Insurance Journal West 2016-01-11

WEST EDITION CEA Increasing Policy Count Cleaner’s $7M Comp Fraud Former Broker Stole Premiums

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WEST

Inside This Issue

On The Cover

Special Report: New Look in Franchise Liability

January 11, 2016 • Vol. 94 No. 1 • West

W2

W3

18

32

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

8

Expect P/C Insurance Price Stagnation in 2016: Kroll

W2 Former Southern California

Insurance Broker Found Guilty

of Stealing Premiums

24 How to Help Clients Make Workers’

Comp ‘Employee Friendly’

8

Fitch Expects Modest Gains for U.S. Brokers in 2016

14 Scottsdale’s Miller Departs to

Lead Nationwide’s Venture Arm 14 Wells Fargo Renews Hunt for

Insurance Brokerages to Buy 16 Entrepreneurs Raise $13 Million

to ‘Reinvent’ U.S. P/C Insurance

W2 Owners of Hotel Cleaning Firm

in California Charged with $7M

Workers’ Comp Fraud W2 Oregon Woman Struck by Car Files

Suit over Designer Clothes

32 The Competitive Advantage:

Chris Burand 34 Closing Quote: Stage Set

for Another Banner Year

for Independent Agents

W3 California Earthquake Authority’s

2016 Changes Aim to Increase

Policy Count

18 Closer Look: Changing Oil &

Gas Industry Delivers New Risks,

Challenges 20 Special Report: New Look

in Franchise Liability 26 2016 Insurance Industry Meetings

& Conventions Directory

4 | INSURANCE JOURNAL-WEST January 11, 2016

DEPARTMENTS 10 Declarations 10 Figures W4 People 11 Business Moves 31 MyNewMarkets

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Opening Note

Publisher Mark Wells | mwells@wellsmedia.com

Bases of Discrimination

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orkplace harassment goes far beyond sex and race discrimination.

Today discrimination claims can stem from age, disability, religion, national origin, sexual orientation and gender identity, according to a panel of experts reporting to the U.S. Equal Employment Opportunity Commission’s (EEOC) Select Task Force on the Study of Harassment in the Workplace in a December public meeting.

“Harassment can cover many bases in many different workplaces,” said EEOC Chair Jenny R. Yang. “Equally important, new digital platforms may provide meaningful ways to communicate within workplaces about unacceptable and potentially harassing workplace behaviors.”

With respect to harassment based on disability, the type of harassment often depends on whether the disability is visible, such as quadriplegia, or hidden, such as a psychiatric disability, Lisa Banks, partner in Katz, Marshall & Banks, told the panel. The plaintiff’s side lawyer went on to explain that obvious disabilities may give rise to playground type taunts and mocking; while hidden disabilities may result in intrusive medical questions or gossip and innuendo based on myths, fears and stereotypes.

Zahra Billoo, executive director, Council ‘Harassment can cover many on American-Islamic bases in many different Relations (CAIR) for the workplaces.’

San Francisco Bay area, told the task force that for many Muslims, current events have only exacerbated the potential for harassment. Even when harassment is not mocking or name-calling, individuals may feel harassed if they are constantly called on to explain the actions of other Muslims or to explain their religion or religious garb.

Tara Borelli, of Lambda Legal Defense and Education Fund, testified that as more individuals come out in the workplace as a result of marriage equality, they may find themselves the victims of harassment, including epithets and ostracism. Individuals who are transgender, or who are transitioning, face severe harassment, often by co-workers who mock them in front of customers, making it impossible to do their jobs.

Dan Kohrman of the AARP Foundation Litigation noted that the courts often do not take age-based harassment seriously. Remarks that would be considered to create a hostile environment under other bases such as race tend not to be considered as severe when they involve age. Yet, encountering a daily barrage of negative age-based comments can have the same deleterious effect on older workers as harassment on other bases.

“It’s on us — all of us — to prevent and stop harassment in the workplace, and the EEOC intends to play a critical role in doing so,” said EEOC Commissioner Chai R. Feldblum, who Andrea Wells co-chairs the task force.

Editor-in-Chief

6 | INSURANCE JOURNAL-NATIONAL January 11, 2016

EDITORIAL Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@insurancejournal.com East Editor Young Ha | yha@insurancejournal.com Southeast Editor Amy O’Connor | aoconnor@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Senior Editor Susanne Sclafane | ssclafane@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com Columnists Chris Burand Contributing Writers Denise Johnson, Mark Hollmer, Ken Miller, Pascal Ray, Kevin Ring, Robert Rusbuldt SALES Chief Marketing Officer Julie Tinney (800) 897-9965 x148 | jtinney@insurancejournal.com Sales Manager Lauren Knapp (800) 897-9965 x161 | lknapp@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 | dkaplan@insurancejournal.com Midwest Lisa Whalen (800) 897-9965 x180 | lwhalen@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@insurancejournal.com East (NY, PA and CT only) Dave Molchan (800) 897-9965 x145 | dmolchan@insurancejournal.com Southeast & East (except for NY, PA and CT) Howard Simkin (800) 897-9965 x162 | hsimkin@insurancejournal.com New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Kelly De La Mora (800) 897-9965 x125 | kdelamora@insurancejournal.com MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 x120 | eburns@insurancejournal.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com DESIGN/WEB Chief Technology Officer/Chief Innovation Officer Joshua Carlson | jcarlson@insurancejournal.com V.P. of Design Guy Boccia | gboccia@insurancejournal.com Audience Development Elizabeth Duffy | eduffy@wellsmedia.com Marketing Director Derence Walk | dwalk@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Tim Layer | tlayer@wellsmedia.com IJ ACADEMY OF INSURANCE V.P. of Education Chris Boggs | cboggs@ijacademy.com Sales Executive Romeo Valdez | rvaldez@ijacademy.com Online Training Coordinator Barbara Whiffen | bwhiffen@ijacademy.com ADMINISTRATION Chief Executive Officer Mitch Dunford | mdunford@wellsmedia.com Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com

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News & Markets Expect P/C Insurance Price Stagnation in 2016: Kroll

A

catastrophe losses and depressed investfter a banner 2015 for the U.S. properment income. Kroll said that catastrophe ty/casualty insurance sector, pricing losses in the past three years landed well pressures will lead to stagnation or rate below the 10-, 20- and 25-year averages, even declines in 2016, Kroll Bond Rating Agency though winter storm losses were above averInc. predicted. age.

Pricing will either be Kroll said the lack of flat or down over the next ‘There is a potential major wind events also 12 to 18 months, with the coverage issue and pressured rates and could biggest pressure in comincreased claims activ- have led to complacency mercial lines, property ity with earthquake regarding catastrophe and reinsurance, Kroll said in its U.S. Property/ claims, especially as it exposure and overall risk with some Casualty Insurers 2016 relates to fracking and management underwriters. outlook. wastewater disposal “Although not an earn According to Kroll’s ings or capital issue, there expectations, commercial wells.’ is a potential coverage lines rates will dip in issue and increased claims activity with the low- to mid-single digits, but property earthquake claims, especially as it relates lines and reinsurance rates could decline by to fracking and wastewater disposal wells,” more than 10 percent in response to continKroll said. ued favorable experience and a lack of major weather events. Kroll said that rate changes Not every P/C line is facing pricing started trending downward in the 2014 declines. Kroll noted that personal lines second half, with an acceleration of rate auto saw “notable increases” with a number decreases in 2015. The downward pressure of “market leaders” in 2015, adding that the on rates comes from factors including low trend should continue in 2016.

Still, even as claims frequency in personal lines auto has trended, Kroll said that frequency should trend downward in the years to come due to automobile safety features.

Another line that has seen premium and rate increases is cyber liability. Kroll said that as this line continues to evolve, pricing, while inconsistent, is “expected to increase significantly until loss patterns emerge for specific coverages and forms.”

Kroll said it expects errors and omissions (E&O) and directors and officers (D&O) rates tied to cyber insurance to experience rate increases.

Kroll noted that 2015 will likely be another profitable year for the P/C sector.

“Dampened by record tornado losses in 2011 and Superstorm Sandy in 2012, industry results have been more favorable for the third consecutive year,” Kroll wrote. Even with continued depressed investment income and price softening, Kroll said favorable earnings will place the industry surplus at or near its all-time high heading into 2016.

Fitch Expects Modest Gains for U.S. Insurance Brokers in 2016

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evenues and earnings for public U.S. insurance brokers are likely to modestly improve in 2016 relative to levels reported through nine months of 2015, according to Fitch Ratings’ 2016 U.S. Insurance Broker Outlook report.

The ratings agency said near-term operating performance and balance sheet strength will remain supportive of a stable credit ratings outlook for the brokers in its ratings universe. Fitch said it sees limited potential for rating changes in the next 12 to 18 months, despite anticipating modest improvement in some credit fundamentals.

However, according to Fitch, Willis Group Holdings PLC is an exception. Willis is on Rating Watch Positive due to the proposed merger with Towers Watson & Co. Fitch noted that the merger faced closing uncer8 | INSURANCE JOURNAL-NATIONAL January 11, 2016

tainty tied to gaining Towers Watson shareholder approval. However, on December 11 Towers Watson & Co. won approval from its shareholders for the $8.9 billion merger, overcoming opposition from proxy advisers.

Willis shareholders also supported the combination, according to a statement from both companies.

The sector outlook is stable as debt servicing capabilities are anticipated to remain steady.

A soft reinsurance market with flat or declining premium rate changes in primary commercial insurance segments will pressure brokers’ 2016 organic growth and margins. However, global brokers’ revenues from diverse product and

geographic platforms, including healthcare and benefits consulting, should help offset these headwinds. Strong retention and insured exposure growth from a slowly improving economic environment will also promote revenue expansion.

Fitch said its analysis for a group of publicly traded brokers reveals that on average profit margins were relatively flat in 2015 with two of the five peers reporting reduced margins in part from onetime items. Financial leverage increased for several organizations including the three largest brokers while interest coverage remains favorable and supportive of current rating levels. www.insurancejournal.com

36%

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FIGURES

$650,000 What Yellowstone County, Mont., has agreed to pay to settle a case brought by a former courthouse janitor who died from mesothelioma. The county reached the settlement in November 2015 with the estate of Lauren DuPuis, who filed a civil complaint saying he was exposed to asbestos while he worked at the county courthouse as a janitor.

DECLARATIONS

73

The number of inches of rain that fell in Charleston, S.C., in 2015 as of Dec. 22. The National Weather Service reported that it was the wettest year on record, breaking the previous record set in the city back in 1964.

Qualifying Life Event

“This legislation will help expectant mothers get access to essential prenatal care and help build a stronger and healthier New York.”

— New York Gov. Andrew Cuomo on a new law that expands health insurance access to pregnant New Yorkers. On Dec. 22, 2015, Cuomo signed the bill, which makes New York the first state in the nation to make pregnancy a “qualifying life event” to obtain health insurance benefits at any time through the state’s health exchange.

Muddy Tragedy

“Whether she opened the door or not we don’t know for sure what happened, but she was in the area of the door and the husband heard a scream. He went to look and that’s when the mud was all in the house.”

1,650 The number of identity theft complaints received in 2015 by the Ohio Attorney General’s office as of mid-December. That surpassed the number received in 2014 by about 300. The AG received 1,343 ID theft complaints last year.

461

— The Siuslaw Valley Fire and Rescue Marshal said a woman had gone to let one of her two dogs out when a landslide struck the home she shared with her husband on the central Oregon coast.

Flood Insurance Fairness

“We demand an opportunity as Floridians to have an open and transparent process to see how rates are developed and how rates are being used — since we’re paying 37 percent of the premium.”

— Florida Insurance Commissioner Kevin McCarty, in regards to his quest for fairness for Florida’s flood insurance rates.

Wildfire Detection

“Going forward, DNR fire control will rely solely on aircraft and citizen reporting for the detection of wildfires.”

The number of roadway accidents that Connecticut State Police responded to over the Christmas holiday weekend from Dec. 23 through Dec. 27, 2015. Five of the accidents resulted in fatalities and 56 crashes involved injuries.

— Trent Marty, director of the bureau of forest protection at the Wisconsin Department of Natural Resources. The DNR is taking dozens of towers built mainly in the 1930s and 1940s for spotting forest fires out of commission.

Land Loss Costs

366 The number of days to which an exotic car salvage yard owner in Texas, has been sentenced to federal prison after pleading guilty to insurance fraud. Andy House purchased a 2006 Bugatti Veyron for $1 million in October 2009, insured the car for $2.2 million, and drove it into the Gulf of Mexico in November 2009. He filed a claim but a video of the act taken by a passing motorist was later posted on YouTube. House pleaded guilty in August 2014.

10 | INSURANCE JOURNAL-NATIONAL January 11, 2016

“Every dollar we spend today on coastal restoration and protection will save us many, many more dollars in the future.”

— Chip Kline, chairman of the Louisiana Coastal Protection and Restoration Authority.

A study conducted by the Louisiana State University Economics and Policy Research Group and the RAND Corp. shows that if land loss continues along Louisiana’s coast at the pace predicted by scientists the cost to the state’s economy would be in the billions of dollars. Louisiana has a 50-year, $50 billion coastal restoration master plan to stop land loss and is seeking federal financial support for it.

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News & Markets Former Southern California Insurance Broker Found Guilty of Stealing Premiums

Oregon Wife Files $7.9M Suit After Husband Crushed by Dump Truck

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A

ia Chang, 51, former insurance broker and owner of Lotte Insurance Services in Southern California, was sentenced in December for felony insurance fraud and grand theft.

After her arrest Chang returned $19,218 in stolen premiums with interest to the owner of a sizable construction company.

Chang reportedly collected full Mia Chang payment for an annual workers’ compensation insurance policy and pocketed a majority of the victim’s premium, forwarding only a small amount to the insurer and leaving the business owner without coverage, investigators say.

After receiving a letter from a collection agency for nonpayment of premium, the victim reportedly contacted Chang who assured him there had been an error, that he was still insured and issued him a bogus insurance certificate.

The victim remained suspicious, contacted the insurance company and discovered he

had been uninsured for several months. The victim asked Chang to return the money, but she ignored his request and shortly after, closed her business and disappeared, according to investigators.

Unaware of the resources available to help him, the victim did not file a complaint with the California Department of Insurance for two years. By that time the department had already revoked Chang’s license and she was convicted of grand theft for stealing premiums from five businesses and one individual, according to CDI. The department launched a new investigation and a warrant for Chang’s arrest was issued, which she evaded for over three years until investigators located and arrested her in La Quinta in June 2015.

This case was prosecuted by the Los Angeles County District Attorney’s Office.

Chang pleaded no contest and was sentenced to three years of formal probation and 200 hours of community service.

Owners of Hotel Cleaning Firm in California Charged with $7M Workers’ Comp Fraud

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he owners of a janitorial company serving luxury hotels in Southern California and Nevada have been accused of running a $7 million workers’ compensation insurance and tax evasion scam.

Hyok “Steven” Kwon and Woo “Stephanie” Kwon were arrested in December with bail set at $1 million each, according to the San Diego County district attorney’s office.

The couple own Irvine-based Good Neighbor Services. Prosecutors say they concealed the existence of at least 800 employees to avoid paying millions in payroll taxes and workers’ comp insurance.

W2 | INSURANCE JOURNAL-WEST January 11, 2016

The company’s website says its clients include the Westin, Hyatt, Hilton, Ritz-Carlton, Four Seasons, Omni, Marriott and Sheraton hotel chains, and other hotels including the MGM Grand in Las Vegas.

The website says the company has offices in San Francisco, Santa Barbara, Los Angeles, Orange County, San Diego, Las Vegas and Atlanta.

The Kwons are charged with insurance fraud, tax evasion and extortion. They each face up to 31 years in prison if convicted.

Six other people also have been charged in the alleged scheme.

Copyright 2015 Associated Press.

Medford, Ore., woman has filed a lawsuit against two construction companies after her husband was crushed to death by a dump truck in a construction area on Interstate 5 near Cottage Grove.

Karee Battenfield filed a $7.9 million lawsuit in Multnomah County Circuit Court in late December.

Her husband, Layne Battenfield, was a construction worker and supervisor. On May 1 he was killed when struck by an asphalt dump truck that was backing up in the construction area.

The driver wasn’t cited after investigations by police and the Oregon Occupational Safety and Health Division.

A trooper found no criminal intent or recklessness, and an Oregon OSHA inspector found no safety or equipment violations.

Copyright 2015 Associated Press.

Oregon Woman Struck

by Car Files Suit over Designer Clothes

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Portland, Ore. woman struck by a drunken driver in a crosswalk has filed a lawsuit seeking $4,600 for the designer clothes she was wearing at the time, on top of the cost of her medical bills.

Susan Layne sued in Multnomah County Circuit Court in December. She says the crash not only left her with bruises, scratches and pain but destroyed a Chanel handbag, Prada boots and Burberry trench coat.

Several Portland attorneys said they have never had a client seek compensation for designer clothes, but it isn’t outside the realm of possibility. They say a crash victim with high-priced clothing would be entitled to payment.

Copyright 2015 Associated Press. www.insurancejournal.com

WEST COVERAGE

News & Markets California Earthquake Authority’s 2016 Changes Aim to Increase Policy Count

By Don Jergler

I

t’s about the closest thing to DIY earthquake insurance as one can get, though there’s definitely no indication that the newest consumer-friendly features being rolled out by the California Earthquake Authority will enable people to do without their agents.

CEA this month began offering several new options for consumers who wish to buy earthquake insurance. The new options being launched include a new premium calculator, more deductible options, a rate reduction as well as an advertising blitz that’s hitting television, radio and the internet.

The goal is to get more California home “We’ve been slowly moving forward,” owners to buy earthquake insurance, said Pomeroy said. “Many of these things we’ve CEA CEO Glenn Pomeroy. been working on in the last few years have “When we hear the voice of the conbeen starting to take hold.” sumer, we hear from people who may not New deductibles, lower rates, retrofithave looked at earthquake insurance in ting incentives and more coverage options a while and think it costs too much and are among the new features CEA customthe deductible is too high,” Pomeroy said.

“Their earthquake insurance impression ‘When we hear the voice of the consumer, we is frozen in their hear from people who may not have looked minds.” at earthquake in a while and think it costs He added, “We have all sorts of new too much and the deductible is too high.’ options now coming ers will be seeing this year. their way.”

One of the biggest moves CEA is making The California Earthquake Authority’s is spreading out deductible options from new premium calculator is among the 5 percent to 25 percent, which Pomeroy CEA’s new offerings in 2016. views as a major improvement over the Roughly one-in-10 California homeownoriginal “barebones policy” that offered ers have earthquake insurance, and the only a 15 percent deductible.

CEA has been launching new initiatives “Beginning in January consumers can each year to try and beef up those numchose a deductible as low as 5 or as high bers. as 25 percent,” Pomeroy said. “They now Indications are that it may be working. have options for 5 percent, 10 percent, 15 According to the CEA, the policy count is percent, 20 percent or 25 percent. This is a now the highest it’s been since 1999. There real game changer.” are now more than 876,000 CEA earth Also starting in January an average 10 quake policies in force, a figure that’s been percent rate reduction kicks in — some rising steadily since 2003.

will see higher or lower reductions depending on several factors, including proximity to fault lines.

The CEA is also stepping up efforts to incentivize people to retrofit their homes.

CEA historically offered a mitigation discount of 5 percent off of consumer premiums when a retrofit is completed. The authority is now expanding that to include 10 or 20 percent depending on varoius factors, Pomeroy said.

The authority is also offering a number of expanded coverages.

Pomeroy believes the change coming in the new year that may prove to be the most enticing to consumers is a new premium calculator on the authority’s website. Homeowners can input some basic information like the age of their home, whether it’s a wood frame building, the value, number of stories, and land on a page where a deductible can be chosen, along with options to upgrade coverage.

Visitors then have option buttons to compare rates or find an agent.

“We put them in the driver’s seat so they can design the kind of policy that supports their needs and budget,” Pomeroy said.

www.insurancejournal.com

January 11, 2016 INSURANCE JOURNAL-WEST | W3

WEST COVERAGE

People Mike Roark

Sarah Marsh

Steve Christensen

Lockton’s Mountain West practice in Denver announced that Mike Roark has joined the firm as its senior vice president and construction practice leader.

Roark comes to Lockton from the Moody Insurance Agency, where he was executive vice president.

Previously he was an underwriter and marketing representative for Travelers Insurance and an underwriter for Aetna.

Kansas City, Mo.-based Lockton is a large privately held independent insurance broker.

property, boiler and machinery and product liability.

Global technical services is Atlanta, Ga.-based Crawford’s global solution for large, complex and specialty claims.

M.J. Hall and Company Inc. promoted Sarah Marsh to assistant vice president.

Marsh is part of the firm’s Stockton, Calif., team. She will continue to underwrite and broker excess and surplus line business in the Western U.S. She focuses on general liability, property, excess and professional liability.

Marsh has been with M.J. Hall since 2006. She began as the marketing and event coordinator for M.J. Hall.

M.J. Hall is an insurance brokerage with offices in Stockton, Napa, Woodland Hills, and San Francisco.

Crawford & Co. has named Steve Christensen executive general adjuster for Crawford’s global technical services division in the Los Angeles, Calif., office.

Christensen has 28 years of insurance experience. His specialties include hospitality, flood, earthquake, hurricane, builders risk, wildfire, construction defect, mold,

San Deigo, Calif.-based Cavignac & Associates has named Vy Ouk a commercial lines account manager.

Ouk will identify exposure to loss for clients, educate them on compliance issues and advise them on coverage.

Ouk has nine years of experience the insurance industry. Prior to Cavignac & Associates, Ouk was a mid-loss field property adjuster for Mercury Insurance, a property claims adjuster for Travelers Insurance and a commercial lines marketer for J.L. Hubbard Insurance & Bonds.

Cavignac & Associates is a risk management and commercial insurance brokerage firm.

Owen Oakley, vice president at Heffernan Insurance Brokers, has been named chairman for the San Francisco chapter of the California Trucking Association.

Owen previously served as a steering and planning committee representative for the association. His new duties include overseeing membership growth and the overall success of the San Francisco Bay area unit.

Walnut Creek, Calif.-based Heffernan has offices in San Francisco, Petaluma, Menlo Park, Los Angeles and Orange County, as well as in Portland, Ore.; St. Louis, Mo.; Long Island and New York, N.Y. San Francisco-based Socius Insurance Services Inc. named Ian Bell senior vice president.

Bell joined Socius Insurance Services in 2013 and works on the firm’s management and professional liability team.

Socius Insurance Services is a property/casualty and management liability wholesale broker.

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W4 | INSURANCE JOURNAL-WEST January 11, 2016

License #0488901 12/15/15 3:55 PM

Carl Swan joined Tacoma, Wash.based Propel Insurance’s national senior living practice as a sales executive.

Swan spent the last several years developing risk solutions for long-term care communities across the country.

Propel is a privately owned insurance agency that provides property/casualty, risk management, workers’ compensation, employee benefits, personal insurance and other products.

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Business Moves NFP, Absolute Advantage, Vanorsdale Insurance NFP Property & Casualty has acquired Lake Havasu City, Ariz.-based Absolute Advantage Insurance Services LLC. NFP also acquired San Diego, Calif.-based Vanorsdale Insurance Services Inc. Both deals closed in December. Terms were not disclosed.

Absolute will operate from the existing NFP office in Lake Havasu City, and Brian Castle will assume the role of account executive at NFP. Vanorsdale’s president, Doug Galloway, will assume the role of director of NFP and will report to Paul Saich, California regional president at NFP. The newly acquired operation will remain in San Diego under the direction of Saich and NFP. Absolute is a property/casualty agency that specializes in commercial and personal line services and employee benefits.

Vanorsdale is a property/casualty insurance agency that specializes in providing commercial and personal coverage and employee benefits to the San Diego and Los Angeles communities.

NFP Corp. provides employee benefits, property/casualty , retirement, and individual insurance and wealth management solutions.

Cross Insurance, Knapp Schenck & Co. Cross Insurance, an independent insurance agency based in Bangor, Maine, purchased Boston-based independent agency Knapp Schenck & Com. Terms of the deal were not disclosed.

Knapp Schenck & Co. is a regional property/casualty retail agency providing insurance services to commercial and personal clientele. The agency is based in Boston’s financial district, with a branch office in Braintree, Mass. The firm has 33 employees and reports $35 million in premium volume.

Under terms of the acquisition, Knapp Schenck & Co. will retain its name and continue to operate with the same staff and leadership from Boston and Braintree offices.

Cross Insurance is an independent insurance agency serving 100,000 customers www.insurancejournal.com

throughout the Northeast region.

Cross Insurance, a subsidiary of Cross Financial Corp., provides insurance and financial products including personal and commercial insurance lines, employee benefits, surety bonds, risk management advice and counsel, and products focused on higher education and high net worth needs.

OVIA, Banach Insurance Oswego Valley Insurance Agencies LLC (OVIA), an independent agency based in Oswego, N.Y. has acquired Banach Insurance Agency in Pulaski, N.Y. Terms of the deal were not disclosed.

Banach Insurance Agency is an independent agency offering personal and business property/casualty insurance. Cindy Banach, owner of the Banach Insurance Agency, plans to retire following the transaction. OVIA said it will move Banach Insurance Agency’s customer accounts to its office in the town of Mexico, N.Y. Kathie Hoffman, a Banach Insurance employee, will join the OVIA staff.

OVIA was founded in 1997 with the merger of Dowd & Harrington Inc. and Streeter & VanSanford. OVIA has 24 employees and serves more than 10,000 personal and commercial clients in New York State.

Eastern Insurance, Northwestern Benefit Eastern Insurance Group in Natick, Mass., has acquired Northwestern Benefit Associates, an independent group benefits broker based in Boston, from the broker’s parent company Northwestern Mutual.

Terms of the deal were not disclosed.

Eastern Insurance said Northwestern Benefit Associates’ Boston office will remain open and rebranded as an Eastern Insurance location. Upon completion of the transaction, Eastern Insurance will have 25 locations in New England. Eastern Insurance is a wholly owned subsidiary of Eastern Bank, an independent, mutually owned bank in Boston.

Eastern Insurance provides personal and commercial insurance products, surety, and employee benefits services. The firm was ranked 34th in Insurance Journal‘s Top 100 Property/Casualty Agencies list in 2015, based on total property/casualty agency revenues for 2014.

Chestnut Hill, Rotatori Chestnut Hill Insurance Group, an independent property/casualty insurance agency in Chepachet, R.I., announced that it has acquired Rotatori Insurance, an independent P/C agency also based in Chepachet.

Terms of the deal were not disclosed.

Chestnut Hill was launched in 2013 by Agnone after leadership positions at The Hartford, Travelers, AIG, and Providence Washington.

CoreLogic, FNC Real estate information provider CoreLogic is buying Oxford, Miss.-based FNC Inc. for $475 million.

CoreLogic, based in Irvine, Calif., announced the purchase Dec. 17, saying it wants to integrate FNC’s real estate appraisal software into its products.

FNC will maintain its operations in Oxford, where the company is building a $20 million corporate headquarters, promcontinued on page 12 January 11, 2016 INSURANCE JOURNAL-NATIONAL | 11

NATIONAL COVERAGE

Business Moves

continued from page 11 ising to more than double its workforce to 600.

The sale is scheduled to close by March 31, with CoreLogic using cash and borrowing money to pay for it. The company said the FNC acquisition would add to profit in 2016, excluding certain fees and accounting items.

CoreLogic said the purchase price is 13.5 times FNC’s earnings before interest, taxes, depreciation and amortization.

CoreLogic said FNC’s software is used by 18 of the 20 largest American banks and connects to 80,000 appraisers, property inspectors and title insurers.

Arthur J. Gallagher & Co., The Hawk Agency, Brown Hobbs & McMurray Insurance, Managed Healthcare Solutions Arthur J. Gallagher & Co. (AJG) has acquired The Hawk Agency Inc. in Peoria, Ill. Terms of the deal were not disclosed.

Thomas D. Fliege and his associates at The Hawk Agency will continue to operate in their current location under the direction of Michael Pesch, head of Gallagher’s Midwest region retail property/casualty brokerage operation.

The Hawk Agency is a retail insurance 12 | INSURANCE JOURNAL-NATIONAL January 11, 2016

broker providing commercial property/casualty, employee benefits, risk management consulting and personal lines insurance services for its clients throughout the Midwest.

In a separate deal, AJG also acquired Brown Hobbs & McMurray Insurance in Urbana, Ill. Terms of the deal were not disclosed.

Brown Hobbs & McMurray (BHM) is a retail insurance broker providing commercial property/ casualty, employee benefits, risk management consulting and personal lines insurance services to clients in the Midwest.

Thomas Brown, Paul Hobbs, William Hobbs, Dick and Rich McMurray, and their associates will continue to operate in Urbana under the direction of Michael Pesch, head of Gallagher’s Midwest region retail property/casualty brokerage operation.

In another deal, AJG acquired Managed Healthcare Solutions Inc. in Atlanta. Terms of the deal were not disclosed.

Managed HealthCare Solutions (MHS) provides employee benefit consultation, management and brokerage services for clients throughout the southern U.S. MHS specializes in cost management, employee engagement, and plan design and funding arrangements for group health insurance programs.

Mark Ilgenfritz and his associates will continue to operate in their current location under the direction of David Ziegler, head of Gallagher’s Eastern employee benefit consulting and brokerage operations.

Arthur J. Gallagher & Co. is a brokerage and risk management services firm headquartered in Itasca, Ill. Brown & Brown (Virginia), Ocean Marine, Smith Insurance Brown & Brown Inc. announced that its subsidiary Brown & Brown Insurance Agency of Virginia Inc. has acquired certain assets of Ocean Marine Insurance Agency Inc., Ocean Marine Insurance Agency of

Massachusetts Inc. and Ocean Marine Underwriters Agency Inc. (collectively called “Ocean Marine”). Terms of the deal were not disclosed.

Ocean Marine has annual revenues of roughly $2 million. The firm specializes in maritime insurance products.

Following the transaction, the Ocean Marine team will remain in its current Warwick, R.I., and Fairhaven, Mass., locations and will operate as a branch office of Brown & Brown’s “Flagship Group” maritime operations in Norfolk, Va. In a separate deal, Brown & Brown Inc. also announced that its subsidiary Brown & Brown of Connecticut Inc. has acquired substantially all of the assets of Smith Insurance, an independent agency based in Niantic, Conn. Terms of the deal were not disclosed.

Smith Insurance provides personal lines and commercial insurance services in Connecticut and Rhode Island.

Smith Insurance will continue to operate from its current Niantic location under the leadership of the agency’s executives Bill Budds and Mike Meeneghan.

The agency will report to Don McGowan, executive vice president of Brown & Brown of Connecticut Inc. Brown & Brown (Florida), BenTrust Brown & Brown of Florida Inc., a subsidiary of Brown & Brown Inc., has acquired certain assets of BenTrust.

This includes: Bentrust Financial Inc. d/b/a Bentrust Insurance Group; Bentrust AIB LLC, and Florida MGA LLC d/b/a Delta Dental MGA. BenTrust was founded by Frank Carreras in 1999 and has annual revenues of roughly $4 million.

The firm provides a range of retail insurance products and services to clients throughout Florida.

Following the transaction, the BenTrust team will remain in their current Miami location as a branch of Brown & Brown’s existing Miami operations.

Brown & Brown Inc., through its subsidiaries, offers a range of insurance and related services. www.insurancejournal.com

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NATIONAL COVERAGE

News & Markets Scottsdale’s Miller Departs to Lead Nationwide’s Venture Arm

By Mark Hollmer

M

ichael Miller, the longtime president and chief operating officer of Scottsdale Insurance Co., has quietly moved onto a new executive role with corporate parent Nationwide, where he’ll manage and spearhead strategic investments for the insurance giant.

Miller is the new president of Nationwide Ventures, Nationwide spokesman Eric Hardgrove told Carrier Management, Insurance Journal’s sister publication.

Michael Miller Miller’s new role was formally announced in October both internally and with business partners, he noted.

“He is going to be…working to successfully source, manage and executive strategic investments for Nationwide,” Hardgrove

explained.

Tom Clark will take over Miller’s slot at Scottsdale, an E&S insurer and wholly owned subsidiary of Nationwide. He is a 25-year industry veteran who was most recently executive vice president for Nationwide Excess & Surplus/Specialty Insurance. He also was a senior executive with Allied Insurance, Nationwide’s independent agent brand, which now uses the Nationwide name.

Miller first joined Nationwide in 1985 and signed on with Scottsdale Insurance in 1995 as chief financial officer. He became Scottsdale’s president and COO in 2004.

Scottsdale and Nationwide E&S are essentially the same entity at this point, stemming from a rebrand announced in 2014 with a focus on using the Nationwide name. That effort is being undertaken in phases.

Hardgrove explained that Nationwide first disclosed a planned change in leadership at Nationwide Excess & Surplus Specialty Insurance in 2014, at which point it identified Clark as Miller’s successor.

Nationwide’s 2016 planning cycle, which began in October 2015, led to Miller’s new role as head of Nationwide Ventures, he said.

Why the switch? Hardgrove said it amounted to timing.

“The timing was right for a change,” Hardgrove said. He explained that Miller helped fuel “a tremendous amount of growth and [market] position in excess and surplus lines at Nationwide and made it a critical proponent of our diverse lines of business.”

He added that after more than a year of planning for Miller’s transition, it triggered this fall because “the timing was right.”

This wasn’t Scottsdale’s only big executive change.

Last summer, Gary Tiepelman, senior vice president of contract and professional lines underwriting, retired from Scottsdale.

In November, Validus Holdings Ltd. named him senior vice president of Western World Insurance Co., and he’ll manage the insurer’s office in Scottsdale, Ariz.

Wells Fargo Renews Hunt for Insurance Brokerages to Buy

W

ells Fargo & Co. is restarting efforts to expand its insurance brokerage business through acquisitions after previously announced mergers and acquisitions (M&A) aspirations did not pan out.

Laura Schupbach, executive vice president and head of Wells Fargo Insurance, said she “hit the pause button” on plans to do deals after she determined when taking the reins of the business four years ago that existing businesses were not fully integrated after earlier deals over a period of about 15 years.

Schupbach cited technology platforms and contracts with insurance carriers as 14 | INSURANCE JOURNAL-NATIONAL January 11, 2016

examples of inconsistencies that have now been addressed across the bank’s 2,500-person insurance brokerage and consulting unit.

Having resolved those issues and “upgraded talent,” Wells Fargo is again looking at M&A, Schupbach said in an interview.

“We’re very interested in building out industry expertise,” Schupbach said in mid-December. She cited industries including healthcare, hospitals and agriculture as possible targets. In terms of deal size, she said Wells Fargo would prefer to target larger companies.

On the low end, Schupbach said, “Could it be $20-50 million? Maybe.” She declined to

comment regarding the possible high end of the range and added that she can grow the business without acquisitions if necessary.

Wells told ‘We’re very interested Reuters in in building out industry August it is selling expertise.’ its crop insurance business, thought to be valued at $1 billion. The company announced a $1.05 billion deal with Zurich Insurance for the sale of the crop insurance business Dec. 17.

Schupbach said Wells targeted the business for sale because it does not provide as much opportunity as the bank’s other insurance business lines to serve bank consumer and commercial customers.

Copyright 2016 Reuters. www.insurancejournal.com

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NATIONAL COVERAGE

News & Markets Entrepreneurs Raise $13 Million to ‘Reinvent’ U.S. P/C Insurance with Peer-to-Peer Insurer Lemonade

By Andrew Simpson

T

he U.S. property/casualty insurance industry is about to be tested directly by the sharing economy.

Two tech entrepreneurs have raised $13 million in initial funding to launch a peerto-peer online property/casualty insurance company named Lemonade, which they promise will reinvent the insurance industry business model and make insurance a “delightful” experience for consumers.

The founders claim that with their peerto-peer (P2P) technology, they will alter the current industry’s bureaucracy and structure “in ways not available to the legacy insurance carriers.”

Lemonade, headquartered in New York, is being founded by Daniel Schreiber and Shai Wininger, both of whom have track records in tech startups. Schreiber most recently was president of Powermat (portable wireless device charging). Wininger co-founded Fiverr.com, a site for freelance design and other creative professionals.

While the founders suggest they are onto something revolutionary, they are not yet talking about exactly what their business model is, what their product will do, or who else is involved.

In an interview with Insurance Journal in December 2015, Daniel Schreiber, CEO, would not talk specifics about the company or its products, but said Lemonade plans to launch in a few months and will target consumers, not businesses.

He said the firm has hired technologists, designers, actuaries and other insurance professionals (whose names he said will be recognized within insurance circles) and has been able to attract an “eclectic” group of people that the insurance industry has trouble recruiting.

He said they have been working with New York regulators and will be a fully-approved and licensed insurance carrier, not a broker. He said that unlike the car-sharing 16 | INSURANCE JOURNAL-NATIONAL January 11, 2016

firm Uber, his firm will comply with laws consumers feel is a “lemon” of an experience and not go about challenging insurance reginto “lemonade.” ulations.

“Most Americans view insurance as a Schreiber said what they want to do can’t necessary evil rather than a social good, be done by simply applying technology to and that’s something we’d like to change,” the existing insurance carrier bureaucracy.

Schreiber said in the capital raising Instead, Lemonade aims to “go back to the announcement. basics” and use technology to replace the “We’re challenging the way insurance centralized bureaucracy of insurers and companies work, with a peer-to-peer busiemploy transparency to ness model fueled by alter the culture around New P/C insurer aims self-serve technology,” paying claims that many to turn a consumer said Wininger, presiconsumers distrust. He and CTO, in the lemon of an experience dent referred to studies showannouncement. “We’ve into ‘lemonade.’ ing almost a quarter of seen this kind of combipolicyholders think it is nation breathe new life acceptable to improperly inflate claims. into other industries, and we’re determined to do the same for insurance.”

What’s in a Name?

Schreiber said that the idea of Lemonade Schreiber said the name for the company “harkens back to the origins” of insurance came from his partner, Wininger, and capbut he argues those original businesses have tures the idea of turning what they believe become big and bureaucratic while con-

Shai Wininger (l) and Daniel Schreiber, founders of P2P insurer Lemonade www.insurancejournal.com

sumers have become disenchanted. He said “it’s not insurers’ fault” they have become so bloated but people coming from other industries with different perspectives see insurance as ripe for transformation.

Schreiber pointed to other financial technology firms that have been “cherry picking” aspects of the lending industry, including the LendingClub.com in personal loans and sofi.com in student loan financing.

“It [the insurance industry] appears to most outsiders as a daunting task. It’s a whole different language,” he said when asked why it has taken until now for anyone to target insurance in the way other financial services have been targeted.

It’s also been slow to happen because it takes a lot of money to start an insurance carrier, he said, suggesting that was why raising the $13 million was so important.

Schreiber described the level of funding they received from Sequoia as a “very big deal” in venture funding circles.

Lemonade will not be the first P2P www.insurancejournal.com

insurance venture. Germany has Sequoia Capital, in the release. “But it is friendsurance (founded in rarer still to find such accomplished found2010), the United Kingdom ers tackling such a sizable industry with has Guevara, and China such a compelling solution. We’re betting has TongJuBao. It’s not Lemonade will transform the insurance now known in what ways landscape beyond recognition. It is one to Lemonade will compare watch.” to other P2P insurance ven “I’ve known Lemonade’s founders for tures, although years, and we’re thrilled some act as brokers, Lemonade’s financial to be part of their journey not carriers. from the very start. I can backers say they Typically, P2P sites think of no entreprethink they are onto invite users to form neurs better equipped small groups of polto reinvent insurance,” something big. icyholders who pay said Michael Eisenberg, premiums into a pool founding partner at to pay claims. If there is money left in Aleph. “Daniel and Shai are on a mission the pool at the end of the policy perito deliver a wake-up call for the industry, od, the members get money back. and a refreshing experience to consumers Lemonade’s financial backers are worldwide.” equally excited, saying that they think Since 1972, Sequoia has partnered with they are onto something big, partthe founders of what are now well-known nering with people they know and large companies including Apple, Airbnb, believe are well-suited to take on the Dropbox, Google, LinkedIn, Square and big insurance industry.

Trulia.

“It is very unusual for a company to Israeli venture capital firm Aleph has receive $13 million in an initial round invested in WeWork, Seeking Alpha, Gigya of funding,” said Haim Sadger, partner at and others.

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January 11, 2016 INSURANCE JOURNAL-NATIONAL | 17

CLOSER LOOK

Oil & Gas Changing Oil & Gas Industry Delivers New Risks, New Challenges Editor’s Note: This is the first article in a threepart series on the oil and gas industry. The second article will address new and emerging claims trends and the third article will address the emerging risks arising from new technologies, new labor/employee risks, and simultaneous operations.

T

he year 2015 was significant for the oil and gas industry: • President Obama announced that the U.S. has become the number one producer of oil and gas in the world.

• The United States can now export oil and gas after a change in law in 2015 which opened up the U.S. to a global marketplace previously not accessible for 40 years.

By Pascal M. Ray • The United States broke production records for both oil and gas in 2015 despite the price drop on oil

18 | INSURANCE JOURNAL-NATIONAL January 11, 2016

from a high of $105 a barrel in 2014 to a low of $35 a barrel in 2015.

• The drilling rig count went from a high of 1,609 in 2014 to a low of 698 drilling rigs in 2015 while during the same time period oil and gas production increased to record levels primarily due to hydraulic fracturing technology.

• Increases in oil and gas production in the U.S. are no longer dependent on new well drilling. Furthermore, the rig count is no longer an accurate measure of oil and gas production or a risk metric that can correctly measure oil and gas activity for insurers.

In fact, the U.S. Department of Energy has developed a new model to try to estimate U.S. oil and gas production because using the rig count alone is no longer a viable metric.

• Hydraulic fracking is a well completion and well stimulation operation that is done independent of drilling operations and after the drilling rig is removed from the well.

Fracking can be done years after the well

has been drilled. The drilled shale well is not capable of commercial oil and gas production until it is completed using hydraulic fracturing technology.

• There will be many more wells hydraulically fractured in 2016 than wells drilled. As fracking technology evolves, wells previously drilled with old fracking technology are now becoming candidates to be re-fracked to improve production performance. Older conventional wells are also being fracked to improve production performance.

• The risks involved with wells that are completed using hydraulic fracturing are significantly higher and different than conventional wells. Also, a well drilled in one policy period, where coverage for the well completion was paid for, may not be completed via fracking until several years later, and possibly with a different carrier, potentially causing issues for brokers and clients alike. Fracking risks have evolved to the point where the idea of creating a separate insurance coverage for hydraulic fracking and separating it from drilling exposures has come up.

All of the above points are possible due to the fact that oil and gas are now technically recoverable from the vast shale resources held in the United States. The pairing of horizontal drilling and hydraulic fracturing technologies allows us to create manmade reservoirs that can be produced in the dense shale that has kept oil and gas hydrocarbons trapped for millions of years and previously not obtainable.

While this new technology has created many new issues for the insurance industry, this parwww.insurancejournal.com

ticular article is centered on risks that exist with the 4.3 million existing wells in the U.S. that have already been drilled and completed since the first commercial oil well was drilled in Pennsylvania in 1859.

Non-Infinite Life Span Oil and gas wells do not have an infinite life span. With thousands of wells across the nation now over 150 years old, the evolving risks that come from aging oil and gas wells failing are becoming more apparent.

A well can “blowout” in any phase of its life, even when it is producing, shut-in, or plugged and abandoned. As the casing and cementing on older wells deteriorate, the risk of failure increases. At some point in the future, well failures from these older wells may become more commonplace and could have a major impact on the insurance industry.

Oil and gas wells are known to pollute ground water, air and surface areas, as long as we have been drilling wells. Even with millions of wells safely drilled, hazardous pollutants can escape during a blowout, as the Gulf of Mexico blowout in 2010 substantiated.

Well integrity is critical for the reliability and longevity of a well. The well casing and cementing are the front line defense to keep unwanted substances from migrating outside of the well and possibly making it into the groundwater, or reaching the surface, causing a cratering event. Pollution arising from oil and gas wells mostly involve surface events, such as spills or other surface-related occurrences, but these events also can involve underground crossflows of water and/or hydrocarbons between sub-surface strata. When a sub-surface event arising directly from a well does occur, one of the major causes of this is the failure of the well casing and cement that seals it in place.

In October 2015, a natural gas storage facility well blowout occurred in Los Angeles in an area known as Porter Ranch. www.insurancejournal.com

The well went into operation in 1954 and was converted into a gas storage well in 1973. The cause of loss was predicted to be a casing failure possibly due to corrosion, but no one knows for certain at this time.

This blowout is ongoing and expected to be brought under control in late February or March 2016 via relief wells being drilled.

The Porter Ranch blowout is unique as it is developing into what may be one of the largest evacuations due to a well blowout in U.S. history. Several thousand people evacuated the area and more are considerUSA12043.qxd 1/4/08 2:26 PM Page ing evacuation from this populated area of

30,000. Evacuation expenses from this will be significant.

Proximity of well operations to populations of people is an often overlooked exposure, and evacuation costs need to be factored into the decision on how much insurance coverage, in terms of limits of insurance, a client should purchase. Defense costs are another significant and often overlooked exposure that need to be quantified and defined in clear language on the policy.

The Porter Ranch blowout is attracting media’s attention, several class action lawsuits have been filed, and celebrities and activists are getting involved. Public opinion may have an effect on jury verdicts arising from the lawsuits, which may significantly increase exposure to insurers.

As risks in the oil patch evolve, so should the insurance program of clients in this business.

Ray is USI’s senior vice president and marine and energy program leader. Phone: 713-490-4757. Email: 1 Pascal.Ray@usi.biz.

January 11, 2016 INSURANCE JOURNAL-NATIONAL | 19

SPECIAL REPORT

Employment Practices Liability

By Andrea Wells

B

usinesses known for their uniforms are worried about lawyers in business suits in the wake of a change in the nation’s labor laws affecting their liability for employment practices.

The change could unravel the franchise business and wreak havoc for thousands of companies and contractors, according to franchise industry groups and insurance professionals.

In a decision known as Browning-Ferris Industries (BFI), the National Labor Relations Board (NLRB) in August 2015 ruled that a small business franchisee could be considered a “joint-employer” with the franchisor company that lends its brand name and mar20 | INSURANCE JOURNAL-NATIONAL January 11, 2016

www.insurancejournal.com

keting to the small business. This ruling overturned decades-long regulatory and legal precedent for determining whether a joint employer relationship exists under the National Labor Relations Act. Previous law held that a franchisor that did not directly employ or control the franchisee’s workers was exempt from joint liability for employment practices happening at the local franchisee.

The new NLRB standard now considers a franchisor as a joint employer not only if it exercises direct control of employees’ activities, but also if it has “indirect” or even “potential” control.

That’s a big deal, according to Peter Taffae, managing director of FranchisePerils, which operates a national program administrator offering a program specifically for franchisors. It’s very concerning and could wipe out franchising, he says.

“For 30 years the Labor Relations Board has said for a joint employer to be responsible they have to have direct involvement,” said Taffae. “Now, after 30 years that’s changed. The NLRB now says that the employer only needs to have an indirect relationship.”

Franchisors are not the only business group at risk under the new NLRB standard. Employers using professional employment organizations, or PEOs, staffing agencies, independent contractors and even general contractors now have employment practices liability insurance (EPLI) risk that they didn’t have before.

In its decision to change the standard, the NLRB said that the old standard was “increasingly out of step” and “outdated” with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.

The NLRB stated the old standard “did not reflect the realities of the 21st century workforce.”

A rise in temporary employment in the U.S. workforce is one reason the NLRB cited as a need for the change. Almost 2.9 million Americans had jobs through temporary agencies in 2014, or 2 percent of the workforce, up from 1.1 million in 1990, the board said.

Wilma Liebman, a former head of the www.insurancejournal.com

labor board who advocated for the new standard, told Bloomberg in August that shifts in the workforce threatened to make basic protections provided by labor laws “illusory.”

Often the company with deeper pockets that hires a subcontractor sets conditions of employment through a contract, she said.

These companies should be at the bargaining table, she said.

“The nature of employment and the nature of the economy has changed a lot,” Liebman said in the Bloomberg interview.

Unions and others who support the change say the decision was necessary to bring companies that indirectly control working conditions to the bargaining table, and to curb the use of “permanent temps” who are paid less and do not get the same benefits as ordinary employees.

But the change could have devastating effects on thousands of small business owners, said Darrell Johnson, chief executive of FRANdata, a provider of information and analysis on the franchise industry located in Arlington, Va. “The Browning-Ferris decision sets a dangerous precedent that is greatly disruptive to the franchise business model and to thousands of small businesses around the country.”

According to research released in December by FRANdata, at least 40,000 small businesses operating in more than 75,000 locations are at risk because of the recent NLRB ruling, which the group says jeopardizes the ability of franchise small business owners to hire, schedule and set the salaries of their employees.

“Our survey results indicate the ruling is already impacting expansion plans, and thus, economic growth,” Johnson said.

Expansion in Liability The recent ruling has removed much of the protection franchisors have enjoyed, with implications for EPLI policies.

A franchisor, such as McDonald’s, Subway, Chem-Dry or even UPS stores, could now be pulled into a lawsuit, for example, when one franchisee terminates an employee and that termination results in some type of employment practice liability issue.

This expansion of the scope of liability is going to be “monumental” for many businesses, Taffae said. Not only could it change the franchising industry but also it’s likely to encourage the plaintiff’s bar to chase after some deep pockets in various industries, according to Taffae.

The most obvious example of the widening scope in franchisor liability involves the world’s biggest fast food restaurant. In December 2014, the NLRB determined that McDonald’s is a joint employer, pointing to the franchisor’s comprehensive computer system, which tracks labor usage and costs, as one of the ways it controls franchisee operations.

The fast food giant is fighting back to protect its decades-old franchise model that holds the corporation does not directly employ the staff of its franchisees. In a court filing in late October, McDonald’s said it had already spent more than $1 million on the legal fight and produced more than 160,000 pages of documents in response to the NLRB case.

The case, NLRB v. McDonald’s USA LLC, U.S. District Court for the Southern District of New York, scheduled to go to trial before an administrative law judge this month, is expected to have a major impact on U.S. franchisors.

The new NLRB standard could also be dangerous for many in the construction business.

Denise Gold, associate general counsel for the Associated General Contractors of America (AGC), which represents 26,000 members nationwide, says while NLRB decision is not an immediate problem, it has definitely muddied what had been an established and clear precedent for years and has the potential to be a major problem for contractors.

In construction, joint employer status can derive in the context of a staffing company, or it could come up in the context of a subcontract arrangement, or in the context of a joint venture, which is pretty common in construction and not talked about, according to Gold.

Employers aren’t finding much direction from the federal agency either, Gold said. continued on page 22 January 11, 2016 INSURANCE JOURNAL-NATIONAL | 21

SPECIAL REPORT

Employment Practices Liability continued from page 21

higher the premium.”

The NLRB’s “totality of circumstances test” In the new joint employer landscape, if a to decide whether there is enough authority franchise owner in a particular community to control, either indirect control or direct is required by an insurer to have its franchicontrol, to create joint employer status is so sor co-sign on an EPLI policy, Layman says, vague that it gives employers little guidance “the entire number of employees in the sysas to when joint employer status exists and tem may be factored into that policy.” So a does not exist, she maintained. It’s not only single franchise operator with 25 employees that the standard is new, but it is also not now has lost a significant amount of autonclear. omy over their operation.

Joint employer status “Their franchisor has to “Theoretically, the NLRB could have come exposes an employer to be involved and their up with very specific may be much potential employment premium guidelines but instead higher because of the liability of others. they decided to create potential liability that the a more-vague standard,” franchisor and franchisee she said. In her opinion, that vagueness may jointly share.” leaves employers with little knowledge as Small businesses could see EPLI premito when they might be joint employers. ums skyrocket or not be able to buy cover “And being a joint employer is an importage at all, Layman fears. ant thing because it exposes the employer “We have heard from our members who to potential liability for unfair labor practicare franchisees/small business owners that es of other companies, for potential bargaina carrier wouldn’t write an EPLI policy to a ing negotiations, for breaches of collective franchisee without naming the franchisor bargaining agreements, and for what you as an additional named insured,” Layman might call economic protest activities,” said. Should the franchise owner attempt to Gold said. “If the employer is not deemed secure coverage alone, the market becomes as a secondary employer and instead (con“markedly more expensive for the franchisidered) a joint employer then they can be see” — that’s a new trend, he said. “A year subject to activities like strikes, boycotts ago, five years ago, that wasn’t happening and picketing.” but the looming and growing threat of joint The potential impact is significant, Gold employer is having that impact.” says, but how significant has yet to be It’s not just the NLRB advocating a determined. “We don’t know quite yet as to new joint employer doctrine, according to where the line is drawn on who is a joint Layman. “Other federal agencies, even at the employer,” she said. “We have to wait for state level and municipal level, are tackling further cases to come out to flush out that the issue. “It’s a growing threat in pockets standard.” of government and the number of businesses at stake, not just in the franchising Impact on Insurance world, is great,” he said.

The new NLRB standard has the poten Some states, including Michigan, Texas, tial to create myriad unintended insurTennessee and Louisiana, have already ance consequences for small businesses passed legislation aimed at protecting nationwide, according to Michael Layman, franchisors from being considered a joint vice president, regulatory affairs, for the employer with their franchisees. Virginia International Franchise Association (IFA). and Wisconsin may also follow suit.

“Any small business or big businesses “This joint employer issue is just beginneeds to have employment practices liabilining to be an issue from an insurance stand ty insurance or other management liability point,” says Richard S. Betterley, president coverage and that coverage is usually based of Betterley Risk Consultants Inc. based in on the number of employees an employer Boston. has,” Layman said. “The more employees the Betterley is the writer and publisher 22 | INSURANCE JOURNAL-NATIONAL January 11, 2016

of an annual review of the EPLI market.

The report, Employment Practices Liability Insurance Market 2015, published in December took aim at the growing insurance concern over joint employer exposures.

“In this year’s survey, we ask carriers directly about their ability and willingness to include joint employers as insureds,” Betterley said. “For the most part they answered optionally — in other words they are willing to consider it.”

Betterley said most insurers didn’t say “no” to joint employers, but he admits that most of the carriers responding to the survey “tend to respond relatively liberally because they don’t want to shut off business opportunities so they tend to say they are more willing (to insure) than they are in practice.” (See table on page 23) “This is the beginning of a problem (where) other parties will be held liable or dragged into suits successfully where they didn’t used to be,” Betterley said. “That’s going to be in the franchise business, in the construction world where there is a lot of subcontractors and potentially even in the independent contractor, 1099 world.”

At the least, the NLRB ruling has made insurers rethink their approach.

“The reality is that insurers are becoming cautious because the exposure has changed,” Betterley said. “In the past if there was a request to add the franchise the underwriting assessment would be presumably that the risk is minimal and yes probably they would. Now they have to look at it and say, ‘No, wait a minute there’s real exposure here.’” As a result of the new exposure, insurers are reacting, but at varying speeds.

“The potential for claims has increased but the actual level of claims has probably not yet increased,” Betterley said. “But you’ve got to believe that that’s just a tidal wave on the horizon that hasn’t yet hit shore.”

Taffae says the trend is quite concerning because there’s no way to manage this risk.

“From our perspective, from a transfer of risk perspective, it’s very scary,” Taffae said.

“There’s just no way to underwrite it. …

This whole joint employer thing could really blow up.” www.insurancejournal.com

The Betterley Report

Joint Employer Coverage Details Carrier Private Company Public Company

ACE USA AIG

Public, Private and Not-for- Profit Orgs.

Healthcare

Coverage Available for Joint Employers?

Automatically Included in Policy No No No

If Not Included, Can Be Included as an Option

Yes Yes Supplement information needed to include others as insureds under the policy

If Covered, is it Subject to a Sublimit?

Underwriter Consideration Underwriter Consideration Subject to underwriting and acceptance

No

No

No

No

N/A

Arch

No

Yes

Subject to Underwriting

Argo Insurance

N/A

To be determined subject to underwriting review

To be determined subject to underwriting review

Yes

N/A

No

Yes, by endorsement

Based on Underwriting

No

N/A

Allied World

Argo Re AXIS US Lloyds Business Risk Partners Liberty International Chubb Specialty Cincinnati CNA

If covered under definition of Insured Individual. No explicit cover No

N/A

No

No

N/A

No

Yes

Varies by situation

No

No

N/A

No

Will consider

No

FranchisePerils

Quoted as an option

Yes

Yes, up to $5,000,000 sublimit

Great American Hanover

No

No

N/A

No

No

NA

The Hartford

No

Dependent on underwriting and industry class

Risk specific

HSB Houston Casualty Liberty Markel Bermuda Maxum

Yes

No

No

No

Program Specific

N/A

Yes

N/A

No

No

No

N/A

No

No

N/A

Monitor

Yes

Available by either one of the following endorsements: Co-Defendant Liability or Franchisor Liability

Co-Defendant-up to the limit of liability Franchisor- sublimit of $100,000

RLI Starr Target Professional Programs (Lloyd’s) Travelers Bond & Specialty Insurance USLI

?

?

?

No

Yes

Risk Specific

No

No

None

No

No

N/A

No

No

N/A

Information in this Report includes information provided by participating insurance companies. Professional counsel should be sought before any action or decision is made in the use of this material.

Copyright 2015 Betterley Risk Consultants, Inc. No part of this publication or its contents may be copied, downloaded, stored in a retrieval system, further transmitted or otherwise used in any form other than with the expressed written permission of Betterley Risk Consultants, Inc.

Page 42 www.insurancejournal.com

January 11, 2016 INSURANCE JOURNAL-NATIONAL | 23

IDEA EXCHANGE

Workers’ Compensation How to Help Clients Make Workers’ Comp ‘Employee Friendly’

B

oth in the media and in general conversation, we often hear people refer to the workers’ compensation laws in various states as being very “employee friendly” because they feel that it’s easy for injured employees to get more than they “deserve” from the workers’ comp system.

This may be true; as certainly there is little or no question that there are laws in some

By Kevin Ring states that are more business friendly as opposed to employee friendly. But employers would do well to ignore this debate because in reality when employers put the right systems in place and implement a positive corporate culture, both employers and employees benefit.

As an agent, helping your clients communicate with employees before they suffer an injury is key. However, when we discuss this with brokers they are often hesitant, stating: “If we tell them how comp works, they’ll just want to file a claim!”

It doesn’t need to be this way. You should encourage employers to have an employee meeting to discuss workers’ comp.

Here’s how the dialog between employer and employee should go: “We buy workers’ compensation insurance as a benefit for you, our employees, to make sure that when you are injured while you are working for us that your medical and lost wage expenses are covered. Your medical expenses will be covered 100 percent. There are no co-pays or deductibles like there are when you are sick or have to go to the doctor for personal reasons.

“We cover all lost wages as well. However, the law requires a few things.

“First, the law in our state requires that during the first seven days (this number will vary from state-to-state) you are out of work, you do not receive pay. This might seem unfair but it’s the law and out of our control. If you are out more than a week, the insurance company will pay you 66.7 24 | INSURANCE JOURNAL-NATIONAL January 11, 2016

percent of what you are making now. (Each state has a maximum amount an employee can receive. If the work force might run into that, you might mention it as well.)

“I know that 66 percent seems low, and we agree. So that is why we built a recovery-at-work program, so that when you are injured, we can bring you back to work and pay your full salary, even if the doctor says that you can’t immediately go back to your regular job.

“We work with Dr. Welby from Welby’s Urgent Care (it works even better if Dr. Welby is actually at the meeting). Dr. Welby will make it his priority to see you immediately should you suffer an injury, so you aren’t stuck in a waiting room for hours before being seen.”

OK, let’s break down what your employer client just communicated to it employees: We care about you. This has to be the baseline. If the employer doesn’t care about its employees, nothing else matters.

Workers’ compensation results will suffer.

If an employer treats its employees as interchangeable parts, it’s impossible to build a process that works. Workers’ compensation is an employee benefit. It’s required by law (in most states), but it is there to protect employees when they suffer an injury.

Educating the employees about the real benefits of workers’ compensation. The vast majority of employees who file for workers’ compensation have never filed a claim before, so it is highly unlikely they will understand how the system works. There are thousands of pages on the web about workers who worry about how a claim will affect them. How much will it cost? Can I be fired? So it is to the employer’s benefit to be truthful at all times.

It should be a condition of employment that all injuries are reported before the end of the day in which the injury occurs.

Employees shouldn’t be given the opportunity to see if it “feels better tomorrow” instead of notifying the employer they have been injured.

Also let them know what lost income benefits they will receive if they are out on workers’ compensation. Every state has a waiting period during which workers will receive no pay. While it is generally allowable for an employee to use their paid time off in this window, it’s important for employees to know this time can be unpaid. Research shows that employees recover faster back at work and we want to build the expectation they will be released to work and are expected to return immediately after they see a doctor.

In the vast majority of states, the employer can at

Notification Employees need to know their medical costs will be covered and that they are required to notify the appropriate people in the company should an injury occur. www.insurancejournal.com

least recommend which doctor an injured employee should see when injured. When you let an injured employee go to their personal doctor (or worse, to the emergency room), the stage is set for the claim to go sideways and cost additional dollars even before the employee completes their first doctor’s visit.

Employers should identify — with their agent’s assistance — a doctor who is skilled in treating occupational injuries.

Local urgent care clinics are a great source because many are already advertising services as workers’ compensation doctors.

Many of these clinics are searching for business partners to improve their business.

Physician Partners When visiting their facility, make sure they do not have live TV on in the waiting room. Daytime television is rife with ads for attorneys, and it’s not a good idea to have them chirping in the ear of an injured employee before they even have the opportunity to see the treating physician.

When you partner with a physician, invite them to visit the employer. The more the doctor understands the employer’s process, the more effective they can be in setting restrictions for injured employees. When it comes to restrictions, you want a physician who will send every employee back to work with restrictions unless they are in one of the following conditions: • Hospitalized; • Contagious; and/or • On medication that makes it unsafe for them to get to or be at work.

Other than these three issues, the injured employee should be back at www.insurancejournal.com

work doing something, rather than just sitting at home.

injured employee is likely to return to their full duty job more quickly, while also reducing the overall cost to the employer.

When you communicate with employees about how workers’ compensation works before they suffer an injury, many good things happen. When they know what to expect, which doctor they’ll see, and what their expectations will be returning to work, an employer is very likely to have positive results in their workers’ compensation program while also having happy, healthy and productive employees.

When you have a process in place that puts everyone on the same page, that’s when workers’ compensation will work for both the employer and the employees.

Recovery-at-Work If the physician is going to return the injured employee to work, they must understand that the employer has a functioning Recovery-at-Work program. You may find an employer that resists Recovery-at-Work for a variety of reasons. It’s important they understand Recovery-at-Work benefits both the injured employee and the employer.

When the injured employee returns to work, they tend to get better faster. They are unlikely to be paid indemnity benefits which reduces the cost of the claim. In many states when no indemnity is paid this claim qualifies for a 70 percent discount Ring is the lead analyst for the Institute of Workon the experience modification factor. The Comp Professionals, which trains insurance agents employee can continue to collect their full to help employers reduce workers’ compensation wage rather than the 66.7 percent that most states mandate. expenses. Phone: 828-274-0959. Email: Kevin@ A&M IJ Personal Umbrella.pdf 1 12/28/15 10:22 AM Bottom line: With Recovery-at-Work, the workcompprofessionals.com.

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January 11, 2016 INSURANCE JOURNAL-NATIONAL | 25

2016

Insurance Industry Meetings & Conventions Directory

Welcome to Insurance Journal’s 2016 Insurance Industry Meetings and Conventions Directory. The information in this directory is taken from a larger database containing additional information on these and other meetings, including industry-related seminars, conferences and workshops. The online Insurance Journal events database can be found at www.InsuranceJournal.com/events. Meeting planners are invited to add new meetings, conventions and seminars to the database free of charge, all year long.

CIWA Wholesaler Industry Days Jan. 10-13 Hilton La Jolla Torrey Pines La Jolla, CA California Insurance Wholesalers Association www.ciwa.net P/C Insurance Joint Industry Forum Jan. 12 The Waldorf Astoria New York, NY Insurance Information Institute www.iii.org

Toronto, Ontario CatIQ www.catiq.com 2016 NAPSLO Surplus Lines Management Program Feb. 1-4 Emory University Goizueta School of Business Atlanta, GA NAPSLO www.napslo.org/

Independent Insurance Agents of Houston www.iiah.org/ MAIA’s Annual Convention Feb. 22-25 Amway Grand Grand Rapids, MI Michigan Association of Insurance Agents www.michagent.org/home NAMIC Claims Conference Feb. 23-26 The Westin Westminster Westminster, CO NAMIC www.namic.org/

MAIA’s YAC Red Wing Game Jan. 23 Joe Louis Arena Detroit, MI Michigan Association of Insurance Agents www.michagent.org/home

Independent Insurance Agents of Nebraska Winter Conference Feb. 3-4 Holiday Inn Kearney, NE Independent Insurance Agents of Nebraska www.iian.org/default.aspx

Kansas Rural & Small Conference Jan. 26-28 Atrium Hotel Hutchinson, KS Kansas Association of Insurance Agents www.kaia.com/default.aspx

2016 PLUS D&O Symposium Feb. 3-4 Marriott Marquis Hotel New York City, NY Professional Liability Underwriting Society plusweb.org/

Professional Insurance Agents of New York Metro Regional Awareness Program Jan. 28 The Roosevelt Hotel New York, NY Professional Insurance Agents of New York State Inc. www.pia.org/NY

Xactware User Conference 2016 Feb. 9-10 Grand America Hotel Salt Lake City, UT Xactware www.xactware.com

The Insurance Summit 2016 Feb.25 Grosvenor House London, UK Economist Events www.economist.com/events-conferences/ emea

IIABA ACT/AUGIE Meeting Feb. 16-19 Embassy Suites Phoenix-Scottsdale Phoenix, AZ Independent Insurance Agents and Brokers of America Inc. www.independentagent.com/default.aspx

2016 NAPSLO Mid-Year Leadership Forum Feb. 29-March 3 Fairmont Scottsdale Princess Scottsdale, AZ NAPSLO www.napslo.org/

Houston Insurance Day Feb. 17 Houston Marriott Westchase Houston, TX

Independent Insurance Agents of Wisconsin Day on the Hill March 1-2 Madison Concourse Hotel & Wisconsin Capitol

Windstorm Insurance Conference Feb. 1-4 Hilton Orlando Bonnet Creek Resort Orlando, FL Windstorm Insurance Network Inc. www.windnetwork.com CatIQ’s Canadian Catastrophe Conference Feb. 1-2 Toronto Region Board of Trade 26 | INSURANCE JOURNAL-NATIONAL January 11, 2016

IIANC’s InsurEXPO16 Feb. 25-26 Sheraton Imperial RTP Durham, NC Independent Insurance Agents of North Carolina Inc. www.iianc.com/iMISLive/ WCM/?hkey=9673470b-9642-4244-95376a3bcc133181

www.insurancejournal.com

Madison, WI Independent Insurance Agents of Wisconsin www.iiaw.com/ NAMIC Commercial Lines Seminar March 2-4 Renaissance Chicago Downtown Hotel Chicago, IL NAMIC www.namic.org/ NetVU Conference March 3-5 HB Gonzalez Convention Center San Antonio, TX NetVU (Network of Vertafore Users) www.netvu.org City of Hope NIIC Annual Campus Tour & Dinner March 3 City of Hope Duarte, CA City of Hope National Insurance Industry Council www.cityofhope.org/niic 2016 AAMGA Automation Conference March 5-8 InterContinental Dallas Dallas, TX AAMGA www.aamga.org 2016 Ohio Joint Insurance Fraud Seminar March 9 James G. Jackson Training Academy Columbus, OH NSPII - Ohio Chapter www.nspii.com Professional Insurance Agents of Connecticut Annual Convention March 10-11 Foxwoods Resort and Casino Mashantucket, CT Professional Insurance Agents of Connecticut Inc. www.pia.org/CT/ 12th Annual Insurance Public Policy Summit March 17 International Trade Center Washington, DC Networks Financial Institute isunetworks.org Missouri Small Agents Conference March 17-18 Holiday Inn Columbia, MO Missouri Association of Insurance Agents www.moagent.org/default.aspx www.insurancejournal.com

Insurance Club of Pittsburgh I Day 2016 March 29-30 Wyndham Grand Pittsburgh Downtown Pittsburgh, PA Insurance Club of Pittsburgh www.insclubpgh.com International Cyber Risk Management Conference (ICRMC) March 31-April 1 Toronto Hilton Toronto, Ontario MSA Research Inc. www.msaresearch.com/ FIWT Leadership & Education Mid Year Expo April 15-16 South Shore Harbour League City, TX Federation of Insurance Women of Texas www.FIWT.com 2016 IRES Foundation National School on Market Regulation April 17-19 Westin Riverwalk in San Antonio, Texas San Antonio, TX IRES Foundation www.ires-foundation.org PLRB 2016 Claims Conference April 17-20 Gonzalez Convention Center San Antonio, TX Property & Liability Resource Bureau www.plrb.org 2016 NAPSLO Executive Leadership Summit April 19-22 Darden School of Business Charlottesville, VA NAPSLO www.napslo.org/ 2016 PLUS Medical PL Symposium April 20-21 Hyatt Regency Chicago, IL Professional Liability Underwriting Society www.plusweb.org 2016 PLUS Professional Risk Symposium April 20-21 Hyatt Regency Chicago, IL Professional Liability Underwriting Society www.plusweb.org The AAIS Main Event April 24-26 Ponte Vedra Inn & Club Ponte Vedra Beach, FL

AAIS www.aaisonline.com/ IIAV insurEXPO16 April 25-26 Richmond Downtown Marriott Richmond, VA Independent Insurance Agents of Virginia www.iiav.com NICB Special Investigations Academy Basic and Specialized Tracks May 2-5 Sheraton Westport Lakeside Chalet St. Louis, MO National Insurance Crime Bureau www.nicb.org 2016 Long Island Regional Awareness Program May 4 Crest Hollow Country Club Woodbury, NY Professional Insurance Agents Association of NY www.pia.org/NY/ NCCI’s Annual Issues Symposium May 5-6 Hyatt Regency Grand Cypress Resort Orlando, FL NCCI www.ncci.com BIG Independent Group Convention and Tradeshow May 5-8 Riverside Convention Center Riverside, CA BIG Independent Group biginsusa.com/ NAMIC Directors’ Boot Camp 2.0 May 9-11 Sandpearl Resort Clearwater Beach, FL NAMIC www.namic.org/ Independent Insurance Agents of Wisconsin Annual Convention May 11-12 Kalahari Resort Wisconsin Dells, WI Independent Insurance Agents of Wisconsin www.iiaw.com/ Professional Independent Insurance Agents of Colorado Leadership Conference May 12 Arvada Center Arvada, CO Professional Independent Insurance Agents of Colorado www.piiac.com/default.aspx January 11, 2016 INSURANCE JOURNAL-NATIONAL | 27

2016 Insurance Industry Meetings and Conventions Directory Independent Insurance Agents & Brokers of New York Annual Meeting May 12 Thayer Hotel West Point, NY Independent Insurance Agents & Brokers of New York, Inc. www.iiabny.org/default.aspx Independent Insurance Agents of Oklahoma 2016 Annual Conference May 17-18 Embassy Suites Norman Norman, OK Independent Insurance Agents of Oklahoma, Inc. www.iiaok.com/default.aspx AAMGA Annual Meeting 2016 May 22-25 J.W. Marriott Desert Ridge Resort Phoenix, AZ AAMGA www.aamga.org/ NAMIC Farm Mutual Forum May 23-25 Hyatt Regency Milwaukee Milwaukee, WI NAMIC www.namic.org/ San Diego I-Day 2016 May 25 Town & Country Convention Center San Diego, CA IBA of San Diego www.ibasandiego.com PIANJ and PIANY Annual Conference June 5-7 Harrahs Atlantic City, NJ PIANJ and PIANY www.pia.org/NY/ 2016 NAPSLO Excess & Surplus Lines Program June 5-8 Eric P. Newman Education Center St. Louis, MO NAPSLO www.napslo.org/ IIAC Annual Membership Meeting June 7 Wethersfield Country Club Wethersfield, CT Independent Insurance Agents of CT www.iiact.org Big “I” Sales & Leadership Conference June 8-9 Holiday Inn University Plaza Bowling Green, KY 28 | INSURANCE JOURNAL-NATIONAL January 11, 2016

Independent Insurance Agents of Kentucky www.iiak.org Independent Insurance Agents of Arkansas 115th Annual Convention June 13-15 Hilton Pensacola Pensacola, FL Independent Insurance Agents of Arkansas www.iiaar.org FAIA’s 112th Anniversary Convention & Education Symposium June 16-18 Orlando World Center Marriott Orlando, FL Florida Association of Insurance Agents www.faia.com/ 2016 IMCA Annual Conference and Showcase Gala June 19-21 Hyatt Regency Baltimore on the Inner Harbor Baltimore, MD Insurance Marketing & Communications Association imcanet.com/ Louisiana Annual Convention June 19-22 Sandestin Beach Hilton Destin, FL Independent Insurance Agents & Brokers of Louisiana www.iiabl.com/default.aspx PIA of OR/ID EXPO June 20-22 Eugene Hilton Hotel Eugene, OR PIA Western Alliance www.piawest.com/?page=PIAOIEXPO PLRB 2016 Western Regional Adjusters Conference June 21-22 Sacramento Convention Center Sacramento, CA Property & Liability Resource Bureau www.plrb.org MAIA’s YAC Conference June 22-24 Otsego Resort Gaylord, MI Michigan Association of Insurance Agents www.michagent.org/home CIWA Summer Forum June 26-28 California Insurance Wholesalers Association www.ciwa.net NAMIC Management Conference June 26-29

The Westin Hilton Head Island Resort and Spa Hilton Head Island, SC NAMIC www.namic.org/ Missouri Joint Leadership and Young Agents Conference July 13-15 The Hilton Branson Landing Branson, MO Missouri Association of Insurance Agents www.moagent.org TSLA 2016 Mid-Year Meeting July 17-20 Four Seasons Biltmore Santa Barbara, CA Texas Surplus Lines Association Inc. www.tsla.org PIA of GA/AL Annual Agents Tradeshow and Convention July 17-19 The Ritz Carlton Lodge at Lake Oconee Greensboro, NC PIA of Georgia/Alabama www.piaga.com NAMIC Agricultural Risk Inspection School July 19-21 The Seelbach Hilton Louisville Louisville, KY NAMIC www.namic.org/ 48th Trusted Choice Big “I” National Championship Aug. 1-4 Del Paso Country Club Sacramento, CA Independent Insurance Agents and Brokers of America Inc. www.independentagent.com/education/ Pages/home.aspx NAMIC Leadership Development Workshop Aug. 2-3 Omni Chicago Hotel Chicago, IL NAMIC www.namic.org/ FSLA 2016 Annual Convention Aug. 3-5 The Vinoy Renaissance St. Petersburg Resort & Golf Club St. Petersburg, FL Florida Surplus Lines Association www.myfsla.com IIABAZ’s 82nd Annual Convention Aug. 10-12 Arizona Biltmore Resort Phoenix, AZ www.insurancejournal.com

Independent Insurance Agents and Brokers of Arizona www.iiabaz.com NIIC Strike Out Cancer, Atlanta benefiting City of Hope Aug. 17 Atlanta, GA National Insurance Industry Council Benefiting City of Hope www.cityofhope.org/niic James K. Ruble Graduate Seminar Aug. 17-18 DoubleTree Suites Seattle Airport Southcenter Seattle, WA PIA Western Alliance www.piawest.com/ IIAB of Idaho Annual Convention Aug. 21-23 Coeur d’Alene Resort Coeur d’Alene, ID Independent Insurance Agents & Brokers of Idaho Inc. www.iiabi.org/default.aspx Independent Insurance Agents & Brokers of Oregon 87th Annual Convention Aug. 23-25 Eagle Crest Resort Redmond, OR Independent Insurance Agents & Brokers of Oregon www.iiabo.org/ PLRB 2016 Central Regional Adjusters Conference Sept. 7-8 Hyatt Regency St. Louis at the Arch St. Louis, MO Property & Liability Resource Bureau www.plrb.org Big “I” Fall Leadership Conference Sept. 7-11 Hyatt Regency Chicago Chicago, IL Independent Insurance Agents and Brokers of America Inc. www.independentagent.com/default.aspx 2016 Washington Joint Conference and Trade Show Sept. 14-16 Davenport Grand Hotel Spokane, WA PIA Western Alliance and IIABW www.wajointconference.com/ Independent Insurance Agents of Iowa Annual Convention, Tradeshow & Expo Sept. 14-15 Altoona, IA www.insurancejournal.com

Independent Insurance Agents of Iowa Inc. www.iiaiowa.com/default.aspx Independent Insurance Agents & Brokers of Washington/PIA Joint Conference Sept. 14-16 Davenport Grand Hotel Spokane, WA Independent Insurance Agents & Brokers of Washington/PIA Spencer Educational Foundation Gala Dinner Sept. 15 Waldorf Astoria New York New York, NY Spencer Educational Foundation www.spencered.org Applied Net 2016 Sept. 19-22 Swan & Dolphin Resort Orlando, FL Applied Client Network www.AppliedClientNetwork.org Independent Insurance Agents of New Mexico 82nd Annual Convention Sept. 21-22 Isleta Resort & Casino Albuquerque, NM Independent Insurance Agents of New Mexico Inc. www.iianm.org/default.aspx 2016 American Agents Alliance Convention & Expo Sept. 22-25 JW Marriott Desert Springs Resort & Spa Palm Desert, CA American Agents Alliance www.agentsalliance.com/ IIABNJ 123rd Annual Business Meeting and Networking Event Sept. 25-27 Congress Hall Cape May, NJ Independent Insurance Agents & Brokers of New Jersey www.iiabnj.org/default.aspx 2016 NAPSLO Annual Convention Sept. 25-28 Atlanta, GA NAPSLO www.napslo.org/ 2016 PLUS Cyber Symposium Sept. 27 New York City, NY Professional Liability Underwriting Society www.plusweb.org

2016 National Insurance Conference of Canada (NICC) Sept. 28-30 The Westin Bayshore Vancouver, BC MSA Research Inc. www.msaresearch.com MCIEF Annual Conference Sept. 29-30 Hyatt Regency Orlando International Airport Orlando, FL Motor Carrier Insurance Education Foundation transportationriskspecialist.com 119th IIANC Annual Convention Oct. 2-4 Marriott Resort & Spa at Grand Dunes Myrtle Beach, SC Independent Insurance Agents of North Carolina Inc. www.iianc.com PLRB 2016 Large Loss Conference Oct. 4-6 Chicago Marriott Downtown Mag Mile Chicago, IL Property & Liability Resource Bureau www.plrb.org Independent Insurance Agents of Illinois Convention and Trade Show Oct. 4-6 Marriott Pere Marquette/Peoria Civic Center Peoria, IL Independent Insurance Agents of Illinois www.iiaofil.org/ IIAV Young Agents’ Conference Oct. 6-7 Hilton Virginia Beach Oceanfront Virginia Beach, VA Independent Insurance Agents of Virginia www.iiav.com NIIC Drive for Hope, benefiting City of Hope Oct. 12 TopGolf Tampa, FL City of Hope National Insurance Industry Council www.cityofhope.org/niic Independent Insurance Agents & Brokers of New York “NYiDay” Oct. 14 Millennium Broadway Hotel New York New York City, NY Independent Insurance Agents & Brokers of New York Inc. www.iiabny.org/default.aspx

January 11, 2016 INSURANCE JOURNAL-NATIONAL | 29

2016 Insurance Industry Meetings and Conventions Directory IBA Sacramento Big “I” Day Oct. 18 Sacramento, CA The Insurance Brokers and Agents of Sacramento (IBA) www.ibasacramento.com/ Independent Insurance Agents of Nebraska Annual Convention Oct. 25-27 Younes Cente Kearney, NE Independent Insurance Agents of Nebraska Inc. www.iian.org/default.aspx FIWT 72nd Annual Convention Oct. 27-30 Embassy Suites Frisco Frisco, TX Federation of Insurance Women of Texas www.FIWT.com Insurors of Tennessee 123rd Annual Convention Oct. 29-Nov 1 Omni Hotel Nashville Nashville, TN Insurors of Tennessee www.insurors.org 2016 City of Hope NIIC Spirit of Life honoring Christopher Swift of The Hartford Oct. 29 Los Angeles, CA National Insurance Industry Council Benefiting City of Hope www.cityofhope.org/niic

30 | INSURANCE JOURNAL-NATIONAL January 11, 2016

IIAB of South Carolina Annual Convention Oct. 30-Nov. 1 The Omni Grove Park Inn Asheville, NC Independent Insurance Agents & Brokers of South Carolina www.iiabsc.com/default.aspx

TSLA 2016 Annual Meeting Nov. 13-14 Four Seasons Hotel Austin Austin, TX Texas Surplus Lines Association Inc. www.tsla.org

ACORD2016 Nov. 1-3 Boca Raton Resort and Club Boca Raton, FL ACORD www.acord.org/Pages/default.aspx

Independent Insurance Agents of Indiana’s Annual Convention Nov. 14-16 Westin Hotel Indianapolis, IN Independent Insurance Agents of Indiana www.bigi.org/default.aspx

James K Ruble Graduate Seminar Nov. 1-2 Portland Airport Sheraton Hotel Portland, OR PIA Western Alliance www.piawest.com/ IIAK’s 120th Annual Convention & Trade Show Nov. 9-11 The Brown Hotel Louisville, KY Independent Insurance Agents of Kentucky www.iiak.org

PLRB 2016 Eastern Regional Adjusters Conference Nov. 15-16 Richmond Marriott Richmond, VA Property & Liability Resource Bureau www.plrb.org

IIAC Mid-Year Convention Nov. 10 Aqua Turf Club, Plantsville, CT Independent Insurance Agents of CT www.iiact.org

www.insurancejournal.com

NATIONAL COVERAGE

MyNewMarkets Risk Management for PEO’s Market Detail: Stonehenge Insurance Services (www.stonehengeis. com) are prior PEO executives and insurance carrier employees committed to solving PEO-specific issues. Stonehenge offers a variety of programs for PEO’s and provides risk management strategies and measurable metrics to support educated and fact-based decisions.

Stonehenge works on improving overall insurance program performance and lowering long term workers’ compensation, EPLI and other commercial insurance costs for its PEO partners.

Available limits: As needed Carrier: Unable to disclose States: All states Contact: Troy Reynolds at 561-951-4315 or email: treynolds@ stonehengeis.com

States: All states Contact: Customer service at 800-330-3370

Equipment Market Detail: Texas All Risks (www.allriskga.com) can provide coverage for nearly every type of equipment for construction, agriculture, manufacturing, including specialized and breakdown coverage. Policies are available through eight “A” rated or better domestic carriers.

Available limits: As needed Carrier: Various States: La., Okla., and Texas Contact: Customer service at 800-627-0303

Workers’ Compensation Market Detail: Agency Resources (www.agencyresources.com) works with agents in placing small-premium workers’ compensation business outside of the assigned risk market. Products are sold only through agents and brokers. Minimum premium starts at $1,000; brokered business is accepted.

Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Florencia Robledo at 866-454-9676 or email: florencia. robledo@agencyresources.com

Contracting - All Classes Market Detail: Peachtree Special Risk Brokers (www.psrllc.com) offers primary and excess, inland marine, business auto for general and trade contractors, including: alarm systems installations/asbestos and lead abatement; bridge construction; concrete/crane rental (with and without operator); demolition; electrical/environmental/ excavating and grading; HVAC/iron and steel fabrication and erection/janitorial; masonry/millwright, rigging, heavy hauling; pile driving/playground/roofing; scaffolding rental and erection/sprinkler installation/street and road; utility pipeline/welding and more.

Available limits: Minimum $500,000, maximum $100 million Carrier: Multiple, admitted and nonadmitted available States: All states except N.D., S.D., and Wyo. Contact: David O’Keeffe at 201-913-8030 or email: dokeeffe@psrllc. com

Passenger Vessel - Excursions Market Detail: Atlass Insurance Group (www.atlassinsurance. com) offers excess liability; hull and P&I; liability; medical payments; pollution liability; uninsured boaters. Coverage is complete and comprehensive for commercial hull & marine insurance. Atlass represents many domestic insurers and maintains contact with the London Market, and other European underwriters.

Available limits: As needed Carrier: Various, admitted and non-admitted available www.insurancejournal.com

Tax Preparers & Bookkeepers Market Detail: Herbert H. Landy Insurance Agency Inc. (www. landy.com) offers professional liability insurance for tax preparers, bookkeepers, enrolled agents and accounting firms of all sizes and areas of practice.

Available limits: As needed Carrier: Navigators Insurance Co. States: All states except Alaska, and La. Contact: John Torvi at 781-292-5417 or e-mail: johnt@landy.com

General Contractor Insurance | Contractors Liability Insurance Market Detail: Risk Transfer Partners (www.

RiskTransferPartners.com) provides customized general contractor insurance and contractors liability insurance with broad form coverages tailored to clients’ exposures and contractual obligations. Coverage is focused on jobs with high liability, including the construction, manufacturing, and environmental industries. Risk Transfer Partners offers companies or contractors with general contractor insurance, or specialized policies for all American markets, including Dallas, Los Angeles, Chicago and New York.

Non Admitted: Yes Available limits: As needed Carrier: Unable to disclose, nonadmitted States: All states Contact: Eric Barron at 214-695-5950 or email: ebarron@ risktransferpartners.com January 11, 2016 INSURANCE JOURNAL-NATIONAL | 31

IDEA EXCHANGE

The Competitive Advantage Playing to Win Versus Playing to Not Lose

I

received an interesting request from a reader regarding a prior article I wrote.

That article was how many people, agencies, companies and associations are not playing

By Chris Burand to win. They are only playing to not lose. The reader emphasized the need to play to win, yet he noted how so many producers have told him they “hate to lose,” and this is

what drives them. They don’t say, “I love to win.” The differences are immense.

One way to explain the difference is that playing to not lose is fighting for status quo.

Playing to win is a march to a successful future, including adapting to a changing environment and changing competitors. It is about continually developing new sales, new programs, new employees, and better operations. Examples abound, but maybe the best is an old example, Paul Bunyan. He fought for the status quo. He fought to keep ax wielding lumberjacks king of the forest versus mere men running chainsaws.

A person playing to win understands change is inevitable and works to take advantage of change. A person fighting for status quo does not accept change is inevitable. A person playing to win goes out and engages in those changes, in real terms and not just window dressing verbiage. Producers I know who play to win tell me they are motivated to win the next challenge. They do not tell me they’re motivated to not lose. The ones who play to win are many times more successful selling.

Their focus is on the prize versus a focus on keeping only what they already have. They continually seek new opportunities without ever really considering losing. The best way to keep what a person already has is to focus on playing to win.

In business and personal relationships, the terms survivor and thriver from the book “The Eagle’s Secret” by David McNally are the two best descriptive words I know. Surviving, just surviving, is status quo, although surviving by definition may be status quo less a little. Thriving is moving forward whether in sales, personal development or building an agency.

Thriving is setting goals and creating accountability, even personal accountability for achieving those goals. Thriving involves the risk of failure.

Status quo is about avoiding risk.

Playing to not lose is lazy. Playing to win is industrious. Playing to not lose is lazy because people playing to not lose only expend effort when a threat is posed. They have nothing to lose without a

threat, so they don’t “play.” They sit.

In fact, playing to not lose is often misperceived as competitiveness. Agency owners often seek competitive people as producers thinking they are self-motivated.

If they are competitive because they “hate to lose,” they are only competitive when threatened. A competitor, a peer or maybe a boss must threaten. This explains why so many producers stop producing. I’ve met many producers who get to a plateau and when they lose a few accounts, they go and get more until they are back on the same plateau. They’ve quit playing to get ahead.

They are now playing to not lose.

Also, beware the sweet talk of producers who want to elevate their personal masquerading as playing to win, when really they want more fame and then status quo once some level of notoriety is gained. This is akin to the emperor having no clothes analogy, because that emperor wants status quo. A change in status quo for these people at that point is anathema. (A test actually exists that identifies these producers before you hire them.)

Producers Who Win Optimally, hiring a producer who plays to win ethically is far more important. They may drive people around them crazy, but the value gained is usually worth the price.

People playing to win are always motivated.

They are always seeking more wins. They

take chances to grow. They take chances survivors, just adrenaline junkies). to thrive. They are focused on the future.

When people play to not lose, their enerWhat are their clients’ current and future gy is sapped by fear. Fear requires energy. needs? What can they do to Fear sucks energy so sometimes build for the future? Another playing to not lose A person play- people way to put it in common busiappear lazy when really, their ing to win ness book vernacular is that fear is so great they don’t have understands a survivor is always surprised any energy left to build. when their cheese gets moved.

The differences change is A person playing to win knows between playing to not lose and inevitable and playing to win are immense. their cheese will be moved and works to take Agencies led by leaders driven they are working to anticipate where it will be moved and how advantage of to success have a complete plan to succeed in the new location. to which the leader is held change.

An agency led by a person accountable. Accountability is a playing to win will do more driver for people truly playing than simply invest in the future. “Investing to win because they do not fear failure. in the future” is such an overused euphePeople playing to not lose fear failure. mism favored by consultants and speakers pandering to people that prefer status quo.

Burand is the founder and owner of Burand & A better term is that agency owners playing Associates LLC based in Pueblo, Colo. Phone: 719to win will invest in their personal, tangible 485-3868. Email: chris@burand-associates.com. leadership abilities. I use tangible leadership abilities because again, most leadership books and programs are the equivalent of a ’60s love-in. A cruder version that applies Readers, browse, contact, or do product searches on any to status quo is the strip club analogy. The of our full page advertisers at: www.insurancejournal.com/ customer thinks they’re getting something adshowcase/ when they’re really losing their wallets one dollar at a time. Leadership workshops Access Home Insurance often work the same way. Everyone loves www.accesshomeinsurance.com SC5, SE5 everyone while losing their wallets.

Agency Ideas Tangible leadership is where a leader www.agencyideas.com 17 Amerisafe puts his or her own vulnerabilities on the www.amerisafe.com SC3 line in an effort to thrive. I have seen many Anderson & Murison www.andersonmurison.com 25 covers of industry publications exalting an Applied Underwriters agency or carrier that I knew to be broke. www.auw.com 2,3, 36 These people are not seeking to win anyBurns & Wilcox Ltd. www.burnsandwilcox.com 7 thing but publicity and maybe a personal FEMA fortune (usually quite secondary), but they www.agents.floodsmart.gov/ij 9 Global Special Risks are not playing to win. Playing to win at the www.globalspecialrisks.com 15 leadership level requires personal accountM.J. Hall & Company www.mjhallandcompany.com W4 ability. People playing to win put their own Midlands Management Corporation accountability on the line in absolutely tanwww.midlandsmgmt.com SC4 gible measures.

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They have so much more energy because they are always fueled by a drive to build and take risks (although not without regard for risks — those folks are not thrivers or

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January 11, 2016 INSURANCE JOURNAL-NATIONAL | 33

IDEA EXCHANGE

Closing Quote

Stage Set for Another Banner Year for Independent Agents

T

By Robert Rusbuldt

he Big “I” is very pleased that 2015 yielded a number of legislative successes.

Early in 2015, the association scored a tremendous double victory when Congress acted on both the National Association of Registered Agents & Brokers (NARAB II) and a long-term extension of the Terrorism Risk Insurance Program in one swoop.

Other wins throughout the year included enactment of the Protecting Affordable Coverage for Employees Act, which corrects a flaw in the Affordable Care Act (ACA) and maintains the small group market at 50 and under employees, and reverses $3 billion in cuts to the Federal Crop Insurance Program (FCIP).

Even with these numerous victories, 2016 is expected to be a very busy year.

One of the ACA’s biggest flaws is the excise tax or so-called “Cadillac” tax. This forthcoming tax will assess a 40 percent levy on health plans that exceed an established annual cost and is expected to negatively impact more and more consumers over time. With the Big “I’s” support, and more than 300 co-sponsors from both chambers and both sides of the aisle, several bills that would repeal this tax have been introduced and are gaining momentum. In a victory for the association, a two-year delay of the “Cadillac”

34 | INSURANCE JOURNAL-NATIONAL January 11, 2016

tax was included in the year-end omnibus funding bill.

While this is a good first step, with at least four repeal bills still pending in Congress, the Big “I” continues pressing for full repeal.

The National Flood Insurance Program (NFIP) is scheduled to expire on Sept. 30, 2017, and the Big “I” will continue reminding Congress that independent insurance agents and brokers play a vital role in the sale and servicing of NFIP policies as reauthorization discussions begin.

The Big “I” also supports S. 1679 and H.R. 2901, the “Flood Market Parity and Modernization Act.” This legislation complements the NFIP and ensures that policyholders will not lose their grandfathered status if they chose to move between the NFIP and the private market for flood coverage.

The Big “I” continues working with state insurance regulators to fight H.R. 3974, the “Nonprofit Property Protection Act.” This legislation attempts to expand the Liability Risk Retention Act to allow Risk Retention Groups (RRGs) to write nearly any form of commercial insurance coverage while retaining a weaker and preferential system of regulatory oversight. There is no marketplace need for this legislation, and it has the potential to harm consumers.

Insurance agents and brokers are also concerned with a proposed rule by the U.S. Department of Labor (DOL) that would expand a fiduciary standard to broker-dealers. As written, the DOL proposal would generate undue compliance burdens and increased liability for many agents and brokers. The association is advocating ‘The Big ‘I’ is for legislative or regulatory excited to hit the solutions to address flaws ground running in the proposed rule and in 2016.’ ensure that investors are not harmed by limited access to advice.

The U.S House of Representatives passed H.R. 1478, the “Policyholder Protection Act,” in November. This legislation protects policyholder assets and reaffirms the primacy of state oversight of the insurance market. The Big “I” has been actively advocating for this bill since it was first introduced in early 2015 and will continue urging the Senate to consider this bill quickly.

The Big “I” is excited to hit the ground running in 2016 and looks forward to announcing more victories on behalf of the almost quarter of a million agents and brokers across the country it represents in the coming months.

Rusbuldt is president and CEO of the Independent Insurance Agents & Brokers of America.

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