Included in this issue:
Louisiana Agent Receives National Award
2017 Legislative Summary Update
IIABL Goes to Washington
Carriers Turn to Agents as Auto Insurance Sales Stagnate
Louisiana Agent Receives National Award
4-5
IIABL STAFF
2017 Legislative Summary Update
6 – 11
Jeff Albright Chief Executive Officer jalbright@iiabl.com
Five Important Questions to Ask an Agent about your Insurance Coverage
12 – 14
Carriers Turn to Agents as Auto Insurance Sales Stagnate: J.D. Power
15-17
Young Agents Day at the Races
18-19
Louisiana/Mississippi Young Agents Conference
27
IIABL Goes to Washington
30-32
Karen Kuylen Director of Accounting kkuylen@iiabl.com
Ask Mike
21-27
E. Lee Mowe Marketing Representative lmowe@iiabl.com
Commissioner’s Corner
35-37
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
Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com Jamie Newchurch Insurance Services jnewchurch@iiabl.com Lisa Young-Crooks Executive Assistant lyoung@iiabl.com
IIABL Calendar
28
Rate & Rule Filings
29
Tech Tips IIABL Partners
20,35
40 Louisiana Agent 3
LOUISIANA AGENT RECEIVES NATIONAL AWARD IIABA recognizes Lee Schilling of Schilling & Reid Insurance in Amite, Louisiana, for his outstanding service.
IIABL National Director, Lee Schilling receives the Sidney O. Smith Award from IIABA Chairman Spencer Houldin.
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The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) has bestowed the Sidney O. Smith Award to Lee Schilling, president of Schilling & Reid Insurance in Amite, Louisiana. “The Big ‘I’ is proud to present the Sidney O. Smith Award to Lee Schilling for his tireless service as chairman of the Big ‘I’ government affairs committee and in numerous leadership roles at the state and national level,” said Spencer Houldin, Big “I” chairman. “During his tenure as chairman, Lee has overseen efforts on key issues such as flood insurance, NARAB II, terrorism insurance and health care, just to name a few. He has advocated on behalf of the Big ‘I’ and participated in the Legislative Conference for nearly two decades. Lee’s work ethic and dedication are a huge asset to the Big ‘I’ and to independent agents in Louisiana and across the country.”
The Sidney O. Smith Award is bestowed annually by the Big “I” and the Independent Insurance Agents of Georgia upon an individual agent or broker for outstanding service to his or her peers and the national association in the field of government affairs. It is named in honor of an IIABA past president and Georgia agent who was instrumental in focusing the association and its members on legislative advocacy. Schilling’s numerous state and national association roles include having previously served as Independent Insurance Agents & Brokers of Louisiana (IIABL) president and IIABA state government affairs chairman. "Lee Schilling has been active in protecting consumer and Independent Agents in the Louisiana legislature and Congress for many years,” said Richard Jenkins, IIABL president. “It is certainly appropriate that he received this well-deserved award."
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IIABL Legislative Summary 2017 Regular Session of the Louisiana Legislature The 2017 Regular Session of the Louisiana Legislature is almost over. It was a relatively quiet session for insurance issues, but there were still plenty of insurance bills killed and passed. Following are the most important insurance related bills of the 2017 Session. Some were opposed and killed by IIABL in cooperation with others in the insurance industry. Others passed the legislature, and subject to the unlikely veto of the Governor, will become law in the coming months. Please review these bills to determine what might affect your agency. Click on the bill number for more information and text of each bill.
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HB 226
Pierre, Vincent(D)
Bill History:
HB 283
Seabaugh, Alan(R)
Bill History: HB 407
Huval, Mike(R) Johns(R)
Bill History:
Provides relative to administrative procedure hearings involving actions of the commissioner of insurance. 05-10-17 H Voluntarily Deferred in Committee House and Governmental Affairs LDI proposed legislation. IIABL and most of the insurance industry opposed this bill. The bill was deferred in the face of very strong opposition. Provides relative to judicial review of administrative hearings involving actions of the commissioner of insurance. 03-30-17 H Referred to House Committee on House and Governmental Affairs LDI proposed legislation. IIABL and most of the insurance industry opposed this bill. The bill was deferred in the face of very strong opposition. Provides for producer fees for individual and group health insurance policies. 08-01-17 G Effective IIABL worked with other insurance producer associations to clarify the agency fee statutes to ensure that agency fees may be charged on individual health insurance policies, group health insurance policies as well as property and casualty insurance policies.
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From page 7
HB 408
Huval, Mike(R) Johns(R)
Bill History:
HB 463
Brown, Chad(D)
Bill History:
SB 44
Smith(R) Anders, Andy(D)
Bill History:
Provides for the change of insurance producer on record. 08-01-17 G Effective IIABL and the Louisiana Surplus Lines Association (LSLA) worked together to pass HB 407, which reduces the waiting period from 15 days to 10 days, requires a new POR to submit new applications, and clarifies commission payments. Provides with respect to professional employer organizations relative to insurance. 04-27-17 H Removed from hearing 05/02/17 - House Insurance IIABL, other agent associations, and most health insurance providers strongly opposed HB 463. Rep Brown had the bill removed at our request. Provides relative to the sale of policies issued by the Louisiana Citizens Property Insurance Corporation. 06-01-17 G Enrolled IIABL worked with LDI to pass SB 44 which provides for reciprocity with other states about access to residual property markets. If another state prohibits LA agents from accessing their residual property market (MS) than agents from that state will not have access to LA Citizens. If another state allows LA agents to access their residual property market (TX) than agents from that state will have access to LA Citizens.
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HB 51
Pugh, Steve(R)
Bill History:
HB 89
Davis, Paula(R) Morrish(R)
Bill History: HB 188
Cromer, Greg(R) Morrish(R)
Bill History:
HB 287
Talbot, Kirk(R) Johns(R)
Bill History:
HB 392
HB 393
Connick, Patrick(R) Smith(R)
HB 503
Allow employees of insurance companies that are not licensed claims adjusters to adjust certain losses that do not exceed five hundred dollars. 08-01-17 G Effective Provides for review of fees charged for external review as relates to a health insurance issuer. 08-01-17 G Effective
Provides for the return of unearned premium and notice of claim payments to the mortgagee. 06-05-17 G Enrolled IIABL and most of the insurance industry worked to amend this bill to protect policyholders. If a mortgagee pays premiums with its own funds, they may be entitled to their share of unearned premiums returned after cancellation. Prohibits insurers from combining a higher classified public fire protection area with a lower classified public fire protection area for the purpose of determining insurance rates for both districts.
Bill History:
08-01-17 G Effective
Connick, Patrick(R) Bishop(D)
Provides for the elimination of contents coverage on residential properties following a declared disaster.
Bill History:
HB 435
Increases the medical malpractice cap in certain circumstances. 04-13-17 H Voluntarily Deferred in Committee House Civil Law
06-04-17 G Enrolled
Talbot, Kirk(R) Morrish(R)
Requires disclosure to patient of out-of-network providers prior to surgery.
Bill History:
06-05-17 G Enrolled
Thibaut, Major(D) Johns(R)
Provides relative to the licensing of insurance producers.
Bill History:
06-01-17 G Enrolled LDI proposed legislation. HB 503 revises the insurance producer licensing fees to allow LDI to renew multiple licenses at the same time. Instead of renewing P&C licenses one year and renewing L&H licenses the next year, LDI will be able to renew both licenses every other year. Louisiana Agent 10
HB 664
Hoffman, Frank(R)
Bill History: HB 675
HB 692
SB 56
Requires contractors to provide certain license, classification, and insurance information. Substitute for HB 440.
Bill History:
06-05-17 G Enrolled
Jordan, Edmond(D)
Provides relative to electronic notification of compulsory motor vehicle insurance. Substitute for HB 607.
SB 184
06-05-17 G Enrolled
Smith(R) Anders, Andy(D)
Provides relative to the definition of ocean marine insurance.
Bill History:
05-31-17 G Enrolled Provides for the self-reporting of administrative actions against an insurance producer by nongovernmental regulatory authorities.
Long(R)
Bill History:
SB 117
6-05-17 G Enrolled
Davis, Paula(R) Appel(R)
Bill History: SB 45
Provides relative to the insurance premium tax credit.
Colomb(D)
05-18-17 H Voluntarily Deferred in Committee House Insurance LDI proposed legislation. IIABL and other insurance producer associations strongly opposed this bill. The bill was deferred in the face of very strong opposition. Requires certain insurance producers to maintain professional liability insurance.
Bill History:
06-06-17 S Set on the Senate Orders
Luneau(D) Brown, Chad(D)
Provides for the removal of an offset or credit against uninsured motorist coverage when the carrier is insolvent.
Bill History:
06-01-17 G Enrolled
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Five Important Questions to Ask an Agent About Your Insurance Coverage
There are dramatic differences among auto policies…some may only cover the use of vehicles you own (e.g., not rental cars), some do not cover business use of autos, and the list goes on and on.
Bill Wilson, CPCU, ARM
A freelance journalist was working on a story for bankrate.com about what questions a consumer or business owner should ask when buying insurance. She was seeking five questions each from several insurance “experts.” These were the five questions I suggested that prospects ask whomever they are purchasing insurance from…just in case YOU are asked these questions by someone who read the writer’s final article. How do you determine what coverage I need? Did the agent use a detailed checklist and ask questions beyond just those on the application for insurance? For example, if you’re shopping for home and auto insurance, the agent should inquire whether you or other resident family members are engaged in any kind of business activities from the home. Who is the legal owner of the home? Do you own other real estate? Do you own or lease all autos being insured? Do you ever rent or borrow autos? Is there a household resident that has their own auto policy? Do you own or ever use watercraft, ATVs, or other vehicles? Do or will you have a child away at school? If so, do they have an auto or access to an auto? Do you do any volunteer work? Are there any potentially catastrophic coverage gaps in my policies that can be covered by a “better” policy than what I have or by an endorsement to my existing policy or by a separate policy?
Despite what you may be lead to believe by cavemen, lizards, and discount store clerks, all insurance policies are not the same or distinguishable only by price. It’s important that the policies procured by the agent address your exposures to loss. Some perils like flood and earthquake are almost never covered by most property insurance policies but they can be covered by endorsement or a separate policy. Some policies cover damage, particularly hidden damage, caused by a leaking water pipe while other policies will not cover such damage if it has taken place over a period of weeks or longer.
How do you know your rates are competitive and are we truly comparing apples to apples when quoting different insurance companies? Again, not all policies are the same. Just because two auto policies are priced for liability, medical payments, uninsured motorists, and physical damage coverage, does not mean that the actual coverages and exclusions are the same. They can be, and often are, catastrophically different. Likewise, the services insurers offer and their reputation for prompt, fair claims settlements are important considerations in comparing quotes. Why did you not offer me an umbrella policy? Whether you’re shopping for personal or business insurance, a good agent will always offer you the option to buy umbrella liability coverage in an amount of at least $1 million above the limits on your other liability coverages. You’ll usually find that the rate per $1,000 of coverage under an umbrella policy is significantly lower than the rate for other liability coverages you have. Even if you are simply looking for renters insurance, you may be a more fitting candidate for an umbrella policy than a single family homeowner. What is the value of the building where your apartment is located and the value of the property owned by the tenants in that building (not to mention the value of their lives)? If you negligently caused a fire that burned down the building, is your renter’s liability coverage limit adequate? Given that the usual limit is $100,000 or less, almost certainly not. If the agent does not offer you the opportunity to buy this coverage, you should be concerned that they may assume you don’t want to buy other types of insurance that could plug coverage gaps in your insurance program. Am I getting all of the premium credits I can? From “good student” auto insurance discounts to premium credits for fire extinguishers, ask the agent to examine all of the scheduled premium credits your insurer has available to see if Louisiana Agent 12
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you qualify or might qualify if you invest a small amount of money in some loss control measures. For example, if you own a business and store a 5-gallon can of gasoline used for lawn equipment in the building, you might find that your property insurance premium will drop by a surprising amount if you simply keep that flammable liquid in a separate small outbuilding. If you are considering opening a retail outlet in one of several multi-occupancy buildings, the presence of a restaurant in one of the buildings could drive up your property insurance premium…is this other tenant getting credit for having a fire suppression system above the cooking surfaces? A good agent asks the right questions. If someone offering insurance, especially online or via phone app, touts that they can provide you with homeowners or auto insurance in minutes, RUN. There is no way your unique exposures to catastrophic financial loss can be ascertained in minutes. Not every transaction can be reduced to an Amazon-like “1-Click”
purchase. Once the right questions have been asked, a good agent procures the proper coverage at the best value proposition possible. And, perhaps most important, if there is a coverage dispute at claim time, a good agent advocates on your behalf to resolve the claim promptly and fairly. A good agent earns every penny he or she is paid in commission by the insurer. Be smart, choose a good agent. 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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Carriers Turn to Agents As Auto Insurance Sales Stagnate: J.D. Power Amid a second straight year of stagnant auto insurance shopping activity and modest rate increases, auto insurance companies have grown increasingly reliant on great customer service, personalized advice and strong agents to win over their customers, according to the J.D. Power 2017 U.S. Insurance Shopping Study. With average premiums increasing by a modest 2-3 percent annually, new insurance shopping rates flat and new customer acquisition rates unchanged, auto insurers are faced with the challenge of resisting commoditization, he report says. The study finds that as auto insurers struggle to compete on price, they are being forced to differentiate based on factors such as brand reputation, agent recommendations, product and service to drive new business sales.
Communication remains critical, as the key performance indicator (KPI) that has the greatest influence on customer satisfaction in this year’s study is ensuring that customers completely understand their coverage. “The auto insurance industry is at an inflection point where customer patterns and behaviors are on the verge of shifting,” said Greg Hoeg, vice president of U.S. insurance operations at J.D. Power. “To survive this period of price stagnation, insurers must develop strategies to be able to better differentiate not just to acquire new customers, but also to acquire customers with desirable risk profiles in order to maintain profitability.” Key findings of the 2017 study include:
Auto insurance market shopping stagnates: This year sees a continuation of the ·
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slowdown in shopping activity that was first noted in 2016. Average premium rates have increased just 2-3 percent; customer acquisition rates are flat; new quote volume is flat; and the total number of insurance shoppers is largely unchanged from the last year.
Price is more influential in brand consideration and quoting: Despite stagnant pricing, ·
Communication is critical driver of satisfaction: The KPIs affecting the purchase ·
experience index the most are ensuring the customer completely understands coverage; providing guidance and/or tools for selecting the right coverage; and ensuring customers understand premium calculations.
price remains a driver in every stage of the acquisition process, meaning insurers must always take it into consideration to be competitive in the market. For example, the influence of price on a shopper’s decision to consider and quote a brand has increased 5 percentage points in each of the past two years. As a result, the importance of price has surpassed that of a good past service experience when a shopper considers or quotes a brand.
Study Rankings
· Agents continue to play key role: Agent recommendations have become an increasingly important driver of customer consideration and quote generation. Shoppers are also increasingly reliant on agent recommendations when considering and quoting insurers, compared to 2015 (a 9- and 10-percentage point increase, respectively).
The study is based on responses from more than 16,400 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past nine months and includes more than 50,000 unique customer evaluations of insurers. The study was fielded in April, July and October 2016 and January 2017.
In the JD Power customer satisfaction rankings, Erie Insurance came in highest among auto insurers in providing a satisfying purchase experience, with a score of 879. This marks the fifth consecutive year Erie Insurance has ranked highest in the study. American Family ranks second (869); The Hartford third (861); Automobile Club Group fourth (852); and Amica Mutual fifth (850).
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IIABL YOUNG AGENTS ENJOY A DAY AT THE RACES LOUISIANA DOWNS—BOSSIER CITY
IIABL Young Agent Chair Derek Canchola , far right is pictured with Jordan Smith and Elliott Maples both with Moreman, More & company
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Don’t Let the WannaCrypt Virus Make You WannaCry It is likely you have heard about the massive cyber-attack that started last Friday, May 12. It is technically known as WannaCrypt but is now commonly referred to as WannaCry. This ransomware virus affected computers in over 150 different countries starting in Europe. Fortunately, there are fewer victims in the United States. The virus encrypts data on infected machines. Victims are told they will receive instructions on how to un-encrypt their files after paying the equivalent of $300 in Bitcoin. The ransomware threatens to delete the files within seven days if no payment is made. The malware makes use of a vulnerability in older versions of a Windows Server. Microsoft patched the vulnerability in March. Any organization that has updated their software with the latest Windows patches will be protected from this virus. Because of this attack, Microsoft issued new updates specifically addressing the WannaCrypt attacks and other copycat attacks. Microsoft even took the step of releasing a security update for Windows XP machines, which are no longer supported.
Don’t Be Complacent About WannaCry While the initial wave of WannaCry malware attacks seems to be subsiding, it is a wake-up call to all organizations globally to make sure they take appropriate steps to protect their data and information. The WannaCrypt attack is a wake-up call for any organization regarding the importance of a full cyber-security plan.
Internal Protection Steps
Every organization should take the following steps to ensure their organization is adequately protected. Ensure Microsoft Operating Systems are up-to-date Stop using older version of Windows OS and servers Make sure any anti-virus software you have installed is up-to-date Train employees not to open or click on unknown emails and links Remind employees often about ransomware attacks
Educate Your Clients In the same way, you should educate your clients about the risks they face due to cyber-attacks like WannaCry. Cyber liability insurance is an important tool you can provide to your clients that will help them recover in the event of a cyberattack. You owe it to your clients to continually remind them of the increased risk they face due to cyber-security issues.
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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: Family LLC Purchases Home for Daughter Q.: We have a somewhat unusual situation that probably has a couple of right answers, as well as a couple of wrong answers. Hoping to avoid the latter, we’d like your thoughts. Our insured is purchasing a home for his daughter, who is moving back to Louisiana to attend graduate school. After talking to his CPA, he plans to purchase the home in the name of an LLC. We are debating what the best route is for insuring the home, so that the interests of all parties are properly protected. Would you recommend commercial lines, with the LLC as named insured, or personal lines, with daughter as named insured, and LLC as additional insured? The home they want to purchase is a townhouse that is part of a 4-unit building. There is a common parking area at ground level, underneath the front part of the building, which serves all 4 units. Each unit has one assigned parking space. Visitor parking is located elsewhere on the property. Regarding the parking area, my insured sent me a copy of a hold harmless agreement that will be a part of the closing documents when the purchase takes place. The purchase agreement includes an indemnity agreement in favor of each of the other owners of the 3 other units, relating to "...all liabilities, claims, costs, expenses, judg-
ments, or causes of action (including attorneys' fees) arising from or relating to any use or misuse of the driveways, access ways, entrances and exits..." What’s the best way to cover this exposure?
A.: First, what a credit it is to your agency that the insured consults with you before the purchase. Having that kind of relationship with an insured is vitally important, especially in this competitive market. Too often, the agency ends up as
the caboose, with other parties (attorney, CPA, friends of the insured, Internet advice, etc.) driving the train. Also, thank goodness the CPA didn’t stipulate just how the insurance should be written. Some can’t avoid the temptation. Here are the options I see that are viable, with thoughts about some that are not. Spoiler alert: I am Old School, and prefer that business exposures are written in commercial lines, and personal exposures written in personal lines. For the discussion below, assume that Jack is your insured, Jill is his daughter, and the unit will be owned by JJ-LLC. Also, comments and excerpts on coverage issues are based on ISO (Insurance Services Office) forms and endorsements. Proprietary forms may be different. Option #1: The LLC is named insured under commercial lines policies. Commercial Property policy: Since an LLC (Limited Liability Company) is a business entity, insuring a residential unit owned by JJ-LLC should not present an underwriting problem, in my view. And it would be important to know if any of the household contents, furniture, appliances, etc., are owned by the LLC. Commercial General Liability (CGL) policy: The CGL would also be appropriate for the premises-related exposures. (See discussion of the hold harmless agreement in last section of this article.) Businessowners Policy (BOP) : Eligibility rules for writing a BOP on a single residential unit vary by insurer. Louisiana Agent 21
Best option for JJ-LLC is the Commercial Property policy and the Commercial General Liability (CGL) policy. However, it would be very important to use coverage checklist to uncover other exposures, for both JJ-LLC’s ownership of Jill’s unit (flood, etc.), as well as other property or liability exposures. In my experience, LLCs and Trusts, once established, often accumulate additional assets, given the tax and legal advantages, which makes annual reviews crucial. Option #2: The LLC is named insured under a personal lines policy.
Homeowners policy: This option is on my “Don’t Even Think About It” (“DETAI”) list, although it is done by some markets. However, one reason the ISO Homeowners Manual specifies that eligibility is only for owner-occupied dwellings is that a commercial entity will have potentially serious coverage gaps. See this article from the IIABA’s Virtual University: “HO Policies Are NOT for Corporations” Worse still, there may be no coverage at all in the policy. A troubling trend in recent litigation has
been over the phrase “Where You Reside” (“WYR”). Most perplexing is that the loss of coverage does not come from an exclusion in the policy. It is lies in an (adverse) interpretation of the “residence premises.” Excerpt:
HO 00 03 05 11 Homeowners 3 – Special Form Section I – Property Coverages A. Coverage A – Dwelling 1. We cover: a. The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling; and Definitions 11. "Residence premises" means: reside;
a. The one-family dwelling where you
Comments: (1) JJ-LLC is the named insured (“you”), but it
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does not reside at that this dwelling. Where JJLLC’s homeowners insurer takes that view, in jurisdictions where it has been upheld, at a minimum there is no coverage on the dwelling, and more likely, no valid policy in effect at all. (2) The IIABA’s Virtual University has a comprehensive resource page, with many articles, including court cases, dealing with the WYR issue: “Where You Reside” Dwelling policy: While technically a personal lines policy, it is often used for a commercial insured who owns rental houses. But with the growing frequency of individuals and families setting up LLCs and Trusts to hold property, the Dwelling policy can be used for such exposures. Note, however, that ISO Dwelling Program Eligibility Rule 103 stipulates that the dwelling must be used “solely for residential purposes.” For example, if JJ-LLC purchased a dwelling to be used as an office, it would not be eligible for the ISO Dwelling Program.
The Dwelling Program offers both property and liability coverages, although not as a package, as in the Homeowners Policy. Option #3: Jill is the Named Insured in HO-3, with JJ-LLC as Additional Insured. This is another “DETAI” option. Potential problems: (1) Jill has no insurable interest in the dwelling, since it is owned by JJ-LLC. (2) Under ISO eligibility rules, the HO 00 03 can only be issued if the dwelling is owner- occupied. But if an insurer issues the policy anyway, it still doesn’t overcome Jill’s lack of insurable interest (at least in the unendorsed ISO HO). (3) If the insurer will add JJ-LLC as an additional insured under endorsement HO 04 41 (and that’s a big “if”), it only provides JJ-LLC with Coverage A (dwelling), Coverage B (other structures), while Coverage E (liability) and Coverage F (medical payments) apply for the residence premises only. Under the endorsement, an adContinued page 23
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ditional insured has no Coverage C (personal property). It’s quite possible that since this is a starter home for Jill, Jack may have JJ-LLC purchase some furniture and/or appliances for the home. Option #4: Jill is the Named Insured in HO -4, with JJ-LLC as Additional Insured. The HO-4 is the correct coverage for Jill. However, since the HO-4 does not provide coverage for the dwelling or other structures, JJ-LLC has a major coverage gap. And as noted in Option #3, the HO 04 41 provides JJ-LLC with premises liability only. Therefore, the presumption would be that JJ-LLC procured only a Commercial Property policy, and rather than obtaining a CGL, it is depending on AI status under Jill’s HO for the premises exposure as the owner of the dwelling. In my view, this is not recommended. I think JJLLC needs the broader commercial liability coverages in a CGL. One last point is that under ISO rules, the HO 04 41 Additional Insured endorsement cannot be attached to an HO-4, although
some markets might do so.
Option #5: Jill is the Named Insured in HO -4. Best option for Jill is the HO-4, free of any connections to coverages related to JJ-LLC. Her personal exposures can be handled here, and the exposures and interests of JJ-LLC can be handled in the appropriate commercial lines policies. One note of caution is that since Jill’s dad is your insured, he is likely the person arranging the coverage for both the JJ-LLC and Jill, since she is in the process of moving from out of state. It is very important to have a conversation with Jill personally, in order to understand the full extent of her personal exposure. A good coverage checklist is the best tool for this. For example, given that she is a graduate student, it’s quite possible that she may study overseas at some point. This would be an important question, since special coverages would be needed for this exposure. In addition, since she is a new customer to the agency, questions should be asked about auto exposures, as well as myriContinued page 24
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ad other topics, such as owned watercraft or recreational vehicles, items of unusual value, collectibles, etc. Also, a personal umbrella should be a recommendation, as well as flood coverage. The Hold Harmless Agreement. I closely reviewed the excerpt from the hold harmless agreement included in your question. I am not an attorney, so I cannot offer any advice about the legality or enforceability of the hold harmless agreement. Jack should certainly consult appropriate legal counsel regarding advice on this document. Here are my thoughts, from an insurance perspective. (1) I believe this would qualify as an "insured contract" in the ISO CGL. (2) However, the ISO CGL, nor any insurance contract that I am aware of, would cover "all liabilities,
claims, costs, expenses, judgments, or causes of action..." Two key points. First, the ISO CGL only applies to Bodily Injury, Property Damage, Advertising Liability, and Personal Injury, which are certainly not “all liabilities.” Second, the “insured contracts”
coverage is always subject to the CGL exclusions. Here is an excellent article from the IIABA’s Virtual University on that: “Contractual Liability Coverage…Does It Override Exclusions?” (3) If you are being asked to provide a Certificate of Insurance which indicates in specific language on the Certificate that the CGL is in full compliance with this agreement, I would advise against that. Since the ISO CGL does not apply to “all liabilities,” a manuscripted statement on the Certificate stating that is does, might be in violation of a provision of Louisiana’s statutes on certificates of insurance, specifically 22:890.H.
22:890.H. No certificate of insurance shall contain references to legal or insurance requirements contained in any contracts, including but not limited to construction or service contracts. The certificate of insurance may list only the Continued page 28
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IIABL AND IIAM
specific forms or endorsements contained in the underlying contracts of insurance. No certificate holder or other interested party may require an interpretation of those forms or endorsements from the insurance agent. The provisions of this Subsection shall not apply to lenders, as defined in this Section, or to certificates of insurance required or requested by a lender from a policyholder. For additional information, see IIABL Technical Advisory #326: “2016 Changes to Certificates of Insurance Statute”
Additional information. “Insuring Homes Owned by LLCs” “How to Insure a Condo Owned by an LLC” 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.
YOUNG AGENTS CONFERENCE AUGUST 17-19,2017 BEAU RIVAGE—BILOXI, MS
Tentative Agenda Thursday, August 17th 12pm
Golf Shotgun Start Fallen Oak Golf Course
Friday, August 18th 1pm-4pm
CE Seminar with Larry Linne Larry Linne is President & CEO of InCite Performance Group
6pm—7pm
Welcome Reception
Saturday, August 19th
9:00am
Continental Breakfast
9:30am—11:30am
Roundtable Discussions
11:30am—1:00pm
Meet the Sponsors Luncheon
6pm—7pm
Cocktail Reception
IIABL & IIAM are pleased to offer first time young agent member attendees free conference registration! The Independent Insurance Agents of Mississippi will process all registration for the year’s conference. Register on-line Download Registration Form Download Sponsor Form JOIN US ON THE MISSISSIPPI GULF COAST!
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Webcasts E&O Risk Management June 10, June 11, June 27, July 6 Available on Demand
Ethics June 19, June 21, July 18, July 19
Available on Demand
Flood June 16, July 24
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.
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Company
Coverage Type
Overall % Impact:
Overall $ Impact:
Number of Policyholders:
Changes
Bitco General Insurance Bitco National Insurance
16-Workers Comp
-4.60%
-$124,776
73
American Alternative Ins
17-Other Liability
+25.8%
+$366,058
3
Ohio Indemnity Company
9 – Inland Marine
+94.7%
+$415,068
2,319
New: 7/1/2017 Renewal: 7/1/2017
Anpac Louisiana Ins Co
Commercial Farm & Ranch Special Farm Package “10” Product 19-Private Passenger Auto
+4.4%
+$90,880
493
New: 11/1/2017 Renewal: 11/1/2017
+10.0%
+$3,120,448
14,962
New: 6/6/2017 Renewal: 6/6/2017
American National General Ins Anpac Louisiana Ins Co
New: 5/1/2017 Renewal: 5/1/2017
LUBA Casualty Ins Co
16-Workers Comp Lost Cost Adoption
-8.80%
-$9,492,658
3,500
New: 7/1/2017 Renewal: 7/1/2017
Farmington Casualty Co Charter Oak Fire Ins Co Phoenix Insurance Co Standard Fire Insurance Co Travelers Indemnity Co Travelers Indemnity Co of America Travelers Indemnity Co. of Connecticut Travelers Casualty & Surety Travelers Property & Casualty
16-Workers Comp Lost Cost Adoption
-6.30%
-$2,964,905
6,185
New: 7/1/2017 Renewal: 7/1/2017
Foremost Property & Casualty Foremost Signature Ins Foremost Insurance Co Amerisure Mutual Insurance Amerisure Insurance Co Amerisure Partners Ins Co
5 – Commercial Multiple Peril
-5.6%
-$173,014
997
New: 7/15/2017 Renewal: 7/15/2017
16 – Workers Comp
-3.20%
-$154,107
218
New: 7/1/2017 Renewal: 7/1/2017
Progressive Security Ins Co
19-Private Passenger Auto
+8.00%
+$30,520,246
163,027
New: 6/23/2017 Renewal: 11/24/2017
Progressive Paloverde Ins Co
19-Private Passenger Auto
+16.50%
$22,255,202
59,455
New: 6/23/2017 Renewal: 11/24/2017
Stonetrust Commercial Ins Co
16-Workers Comp
-3.20%
-$824,560
2,833
New: 7/1/2017 Renewal: 7/1/2017
AmGUARD Ins Co EASTGUARD Ins Co NORGUARD Ins Co
16- Workers Comp
-7.70%
-$269,286
640
New:6/1/2017 Renewal: 6/1/2017
Amended:
-10.3%
-$359,483
Amica Mutual Ins Co
4 – Homeowners
+10.0%
+$331,846
1,451
New: 9/1/2017 Renewal: 9/1/2017
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IIABL GOES TO WASHINGTON
A team of IIABL members lobbied our Louisiana congressional delegation in Washington D.C. on May 4th. Our group included IIABL President-Elect Neil Record, National Director Lee Schilling, Board members Don Stiel, Mike Scriber, Bret Hughes, Joey O’Connor, Past Presidents Clay Mullin and Randy Lanoix, IIABL Member Jim Myers, Young Agent Chair Derek Canchola, Young Agent Vice-Chair Donnie Stiel, IIABL Lobbyist David Tatman and IIABL CEO Jeff Albright. IIABL members met with Senator John Kennedy, Congressman Steve Scalise, Congressman Ralph Abraham, Congressman Garrett Graves, Congressman Mike Johnson and staff members from the offices of Senator Bill Cassidy, Congressman Clay Higgins and Congressman Cedric Richmond. We discussed the following issues with our Congressional delegation.
Flood Insurance We lobbied for a 10-year reauthorization of a reformed National Flood Insurance Program before it expires on September 30th.Some of the reforms that are being considered include increased use of mitigation practices, updated mapping technologies and the purchase of reinsurance to spread taxpayer risk. We also shared our support for a bill that would allow private flood policies to satisfy the mandatory purchase requirement for flood insurance. The NFIP has a debt of over $24 billion, largely due to Hurricane Katrina and Superstorm Sandy. For more than two decades, up until the 2005 hurricane season, no taxpayer money had been used to support this program. There has been considerable discussion in Congress on the role of agents and their compensation levels. We explained how time intensive and Continued page 30 Louisiana Agent 30
complicated the program is to sell and how critical we are in the process. Health Insurance On the day that we met with our Congressional delegation, the U.S. House passed the American Health Care Act. In fact, we were not able to meet with many of our legislators because they were on the House floor voting on this bill. We urged Congress to protect the employer sponsored health care system in any reforms being considered. We asked them to support and co-sponsor the ‘Cadillac tax’ repeal bill (S. 58/H.R. 173). The ‘Cadillac tax’ assesses a damaging 40% tax on health plans that exceed a fixed annual cost which is expected to be less than $11,000 per year for an individual when the law goes into effect on 2020. We lobbied against the idea that is being considered in Congress to tax employees on the now tax exempt cost of their health benefits if the benefits exceed a certain threshold set by Congress. This proposal would have a similar effect as the ‘Cadillac tax’ to discourage employers to offer health plans to their employees.
form efforts. Since the majority of independent agencies are small business pass-through entities (subchapter S corporations, partnerships, sole proprietorships) that file at individual rates, by reforming only corporate rates would further create an uneven playing field for our members. Insurance Regulatory Reform We shared how the Big I remains dedicated to preserving the state-based system of insurance regulation. We asked our Congressional delegation to significantly restrict or eliminate the Federal Insurance Office which was created by the Dodd-Frank financial services reform law. FIO has proven to have questionable value for the insurance market and consumers and could evolve into a regulatory force on the federal level. Crop Insurance IIABL continued to lobby our Congressional delegation against any attempts to cut or cap premium incentives on the Crop Insurance Program in the 2018 Farm bill. We also advocated for assurances that the private sector will remain the primary distribution force of the flood program.
Taxes We urged our legislators to reform small business and individual rates along with corporate rates in tax re-
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Here are some suggestions:
Make sure you understand the coverages available in a cyber liability product (or endorsement to an existing policy). Not all policies provide coverage for a ransomware type attack. Include a cyber liability quote (or indication) on every proposal for every size business. Everyone in the office cannot be a cyber liability expert. Designate one individual to be the point person for the organization. Mandate that clients sign a waiver if they choose not to purchase the coverage.
I have included a few links below for those who want a little more information about the WannaCry attack: YouTube Video describing the WanaCry 2.0 Ransomware attack Wikipedia Article on WannaCry Ransomware WannaCrypt Ransomware Attacks: What You Should Do Agents Council for Technology (ACT) Security and Privacy Resources DocuSign also acknowledged yesterday (May 17, 2017) that one of their computer systems suffered a data breach that resulted in customer and user emails being stolen. If your organization uses DocuSign, you have likely received an email notice. Click here for a more in-depth description of this data breach from Krebs. Both of these incidences should make it clear that data security is vitally important. Data breaches are going to happen again. The WannaCrypt attacks may not be over. The group allegedly responsible for this exploit has indicated they have more on the way that may target Windows 10 machines. These types of attacks are not going away. In our digital world, it’s more important than ever to take all appropriate steps to protect your own organization and your clients’ information.
Commissioner’s Corner The Impact and Future of Flood Insurance in Louisiana As we move into hurricane season and start preparations to safeguard our homes, businesses and communities, it’s a good time to look at the impact of the National Flood Insurance Program (NFIP) and what the future could hold. Floods are the most common natural disaster in the United States and in 2016 there were 19 separate major floods across the country, the most since the recording of floods began in 1980. All 50 states have experienced floods in the past five years and the damage isn’t contained to areas that would normally be considered high-risk. In fact, according to FEMA, NFIP policyholders outside of mapped high-risk flood areas file a quarter of all flood claims. In the past two years Louisiana has endured multiple large -scale flood events including in August 2016 resulting in 26
parishes being declared disaster areas, major flooding in March 2016 with 36 parishes being declared disaster areas and flooding in spring of 2015 with several parishes in north Louisiana being declared disaster areas. The August flood caused billions of dollars of damage to homes and businesses across South Louisiana. Just for that event, the NFIP has paid more than $2.4 billion resulting from 30,000 claims. That makes it the fourth largest NFIP payout event behind Hurricane Katrina, Superstorm Sandy and Hurricane Ike. FEMA statistics show that Louisiana property owners have filed about 450,000 claims since 1978 for more than $19 billion in damages - with claims coming from all 64 of the state’s parishes. The next closest states in terms of payouts are Texas, New York and New Jersey – that have each received between $5-$7 billion from the NFIP. Following Hurricane Katrina, FEMA’s National Flood Insurance Program saw a significant increase in the number of flood insurance policies in Louisiana – from about 380,000 policies in 2003 to nearly 500,000 policies by 2006, an increase of about
30 percent. But memories are short – and the number of NFIP policyholders had been on the decline in recent years. That is, until the August flood event. The number of policies had dipped back down to about 450,000 policies – but it’s increased again to over 490,000. While we have higher participation than the vast majority of other states, the level of NFIP penetration in Louisiana has been disappointing. Statewide, the residential take-up in the NFIP was 23.4 percent as of December 2016. For most parishes, it is far below that. Parishes in southeast Louisiana are leading the pack with residential take-up in New Orleans and the surrounding parishes topping 40 percent. Even still, think about what that means in black and white terms. Ten years after Hurricane Katrina, half of those residents don’t have flood insurance. A solution to this problem could lie in a federal mandate that all federally backed mortgages secured by real estate be protected by mandatory earthquake and flood coverage. Such a mandate would spread the risk of both perils over the entire country with minimal costs for those in lower risk areas.
Even as the NFIP is up for reauthorization by Congress this year, some states are questioning the value of the program. Researchers at UC Davis recently concluded California should consider leaving the NFIP after decades of being a net payer into the system. The researchers audited data back to 1994 and found that NFIP policyholders pay significantly more in insurance premiums than they receive in damage payouts, despite the fact that several of the state’s most damaging floods occurred during the time period under review. Supporters of the NFIP point out that it only takes one big event, such as Superstorm Sandy, to turn a net payer state into a net receiver. We are also seeing states working to promote the private flood insurance market. Our department recently received annual statements from insurers that for the first time provide us with information on the amount of private flood written in Louisiana. Previously, insurers reported the total of federal and private flood combined. The statements show 18 companies wrote $11.5 million in direct written premium for private flood in 2016. That includes first dollar and excess flood coverage written by both admitted and surplus lines companies. The statements show
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more than $250 million in direct premium for federal flood in 2016. We do have a number of challenges to the private flood market. A major concern for the emergence of private flood insurance is the possibility of such coverage disappearing and policyholders having to “bounce back” to the NFIP. Enactment of legislation such as the Flood Insurance Market Parity and Modernization Act (H.R. 2901) that passed the House late in the 114th Congress would lay the foundation for a competitive flood insurance market.
NFIP and to work towards a sustainable future for the program. Meanwhile, we will work towards solutions closer to home so that all of our citizens can have an insurance product that allows them to rest easy during the storms of life.
A second obstacle of particular importance to Louisiana is the development of a reasonably priced market for those areas not insurable in a competitive market. Much of south Louisiana is a “working coast,” with people living on or near the water because that is where they earn their livings supporting the ports, fisheries and oil and gas industries. A substantial portion of the state and its economy would fall into that category, and a dwindling NFIP would soon be in a death spiral without prohibitive rate increases. No depopulation of the NFIP is acceptable unless it includes a market to provide coverage for areas tied to the coastal economy of Louisiana and other coastal states. The third obstacle to the emergence and growth of private flood coverage is the preference for admitted insurance over surplus lines insurance. Surplus lines insurance often leads the way into new markets for high or unknown risk insurance as they recently did with transportation network companies (TNCs). Once the market matures and the risk is better understood, admitted insurers will begin to write more of the coverage. After Hurricanes Katrina and Rita, the surplus lines market was an important source of insurance coverage for the small commercial property market. Any program to develop the private market will have to allow for participation by surplus lines insurers. Passage of a provision such as that in the Flood Insurance Market Parity and Modernization Act, which requires the acceptance of flood insurance from eligible surplus lines insurers, would remove this obstacle to the emergence of a private flood insurance market. Even as we hope the coming years will give us kinder weather, we must safeguard the people and communities that are vital to our state’s economy. I have joined with advocates not only from Louisiana but also from other coastal states to push for reauthorization of the
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GOLD LEVEL
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 EMC INSURANCE
AMERICAS INSURANCE
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IIABL 2016—2017 BOARD OF DIRECTORS & OFFICERS Richard D. Jenkins President Moore & Jenkins Insurance—Franklinton Neil Record President Elect Record Agency, Inc.—Clinton
John L. Beckmann, III Secretary/Treasurer J. Everett Eaves—New Orleans H. Lee Schilling, Jr. National Director Schilling & Reid Insurance—Amite David Dethloff Past President Dethloff & Associates—Shreveport Derek Canchola Young Agent Representative Blumberg & Associates—Baton Rouge Byram H. Carpenter, III Moreman, Moore & Co—Shreveport Brenda Case Lowry-Dunham, Case & Vivien—Slidell Joseph Cunningham, Jr. Cunningham Agency—Natchitoches Donna DiCarlo Riverlands Insurance Services—LaPlace Morris Funderburg Reeves, Coon & Funderburg—Monroe
Ross Henry Henry Insurance Service—Baton Rouge Bret Hughes Hughes Insurance Services—Gonzales Philip McMahon Paul’s Agency—Morgan City Joe King Montgomery Thomas & Farr Agency—Monroe Joseph A. O’Connor, III The O’Connor Insurance Group—Metairie Paul Owen John Hendry Insurance Agency-Zachary Martin Perret Quality Plus—Lafayette David T. Perry Arthur J. Gallagher RMS—Baton Rouge Robert Riviere Riviere Insurance Agency—Thibodaux
Armond Schwing Schwing Insurance Agency—New Iberia Michael D. Scriber Scriber Insurance Services—Ruston Donelson P. Stiel David H. Stiel, Jr. Agency—Franklin
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