Louisiana Agent April 2018 A publication of the: Independent Insurance Agents & Brokers of Louisiana
IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com Francine Berendson Director of Communications & Events fberendson@iiabl.com
In this issue: Big I Goes to Washington! ................................................ 5-6 Agency Resource Guide ....................................................... 7 Young Agents Crawfish Boil Pictures ............................. 8 – 10 2018 Hurricane Season Forecast More Active than Usual ................................................ 12 -16 Certificate of Insurance Requests .................................. 17-18 Meeting Old Challenges with New Technology ................ 19-20 Capture Business Cards with Microsoft Pix Camera .......... 21-22
Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com
Spring Education Conference ............................................. 23 Ask Mike: Is a Non-owned Dock Used Regularly by the Insured and “Insured Location?” ................................... 24-33 Rate & Rule Filings ............................................................ 24
Kim Jackson Education & Membership kjackson@iiabl.com
2018 IIABL Convention ...................................................... 29 Commissioner’s Corner: Cybersecurity & the Future of Insurance ............................................. 33-36 Education & Events Calendar ............................................. 37
Karen Kuylen Director of Accounting kkuylen@iiabl.com Ed O’Brien Marketing Representative eobrien@iiabl.com Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com Jamie Newchurch Insurance Services jnewchurch@iiabl.com Lisa Young-Crooks Executive Assistant lyoung@iiabl.com
IIABL Partners .................................................................. 39 2017-2018 Officers & Board of Directors ............................. 40
Big I Goes to Washington! is the only safety net availaEvery April, the IIABA Nable to all types and sizes of tional Legislative Conferfarmers in all regions. The ence brings almost 1000 Federal Crop Insurance Proindependent agents to our gram (FCIP) is an example nation’s capital to lobby of a successful privateCongress on important inpublic partnership and indesurance issues. IIABL sent pendent agents play an im11 members to Capitol Hill portant role in the sale and to visit the Louisiana conservicing of crop insurance gressional delegation. Inunder the FCIP. cluded in the group were Neil Record, IIABL President, Johnny Beckmann, Tax Reform IIABL President-Elect, Joey A key provision of the new O’Connor, IIABL Secretary, Left to right: IIABL CEO Jeff Albright, IIABL Board Member tax law creates a 20% deLee Schilling, IIABL Nation- Brett Hughes, Becky Record, Senator Bill Cassidy, IIABL duction on qualified busial Director, IIABL Board Young Agent Vice-Chair Brittany Mohr, IIABL President Neil ness income for some busiMembers Harry Kelleher, Record, IIABL Board Member Don Stiel, IIABL Young Agent nesses organized as passMike Scriber, Don Stiel and Chair Donnie Stiel. through entities. Two-thirds Bret Hughes, IIABL Past of Big “I” member agencies Presidents Randy Lanoix are organized as pass-throughs, and many will and Clay Mullin and IIABL Young Agents Chair Donbenefit from the deduction. However, questions nie Stiel and Vice-Chair Brittany Mohr. over how the deduction will apply to some Big “I” members remain. At this time, it is unclear These IIABL members met with our Louisiana senwhether insurance agencies and brokerages will ators, congressmen, and staff to discuss the followbe considered a “specified service business” by ing issues that are important to IIABL members: the IRS even though Congress chose not to include “insurance” in the definition of “specified Flood Insurance service business” in the new law. Some passThe Big “I” calls on Congress to extend the Nationthroughs in this category are prohibited from utial Flood Insurance Program (NFIP) before it expires lizing the deduction based on the tax filer’s inon July 31, 2018. It is critical that the program not come. This disparate treatment provides new expire during hurricane season. The Big “I” also complexity and confusion in the tax code and supports a long-term reauthorization of a moderncreates an unlevel playing field for small busiized NFIP that would increase take up rates for nesses. As such, the Big “I” is seeking guidance flood insurance, both in the NFIP and the private from the Administration clarifying the application market. The Big “I” opposes cuts to the Write-Your of the deduction to insurance agencies and bro-Own insurer reimbursement rate and agent comkerages. missions, which would only serve to harm the private-public partnership of the NFIP and limit the Insurance Regulatory Reform delivery mechanism for flood insurance hurting The Big “I” remains dedicated to a modernized consumers. Compensation for the program is fair. state-based system of insurance regulation and is Agents and insurers play an essential role in the concerned that some federal and international sale and servicing of flood insurance and are a vital regulatory efforts could lead to an erosion of part of the consumer experience. state-based regulation. As such, the Big “I” supports significantly restricting or eliminating the Crop Insurance Federal Insurance Office (FIO), including H.R. Crop insurance is critical for the security of Ameri3861 by Reps. Sean Duffy (R-WI) and Denny ca’s economy and food supply. Crop insurance enables farmers to rebound quickly after disaster and Continued page 6 Louisiana Agent 5
Heck (D-WA) to restrict the authority of the FIO and H.R. 4483 by Rep. Alex Mooney (R-WV) to eliminate the FIO. The association also supports legislative efforts to install stronger procedural “checks” for federal officials in international insurance negotiations.
Thank You IIABL Members for your support of InsurPac. Once again IIABL was the recipient of the InsurPac Eagle Award. This award is given annually to states that surpass a fundraising average of $100 per member agency.
Health Care It is imperative that Congress protects the employer-sponsored healthcare system for the 177 million Americans who depend on it. As a result, the Big “I” supports full repeal of the “Cadillac tax” and supports S. 58/H.R. 173, the “Middle Class Health Benefits Tax Repeal Act,” by Sens. Dean Heller (RNV) and Martin Heinrich (D-NM), and Reps. Mike Kelly (R-PA) and Joe Courtney (D-CT). Cybersecurity In the wake of numerous data breaches, cybersecurity is becoming increasingly important to Big “I” members and their clients. If a nationwide uniform data breach and/or data security standard is created, it is vital it does not result in conflicting or varying standards at the state and federal level or on a state-by-state basis. Also, many Big “I” members are small businesses and as such any nationwide standards or requirements must be scalable, flexible and reasonable for all insurance agencies and brokerages no matter their size.
Pictured left to right: IIABL President-elect Johnny Beckmann, IIABL Board Member Harry Kelleher, IIABL Young Agent Vice-Chair Brittany Mohr, IIABL National Director Lee Schilling, IIABL Board Member Mike Scriber and IIABL Young Agent Chair Donnie Stiel.
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Agency Resource Guide: 2018 Edition One of the important benefits of IIABL Membership is access to information. The Agency Resource Guide is your comprehensive road map for information in the areas listed below. Reminder you must log-in to the IIABL website to access this information. We advise that anytime you go to the IIABL website to log-in with your member user name and password. There is an abundance of member-only content that you will miss out on if not logged-in!
Part 1 - New Employees •
Recruitment, Hiring & Development
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Employee Testing
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New Employee Basic Training
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Insurance Licensing
Part 3 - Additional Resources •
Industry facts, statistics, articles & reports
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Legal & Technology Articles for independent agents
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Best Practices
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Louisiana Legislative Summaries
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Frequently Requested Louisiana Insurance Statutes
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Markets
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Coverage Checklists, surveys & questionnaires
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Customer Service Training
Part 2 - Technical Training Information on Insurance Professional Designations Online Learning Books and articles on coverages Louisiana Specific Articles & Information "Insurance for Dummies"
Part 4 - Educating Customers & The Public •
Brochures & newsletters for consumers
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Consumer Articles
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Information on Insurance Careers
Part 5 - Member Services from IIABL •
Our complete guide of member benefits.
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2018 YOUNG AGENTS CRAWFISH A GOOD TIME WAS HAD BY ALL!
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Louisiana Agent 9
2018 YOUNG AGENTS CRAWFISH A GOOD TIME WAS HAD BY ALL!
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Louisiana Agent 8
2018 Hurricane Season Expected to be More Active Than Usual, CSU Forecasters Say By Jonathan Belles and Linda Lam, weather.com
The 2018 Atlantic hurricane season forecast released Thursday from Colorado State University calls for the number of named storms and hurricanes to be slightly above historical averages, but less than last year. The group led by Dr. Phil Klotzbach calls for another busy season with a total of 14 named storms, seven hurricanes and three major hurricanes. This is just above the 30-year average of 12 named storms, six hurricanes and two major hurricanes. A major hurricane is one that is Category 3 or stronger on the Saffir-Simpson Hurricane Wind Scale. Though the official Atlantic hurricane season runs from June through November, occasionally we can see storms form outside those months, as happened last season with April's Tropical Storm Arlene.
The CSU outlook is based more than 30 years of statistical predictors, combined with seasons exhibiting similar features of sea-level pressure and sea-surface temperatures in the Atlantic and eastern Pacific Oceans. Here are three questions what this outlook means. Q: What Does This Mean For the U.S.?
There is no strong correlation between the number of storms or hurricanes and U.S. landfalls in any given season. One or more of the 14 named storms forecast to develop this season could hit the U.S., or none at all. Therefore, residents of the coastal United States should prepare each year no matter the forecast. A couple of classic examples of why you need to be prepared each year occurred in 1992 and 1983. Continued page 12
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The 1992 season produced only six named storms and one subtropical storm. However, one of those named storms was Hurricane Andrew, which devastated South Florida as a Category 5 hurricane. In 1983 there were only four named storms, but one of them was Alicia. The Category 3 hurricane hit the Houston-Galveston area and caused almost as many direct fatalities there as Andrew did in South Florida.
each season, according to NOAA's Hurricane Research Division statistics. In 2017, seven named storms impacted the U.S. coast, including Puerto Rico, most notably hurricanes Harvey, Irma and Maria, which battered Texas, Florida and Puerto Rico, respectively.
In contrast, the 2010 season was active. There were 19 named storms and 12 hurricanes that formed in the Atlantic Basin.
In 2016, five named storms impacted the Southeast U.S. coast, most notably the powerful scraping of the coast from Hurricane Matthew, and its subsequent inland rainfall flooding.
Despite the large number of storms that year, not a single hurricane and only one tropical storm made landfall in the United States.
Before that, the number of U.S. landfalls had been well below average over the previous 10 years.
In other words, a season can deliver many storms, but have little impact, or deliver few storms and have one or more hitting the U.S. coast with major impact.
The 10-year running total of U.S. hurricane landfalls from 2006 through 2015 was seven, according to Alex Lamers, a meteorologist with The National Weather Service. This was a record low for any 10-year period dating to 1850, considerably lower Continued page 13
The U.S. averages one to two hurricane landfalls
Continued page 11
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than the average of 17 per 10-year period dating to 1850, Lamers added. Bottom line: It's impossible to know for certain if a U.S. hurricane strike, or multiple strikes, will occur this season. Keep in mind, however, that even a weak tropical storm hitting the U.S. can cause major impacts, particularly if it moves slowly, resulting in flooding rainfall. Q: Will El Niño or La Niña play a role? The odds are increasingly in favor for the development of a neutral state of El Niño or a weak El Niño by the heart of the hurricane season. In other words, near average or slightly warmer than average water temperatures in the eastern Pacific are anticipated. El Niño, or the periodic warming of the central and eastern equatorial waters of the Pacific Ocean, tends to produce areas of stronger wind
shear (the change in wind speed with height) and sinking air in parts of the Atlantic Basin that is hostile to either the development or maintenance of tropical cyclones. The chances of El Niño development climb toward the end of the season, according to the Climate Prediction Center, but neutral conditions are most likely during the peak of hurricane season, which occurs in September. Klotzbach noted in the outlook that there is considerable uncertainty regarding the future state of El Niño. In fact, "the latest plume of ENSO (El Niño-Southern Oscillation) predictions from a large number of statistical and dynamical models shows a large spread by Continued page 14
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the peak of the Atlantic hurricane season in August-October." However, based on the current information, Klotzbach says that the "best estimate is that we will likely have neutral ENSO conditions by the peak of the Atlantic hurricane season." ENSO conditions will need to be closely monitored over the next few months. Q: Any Other Factors in Play? Water temperatures in the Atlantic have a much more direct role in tropical cyclone development on our side of the continent. The current water temperatures across the North Atlantic basin show cooler-than-average water temperatures in the far North Atlantic and
in the eastern tropical Atlantic and warmer-thanaverage water temperatures off the East Coast of the U.S., Klotzbach points out. Since early March there has been some slight anomalous warming across the eastern and central tropical Atlantic, Klotzbach notes. It remains a big question of what water temperatures will be in the North Atlantic during the peak of hurricane season. Remember, however, that it isn't the anomalies that allow hurricanes to intensify, but rather the actual heat of the oceans. Water temperatures of 80 degrees or higher are generally supportive of tropical storm and hurricane formation and development. Much of the tropics stay at or above this temperature for most of the year. So why bring it up if favorable conditions are always around?
Continued page 13 Louisiana Agent 15
If temperatures in the MDR are warmer than average, we often get more than the average number of tropical storms and hurricanes from this region. Conversely, below average ocean temperatures can lead to less tropical storms than if waters were warmer. Another aspect that we must keep in mind is that warmer waters in the MDR allows tropical waves, the formative engines that can become tropical storms, to get closer to the Caribbean and United States. Another factor to consider is the end of the positive phase of the Atlantic Multidecadal Oscillation (AMO). This is a climate cycle that lasts roughly 50-80 years, with about half of that period seeing increased hurricane activity while the other half sees decreased activity. The current upward swing began in 1995, and the index that measures AMO has been in the cold or decreased phase in recent years and is near its long -term average. The AMO only has high-level effects on the tropics, and any effects from the cycle will need to be researched after the season is over. Other factors that can be detrimental to tropical storm or hurricane development include dry air and wind shear. The 2013 and 2014 seasons featured prohibitive dry air and/or wind shear during a significant part of the season, but El Niño was nowhere to be found. This was the second April outlook issued since the passing of Dr. William Gray, noted hurricane researcher and emeritus professor of atmospheric science at Colorado State University. Gray, who died in April of 2016, was the creator of the yearly Atlantic hurricane season outlooks, which have been published every year since 1984. He developed the parameters for these outlooks in the late 1960s, which was considered ground-breaking research at that time.
Planning for a Catastrophe As a Big I member you have full access to our website’s catastrophe planning resource page. Once you login to the IIABL Website click on the Information & Membership tab and under Insurance Information is our web page dedicated to catastrophe planning. Information includes the 31 page IIABL Agency Catastrophe Guide just for Louisiana Big I members. Additional resources include
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ACT Disaster Planning Checklists
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Disaster Planning & Management for Independent Agents & Brokers
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Information to share with your insureds
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Ready.gov
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Get a Game Plan
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FEMA Assistance
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SBA Assistance
And other valuable resources.
Don’t wait for a disaster to strike...Be Prepared and review your member benefit!
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Bill Wilson, CPCU, ARM, AIM, AAM
“Following Form” Certificate of Insurance Requests
I’ve spoken about this before in a number of seminars and webinars, but I don’t think I’ve ever written about it. Not long ago, an agent who had attended one of my webinars asked about an article on why you should never say on a certificate of insurance (or elsewhere) that a umbrella or excess liability policy provided “following form” coverage. I’ve seen contracts with these kinds of requirements if limits are provided by umbrella or excess policies: “Excess or umbrella liability policy is follow-form with no additional exclusions.” “Umbrella (excess) liability insurance is ‘Following Form’ to the General Liability Policy (meaning no additional exclusions that aren’t already on the CGL policy). Y or N.”
The “following form” requirement usually means that the umbrella or excess policy is expected cover everything covered by the underlying policies. The reality is that this is almost never the case. Many/most umbrella and excess policies have exclusions or an absence of coverage for exposures covered by underlying policies. For example, an exclusion for damage to rented premises is common, with no exception for fire damage legal liability (FDLL) coverage or the ISO CGL’s open perils coverage that is provided for temporary rentals of 7 days or less. Here is an example of a primary policy exclusion and the FDLL exception: “‘Property damage’ to property rented to, occupied by or in the care of an ‘insured’. This exclusion does not apply to ‘property damage’ caused by fire, smoke or explosion.” Here is the exclusionary language in the excess policy: Continued page 16
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“Property Damage to property owned, rented or occupied by you….” As you can see, the excess policy provides no exception for fire, smoke or explosion. Defined terms such as “bodily injury” and “property damage” are often different and may effect lesser coverage in the umbrella/excess policy than the underlying CGL or auto. Umbrella/excess policies often exclude auto UM/ UIM coverage or, more commonly, provide a UM/UIM limit less than the liability limit. IRMI’s CGL reference manual set includes an analysis of the common umbrella/excess policies in the marketplace and might also address “following form” issues. You have to subscribe to this reference material to review that. For a good free article from IRMI about following form issues, click here. There is always a danger when you use verbiage on a certificate of insurance to describe coverage that is different from the actual policy language. Terms like “following form,” “blanket,” and “all risk” are terms we should resist using since they
often serve as a noose in which the certificate holder hopes the agent will stick his or her head in. Bill Wilson, CPCU, ARM, AIM, AAM Founder & CEO, InsuranceCommentary.com Bill@InsuranceCommentary.com or InsuranceCommentary@outlook.com
Com•men•tar•y … an expression of opinions or offering of explanations
William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of InsuranceCommentary.com. He retired from the Independent Insurance Agents & Brokers of America in December 2016 where he served as Assoc. VP of Education and Research and was the founder and director of the Big “I” Virtual University for over 17 years. He is the former Director of Education & Technical Affairs for the Insurors of Tennessee and, prior to that time, he was employed by Insurance Services Office, Inc. He is a graduate of the Illinois Institute of Technology with a B.S. degree in Fire Protection & Safety Engineering.
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The Road Ahead: Meeting Old Challenges with New Technology Think about it: just 100 years ago, people travelled by horse, wrote letters to communicate and used candles to provide light. Can you imagine doing all three simultaneously? Well, today that same person would be driving down the road in a much-improved ride, using his headlights for illumination while speaking to a customer on a hands -free device. How times have changed! Technological innovations have indeed changed our everyday lives, both at home and at our local insurance agency. They have provided boundless savings in time and money, but can also lead to inconsistencies and confusion. The ever increasing utilization of e-signatures has revolutionized the way agencies work and, in some respects, made them more efficient. A producer can quickly and easily reach her customers on a moment's notice when time, schedules and
geographic distance would otherwise be a barrier. E-signatures, if used properly, can actually enhance an agency's defense if a lawsuit is filed against them. Take the example of an agency that procured a commercial property policy for a new client. The producer reviewed the application over the phone with the client and discussed each question before inputting the answer. The client responded "no" to the question regarding whether he had filed bankruptcy in the past 5 years. This response was recorded on the application. The completed application was uploaded to an on-line service (such as DocuSign, Silanis and DocVerify), then tagged with special annotations where signatures were required and sent to the client for his e -signature. Client e-signed, emailed to the agency, the application was processed and a policy issued. Continued page 18
Continued page 16
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A few months later, a fire engulfed the property which burned to the ground. A claim was submitted to the carrier who completed an investigation and discovered that the client had filed for bankruptcy less than a year before the fire. Not surprisingly, the policy was rescinded based on material misrepresentation in the application. The client sustained a significant loss with no money coming from the carrier. As a result, he decided to pursue a claim against the agency for inputting incorrect information on the application. The client swore up and down that he told the producer about the bankruptcy and never actually signed the application. What the client may not have known is that, in most jurisdictions, electronic signatures are both legal and binding to the same extent as a 'wet' signature. An e-signature on an application demonstrates that a person intends to commit to the contents of the insurance contract. In the case above, we were able to submit as evidence relevant details such as location, time, date and IP address of the e-signing party -- information that bolsters the legitimacy of an e-signed document if a dispute over the authenticity of the signature arises. The case above was a perfect example of how new technology can work to an agency's benefit. But these benefits do not come easily. Ongoing innovations and changing technology come with a need to be fully informed as to how the systems function and – just as important -- consciously aware of how the systems 'look and feel' to the user and how they actually operate. In another case, an agency procured a homeowner's policy for a client living in Florida. A screen enclosure endorsement was added to the policy, which is not unusual in the state. A request was made after policy inception for an increase in Building limits. A signed approval was received from the client to complete the limits increase. All good so far – but next came the tricky part: the producer accessed the carrier's website and inputted an increase in limits. The change request was approved by the carrier and the
limits were increased. Hurricane Irma made landfall in September 2018 causing minor damage to the client's house, but completely destroyed the pool cage. It wasn't until the carrier began their adjustment of the loss that the client was notified that she had no coverage for the pool cage. How could that be?! Screen shots from the carrier's website clearly show that the Screen Enclosure endorsement box was unchecked at the same time the limits increase was entered. The producer had no recollection of doing this, but the presumption is that he must have inadvertently clicked on the Screen Endorsement box without realizing what had occurred. Having direct access to a carrier's system can facilitate the process placing or renewing coverage and reduce the time it takes to effectuate policy changes. Nonetheless, be forewarned: inadvertent changes can have significant negative ramifications for your client and, ultimately, your agency. As a wise man once said, "Technology is great – until it isn't." There's a simple message there: technology may have improved, but it will never be foolproof. That new ride with its fancy headlights and hands-free phone may be sweet, but never forget that there will always be a new pothole to match it just around the corner...
Barbara Rocco is an Assistant Vice President and Claims Specialist with Swiss Re Corporate Solutions and works out of the Chicago office. Insurance products underwritten by Westport Insurance Corporation, Overland Park, Kansas, a member of Swiss Re Corporate Solutions.
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Steve Anderson
Easily Capture Business Cards with the Microsoft Pix Camera
I have been talking about the Microsoft Pix camera app quite a bit over the last couple of months. I usually gather multiple updates into one article, however, Microsoft has been updating the app with exciting capabilities on a regular basis, and I do not want to wait to let you know about this new capability. In a previous TechTips, I talked about using the Microsoft Pix app to take whiteboard photos and the addition of Photosynth. You can see an overview of the full capabilities of the app here. Microsoft Pix’s Business Card Scanner
Today, I want to highlight the newest feature added to the Microsoft Pix app – Business card scanning. The new business card feature for iPhones makes it quick and easy for you to add contacts, not only to your iPhone’s address book but also to your LinkedIn account. This is yet another example of the integration of LinkedIn into the Microsoft ecosystem. To use, just open Microsoft Pix and point your iPhone at a contact’s business card. Using machine learning, Pix automatically detects the business card and asks if you would like to take action to add the contact information.
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If you tap to take action, Pix will capture and organize numbers, email addresses, and URLs — and add this new contact into your iPhone contacts app with all the information populating the correct fields within your address book. If you are signed into LinkedIn on your iPhone, you can also seamlessly store the business cards of people you meet on your LinkedIn account. You will be able to instantly see their profile, job title, and work experience, letting you quickly personalize staying in touch. Creating a practice information and tact quickly can from others.
of capturing business card following up with a new conhelp make you stand out
Business card scanning is a simple enhancement to the app that could help streamline your prospect management process.
Don’t Miss New Marketing Materials for Cyber – Small Business Solution The Cyber – Small Business Solution product on Big “I" Markets gives Big “I" members a quick and easy way to cover their clients with admitted cyber liability insurance.
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“Cyber, solved" ad
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“Inoculate" ad
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Drop-in article
To aid in the process, we've added a flyer members can customize and share with their clients to the available marketing materials in the State Marketing Activity Center (SMAC). We've also developed a brief video tutorial that walks agents through the simple online cyber submission process, now available on Big “I" Markets. Feel free to share with your members.
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Suggested social posts
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Cobranded website slider
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Sample client solicitation letter
Note that these items are not for use in Washington state due to coverage differences. Washingtonspecific versions are available in SMAC.
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Declination form
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Consumer flyer
Visit SMAC to download the following items: Agent-facing materials
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Agent flyer
Video tutorial
Client-facing materials
Consumer FAQs Questions? Log in to Big “I" Markets and select Cyber Liability – Small Business Solution from the Commercial Products menu, or email Big “I" Markets. Louisiana Agent 22
IIABL Spring Education Conference May 15, 2018 Crowne Plaza—Baton Rouge Each Session Approved for 3 Hrs CE The ABC's of Trusted Choice Attending the IIABL Spring Education Conference will jump start the future of your agency. How? •
Assist you in efficiently using the free resources
offered at Trusted Choice •
Branding - you have the power in a national brand
and you will learn how to cobrand Trusted Choice with your agency •
Connecting to consumers who are looking for your
agency through the lead generation program
ACT - Agents Council for Technology
Protect Your Agency
Virtual/Augmented/Mixed Reality
Recommendations For Your Agency
REGISTER HERE
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IIABL Director of Education, Mike Edwards, CPCU, AAI is your source for technical questions. Contact Mike at medwards65@aol.com or 770.402.1011
Subject: Is a Non-owned Dock Used Regularly by the Insured an “Insured Location”?
Q. I have an unusual question from one of my insureds. (Is there ever any other kind?!) He regularly uses a dock that is adjacent to his property. For his daughter’s upcoming birthday, they are planning a cookout, and a couple of her friends want to know if they can fish off the dock later that day. My insured asked me if he could be sued (“talk to your lawyer”), and if so, does he have coverage. Here’s some background. My insured lives in a subdivision where a number of homes have frontage on a lake. Each waterfront home has a dock, although the docks are owned by the Home Owners Association (HOA) and not the individual owners of the homes. Apparently, when the subdivision was originally platted, an easement was created along the shoreline, several feet inland of the OHWM (ordinary high water mark). This interrupts the riparian rights of each respective waterfront property owner, thus the subdivision residents are allowed to walk along the lake without trespassing on each waterfront home’s property. In addition, the extra width of the easement allows the inland-side of each dock to be on the easement, so as not to encroach on any homeowner’s property. I ran the coverage question by the underwriter, who replied as follows: “We cannot extend liability to non-
owned property. Therefore, there is no coverage for the dock because the insured does not own it. Also, the dock would not meet the definition of an insured location, and is not a premises location.” I reviewed the Homeowners Policy of my insured, and I’m not sure I quite agree with the underwriter, although I cannot put my finger on any specific wording that refutes it. What do you think?
A. I think the underwriter would have trouble sup-
porting those statements based on policy language, assuming the policy follows ISO. Here is how I would analyze the coverage. Excerpts and comments below are based on coverage forms issued by the Insurance Services Office (ISO). Proprietary
forms may be different. Also, for the discussion below, assume your insured is Jack, and his daughter is Jill. Issue #1: Is the dock an “insured location”? Here is the definition from the ISO Homeowners Policy:
Homeowners 3 – Special Form HO 00 03 05 11 Definitions 6. "Insured location" means: a. The "residence premises"; b. The part of other premises, other structures and grounds used by you as a residence; and (1) Which is shown in the Declarations; or (2) Which is acquired by you during the policy period for your use as a residence; c. Any premises used by you in connection with a premises described in a. and b. above; d. Any part of a premises: (1) Not owned by an "insured"; and (2) Where an "insured" is temporarily residing; e. Vacant land, other than farm land, owned by or rented to an "insured"; f. Land owned by or rented to an "insured" on which a one-, two-, three- or four-family dwelling is being built as a residence for an "insured"; g. Individual or family cemetery plots or burial vaults of an "insured"; or h. Any part of a premises occasionally rented to an "insured" for other than "business" use. Comments: (1) In my view, Definition 6.c. clearly applies to the dock in this situation, given that the dock is quite literally out Jack and Jill’s back door, one step beyond their property line. In addition, they most likely use the dock on an almost daily basis. Continued page 24 Louisiana Agent 24
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(Who wouldn’t??) If this situation doesn’t fall within the meaning of “used by you in connection with” the residence premises, then I don’t know what does. (2) The phrase “used in connection with” is not defined in the ISO Homeowners Policy, but is often described in much of the insurance literature as meaning the property is “adjacent or adjoining.” Some take that to mean the two words are interchangeable, and Webster's Third New International Dictionary categorizes them as synonyms. However, Black’s Law Dictionary (9th) indicates that from a legal standpoint, they are different. “Adjacent: Lying near or close to, but not necessarily touching.” “Adjoining: Touching; sharing a common boundary; contiguous.” So I think it would be accurate to say that Jack & Jill’s property is “adjoining” the property where the dock is located, and is regularly used by them, which I believe would be very supportive of a claim that the dock is within the definition of an “insured location.” (3) On the other hand, what if the only dock in Jack & Jill’s subdivision was located at the HOA’s community-use area, which had a pavilion, picnic tables, and a dock. If Jill’s birthday party was held there, would the dock still be considered “used in connection with” their residence? Courts often consider the proximity and use of the specific location where an injury occurred, in determining the “connection” to the insured’s residence. In my view, I think this dock would reasonably be considered within the definition of an “insured location” under 6.c.
literature indicates that “The driver was severely injured when he flipped the go-cart in a community area, and the court ruled that this location was not used in connection with the insured’s residence, and thus the accident was not covered under their Homeowners Policy.” (5) The cursory summary of this case in the literature offered no guidance or rationale as to why the court felt that a common area in a HOA subdivision was not considered to be used in connection with the insured’s residence. After all, HOA dues go to the upkeep and maintenance of such areas. However, I read the actual case from a law journal, and found the specific point of contention about where the injury occurred. The driver of the go-cart was tossed 17 feet through the air from where the gocart flipped, landing him in a dry concrete retention pond, causing severe head injuries. The court therefore ruled that the concrete retention pond itself was not “used in connection with” the insured’s residence. Some experts consider such a distinction is putting too fine a point on the issue. The court apparently did not address whether or not riding the go-cart around in the subdivision Continued page 29
(4) However, case law is decidedly mixed on when a location is “used in connection with” a residence. For example, industry literature cites numerous cases where a common area of a subdivision, which is owned by the homeowners association (HOA), did not necessarily qualify as “used in connection with” the residence premises of a homeowner in the subdivision. In one illustrative case, the homeowners owned a 5 h.p. go-cart, and their 12-year old son allowed one of his friends to drive it around the subdivision. The brief description of the accident in the Louisiana Agent 26
Louisiana Agent 21
Company Hanover American Ins Co Massachusetts Bay Ins Co Hanover Insurance Co
Coverage Type
5 – Commercial Multiple Peril
Number of Policyholders:
Overall % Impact:
Overall $ Impact:
+6.3%
+$515,345
556
New: 8/1/2018 Renewal: 8/1/2018
+10.061 %
+$652,508
354
New: 8/15/2108 Renewal: 8/15/2018
Changes
Federated Service Ins Co
19 – Commercial Auto
Ace American Insurance Co Ace Fire Underwriters Ins Co Ace P&C Insurance Co Bankers Standard Ins Co
16 – Workers Comp
-4.1%
-$930,747
955
New: 6/1/2018 Renewal: 6/1/2018
LUBA Casualty Ins Co
16 -Workers Comp
0.7105
$546,956
3,236
New: 7/1/2018 Renewal: 7/1/2018
19 – Commercial Auto
+10.961 %
+$652,508
354
New: 8/15/2018 Renewal: 8/15/2018
National Liability & Fire Ins Co
19 – Commercial Auto
+18.580
+$2,660,795
842
New: 6/1/2018 Renewal: 7/1/2018
Travelers Property Casualty Co of America
16 – Workers Comp
.40%
+$163,799
5,520
New: 5/1/2018 Renewal: 5/1/2018
State Farm Fire & Casualty
Boatowners/ Personal Watercraft
-4.9%
-$648,228
31,338
New: 7/15/2018 Renewal: 9/15/2018
Allamerica Financial Benefit Insurance Co
19 – Commercial Automobile
7.0%
+$338,772
620
New: 8/1/2018 Renewal: 8/1/2018
Federated Mutual Ins Co Federated Service Ins Co
Louisiana Agent 28
IIABL 2018 CONVENTION
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Louisiana Agent 29
Louisiana Agent 26
would be within an area considered used in connection with the insured’s residence. [United Services Auto.Ass’n v Parry, 761 P.2d 157. (Ariz. Ct. App. 1988)] (6) Another case that illustrates how closely the courts often examine the finer details of proximity and usage in determining whether or not a location is “used in connection with” an insured’s residence involved an ATV being driven across a hayfield. A family allowed a friend of their teenage daughter to drive the family’s ATV. She rode around their property, and then across a large hayfield that was adjacent to the family’s residence. (The hayfield was not owned by the family). The ATV flipped, injuring the teenager. The court ruled that although the hayfield actually adjoined the insured’s property, the hayfield was not “used in connection with” their residence. Therefore, since the site of the injury was not an “insured location,” the Homeowners Policy of the family that owned the ATV excluded the loss.
for their use to any of the eight enumerated parts of the definition of “insured location.” [6.a. -h.] But in the HO-2000 filing, ISO restricted the automatic coverage for owned recreational vehicles to only five: [6.a.,b.,d.,e., h.] Noticeably absent was coverage for the use of owned recreational vehicles on location 6.c. : “Any premises
used in connection with a premises described in a. and b. above.” Both cases discussed above pre-date the HO-2000 (Parry 1988 and Coppa 1993).
A second comment is that in cases such as these two, which involve the off-premises use of owned recreational vehicles, litigation could have avoided by procuring specific coverage on any owned recreational vehicles. Relying solely on automatic coverages often leaves coverage gaps. Here is an article on this from the IIABA’s Virtual University: “The Danger of Relying on Automatic Coverages” Continued page 30
(7) Near the end of this case, as reported in the law journal, I found this observation from the court particularly illuminating on its rationale: “When examining all the provisions of the policy
Continued page 26
together, and in particular the nine specifications included in the definition of the "insured location," we are compelled to conclude that "insured location" was not meant to describe adjacent, nonowned land on which an ATV might be used. The hayfield is not part of the residence premises and is not "used in connection with" such premises as are approaches or easements of ingress to or egress from the property. It is not reasonable to expect that every field or pathway in the neighborhood leading to the insureds' residence is property "used in connection with" the residence. We hold that the trial court did not err in finding that coverage was precluded under the policy.” [Illinois Farmers Ins. Co. v Coppa, 494 N.W. 2d 503. (Minn.Ct.App. 1993)]
(8) Here is an excellent article posted on the IIABA’s Virtual University: “What Does ‘Used in Connection With’ Mean?” (9)Two final comments on the definition of “insured location.” First, prior to ISO’s HO-2000 program, the automatic coverage for owned recreational vehicles such as go-carts and ATVs applied Louisiana Agent 31
Issue #2: Does the premises exclusion apply to the dock? Definitions in an insurance policy are important in crafting coverages or exclusions. Pertinent to Jack and Jill’s dock situation is the use of the “insured location” definition in the following exclusion:
Section II – Exclusions E. Coverage E – Personal Liability and Coverage F – Medical Payments Coverages E and F do not apply to the following: 4. "Insured's" Premises Not An "Insured Location" "Bodily injury" or "property damage" arising out of a premises: a. Owned by an "insured"; b. Rented to an "insured"; or c. Rented to others by an "insured"; that is not an "insured location"; Comments: (1) Exclusion E.4. is very narrow. It only applies to a premises which is: owned by an insured [E.4.a.]; rented to an insured [E.4.b.]; or rented to others by an insured [E.4.c.]. None of those provisions apply to the dock, since the
dock is owned by the HOA. Therefore, Exclusion E.4. does not apply in the event one of Jill’s guests is hurt while fishing on the dock. (2) The last six words in the exclusion (that is not an "insured location”) are often a source of confusion. The intent is that even for situations where a location is owned by Jack, is rented to Jack, or is rented to others by Jack, Section II can still apply for such locations, if they are within the definition of an “insured location.” (3) In the language of the exclusion, such a ren ted premises is excluded if it is “not an ‘insured location’.” Stated in the positive, such a rented premises is covered if it is an “insured location.” (4) For example, if the weather forecast was bad for the day of Jill’s birthday party, they might rent a place for the party, such as a banquet facility, where they could have indoor activities, including catered party food and party
Continued page 31
Continued page 32
games, etc. A premises rented to Jack falls under Exclusion E.4.b. However, the definition of “insured location” includes “Any part of a premises
occasionally rented to an insured for other than business use.” See Definition 6.h. Therefore, an
injury is covered that is alleged to arise out of the rented premises, such as a guest tripping over a power cord Jack was using, or slipping on a wet floor where guests played with water balloons, Silly String, etc. (5) Here are two articles posted on the IIABA’s Virtual University that deal with similar types of premises claims in the Homeowners Policy. “Homeowners Coverage for Non-Rented Premises” “Insured’s Party Gives Her Insurance Agent Heartburn” These materials are intended for educational purposes only and should not be relied upon as legal advice. Please consult a qualified attorney for legal advice.
Commissioner’s Corner
Cybersecurity and the Future of Insurance To find proof that there’s nothing new under the sun, I only have to look back into the past editions of my column. Three years ago, in March of 2015, I was sounding the alarm about cyberattacks, most notably at the time the attack on Anthem, Inc. Here again, I feel the need to spread the word about cybersecurity attacks. Not just their frequency, which seems to be happening so often that small-scale attacks are getting less and less attention, but the changing landscape of what cybersecurity has become. Threats to data privacy are nothing new. Regulators and legislatures have required businesses to protect consumer data for decades. However the modern size, scale and methods of data collection, transmission and storage all present new challenges. As we beContinued page 32
Continued page 33
come more reliant on electronic communication and businesses collect and maintain ever more granular information about their customers, the opportunity for bad actors to inflict damage on consumers and businesses increases exponentially. In addition to large scale hacking like in the case of 145 million American consumers who had their personal information stolen from Equifax, there have been cases of hackers locking information away from businesses and then ransoming access back. Already this year, a hospital in Indiana faced the difficult choice of paying a ransom or having hackers delete their patient data. The hackers replaced all information in thousands of patient records with the words “I’m sorry” and demanded four bitcoins, valued at $55,000 at that time, in return for releasing the data. Faced with possible weeks of reconstructing data on their own should the information be erased, the hospital paid the ransom. There are more stories of the same sort from around the country. The amounts are usually strategically lower than it would cost for the hostage company to fix the problem on their own.
There’s a lot of room for improvement in this sector. Most businesses are familiar with commercial insurance policies that provide general liability coverage to protect against injury or property damage. What they may not realize is that most standard commercial lines policies do not cover many cyber risks – and they must secure a special cybersecurity policy. Aon Benfield estimates that less than 15 percent of US businesses have cybersecurity insurance and less than one percent in other regions of the world. In fact, Aon Inpoint estimated the global standalone cyber market to be worth $1.7 billion in annual gross written premium in a study conducted in 2015. While the need for cybersecurity insurance for businesses is large, cybersecurity risk remains difficult for insurance underwriters to quantify due in large part to a lack of actuarial data. In the absence of such data, insurers compensate with pricing that relies on qualitative assessments of an applicant’s risk management procedures and risk culture. As a result, policies for cyber risk tend to be more customized than policies for other risks, Continued page 34
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and therefore more costly. There are many factors that go into determining the scale and cost of a policy including the type of business operation seeking coverage, the size and scope of operations, the number of customers, the type of data collected and how it is stored. From a regulatory perspective, we would like to see insurers use quantitative measures like those listed above coupled with robust actuarial data based on actual incident experience. To aid in collecting this data and protecting consumers, the National Association of Insurance Commissioners (NAIC) adopted the Insurance Data Security Model Law in late 2017. That model establishes the standards for data security and investigation and notification of a breach of data security applicable to insurance providers. In a constantly connected world, we are all vulnerable to this sort of attack on our businesses and personal data. At the Department of Insurance, we are committed to working with companies to keep their data and consumer personal information as safe as possible. All of us working together can provide a united front, faster responses and stronger defenses against those who will attempt to use illegal hacking for their own gains.
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Webcasts E&O Risk Management May 1, 17, 22, 24 Available on Demand
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May Lightning Learning: Personal Auto Policy 2 Personal Auto Policy – Who
Is Eligible? 9 Who is Insured in a Personal
Auto Policy? 23 How do You Assign the
Proper Use Classification to a Personal Auto?
Flood May 17
8 New Technologies, New Risks: Drones, Home and Ride-Sharing 10 Excess and Umbrella Fundamentals PLUS
22 Contractors, Contractors, Contractors 29 Home Business vs Home Insurance
17 Your Agency Online: Communication Cure or E&O Plague
Seminars E&O Risk Management 5/8/18—Monroe 5/9/2018—Lafayette 5/10/2018—BR 5/11/2018—NOLA
E&O Risk Management 10/16/2018 –Shreveport 10/17/2018—Lafayette 10/18/2018—Kenner 10/19/2018—Covington
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IIABL 2017—2018 BOARD OF DIRECTORS & OFFICERS Neil Record President Record Agency, Inc.—Clinton John L. Beckmann, III President Elect J. Everett Eaves—New Orleans
Joseph A. O’Connor, III Secretary/Treasurer The O’Connor Insurance Group—Metairie H. Lee Schilling, Jr. National Director Schilling & Reid Insurance—Amite Richard Jenkins Past President Moore & Jenkins Insurance—Franklinton
Stuart Harris McClure, Bomar & Harris—Shreveport Ross Henry Henry Insurance Service—Baton Rouge Bret Hughes Hughes Insurance Services—Gonzales Harry B. Kelleher, III Harry Kelleher & Company—Harahan Philip McMahon Paul’s Agency—Morgan City Joe King Montgomery Thomas & Farr Agency—Monroe
Paul Owen John Hendry Insurance Agency-Zachary
Donnie Stiel Young Agent Representative Stiel Insurance of Acadiana, Inc.
Martin Perret Quality Plus—Lafayette
Byram H. Carpenter, III Moreman, Moore & Co—Shreveport
David T. Perry Arthur J. Gallagher RMS—Baton Rouge
Brenda Case Lowry-Dunham, Case & Vivien—Slidell
Robert Riviere Riviere Insurance Agency—Thibodaux
Joseph Cunningham, Jr. Cunningham Agency—Natchitoches
Armond Schwing Schwing Insurance Agency—New Iberia
Donna DiCarlo Riverlands Insurance Services—LaPlace
Michael D. Scriber Scriber Insurance Services—Ruston
Morris Funderburg Reeves, Coon & Funderburg—Monroe
Donelson P. Stiel David H. Stiel, Jr. Agency—Franklin Louisiana Agent 40