORE THAN

OF THIS ABUSE IN NURSING HOMES SINCE 2000.

CASUALTY

KIDNAP & RANSOM DURING KIDNAP-FOR-RANSOM INSTANCES, THE AVERAGE RANSOM DEMAND IS

21 OR MORE LAWSUITS EACH YEAR. 20% IN $10 MILLION ANNUALLY THE PAST DECADE. ON LITIGATION.

MORE THAN 16,000 COMPLAINTS

CASUALTY IF A LAWSUIT IS INVOLVED, DEFENDING AND SETTLING A GENERAL LIABILITY (GL) CLAIM CAN AVERAGE

PROPERTY

EXECUTIVE MANAGEMENT LIABILITY MOST RECENT DATA SHOWS DISCRIMINATION CHARGES AGAINST EMPLOYERS HAVE INCREASED MORE THAN

Know your clients. Know the risks. Take Action. COMMERCIAL

ERRORS & OMISSIONS MORE THAN 30% OF COMPANIES EXPERIENCE

NEARLY 40%

OF HIGH-VALUE HOMES 17 ARE UNDERINSURED.

$3.2 MILLION. IN ANOTHER AUCTION, A RARE BASEBALL CARD RECENTLY DREW A

WINNING BID OF $609,294. STANDARD HOMEOWNERS POLICIES OFTEN LEAVE 19 THESE POSSESSIONS UNPROTECTED. RECREATIONAL MARINE RECREATIONAL BOATING ACCIDENTS RESULT IN

NON-WEATHER RELATED WATER DAMAGE CONSTITUTES

20% OF ALL

ON AVERAGE, A CYBER-DATA BREACH COSTS AN ORGANIZATION MORE THAN

$220 PER STOLEN RECORD. 14

PERSONAL LIABILITY

DOG BITES ACCOUNT FOR 1/3 OF ALL HOMEOWNER’S INSURANCE 20 LIABILITY CLAIMS.

NEARLY $40 MILLION IN PROPERTY DAMAGE EACH YEAR.

HOMEOWNERS

CLAIMS.

Sources: 1 Associated General Contractors of America (AGC); 2 Insurance Information Institute (III); 3 PC360; 4 Harvard Business Review; 5 Burns & Wilcox; 6 CargoNet; 7 American Trucking Associations; 8 The Washington Post; 9 Norton Rose Report; 10 U.S. Equal Employment Opportunity Commission; 11 Cornerstone Research; 12 National Practitioner Data Bank; 13 CNN; 14 Ponemon Institute LLC, Sponsored; by IBM; 15 FBI; 16 FEMA; 17 Burns & Wilcox; 18 The Travelers Companies Inc; 19 The Washington Post, 20 Insurance Information Institute , 21 U.S. Coast Guard

INSURANCE MARKET SOURCE | FALL 2018

IN THE NEWS: CALIFORNIA MAN ABDUCTED, $2 MILLION RANSOM SOUGHT

CRISIS MANAGEMENT

Kidnap and Ransom Insurance Makes Sense for High-Net-Worth Individuals, Global Organizations

California man who owns a luxury car dealership remains missing after he was abducted by three men in July near Los Angeles, California, according to authorities. His captors have demanded $2 million in ransom. The kidnappers reportedly contacted missing entrepreneur Ruochen “Tony” Liao’s family in China to demand the ransom. The captors did not say how to deliver the money. The family has offered a $150,000 reward for information that could lead to locating Liao. In addition, the FBI has offered a $25,000 reward. This example illustrates how the threat of kidnapping and extortion has dramatically increased. Control Risks recorded kidnap-for-ransom cases in 87 countries in 2017. Most cases were resolved quickly, but four percent had not been resolved within the first month. Any leads generally will spur action – and such activities cost money. Liao’s situation is an example of why affluent individuals, families and large employers should consider a Kidnap and Ransom (K&R) Insurance policy in the U.S. and Canada. K&R policies generally cover costs associated with kidnapping, extortion, wrongful detention and hijacking as it applies to one or more individuals or a group. This essentially is an indemnity

policy because it will reimburse a loss incurred by the insured. The policies do not pay ransoms on behalf of the insured, but it can include reimbursement for money paid by the insured for extortion or ransom. “It’s a policy that is for the family of the kidnapped person as much as it is for the individual,” said Lalita Mohabir, National Product Leader and Personal Accident/Special Risks Manager, Burns & Wilcox Canada, Toronto, Ontario. “We sell these on an individual basis to affluent individuals and families and as part of group policies to employers. When selling to employers, they can treat it more as an employee benefit, much like a life insurance policy.”

Kidnappings can happen to anyone In 2014, more than two dozen Americans working for companies were kidnapped in terrorism-related incidents, according to CNBC. The U.S. government has traditionally not paid for ransoms for Americans kidnapped by terrorists, putting more of the onus on the individuals, families or companies themselves to help support recovery efforts. About 60 percent to 70 percent of overseas kidnapping of U.S. citizens goes unreported, according to the Bureau of Consular Affairs

INSURANCE MARKET SOURCE | FALL 2018

at the U.S. State Department. “The news media may not cover or may not know about a kidnapping or ransom situation locally, but these events can happen right in our backyard,” Mohabir said. A 21-year-old man was taken by five men in late July at a motel in Berkeley, California. They threatened to kill him unless they were paid $30,000. This incident was successfully resolved with the safe return of the victim and five arrests. About 650,000 missing person reports have been filed with the National Crime Information Center in the U.S. each of the past two years. The number of missing persons is much higher when including unreported cases. More than 88,000 cases remained active at the beginning of 2018. In Canada, more than 70,000 individuals are reported missing each year.

Comprehensive coverage for the unforeseen A K&R policy can cover a wide range of costs, including the ransom fee, security, travel associated with managing the recovery of a person, interpreters, legal fees and crisis communication. Following the conclusion of the incident, the kidnapped person may have medical and dental bills, psychiatry fees and other financial needs, in addition to a possible loss of income. A K&R policy can also reimburse the insured for interest if a loan is required for the ransom payment. “It covers the event and the aftermath of the event,” said Heather Schaaf, Underwriting Director, Executive Liability, Burns & Wilcox, Chicago, Illinois. “There are many additional costs that can accrue when a person who was kidnapped comes back.”

“It’s a policy that is for the family of the kidnapped person as much as it is for the individual.” -- Lalita Mohabir, National Product Leader and Personal Accident/Special Risks Manager, Burns & Wilcox Canada, Toronto, Ontario A crisis control team is available to the insured and family members as part of most policies. Employers can have 24/7 access to information available about the situation under a group policy. “This is a very broad policy that covers more than you might think,” Schaaf said. “In a crisis you need a fast, specialized response that is organized whenever/wherever the incident happens. Threats to personal and business security are frequent and unpredictable.” The insured family members should not let hostage takers know that a K&R policy exists because it could adversely compromise the situation. “It’s supposed to be a confidential policy,” Mohabir said. For executives looking at new job opportunities, inquiring about K&R coverage could be discussed during the negotiation phase, Mohabir added. Often employers will purchase a group policy to protect directors and officers or executives, said Schaaf. Airlines, maritime companies, employers with frequent global travel and affluent individuals are some of the most likely clients for such policies. Additionally, organizations that are at high risk for threats of abduction or hostage situations, such as hospitals and credit

INSURANCE MARKET SOURCE | FALL 2018

Kidnap and Ransom Insurance WHY YOUR CLIENTS NEED: The threat of kidnapping and extortion has dramatically increased, not only abroad, but also at home. Whether it is companies with employees traveling, a family on vacation, or even a domestic threat, it seems these emotional, financial and devastating threats of extortion and detention are all too real. PROTECTS AGAINST: Costs associated with kidnapping, extortion, wrongful detention and hijacking as well as other critical related expenses as it applies to one or more individuals or a group . The policy does not pay on an insured’s behalf, but reimburses for claims made in the case of a covered incident. EXPERT OPINION: “In a crisis you need a fast, specialized response that is organized whenever/wherever the incident happens,” said Heather Schaaf, Burns & Wilcox. LEARN MORE ABOUT THIS POLICY: Search “Kidnap” at burnsandwilcox.com or burnsandwilcox.ca.

unions, are also key targets. Contractors and part-time and seasonal employees can be covered as well. The length of a K&R policy can range from one day to three years on average, Mohabir said. A short-term policy can cover an individual or family during a vacation or business trip. Group or individual policies will cover insured individuals no matter where they are in the world, unless otherwise noted. Additional insurance coverage is available as extensions to the core K&R policy, including business interruption, emergency security evacuations and cyber extortion business interruption, Schaaf said. Domestic instances may also be covered when it relates to threats at the workplace, in which case an in-office security team is hired to protect all employees onsite.

Policies can be affordable and are generally available During kidnap-for-ransom instances, the average ransom demand is $1.15 million, the average settlement is $355,000 and about 98 percent of insured criminal kidnapping victims are safely retrieved, according to Burns & Wilcox. Aggregate policy limits up to $50 million are possible and limits made available by the carrier are partially based on family net worth for individual policies and a company’s net assets for group policies. Individual policies can start at between $1,000 and $1,500 for a short-term or annual policy. The costs will be based on many risk factors, including where the insured travels, size of the company and type of work or industry. Group or individual policies that involve less travel to certains parts of the world where kidnappings for ransom are more common may be more affordable. While there are many carriers that may offer K&R policies, what is covered can vary, Schaaf said. “I’ve found that few carriers offer a broad K&R policy that will include all the reimbursable expenses,” she said. This is why working with an insurance broker or agent is critical, Schaaf added. “You have to remember that we don’t ask whether a person is traveling on a vacation or for business,” Mohabir said. “It usually doesn’t matter where they’re going or why, it’s really an added benefit that is always available to them.” ■

Put partners first.

We do. Collaboration with partners to take their business to the next level. nationwide.com/wedo

A.M. Best rating of A+ (Superior), FSC XV Fortune 100 company

ESO-0376AO_NWPC_KaufmanLeadershipMeeting_WeDo_ad.indd 1

8/27/18 8:02 AM

INSURANCE MARKET SOURCE | FALL 2018

vehicles and damage to any cargo, companies should also consider umbrella options, often from $1,000 to $5,000 annual premium per vehicle for each $1 million of coverage limits beyond the Commercial Auto Liability policy. Excess Auto coverage can further protect against financial loss resulting from legal liability for automobilerelated injuries to others or damage to property. Read more and share this story with your clients at insurancemarketsource.com/motorcoach. ■

#TRENDING

How to combat liability risk for house gatherings

I Risk in transporting employees, clients

ragic bus accidents from Canada to Georgia this year remind organizations that Commercial Auto Liability coverage can limit their financial loss when using a company-owned or third-party vehicle. In April, a bus carrying a junior hockey team collided with a tractor-trailer, killing 15 people and injuring 14 others. A team coach and players were among those killed. The Federal Motor Carrier Safety Administration requires vehicles transporting 15 or more passengers in the U.S. to carry a minimum of $5 million in Commercial Auto Liability insurance; vehicles transporting fewer than 15 passengers should have at least $1.5 million in coverage. Because the at-fault party can also be responsible for damages resulting from bodily injury, property damage, physical damage to the

ndividuals should be aware of the liability they could face from hosting large celebrations at their homes. The more people who attend a house party, combined with an array of items and “toys” that could cause an injury to visitors, could result in an unexpected financial liability that threatens a family’s ability to stay in their home. If that sounds unlikely, consider that all it takes is one slip and fall, an injury in a swimming pool, a car accident caused by someone of age – or under age – who had recently left a house party where he or she had been drinking, or any one of many other incidents. Such scenarios are reasons homeowners should consider not only higher amounts of Homeowners Liability limits, but a Personal Umbrella policy for further protection against claims that could rise to six or seven figures. Besides auto accidents, swimming pools, trampolines, boats, 4-wheelers and other motorized vehicles, a firepit and even sand volleyball courts as potential dangers for severe or even catastrophic injuries. This is why at the very least Homeowner Liability limits of $500,000 to $1 million should be considered. Read more and share this story with your clients at insurancemarketsource.com/houseparties. ■

“We require quick and detailed responses, a company who is willing to go above and beyond.” – Wholesale Broker

You share, We listen. (877) VELA-INS | vela-ins.com Products and services described above are provided through various surplus lines insurance company subsidiaries of W. R. Berkley Corporation and offered through licensed surplus lines brokers. Not all products and services may be available in all jurisdictions, and the coverage provided by any insurer is subject to the actual terms and conditions of the policies issued. Surplus lines insurance carriers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. Vela Insurance Services conducts business as Vela Insurance Services, LLC in California as a licensed surplus lines broker (License Number 0C94218). This material does not amend, or otherwise affect, the provisions or coverages of any insurance policy issued. It is not a representation that coverage does or does not exist for any particular claim or loss under any such policy. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy provisions and any applicable law. Availability of coverage referenced in this document can depend on underwriting qualifications and state regulations. ©2018 Vela Insurance Services | a Berkley Company. All Rights Reserved.

We understand your time is valuable. You want immediate and reliable responses so you can reply to your clients. VELA INSURANCE SERVICES | A BERKLEY COMPANY focuses on Core Construction, Specialty Construction, Specialty Casualty, and Professional Liability classes. Responsiveness is invaluable in a partnership and we go that extra mile, every single time.

California SL License # 0C94218

VELA TSLA 2018 Half Page Ad 08-18.indd 1

8/20/18 10:59 AM

service area or showroom, and test-driven or driven for personal use by an owner or employee. In addition to weather-related incidents, Dealer’s Open Lot Insurance covers vandalism, which can range from a smashed window to vehicle theft. Read more and share this story with your clients at insurancemarketsource.com/openlot. ■

#TRENDING

INSURANCE MARKET SOURCE | FALL 2018

Protection when renting your home

E Dealership protection against Mother Nature

nclement weather can destroy a dealership’s inventory. It happened in August in New Jersey when a Chrysler Jeep Dodge dealership saw a flash flood send 42 vehicles down the Peckman River. It happened in July 2017 in Chicago when flooding reached more than 100 cars and caused between $4 million and $5 million in damages at a Ford Lincoln dealership. And it happened in March, when hundreds of vehicles at a dealership in Alabama were damaged by hail. Dealerships can reduce risk through Dealer’s Open Lot Insurance, which includes comprehensive and collision coverage but also provides physical damage protection to a dealer’s vehicles and equipment. Coverage applies to all types of vehicles including cars, trucks, campers, motorcycles and farm equipment. This policy covers those vehicles while they are being driven to or from auction, parked on the dealer lot as inventory, housed inside the dealer’s

arlier this summer in Florida, two roller coaster riders fell 17 feet resulting in severe injuries when a car derailed. An investigation showed the derailment was likely the result of the initial design of the roller coaster in combination with wear and multiple strains. In July, a duck boat used for a guided tour of Table Rock Lake in Missouri capsized during a storm. Seventeen of the 31 individuals on board died, the highest fatality total for a duck boat accident since 13 people died after a boat sank in 1999 in Arkansas. In that incident, the National Transportation Safety Board (NTSB) concluded that a design flaw contributed to the high loss of life. The Missouri incident is still under investigation These summer recreation tragedies show the importance of certified professionals conducting regular inspections on any type of machinery that transports people. Proper insurance is important too. A General Liability policy covers liability arising from negligence in the operation of the attraction. Design Liability Insurance covers staff employed within the design firm and can help protect from lawsuits arising from negligently performed professional services. Read more and share this story with your clients at insurancemarketsource.com/summerrecreation. ■

W Technology E&O protects against legal claims in AV sector

utonomous vehicles (AV) are changing the way the world drives. Yet this emerging industry is also changing how technology companies think about limiting liabilities in case their products do not work as intended. In the aftermath of the death of a pedestrian struck by an Uber self-driving vehicle on March 18 in Arizona, the future of the company’s self-driving program is in question. Other companies have halted their efforts to test self-driving vehicles on public roads. The Arizona incident could offer a test of who could be held liable for accidents when a human is not in complete control at the wheel. For companies in the AV sector, Technology Errors and Omission (E&O) coverage can help protect against such claims and help reduce liabilities. The coverage protects against the risk of errors, omissions or negligence in relation to hardware, software and online

New solutions, New opportunities.

Photo by Robert Chase

We have a solid foundation. We’re looking ahead. We’re consistently finding better ways to serve you and develop profitable partnerships.

westernworld.com | validusspecialty.com | follow us

hether for specific events such as  the Masters or the Kentucky Derby or vacations in general, more homeowners are finding income opportunities in renting their homes online. But renting your home does come with unfamiliar risks. Make sure your insurance company knows that one or more of your properties are being rented. A wide range of potential products can help limit exposure and provide the coverage needed. Homeowners and Dwelling policy: With risks ranging from fire, water damage and liability losses, it is important to be covered for exposures that are more likely to occur when a property is rented out. Cottages and vacation homes can be particularly at risk. Homeowners should ensure their Homeowners and Dwelling policy includes Short-term or Long-term coverage for as long as they rent out their home. Umbrella policy: This policy is designed to insure for an additional layer of liability protection, and supplements current policies to limit exposure to crippling financial losses. For example, a deck collapse or a tree branch falling that caused a personal injury could leave the homeowner liable for millions of dollars. Read more and share this story with your clients at insurancemarketsource.com/houserentals. ■

Kaufman, Payton & Chapa

Western World and Validus Specialty are now AIG companies.

Expect more…

services. Contingent bodily injury and property damage coverage for when technology fails may be available. Any technology that provides access to the internet may also be covered under this type of insurance for data hacks and viruses. Read more and share this story with your clients at insurancemarketsource.com/autonomousvehicles. ■

#TRENDING

Summer recreation tragedies show elements of risk

anies.

tly s.

INSURANCE MARKET SOURCE | FALL 2018

#TRENDING

Four types of coverage options are generally available to homeowners with property that could be threatened by a wildfire: Actual Cash Value, Replacement Cost, Extended Replacement Cost and Guaranteed Replacement Cost. The compensations range from value at construction to full costs regardless of dwelling limits. Before a homeowners policy is selected, valuable items within the property should be catalogued. Particularly valuable items, such as fine arts and antiques, might require a Personal Articles Floater policy. Read more and share this story with your clients at insurancemarketsource.com/wildfires. ■

INSURANCE MARKET SOURCE | FALL 2018

#TRENDING

W Wildfires cause daunting property damage and reconstruction costs

urning near the western edge of Yosemite National Park in California, the Ferguson forest fire burned tens of thousands of acres, injured several firefighters and forced the evacuation of residents in the area in July. Wildfires can easily – and quickly – destroy homes, even spreading to nearby dwellings that are not considered high risk on their own. In 2017, more than 8,000 homes were destroyed by wildfires, according to the National Fire Protection Association. The cost of reconstruction will vary depending on available resources, materials, skilled labor and the number of properties needing work. The average build price in 2015 was $103 per square foot, according to the National Association of Home Builders.

businesses do not purchase EPLI. Directors & Officers (D&O) Liability Insurance often applies to larger organizations worried about the potential mismanagement of harassment situations, which in turn could adversely impact shareholders, company officers and other stakeholders. Typically it covers settlements or defense costs from legal actions brought against current and former C-suite executives. Read more and share this story with your clients at insurancemarketsource.com/metoo. ■

Athletes can be prime targets for risk

How to protect sports collectibles

hen bidding on a 1993 Upper Deck SP rookie baseball card of Derek Jeter soared to nearly $100,000 in an eBay auction in May, it served as a reminder that the sports collectibles market can be fickle. The value of such collectibles – be it signed memorabilia, gear, art or rare cards – fluctuates for many reasons. Individuals or businesses with an expensive collection need to be properly insured so that a potential disaster, such as a flood, fire or having the items lost or stolen, will still net them the market value replacement cost. The first step is to have items appraised to determine if insurance is needed. If so, a Personal Articles Floater (PAF) policy can cover collectibles at market value and can also be written to cover special personal assets, including fine art, jewelry, antiques, sports memorabilia and other unique collections. A Personal Articles Floater has no deductible and few exclusions. It is in place so that an item or a large collection are reimbursed for the full loss if a fire, flood or theft occurs. Read more and share this story with your clients at insurancemarketsource.com/collectibles. ■

Liability policies combat harassment, discrimination in workplace of #MeToo era

he #MeToo era Americans live and work in is prompting organizations to ask whether their insurance policies protect their executive team and employees from accusations of sexual harassment. In the wake of ruinous allegations against Harvey Weinstein, Matt Lauer, Kevin Spacey and a growing roster of high-profile celebrities and businessmen, organizations can set up policies that could help avoid costly litigation, even if employees are not found to be at fault. The average settlement for an employment practice liability matter is $125,000. Employment Practices Liability Insurance (EPLI) addresses claims resulting from wrongful employment practices such as workplace harassment, sexual harassment, racial discrimination, retaliation, wrongful termination, failure to promote, demotion, unequal pay, invasion of privacy and defamation. About seven out of 10

ore than 200 players were selected in the NFL draft in April, marking a turning point in both their professional and personal lives that also brings added liability with the sudden influx of income and rise in recognition. A Personal Umbrella policy is recommended for wealthy individuals who are known public figures. It can supplement an athlete’s current policies to limit exposure to crippling financial losses in the event of a liability claim or lawsuit. In addition, Sports and Entertainment Insurance can help athletes, as well as other public figures and high-net-worth individuals, secure death and disability coverage in excess of $100 million and “disgrace” coverage in case of an off-field or personal issue of up to $50 million. A Loss of Value (LOV) policy covers aspiring professional athletes expected to be high draft picks against injuries that could adversely impact their draft status but are not likely to prevent the athlete from returning to competition. It can help an athlete recover millions of dollars, or part of the monetary value of a drop in the draft because of an injury. Read more and share this story with your clients at insurancemarketsource.com/athletes. ■

INSURANCE MARKET SOURCE | FALL 2018

#TRENDING

Van Enkevort Barge Company, which operated the boat that allegedly caused the damage, is facing lawsuits from Consumers Energy, the State of Michigan, Enbridge Energy and the company that owns other damaged lines. Read more and share this story with your clients at insurancemarketsource.com/underwatercables. ■

How volunteers and organizations can protect against lawsuits

Oil spills shows need for environmental and P&I coverage

fficials suspect a boat anchor strike on April 1 severed underwater cables that leaked about 600 gallons of mineral oil insulation fluid in the Straits of Mackinac. The incident, which took place in the waterway that connects Lake Michigan and Lake Huron, is prompting organizations to ask whether they have sufficient Environmental insurance to limit risk. The amount of insurance a party has will be crucial to its ability to pay for what could amount to millions or even billions of dollars in fines, cleanup costs, lost work hours, structural damage and other expenses. Both Environmental and Protection and Indemnity (P&I) insurance may be utilized depending on the outcome. While most organizations will have a General Liability (GL) policy, there is often little, if any, environmental liability protection in a GL policy, so issues such as pollution caused by contractors or pollution that may occur on owned land generally will not be covered to any significant degree.

he July rescue of 12 youth soccer players and their coach trapped in a flooded cave in Thailand is an example of accidents and damages that could put volunteers and volunteer organizations at risk. The incident points to the need for sufficient insurance coverage for clubs and organizations and their volunteer leaders. Organizations, such as sports clubs, volunteer groups or nonprofits, should consider Directors & Officers (D&O) Insurance in addition to their General Liability (GL) policy to protect against lawsuits, including those prompted by a volunteer’s actions. Volunteers should research the GL policy of the organization, review their individual Homeowners policy with their insurance broker, which provides personal liability protection, and look into additional layers of protection such as a Personal Umbrella policy. An umbrella policy covers anything from slips and falls to automotive accidents to negligence that could be associated with not just volunteer activities, but anything that may occur in everyday life, Among the lawsuits brought against volunteers are breach of fiduciary duty, sexual misconduct or other types of harassment, bodily injury and negligence. Read more and share this story with your clients at insurancemarketsource.com/thaicave. ■

Think again. By constantly looking at opportunities for growth, we’ve become a market-leading specialty insurance group. With 100 years under our belt, we now have more business lines, more specialty products and more claims handling expertise than ever before. Let our specialists help navigate your business risks. There’s no better time to discover what we can do for you. For smooth sailing, THINK HUDSON.

Rated A by A.M. Best, FSC XV

HudsonInsGroup.com

INSURANCE MARKET SOURCE | FALL 2018

IN THE NEWS: 800-POUND BOULDER FALLS OFF TRUCK, STRIKES CAR

U.S. Commercial Auto Liability WHY YOUR CLIENTS MIGHT NEED: A significant accident, even one that does not involve a serious bodily injury or death, could see costs in excess of $1 million when legal fees, cleanup costs and other expenses are totaled. PROTECTS AGAINST: Costs associated with bodily injury and property damage where the driver of an insured vehicle is involved in an accident. Defense or legal costs are generally covered as well. EXPERT OPINION: “The business owner is ultimately responsible for the actions of his or her employees, so there’s a lot on a day-to-day basis you can’t control. If your driver is at fault, you could be responsible for a loss settlement well above your insurance limit, which could threaten the business,” said Rebecca Roberts, Burns & Wilcox. LEARN MORE ABOUT THIS POLICY: Search “Commercial Auto Liability” at burnsandwilcox.com.

“If your driver is at fault, you could be responsible for a loss settlement well above your insurance limit, which could threaten the business.”

HANDLE WITH CARE Cargo Insurance, Commercial Auto Liability Policies Provide Protection When Transporting Goods

hen transporting items commercially, securing your cargo properly could be the difference between life and death. A mother and daughter were tragically killed in July in Minnesota after an 800-pound boulder fell off a truck and struck their car, according to police. This tragedy – and others that do not involve loss of life – could have been prevented if proper guidelines were followed. But accidents do happen. On average, over 10 million motor vehicle accidents occur in the U.S. every year. The damages caused by these accidents cost upward of $230 billion annually. Without the proper insurance in place, a company or organization involved with transporting goods could be exposed to costly repairs and litigation fees that could put the existence of a business in jeopardy. In both the U.S. and Canada, several policies offer protection, ranging from Auto Liability to Umbrella policies to Cargo Insurance.

However, the amount and types of coverage needed will vary significantly from one organization to another based on the number of vehicles and drivers, what is being transported, the industry, length of routes, experience level and other factors, said Steve Shepard, Underwriting Manager, Transportation, Burns & Wilcox, Indianapolis. “You really need to be working with an insurance broker or agent who specializes in this type of coverage because they will be in the best position to guide you,” Shepard said. All organizations hauling goods in the U.S. should review the Driver’s Handbook on Cargo Securement provided by the Federal Motor Carrier Safety Administration (FMCSA). Available online at no cost, the handbook provides guidance on securing, transporting, loading, immobilizing and restraining cargo, said Rebecca Roberts, Associate Vice President and Managing Director,

– Rebecca Roberts, Associate Vice President and Managing Director, Burns & Wilcox, Indianapolis Liability policy, Roberts said. “You have to remember that the business owner is ultimately responsible for the actions of his or her employees, so there’s a lot on a day-to-day basis you can’t control,” Roberts said. “If your driver is at fault, you could be responsible for a loss settlement well above your insurance limit, which could threaten the business. So you want to make sure you have the proper coverage.” Burns & Wilcox, Indianapolis. “These regulations are designed to protect the public – you and I – when driving with families on the road,” Roberts said. “There are clear statements as to how cargo should be handled and it seems those guidelines weren’t followed in the Minnesota tragedy.”

Start with a standard Auto Liability policy For vehicles that haul products from point to point, an Auto Liability policy is typically purchased with limits up to $1 million per vehicle in the U.S., according to Roberts. In the U.S., Auto Liability covers bodily injury and property damage where a driver of the insured vehicle is at fault. In Canada, the limits go up to $2 million, said Mauricio Zani, National Product Leader, Inland Marine, Burns & Wilcox Canada. A significant accident, even one that does not involve a serious bodily injury or death, could see costs in excess of $1 million when legal fees, cleanup costs and other expenses are totaled. Some insured parties may benefit from an additional Umbrella policy, where additional limits totaling multiple millions of dollars may be available. Defense or legal costs are generally covered by the Auto

Cargo Insurance in the U.S. Cargo Insurance in the U.S. is separate from Auto Liability and Umbrella policies. It provides coverage should cargo be damaged or lost when travelling by land, sea or air. It can also limit a commercial operation’s exposure to liability resulting from the shipment of products. “A typical Cargo policy will have limits between $100,000 and $500,000. Companies hiring a third party to transport items will often require a minimum amount of coverage as part of a contract to protect their loads,” Shepard said.

Policies differ in Canada Transportation-related insurance products in Canada include General Liability (GL) or Commercial General Liability (CGL). They are legally required and cover the insured’s liability to others, or the property of others, excluding goods in their care, custody or control. The most common type of Cargo Insurance in Canada is Carriers Legal Liability, which covers the legal liability of the insured for its customers’ cargo. A separate Cargo policy covers the insured’s goods while they are being transported, Zani said. Both of these

INSURANCE MARKET SOURCE | FALL 2018

Cargo Insurance / Motor Truck Cargo Insurance WHY YOUR CLIENTS MIGHT NEED: When hauling products (your own or your clients) from manufacturer to marketplace, it is important to have coverage in place for the value of goods being shipped. PROTECTS AGAINST: Financial losses should cargo be damaged or lost while in the course of transit. It can also limit a commercial operation’s exposure to liability resulting from the shipment of products. In Canada, Carriers Legal Liability covers the legal liability of the insured for its clients’ cargo, while a separate Cargo policy covers the insured’s goods while they are being transported. Both policies usually cover cleanup costs for debris and freight costs. EXPERT OPINION: “Stringent requirements are needed for all drivers for operating a vehicle and handling their loads,” said Mauricio Zani, Burns & Wilcox Canada.

policies usually cover cleanup costs for debris and freight costs Collision and Comprehensive (Comp) coverage are part of an Auto policy in Canada but are optional, Zani said. Collision covers the insured in the event of an at-fault accident while Comp covers damages not related to a vehicular accident such as theft, vandalism or hail. There are similar Collision and Comp options in the U.S. “Auto Liability and CGL policies have a duty to defend if the insured is being sued,” Zani said. “Commonly a settlement is reached by the claimants and insurers with the assistance of local adjusters, but they would defend if it went to court.”

“One way to help reduce the liability a company or organization could be faced with is to more effectively train drivers.” – Mauricio Zani, National Product Leader, Inland Marine, Burns & Wilcox Canada

Truckers pack U.S. roads There are 3.5 million drivers in the U.S. trucking industry, according to 2015 statistics published by TruckerPath.com. Truck drivers often work 70 hours in an eight-day work week before getting a day off and log 432 billion miles combined annually. Commercial trucks pose extra hazards on the road because of their size and the potential for unsecured loads. 2016 data from the AAA Foundation for Traffic Safety found that more than 200,000 crashes involved debris on U.S. roads during the previous four years. Road debris has resulted in about 39,000 injuries and more than 500 deaths between 2011 and 2014. In May of this year, police say one motorist died after a piece of concrete fell off the back of a flatbed truck on an Oklahoma highway. In the Minnesota tragedy, police say the boulder rolled off the truck’s bed after crossing railroad tracks. It took investigators a few days to track down and arrest the alleged driver, Joe P. Czeck.

Training can be improved One way to help reduce the liability a company or organization could be faced with is to more effectively train drivers, Zani said. This would improve their driving skills and also help them better understand the logistics of transporting goods. Many drivers on the road today are not native to the United States and Canada and may experience challenges navigating the roads during inclement weather such as snow and ice. Some drivers may not be familiar with how to properly secure, stack or store items on a

truck or even load heavy items using machinery, Zani said. “We are going through a situation where there is a clear shortage of drivers so companies are really struggling to staff those positions,” Zani said. “Stringent requirements are needed for all drivers for operating a vehicle and handling their loads.” Having a standard safety plan and program in place can also help decrease chances for an accident, Shepard said. Employers can incentivize drivers for following or exceeding federal, state and corporate safety regulations while penalizing those who fail to do so. A state Department of Transportation (DOT) official can pull over a vehicle at any time for a variety of reasons to inspect cargo and loads, so drivers are at risk for penalties any time they are on the road. “Given the gravity of the situation created when loads are not secured properly, drivers should have both an understanding and regular on-going training regarding Cargo Securement Requirements as detailed in chapter 2 of the FMCSA Driver’s Handbook. When adequate knowledge and training cannot be provided in-house, a reputable consultant specializing in DOT training should be secured by the employer,” added Jon Kovach, President, Afirm, a premier provider of premium audits, inspections and risk solutions. “If you are monitoring drivers and load securement, a tragedy such as the one we saw in Minnesota would likely be prevented,” Shepard said. “Incentivizing drivers to follow set policies can go a long way as well.” ■

is something people tend to overlook. But not us. In fact, we focus on it. Because in a relationship business, like yours

ours, that

simple symbol stands for what is essential: the power of partnership. The value of the right combination. It stands for unparalleled expertise

flawless service.

thatâ&#x20AC;&#x2122;s what

we bring you.

burnsandwilcox.ca