Louisiana Agent July 2017
A publication of the: Independent Insurance Agents & Brokers of Louisiana
Features in this issue:
Support of the VU
Catastrophe Planning
E&O Audits
Medical Marijuana
IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com Francine Berendson Director of Communications & Events fberendson@iiabl.com
In this issue: In Support of the Virtual University ...............5-6 IIABL Member Benefit Catastrophe Planning ...................................5-6
NCCI Regulatory Digest ............................ 10-13 CE21 APP ......................................................... 13
Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com
E&O Audits for Small Agencies ............. 14 – 16
Kim Jackson Education & Membership kjackson@iiabl.com
Rate Filings ...................................................... 24
Karen Kuylen Director of Accounting kkuylen@iiabl.com
Tech Tips.................................................. 25 – 27
E. Lee Mowe Marketing Representative lmowe@iiabl.com Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com Jamie Newchurch Insurance Services jnewchurch@iiabl.com
Ask Mike ................................................. 19 – 23
New members welcome ............................... 14
He Said, She Said ...................................... 28-29 Calendar ......................................................... 30 Medical Marijuana Complicates Workplace Policies ................................... 31-33
4 Insurance Contents Claim Innovations Born from Catastrophe.............................. 33-35 Board ............................................................... 38
Lisa Young-Crooks Executive Assistant lyoung@iiabl.com Louisiana Agent 4
IN SUPPORT OF THE VIRTUAL UNIVERSITY By R. Parke Ellis, CPCU Gillis, Ellis & Baker Recently I was faced with an interesting question on how to handle a liability coverage on a real estate development project for one of my clients. The client wanted to place an Owners and Contractors Protective policy on the location, in their own name. I had misgivings, given the limitations of the OCP, and I wanted to make sure I gave the client the full pro and con on their coverage position before we proceeded. After 36 years in the business you think you know most of the answers but in this case I found myself doing what I have done so many times in the past…. logging into IIABL.com and clicking into Virtual University. I typed three letters into the search box – OCP – and out poured several great articles on the subject complete with expert opin-
IIABL MEMBER BENEFIT CATASTROPHE PLANNING Yes, it is July and yes, the dreaded H (hurricane) word and F(flood) word come to mine. The good news is your association is here for you. Disaster planning is for every independent agency. How prepared is your agency for a catastrophe situation? In Louisiana we have learned a lot from Katrina Rita, Gustavo the 2016 flood events. But as we have endured these events there is always room to learn more or a better way to prepare for these situations. As an IIABL member we have an entire page on the IIABL website, www.IIABL.com dedicated to catastrophe planning? Sign in on our website, this is member only benefit, to review the Catastrophe Planning page located under the Information & Membership tab. This page contains information on planning for a catastrophe situation and response for a catastrophe situation.
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VU continued from page 5
ions from the Virtual University faculty. Armed with this information I gave an insightful overview to my client who decided that OCP was not the way to go. We placed a standard CGL policy and the client is better off for it given their particular situation. I tell you this anecdote to let you know that if you and your staff are not utilizing the Virtual University site, you are not taking advantage of one of the finest technical tools that the independent agency system has to offer.
Knowledge gleaned from this site can be a real difference maker in your ability to obtain and, as importantly, maintain strong client relationships. While price is always an important factor in a client’s or prospect’s decision process, I am a firm believer that
expertise still counts for something. Virtual University offers you the tools to pursue your intellectual curiosity and sharpen your technical skills. Clients getting divorced? VU tell you where the pitfalls are. Shortcomings of the Blanket Additional insured form? It’s in there. Where does Fire Legal Liability coverage leave off and CP 00 40 take over? (if you don’t know, VU does Have a question about how coverage applies to a claims situation? Click “Ask and Expert” and get their take.
Often times we get complacent about the many resources that the IIABL/IIABA can provide. Don’t pass up Virtual University. It is a great resource and I cannot recommend it highly enough – whether you have been at this for 36 days…. Or 36 years.
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Cat Planning continued from page 5
Preparing for a disaster: Agency Catastrophe Guide ACT (Agents Council on Technology) Checklist and a Planning & Manage ment guide for independent agents & brokers.
Flood Insurance Claims Handbook
FEMA Assistance SBA Assistance
Get a Game Plan – Governor’s office of Homeland Security & Emergency Preparedness
Responding to a disaster: Insurance Company Claims Filing Telephone Numbers
Selective Insurance Flood Claims Procedures & Contact Info
Ready.gov – US Department of Homeland Security We encourage you to review the IIABL Catastrophe Planning page and to talk to your employees in regards to a catastrophe that might impact your agency.
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National Council on Compensation Insurance Regulatory Digest Excerpts NCCI’s State of the Line Highlights Key Indicators of the Workers Compensation Industry NCCI released its highly anticipated annual State of the Line Guide (PDF), the industry’s most extensive workers compensation market analysis. As presented in this year’s State of the Line Report, the workers compensation Calendar Year 2016 combined ratio for private carriers was 94%. This is the second consecutive year the industry has posted a sixpoint underwriting gain. Total market net written premium volume remained steady between 2015 and 2016 at $45.5 billion. “The workers compensation underwriting results for 2016 were very strong, especially relative to other property and casualty lines of business,” said NCCI Chief Actuary Kathy Antonello. “A decline in frequency, paired with increases in indemnity and medical severity, contributed to a preliminary combined ratio of 94%. While faced with continued, historically low interest rates, the industry seems to be responding with diligence on the underwriting side.” On an accident year basis, the industry-reported 2016 workers compensation combined ratio was 98%. Other market indicators and trends highlighted in NCCI’s 2017 State of the Line Report include: The overall reserve position for private carriers improved in 2016. NCCI estimates the year-end 2016 reserve position to be a $5 billion deficiency—down from $7 billion in 2015. Estimated reserve redundancy in Accident Year 2016 contributed to this reduction. Continued page 11
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• Average lost-time claim frequency across NCCI states declined by 4% in 2016, on a preliminary basis.
In NCCI states, the preliminary Accident Year 2016 average indemnity claim severity increased by 3% relative to the corresponding 2015 value. For medical, the preliminary average losttime claim severity increased by 5% relative to that observed in 2015.
• The workers compensation Residual Market Pool premium volume remained flat between 2015 and 2016, and the average residual market share remained stable at 8%. The latest NCCI data shows that total residual market premium declined in the first quarter of 2017 compared with the first quarter of 2016.
For more information about NCCI’s State of the Line Report, please visit ncci.com or contact NCCI via email at stateoftheline@ncci.com.
Learn How to Analyze Risk Using Riskworkstation™
Want to learn how to analyze risks quickly and make sound underwriting decisions? Watch a free webinar to learn how Riskworkstation™ allows you to access mods, worksheets, Contracting Classification Premium Adjustment Program (CCPAPA) factors, and RiskSnapshot® reports to aid in your risk evaluation.
Best’s Underwriting Guide, NCCI’s Quick Scopes®, and NCCI’s Risk History Report Create Test Mods—Use real-time calculations for “what -if” scenarios
NCCI’s Classification Inspection Program— Top Five Reclassified Codes in 2016 NCCI continuously conducts classification inspections in all NCCI states as one of our core services. NCCI’s Classification Inspection Program monitors the accurate and consistent application of the classification system, thereby maintaining its overall integrity. NCCI identifies the top five reclassified classification codes, which in past reports were based on an analysis of inspections completed within the prior three years. The term “reclassification” refers to the governing class code changes reflected on an NCCI Inspection & Classification Report. According to Rule 1-B-5 of NCCI’s Basic Manual
for Workers Compensation and Employers Liability Insurance (Basic Manual), the governing code is the classification at a specific job or location (other than a standard exception code) that produces the greatest amount of payroll.
NCCI’s 2016 report focuses on the top five reclassified codes for the prior year, based on an analysis of inspections completed in 2016 in all NCCI states. This provides a snapshot of the most current year’s inspection information. NCCI has identified the top five classification codes that are most commonly reclassified, as well as the classification codes into which employers are typically moved (in order of frequency). Continued from page 11
NCCI’s Basic Manual Rule 1—Classification
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NCCI continued from page 11
Assignment provides instructions on how to classify businesses. Please refer to NCCI’s Basic Manual for the full list of rules and classifications, along with any state exceptions. The top five reclassified codes are: • 8017—Store—Retail NOC • 8810—Clerical Office Employees NOC • 9082—Restaurant NOC • 8018—Store—Wholesale—NOC • 9014—Janitorial Services by Contractors—No Window Cleaning Above Ground Level & Drivers Read the full article on ncci.com for an explanation of why and how these codes are reclassified. If you have any questions or would like to order a classification inspection, please contact our Customer Service Center at 800-NCCI-123 (800-622-4123)
CE21 APP We are excited to announce all ABEN courses can now be viewed on the go with the newly created CE21 app! It's as easy as downloading the app from the App Store or Google Play and signing in to your ABEN account. The courses you have previously registered (cannot register for classes on app!) for will show up in your account and you can view from your phone, iPad or tablet. All attendance verification processes are handled the same way as viewing on your computer.
Earning CE has never been easier!
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Why E&O Audits for Small Agencies (or any agency) Should Not Be Feared I’ve heard quite a few owners of small agencies avoid E&O audits because they feared the results would cause more damage than the benefits generated. In fact, beyond possibly minimizing future E&O claims, and I emphasize “possibly,” these owners did not see any benefit to an E&O audit. Thoughts like those trouble me because these owners are foregoing considerable benefits including, in some cases, significant discounts on their E&O premiums, helping their agencies run more easily, and definitely making their agencies safer from suits because their fears are so great. Fears often have the consequence of causing people to forego considerable benefit. Fears can be rational or irrational, it does not really matter and in agency owners’ situations, some of their fears are indeed irrational relative to E&O audits. Here are some of the fears I have heard and my response. I can only speak to how I do E&O audits and not others, so please do not read into this any universal promises. Concern: When the E&O carrier sees the audit results they will nonrenew my policy or at least jack up the rate. Reality: This is a possibility. I have only seen this happen once in 25 years but it was combined with a large E&O claim. Maybe without that large claim, the agency’s rate would not have increased or maybe without the audit but with the claim it would not have increased. The underwriter would not tell my client. With that one exception, rates usually decrease especially if the carrier offers a discount for completing the audit. They are pleased the agency is taking steps to minimize the odds of incurring a claim which means the agency is taking steps to in-
crease the carrier’s profitability. The carrier understands that without an audit, the agency may be following potentially injurious processes (or lack thereof). The audit simply specifies which of those processes exist but they know a plan has been developed to fix them. This fear is somewhat akin to not going to the doctor. If I don’t go to the doctor, I won’t get a serious disease. Obviously that is wrong. If you don’t go to the doctor, you just won’t know you’re dying of a serious disease until it is too late to fix. E&O audits are quite similar. Concern: The procedures the auditor recommends only fit large agencies. Reality: If this is the result, get a different auditor. With a few exceptions that are almost always tied to group benefits and surety, the recommendations specific to a certain exposure are the same regardless of agency size, all else being equal. In other words, an exposure relative to proposals has the same solution regardless of agency size. Can large agencies institute the solution more easily? Sometimes they can because they have more resources but quite often in my experience, their size is more of an impediment than a benefit. Large agencies have to get so many layers of management to approve changes that improvements take forever. Then, almost inevitably, someone has a personal stake in leaving things the way they are even if that way is wrong. The reality is that what makes a difference is Continued page 15 Louisiana Agent 14
E&O Audit Continued from page 14
the level of leadership and commitment to becoming a better agency without regard to agency size. Concern: I will not have enough time to implement the auditor’s solutions which will cause a problem with the underwriter.
Concern: I will have to institute the auditor’s recommendations. Reality: This is generally true unless the agency can make the point the auditor misunderstood the situation. In other words, if the auditor has correctly identified a material exposure, why would an agency owner refuse to implement a reasonable solution?
Reality: I have never seen this happen if the agency works diligently. Even when the agency did not get everything done but could show the underwriter they were working hard, the underwriter has given them more time. I cannot speak for all underwriters everywhere, but they generally seem pleased to see significant improvement even if it takes longer than expected.
I have met several agency owners who have advised that if they personally have to abide by rules that reduces their E&O exposure but takes away their freedom to operate however they want, it is not worth it to them. That is a personal choice and generally a bad business decision, but it is yours to make.
The exception is the agency that does not do anything until the deadline approaches.
Concern: Procedures will reduce profitability/efficiency.
Continued page 16
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Reality: This is not true unless an agency is E&O Audit continued from page 15
cheating, unethical or so sloppy they are lucky to not have already been sued out of business. Good procedures reduce E&O exposures and increase efficiency, at least the way I recommend procedures be instituted. During the transition, productivity is affected but a few months, sometimes only weeks, of extra work is worth a decade of extra efficiency. The reason good procedures benefit E&O and efficiency is because CSRs can operate more quickly since they do not have to look as hard to find data, they get the data they need the first time and because they see the agency being run fairly because everyone has to follow the same rules. It is not unusual for my clients to increase productivity at least 10%. Concern: The auditor will identify an exposure but not a practical solution. Reality: I ALWAYS provide a workable solution. Sometimes an agency owner may not like the solution but that is different from providing a workable, reasonable solution. A few exposures exist where an agency principal may not understand how to implement a solution which is different from the auditor not providing a solution. A good and simple example is a coverage rather than a procedure. Business income is a coverage that I find many agencies avoid discussing with clients in detail because they simply do not know how to discuss it. If an auditor makes a recommendation and you simply do not know how to deal with it, ask. I can only speak for myself but I am happy when agents ask for more help because it means they want to improve. Another example involves factors like creating proper contracts and following certain rules where owners and producers regularly argue they should not be required to follow the auditor’s recommendation because it will cost too much money. I cannot judge what “too much
money” means to any given person. However, a claim is likely to cost far more and these steps almost always bring additional benefits. One of the best benefits of a good E&O audit that is followed, is the agency becomes more professional in a completely positive sense. The result is an agency that is easier, not harder, to manage. Concern: An E&O audit, if followed, will reduce sales. Reality: Agencies that actually follow the recommendations, at least the way I do audits, almost always increase sales. A common reaction a year or two later is, “I didn’t believe you and I didn’t want to believe you when you said your recommendations would increase sales, but they did.” Does the sale take more time? Yes, but the agency makes more money, builds a better client relationship and reduces E&O exposures. Does the sale potentially require more knowledge? Yes, but that is why clients and carriers need agencies. If they do not need on-the-ground knowledge, they can sell just as effectively, for less money, through the internet and 800 numbers. An E&O audit results in entirely positive results if an agency embraces the opportunity to improve its services to clients, decrease its E&O exposures, increase sales, and often improve the workplace environment for its staff. Chris Burand is president of Burand & Associates, LLC, an insurance agency consulting firm. Readers may contact Chris at (719) 485-3868 or by e-mail at chris@burandassociates.com. NOTE: None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any
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IIABL Director of Education, Mike Edwards is your source for technical questions. Contact Mike at medwards65@aol.com or 678.513.4390
Subject: Arson vs. Vandalism to a Vacant Home or Commercial Building
Q.
Several of us from the agency had lunch last week with a retired colleague, to celebrate her birthday. The conversation eventually drifted to the agency (shocking, right?!), and the industry in general. Someone mentioned a recent article they read on the internet about a court case where vandals broke into a vacant home, did a lot of damage with what police said was probably baseball bats, and then set the house on fire. The court upheld the insurer’s denial of the entire claim, including the fire damage, on the basis that arson was a form of vandalism. Do you have any information about this being a prevailing view in courts today, or do you think this was just an isolated decision?
A.
The debate over arson vs. vandalism is not new in insurance, and the jurisprudence has been mixed. But from all I’ve read, there seems to be a growing acceptance in some courts that vandalism, in the context of the vacancy exclusion, does include arson set by the vandals. So it would not be a surprise to see additional court decisions being reported in law and insurance publications, as the cases occur. As with most coverage disputes, the debate forms around two opposing views: clear and unambiguous expression of intent in the form, vs ambiguity and conflicting interpretation of intent. If the latter view prevails, the decision favors the insured, based on the legal principle of contra proferentum, meaning an interpretation of documents is made “against the offeror.” [Black’s Law, 9th.] In insurance contracts, the court would rule against the party that drafted the coverage form.
both homeowners and commercial property forms. Note that I am an insurance nerd and not an attorney, so this summary is not intended to reflect the full body of case law on this subject. Also, the comments on coverage form language are limited to those promulgated by ISO (Insurance Services Office). Proprietary forms may be different. Issue #1: Vandalism does not include arson. (1) “Arson” is a term not used in the ISO Homeowners or Commercial Property coverage forms, although “fire” appears in numerous provisions in both named perils and special form (“all-risk”) forms. In fact, named peril forms list “fire” and “vandalism” as separate covered perils.
(2) Some states have property-crime statutes that distinguish vandalism and arson, the former often being considered less severe, with lesser penalties. (3) The term “vandalism” is not defined in the ISO Homeowners forms. In Commercial Property, the CP 10 10 10 12 Causes of Loss – Basic Form, and CP 10 20 10 12 Causes of Loss – Broad Form, define vandalism as “willful and
malicious damage to, or destruction of, the described property.” The CP 10 30 10 12 Causes of Loss – Special Form does not define vandalism.
Therefore, courts often consider standard dictionary definitions, as well as what an ordinary person considers the term to mean. Under this argument, some hold that most people consider vandalism and arson to be different acts. Issue #2: Vandalism includes arson.
Here are some of the most common arguments made in various court cases dealing with vandalism vs arson, followed by pertinent excerpts from
(1) Absent a definition of vandalism in the coverage form, dictionary definitions can be instructive to the courts. Many dictionaries interpret Louisiana Agent 19
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vandalism more broadly than many people do in everyday conversation. This is one example: “Vandalism (n): Willful or malicious destruction or defacement of things of beauty or of public or private property.” [Merriam-Webster Unabridged.] (2) The inherent conflict between Issue #1 and Issue #2 is an example of an old adage in insurance: “If you can’t argue the form, argue logic. If you can’t argue logic, argue the form.” Issue #3: The full term is “vandalism and malicious mischief” (“V&MM”). (1) Many courts hold the view that V&MM requires that the damage be caused by willful and malicious intent. This is similar to the court’s view that “intentional acts” exclusions for damage to property as well as bodily injury are interpreted to mean that not only must the act be intentional, but the result must also be intentional. So under this line of reasoning, arson would be within the scope of vandalism, but accidental fire would not. (2) Conversely, some courts have ruled in specific instances that while an act of vandalism was intentional, but the resulting or ensuing damage might not have been intended (no malice), the damage was reasonably foreseeable, and thus met the threshold for vandalism. In one case, a commercial waste hauler dumped toxic waste into a manhole of a city’s sewer system. When the chemicals reached the wastewater treatment plant later, they caused serious damage to the equipment. A claim was submitted for vandalism damage to the equipment, but the city’s insurer argued that this did not constitute vandalism, since while the dumping was intentional, the resulting damage was not. However, the court noted that the waste hauler certainly knew, or should have known, that the chemicals would damage machinery and equipment, and was therefore was within the scope of vandalism. (3) Recent cases involving claims by landlords for damage to rented homes or commercial buildings due to the operation of meth labs or marijuana grow-houses by tenants has given rise to broader interpretations of V&MM, where no malice was intended. Much of the damage is caused by the toxic chemicals used in cooking meth, which often seep into the flooring, splatter on walls, etc. Some insurers deny such claims as pollution. In grow-houses, the damage is from mold and mil-
dew throughout the interior of the building. A number of courts have ruled that “reckless disregard for damage to property of others” falls within the definition of vandalism, and would be covered under the landlord’s policy. See this excellent article posted on the IIABA’s Virtual University: “Insurance and Meth Labs” Issue #4: Vacancy vs Unoccupancy. (1) The entire vacancy exclusion can be defeated by establishing that the building was not vacant at the time of loss. (2) The ISO Homeowners Policy does not define vacancy, and dictionaries usually describe vacancy as having no people or property present, while unoccupancy only refers to the absence of people. This has led to some creative attempts by homeowners to establish a veneer of occupancy, such as sleeping on a cot in the home once every week or two. One court held that such activities “do not convey the appearance of residential living,” and that the home was actually vacant. (3) Vacancy can impact far more perils than vandalism. If the home has become permanently vacant, meaning the owner has no intent to return, many courts have ruled that there is no longer any Coverage A, and in some cases, no policy at all, under the “Where You Reside” doctrine. See this excellent Virtual University article (4) Unlike the Homeowners Policy, the ISO commercial property program does define vacancy. This appears within the Loss Condition for Vacancy in the CP 00 10 Building and Personal Property Coverage Form (and not the Causes of Loss forms). Issue #5: Review of Homeowners coverage forms. HOMEOWNERS
Homeowners 3 – Special Form Coverage A – Dwelling and Coverage B – Other Structures We insure against risk of direct loss to property described in Coverages A and B only if that loss is a physical loss to property. We Louisiana Agent 21
do not insure, however, for loss:
2. Caused by: [1991 edition]:
d. Vandalism and malicious mischief if the dwelling has been vacant for more than 30 consecutive days immediately before the loss. A dwelling being constructed is not considered vacant; [2000 and 2011 editions]:
(4) Vandalism and malicious mischief, and any ensuing loss caused by any intentional and wrongful act committed in the course of the vandalism or malicious mischief, if the dwelling has been vacant for more than 60 consecutive days immediately before the loss. A dwelling being constructed is not considered vacant; Comments: (1) In the HO 2000 and HO 2011 forms, ISO added language that broadens the vandalism exclusion to apply to ensuing losses. [My emphasis added above.] (2) Authoritative insurance sources express the
view that these changes clearly exclude damage by fires (whether by arson or accident) caused by vandals. (3) Referring to Issue #3.(1) above – addressing fires accidentally occurring during or after acts of vandalism – the new language would seem to eliminate that argument. In fact, the ISO filing for HO 2000 specifically references court cases that have allowed coverage for fires which occurred during vandalism, and the filing indicates that the revised form language was intended to exclude such ensuing losses.
(4) Note that the permitted 30-day vacancy period in the HO 1991 edition was doubled to 60 days in the HO 2000 and HO 2011 editions, which is a broadening of coverage. Issue #6: Review of Commercial Property forms. COMMERCIAL PROPERTY
CP 00 10 10 12 Building and Personal Property Coverage Form
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E. Loss Conditions
6. Vacancy a. Description Of Terms (1) As used in this Vacancy Condition, the term building and the term vacant have the meanings set forth in (1)(a) and (1)(b) below: (a) When this policy is issued to a tenant, and with respect to that tenant's interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations. (b) When this policy is issued to the owner or general lessee of a building, building means the entire building. Such building is vacant unless at least 31% of its total square footage is: (i) Rented to a lessee or sublessee and used by the lessee or sublessee to conduct its customary operations; and/or (ii) Used by the building owner to conduct customary operations. (2) Buildings under construction or renovation are not considered vacant. b. Vacancy Provisions If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs:
(1) We will not pay for any loss or damage caused by any of the following, even if they are Covered Causes of Loss: (a) Vandalism; (b) Sprinkler leakage, unless you have protected the system against freezing; (c) Building glass breakage; (d) Water damage; (e) Theft; or
(f) Attempted theft. (2) With respect to Covered Causes of Loss other than those listed in b.(1) (a) through b.(1)(f) above, we will reduce the amount we would otherwise pay for the loss or damage by 15%. Comments: (1) The term “vandalism” is not defined in the CP 00 10 10 12, so a dispute over a claim will probably include some of the key points discussed in Issues #1 – #4 above. In addition, relevant jurisprudence would be applicable.
(2) The definition of “vacancy” raises some interesting questions. [E.6.a.] If the insured is a tenant, his unit or suite is vacant if during the “60 consecutive days before the loss,” the unit or suite “does
not contain enough business personal property to conduct customary operations.” [E.6.a.(1)(a)] (3) Some experts have questioned just how “customary operations” will be interpreted, in situations where a tenant has suffered damage to his unit, and is attempting to remain open with limited operations. (4) Endorsement CP 04 50 Vacancy Permit can be used to extend coverage for vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft, beyond the 60-day limit. The Permit Period (“from – to”) must be shown on the endorsement. There is an option to not include loss from vandalism and/or sprinkler leakage during the extended period of vacancy, and have coverage extended only for the 4 remaining causes of loss. (ISO Commercial Property Manual, Rule 38.P.1.) (5) Endorsement CP 04 60 Vacancy Changes can be used to reduce the 31% vacancy provision to a lower percentage, for policies issued to building owners or general lessees. (Rule 38.P.2.) 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. Louisiana Agent 23
Company
Coverage Type
Overall % Impact:
Overall $ Impact:
Number of Policyholders:
Changes
AmGUARD Insurance Co EastGUARD Insurance Co NorGUARD Insurance Co
16 – Workers’ Comp
-7.70%
-$269,286
640
Effective: 6/1/2017 Renewal: 6/1/2017
Amica Mutual Insurance Co
4 – Homeowners
10.0%
+$331,846
1,451
Effective: 9/1/2017 Renewal: 9/1/2017
Milwaukee Casualty Ins Co Amtrust Ins Co of Kansas Technology Insurance Co Republic Underwriters Ins Co Republic Fire & Casualty Ins Southern Underwriters Ins Co
9 – Inland Marine
-1.51%
-$87,480
394
Effective: 1/1/2018 Renewal: 1/1/2018
California Casualty Indemnity
19 – Private Passenger Auto
+7.0%
+$56,416
341
Effective: 10/1/2017 Renewal: 10/1/2017
Hanover Insurance Co Massachusetts Bay Ins Co Hanover American Ins Co
5 – Commercial Multiple Peril Ave Businessowners Program
+0.9%
+$37,037
1,038
Effective: 9/1/2017 Renewal: 12/1/2017
Kelly Coker Assurance Risk Management Group, LLC 200 Tealwood Dr. Bossier City, LA 71111 (318) 469-1059 kelly.assurancermg@gmail.com Patrick Jordan Jordan Wigwam LLC dba Compass Insurance Advisors 507 Windhaven Lane Lafayette, LA 70506 (337) 258-0567 patrickwaynejordan@gmail.com
McKee Agency 1400 South 5th Street, Suite B Leesville, LA 71446 (337) 238-2832 jmckee@mckag.com
Joe Lohman Lohman and Lohman Insurance Services 10124 Jefferson Hwy. Baton Rouge, LA 70809 (225) 292-6974 joe@lohmanandlohman.com Bobby Adams Integra Insurance 5702 Mancuso Lane Baton Rouge, LA 70809 mmichaels@integragroup.us Louisiana Agent 24
6 Tips for Spotting Phishing One of the recommendations I made in last week’s TechTips regarding the WannaCry ransomware attack was to make sure your employees are always reminded of the danger of opening emails from unknown entities.
a legitimate bank, government agency, or organization. Typically, these emails ask you to click on a link that goes to a page where a form asks for personal information or account information.
What is Phishing?
Tips to Protect Yourself and Your Organization
According to Wikipedia, “Phishing is the attempt to obtain sensitive information such as usernames, passwords, and credit card details (and, indirectly, money), often for malicious reasons, by disguising as a trustworthy entity in an electronic communication.” Cyber criminals use emails designed to look like they came from
Following are some tips to help you recognize phishing emails, so you do not get caught in a cyber criminal’s trap. Understand that these tips are not foolproof, but certainly will help you better understand the difference between legitimate emails and phishing emails. Continued page 28
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1. A real company does not request sensitive information in an email.
5. A real company does not send imageonly emails.
Companies know that phishing emails are a real problem. Look at the legitimate emails you receive from your bank. They always tell you to log into your online bank account to provide them sensitive information. A real company will never ask you to click on a link that takes you to a website to enter sensitive information. If they do, stop doing business with them.
Some phishing emails look like they contain text but only include an image. The danger is that the picture could be one big hyperlink. You may be thinking you’re clicking on a link in the email when in fact you’re clicking on the image.
2. A real company knows who you are.
Receiving an email from a company with an unexpected attachment is another tip-off that the email might not be legitimate. While this is not always the case (you could receive an invoice via an email attachment) be very skeptical about the email if it contains an attachment you are not expecting.
Phishing emails often have generic greetings. You do have to be careful here, however, because smarter cyber criminals may have done research on the organization and use a legitimate name and title in a phishing email.
6. A real company does not randomly email attachments.
Take these steps if you identify a phishing email
3. A real company sends emails from their own domain. If you have any doubt about a received email, always check the domain where the email is being sent from. You can test the email address by hovering your mouse over the “from” address. This is not a foolproof method as sometimes companies use other domains to send emails to customers. 4. A real company knows how to spell and use correct grammar.
This can be subtle. Most companies take great pains to make sure the spelling and grammar within their emails to customers are accurate and proper. If the text in an email seems off, it could be a tip-off to a phishing email. Also, the description of currency can be a tip-off. $100 USD is not a normal way to describe a price. Unless you do a significant amount of international business, using USD to describe U.S. dollars is not common.
Following are some steps you should take if you receive a phishing email: Make sure you do not click on any links within the email or open any attachments. Also, be careful before you click on any pictures that might be contained in the email.
Don’t reply to the sender.
Report the phishing scam to your spam filter company (AppRiver in my case) and the FTC at spam@uce.gov.
Delete the email. Make sure you physically remove it from your computer. If you are using Outlook, make sure to use the Shift|Delete keys, not just Delete. Deleting an email in Outlook moves it to the deleted items folder. Using Shift|Delete physically removes the email from your computer.
If you do business with the company mentioned in the email, you can check with the firm (an actual phone call?) to let them Louisiana Agent 27
know their name is associated with a phishing email.
If you are not sure a received email is legitimate (especially if it has an attachment that you are not expecting), send a separate email — don’t use reply! — asking the individual if they sent you the attachment. My personal rule? If I receive an email with an attachment I am not expecting, I delete it.
None of the tips mentioned above are foolproof. They will, however, provides you with a quick checklist you can use when evaluating a suspicious email. The greatest asset of an organization is their employees. The most significant security risk for an organization is their employees. We all need to be reminded constantly that not every email you receive is legitimate and could cause you and the organization great harm. What other tips would you suggest to protect your organization against phishing emails?
He Said, She Said How to avoid a “swearing match” in E&O claims By Caryn Mahoney
Author Foster Meharry Russell said, “Every story has three sides to it—yours, mine, and the facts.” An errors & omissions claim against an agent can often devolve into the agent’s word against the client’s. When a lawsuit involves this type of “swearing match,” getting the case dismissed on a motion is usually not an option—and if it goes to trial, it’s up to a jury to decide who’s telling the “truth.” Unfortunately, many jurors don’t like insurance companies—or, by extension, insurance agents— and are more likely to side with the claimant, who is just another person like them from their hometown.
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Your best weapon against this type of case: documentation of the facts. Better still, if your agency has a Swiss Re Corporate Solutions policy, proper documentation may serve as the basis for up to a 100% reduction in the deductible under the new policy. The current Swiss Re policy includes a “deductible reduction provision” that gives the agency a 50% reduction of their deductible up to a maximum of $12,500, in the event that the agency “generates and maintains contemporaneous written documentation in the agency file of the refusal of any customer to accept any type of coverage or limits recommendation made” by the agency, and a subsequent claim alleges failure to secure the recommended type of coverage or limit.
reduction provision, it is enough to have documentation that you sent your client something in writing that included your offer, and documentation that they rejected the coverage. Note that this documentation must be “contemporaneous,” meaning it either existed or occurred during the same time period as the claim involving the coverage or limit. It’s much easier to defend an E&O claim when you’re armed with undeniable facts, not just a memory of what took place.
Caryn Mahoney is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the Chicago office. Insurance products underwritten- ten by Westport Insurance Corporation, a member of Swiss Re Corporate Solutions, Overland Park, Kansas.
Under the new Swiss Re policies that will phase in this year, the deductible reduction provision now gives agencies in most states a 100% reduction in the deductible, up to a maximum of $25,000. The same requirements apply. As a Swiss Re policyholder, how can you secure this benefit? The first best practice is to always send your client something in writing that outlines the quote and/or policy and clearly states your recommendation that they consider “the following optional coverages and limits,” along with the cost of those coverages. Require your client to initial and sign any coverages they reject.
Logistically, it is not always possible to get a signed rejection of the coverages back from your client. For the purposes of the deductible
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Webcasts E&O Risk Management July 6, July 20, August 1
Ethics July 18, July 19, August 8
Available on Demand
Available on Demand
Flood July 24, August 4
Available on Demand
Commercial & Personal Lines Courses Click above title for courses & dates for 2017 Available on Demand
Seminars E&O Seminars 9/19—Shreveport 9/20– Lafayette 9/21—New Orleans 9/22—Covington
IIABL Fall Education Conference October 19 Shreveport Convention Center
Events Louisiana/Mississippi Young Agents Conference 8/17—8/19 Beau Rivage—Biloxi
On-Demand Webcasts Masters Series: The Master Series are unique agency management courses from industry experts. in the Masters Series.
CSR Training: The Customer Service Representative is key employee in every agency and is a difficult commodity to find.
Environmental Strategists (eS) Becoming a certified environmental Strategist™ (eS) will equip you with the knowledge to identify, manage and transfer environmental exposures impacting everyday business.
Cyber Risk Manager (cyRM) Completion of the Cyber Exposures & Insurance – Training for Agents & Brokers course qualifies you to register for the cyRM certification for FREE.
Pre-Licensing Online prelicensing 3 optional study packages available Click here for additional information
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How Medical Marijuana Complicates Workplace Policies for Employers BY JAMES W. GOW JR., CPCU, AU PropertyCasualty360◦
For some, it may seem shocking that we’re to the point of discussing the impact of marijuana use in the workplace. For others, it's a no-brainer: a potential cure for some significant issues. Many are quick to joke about legalized pot, but for employers and risk managers, the notion of legalized medical or recreational marijuana is no laughing matter. Rapidly evolving Marijuana usage is a rapidly evolving issue. Public perception seems to be moving steadily toward support for legalization, for both recreational and medicinal use. In fact, a recent report found 93% of people believe marijuana should be legal with a doctor’s prescription.
This discrepancy between state and federal laws means there is little guidance about what the statutes mean or an obvious direction for employers to take regarding workplace drug-use policies. What employers need to know Who can use medical marijuana? The laws vary, but states with medical marijuana laws typically permit people with serious medical conditions — like cancer, Crohn’s disease, epilepsy and multiple sclerosis — to use marijuana or its active ingredient THC without penalty. Most patients need permission from a doctor and must buy marijuana from certified dispensaries.
Support for its legalization is growing at the state level. It’s now legal in 28 states plus Washington, D.C., and new states are pushing to legalize it every year. However, marijuana remains classified as a Schedule 1 drug under the federal Controlled Substances Act (CSA) of 1970. Two petitions to strip marijuana of its Schedule 1 classification were denied in 2016. And the Trump administration — specifically Attorney General Jeff Sessions and Health and Human Services Secretary Tom Price — have expressed opposition to medical and recreational marijuana use. While it’s too early to tell exactly what form changes may take, it seems unlikely that there will be a universal understanding any time soon. Meanwhile at the state level, marijuana cases are being tried frequently, and new precedents are set all the time. For example, in Colorado where both medical and recreational marijuana are legal according to state law, the state Supreme Court ruled that employees can be fired for using medical marijuana off the clock, even if they aren’t impaired on the job.
However, as the Colorado court decision indicates, employers are not required to allow the use of medical marijuana, even if it’s been obtained legally. This is where it gets complicated.
How does this change affect employers? The conflict between federal laws and those of some states create uncertainty for employers. Thus far, courts have upheld an employer’s right to maintain a zero-tolerance position regarding illegal drug usage. Even if an employer is more liberal regarding either recreational or medicinal marijuana usage, they would likely have a policy against working while impaired. One of the challenges is that, unlike alcohol or some other drugs, it is very difficult Louisiana Agent 31
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to determine the time of use or level of impairment for marijuana, as it can remain in a person’s system for weeks. Additionally, if the employer is — or hopes to become — a federal contractor, they cannot have anything other than a zero-tolerance position against something that is considered illegal under federal law. What should employers do? That’s a good question. As mentioned earlier, even if more states continue to legalize medical marijuana, the issues remain until the federal law is changed. Regardless, employers should take steps now to ensure they’ve got policies to protect themselves. For example, employers should update their employee handbooks to clearly state their position on drug usage. Even if the employer wants to allow recreational or medicinal use in compliance with their state laws, it is recommended that they maintain the same position they would on alcohol use — it is not likely that an employee handbook would comment on legal alcohol consumption. However, one would expect to see comments forbidding reporting to work impaired or under the influence of alcohol. As mentioned, employers who work in an industry where federal contracts or grants are being used are obligated to abide by the Drug-Free Workplace Act. The same goes for industries that involve transportation or the use of heavy equipment. All employers need to provide a safe workplace to their employees, and drug policies should reflect this. Employers should review their drug policies often, update training for new and incumbent employees, and communicate with employees as laws change in the coming years.
James W. Gow Jr., CPCU, AU is senior vice president, Property & Casualty Practice, at Corporate Synergies. Gow serves as a resource to both the Insurance Institute of America and the A.M. Best Company. He can be contacted at James.Gow@corpsyn.com.
4 Insurance Contents Claim Innovations Born From Catastrophe Combining expertise, technology and compassion to deliver for policyholders in their time of need BY JOEL MAKHLUF PropertyCasualty360◦
Back in November 2016, a devastating fire ravaged the small town of Gatlinburg, Tennessee. It began as kids played with matches in the Great Smoky Mountains that surround the town, and it ended with 14 deaths; 17,000 acres burned; and 2,500 structures damaged. In the aftermath, almost 4,000 insurance claims were filed and the combined residential and commercial property loss was just shy of $850 million. Gatlinburg highlighted the complexity these events represent for claims professionals, but it was infinitely harder for the people who had lost their homes and possessions. Working together with policyholders to ensure they can rebuild their lives takes patience and compassion. Since many lacked a full contents inventory, a real depth of expertise was required to capture the full story of their belongings and arrive at accurate valuations. The claims process is traditionally hard, complex and tedious. Contents claims innovation is all about designing processes that relieve the burden for policyholders and adjusters, helping them to get their lives back on track as quickly as possible in their most vulnerable time of need. And it’s not only high profile catastrophes that breed innovation in the claims process either. The nation got a glimpse of the devastation in Gatlinburg due to the extensive media coverage it garnered. For every Gatlinburg-type catastrophe, there are literally hundreds of thousands more individual homeowner losses that occur each year. The affected policyholders in these scenarios may not make the national news, but feel the same level of devastation with their individual catastrophes as Louisiana Agent 33
“Auto Policy Coverage for Indirect Losses” Bill Wilson, CPCU, ARM In one of my first blog posts, I discussed coverage for indirect or consequential damage under homeowners policies. Recently, this question came through the Big I’s Virtual University (I’m paraphrasing for brevity): “One tire on an insured’s allwheel drive vehicle was damaged in a covered collision loss. The carrier offered to pay for two front tires, with an allowance for betterment. The manufacturer and tire retailers say all four tires should be replaced at the same time. The insured believes that the insurer, having agreed to pay for two tires, must now agree to pay for four new tires, less betterment. Who is correct?” The ISO Personal Auto Policy (PAP) says that the insurer “will pay for direct and accidental loss….” The ISO Business Auto Policy (BAP) has similar language. Both cover only DIRECT damage. In this case, only one tire was directly damaged, so there should be no coverage for the consequential loss via
manufacturer-suggested replacement of the undamaged tires. The policy does not cover compliance with manufacturer recommendations. Unfortunately, unlike the “pair or set” clause in the ISO HO forms discussed in my prior article, there is no similar coverage in ISO’s auto policies. However, the carrier has already gone on record as saying it would pay for a second tire, though the logic of this offer is unclear. Is it possible that they have established a precedent that could extend to all four tires, depending on the rationale for replacing the second tire? What do you think? Feel free to express your opinion in the Comments on my blog. 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
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those seen in bigger catastrophe (CAT) events; and they require the same level of support, compassion and expertise to get their lives back in order post-catastrophe. Here are four examples of innovation designed to deliver exceptional service in the face of catastrophe: 1. Boots on the ground Sending everyday adjusters who aren’t necessarily well-versed in CAT events can make a bad situation worse. A high level of turmoil can take an emotional toll on all parties. Keeping a level head can be a challenge. As the Navy SEALs author Rorke Denver says, “calm is contagious.” Having a national team of trained experts who are ready for deployment at a moment’s notice can ease the confusion. It’s important to build relationships with policyholders to gain their trust. A compassionate approach combined with sincere patience is the best way to get through a catastrophe and start the process of community healing one policyholder at a time. 2. Policyholder self-service In the aftermath of a disaster, policyholders are struggling to rebuild their lives. Stress levels are high and it can be difficult for them to recall all their lost possessions. By providing an online portal for contents inventory, they have 24/7 access, so if they suddenly remember a lost possession they can log on and record it. This can make the process easier for policyholders and helps to ensure inventories are complete. Not only does this empower the policyholder and speed up the process, it also lightens the load for adjusters.
For millennials who already do their banking online via apps, there’s an expectation that they can deal with insurance in the same way. Providing an online portal for contents inventory meets that expectation and allows all policyholders to get involved and push things forward in a way that’s convenient for them. 3. Real-time transcription Adjusters traditionally have to walk around burned out or post-flood homes, recording what inventory they can using pen and paper. The investigation
must be thorough and it requires a keen eye. Realtime transcription via a remote contents specialist enables adjusters on the ground to work hands-free. If they don’t have to hold anything, it’s easier for them to navigate dangerous environments safely. In CAT situations like Gatlinburg, this offers a prime example where service-level innovation can make a big difference. Remote transcription reduces the time it takes to complete the inventory process post-loss, and that cuts down the time they need to spend on the scene. A transcription service can also work directly with policyholders calling in to describe their lost belongings to empathetic claims professionals on the receiving end, who can ask for the key value factors that will expedite item valuation. The goal is to ensure the process is completed as quickly and painlessly as possible. 4. Specialty expertise Artwork or rare and antique items and commercial contents require specialized hands before they can be accurately evaluated. It makes sense to build a team of high-level experts who can be called in to provide timely valuations on expensive jewelry, original art, antique furniture or other specialty items. These kinds of items often hold great sentimental value, or, in the case of commercial contents, may be vital to the future of the business. The right experts can coax out the full story and provenance behind each item to arrive at the right valuation and ensure that policyholders get the compensation they need. The driving force behind these innovations is catastrophe both on large and small scales, and the need to provide expert and compassionate service to the affected policyholders. It’s vital to provide emotional support to guide them through the difficult times. A compassionate approach, combining patience, efficiency and expertise, allows people to get on with their lives and back on their feet as soon as possible. Joel Makhluf is a vice president at Enservio and the director of the Property Innovation Summit, the insurance industry’s premier thought leadership conference. Enservio is a leading provider of contents claim management software, inventory and valuation services and payments solutions for property insurers. Contact Joel at jmakhluf@enservio.com.
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SILVER LEVEL
BRONZE LEVEL
BANKERS INSURANCE
CNA INSURANCE
FCCI GROUP
FOREST INSURANCE
GULFSTREAM P&C
HOMEBUILDERS SIF
IROQUOIS SOUTH, INC.
LANE & ASSOCIATES
LUBA WORKERS’ COMP
MAISON INSURANCE
MARKEL FIRST COMP
RPS COVINGTON
SUMMIT CONSULTING
AMERISAFE
EMC INSURANCE
AMERICAS INSURANCE
Louisiana Agent 37
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 38