A publication of the: Independent Insurance Agents & Brokers of Louisiana
Louisiana Agent AUGUST 2018
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IIABL STAFF
In this issue:
Jeff Albright Chief Executive Officer jalbright@iiabl.com
New Tax Regulations ........................................... 5-8
Francine Berendson Director of Communications & Events fberendson@iiabl.com
Exclusive Big I Member Call Answering Center .................................... 11-12
Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com Karen Kuylen Director of Accounting kkuylen@iiabl.com
Louisiana/Mississippi Big I Young Agents Conference..................... 10-11
Employment of Felons LDI Advisory Letter ......................................... 12—15 Ask Mike: Sub Damages Customer’s Property ............. 16—25 Change of Producer of Record ...................... 25-26 Trusted Choice’s I Am Campaign .................. 27-29 Rate & Rule Filings ................................................. 31
Ed O’Brien Marketing Representative eobrien@iiabl.com Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com
ACV vs. RC ....................................................... 32-34 Calendar ................................................................ 35 RLI’s New Producer Portal ..................................... 36 IIABL Partners ......................................................... 37 IIABL Officer & Board ............................................. 38
Jamie Newchurch Insurance Services jnewchurch@iiabl.com Lisa Young-Crooks Executive Assistant lyoung@iiabl.com
New Tax Regulation is a Big Win for Big I Members By Jennifer Webb
The Internal Revenue Service issued a draft regulation on a key provision of the 2017 tax law (26 U.S.C. §199A) that allows for a 20% deduction on “qualified business income” for owners and shareholders of pass-through businesses. Under the draft regulation, owners and shareholders of insurance agencies and brokerages can take the 20% tax deduction on qualified business income, no matter their taxable income levels, because the IRS does not consider insurance agents and brokers to be a “specified service trade or business.” Owners and shareholders of specified service trades and businesses cannot take advantage of the deduction if their taxable income is over a certain level. The relevant part of the draft regulation reads as follows:
“Proposed §1.199A-5(b)(2)(x) uses the ordinary meaning of “brokerage services” and provides that the field of brokerage services includes services in which a person arranges transactions between a buyer and a seller with respect to securities (as defined in section 475(c)(2)) for a commission or fee. This includes services provided by stock brokers and other similar professionals, but does not include services provided by real estate agents and brokers, or insurance agents and brokers.” Section 199A provides the 20% tax deduction to an owner or shareholder of a pass-through entity where the owner or shareholder’s annual taxable income does not exceed $315,000
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for joint filers and $157,500 for single filers in 2018. In other words, all owners or shareholders that are organized as pass-throughs under the above income thresholds can utilize the full 20% deduction, and any regulations or guidance released by the Treasury Department, including the draft released yesterday, will not impact this. However, an owner or shareholder of a specified service trade or business with an annual taxable income between $315,000 and $415,000 (joint) and $157,500 and $207,500 (single) will see the deduction phased out. Those with an annual taxable income above $415,000 (joint) and $207,500 (single) will be prohibited from utilizing the new deduction. While the regulation is only in draft form, it was previously unclear whether insurance agencies and brokerages would be considered specified service trades or businesses.
Because insurance agencies and brokerages are not a specified service trade or business, it means that those with annual taxable income above the $315,000 (joint) and $157,500 (single) thresholds can take advantage of the deduction. But, the total amount of the deduction for those at these upper income levels cannot exceed 50% of employee W2 wages, or 25% of W-2 wages plus 2.5% of capital assets (e.g. tangible property purchased for the business), whichever is greater. Alongside the draft rule the IRS released a proposed procedure for calculating W-2 wages. The Big “I” has been aggressively advocating before Congress and the Treasury Department that insurance agencies and brokerages should not be considered a specified service trade or business. In April, the Big “I” sent a letter to key Treasury Department officials and had a meeting with the department. As a follow-up to the meeting, the Big “I” sent another letter to the Treasury Department,
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specifically addressing questions about the term “brokerage.” The Big “I” has also had a number of meetings with key congressional offices on this issue. Beyond the “specified service trade or business” definition, the draft regulation covers several issues related to the Section 199A deduction which may impact agents and brokers depending on individual circumstances. For example, financial advice and retirement planning services would qualify as specified service trades or businesses, and consulting is considered a specified service trade or business to the extent that a fee is charged for such services. However, “consulting that is embedded in, or ancillary to, the sale of goods, if there is no separate payment for consulting services” is not considered a specified service trade or business. Also of note, a trade or business is not a specified service trade or business if it has “gross receipts of $25 million or less (in a taxable
year) and less than 10 percent of the gross receipts…[are] attributable to the performance of an SSTB.” If gross receipts are above $25 million, the relevant percentage is 5%. This means an insurance agency that has predominantly a property-casualty book of business, but also has a small retirement planning, consulting or financials services component, would not be considered a specified service trade or business under the draft regulation. The Big “I” is currently reviewing the draft regulation, which is open for a 45-day public comment period. A public hearing on the regulation is tentatively scheduled for Oct. 16. Because the regulation is in draft form and open for public comment, changes may occur before the rule becomes final. The Big “I” will provide comments to the IRS and additional guidance to members over the next few months. Final regulations are expected before the end of the year. Jennifer Webb is Big “I” federal government affairs counsel.
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2018 Louisiana & Mississippi Big I Young Agents Conference
The Louisiana/Mississippi Young Agents Conference was held at the Ritz Carlton Hotel in New Orleans on August 2-34 2018. Almost 300 people attended the conference this year, and the exhibit hall was crowded with 49 exhibitors. 58 golfers played the Bayou Oaks golf course on Thursday, and a wonderful time was had by all. Friday afternoon started off with a presentation on “How Your Agency Can Leverage the Big Societal Disruptors” presented by Aubie Knight, CEO of the IIA of North Carolina. Disruptive forces identified included: Louisiana Young Agents Chair, Brittany Mohr with Lewis Mohr RE & Insurance in Baton Rouge, LA and Mississippi Young Agents Chair, Roger Elfert with Fisher Brown Bottrell in Jackson, MS.
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Changing Demographics
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Climate Change
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Big Data Continued page 12
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Urban Regeneration
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Peer-to-Peer Platforms
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Technology Advancements
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Artificial Intelligence
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Blockchain
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Advances in Energy Generation & Storage
Knight discussed different action ideas for agencies to respond to changing demographics, plans to take advantage of big data, lessons agencies can learn from peer-topeer platforms, and how to provide better customer service through implementing artificial intelligence (AI) such as chat bots within your agency. Saturday morning the young agents and company/broker representatives gather together to learn from each other and share ideas at the roundtable discussions.
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voicemail or were not answered at all and 86% of calls that go to voicemail were hang-ups. Bottom Line: Customers expect a human to answer. If they get voicemail, they hang up and your agency misses out on a new sale or actively servicing an existing client when it's convenient for them.
Insure Response can answer the calls you've been missing like an in-house CSR. They are licensed insurance agents in the USA to equipped to answer new and existing client phone calls 24/7, after hours or when you're busy. And, they are offering Big "I" members deeply discounted rates on call answering services. Continued page 11
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Follow-Up to LDI Advisory Letter 2018-02 Employment of Felons and
IIABL Technical Advisory 334 On July 31, 2018 issued LDI Advisory Letter 201802 which provides important guidance to insurance agencies (and any other insurance businesses) regarding federal and state laws related to employing or allowing to associate with your business, any person engaged in the business of insurance who has been convicted of a felony. Numerous insurance agencies and their employees may currently be in violation of these laws and must take action before December 31, 2018. It is extremely important that every insurance agency (and other insurance business) review LDI Advisory Letter 2018-02 carefully, and make sure that every employee or other person associated with your business are compliant. LDI Advisory Letter 2018-02 can be found HERE. On August 1, 2018, IIABL issued Technical Advisory 334, which highlighted LDI Advisory Letter 2018-02. You can find Technical Advisory 334 HERE.
Key Points of LDI Advisory Letter 2018-02 Both federal and state laws prohibit insurance agencies from employing, or allowing to associate with your business, any person who has been convicted of a felony. These laws allow exceptions for agencies and persons who apply to the Commissioner of Insurance for a waiver, and the Commissioner grants such waiver. Commissioner Donelon requested legislation during the 2018 Regular Session of the Louisiana Legislature to allow such waivers under Louisiana law. IIABL supported and helped Commissioner Donelon pass Act 299 to allow for such waivers. Insurance agencies are required to conduct criminal background checks or otherwise insure that all persons employed by or associated with the agency do not have felony convictions.
Continued page 14 Louisiana Agent 13
Persons with felony convictions who do not obtain a waiver, and insurance agencies who employ such persons are subject to regulatory action by the Louisiana Department of Insurance. Insurance Commissioner Jim Donelon has given insurance agencies with employees who have felony convictions until December 31, 2018 to come into compliance with Act 299. Any employees hired after August 1, 2018 are immediately subject to R.S. 22:1554 (18) as amended by Act 299. Insurance agency (and other insurance business) owners and managers need to run criminal background checks or otherwise insure that all employees or other persons associated with the agency do NOT have felony convictions. If the agency finds employees who have felony convictions, the agency and the employee need to file with the Commissioner of Insurance for a waiver as outlined in Advisory Letter 2018-02. Insurance Commissioner Jim Donelon has given insurance agencies with employees who have felony convictions until December 31, 2018 to come into compliance with Act 299. Any employees hired after August 1, 2018 are immediately subject to R.S. 22:1554 (18) as amended by Act 299. LDI Advisory Letter 2018-02 can be found HERE.
How Do I Comply? So, how does a small independent insurance agency comply with LDI Advisory Letter 201802? Start by educating your employees. They must comply with the law the same way that the agency does! Share IIABL TA-334 and LDI Advisory Letter 2018-02 with your entire staff. Make sure they understand that if they have a felony conviction they need to confidentially notify the appropriate agency manager and work with them to apply for a waiver from the Commissioner of Insurance. Any new hires should complete an employment application that asks whether or not they have a felony conviction. Share IIABL TA-334 and LDI Advisory Letter 2018-02 with any prospective new hires and make sure they understand that they cannot be engaged in the insurance business if they have a felony conviction unless they secure a waiver from the Commissioner of Insurance. Continued page 15
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The safest way to make sure that an employee does not have a felony conviction is to run a background check. Agencies may want to run background checks on all current employees to insure compliance, but particularly want to make background checks a requirement of any new employees. So, how do you run criminal background checks? There are many sources, but one source that LDI recognizes and accepts is the list maintained by the National Association of Insurance Commissioners (NAIC) of “Independent Third-Party Vendors for Furnishing Background Investigation Reports in All States” which can be found HERE.
“This restaurant has an app that lets you download parmesan cheese from the cloud!”
Continued page 16
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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: My Insured’s Sub Damages Customer’s Property
Q. I’m in a quandary about a claim involving a
retail flooring company I insure. One of my insured’s customers was renovating and upgrading their home, and made a substantial purchase of expensive wood flooring from my insured. The flooring company subs a lot of their installation work. Three weeks ago, the sub handling the installation was in the process of moving furniture and appliances in preparation for the work. The refrigerator became unbalanced, tipped over, and smashed into the new Viking stove, cracked the Italian marble countertop, while putting a large dent in the doubledoors of the refrigerator. The sub’s insurer has denied the entire claim, citing three exclusions: (1) care, custody or control; (2) property that must be repaired because
of poor workmanship; and (3) the Your Work exclusion. I have since turned in the claim to my insured’s CGL carrier, and I found out yesterday that they are also denying the claim, for the same three reasons. As you can imagine, my insured is livid. My gut tells me that the claim should be covered, but my brain can’t figure out why. Thoughts?
A. Welcome to insurance, where a claims conflict is “just another day in the office.”
For the following discussion, assume Smithco Flooring Outlet is your insured, and Jones Flooring Installers is the sub. Coverage form excerpts and comments are based on ISO (Insurance Ser-
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vices Office) forms. Proprietary forms may be different. The three reasons cited for the claim denial are found in Exclusions J. and L. in the ISO CGL:
Commercial General Liability CG 00 01 04 13 Section I – Coverages Coverage A – Bodily Injury and Property Damage Liability 2. Exclusions
(2) Premises you sell, give away or abandon, if the "property damage" arises out of any part of those premises; (3) Property loaned to you; (4) Personal property in the care, custody or control of the insured; (5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations; or
"Property damage" to:
(6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it.
(1) Property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property;
Paragraphs (1), (3) and (4) of this exclusion do not apply to "property damage" (other than damage by fire) to premises, including the contents of such premises, rented to you for a period of seven or fewer consecutive days. A sepa-
J. Damage To Property
Continued page 16
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rate limit of insurance applies to Damage To Premises Rented To You as described in Section III - Limits Of Insurance. Paragraph (2) of this exclusion does not apply if the premises are "your work" and were never occupied, rented or held for rental by you.
Section V - Definitions
22. "Your work": a. Means: (1) Work or operations performed by you or on your behalf; and
Paragraphs (3), (4), (5) and (6) of this exclusion do not apply to liability assumed under a sidetrack agreement.
(2) Materials, parts or equipment furnished in connection with such work or operations.
Paragraph (6) of this exclusion does not apply to "property damage" included in the "productscompleted operations hazard".
(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work" and
L. Damage To Your Work "Property damage" to "your work" arising out of it or any part of it and included in the "productscompleted operations hazard". This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
b. Includes:
(2) The providing of or failure to provide warnings or instructions. Issue #1: Denial for “care, custody or control.”
Comments: (1) The phrase “care, custody or control” (often referred to as the “ccc” exclusion) is found in Ex-
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clusion 2.J.(4). Note first of all that it applies only for to damage to personal property. Therefore, damage to the marble countertop is not reached by the exclusion. While the stove and refrigerator are both personal property, only the fridge could be considered in the care, custody or control of Jones Flooring Installers. (2) Under the common interpretation of the “ccc” exclusion, the CGL of Jones Flooring Installers will probably deny coverage for Jones for damage to the refrigerator. I say “probably” because the “ccc” exclusion is one of the most litigated provisions in the CGL, and case law is very fact-specific. In addition, the terms “care,” “custody,” and “control” are not defined. Therefore, some courts apply a broad, everyday meaning to the terms, while others dive deep into technical parsing of each term, referring to resources such as Black’s Law Dictionary, and where applicable, state statutes or other pertinent cases. For example, a Louisiana Appellate Court, 1st Circuit, reviewed the jurisprudence regarding the definition of “custody” within the meaning of Louisiana Civil Code Article 2317. The case involved a night watchman provided by a security service, who allegedly failed to detect a fire on the premises he was guard-
ing. The proprietary liability policy of the security service contained a “ccc” exclusion similar to, but broader than, the one in the ISO CGL. The Court’s interpretation was that “custody” meant “some sort of supervision and control either be-
cause he has an interest them or derives a benefit from their use.” Therefore, the Court found
that the premises were not in the “custody” of the night watchman. [Gulf-Wandes Corp. v. Vison Guard Service, Inc., 459 So.2d 14 (La.Ct.App. 1st Cir. 1984).] (3) On the other hand, under the CGL of Smithco Flooring Outlet (your insured), I believe Smithco is covered for damage to the refrigerator, since the exclusion applies to Personal property in the care, custody or control of the insured. Smithco is “the insured” in its own CGL, and most authorities would argue that a contractor is generally considered to not have “ccc” of property while it is it is care, custody or control of a subcontractor. (4) Further, if the CGL insurer for Jones Flooring Installers is adamant in denying all coverage, I think Smithco Flooring Outlet has coverage for all
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damage under its own CGL. Issue #2: Denial for “property that must be repaired because of poor workmanship.”
Comments: (1) I assume the insurer is referring either to Exclusion J.(5) or J.(6), or both. Both are discussed below. (2) Exclusion J.(5) excludes damage to certain specific parts (“That particular part”) of real property on which operations are being performed by Smithco Flooring Outlet or Jones Flooring Installers. Within the scope and intent of this exclusion, it does not apply to this situation. The refrigerator and stove are personal property, not real property, so the exclusion is inapplicable for damage to those two appliances. The Italian marble countertop, on the other hand, is clearly a part of the realty. Nonetheless, no “operations” are being performed, nor will be performed, on the countertop. Smithco or Jones were contracted to work exclusively on the flooring. (3) A general ballpark definition of J.(5) would be to exclude “damage to a specific part of real property you or your subs are working on.” But agreement on just how specific the part (“that particular part”) being worked on actually is, forms the basis of much litigation. A frequent situation involves work being done on complex equipment or machinery of a building. The dispute over “that particular part” arises when the technician accidentally causes damage to a part or system other than the specific one he has been working on.
erator, stove, or marble countertops. (Recall that damage to the refrigerator would almost certainly be denied based on Exclusion J. (4).) (6) But a slight change in the facts could bring damage to the a kitchen appliance, or the countertop, within the scope of J.(6). One of the most commonly litigated issues under J.(6) is cleanup work during, or at the conclusion of, “Your Work.” Assume that in the process of laying the flooring, some chemicals were accidentally applied or spilled onto an appliance, or the countertop, cabinets, etc. In attempting to clean up the damage, the employee of Jones actually made matters worse, such as by leaving scratch marks due to vigorous cleaning, or discoloration from harsh chemicals. Some courts have ruled that this amounts to “incorrectly performed” work on the appliance, countertop, cabinets, etc. Other courts have maintained that this was incidental to actually laying the flooring, and not within the exclusion. (7) To take unintended damage a step further, what if the chemicals being used acci-
(4) Exclusion J.(6) is often referred to as the “workmanship exclusion,” although it isn’t the only exclusion that could apply to various forms of workrelated property damage in Exclusion J. (5) The intended scope of J.(6) is to exclude damage due to “Your Work” being incorrectly performed on any property (real or personal) which must subsequently have to be restored, repaired, or replaced. See Definition 22 above. Note that “Your Work” applies to “Work or operations performed by you or on your behalf.” Therefore, the incorrect work being done on property which resulted in damage to that property would be excluded, whether the work or operations were done by Smithco or Jones. However, it seems highly unlikely that Smithco Flooring Outlet or its sub, Jones Flooring Installers, could be deemed to be performing “Your Work” on the refrigContinued page 26 Louisiana Agent 20
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dentally ignited a fire, causing substantial damage to the house. The majority opinion seems to be that this damage not excluded under J.(6).
performing the work on the wrong property?” [Thommes v. Milwaukee Ins.Co, 641 N.W.2d 877 (Minn. 2002).]
(8) An intriguing legal subtly to the issue of “incorrectly performed” work involves cases of correctly performed work on incorrect property, or at incorrect locations. Two of the most frequent types of mistaken work involve tree (or timber) cutting, and demolition of buildings. A case frequently cited in insurance texts dealt with the clearing of trees and brush at a construction site. In the process, the insured mistakenly cut approximately a half-acre of trees on an adjoining property. The insured’s defense was based in part on the meaning of “incorrect,” which connotes “faulty or defective” work. The insured alleged that this created an ambiguity in the insurer’s argument that the term “incorrect” included work being done at the wrong location. Agreeing with the ambiguity in the terminology in the exclusion, the Court ruled in favor the insured who overcut the timber. However, dissenting Justice Stringer strongly disagreed with the majority’s interpretation, arguing, “What could be more incorrect than
(9) And who says insurance is boring??!! Issue #3: Denial for the “Your Work” exclusion.
Comments: (1) Exclusion L. deals with “Damage to Your Work.” While Exclusions J.(5)(6) address situations dealing with various parts of the work exposure, they are confined to ongoing operations. Exclusion L. applies solely after the work project is over, under the “products/ completed operations hazard.” Thus, this exclusion would not be a factor in the present situation involving Smithco Flooring Outlet and Jones Floor Installers. (2) However, if damage appears to the flooring after the work has been completed, one advantage for Smithco, since the work was Continued page 31
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done by the sub, is that Exclusion L. provides an exception to Smithco for subcontracted work which was faulty. Excerpt from the exclusion (see full text of the exclusion above): This exclusion
does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
(3) This is often referred to as the “subcontractor exception,” and is not included anywhere in Exclusion J. (4) The “subcontractor exception” is very important for general contractors, since damage to the faulty work falling under Exclusion L., which was caused by his subs, is not excluded in the GC’s CGL. Only the GC’s faulty work is excluded. Yet under Exclusion J.(6), the faulty work of both contractor and subcontractor is excluded. Some contractors consider this an ambiguity worth litigating. (5) In 2007, the Louisiana Supreme Court addressed that issue in Supreme Services and Specialty Co., Inc. v. Sonny Greer, Inc., 958 So.2d 634 (La. 2007). The Court reiterated what it called the “plain language” in the two exclusions, which meant that damage to the work product in Exclusion J. applied to both the general contractor and subcontractor, while Exclusion L. applied only to the faulty work done by the general contractor. (6) Shortly after the Court’s decision was released, the case was summarized in an article posted on our website. Additional information.
“Not All Damage to ‘Your Work’ is Excluded”
“Faulty Work and the CGL” “The Subcontractor Exception to the Your Work Exclusion” 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.
Follow-Up to LDI Directive 211 – Change of Producer of Record On June 28, 2018, the Louisiana Department of Insurance (LDI) issued Directive 211 outlining the provisions of R.S. 22:1564 which controls the change of producer of record in Louisiana. Directive 211 can be found HERE. On August 8, 2018, IIABL published Technical Advisory 335 which highlighted LDI Directive 211. Technical Advisory 335 can be found HERE. Since the release of Technical Advisory 335, IIABL has received numerous questions. We hope to answer some of those questions with this additional information.
“Care, Custody or Control in the CGL” “Another Look at Care, Custody or Control” “Care, Custody, or Control Exclusion in the CGL” “Care, Custody or Control in Property Management” “What Is(n’t) “Your Work” in the CGL?” “CGL Workmanship Exclusion – Part 1 of 3” “CGL Workmanship Exclusions – Part 2 of 3” “CGL Workmanship Exclusions – Part 3 of 3” “CGL Coverage for Glass Scratched by Contractors” “The CGL ‘Your Work’ Exclusion & Subcontractors”
New POR Law?
The most common questions have been about the “new” producer of record statute. When did the law change? What are the recent changes? When did they make the law apply to surplus lines insurers? There are no new changes to R.S. 22:1564 from the 2018 Regular Session of the Louisiana Legislature. The law was last changed in 2017 when the notice period was reduced from 15 days to 10 days, and a requirement for the new producer of record to provide applications to receive a quote Louisiana Agent 24
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was added. Otherwise, the producer of record statute has been the same for many years, and has applied to all insurers, including surplus lines insurers. Directive 211 states in part, “All insurers, including surplus lines insurers, who receive a request in writing from the owner of the policy or the first-named insured to change or remove the producer of record shall comply with the law and make the change or removal of the “producer of record” as set forth in La. R.S. 22:1564. Any insurer who refuses to accept a written request and recognize a change in the “producer of record” from the owner of the policy or the first-named insured may be in violation of La. R.S. 22:1564 and subject to regulatory sanctions.” The problem has been that some insurance companies and brokers (particularly in the surplus lines industry) have refused to recognize producer of record letters. Directive 211 clearly states that, “All insurers, including surplus lines insurers, …shall comply with the law…” The bottom line is that the law applies to all insurers and supersedes any insurance company or broker “rules” about producer of record letters.
“Property, casualty, and bond commissions shall be paid to the producer of record at the policy inception for the full term of the policy, unless such policy is written for more than one year or is continuous until canceled, in which case commissions shall be paid to the new producer of record starting on the anniversary rating date when new rates take effect. Accident, health, or benefits commissions shall be paid to the current producer of record and shall change when the producer of record changes.” You can find the producer of record statute R.S. 22:1564 HERE.
IIABL TECHNICAL ADVISORIES
10-Day Waiting Period?
Why is membership in IIABL important?
Another area that raises a lot of questions concerns the 10-day waiting period. The law states the following about the 10-day waiting period.
IIABL recently sent out two important technical advisories to members. We received numerous questions from both of these technical advisories.
“If the insurer receives a written request by the insured to change the producer of record on an application, the insurer shall give the initial producer of record written notice ten calendar days in advance of the change or removal.” “If the insurer receives a request to change a producer of record on an application within ten calendar days of the policy inception, the insurer shall provide the required ten- calendar day notice; however, any required change of producer shall be effective on the inception date of the policy.” Agent Commissions? Payment of agent commissions after a producer of record change also generates a lot of questions. Here is what the statute says on that subject:
We are including two articles in this newsletter addressing the questions received and to clarify a few items. This is a reminder of a valuable member only resource on the IIABL website—IIABL Technical Advisories.
Login to the IIABL website and browse the TA’s by topics to get answers to your technical questions. Subjects covered are: • • • • • • •
Agency Operations E&O Federal Laws Insurers Louisiana Laws, Bulletins & Court Cases Miscellaneous Topics Technical—Commercial lines, personal lines, interline, uninsured motorists Louisiana Agent 26
Trusted Choice® Launches ‘I Am” Campaign Insurance customers should know their agents. That's why Trusted Choice® launched the new “I Am" campaign for independent agents to help them show their clients a more personal side of insurance. Complete with print ads, digital graphics and videos, the campaign enables agents to provide a snapshot of who they are and how their local ties benefit their clients—from being active in their community to being there when their clients need it most. Each advertising element can be customized with a photo and agency-specific information, enabling agents to make the ad their own. The postcard ad also provides a place for agents to add their agency logo, helping strengthen their brand. States, partners and Big “I" members can promote the new campaign by sharing the resources with members who would benefit from the campaign elements.
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Company
Number of Policyholders:
Coverage Type
Overall % Impact:
Overall $ Impact:
Foremost Insurance Co
4—Homeowners
+4.65%
$1,026,733
17,609
New: 12/1/2018 Renewal: 12/2/2018
Bankers Insurance Co
5—Commercial Multiple Peril Revised Rate & Rule
+3.81%
$296,955
2,316
New: 12/1/2018 Renewal: 12/1/2018
AIG Property Casualty Co
19-Private Passenger Revised Rate & Rule
+9.2%
$434,715
816
New: 10/15/2018 Renewal: 10/15/2018
4—Homeowners
+10.0%
$514,725
21,371
New: 10/25/2018 Renewal: 10/25/2018
Republic Fire & Casualty Insurance Co
19—Private Passenger
+4.3%
$235,646
2,660
Renewal: 11/1/2018
Government Employees Insurance Co
17-Other Liability Revised Rate & Rule Personal Umbrella & Excess
+15.3%
$182,259
1,665
New: 10/29/2018 Renewal: 10/29/2018
Republic Fire & Casualty Insurance Co
19—Private Passenger Auto
+8.0%
$546,698
2,768
New: 10/1/2018 Renewal: 11/1/2018
United Services Insurance Co., USAA Casualty Insurance Co, USAA General Indemnity Co., Garrison P&C Insurance Co
Changes
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ACV vs. RC…Which Valuation Method Is Used for Liability Claims?
Bill Wilson, CPCU, ARM, AIM, AAM
Although I retired from the Big “I” at the end of 2016, I still serve as a faculty member on their Virtual University. Three days ago, we received an “Ask an Expert” question where a delivery truck negligently backed into the door of a commercial building. The business auto adjuster says they are only responsible for the ACV of the damage, not the replacement cost.
This isn’t the first time I’ve seen this question. In my 17 years directing the VU, questions like this were routine. For example, here are four claim scenarios I wrote about during that time: •
A tenant in a commercial building negligently
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•
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causes fire damage to his leased space. His only coverage is ‘fire damage legal liability’ (FDLL) under his current ISO CGL policy. The lease he signed says that damages would be settled on a replacement cost basis. The adjuster says FDLL pays on an ACV basis. A negligent motorist ran off the road and into a dwelling and garage, damaging both structures and the vehicles in the garage. The driver’s PAP insurer says they are only responsible for paying ACV, not replacement cost. A faulty plumbing job resulted in water damage, including damage to an 8-year-old TV whose cost new for one of similar size and features is currently $1,000 but the ACV is virtually nil. The plumber has a current ISO CGL policy. A water line on a homeowner’s property ruptured and flooded a neighbor’s basement. The homeowner’s HO insurer has accepted the homeowner’s legal liability but is only willing to pay for damage on an ACV, not replacement
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Louisiana Agent 30
cost, basis. So, for PD claims under liability policies, what valuation method is appropriate, ACV or replacement cost? Well, absent any policy language to the contrary, it depends on what the tortfeasor is “legally liable” for. Although I’m not fond of “general rules,” in general, liability policies play on an ACV, not a replacement cost basis. This is, again generally, supported by case law and established legal doctrines. “In general, liability policies pay on an ACV, not RC, basis.” Replacement cost coverage is usually an option available under first-party property policies that the named insured has paid extra for. This is just one reason why someone whose property has been damaged by a third party should turn the claim into their property insurer in order to receive replacement cost coverage. The property insurer can then subrogate against the liability carrier to recover at least part of their payment.
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Webcasts E&O Risk Management August 28 September 4, 20, 25, 27
Ethics August 27, 28 September 24, 25, 27, 28
Available on Demand
Available on Demand
Virtual University ISO’s Personal Auto Policy Changes 9/12/2018
Flood September 20
Available on Demand
Commercial & Personal Lines Courses Click above for courses & dates for 2018
August Webinars
September Webinars
21 Cyber Insurance: When
Convenience Turns Catastrophic
September Lightning Learning:
22 The New ISO PAP: A
Look Backwards and a Look Forwards
6 Is an OCP Worth the Premium?
28 Excess and Umbrella
18 Is the MCS-90 Broader Than the BAP?
Fundamentals PLUS
27 Understanding Liquor Liability Laws and Coverage
6 Catastrophe: The Coverage Expertise You'll Need When it Matters Most 6 Tricks to Fix: Closing Coverage Gaps in Home, Work and Auto 25 Home Business vs. Home Insurance 25 Flood Insurance 27 Your Agency Online: Communication Cure or E&O Plague
Seminars E&O Risk Management 10/16/2018 –Shreveport 10/17/2018—Lafayette 10/18/2018—Kenner 10/19/2018—Covington
Events IIABR September Luncheon September 13, 2018 Speaker: Holly Clegg
IIAGNO Young Agents Event September 20, 2018 Port Orleans—New Orleans
On-Demand Webcasts
Pre-Licensing
Click here for the course catalog of all of the on-demand webcasts. Reminder– all of the IIABL online courses do not require a test for CE Credit
Online prelicensing 3 optional study packages Click here for additional information
Louisiana Agent 31
RLI's New Producer Portal Launched with Redesign and Additional Site Features RLI has launched a redesigned, enhanced portal this summer, offering producers an improved digital experience in a user-friendly, self-service format. If you're a licensed producer for RLI's Personal Umbrella or Home Business products your invitation to register for the portal and set up your account is in your inbox or will be on its way soon. "RLI's new portal is the result of extensive user research and listening closely to customer feedback," said RLI Underwriting Supervisor Tim Flanagan. "Because it is for agents and producers, we asked about their preferences and ideas, then used that information to design a new self-service experience just for them." Some of the changes that producers experience on the new site include:
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A modern, clean and simple design and navigation, allowing them to quickly find what they're looking for and take action fast.
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One point of access to manage their RLI business using a single login.
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New features like enhanced site search, form and marketing materials, emailing capabilities and other self-service tools that make it faster and easier to complete key tasks.
A personal profile with a quick view of the products and agencies producers are authorized to represent. Future enhancements are coming soon! Based on advanced analytics and customer feedback, the RLI team will continue to add product lines and functionality to the portal. Learn more about RLI personal umbrella at www.iiaba.net/RLI.
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GOLD LEVEL
SILVER LEVEL
BRONZE LEVEL
ACCIDENT FUND
AMERISAFE
AMERICAS INSURANCE
BANKERS INSURANCE
EMC INSURANCE
EMPLOYERS
FCCI GROUP
FOREST INSURANCE
GULFSTREAM P&C
HOMEBUILDERS SIF
IROQUOIS SOUTH, INC.
LANE & ASSOCIATES
RPS COVINGTON
STONETRUST INSURANCE
LUBA WORKERS’ COMP
MARKEL FIRST COMP
SUMMIT CONSULTING
Louisiana Agent 33
IIABL 2018—2019 BOARD OF DIRECTORS & OFFICERS
Louisiana Agent 34