Louisiana Agent March 2018 A publication of the: Independent Insurance Agents & Brokers of Louisiana
Louisiana Agent
Louisiana Agent
February 2018
March 2018
IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com
In this issue:
IIABL Legislative Update .......................................... 5-6 What the Internet of Things Will do to Insurance ...... 8-9
Francine Berendson Director of Communications & Events fberendson@iiabl.com Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com Kim Jackson Education & Membership kjackson@iiabl.com Karen Kuylen Director of Accounting kkuylen@iiabl.com
TechTips—Documenting Text Messages .................10-13 Insurance is NOT a Commodity .............................14-17 IIABL 2018 March Board Meeting Recap
.............. 17-19
Ask Mike –Forklift Damages Non-Owned Trailer On Premises ...................... 20-29 Rate & Rule Filings ................................................. 24 116th Annual Convention & Exposition ................ 25 Agency Management Systems Can Help Defend E&O Claims .......................................... 29-34 Calendar................................................................. 33 Spring Education Conference ................................ 34 IIABL Partners ........................................................ 35 IIABL Officers & Board .............................................. 36
Ed O’Brien Marketing Representative eobrien@iiabl.com Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com Jamie Newchurch Insurance Services jnewchurch@iiabl.com Lisa Young-Crooks Executive Assistant lyoung@iiabl.com
On the cover: Louisiana's Old State Capitol, a Gothic architectural treasure, stands high on a bluff overlooking the Mississippi River. The 165-year-old statehouse has withstood war, fire, scandal, bitter debate, abandonment and an occasional fistfight. Today, the building stands as a testament to bold, inspired leadership and active citizenship.
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IIABL LEGISLATIVE UPDATE Legislators have their hands full with the state budget problems. As a result, less than half the normal number of bills were filed in the 2018 Regular Session of the Louisiana Legislature. IIABL is only tracking 112 bills this session, which is less than half the normal number of insurance related bills. Following are a list of the most important insurance bills IIABL is lobbying this year, with a brief explanation and the current position IIABL is taking on each bill. Please note that our position is subject to change as the bill moves through the legislative process. You can click on the bill number for more information about each bill. If you have any questions, please feel free to contact IIABL CEO, Jeff Albright at JAlbright@IIABL.com.
HB 169
Talbot, Kirk(R)
Provides for notice of the cancellation of an insurance policy. Allows enhance bar code mailing. IIABL Supports.
HB 170
Foil, Franklin(R)
Provides relative to non-competition provisions in employment contracts. Voids noncompete contracts when employee is terminated. IIABL Opposes. IIABL met with Rep Foil and explained our concerns. Rep Foil agreed not to move HB 170.
HB 206
Anders, Andy(D)
Permits the employment of a convicted felon in the business of insurance in certain circumstances. Allows the commissioner to approve employment of a convicted felon. IIABL Supports.
HB 333
Talbot, Kirk(R)
Provides relative to the Louisiana Citizens Property Insurance Corporation Policy Take-Out Program. Allows LA Citizens to manage depopulation process. IIABL Supports.
HB 363
Huval, Mike(R)
Provides relative to the registration of controlling persons for business entities acting as insurance producers. Clarifies which persons must register with licensed businesses. IIABL Supports.
HB 370
Talbot, Kirk(R)
Authorizes electronic delivery of insurance coverage notices. IIABL negotiated legal protections for agents. IIABL Supports.
HB 472
Thibaut, Major(D)
Establishes the Louisiana Health Reinsurance Association. Establishes a state reinsurance program for individual health insurance. IIABL Supports.
HB 586
Harris, Jimmy(D)
Amends the Medical Malpractice Act. Increases the noneconomic damages cap from $500,000 to $1,000,000 and adds inflation index. IIABL Opposes.
Continued page 6
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HB 619
Huval, Mike(R)
Provides with respect to the use of a wireless telecommunications device while operating a motor vehicle. Distracted driving bill. IIABL Supports.
HB 636
Hunter, Marcus(D)
Prohibits the use of zip codes as a base for rate determinations as relates to insurance. IIABL Opposes.
SB 35
Smith(R) Crews, Raymond(R)
Provides relative to the discretion vested in the commissioner of insurance to levy fines for the violation of complaint directives. IIABL Supports.
SB 36
Smith(R)
Provides relative to continuing education requirements for insurance producers. Provides reciprocity for nonresident agents. IIABL Supports.
SB 139
Luneau(D)
Provides the option of a right of direct action against the insurer alone when the insured is a small business employing fifty or fewer full-time employees. Expands direct action for small businesses. IIABL Opposes.
SB 180
Milkovich(D)
Provides for tort liability for a worker's compensation insurer that causes further injury through the unreasonable denial of medical treatment to an injured worker. IIABL Opposes.
SB 361
Walsworth(R)
Provides relative to the protection of computerized data that contains personal information and requires notification of data breaches. IIABL takes no position.
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Louisiana Agent 7
What the Internet of Things Will Do to Insurance? March 23, 2018 by Marty Agather One of the best (worst??) features of the interwebs is how you can drill down ever further into what ever rabbit hole strikes your fancy. In the spring, a young man’s thoughts turn to…fishing. At least ’round here. Earlier this month, a couple of different research projects amplified each other. The blog on voice computing paired up with some discussions with an insurtech startup working in the smart home arena. One hyperlink led to another and soon Amazon had a number of packages in transit. Changing Nature of Risk is ACT’s working group that looks at new exposures and coverage availability for agents and carriers. One of our advisories is an exploration of the Internet of Things (IoT). Rather than regurgitate that here, if you need a refresher, take a quick gander.
Insurance and IoT Ernst and Young wrote a white paper in 2016 on the opportunities that IoT provides to the insurance industry. As might be surmised, in an analysis of seven industries, insurance comes in last in terms of the number of companies able to use insights from new data sources to boost customer value.* In E&Y’s view, that data can come from 4 different sources.
Wearable technology that provides health metrics Sensors attached to mobile objects reporting on
to insurance carriers. First, because the data is real time and direct from the sensors, a direct connection to experience with less unintentional (or otherwise) filtering. More accurate data means more accurate insights. Second the direct connection can provide a closer relationship to the insured and facilitates an understanding of how the insured’s needs change over time.
Finally, that greater customer intimacy provides the ability to develop customized insurance products with features that appeal to customers. The implications for how an insurance company could use these insights to improve underwriting and pricing algorithms are huge. Imagine being able to identify changing loss trends even before the claims payments have been made and changing pricing models instantaneously. An insurance company could develop products that allow customers to up sell themselves on features and benefits that they value. Or even more radical, down sell less desirable customer segments.
New Capabilities, New Opportunities Potentially the most revolutionary aspect of all of this new information is a radical restructuring of the insurance value proposition.
location or performance Location based sensors such as home thermostats Geospatial Information Systems that provide information on huge systems such as hydrological data
Historically, the primary reason most insurance products were bought was the promise of payment after loss. But what happens to our industry when the numbers of losses and total claims decrease by 10, 20 or even 50 percent?
These sensors are then connected into communication networks that provide insights that were previously unavailable. Think about how your use of a mapping program on your phone enables real time updates on traffic congestion.
Perhaps you are out of state on vacation and a temperature device in your home reports that interior temperatures are dangerously low and your pipes may freeze. A technician could be dispatched to service your furnace.
All of this data is communicated with cloud based applications that turn that data into information in real time. This information provides three distinct advantages
Water damage claim averted. Or possibly your iHeartMyself device reports potentially deadly arrhythmia. A medical professionLouisiana Agent 8
al is automatically notified and an Uber is dispatched to take you to the local hospital for the appropriate treatment. Major hospital stay and expensive rehab avoided. Dan Burrus, a noted speaker and futurist, has defined two principals for future trends: hard vs soft. “A hard trend is something that will happen: a future fact. A soft trend is something that might happen: a future maybe.” That there will be significant loss reduction in some existing lines of business and segments is a hard trend. Whether or not the changing nature of risk and new exposures will replace some or all of those claims dollars is unknown. As an example, statistics say that 90% of vehicle accidents are caused by human mistakes. If autonomous vehicles are only half again as safe as we are, then when most or all vehicles are autonomous, we should see a 40+ % decrease in accident frequency. Even though we’re quite a few years away from most vehicles on the road being autonomous, the reduction in losses could be dramatic.
Some members of the Society of Automobile Engineers working on autonomous cars believe that their vehicles will eliminate 80% of human caused accidents. Combine that with smart road surfaces reporting weather conditions and traffic flow rates. Perhaps a majority of vehicle accidents can be eliminated. While this might be the most dramatic example of how IoT can affect the insurance industry, it is not the only one. IoT will mitigate losses in multiple lines. What does that do to demand for insurance products? How does an insurance organization realign the value proposition when the potential for losses decrease dramatically? What happens to an industry when dramatic, fundamental changes take place to the underlying economics?
Long Story Short The Internet of Things is being embraced in many
industries. Connecting sensors to cloud applications in order to gain new insights and create new value and services is proceeding at a rapid pace. Although insurance lags in these developments, both established players and new startups are working to leverage these new capabilities. Hardware manufacturers are developing loss control devices. Industrial equipment manufactures are instrumenting their products so that performance can be remotely monitored. Biometric wearables get smarter and more capable every day. Software companies and app developers are building reporting and control capabilities. Insurance companies are forming partnerships with established companies and start ups alike. The world is becoming more interconnected every day. The best way to get a feel for what is possible is to plug yourself into the world of sensors and connected devices. A simple place to start is in your home. Purchase a smart thermostat or a Phillips Hue Lighting starter kit. A smart thermostat will provide a taste of the possibilities but operate in the background. Phillips LED lightbulbs aren’t the least expensive on the market, but the Phillips app is well designed and feature rich. The color changing bulbs are a bit pricey, but the white-only lights aren’t too bad at $ 12 per bulb. Note that you will need one Hue bridge (included in the starter kit) to plug into your router. Once you get your bulbs installed you can create routines that will welcome you home, turn out lights when you leave, and make lights turn on and off when you are out of town to make it appear that you are still home. See how you’re reducing your exposures and potential losses? Once you get some experience with IoT, you might find that you’re adding security cameras or smart outlets to control other devices. Think I’m all wet, or right on? Hit me up with your objections, or raves on how you are using connected devices to improve your life and what you think they mean for the insurance industry. Louisiana Agent 9
Louisiana Agent 8
Steve Anderson
How to Think About Documenting Text Messages for E&O Protection
You know as well as I that the adoption of text messaging as a communication channel is not going to slow down and certainly is not going away. The key to proper documentation of these conversations is training staff on how to make sure copies of text messages get to someone who can make sure they are attached to the client file. Documenting this way is currently cumbersome. There are documentation gaps. You know this, I know this and your agency E&O underwriter knows this.
The Process is Improving — Slowly While the process is improving, it is slow and there are some gaps in your current process. Here are some thoughts on where we are now and steps you can take to improve:
Find out who is texting: While outside salespeople might text clients and prospects more than inside staff, don’t assume. Device being used: It is likely all staff is currently using their personal phone for text messages. Personal phone for business use may create problems.
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Electronic Communication Policy: What is your organization’s electronic communication policy? Is it clear what is expected of staff that uses their personal device to communicate with clients? What documentation is acceptable? Upgrade management system: Several management system vendors have upgraded or are upgrading their platforms to handle inbound and outbound texts. Typically, these texts are sent to an agency phone number and imported into the system for documentation. Train all staff: When your management system can take over text communication, you will continue to have individual personal phones used by clients. Decide if you will require (and how you will enforce) the use of the agency text number of all “official” agency/client communications. Train your clients: It is going to be hard to get
your clients to move to the agency text channel. Old habits are hard to break. An option might be to train staff on how to forward a received text on their personal device to the agency number to more easily get it attached to the client file. My key point is to begin the discussions now for how you want to handle these communications in the future. Software recommendations for documenting text messages There are a couple of software options that allow creating a document (typically PDFs) of text conversations. I have previously written about using iExplorer to create PDFs of text conversations. Another option I recently came across is Decipher TextMessage. Continued page 11
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Capturing phone screenshots of the text message and emailing to someone in the office continues to be a favorite method of sending documentation. For many, this can be a cumbersome multi-touch process. In next week’s TechTips, I am going to share a technique to automate sending the email with screenshots attached. Stay tuned. No matter how you preserve text messages for client documentation, you should make sure the records have all of the information necessary for them to be admissible in court if the need arises. Always consult a lawyer for the specifics for your region about what information is required.
For SMS this is a phone number. For MMS or iMessages, this is either a phone number or an email address.
Contact information:
Steve Anderson PO Box 429 Franklin, TN 37065 615.599.0085 techtip@steveanderson.com
For most legal matters the following details should be visible in your text message documentation: Date and time of the messages. The real contact information for the other party or parties in the text message conversation.
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Bill Wilson, CPCU, ARM, AIM, AAM
Insurance Is NOT a Commodity... Real Life Example #12,473: Street Racing
Last year, the LA Times published an article about the rise in deadly street racing incidents. And, of course, we have the glamorization of street racing courtesy of “The Fast and The Furious” movie and video game franchises. So, for us, the question is, “Does AN auto policy cover street racing?” I purposely capitalized “AN” because, as I’ve written many times before, when I was involved in the Big “I” Virtual University “Ask an Expert” service, questions about auto insurance coverage often began with “Does ‘AN’ auto policy cover….” You cannot generalize about insurance coverages. Insurance, even/especially auto insurance is NOT a commodity. Coverage depends on the specific wording of each individual insurance contract.
In one claim submitted to the VU “Ask an Expert” service, a business owner had insured a personally-owned auto normally driven by his son on his business’s ISO business auto policy (BAP). Why? It was cheaper. I wrote a series of articles for the VU several years ago that included many examples of writing personallyowned autos on BAPs and business-owned autos on PAPs. In every instance, the reason was price. It didn’t matter that the coverage form was the wrong one for the exposure…someone was able to save a few dollars while putting their assets and income at risk for an uncovered claim. That’s what you get when you view “car insurance” as a commodity differentiated solely by price. In the instant case above, the son was street Continued page 13
Continued page 13 Louisiana Agent 14
racing when he lost control of the car and wrecked, killing his passenger. In the resulting lawsuit, the insurer denied the claim, citing the “racing” exclusion. This is the racing exclusion in the current ISO PAP: “Any vehicle, located inside a facility designed for racing, for the purpose of… Competing in; or…Practicing or preparing for… any prearranged or organized racing or speed contest.” Note that the ISO PAP exclusion is triggered only while the vehicle is located inside a racing facility, not while racing on a street. However, since the son’s car was insured on the ISO BAP, this exclusion applied: “Covered ‘autos’ while used in any professional or organized racing or demolition contest or stunting activity, or while practicing for such contest or activity. This insurance also does not apply while that covered ‘auto’ is being prepared for such a contest or activity.” Note that the language in the BAP exclusion is different from that in the PAP. It does not condi-
tion the exclusion on the auto being inside a racing facility. Therefore, street racing MIGHT be excluded. I say “might” because it still requires that the activity be “professional or organized.” In this particular case, the street racing was spontaneous and not organized. Despite the initial carrier denial, we were able to get them to reverse that position by pointing out that language in the exclusion. (If someone bought auto insurance online from a direct sales insurer, would they get the same advocacy and claim denial reversal this customer got from his agent?) As you can see, the difference in language in these “racing” exclusions can potentially mean the difference between a covered claim with unlimited defense coverage and a denial. In this case, the customer had high limits in the form of the PAP and an excess policy but those limits wouldn’t matter much if there was no coverage. And it gets worse…. Continued page 14
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Recently I did some seminars in North Carolina where they have a bureau-mandated auto policy. This is the racing exclusion in that policy: “Any vehicle while participating in any prearranged, organized, or spontaneous…racing contest, speed contest, demolition, stunt activity….” Note that this non-ISO PAP language does not condition the racing exclusion on being inside a racing facility or on an organized racing activity. In other words, a non-ISO PAP with this language would have resulted in the claim against the business owner’s son being excluded and the family being out potentially millions of dollars. Insurance is NOT a commodity. Just three days ago, my mother-in-law asked me to look at her Nationwide auto policy. I noticed the same “spontaneous” language in that policy’s racing exclusion. Not that my 84-year-old mother-in-law does a lot of street racing, but some individuals or families might include insureds who could become involved in some tes-
tosterone-fueled street racing. This illustrates the importance of underwriting in identifying likely loss exposures and matching them with the appropriate insurance policy. This, in addition to claims advocacy, is another value an independent insurance agent brings to the table.
“There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.” – John Ruskin Bill Wilson, CPCU, ARM, AIM, AAM Founder & CEO, InsuranceCommentary.com Bill@InsuranceCommentary.com or InsuranceCommentary@outlook.com
Com•men•tar•y … an expression of opinions or offering of explanations William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of InsuranceCommentary.com. He retired from the Independent Insurance Agents & Brokers of America in December 2016 where he served as Assoc. VP of Education and Research and was the founder and director of the Big “I” Virtual University for over 17 years. He is the former Director of Education & Technical Affairs for the Insurors of Tennessee and, prior to that time, he was employed by Insurance Services Office, Inc. He is a graduate of the Illinois Institute
of Technology with a B.S. degree in Fire Protection & Safety Engineering.
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MARCH IIABL BOARD OF DIRECTORS MEETING The IIABL Board of Directors met in Baton Rouge on March 16, 2018. President-Elect, Johnny Beckmann called the meeting to order. The following board members were present: Johnny Beckmann, Brenda Case, Joe Cunningham, Donna DiCarlo, Morris Funderburg, Stuart Harris, Ross Henry, Bret Hughes, Richard Jenkins, Harry Kelleher, “Phe” McMahon, Joe Montgomery, Joey O’Connor, Paul Owen, Teeny Perret, Neil Record, Robert Riviere, Lee Schilling, Armond Schwing, Mike Scriber, Don Stiel, and Jeff Albright. Young Agents Chairman, Donnie Stiel attended the meeting, along with IIABL lobbyist, David Tatman. Members of the Young Agents Committee were also guests at this meeting. IIABL Legislative Chairman, Mike Scriber, reported that the Louisiana Department of Insurance filed 26 bills in the 2018 Regular Session of the Louisiana Legislature. Many of the bills were technical amendments that corrected various sections of the Insurance Code. Scriber was pleased to report that Commissioner Donelon decided not
to file a bill to enact the NAIC Data Security Model Act. IIABL and others in the insurance industry had serious concerns that while well intentioned, the Model Act had many practical problems that would make compliance difficult or impossible. Scriber thanked the board for their personal outreach to Commissioner Donelon expressing our concerns about the NAIC Data Security Model Act, and thanked Commissioner Donelon for not filing the bill during this session. IIABL lobbyist, David Tatman, gave an overview of the legislative session. The ongoing state budget problems and the failed Special Session has created a very contentious environment that is deeply divided along party lines. Although this is a Regular Session, when legislators can file as many bills of general jurisdiction as they want, there were a historically low number of bills prefiled. There were less than 1300 bills filed before the deadline, less than half the normal bill count.
Continued page 16
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David Tatman reported that he and IIABL CEO, Jeff Albright, had visited most of the members of the House and Senate Insurance Committees before the Session started to discuss legislation which would be debated during the legislative session. They also met with Commissioner Donelon and his staff to review the Department bills and discuss the NAIC Data Security Model Act. Jeff Albright reviewed several of the most important prefiled bills with the board to decide the position IIABL would take on each bill. HB 370 would allow electronic cancellation of insurance policies. 42 states allow for electronic delivery of cancellation notices. IIABL was initially opposed to this bill because of concerns that failure of electronic delivery of cancellation notices would be a significant E&O risk for agents. However, Albright and Tatman were able to negotiate provisions of the bill that provides that electronic delivery was legally equivalent to any other delivery method, and that there would be no legal cause of action against an agent for the failure of electronic delivery. These added protections reduce the E&O exposure to agents compared to the current law, which convinced the IIABL Board of Directors to take a neutral / support position on HB 370. HB 361 expands the authority of the Louisiana Attorney General to protect the personal information of consumers. The bill requires businesses to take reasonable precautions to safeguard personal information stored in computer systems and to arrange for the safe destruction of paper records containing personal information. The board reviewed the provisions of the bill and found them reasonable so they adopted a neutral position. HB 333 allows LA Citizens Property Insurance Corporation to use actuarial methods to manage the depopulation process. After Hurricanes Katrina and Rita, LA Citizens policy count grew from 110,000 policies to almost 180,000 policies. Since then, the depopulation process has been so successful that the current policy count is around 39,000. The problem is that the private market has “cherry picked� the better policies and left LA Citizens with adverse selection. HB 333 simply allows LA Citizens to manage the depopulation process in ways that reduce the risk of assessment. The IIABL Board of Directors voted to support HB 333. The board also discussed HB 170 by Rep Foil which would void noncompete or non-solicitation employment contracts if the employer terminates the em-
ployee. The board expressed strong opposition to the bill in as much as it would create a huge loophole in employment contracts used by many insurance agencies. Following the board meeting, IIABL board member, Ross Henry, and Jeff Albright met with Rep Foil to express our concerns. Rep Foil agreed not to move HB 170. IIABL would like to express our appreciation to Rep Foil for working with us on this bill. The IIABL Board of Directors discussed a number of other bills and took positions as appropriate. Please see the separate Legislative Report for details. Jeff Albright reviewed the January YTD financial statement and presented the 2018-2019 Annual Budget, which the board discussed and approved. The board discussed the development of a sponsored third-party credit card and EFT payment vendor which would allow member agencies to offer additional premium payment options without expensive fees and access to personal information. Additional research and development will be conducted and a final proposal will be brought back to the board for their consideration.
At the January meeting, the board discussed problems with some brokers and insurance companies refusing to comply with the producer of record statute. The board instructed Jeff Albright to meet with Commissioner Donelon to discuss the issue. Albright reported back to the board that Commissioner Donelon agreed to issue an advisory letter directing agents, brokers, and insurance companies to comply with the producer of record statute. IIABL President, Neil Record, reported on some of the lobbying success has had during legislative session, and thanked the board for their grassroots involvement. Record also commented on efforts of various Big I state associations, including IIABL, to work together and combine resources in order to maximize benefits to member agencies. National Director, Lee Schilling, reported that the National Flood Insurance Program was set to expire on March 23, 2018. The House and Senate are still divided on a long-term extension of NFIP, so a short-term extension is likely. The IIABA National Legislative Conference is sched-
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uled for mid-April in Washington, DC. Over 1000 Big I members will be on Capitol Hill lobbying Congress. NFIP reauthorization will be a top priority.
will retire from IIABL at the end of the year.
Independent Agents Service Corporation (IASC) is the for-profit subsidiary of IIABL which provides products and services to members. IASC President, Brad Bourg, updated the board on Independent Market Solutions (IMS), a market access program for small agents.
Young Agents Chairman, Donnie Stiel, thanked the board for inviting the young agents to attend the board meeting. The Young Agents Crawfish Boil is scheduled for March 23, 2018. The Young Agents Conference is scheduled for August 3-4, 2018 at the Ritz Carlton in New Orleans.
IIABL CEO, Jeff Albright, updated the board on the tort reform / automobile market reform efforts. IIABL is organizing an effort in the insurance industry to research and develop information about the most important tort reforms which would improve the automobile market in Louisiana. If the business community is successful in electing a tort reform minded legislature and governor in 2019, a major tort reform effort will be launched in 2020. Such tort reforms should help improve the Louisiana automobile market.
The meeting was adjourned.
Albright advised the board that Lee Mowe has retired as our IIABL Marketing Representative, but that Ed O’Brien has been hired as his replacement. In addition, Mike Edwards has announced that he
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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 Forklift Damages a Non-Owned Trailer on Premises: BAP, CGL, or CP?
Q.
I’m in the early stages of sifting through the details of a claim we just received from one of our commercial insureds, and I would appreciate your thoughts on coverage. A non-owned, dual-axle cargo trailer was parked on my insured’s business premises, and was heavily damaged in an accident. An employee was moving a load of steel pipe with a forklift when the load began to shift. The employee attempted to steer the forklift to keep the load from toppling, but in the process, he rammed the trailer, which was parked near the loading dock. Several of the heavy pipes landed on the roof of the trailer, and the two forks pierced the side of the trailer. My first thought was Business Auto, since it covers autos and trailers. The policy has symbol 1 for liability, and symbol 2 for physical damage. One of my producers thinks it’s a CGL claim, since the forklift is mobile equipment. Our commercial CSR says there is coverage under the Commercial Property form for damage to non-owned trailers.
A. This could be the insurance version of Pin the Tail on the Donkey. For the discussion below, assume your insured is Smithco, Inc. Coverage form excerpts and comments are based on ISO (Insurance Services Office) forms and endorsements. Proprietary forms may be different. Issue #1: Business Auto Policy (BAP)
Business Auto Coverage Form CA 00 01 10 13 Section I – Covered Autos Symbol 1 – Any Auto. Symbol 2 – Owned Autos Symbol 8 – Hired Autos. Only those "autos" you lease, hire, rent or borrow. This does not include any "auto" you lease, hire, rent or borrow from any of your "employees", partners (if you are a partnership), members (if you are a limited liability company) or members of their households. Symbol 9 – Non-owned Autos. Only those "autos" you do not own, lease, hire, rent or borrow that are used in connection with your business. This in-
cludes "autos" owned by your "employees", partners (if you are a partnership), members (if you are a limited liability company) or members of their households but only while used in your business or your personal affairs. Symbol 19 – Mobile Equipment. Only those "autos" that are land vehicles and that would qualify under the definition of "mobile equipment" under this policy if they were not subject to a compulsory or financial responsibility law or other motor vehicle insurance law where they are licensed or principally garaged. Section II – Covered Autos Liability Coverage A. Coverage We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance or use of a covered "auto". B. Exclusions 6. Care, Custody Or Control "Property damage" to or "covered pollution cost or expense" involving property owned or transported by the "insured" or in the "insured's" care, custody or control. But this exclusion does not apply to liability assumed under a sidetrack agreement.
Section V – Definitions B. "Auto" means: 1. A land motor vehicle, "trailer" or semitrailer designed for travel on public roads; or 2. Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged. However, "auto" does not include "mobile equipment". K. "Mobile equipment" means any of the following types of land vehiContinued page 19 Louisiana Agent 18
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cles, including any attached machinery or equipment: 1. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads; However, "mobile equipment" does not include land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered "autos". Comments: (1) Since the damage to the trailer was done by Smithco’s forklift, I do not see any coverage under Section II of their BAP, since it applies only to legal liability arising from “covered autos,” and specifically does not include “mobile equipment.” (2) The only exception would be if the forklift was subject to “a compulsory or financial responsibility
(7) Coverage might be found under Section III – Physical Damage Coverage.
Section III – Physical Damage Coverage A. Coverage [Symbol 2 – Owned Autos] 1. We will pay for "loss" to a covered "auto" or its equipment under: a. Comprehensive Coverage b. Specified Causes Of Loss Coverage c. Collision Coverage Comments: (1) As you indicated, Smithco’s BAP has only symbol 2 for physical damage. That’s a problem, since the trailer was not owned by Smithco. (2) Symbol 8 would apply (had symbol 8 been purchased), if Smithco leased, hired, rented, or borrowed the trailer. (3) Symbol 9 is not normally used for any coverage except liability.
law or other motor vehicle insurance law where it is licensed or principally garaged.” [Section V – Definition K.] In that case, the forklift would be considered an “auto” under the BAP. (These vehicles are often referred to as “METINA – Mobile Equipment That Is Now an Auto.”) (3) If Smithco’s forklift was a METINA, symbol 19 would be appropriate for liability coverage. Many experts believe that even if symbol 19 was not included on the BAP, coverage for a METINA would still be afforded under every symbol except 3 (Owned Private Passenger Autos Only) and 7 (Specifically Described Autos), since by definition the forklift has been designated as an “auto.” But this view is not shared universally, so the recommended procedure would be to have symbol 19 added, where a METINA is (or might be) owned, rented, borrowed, etc. by Smithco. Some insurers will add symbol 19 on an on an “if any” basis. (4) One other component to the METINA issue is that the applicable laws governing them are those where the METINA is licensed or principally gar-
aged.
(5) Here are two articles for reference on METINAs: Mobile Equipment & Symbol 19 (See pages 7-11.) “CGL/BAP Mobile Equipment Changes and Louisiana Law” (6) Lastly, even if the BAP applied to the forklift as an “auto” (METINA), there would be no liability coverage for damage to the trailer, if it was in the insured’s “care, custody or control.” [Exclusion B.6.] Louisiana Agent 22
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Company
Number of Policyholders:
Overall % Impact:
Overall $ Impact:
19– Private Passenger
+15.8%
$34,018,294
93,382
19– Private Passenger
+19.6%
$4,760,650
10,353
American Fire & Casualty Ohio Casualty Ins Co Ohio Security Ins Co West American Ins Co
5—Commercial Multiple Peril
+5.0%
$287,553
1,481
ASI Lloyds
4—Homeowners
+7.5%
$4,957,803
33,840
New: 3/24/2018 Renewal: 5/24/2018
1—Property
+2.7%
$1,733,621
39,000
New: 6/1/2018 Renewal: 6/1/2018
United Services Auto Assoc. USAA Casualty Ins. Co. USAA General Indemnity Garrison P&C Ins. Co.
Imperial Fire & Casualty Ins
Louisiana Citizens Property Ins Co Revised rate only Personal Property (including Homeowners) Fair & Coastal Plans
Coverage Type
Changes
New: 3/19/2018 Renewal: 6/12/2018
New: 3/11/2081 Renewal: 4/16/2108
IIABL WELCOMES NEW MEMBERS Jay Arnold
Kevin Verneuil
Sham Singh
Arnold Insurance Agency
Cada Insurance Services
Southern Oaks Ins. Services
125 Linton Road
2548 Williams Blvd.
900 W. Pine St.
Benton, LA 71003
Kenner, LA 70062
Ponchatoula, LA 70454
318.965.5953
504.305.4446
985.791.3320
Jay_arnold@bellsouth.net
kevin@cadainsurance.com
ssingh@southernoaksinsurance.com
Louisiana Agent 24
IIABL 2018 CONVENTION
Registration is now open for the 2018 IIABL Convention! For online registration, sponsorship, exhibits, etc. click here Download Convention Forms: Convention Registration Tentative Convention Agenda Exhibit Registration Exhibit Information Sponsorship Company & Broker Reception
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Louisiana Agent 26
Issue #2: Commercial General Liability (CGL)
Commercial General Liability Coverage Form CG 00 01 04 13 Section I – Coverages Coverage A – Bodily Injury and Property Damage Liability 2. Exclusions. This insurance does not apply to: g. Aircraft, Auto Or Watercraft "Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading". h. Mobile Equipment "Bodily injury" or "property damage" arising out of: (1) The transportation of "mobile equipment" by an "auto" owned or operated by or rented or loaned to any insured; or (2) The use of "mobile equipment" in, or while in practice for, or while being prepared for, any prearranged racing, speed, demolition, or stunting activity. j. Damage To Property "Property damage" to: (3) Property loaned to you; (4) Personal property in the care, custody or control of the insured;
might hold that the trailer was actually not in Smithco’s care, custody, or control. If so, the damage done by the forklift would be covered. (5) Litigation over the care, custody or control exclusion, which appears in most all liability policies, is very fact-dependent. Here is an excellent article from an industry publication. “Care, Custody, or Control Exclusion” (6) Most experts recommend that the BAP and CGL be written with the same carrier, principally to avoid potential gaps for auto vs mobile equipment, as well as the loading/unloading exposures. Issue #3: Commercial Property
Building and Personal Property Coverage Form CP 00 10 10 12 A. Coverage 2. Property Not Covered Covered Property does not include: p. Vehicles or self-propelled machines (including aircraft or watercraft) that: (1) Are licensed for use on public roads; or (2) Are operated principally away from the described premises. Continued page 26
Comments: (1) If Smithco’s forklift is a METINA, any resulting BI and PD liability is excluded [2.g.] (2) Otherwise, Smithco’s CGL covers any BI and PD arising from the forklift, which is not excluded. Note the exclusion for racing of mobile equipment [2.h.(2).] The exclusion applies to “prearranged” racing, so one would assume that if the trailer was damaged during an impromptu race involving the forklift, exclusion [2.h.(2)] would not apply. As an example of “When the cat’s away, the mice will play,” check this out: “forklift racing.” (3) Despite the broad coverage for use of a forklift in the CGL, the exclusion for Damage to Property [2.j.] would prohibit coverage for damage to the trailer, if it was loaned to Smithco [2.j.(3)], or in the care, custody or control of Smithco. [2.j. (4)] (4) However, if Jack Smith, owner of Smithco, had allowed Jill, his CPA, to park her horse trailer on Smithco’s premises for a couple of days, a court Louisiana Agent 27
This paragraph does not apply to: (d) Trailers, but only to the extent provided for in the Coverage Extension for Non-owned Detached Trailers; 5. Coverage Extensions Except as otherwise provided, the following Extensions apply to property located in or on the building described in the Declarations or in the open (or in a vehicle) within 100 feet of the described premises. If a Coinsurance percentage of 80% or more, or a Value Reporting period symbol, is shown in the Declarations, you may extend the insurance provided by this Coverage Part as follows: f. Non-owned Detached Trailers (1) You may extend the insurance that applies to Your Business Personal Property to apply to loss or damage to trailers that you do not own, provided that: (a) The trailer is used in your business; (b) The trailer is in your care, custody or control at the premises described in the Declarations; and (c) You have a contractual responsibility to pay for loss or damage to the trailer.
(2) We will not pay for any loss or damage that occurs: (a) While the trailer is attached to any motor vehicle or motorized conveyance, whether or not the motor vehicle or motorized conveyance is in motion; (b) During hitching or unhitching operations, or when a trailer becomes accidentally unhitched from a motor vehicle or motorized conveyance. (3)The most we will pay for loss or damage under this Extension is $5,000, unless a higher limit is shown in the Declarations. (4) This insurance is excess over the amount due (whether you can collect on it or not) from any other insurance covering such property. Comments: (1) Coverage applies only to trailers that are nonowned, used in Smithco’s business, in Smithco’s care, custody or control while located on premises, and for which Smithco has a contractual responsibility for damage to the trailers. [A.5.f.(1) (a)(b)(c)] (2) In addition, damage to the trailer is not cov-
Continued page 28
ered while the trailer is attached, or while being hitched or unhitched, to any vehicle or conveyance. [A.5.f.(2)(a)(b)] (3) The maximum payable is $5,000, and is on an excess basis. [A.5.f.(3)(4)] (4) This Coverage Extension is meant to fill a very small coverage gap for Smithco. The two most common situations where this exposure exists for Smithco is if their vendors leave delivery trailers on premises, or Smithco uses rented trailers on premises for makeshift storage. 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.
How agency management systems can help defend E&O claims By John Nesbitt
Electronic communication is nothing new; independent insurance agencies have widely used e-mail and the internet for about 20 years, and there are many choices of agency management systems available. Despite this, too many errors & omissions claims still end up as a "he said/she said" credibility dispute. Documenting all interactions with customers and carriers and every insurance transaction can be critically important to the defense of an E&O claim. Without time-stamped documentation, an agency will be left with little more than its employees' memories of conversations that may have taken place years earlier,
Continued page 29
and your E&O carrier may recommend that you settle your claim. Agency management systems provide many benefits, not the least of which is the contemporaneous documentation they provide. Electronic documentation more definitively establishes what occurred than handwritten or paper files. Documenting a customer's file through an agency management system is more credible evidence than paper files because the automated system creates a record of the date and time of the entries, which cannot be manipulated later. All employees should make electronic notes documenting every conversation with customers, carriers, or anyone else with whom they discuss coverage. Electronic documentation of coverages offered and declined or the specific type of coverage requested can be very persuasive evidence to defend an E&O claim. Of course, while the quantity and consistency of documentation is important, so is the quality. Each entry about a conversation should include:
• Who - The names and roles of the person at your customer and at the agency involved • What - The specific topics discussed and any actions or decisions reached • When - The date and time of the conversation and any deadlines or next steps • Why - The reason the conversation took place • Where - Where are you in the process? If the activity can be closed, close it • How - Was it a phone call? Email? In office visit? On location? Many agency management systems also integrate with other agency applications, such as email and word processing systems. This can ensure that documents such as applications, quotes, change endorsements, rejections, checkContinued page 31
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lists, and other correspondence is immediately placed in the customer's electronic file. If an agency's agency management system does not do this automatically, such documents should be scanned and routed to the system. Emails forwarding a copy of the policy to the customer or even just forwarding a link to the policy on the carrier's website can be documented in many systems, which can be used to confirm that the customer received a copy of the policy. Every certificate of insurance the agency issues for an insured should also automatically be entered as an activity into the agency management system. Some systems will even synchronize with the agency's phone systems to send voice mail messages to the file. Consider the following example in which electronic notes or a time stamped letter in the file would have helped defend an E&O claim. An agent procuring a new policy neglected to have his customer complete a required form. After realizing the
mistake, the agent called the customer and asked her to come sign the form, but the customer did not do so and later had an uncovered claim. Documentation that the customer was given an opportunity to sign the form, but failed to do so, would be key to defending the resulting E&O claim. The agent said he had a log where he keeps that kind of information, which the E&O claims handler thought might establish that the agent gave his customer an opportunity to correct the initial oversight, putting at least some of the responsibility for the lack of coverage on the customer. However, the log the agent sent the claims handler to review turned out to be handwritten notes, which did not provide proof of when the agent made them. Without any other documentation that the customer was informed of the need to come sign the document, the claim became a Continued page 32
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Webcasts E&O Risk Management April 3, 19, 24, 26
Ethics April 3, 24, 27, 30
Flood April 19
Available on Demand Available on Demand Virtual University Live webinar April 11 Condo Cases of Crime and D&O Defects: Learn How to Build Better Fidelity and D&O Policies for Community Associations
Available on Demand Virtual University April Lightning Learning: Good Business 12th Is All Business Good Business 16th How Much Effective Selling Tim do you Actually Have? 24th How Much New Business Do You Have to Add to Make Your Goal?
Commercial & Personal Lines Courses Click above for courses & dates for 2018 Available on Demand
April Webinars 4th Cyber Liability—the 21st Century Peril 5th Insuring the Building Project: Builders Risk & Installation Coverage 17th Scary CGL Exclusions 19th Tricks to Fix: Closing Coverage Gaps in Home, Work & Auto
Seminars E&O Risk Management 5/8/18—Monroe 5/9/2018—Lafayette 5/10/2018—BR 5/11/2018—NOLA
E&O Risk Management 10/16/2018 –Shreveport 10/17/2018—Lafayette 10/18/2018—Kenner 10/19/2018—Covington
Events IIABR Luncheon April 12, 2018 Juban’s Restaurant
IIAGNO Seafood Soiree’ May 18, 2018 Southport Hall
IIABL Spring Education Conference May 15, 2018 Crowne Plaza
On-Demand Webcasts 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
Pre-Licensing Online prelicensing 3 optional study packages Click here for additional information Louisiana Agent 33
simple swearing match between the customer's version of events and the agent's, on a claim in which the agent had admittedly neglected to have the customer sign in the first place. The E&O claims handler recommended settling the claim.
IIABL Spring Education Conference May 15, 2018 Crowne Plaza—Baton Rouge IIABL is pleased to announce our program for the Spring Education Conference.
Handwritten notes or paper files should not be any modern agency's methods of documentation. An agency management system, when consistently and properly used, can increase an agency's efficiency and will be invaluable in successfully defending any E&O claims that arise.
Our morning program is The ABC’s of Trusted Choice. Learn how to differentiate your agency from the competition, how to efficiently use free resources, tools, training & financial support available to you.
John Nesbitt is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the Overland Park office.
The afternoon program is technology with a focus on ACT—Agents Council for Technology . Areas of interest covered are strategic trends, customer experience, productivity, marketing and security.
Enjoy lunch with our exhibitors.
Register Here
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GOLD LEVEL
SILVER LEVEL
BRONZE LEVEL
ACCIDENT FUND
AMERISAFE
AMERICAS INSURANCE
BANKERS INSURANCE
EMC INSURANCE
FCCI GROUP
FOREST INSURANCE
GULFSTREAM P&C
HOMEBUILDERS SIF
IROQUOIS SOUTH, INC.
LANE & ASSOCIATES
LUBA WORKERS’ COMP
MARKEL FIRST COMP
RPS COVINGTON
STONETRUST INSURANCE
SUMMIT CONSULTING
Louisiana Agent 35
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 36