wisconsin INDEPENDENT AGENT OCTOBER 2021
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CONTENTS COVER STORY: October is Breast Cancer Awareness Month This month we are dedicating our magazine to raise awareness about the impact of breast cancer. Breast cancer hits close to home in the IIAW office. We are sharing some of our stories and the importance of early detection.
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wisconsin INDEPENDENT AGENT INDEPENDENT INSURANCE AGENTS OF WISCONSIN 725 John Nolen Drive Madison, Wisconsin 53713 Phone: (608) 256-4429 Fax: (608) 256-0170 www.iiaw.com
2021-2022 EXECUTIVE COMMITTEE President:
Marc Petersen | American Advantage - Petersen Group, New Berlin
President-Elect:
Nick Arnoldy | Marshfield Insurance Agency, Inc., Marshfield
Secretary-Treasurer:
Michael Ansay | Ansay & Associates, Port Washington
Chairman of the Board:
Darrel Zaleski | Spectrum Insurance Group, Eau Claire
State National Director:
RISKY BUSINESS.............................................................................10-11 Does the Right Hand Know What the Left Hand is Doing?
DIVERSITY..........................................................................................12-13 The Business Case for Diversity
AGENCY OPERATIONS................................................................14-15 Avoiding Burnout: Building Better Remote Work Boundaries
COMMERCIAL LINES.....................................................................17-18 180-Day ‘Limitation’ in the Commercial Property Policy: Dazed & Confused
AGENCY MANAGEMENT.............................................................22-23 Mistakes on Certificates Versus Clear Policy Language
GOVERNMENT AFFAIRS.............................................................24 Rebecca Kleefisch Entry Sets in Motion Gubernatorial Race
MEMBERS IN THE NEWS..............................................................26-27 COMMENTARY FROM COUNSEL...............................................28-29 Product Recalls - Issue Spotting in Commercial Lines
FOOD FOR THOUGHT....................................................................39
ADVERTISERS INDEX AAA......................................................................31 AMERISAFE......................................................13 Badger Mutual Insurance............................31 Berkshire Hathaway GUARD....................25 Erickson Larsen...............................................23 IMT........................................................................32 Penn National...................................................19 Robertson Ryan & Associates..................15 UFG.......................................................................2 Vizance................................................................16 West Bend.........................................................21 Western National...........................................30
Steve Leitch | Leitch Insurance, River Falls
2021-2022 BOARD OF DIRECTORS Matt Frank | Robertson Ryan & Associates, Milwaukee Mike Harrison | R&R Insurance Services, Inc., Waukesha Aaron Marsh | Marsh Insurance Services, Inc., Rice Lake Dan Lau | Robertson Ryan & Associates, Milwaukee Andrea Nelson | Unisource Insurance Associates, LLC, Wauwatosa Brad Reitzner | M3 Insurance Solutions, Madison Joanne Lukas Szymaszek | Johnson Insurance Services, LLC, Racine Chad Tisonik | HNI Risk Services, LLC, New Berlin
IIAW Staff Matt Banaszynski | Chief Executive Officer 608.256.4429 • matt@iiaw.com Mallory Cornell | Vice President and Director of Risk Management 608.210.2975 • mallory@iiaw.com Kim Kramp | Association and Agency Accounting Manager 608.210.2976 • kim@iiaw.com Trisha Ours | Director of Insurance Services 608.210.2973 • trisha@iiaw.com Evan Leitch | Agency Solutions Advisor 608.210.2971 • evan@iiaw.com Kaylyn Zielinski | Marketing and Communications Coordinator 608.210.2977 • kaylyn@iiaw.com Jeff Thiel | Director of Agency Success 608.256.4429 • jeff@iiaw.com Ian Tisonik | Agency Solutions Coordinator 608.256.4429 • ian@iiaw.com Andrea Michelz | Membership Engagement Coordinator 608.210.2972 • andrea@iiaw.com Diana Banaszynski | Education Coordinator 608.256.4429 • diana@iiaw.com Wisconsin Independent Agent is the official magazine of the Independent Insurance Agents of Wisconsin (IIAW) and is published monthly by IIAW 725 John Nolen Drive, Madison WI 53713. Phone: 608.256-4429. IIAW does not necessarily endorse any of the companies advertising in publication or the views of the writers. IIAW reserves the right, in its sole discretion, to reject advertising that does not meet IIAW qualifications or which may detract from its business, professional or ethical standards. © 2021 For information on advertising, contact Kaylyn Zielinski, 608.210.2977 or kaylyn@iiaw.com.
wisconsin INDEPENDENT AGENT
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Sustained Labor Shortages Increase Liability Risks to Businesses The impact of labor shortages across the U.S., is being felt in every state and industry. Consider: • Hospitals in Virginia are cross-training employees for clinical roles amid a shortage of nurses and other staff. • Hotel workers in Idaho are switching between front desk work and housekeeping duties. • Texas schools started the school year without enough teachers or bus drivers. This shortage is causing supply chain disruptions and straining delivery services, a corporate economist pointed out in a recent Forbes report. Just six percent of respondents expected current labor shortages to end by 2021 according to a National Association for Business Economics survey. Labor shortages can negatively impact business in many ways, including higher liabilities and financial hardship for companies and employees. In turn, this can drive adverse legal action over delays, product shortages, professional errors, and other issues which result from insufficient staff, said Melissa Martin, Professional Liability Broker, Burns & Wilcox in Waukesha, Wisc. “A business that struggles or fails to meet its contractual obligations can trigger a future domino effect which could result in vendors or clients bringing suit against them for not successfully delivering a service,” Martin said. Companies are doing more with less, but that doesn’t always lead to greater efficiencies. “Even if they make the transition to become more automated, the learning curve to implement such resources are still prone to errors,” said Rahmad Bauldrick, Director, Professional Liability, Regional Practice Group Leader, Burns & Wilcox in Chicago.
As the pandemic evolves, new liabilities are identified The effects of the pandemic have been felt by all employers and the risks are evolving along with COVID. Some employers are returning their team members to the office, causing additional stress. “If workers had the latitude to telework and the company’s policies fail to incorporate telework, in some form, on a permanent basis, personnel may decide to work at more progressive companies,” Bauldrick said. Employment-related lawsuits could become a greater issue in the future as workplaces debate COVID-19 vaccination 4 | OCTOBER 2021 |
wisconsin INDEPENDENT AGENT
mandates, Martin added. “As the Delta variant spikes, I think the amount of litigation involving vaccinated versus unvaccinated employer requirements will increase,” she said.
Specific policies can protect businesses and their employees One way to limit the fallout is carrying the right insurance policies, including Directors & Officers (D&O) Insurance, Errors & Omissions (E&O) Insurance and Employment Practices Liability (EPL) Insurance. D&O Insurance can cover a company’s directors and officers or the entity itself. It can respond to lawsuits related to the operations or management of a business. This type of policy often fills liability gaps left by Commercial General Liability (CGL) Insurance, which covers third-party bodily injuries or property damage. An E&O Insurance policy can help pay for legal defense in the event the company or professional is sued and, in some cases, expenses related to bodily injuries or property damage that occurred directly as a result of the professional services provided. “If a third party suffers an economic loss from the professional services received, their E&O insurance policy can make the professional’s client whole again prior to the loss,” Bauldrick said. “The coverage protects both parties.” Cyber and Privacy Liability Insurance is increasingly important for most business owners, particularly if they no longer employ a digital security officer. If cyberattack occurs, this type of insurance can cover ransom payments, regulatory fines, investigation and notification costs, credit monitoring fees for affected customers, and more. It can also cover incidents that occur because of employees having to work remotely. No business is too small to be completely insulated from liabilities and damages, Martin said. Even things out of a business owner’s control – such as supply chain or labor shortage issues – can prompt the questioning of management and trigger a potential lawsuit. “You have to worry about the financial stability of your business,” Martin said. “Your businesses should be protected from liability threats specific to your industry.”
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THE IMPORTANCE OF BREAST CANCER AWARENESS October is Breast Cancer Awareness Month, an annual campaign about the impact of breast cancer. Raising breast cancer awareness is especially important for all of us at the IIAW. To recognize the impact of breast cancer on our lives and to advocate the importance of self-exams, we’re sharing stories from our team. Learn more about the personal and unique experiences from the IIAW, as they open up to help raise awareness and support others on a similar journey: ------------------------------------------------------------
Mallory Cornell: My mom, Regi Tomasovich (1958-2006), was my biggest fan, despite standing 5” shorter than me. 6 | OCTOBER 2021 |
wisconsin INDEPENDENT AGENT
She always had my back and she was my best friend. At the young age of 45, my mom discovered a lump in her right breast. She went through aggressive chemotherapy and seemed to be on a promising road to remission. Almost 3 years to the date of her last chemo treatment, something did not feel right. She returned to the doctor and received the news that the cancer had returned with a vengeance. It spread into her lungs and her hip and then eventually, into her brain. In just 5 short months, she was taken from us at the age of 48. We had no family history of cancer and she didn’t have any “bad habits”. I believe that if she had the same experience today, the outcome would’ve been much more positive given the advancements made thanks to research and advocacy. My story doesn’t have a happy ending, but that’s OK. I’m a strong woman, because a strong woman raised me. It’s my voice that must keep fighting for a cure. Please do your self-exams, get your mammogram and support those in your life who might be battling with their own fight. ------------------------------------------------------------
She credits her self-breast exam, being an advocate for herself and living a healthy lifestyle as to why she is alive today to see her grandchildren grow up. ------------------------------------------------------------
Matt Banaszynski: My mother, Christine Banaszynski, was diagnosed with breast cancer when I was 10 years old. She was a healthy young mother of a 10-yearold, 8 year old, and 5 year old. She discovered a lump in her breast on her own and went to the doctor for further tests.
Trisha Ours: I am in the best shape and health of my life and I have cancer, how can this be? In July of this year I found a lump in my left breast. At the time I thought maybe it was Unfortunately, three weeks went by, and related to my cycle, so I decided to keep an she never heard back from the doctor. She eye on it. By the end of August, I noticed it assumed it was good news, but thankfully my was still there and it felt much different. It is father, who was a health care executive at the hard to explain, but it was like there was a rope time, pushed her to follow up. She talks about inside of me. I was scared and immediately how she was scared, and that ignorance can scheduled an appointment with my Doctor. be bliss, but ultimately called to follow-up. She He didn’t seem to be very concerned during was very glad that she did. When she followed the exam, but still ordered a diagnostic up with the doctor’s office, they didn’t have mammogram and ultrasound because I was good news to share. They were certain it worried about it. I thought I would get in right was cancer, but needed to do a biopsy. away, but due to scheduling, I had to wait 17 She switched doctors and her new doctor days. I immersed myself in my work, exercise, performed the biopsies. The results came back gardening and spending time with my kids to that she had cancer and that it had spread to keep my anxiety at bay. When the day of the her lymph nodes and multiple other places appointment finally arrived, I was extremely in her body. She immediately underwent a nervous but was trying to remain calm and mastectomy and aggressive chemotherapy for positive. The tech explained the procedure 6 months. and said that I may not need an ultrasound but that they would schedule one just in Thanks be to God’s grace, she ultimately beat case. Well, after reviewing my mammogram cancer against staggering odds and continues images, I did need an ultrasound. During to live a healthy life at the age of 67. She is the ultrasound, I watched the screen as the routinely checked to see if the cancer has sonographer captured image after image. I come back. started to worry when I saw the black spots and she started to put measurement makers on them. wisconsin INDEPENDENT AGENT
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When she was done, she left the room to review with the radiologist. It felt like she was gone forever, and I thought I was going to have a panic attack as my mind kept thinking about the images I just saw. When she returned with the radiologist they went over the images and recommended that I come back for not just one but three biopsies. My heart sank as I agreed to come back in the afternoon. I text my husband, mom and some of my closest friends to let them know I had to have a biopsy as I walked to my car to go home. They told me I wouldn’t be able to do much for a few days after, so I decided to eat and do two workouts before I went back. One of my best friends happened to be in the area for work and offered to come with me for the biopsy because she didn’t want me to be alone. At first, I wasn’t going to let her come along, but she was not taking no for answer.
When I met with the surgeon, I was told it is Stage 1A triple positive invasive ductal carcinoma with a grade of 2 for aggressiveness on a scale of 1-3. I was also told that I can be re-staged many times throughout my journey with cancer. I have faith that I will get through this, but I keep thinking if I had not been proactive with self-checks, I could still be sitting here thinking everything is fine and could be in a much more dire situation.
Don’t get me wrong, I have a tough battle ahead of me, but I have an amazing medical team and the best support system anyone could ask for. -----------------------------------------------------------According to WSAW.TV, “In Wisconsin, 5,200 women have been or will be diagnosed with breast cancer in 2021.” In addition to wearing pink throughout the month and donating to breast cancer research, make sure that you are taking the necessary precautions to detect breast cancer early. The best way to detect They took samples from two areas in my breast breast cancer is to perform a self-exam at and one lymph node under my armpit that least once a month. Self-exams require you appeared suspicious and placed clip markers to feel for lumps or changes in your breasts, in each of the biopsy areas. After that, they did and it’s also important to check the tissue another mammogram to make sure the clips as high as your collar bone and under your were in place. The radiologist came in and armpits. Checking monthly will allow you told me everything went well, but then told to know what is normal for your body and me I should start looking into a breast surgeon detect changes. A great way to remember because it was likely cancer! Everything after these monthly exams is to set an alarm or a that was a blur, but I will never forget how calendar reminder. If you notice something upset and concerned his face looked as he has changed, make sure you go to your tried to reassure me that medicine has come doctor to get it checked out. along way and they would get me through it. I had no emotion. I was completely numb as Additionally, the IIAW is raising money for I told my friend when I saw her in the waiting breast cancer research in honor of Trisha. room. Then, I waited for what seemed like an METAvivor is an organization dedicated to the eternity for the call that would change my life specific fight of women and men living with and enter me into this club of “1 in 8 women” stage 4 metastatic breast cancer. If you would that I never asked to be a part of. When the like to donate, please head to our team page: doctor said, “You have cancer,” I thanked him donate.metavivor.org/team/383943. 100% for not sugar-coating things after my biopsy, of every donation to METAvivor and 100% of hung up the phone, and broke down in tears. every fundraiser (after event expenses) goes How was I going to tell my family and friends into their research grants. this news? I was devastated. 8 | OCTOBER 2021 |
wisconsin INDEPENDENT AGENT
BREAST CANCER
AWARENESS Breast Cancer Awareness Month is an opportunity to increase attention and support for the early detection and treatment of breast cancer. You can do your part with monthly self-exams and regular screenings.
BE INFORMED ABOUT BREAST CANCER Breast cancer star ts when cells in the breast begin to grow out of control
1 in 8 women will develop breast cancer in her lifetime
1 in 25 cases is detected in women under 40 years of age. Self-exams for early detection are key.
In 2021, an estimated 281,550 new cases of invasive breast cancer are expected to be diagnosed in women in the U. S .
DONATE TO CANCER RESEARCH We are not just colleagues, co -workers or staff at the IIAW. We are family. We spend countless hours together laughing, cr ying and suppor ting one another at the off ice & at home. Trisha has been a par t of this family for over four years and our mission is to suppor t her through her breast cancer treatment and beyond. Trisha is strong. She is healthy. And she has an amazing personal and professional squad cheering her on, praying for her and here to help ever y step of the way. You can show suppor t to One of Ours by making a donation. The process is fast, easy and secure... and 100% of your donation goes toward metastatic breast cancer research.
DONATE.METAVIVOR.ORG/TEAM/383943 Infographic Sources: American Cancer Society & breastcancer.org
RISKY BUSINESS
DOES THE RIGHT HAND KNOW WHAT THE LEFT HAND IS DOING? As technology allows the ability to service large groups of clients more efficiently, many agencies are increasingly expanding their reach beyond the confines of one metropolitan area. In order to better service their customer base, agencies may open additional locations or may acquire existing entities to expand their business. The management of multiple locations creates new challenges and those challenges if not handled correctly may lead to increased opportunities for error.
attention they need. You should try to visit your other agency locations frequently, at least once a month. Visit each site for a long enough time that the each site does not put on a front for you but actually reveals to you its true method of operation. By allowing each office to become comfortable with your visits, you can build trust and familiarity. The agents and staff at each location must feel close enough to the primary agency to be able to ask questions, share problems and seek feedback.
Controlled growth whether organic or through acquisition can increase efficiencies and reduce cost. However, it is important to manage that growth. Be sure that the “right hand knows what the left hand is doing”. Consistent culture, compliance and communication throughout the agency at all locations, is essential to prevent confusion and potential claims which may otherwise arise from acquisitions and dispersed locations.
Establish uniform office procedures and a standard system of compliance. Each province has regulations to protect their own citizens. If you locate a branch office or even a teleworker, in another state, you must research licensing and other business regulations impacting your insurance operation. Failure to comply with regulatory requirements could lead to regulatory investigation, disciplinary action, or even the possible revocation of your license.
Make sure all staff understands your agency culture. Owners, producers, agents, CSR’s and all staff must understand the focus of the business. If the agency’s stated focus is on personal lines, then the agency should not deviate into complex specialized lines. If the agency focus is on certain niches of business, the agency should train their agents and supporting staff on how to service those markets. Often claims begin when the agency attempts to sell insurance products with which it is unfamiliar. Understand your focus. If you are acquiring agencies, acquire those that fit your vision. Then share your vision with all staff at every agency location on a regular basis. Help your team see what the agency is trying to accomplish and how each person can contribute by staying focused on the goals of the entire organization. When the workload is heavy and clients demand your attention at your primary agency location, it can be difficult to give your attention to the other office locations. But in order to keep those other locations in line with your vision, you must provide them with the 10 | OCTOBER 2021 |
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If adjustments are needed to be made as a result of the regulations do not begin operating your business until you comply with the law. For example, an agency had a CSR move to another state and began working remotely as a clerical assistant to their Personal Lines Manager. This employee’s job description did not entail discussing or recommending coverage with clients, and the agency believed that her job description was in line with the requirements of the state department of insurance. However the department viewed it differently and fined the agency $7,000 for the employee not having the proper license and viewed the tasks performed by this employee as “effectuating the sale of coverage”. As soon as the agency was notified of the infraction, they made changes to her job description and directed her to acquire the proper license. They then established a Director of Compliance and Compliance Committee to monitor the activities on an ongoing basis.
Standard operating procedures will enhance the efficiency and management of multiple agency locations. Staff can transfer among agencies, without extensive readjustment. The essential procedures should not vary. Each agency should have similar procedures regarding date-identification of communication with clients and carriers. Additionally, documentation of coverage offered and rejected, and maintenance of expiration lists should be standardized. This excerpt from a letter we received from the attorney retained to defend an insured, reveals the difficulties in offering a defense when procedures are not followed. The litigation arose from damage sustained by a commercial enterprise where the carrier argued that the agency had not provided the necessary information for the carrier to quote coverage, despite several requests. Counsel stated the agency “has no documentation that it sent the proper information and the agent who worked on the account left the agency several years ago on unfavorable terms. The agent’s CSR says the agent was not detail oriented, was not good about providing information, and often made mistakes.” Defense counsel opined that it was highly likely the judge will rule that the agency failed to provide the necessary information. The agency itself had a strong culture of compliance but suffered from one agent who had not followed the standard office procedures established and who, thus, created a significant problem for the agency. In addition to implementing uniform procedures around the process of file documentation,the agency should also implement uniform procedures for diary and suspense systems. There should be a centralized agency management system and computers in each location should be compatible with one another. In fact, it is likely that computer systems will become a backbone for your organization as offices are spread out geographically. Additionally, it is essential that you ensure adequate security of personal information acquired from your insureds, and that you provide proper privacy training to all employees. The use of encryption and other measures to protect personal data when transmitted is important. If employees use smart phones, verify the phones are password protected. As part of the establishment of standardized procedures, make sure the staff in each location knows the method to report an errors and omissions situation. Establish and discuss the procedure with all agents and employees. Do so regularly to prevent hesitation in reporting at the time of occurrence. Don’t let problems linger. Delays could create coverage issues with your professional liability carrier. Communication is a key to successfully running multiple locations. Free and open communication with all staff is very important when you have multiple
locations. Neither the culture nor the compliance can happen if you neglect to focus on communication. Have weekly staff meetings by phone or webinar. Have your office personnel get together at least once or twice a year to enhance communication between people on all levels. Communicate your vision to all managers in all locations and they in turn must commit to clearly communicating your vision to others in the off-site agencies. Regular audits and evaluations of the manager and the office are critical to making sure your vision is being carried out according to your expectations. While striving for positive energy in your organization, do not avoid discussing problem situations. Consider learning opportunities which may present themselves from potential claims situations. Educate your employees about the situations which have created problems in one office so other office sites can avoid the same mistake. Growth is positive when controlled but be sure that the “right hand knows what the left hand is doing”. Consistent culture, compliance and communication throughout the agency at all locations, can be essential to preventing confusion and potential claims which may otherwise arise from acquisitions and dispersed locations. Annette Hollingsworth has spent over 30 years in the insurance industry. While with ERC /GE Insurance Solutions/Swiss Re, Annette Hollingsworth has served in a variety of capacities ranging from claims to underwriting, legal to regulatory services and global compliance. Annette now serves in the Products unit where she supports the Insurance Agents Professional Liability underwriters in both the US and Canada. She attended Washburn University undergraduate and KU Law School. She has her JD., CPCU, CLU, and ARC designations. This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re”) and/or its subsidiaries and/ or management and/or shareholders.
>A nnette Hollingsworth,
Vice President, Swiss Re Corporate Solutions
wisconsin INDEPENDENT AGENT
| OCTOBER 2021 | 11
DIVERSITY
THE BUSINESS CASE FOR DIVERSITY The year 2020 was a challenging one for people around the world. The COVID-19 pandemic kept most of us indoors for our health and safety — and the pandemic continues to disrupt nearly every aspect of our lives. Last year, the continued plague of social injustice also produced an uprising in protests and outcry like the world has never seen before. Being a manager in a virtual environment during these trying times was stressful for many. As leader of Erie Insurance’s African American Affinity Network (EAAN), I felt compelled to find unique ways to get our ERIE Family engaged in diversity initiatives such as empathy training, culture education and competency growth opportunities. Despite the challenges of doing this work virtually, we implemented several different programs during this time. ERIE held a virtual Juneteenth celebration that included CNN correspondent Bakari Sellers speaking to Erie Insurance employees. ERIE also initiated a diversity loan program for its independent agents that provides an opportunity to advance marketing, hiring, networking and education with a diversity focus. ERIE also held several meetings and listening sessions across the company that built upon empathy training in an open forum venue that gave employees an opportunity to express their opinions and learn from each other. There was a new level of collaboration within the ERIE Family that made me proud and our corporate Diversity, Equity and Inclusion (DEI) Department continues to further enhance our 12 | OCTOBER 2021 |
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work in this area. Our work was well received and earned ERIE national recognition. In September, ERIE earned three Diversity Impact Awards from the Global ERG Network, the world’s largest network of employee resource groups dedicated to making measurable progress on diversity, equity and inclusion. Our African American Affinity Network and the company’s Dignity & Respect Affinity Network were both named Top 25 ERG Diversity Impact Award recipients by the organization. I was also proud to be named one of five recipients of Diversity Impact Executive Sponsor of the Year honors for our work during one of the most difficult times for social injustice in this century. Awards and recognition are great, but we know there is still much work to be done. I look forward to bringing not only insurance and sales expertise to Wisconsin in my new role, but also helping to advance diversity, equity and inclusion with independent agents across the state. ERIE’s Wisconsin branch office is in Brookfield, but our efforts will extend across Wisconsin. It’s important to remember that the diversity efforts of independent agencies and insurance carriers are not just feel-good activities. Pursuing and educating yourself on diversity is a true business imperative. Our country and communities continue to diversify year after year. Diversity empathy continues to become more mainstream and businesses that identify and
embrace opportunities to engage with diverse customers and communities are achieving even greater success. As we look ahead, we all must continue to consider the tough questions. As independent agents, how much longer will I be viewed in my community as “caring” for my customers if I don’t truly recognize and celebrate the beauty of what makes them different? How much longer will I be able to grow my customer base if I don’t understand and meaningfully engage with some of the fastest-growing population groups in our nation?
----------------------------------------------------------------Erie Insurance continues to grow in the State of Wisconsin. On July 15, 2021, Fred Johnson took over as the Vice President and Wisconsin Branch Manager for Erie Insurance (ERIE). Fred has more than 10 years of experience in liability, property and material damage claims roles. Over the past decade, he has served as a sales manager in Ohio and ERIE’s Canton (Ohio) Vice President and Branch Manager. During this time, Fred also founded Erie Insurance’s African American Affinity Network/Employee Resource Group. He continues to lead this group as its executive sponsor for Erie Insurance.
The business case for diversity — both within our agencies and with our customers — has never been more apparent. If you haven’t started your DEI journey, now is a good time to begin. If you’ve already taken that first step, now is a good time to take another. I am passionate about this work and invite you to join me and IIAW in this effort.
>F red Johnson
Vice President and Wisconsin Branch Manager, Erie Insurance
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| OCTOBER 2021 | 13
AGENCY OPERATIONS
AVOIDING BURNOUT: BUILDING BETTER REMOTE WORK BOUNDARIES Let’s face it: working from home takes some getting used to. Depending on the type of employee, some use it as one long coffee break, or they simply don’t know when to switch off. The majority of remote workers fall into that second camp, as statistics bear out. A recent Catalyst report shows that COVID-related work burnout was reported in 88.4 percent of survey respondents, with 60.7% of those reporting high levels of burnout.
Setting Clear Work/Home Boundaries To find that balance, you need to keep both areas of your life separate. But how do you do that when work and home are the same place? Start with creating boundaries. Login/logout. When the computer/laptop is on, you’re working. That simple shift in thinking – and in presenting your boundaries to other people in the home – gives you a more defined mindset. When you logout, you’re now on personal time. Work cannot interfere.
Despite the positive benefits of remote work – feeling more innovative (63%); being more engaged in work (75%); feeling more included (93%), and; feeling more likely to remain committed to the organization – some Set regular hours. Set a work schedule. For instance, workers are overdoing it. in by 8 am, out by 4 pm. Stick with your schedule as closely as possible. Establishing a routine creates a More than just a few, it would seem. According to an clear boundary between work life and personal life. Indeed.com survey, 52% say they have experienced or are experiencing burnout in 2021 – an increase Reintroduce your “commute.” Before starting your over pre-COVID survey where just 43% felt burnout. day, go out for coffee, take a quick walk, or go for a And 67% believe burnout has worsened during short drive. Treat this as your psychological commute. the pandemic. They’re reporting working longer You are leaving home, and arriving back at your work hours, and that, says 27% of survey respondents, is station. Create that mental separation between work attributing to feeling burned out. and home, even if they are in the same location. With so many of us working remotely, understanding how to prevent or alleviate burnout is critical. Fortunately, just a few modifications in your workday – and your behavior – can bring more order to your day, and deliver a better work-life balance.
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Schedule breaks. Working in an office is filled with breaks – chats with coworkers, coffee breaks, lunch breaks, even exercise breaks. When working remotely, schedule breaks throughout your day. Put them on your calendar and don’t allow anything to get in the way. Walk, stretch, get out of your workspace and do something that isn’t work-related. Two small breaks along with your lunch break can reset your balance.
Limit work-related communications to work hours. Work-related emails, texts, and calls should be restricted to work hours. Establish with your employer and colleagues when you’re available – put your availability in your signature. Anything that comes in after quitting time can wait. The same goes for personal chores. The more that invade your work life, the longer your workday becomes and the more blurred the line between work and personal becomes. Limit errands to your breaks, and don’t allow family or partners to interrupt with personal issues. Save them for your breaks. Log out at the end of your shift. Turn the machine down. Log off. Put away papers and stow the laptop. No matter how big or small your remote workspace is, putting work aside physically will help you put it away mentally, as well. Ask for help. Your manager cannot know you’re overworked unless you say so. If you feel you’re unable to keep up with the amount of work coming in, schedule a conversation. Let your manager know what you can handle reasonably.
Ask for their support, and work with them to devise a more manageable workload. Stay social. Believe it or not, plenty of burnout occurs when people feel isolated from coworkers and their employers. Stay connected to your coworkers. If you can’t meet in person, meet virtually. Have virtual happy hours, celebrate birthdays and milestones, or host a virtual game night. Reconnecting with your workmates can be energizing. Moving Forward Confidently Also, don’t forget to take time off. Use those mental health days, sick days, and vacation days to get away from work and recharge. Burnout can be crippling and demoralizing. Combatting it with a plan that separates work from home, and puts limits on your availability, can protect both your work hours and your personal time.
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180 DAY ‘LIMITATION’ IN THE COMMERCIAL PROPERTY POLICY: DAZED AND CONFUSED Within ISO’s Building and Personal Property Coverage Form (CP 00 10), a 180-day limitation applies to three situations:
Key terms and conditions within this language must be reviewed to understand how this provision applies:
• Within the Additional Coverage – Debris Removal. Simply stated, debris removal expenses, up to the eligible limit, are paid only if they are reported within 180 days of the direct physical loss. • Within the Additional Coverage – Pollutant Clean-up and Removal. Like coverage for debris removal, the forms states that is pays for eligible expenses only if reported in writing to the carrier within 180 days of the date of the Covered Loss. • As part of the requirements of the Optional Coverage – Replacement Cost. This use of the 180 day “limitation” in the ISO form is the subject of this article.
• “You…”: The very first word of this provision points to WHO gets to make what decision. The “you” is the named insured. From the beginning it is clear that the named insured is making a decision. • “…actual cash value basis…”: What does the “you” or the named insured get to decide? The named insured is given the option to make a claim on an actual cash value (ACV) basis rather than on a replacement cost basis as allowed when the insured choses this optional coverage. • “In the event…”: Means, “If.” •“…you may still…”: The you/named insured has the option to change his/her/its mind. • “…notify us…”: If the you/named insured changes his/her/its mind, the insurance carrier must be notified. • “…within 180 days after the loss or damage.”: Although the you/named insured has a right to change his/her/its mind regarding ACV versus Replacement Cost, that right expires 180 days after the loss.
ISO Coverage Form Language To begin this discussion, let’s review the relevant “180-day” wording found within the Replacement Cost provision of ISO’s CP 00 10: c. You may make a claim for loss or damage covered by this insurance on an actual cash value basis instead of on a replacement cost basis. In the event you elect to have loss or damage settled on an actual cash value basis, you may still make a claim for the additional coverage this Optional Coverage provides if you notify us of your intent to do so within 180 days after the loss or damage.
What does this mean? Simply, the INSURED (not the insurance carrier) has the option to settle the property loss on an ACV basis rather than a replacement cost basis when this optional coverage is chosen.
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However, this provision gives the INSURED (not the insurance carrier) the right to change its mind and seek recovery on a replacement cost basis – provided the insurance carrier is notified of such intention within 180 days of the loss. All decisions within this provision are those of the INSURED. None of these decisions are given to the insurance carrier. What This Provision Does NOT Allow Insurance carriers misapply this provision regularly, and in many unique ways. This provision does NOT allow: • The insurance carrier to deny replacement cost if the damage is not discovered until more than 180 days after the loss occurred. Note again that all the decisions within this provision lie with the insured and NOT the insurance carrier. If, upon discovery of the damage, the named insured makes it known that repair or replacement is desired, the insurance carrier owes replacement cost. The only caveat to this may be the insured initially stating that they have no intention to repair or replace and changing their mind later. Past the 180 days, the insured does not have the ability to flip-flop on the ACV vs. Replacement Cost decision. But again, if it’s stated up front that replacement cost is desired, it doesn’t matter how long after the loss the damage is discovered, replacement cost is owed. • The insurance carrier to deny replacement cost because repairs or replacement took longer than 180 days. Nowhere in this provision is there a specified time limit for repairs. The only requirements for payment on a replacement cost basis are: 1) Adequate coverage amounts; 2) The Replacement Cost optional coverage has been chosen; and 3) Actual repair or replacement of the damaged property. While the policy does state that repair or replacement must be completed “as soon as 18 | OCTOBER 2021 |
wisconsin INDEPENDENT AGENT
reasonably possible,” the policy does not place a time limit on what this phrase means. There are times when a damage may not be discovered for more than 180 days (i.e., hail damage). Nothing in this provision allows the carrier to avoid paying replacement cost. Time to repair or rebuild often takes more than 180 days, especially for a major loss. If the carrier was able to deny replacement cost simply because the repair/replacement took more than 180 days, replacement cost coverage in the commercial property policy would be almost illusory (sometimes it takes longer than 180 days just to dig the first hole for the replacement building. Proper Application of the 180-Day “Limitation” for Replacement Cost First, note who gets to make what decision. The named insured (not the insurance carrier) gets to decide whether or not he/she/it wants coverage on an ACV or replacement cost basis. Second, IF the “you” initially chooses ACV rather than replacement cost, that same “you” has the ability to change its mind and chose replacement cost – if such choice is made within 180 days of the loss. Lastly, if the named insured chooses replacement cost within the specified time period, there are adequate coverage limits, and repairs or replacement actually occurs, the insurance carrier owes replacement cost. Nothing within the 180-day “limitation” allows the insurance carrier to make any decisions or take any action; it only allows the insurance carrier to respond to decisions made by the insured. All this provision does is allow the insured to change its mind!
> Chris Boggs, Executive Director Risk Management and Education, Big I Virtual University
In 1919, A group of Pennsylvania farmers founded Penn National Insurance to provide affordable workers’ compensation insurance. Today, Penn National Insurance sells property-casualty insurance in 11 states by partnering with more than 1,200 independent agency operations. In 2012, we affiliated with Wisconsin-based, Partners Mutual Insurance Company. As one company, we bring the personal attention and local focus of a regional carrier, along with the quality of products and services of national carriers. Interested in partnering with a thriving insurance carrier with superior customer experience? We are looking for select commercial lines-oriented agencies in Wisconsin. Contact: Vicki Lentz 262-432-3420 vlentz@pnat.com
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An Equal Employment Opportunity/Affirmative Action Employer ©2020 Penn National Insurance
Policies issued for domiciled businesses and individuals in Wisconsin and Iowa are underwritten under our affiliate, Partners Mutual Insurance Company. wisconsin INDEPENDENT AGENT
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IIAW CONTINUING EDUCATION
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Contracts Agents Should Read
E&O Risk Management: Understanding Risk Mitigation and E&O Claims The Guy in the Bar Returns
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Coverage Disputes Between Thompson & Boggs, You Be the Judge
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Builders Risk and Contractors Equipment
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Those Kids and Their Cars
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11/17
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E&O Exposures: Websites & Social Media
Business Auto Claims That Cause Problems
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It shouldn’t take debris from half a mile away slamming into your customer’s building to find out who you can trust.
BUT SOMETIMES IT DOES. And that’s the Silver Lining®.
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| OCTOBER 2021 | 21
AGENCY MANAGEMENT
MISTAKES ON CERTIFICATES VERSUS CLEAR POLICY LANGUAGE “Can a certificate of insurance limit the breadth of protection provided by the insurance policy and endorsements?” This has to be the weirdest certificate of insurance (COI) question I have ever been asked. Generally, the question goes the other way, asking if language on a COI can broaden coverage. Technically, the answer is the same regardless of whether the COI language “broadens” or “narrows” coverage – no, the COI does not alter coverage. However, and there is always a “however,” the practical answer can be “yes, the COI does alter the breadth of coverage” IF the holder is harmed due to detrimental reliance on the information contained in the COI. Somehow, it seems unreasonable to assert that the holder can be harmed by detrimental reliance if wording in the COI narrows the breath of protection. Because detrimental reliance does not seem to be an issue, the answer is back to no, the COI does not affect the breadth of coverage provided by the policy. (Besides, the concept of “detrimental reliance” is for the benefit of the holder.) Even the disclaimer language contained within the COI supports the idea that coverage is not altered. The COI (ACORD 25) specifically states: “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER.”
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According to the COI language within the form, coverage is not amended in any way. Seems relatively clear that, short of detrimental reliance, nothing in the COI alters the reality of the policy language. Back to the initial question, and the reason for this review, “Can a certificate of insurance limit the breadth of protection provided by the insurance policy?” Obviously, the COI cannot narrow the clear policy language any more than it can expand it. Why, then, is this a question to consider? When the insurance carrier tries to get out of paying a claim because of information contained on the COI. How absurdly ironic. It is understandable for a carrier to attempt to avoid paying a claim because the COI expands coverage. But it seems incredibly ridiculous (maybe not quite to the level of bad faith, but close) for the insurance carrier to then use the COI to claim that the policy doesn’t respond because the COI narrows the breadth of coverage. The carrier cannot have it both ways. Either the COI affects coverage or it does not! Let’s use the Automatic Additional Insured endorsements as an example. For this example, the narrower of the two available ongoing operations automatic additional insured endorsements is used, ISO’s CG 20 33 - Additional Insured-Owners, Lessees or Contractors-Automatic Status When Required in a Written Construction Agreement With You. This is considered the narrower of the CG 20 33 and CG 20 38 because it requires “privity of contract,” meaning that to be an additional insured, the party must be the contracting party. The CG 20 38 automatically extends AI status to any party requiring such status in the contract, not just the contracting party. (Irrelevant to this article, just for information.)
ISO’s CG 20 33 extends additional insured status to, “any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.” “Any” is a relatively broad term – it means any. The wording extends AI status to “any person or organization” the insured is performing operations when a written contract requires AI status be extended to that contracting party. There is very little doubt of the intent. If the contract requires AI status be extended to the party with privity of contract, AI status is extended. How could the COI possibly be used to narrow this grant of protection? Many agents are in the habit of listing the relevant project in the Description of Operations; or possibly such listing is required by the contract, but does listing the wrong project in the COI negate the grant of AI status found in the endorsement? Assume the insured works on many projects for the upper tier contractor, each under separate contracts, and all contracts require AI status. Presently the insured is working three projects: • Johnson Project at 123 Main Street; • Smith Project at 321 King Street; • Jones Project at 456 Meeting Street. The agent issues a COI for each of the project but forgets to change the project name within the COI’s Description of Operations. Does the listing of the
Johnson Project in the COI for the Smith Project change the grant of AI status? Don’t laugh! This is a real possibility, especially if the loss is large enough. Let’s answer three questions: • What does the endorsement require for a party to be an AI? A written contract. As was already stated, each project was under separate contract. But even if all projects were on the same contract, there is still a written contract in place requiring AI status. • Does the endorsement reference any documents OTHER THAN the written contract? Well, no. The only document referenced in the endorsement is the contract. The COI isn’t contemplated in the application of the endorsement. • Does the COI alter coverage? Seems this has already been addressed. Technically no, unless the HOLDER is harmed by detrimental reliance. This leads to the ultimate question, does having the wrong project and/or address affect the extension of AI protection to the upper tier contractor? No! Certainly no insurance carrier would attempt to use a COI to limit coverage when they are endlessly stating that a COI does NOT expand coverage. This would be the height of irony and an ethical low point. > Chris Boggs, Executive Director Risk Management and Education, Big I Virtual University
GOVERNMENT AFFAIRS
REBECCA KLEEFISCH ENTRY SETS IN MOTION GUBERNATORIAL RACE Former Lieutenant Governor Rebecca Kleefisch officially launched her anticipated gubernatorial campaign setting in motion a high stake, competitive race for Wisconsin Governor next year. Kleefisch, 46, is the first known Republican candidate to join the race in a challenge to first term incumbent Democratic Governor Tony Evers, who announced that he’s running for re-election. Kleefisch served as Lieutenant Governor under former Governor Scott Walker from 2011 to 2019. The only other announced GOP candidate so far is businessman Jonathan Wichmann, a relatively unknown name in the race. Other names mentioned as possible Republican primary contenders are State Senator Chris Kapenga of Delafield, State Representative John Macco of Green Bay and 2018 U.S. Senate candidate Kevin Nicholson. But Kleefisch is clearly the heavy favorite among Republicans where she has a strong statewide name ID and has been traveling the state for the past year talking about her policy priorities. The 2022 midterm elections are traditionally a challenge for the political party in the White House and Wisconsin’s race for Governor will be one to watch closely considering those headwinds will be strong. The partisan primary election is on Tuesday, August 9, 2022 and the general election is on Tuesday, November 8, 2022. Gov. Evers Signs Bill Freezing UI Tax Rates Through 2023 As employers continue to deal with challenges brought about by the COVID-19 pandemic, the Wisconsin Republican-controlled state legislature and Democratic governor have found some common ground this legislative session to help try and ease the burden on businesses. Governor Tony Evers signed legislation this past summer that prevents an increase in Unemployment Insurance (UI) contribution rates on employers through 2023. 24 | OCTOBER 2021 |
wisconsin INDEPENDENT AGENT
This is a positive development for businesses all throughout Wisconsin. Assembly Bill 406, now known as 2021 Wisconsin Act 59, passed both houses of the state legislature unanimously with no opposition. The newly enacted legislation: • Prevents the increase of unemployment insurance tax rates on employers by ensuring the state remains in Schedule D for tax years 2022 and 2023; and • Requires $60 million of General Purpose Revenues (GPR) to be transferred into the UI trust fund in each fiscal year of the 2021-23 biennium to offset any lost revenue By way of a little background, under state law most private employers are required to make regular payments to the Unemployment Insurance (UI) program at a rate determined by state statute. State law requires two types of payments - contribution payments and solvency payments. Both types of payments are tied to one of four schedules (A-D) with Schedule A containing the highest rates for employers to pay and Schedule D containing the lowest rates. The balance of the Unemployment Reserve Fund on June 30th of each year determines which schedule will be in effect for the next calendar year. State law specifies that Schedule D is in effect for any calendar year whenever, as of the preceding June 30th, the fund has a cash balance of at least $1,200,000,000. Schedule D is in effect for calendar year 2021. See new employer Schedule D Unemployment Insurance tax rates for 2021 at https://bit.ly/Oct21GovAffairs.
>M isha Lee IIAW Lobbyist
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SOCIETY INSURANCE DIRECTOR SUSAN FINCO NAMED LEAD DIRECTOR AND VICE PRESIDENT OF GREEN BAY PACKERS
Fond du Lac, WI (August 19, 2021) - Susan Finco, a member of the board of directors at Society Insurance, has been named lead director and vice president of the Green Bay Packers board of directors. In her new role, Finco will lead the team’s 42 directors as chair of its executive committee. Finco is the co-founder and owner of Leonard & Finco Public Relations in Green Bay, Wis. She has served on many corporate boards, including 21 years as a Green Bay Packers director and 9 years as a Society Insurance director. As the first female lead director in the history of the Green Bay Packers organization, Finco and her board govern a company that employs more than 500 people in permanent positions. Although the primary focus is to win Super Bowl titles, key ventures such as the Lambeau Field Atrium and Titletown District illustrate the many facets of managing a world-renowned franchise in a mid-size city. Beyond the team and its balance sheet, the organization is heavily invested in diversity and community initiatives that promote equal educational and economic opportunity. Finco, who has served as a Society Insurance director since 2012, has seen changes in that board room as well. In 2019, the company elected its first femalemajority board of directors. “Susan has been an impactful board member for us,” said Rick Parks, Society Insurance president & CEO. “She is highly respected; those of us who know her are not at all surprised to see Susan step into this important role with a high-profile organization like the Green Bay Packers. She is a leader who always contributes and makes a difference.” ABOUT SOCIETY INSURANCE - Headquartered in Fond du Lac, Wis., Society Insurance has been a leading niche insurance carrier since 1915. Society 26 | OCTOBER 2021 |
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focuses on the small details that make a big difference to its policyholders while offering topnotch insurance coverage, service and competitive pricing to businesses in Wisconsin, Illinois, Indiana, Iowa, Minnesota, Tennessee, Colorado and Georgia.
ACUITY NAMED A TOP PERFORMER BY WARD GROUP FOR 22ND STRAIGHT YEAR
Sheboygan, WI (August 25, 2021) - Acuity has been named to the 2021 Ward’s 50 list of top-performing property-casualty companies, putting the company in the top 2 percent of insurers nationwide. Acuity has earned a spot on the Ward’s 50 every year since 2000, making the company one of only three insurers, and the only regional carrier, to be named to the list for 22 consecutive years. Ward Group is the leading provider of benchmarking and best practices studies for insurance companies. “We recognize Acuity for outstanding financial results in the areas of safety, consistency, and performance over a five-year period,” said Jeff Rieder, partner and head of Ward Group. “In selecting the Ward’s 50, we analyze the financial performance of nearly 2,900 property-casualty insurance companies, identifying the 50 companies that pass financial stability requirements and demonstrate the ability to grow while maintaining strong capital positions and underwriting results.” “Acuity’s continued strength, stability, and consistency are essential to all the families, businesses, agents, and employees who count on us,” said Ben Salzmann, Acuity President and CEO. “We are honored to be recognized by Ward Group for 22 consecutive years as a top performer, which demonstrates our ability to fulfil our promises to customers and grow our business.” Acuity continues to outperform the industry. Over the past two decades, the insurer’s rate of sales and surplus growth has been more than double the industry average. In 2020, Acuity added the most new business in its 95-year history and has already surpassed that amount in 2021. The company’s combined ratio, more than 12 points better than the industry average in 2020, has been under 100 for 10 consecutive years, meaning it has generated an underwriting profit in each of those years. ABOUT ACUITY INSURANCE - Acuity Insurance, headquartered in Sheboygan, Wisconsin, insures over 125,000 businesses, including 300,000 commercial vehicles, and nearly a half million homes and private passenger autos across 29 states. Rated A+ by A.M. Best and S&P, Acuity employs over 1,400 people.
ARLINGTON/ROE COMPLETES ACQUISITION OF MUENCH INSURANCE
VILA-NOVA MITCHELL TO LEAD DEI IMPACT AT IMT INSURANCE
Indianapolis, IN (August 31, 2021) - Indianapolisbased managing general agent and wholesale insurance broker Arlington/Roe & Co. has completed the acquisition of Muench Insurance, a wholesale independent insurance broker located in the Omaha, NE, according to James A. Roe, CPCU, President of Arlington/Roe. Rod Muench, owner of Muench Insurance, is a Professional Liability Broker specializing in placing directors and officers, employment practices, professional liability and cyber coverage. Rod has owned and operated Muench Insurance since December 2012. Prior to that, he managed a branch office for a regional wholesaler that held binding authority for auto, property, liability and professional lines for 25 years. Founded in 1964, Arlington/Roe is a family-owned, independent managing general agent and wholesale property and casualty insurance brokerage firm headquartered in Indianapolis, Indiana with 200 staff members spread across the Midwest and premium volume approaching $250 million. “The purchase of Muench Insurance combined with the scale of our independent, family-owned company will bring expanded access to independent agents in Nebraska and Iowa. Representing over 200 markets allows us to provide agents with additional products, expertise and the opportunity to serve their clients even more,” Roe said. Rod Muench stated, “Having offered solutions to independent agents’ challenges since 1987, I am happy to continue doing so with assistance from a major player in the wholesale insurance world that has the same commitment to serving agents’ needs.”
West Des Moines, IA (September 19, 2021) - Gilmara Vila-Nova Mitchell has joined IMT Insurance as director of diversity, equity, and inclusion (DEI). The new position will be instrumental as IMT moves forward with its commitment to integrating DEI into every aspect of the company’s core and culture. For the past two decades, Vila-Nova Mitchell has helped organizations become more inclusive through her engaging DEI sessions, transformative executive coaching, and innovative systems redesign. Through her signature style of heart, honesty, and thoughtful inquiry, Vila-Nova Mitchell will help IMT Insurance develop an inclusive, authentic, and deeply connected culture. Born in Brazil, Vila-Nova Mitchell’s interest in DEI began when she immigrated to the United States. Her personal experiences as an immigrant and a woman of color greatly impacted her perspective on inclusion. She holds a Bachelor of Multicultural Education from FUMEC University (Brazil) and a MSE in School Counseling from Drake University. She is also a proud mama to two incredible, strong, and fierce daughters. ABOUT IMT INSURANCE- IMT Insurance offers personal and commercial insurance products for your auto, home and business through Independent Agency locations throughout a six-state territory – Iowa, Illinois, Minnesota, Nebraska, South Dakota, and Wisconsin. Learn more at imtins.com.
For more information, agents may contact either Rod Muench (1-800-878-9891 ext. 8703; rmuench@ arlingtonroe.com or Alec Immordino (1-800-878-9891 ext. 8784; aimmordino@arlingtonroe.com). ABOUT ARLINGTON/ROE - Arlington/Roe is a family-owned managing general agency and wholesale insurance broker headquartered in Indianapolis, Indiana operating in the core states of Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Tennessee, Ohio and Wisconsin. Arlington/ Roe was founded in 1964 by Francis Roe, Jim Roe’s father. Jim’s sons, Andy and Patrick Roe, are the third generation to work at the company. Arlington/Roe’s specialty departments include Aviation, Bonds, Farm, Personal Lines, Commercial Lines (Underwriting and Brokerage), Transportation and Garage, Professional Liability, Workers Compensation and Healthcare & Human Services. The company writes in excess of $240 million in annual premium.
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COMMENTARY FROM COUNSEL
PRODUCT RECALLS - ISSUE SPOTTING IN COMMERCIAL LINES This month, I thought I would take a break from Covid-19 updates (fatigue, anyone?), employment issues, legislative prognostication and even insurance regulatory concerns, and highlight some issues you may encounter on the commercial lines side of your agency with clients who experience product recall, retrofit and field campaign situations. As many of you know from our discussions over the years, a substantial portion of my practice is devoted to product safety and product liability issues, including both counseling and litigation. On the counseling side, we regularly assist with hazard communications (e.g., warnings, manuals, instructions and advertising), regulatory scenarios (e.g., consumer products and automotive) and post-sale remedies, such as recalls. One of our initial questions when it comes to recalls is whether the company has recall insurance. I am sure you are aware that recall insurance is not as common as product liability insurance, and the terms of recall policies vary greatly. I will save commentary on recall insurance for another day. Even where there is no recall insurance (or in the quest to find out if there is), as a trusted advisor, the insurance agent or broker with whom the company works will often be a first contact when a potential recall scenario pops up. In this column, I am going to provide some general overview of concerns and issues you may hear and spot that should ordinarily send the client to experienced recall counsel. Reporting Obligations—A Potential Pitfall As a threshold matter, many regulated products (i.e., products where one or more government agencies have jurisdiction over their safe use, like consumer products with the U.S. Consumer Product Safety Commission (CPSC), or automotive products, including vehicle accessories, with the National Highway Traffic Safety Administration (NHTSA), to name a few) are subject to strict
reporting obligations when manufacturers, distributors or retailers learn of potential product safety issues. Note that I said potential safety issues—the final conclusion on the issue may be in doubt, but a reporting obligation may already be triggered. The reporting regimes are too lengthy to be summarized in this column, but be aware that time is of the essence, and many companies have incurred substantial fines for late reporting. It is also important to understand that not every report leads to a recall, as the agencies will work with the company to determine whether corrective action is needed and, if so, what the scope of the corrective action needs to be. When Recalls May Be Necessary—If It Looks Like a Duck Regulated products, as discussed above, have statutory and regulatory thresholds, definitions and agencies devoted to determining whether a company needs to take action with products already in the field. Again, entire seminars are devoted to these thresholds and requirements, but for purposes of spotting the issue when a client calls, if there are reports from end-users (or warranty or service data) that product problems may be leading to safety risks, then it is time to promptly investigate and get legal advice. Earlystage companies may not fully appreciate where the line is in terms of regulated products and which agency they may be dealing with, which can lead to the kind of reporting delay and penalties discussed above. Outside regulated products, the same triggering facts, data and reports from the field should lead to a similar investigation, but that investigation will be driven more by industry standards, expertise and outside consultants, all of which will be used to inform the judgment of the company and its counsel on taking action.
Regardless of industry, field campaigns and recalls take on a number of common characteristics: a public notification to product users that explains the problem and the solution; a means to implement the solution (return product, repair, replace, refund, etc.); and tracking the success of the corrective action to ensure that the campaign is successful in reaching as many users as possible. In addition to lawyers, there are a number of consulting firms that assist with recall logistics, which can greatly benefit smaller companies whose internal resources may be stretched thin. But Can It Be Used Against Us Later? Another common question from companies considering a recall is whether the recall will hurt them in future litigation over the product. The first response to this question is simple: it does not matter, because the first priority is to ensure your product is being used safely. The second (more reassuring) response is that generally a recall cannot be used against a company in product
liability litigation involving incidents that occurred before the recall. Sparing you too much legalese, the recall is considered a “subsequent remedial measure” which, under most jurisdictions’ rules of evidence, is not admissible in court. Conclusion The decision whether to report and recall a product is never simple, but it is always time-sensitive and critically important. Brushing off the possibility, or burying one’s head in the sand, is almost always a recipe for disaster. If your clients come to you with product safety concerns, ensure that they deal with them seriously and with competent counsel by their side.
>J osh Johanningmeier IIAW General Counsel
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YOUR CLIENT LOOKS PRETTY CONFIDENT.
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FOOD FOR THOUGHT
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0.837.7833
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To become an Independent Agent with AAA George Maglares (847) 867-6099 GSMaglares@acg.aaa.com
wisconsin INDEPENDENT AGENT
| OCTOBER 2021 | 31
PRSRT STD US POSTAGE PAID MADISON WI PERMIT NO. 549
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