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Contents January 9, 2017 • Vol. 95 No. 1 • West

West

W4 WEST REGULATION REPORT CARD

National 8 Top 10 Personal Auto Insurers and Today’s Market: A.M. Best

W1 Central California City Wins $22M from Shell Oil in Toxic Drinking Water Case

10 Top 10 ‘Most Ridiculous’ Lawsuits of 2016: Chamber of Commerce

W2 Tesla Owner in California Sues Tesla over Sudden Acceleration

12 Reinsurers Can Expect Another Difficult Year, Seeking Price Stabilization: Willis Re

W2 Expert: Remote Nevada Earthquakes Big Enough to Cause $1B in Damage

12 Brexit Threatens 10% of London’s Financial Jobs

W4 West Regulation Report Card: California Most Politicized State

16 Closer Look: Oakland Warehouse Fire Has Some Insurance Pros on Alert

W8 California DIR Releases Overview of New Laws

19 How Flood Risk in U.S. Is Changing: Increasing in North, Decreasing in South

Idea Exchange

20 Special Report: Profile of Employment Practices Under Trump

24 The Competitive Advantage: Chris Burand

23 State Marijuana Laws Are Changing But Employer Attitudes, Federal Law Aren’t

32 Minding Your Business: Catherine Oak & Bill Schoeffler

TOP 10 PERSONAL AUTO INSURERS AND TODAY’S MARKET: A.M. BEST

34 Closing Quote: How Brokers Can Help SMBs Reduce Cyber Risk

26 2017 Meetings & Conventions Directory

Departments 11 Declarations 11 Figures

OAKLAND WAREHOUSE FIRE HAS SOME INSURANCE PROS ON ALERT

4 | INSURANCE JOURNAL | WEST JANUARY 9, 2017

14 Business Moves 18 MyNewMarkets INSURANCEJOURNAL.COM

OPENING NOTE

Write the Editor: awells@insurancejournal.com

The Cost of Workplace Incivility

W Publisher Mark Wells mwells@wellsmedia.com

EDITORIAL

SALES

Editor-in-Chief Andrea Wells awells@insurancejournal.com

West Sales Dena Kaplan (800) 897-9965 X115 dkaplan@insurancejournal.com

East Editor Elizabeth Blosfield eblosfield@insurancejournal.com

Romeo Valdez (800) 897-9965 X172 rvaldez@insurancejournal.com

Chief Content Officer Andrew Simpson asimpson@insurancejournal.com

Southeast Editor/MyNewMarkets 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 L.S. Howard lhoward@insurancejournal.com Columnists Chris Burand, Catherine Oak, Bill Schoeffler

Chief Marketing Officer Julie Tinney (800) 897-9965 X148 jtinney@insurancejournal.com

South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com

Contributing Writers

Insurance Markets Manager Kristine Honey (619) 584-1100 X132 khoney@insurancejournal.com

IJ ACADEMY OF INSURANCE Online Training Coordinator Barbara Whiffen bwhiffen@ijacademy.com

Social Media Manager Ly Short (619) 890-7735 Lshort@insurancejournal.com

John Stephens

Chief Financial Officer Mark Wooster mwooster@wellsmedia.com

Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125 kdelamora@insurancejournal.com

MARKETING

DESIGN/WEB

ADMINISTRATION

Marketing Director Derence Walk dwalk@insurancejournal.com Marketing Administrator Gayle Wells gwells@insurancejournal.com

NEW MEDIA

Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com V.P. of Design Guy Boccia gboccia@insurancejournal.com

New Media Producer Bobbie Dodge bdodge@insurancejournal.com

Senior Web Developer Chris Thompson cthompson@insurancejournal.com

Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com

Web Developer Jeff Cardrant jcardrant@insurancejournal.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

orkplace incivility can create lasting damage — whether employees are intentionally ignored, undermined by colleagues or publicly belittled by an insensitive manager, according to a recent article from McKinsey Quarterly. Hurtful workplace behavior can drain performance, increase employee turnover and even affect customer relationships. Christine Porath, an associate professor at the McDonough School of Business at Georgetown University, has spent the past 18 years researching employee treatment. She says workplace incivility is on the rise: While 49 percent of the workers she surveyed in 1998 reported they were treated rudely at least once a month, that figure rose to 55 percent in 2011 and 62 percent in 2016. That poor treatment has a cost, she says. Whatever the underlying causes, the costs of incivility rise as employee stress levels increase. Among the problem areas are: Workplace performance. Nearly everybody who experiences workplace incivility somehow settles the score — with their offender and the organization. Of the nearly 800 managers and employees across 17 industries polled, those who didn’t feel respected performed worse. Forty-seven percent of those who were treated poorly deliberately decreased the time spent at work, and 38 percent said they intentionally decreased the quality of their work. Sixty-six percent admitted their performance declined and 78 percent said their commitment to the organization declined. Part of the performance penalty is related to how employees internalize stress levels. Eighty percent lost work time worrying about the incident, and 63 percent lost work time in their effort to avoid the offender. Employee turnover. Many losses go undetected when employees leave. Those who quit in response to experiencing bad behavior don’t tell their employers why. Turnover costs add up: estimated twice an employee’s annual salary for high-level employees. Of those treated poorly, 12 percent left their job because of uncivil treatment. Customer experience. Incivility may take a toll on customer relationships. Porath’s research with Valerie Folkes and Debbie MacInnis at the University of Southern FOR QUESTIONS California shows that many consumers are REGARDING SUBSCRIPTIONS: Call: 855-814-9547 less likely to buy anything from a company Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: they perceive as uncivil, whether the rudeinsurancejournal.com/subscribe ness is directed at them or other employees. Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media Witnessing one negative interaction leads to Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 generalizations about other employees, the per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this puborganization and even the brand. lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended Porath provides practical steps for ensuring to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2017 Wells a civil workplace. See the full McKinsey artiMedia Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. cle: “The hidden toll of workplace incivility.” Insurance Journal is a publication of Wells Media Group, Inc.

Nearly everybody who experiences workplace incivility somehow settles the score — with their offender and the organization.

Andrea Wells Editor-in-Chief

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POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: For reprints of articles in this issue, contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or kdelamora@wellsmedia.com Visit insurancejournal.com/reprints/ for more information.

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National

Top 10 Personal Auto Insurers and Today’s Market: A.M. Best

he U.S. personal auto insurance industry saw net premiums written grow 5.1 percent in 2015 — a rate of growth that may not be repeated as rising loss ratios weaken both underwriting and operating results, according to an A.M. Best report. Net premiums written landed at $192.8 billion for 2015, up from $183.5 billion in

2014. The figure grew 4.1 percent in 2013 and 4.9 percent in 2014. A.M. Best credits the growth in new car sales, higher insured values and more vehicles per household. But while personal automobile underwriting results have been generally stable in recent years and close to break-even, A.M. Best said the market has weakened into 2016 and that trend will continue in the months U.S. Personal Lines Automobile Industry – Top 10 Carriers ahead. Ranked by 2015 Direct Premiums Written ($ Thousands) A look at the Direct Premiums Written Marketshare combined ratio Rank Company/Group 2015 2014 Change 2015 2014 1 State Farm Group 36,546,807 35,589,289 2.7% 18.3% 18.7% trends show 2 Berskire Hathaway Ins. Group 22,808,380 20,520,186 11.2% 11.4% 10.8% the emerging 3 Allstate Ins. Group 20,036,978 19,000,660 5.5% 10.0% 10.0% trouble. In 2012, 4 Progressive Ins. Group 17,518,718 16,566,931 5.7% 8.8% 8.7% for example, the 5 USAA Group 10,562,100 9,843,321 7.3% 5.3% 5.2% calendar-year 6 Liberty Mutual Ins. Cos. 9,942,671 9,499,540 4.7% 5.0% 5.0% combined ratio 7 Farmers Ins. Group 9,855,929 9,568,738 3.0% 4.9% 5.0% was 102. From 8 Nationwide Group 7,468,708 7,337,681 1.8% 3.7% 3.9% 9 American Family Ins. Group 3,694,272 3,530,594 4.6% 1.9% 1.9% 2013-2015, it was 10 Travelers Group 3,377,405 3,153,509 7.1% 1.7% 1.7% 101.5 and then Total Top 10 141,811,968 134,610,649 5.3% 71.0% 70.7% 102.4 and 104.6, Total Private Passenger Auto 199,603,597 190,383,710 4.8% 100.0% 100.0% respectively. Data based on companies that filed the Insurance Expense Exhibit and represents all private passenger auto While underlying business written in the U.S. by A.M. Best’s rated financial groups or unaffiliated single companies. Source: A.M. Best data and research underwriting

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expense ratios improved a bit, loss ratios have risen, A.M. Best said, driven by rising loss frequency and severity. A.M. Best asserts that higher rates, improving price segmentation and claim initiatives could address some of the nearterm financial pressures on personal automobile insurance. But the ratings agency notes that other issues could have more longer-term impact on the sector. Among the emerging issues of particular concern, according to A.M. Best: more technology innovation, the continued evolution of autonomous vehicles, the emergence of rideshare companies such as Uber and Lyft, and the potential market growth of “nontraditional competitors.” Within this climate, State Farm emerged once again as the top personal auto carrier in terms of direct premiums written, with a number that came in at $36.5 billion in 2015 and an 18.7 percent market share. That’s 2.7 percent higher than the previous year. Berkshire Hathaway placed second, with $22.8 billion in direct premiums written, 11.2 percent higher than in 2014. INSURANCEJOURNAL.COM

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NATIONAL | News & Markets

Top 10 ‘Most Ridiculous’ Lawsuits of 2016: Chamber of Commerce By Andrew Simpson

oo much ice in an iced coffee? Too much lip balm left in the tube? Too much environmental damage from thousands of red balloons? Lawsuits complaining about those situations made this year’s list of unnecessary litigation as judged by The Institute for Legal Reform (ILR), a unit of the U.S. Chamber of Commerce. ILR regularly shines a light on what it sees as abuses of the country’s legal systeam. Every year at this time, it narrows down its reports to what it calls the most ridiculous lawsuits of the year. ILR’s Top 10 Most Ridiculous Lawsuits of 2016 were chosen from the year’s 10 most popular stories featured on its website, FacesOfLawsuitAbuse.org, and then ranked according to a national Google survey of 5,000 consumers across America. The following is ILR’s Top 10 countdown and slightly-edited commentary.

10.Business Fight Against Overzealous Government Prosecutors

It took $25 million and 100 lawyers for a Minnesota company to beat overzealous federal prosecutors in court. The Feds’ suit claimed products were sold without proper government approval. The jury disagreed.

9. Mom and Son Sue Over SAT Typo that Gave Students Extra Time

Test-taking is nerve-racking… but a lawsuit over extra test time? That’s what one mother and her son did after SAT test instructions mistakenly gave students five more minutes to complete a section.

celebrated Cornhusker touchdowns by releasing thousands of red balloons. But one fan’s lawsuit said this threatens the health and safety of wildlife, even though the balloons were environmentally friendly and biodegradable. Perhaps he’s not feeling that Husker school spirit.

8. Hot Air: Man Sues Nebraska Cornhuskers To End Balloon Release

7. SoulCycle Rider Alleges Injury to Sue Trendy Indoor Cycling Outfit

For 50 years, University of Nebraska football fans have

Celebrity SoulCycle instructor Angela Davis got sued

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for running too rigorous a workout. A California woman claimed the instruction, the equipment and the music caused her to fall off the bicycle while the still-moving pedals banged into her ankle.

6. Lawsuit Turns $40 Printer on Craigslist into $30,000 in Damages

How does a $40 printer on Craigslist turn into a $30,000 nightmare? When the buyer sues. The printer was broken, he claimed. Six years after the original sale, the case is ongoing. Can you say: most expensive printer ever?!

5. MasterCard Blasts Lawsuit Over Cancer Fundraising

MasterCard has raised more than $30 million for cancer research ... and that was too much for one card member who sued claiming the company continued fundraising after the original $4 million goal was met. The legal costs of raising more money for a good cause? Sadly, not priceless.

4. Monkey Business Coming to Ninth Circuit, Courtesy of PETA

In 2015, a British photographer used his camera for a series of popular “monkey selfies…” Animal rights activists sued on behalf of the monkey, claiming the primate — not the photographer — owned the copyright. In 2016, a court ruling allowed the lawsuit to continue.

texting,” which is now common, turned into a payday for a Georgia woman. She walked right into a ladder, causing her phone to hit her forehead! And now ... she’s $161,000 richer.

2. Court Tosses Lawsuit over Lip Balm Left in Tube

Did you ever think there was just a bit more lip balm at the bottom of the tube? Ever consider suing? That’s what a California woman did when she claimed Fresh Inc. conned consumers into thinking there was more “Sugar Lip Treatment” in the empty tube. Her case was thrown out… along with that empty tube.

1. Starbucks Feels Heat from Two Abusive Lawsuits

Starbucks was hit by two class action lawsuits over how much java is in its cups. One says there’s a quarter inch too much steamed milk instead of coffee. Another says there’s too much ice in ... you guessed it — the iced coffee.

3. Woman Walks into Ladder While on Phone; Jury Award: $161,000 “Walking-while-

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West

Central California City Wins $22M from Shell Oil in Toxic Drinking Water Case

he central California city of Clovis in late December won a $22 million civil case against Shell Oil over the cleanup of a toxic chemical found in drinking-water wells, officials said. The chemical 1,2,3-trichloropropane, or TCP, is a waste product from making plastic. A jury found that Clovis residents were harmed by the fumigant. The jury also found Shell did not prove the benefits of its product outweighed the risks, and that those risks were known when it was sold. “It’s not the city’s fault that TCP is in its wells, and it is the city’s responsibility to INSURANCEJOURNAL.COM

protect its citizens,” said Duane Miller, an attorney representing Clovis. Shell attorney Cal Burnton told jurors that residents have not been harmed by the TCP in their water. He said that TCP has never been declared a human carcinogen, though scientific studies show it caused cancer in laboratory animals including rats. Another Shell attorney Tracie Renfroe said the benefits of the product outweighed the risks known at the time, otherwise the federal Environmental Protection Agency wouldn’t have approved its use.

Renfroe also claimed there was sufficient warning. The labels warned of kidney and liver damage but not cancer because the animal studies weren’t done until 1985, she said. Labels also didn’t warn about groundwater risks because she said no one recognized that was possible until 1983. “Shell could not warn of what it did not know,” she said. TCP is prevalent in Fresno, Kern and Tulare counties. But is also found elsewhere in the state, including Los Angeles County. Copyright 2016 Associated Press. JANUARY 9, 2017 INSURANCE JOURNAL | WEST | W1

WEST | News & Markets

Tesla Owner in California Sues Tesla over Sudden Acceleration

esla Motors Inc. has been sued by a Model X owner in California who said his electric SUV suddenly accelerated while being parked, causing it to crash through the garage into the owner’s living room, injuring the driver and a passenger. The Model X owner, Ji Chang Son, said that one night in September, he slowly pulled into his driveway as his garage door opened when the car suddenly sped forward. The lawsuit, filed in U.S. District Court in the Central District of California earlier, seeks class action status. The suit cites seven other complaints registered in a database compiled by the National Highway Traffic Safety Administration dealing with sudden acceleration

without warning. Tesla said in a statement that it had “conducted a thorough investigation” of the claims made by Son. “The evidence, including

data from the car, conclusively shows that the crash was the result of Mr. Son pressing the accelerator pedal all the way to 100 percent,” a Tesla spokesperson said in an

Expert: Remote Nevada Earthquakes Big Enough to Cause $1B in Damage

trio of significant earthquakes that struck a remote part of western Nevada along the Sierra Mountains’ eastern last month were big enough to cause as much as $1 billion in damage if they had been centered beneath a big city, a leading expert said. The first of two magnitude 5.7 quakes and a third that registered 5.5 resulted in no injuries or reports of significant damage. The epicenter was east of the Nevada-California line near rural Hawthorne

about 100 miles southeast of Lake Tahoe and 90 miles south of Reno. “Thankfully, it’s not underneath a big city because a sequence of 5.7s could certainly do a lot of damage,” said

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Graham Kent, director of the University of Nevada’s Seismological Laboratory. “If you put this underneath Reno, we are probably looking at a $1 billion event, probably with some fatalities and many casualties,” he told The Associated Press. “It’s much better to be beneath a ranch 20 miles outside of Hawthorne.” The biggest quakes were followed by a series of smaller

aftershocks, including two in the magnitude 4 range and at least a dozen larger than magnitude 3. Kent said it should serve as a reminder that Nevadans live in the third-most seismically active state in the nation behind California and Alaska. “It’s another wake-up call,” said Kent, who said they have been studying the seismically active region around Hawthorne since a swarm of thousands of smaller earthquakes were recorded there over a two-month period in 2011. Copyright 2016 Associated Press. INSURANCEJOURNAL.COM

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WEST | News & Markets

West Regulation Report Card: California Most Politicized State By Don Jergler

report gives California’s insurance regulatory environment low marks for auto body repair rules, the insurance commissioner’s call for insurers to divest from coal, its prior approval law and being the “most politicized state in the country.” California was given a D- by the 2016 Insurance Regulation Report Card from R Street Institute, a group that says it’s dedicated to the mantra, “Free markets. Real solutions.” The annual survey tests which state regulatory systems “embody the principles of limited, effective and efficient government.” It is the philosophy of the report’s authors that states should regulate only market activities in which government is best-positioned to act, and those activities should produce a little as possible financial burden on policyholders, companies and taxpayers. Other Western states that received poor grades were Alaska (D-), Hawaii (D) and Montana (D). A-grades were given to Arizona, Idaho and Utah. Nevada (B+), Oregon (B+), New Mexico (B) and Wyoming (B) followed. Colorado earned a C-grade and Washington received a C-. Nationwide, Vermont graded out as the best regulatory system for insurance and North Carolina had the worst grade. California’s poor grade didn’t sit well with the insurance commissioner’s office. “These so-called report cards by these right-wing affiliates should be dismissed

R Street Institute, 2016 Insurance Regulation Report Card

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as nothing more than political garbage,” said Byron Tucker, deputy commissioner of the California Department of Insurance. “This is just another partisan study by a biased, self-serving organization. Nobody in California views R Street as objective and credible.” R Street Senior Fellow R.J. Lehmann, who authored the report, said the state had points deducted because the office of insurance commissioner is politicized, which includes decisions made by the commissioner that he said were political. The report, however, isn’t political, he added. “We are free market advocates. That is not something we would hide,” Lehmann said. “We believe there is a role for regulation.” A primary scoring consideration, for example, is solvency regulation. States not doing an effective job of regulating solvency have points subtracted. “The largest single factor in our report is solvency regulation,” he said, adding that solvency is an objective topic, not a political one. “We’re not going to say it’s not ideological, but it’s not anti-gov-

ernment.” Major deductions for California included a decision in January from California Insurance Commissioner Dave Jones, who asked all insurers that do business in the state to divest from thermal coal and to require insurance companies to disclose such investments. To comply with this request would mean making no new investments, not renewing existing investments, and selling or withdrawing from existing investments in thermal coal, according to the California Department of Insurance. It should be noted that as of now, Jones’ divestment request is voluntary, and specifically requests a divestment from any entity that either extracts or burns thermal coal or that derives 30 percent or more of its revenues from thermal coal. “His job as the insurance commissioner of California when it comes to investing is to look to see if they are prudent and they are effectively matched to the risk that the insurer takes on,” Lehmann said. “His job is not to pick industries.” He said he finds the idea “somewhat ludicrous” that the commissioner believes he knows the risk of an investment and an

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insurer doesn’t. This is one of the primary reasons the report declares California to be the most politicized state in the U.S. More deductions came from a decision from Jones in March on a pair of auto-body regulations that would require insurance companies to inspect a damaged vehicle within six business days, and would limit companies’ freedom to comment about a particular auto-body repair shop where the effect might be to dissuade customers from choosing that shop. The top reason Lehmann gave for California’s D- is a law that’s been around since 1988. “It’s basically Prop 103,” he said. “Prop 103 does not permit the kind of market-based competition that we think works in most states.” Prop. 103 requires, among other things, that property/casualty insurers justify their rates. The industry has challenged the law in the past. Last year a Sacramento Superior Court rejected an industry challenge on the commissioner’s regulations under Prop 103 that limit the amount of advertising costs insurers may pass on to consumers through insurance premiums. This prior approval auto regulation makes it difficult to introduce products, and makes it hard for insurers to increase or even lower rates, Lehmann said. An insurer responding to market conditions, for example, may want to cut rates. That would be unlikely, however, knowing they couldn’t easily raise them later.

“If you had the freedom to adjust your rates based on conditions in the market, you would see a lot more companies offer discounts,” Lehmann said. “California’s a very restrictive state and we think that is a concern.” Those who support Prop. 103 say it has saved consumers lots of money. R Street Institute, 2016 Insurance Regulation Report Card A report in 2013 from the Consumer Federation of America that the grading: in Virginia the commissioner analyzed the auto insurance regulatory is nominated by the State Corporation systems of each of the 50 states from 1988 Commission; in New Mexico the Public through present singles out California and Regulation Commission has the say the landmark insurance reforms in Prop over commissioner; and in Florida the 103. Department of Financial Services appoints That report shows an estimated savings the commissioner. to California drivers of $100 billion, or The report also dings California under $8,125 per household, since the category of “residual markets” the law passed. The authors because of the California Earthquake also called for prior approvAuthority, which has an estimated 40 peral regulations similar to cent of the state’s earthquake market. Prop. 103 for the rest of the “The CEA is a product of a law that states. earthquake insurance must be offered in Having an elected comthe first place,” Lehmann said. “We probmissioner also cost points ably would ultimately disagree with that in the R Street report. law.” Lehmann said elected commissioners, The CEA was created by Legislature like California’s, as well as those appointfollowing the 1994 Northridge Earthquake ed by a governor, can get caught up in and the home insurance crisis the ensued. playing politics instead of regulating the At that time the state also passed a law industry. requiring insurers offering homeowners “Among non-elected commissioners, in insurance in the state to also offer earthstates where you serve a set term that can quake insurance. overlap multiple (gubernatorial) adminis Lehmann said he believes it’s appropriate trations, that seems like the independence for a bank to require earthquake insurance that is the best,” he said, adding that this if it is holding an outstanding mortgage, but means a commissioner isn’t serving “at “if you’re not a lender who wants to secure the pleasure of one executive.” their principal, then ultimately it should be The 2016 Insurance Regulation Report up to the policyholder.” Card from R Street knocked Hawaii for He also believes insurers could craft having too concentrated of an auto more products to deal with earthquake insurance market, among other risk if the market were freer, and that things. consumer deductibles would shrink if The 2016 Insurance Regulation more insurers were able to compete in the Report Card from R Street knocked earthquake market. Hawaii for having too concentrat “I think CEA has gotten better,” he ed of an auto insurance market, added. among other things. In fact, the CEA, which is celebrating its Three states in which commis20th anniversary this month, has lowered sioners don’t directly serve one rates by 55 percent combined in that time executive got positive points in and has created a range of deductibles

‘Prop 103 does not permit the kind of market-based competition that we think works in most states.’

R Street Institute, 2016 Insurance Regulation Report Card

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Hawaii received a D for its low loss ratio, having a concentrated homeowners market, having a workers’ comp fund that accounts for more than a quarter of the market, having a prior approval system, banning the use of credit in auto insurance underwriting and rateR Street Institute, 2016 Insurance Regulation Report Card making, and prohibiting the use of age and gender in underwriting variables. “The Office of the Montana State A spokesman for Hawaii’s insurance Auditor didn’t have the regulatory authordepartment declined to comment. ity over the Montana State Fund until The 2016 Insurance Regulation Report 2015,” she wrote. Card from R Street also calls Montana’s Senate Bill 123, passed in 2015, assigned insurance regulatory environment highly regulatory authority over the Montana politicized. State Fund to the auditor’s office with Montana’s D was for having an elected provisions that retained the state fund’s commissioner, for having a state fund that certainty for a certificate of authority, writes more than half the workers’ comp requirement to be a guaranteed market market and prohibiting the use of gender for workers’ compensation and exemption and marital status in underwriting varifrom paying the premium tax. ables. “The fact that State Fund writes more Laura Parvey-Connors, communithan half of the workers’ comp in the state cations director for the Office of the is because they are the guarantee market Montana State Auditor, Commissioner of for worker’s compensation,” she stated. Securities and Insurance, responded in an emailed comment that the commissioner Lehmann and other fellows at R Street Institute are is elected according to the state constituauthors of the Right Street blog on Insurance Journal. tion. com.

Bar

(5 percent, 10 percent, 20 percent, 25 percent), according to CEA CEO Glenn Pomeroy. Several states, including California, were downgraded for practicing “desk drawer rules,” which are rules of thumb that regulators apply that are not on the books. “If you know that there’s a certain kind of requirement that would always be denied, even if there’s no rule that it should be denied, we consider that a desk drawer rule,” Lehmann said. “If you try to obey the law as written, you still could be denied any number of business requests.” The grading isn’t all bad for California. It graded out as one of the most competitive states in terms of the auto insurance market. Alaska was another state that was hammered in the report. The 2016 Insurance Regulation Report Card from R Street cited a variety of reasons for giving Alaska a bad grade. The state received a D- overall. It was knocked for having highly concentrated auto and home insurance markets, and Gov. Bill Walker’s veto in July of SB 127, which would have allowed insurers to consider a consumer’s credit information during policy renewals. Lori Wing-Heier, director of the state’s insurance department, said the state currently allows credit scoring to be used on new applications, but not on renewal business unless certain statutory procedures are met. “SB 127 simplified the process for renewal business, when it was vetoed by Governor Bill Walker,” she wrote in an email reply to a request for comment for this article. “It did not eliminate or change the use of credit scoring on new applications or on renewal.” She noted that Walker intends to introduce a revised bill at the start of the legislative session next month that will strengthen consumer protections. “It is our hope to strengthen the personal lines market and provide additional consumer protections with the passage and enactment of this new bill,” WingHeier said.

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JANUARY 9, 2017 INSURANCE JOURNAL | WEST | W7

WEST | News & Markets

California DIR Releases Overview of New Laws

he California Department of Industrial Relations released its 2016 Legislative Digest, which summarizes new laws that impact workers and employers. Most of the chaptered bills took effect on Jan. 1. Highlights of those new laws include:

Wage and Hour Laws

Senate Bill 3 increases the state minimum wage annually starting on Jan. 1 until it reaches $15 per hour on Jan. 1, 2022. Employers with 25 or fewer employees have an extra year to comply. It also provides that, starting July 1, 2018, In-Home Supportive Services workers are entitled to paid sick days. Assembly Bill 1066 ensures California farmworkers earn overtime pay after eight hours in a day or 40 hours in a week. It creates a schedule to phase in these overtime requirements over a four-year period: from 2019 to 2022 for employers

with 26 or more employees and from 2022 to 2025 for employers of 25 or fewer employees. Senate Bill 1015 indefinitely extends the Domestic Workers Bill of Rights specifying that domestic workers earn overtime pay when they work more than nine hours in one workday day or more than 45 hours in any workweek.

ers’ comp system. SB 1160 expedites treatment to injured workers in the acute stage of a claim. It also mandates electronic reporting of utilization review

Budget Implementation

Access to Medical Care and Fraud Prevention

Assembly Bill 1244 and Senate Bill 1160 build upon California’s workers’ compensation reforms. AB 1244 is designed to reduce treatment delays for injured workers and rooting out provider fraud and illegitimate liens. It requires the Division of Workers’ Compensation to suspend any medical provider, physician or practitioner convicted of fraud from participating in the work-

requirement. Senate Bill 1167 mandates Cal/OSHA propose a new standard that minimizes heat-related illness and injury among workers working in indoor places by Jan. 1, 2019.

data by claims administrators and implements measures to increase transparency and combat fraud.

Worker Health and Safety

AB 1978 protects janitorial workers by requiring registration of employers, starting July 1, 2018, and establishing a sexual violence and harassment prevention training

Senate Bill 836’s changes include the following: Reforms the Labor Code Private Attorneys General Act to allow greater oversight of PAGA claims and litigation; Clarifies public works requirements for ready-mix cement delivery; Aligns statutes that authorize the Divisions of Labor Standards Enforcement and Occupational Safety and Health to charge fees for various regulatory activities to make the programs self-sustaining through user fees and reduce the number of funds into which those fees are deposited.

California Labor Commissioner Nails Taxi Company for Failure to Carry Comp

anta Rosa, Calif., taxi company A-C Transportation Services Inc. has agreed to settle a $522,300 citation for refusing to provide its 30 drivers with workers’ compensation insurance coverage and for misclassifying them as independent contractors. Company owners Kevin and Jennifer Kroh, also doing business as Healdsburg Cab Co., agreed to pay a fine of

$200,000 in installments, with final payment in June 2021. If they default on the payments the agreement is void and the full $522,300 judgement will be due. The company also agreed to cease all operations. The agreement comes after the company was issued a stop order judgment in October by a Sonoma County Superior Court judge for continuing to refuse to provide workers’ comp. An investigation into the company in 2014 and found that it had failed to provide

W8 | INSURANCE JOURNAL | WEST JANUARY 9, 2017

workers’ comp coverage from 2011 through 2014 and was misclassifying drivers as independent contractors. A citation for $522,300 was issued and appealed by A-C Transportation claiming drivers were independent contractors who leased cabs from the businesses. It was later determined that the drivers were employees and not contractors. A-C Transportation petitioned for a review the administrative decision in Sonoma County Superior Court, which found

there was substantial denied the petition. When A-C Transportation continued to operate and refused to secure workers’ comp, stop order was issued. “Hard working business owners across California get up every day and play by the rules, even when it isn’t always easy. This case sends a powerful message to businesses that break those rules by misclassifying their employees,” California Labor Commissioner Julie A. Su said in a statement. INSURANCEJOURNAL.COM

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Figures

1.72

The percentage of late-filed surplus lines insurance policies in Texas in 2015, according to the Surplus Lines Stamping Office of Texas. Surplus lines policies are considered late if they are filed more than 60 days after the effective date or issue date of the policy, whichever is later.

$4 MILLION

Declarations

Opioid Misuse

The percentage by which workrelated fatalities rose last year in Minnesota compared to the recent five-year average. There were 74 work-related fatalities in 2015, up from 62 in 2014 and the average of 66 from 2010 through 2014. Agriculture, forestry, fishing and hunting had the highest number.

$500 MILLION

The estimated damage from the Tennessee wildfires that tore through a tourism town in the foothills of the Great Smoky Mountains in November. The fires killed 14 people.

$500,000

The amount that a 2016 Navajo Agricultural Products Industry water delivery system breach is expected to cost the tribal business in New Mexico. The breach left the 80,000acre farm without water for nearly a month. The estimate includes losses from the potato harvest. INSURANCEJOURNAL.COM

The amount for which 13 current and former New York City employees have been arrested in an insurance fraud scheme. Authorities say 10 FDNY emergency medical technicians and paramedics, including EMS officers, and three NYPD traffic enforcement agents were arraigned on charges of grand larceny and insurance fraud. All pleaded not guilty. State Attorney General Eric Schneiderman says they signed up for disability insurance through AFLAC and used forged signatures to file false claims.

“This is unacceptable. Through the Alabama Council on Opioid Misuse and Addiction, we will continue to build on our existing efforts to combat opioid abuse in our state and will return with new innovative ideas to put an end to this deadly epidemic.” — Alabama Gov. Robert Bentley announcing the formation of a state task force to fight opioid abuse. A report from The Associated Press found that Alabama leads the nation in prescription opioid use, with 5.8 million opioid prescriptions written in 2015.

Private Flood Coverage

“Unfortunately, here and in other parts of the country, we’re seeing flooding occurring outside of flood hazard areas, so we want to continue our efforts to encourage the acceptance of private flood insurance by mortgage lenders. That’s something that is certainly going to be important going forward.” — Ronald Ruman, director of communications at the Pennsylvania Insurance Department, discusses Insurance Commissioner Teresa Miller’s plan in 2017 to encourage mortgage lenders to accept private flood insurance. Federal flood zone remapping has resulted in more communities being designated as high-risk flood hazard areas.

No More Hard Core

“Concealed carry used to be mostly hard-core shooters, but it has become increasingly popular with soccer moms and others who want to be safe in their everyday life.” — Jim Irvine of the Buckeye Firearms Association says concealed carry has become “mainstream” in Ohio with 574,000 active permits. About about 1 in 16 adults has a concealed-carry permit. Ohio recognizes 12.3 million permits from other states, and the number of permits issued ithis year is expected to far exceed the number Ohio issued in 2015.

Quake-Ortunity

“We were very fortunate that this recent shaking was not more severe and that it was centered in sparsely populated areas.”

— Glenn Pomeroy, CEO of the California Earthquake Authority, used a 5.7 magnitude temblor near the state’s boarder in Nevada in late December as an opportunity to deliver a message about preparedness.

InsuranceJournal.com

Poll

How has your agency errors and omissions premium changed in past three years? Increased 56.8% Decreased 18.8% Stayed the same 24.4%

JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 11

NATIONAL | News & Markets

Reinsurers Anticipate Another Challenging Year, Seek Price Stabilization: Willis Re

espite a 50 percent increase in insured losses from natural catastrophes during 2016, the global reinsurance industry achieved profitable results for the third quarter and remains on track to close out another profitable full year, according to a report published by Willis Re. “While there are signs that

reinsurers are not prepared to be as flexible as in earlier years, many buyers have yet again managed to achieve improved terms,” said the report titled “Willis Re 1st View, January 1, 2017 – Struggling to Stabilize.” “Reinsurers, eager for more widespread rating stabilization, have had their hopes dashed yet again, thanks to profitable results allied with continued

capital oversupply from both traditional reinsurers and capital markets,” said a forward to the report, authored by John Cavanagh, global CEO of Willis Re. Key findings from the report include: • While sizeable reductions have been obtained on international business, in the U.S. there are signs of more stability, driven by the capital-intensive nature of some U.S. classes and the very significant improve- ments in terms. • Capital markets have been active, leading to a further compression in margins, particularly on recent catastrophe bond issuances but also on a wider range of collateralized placements. • Reinsurers are taking a stronger client-centric approach to managing their portfolios in the current market; this is leading to superficially inconsistent underwriting at a market level and fragmentation of pricing trends.

• The trend of M&A in the industry continues but the pace of consolidation has slowed when compared to 2015. With the uncertain ties that consolidation brings, many buyers have been more cautious about severing relationships with longstanding reinsurance partners. • Insurtech is emerging as a major market trend with supporters of disruptive insurtech solutions coming from capital markets as well as from major reinsurers seeking access to original risk. “While reinsurers are still able to report profitable results, despite the underlying issues they face, the situation for many primary companies is much tougher,” said Cavanagh. “With the January 1 renewal season setting the tone for 2017, reinsurers can only look forward to another demanding year, where luck will play an even larger role in determining their final results,” Cavanagh affirmed.

Brexit Threatens 10% of London’s Financial Jobs: City of London Corp. Official

p to 10 percent of jobs in London’s financial district may be lost if Britain fails to secure adequate access to European Union markets after Brexit, a City of London official said. Bankers first called for full access after June’s vote to leave the European Union but such hopes have now faded, leaving the sector to call for a transitional deal to ensure a smooth switch to Britain’s new trading

terms with the bloc. Jeremy Browne, the City of London Corp.’s special envoy for Europe, said about a tenth of jobs in the “Square Mile” financial district depend on the banks and other financial firms there having full access to the EU single market. “We shouldn’t assume that all those will go en masse,” Browne told a briefing for the foreign press. Some 164,000 people were

12 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

employed in financial services in the City of London in 2015, according to the corporation’s website. Browne’s comment suggest that 16,400 jobs are at risk, lower than other estimates that lobby groups have put forward. “Once you start pulling bits out, the overall organism could be affected in unpredictable ways,” Browne said. Browne, a former Liberal Democrat lawmaker, has vis-

ited all EU states at least once this year to meet politicians, central bankers, businesses and regulators to spell out how an acrimonious Brexit would harm both sides. Britain is set to begin formal divorce talks with Brussels by the end of March. Paris, Frankfurt, Dublin, Milan, Amsterdam and Madrid are already vying to attract financial firms from London.

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NATIONAL | Business Moves

JLT Re, StoneHill Reinsurance

JLT Re has acquired StoneHill Reinsurance Partners, a reinsurance intermediary specializing in medical professional liability. StoneHill, which is based in Minneapolis, will form part of JLT Re (North America). Terms of the deal were not disclosed. StoneHill was established by Dan Koshiol in 2012 as an independent casualty reinsurance broker with a focus on medical professional liability. The StoneHill team, led by Koshiol and Chip Ott, will join JLT Re. Ed Hochberg, CEO of JLT Re (North America) Inc., said this acquisition “will strengthen JLT Re’s position as a market leader in the medical professional liability space by bringing together two complementary businesses that have longstanding professional relationships and expertise.”

JenCap Holdings LLC, NIF Group Inc.

JenCap Holdings LLC has agreed to acquire privately held NIF Group Inc. (NIF). JenCap Holdings is a New

York-headquartered consolidator of specialty insurance distribution and program management businesses. It was formed in March 2016 by The Carlyle Group and JCH management to consolidate specialty insurance distribution businesses, including managing general agents, program managers and transactional wholesale brokers. NIF Group Inc. is a managed general agency, program administrator and wholesale insurance broker based in Manhasset, N.Y. It was formed in 1976 and has grown to more than $185 million in annual written premiums. The acquisition of NIF is the fourth transaction by JCH since March 2016 and places the company among the largest wholesale brokers in the U.S.

Auto-Owners Insurance, Concord General Mutual Insurance

Auto-Owners Insurance, a Lansing, Mich., based insurance provider, has announced its proposed affiliation with Concord, N.H.-based Concord General Mutual Insurance

14 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

group of companies. The transaction has been approved by both AutoOwners’ and Concord’s boards and is expected to close in the second quarter of 2017, pending regulatory and Concord policyholder approval. This will allow Auto-Owners to expand to the four New England states in which Concord operates — New Hampshire, Vermont, Maine and Massachusetts — and grow its offering of commercial and personal lines products through Concord’s network of 500 independent agencies. Because mutual companies are owned by policyholders, they can’t be acquired outright. Instead, Concord will keep its own name while becoming a member of the Auto-Owners family of companies. There will be no employee cuts as a result of the transaction. Both companies plan to add associates over time.

Cross Insurance, Colt Insurance

Cross Insurance, a Bangor, Maine-based subsidiary of Cross Financial Corp. and one of the largest independent insurance providers in New England, has expanded its presence in western Massachusetts, New York and southern Vermont with the acquisition of Pittsfield, Mass.based independent insurance agency Colt Insurance. Colt Insurance, founded 80 years ago by Samuel Colt, provides a range of insurance services including business and personal lines, as well as employee benefits, and health and life insurance products. Financial terms of the acqui-

sition are not being disclosed. Under the terms of the acquisition, Colt Insurance will become a wholly owned subsidiary of Cross Insurance and will continue to operate under the same name. Orlando will oversee the combined insurance agencies as president. Kelly Collins, former owner and president of Colt Insurance, will continue working for Colt as executive vice president of the agency. Colt’s staff of 14 employees will remain with Colt, and additional hires are expected as the agency continues to grow under Cross.

Grundy County Farmers Mutual, CFM Insurance

The boards of Missouribased mutual insurance companies CFM Insurance Inc. and Farmers Mutual Insurance Company of Grundy County, have approved a plan to merge the two companies. Pending regulatory approval, all FMIC of Grundy County polices will transfer to CFM. FMIC of Grundy County has been in operation since 1895, and CFM has insured Missouri families and businesses since 1869, with $20 million in written premium and more than 21,000 policyholders. With this merger, the united companies will become one of the oldest mutual legacies in Missouri, bringing advantages for policyholders, including stronger policy coverages, rate stability, and reduced reinsurance costs, the companies said.

Higginbotham, Insurance Associates of the Southwest

Ft. Worth, Texas-based independent insurance broker, INSURANCEJOURNAL.COM

Higginbotham, and Insurance Associates of the Southwest (IAS) have merged their operations in Houston. IAS is an independent broker with 38 commercial, personal, life, health and employee benefit professionals in its Energy Corridor office neighboring Higginbotham’s office. After the merger, Higginbotham has a workforce of 160 in Houston and 904 statewide. Higginbotham entered Houston in 2008. This is the sixth merger Higginbotham has completed in 2016 as part of a growth initiative across Texas whereby the firm partners with brokers with strong local reputations. IAS will continue operating under the leadership of Managing Director Jim Kottwitz in collaboration with Higginbotham’s Houston Managing Directors Koby Hackradt and Dudley Ray. IAS opened in 1996 with the merging of three Houston insurance agencies, and a fourth joined in 2002. The firm brokers commercial and personal property/casualty insurance, employee benefits and life/health insurance with services for managing risk and settling claims. It has concentrated experience in the manufacturing, real estate, construction, distribution, high-tech, real estate, medical and professional industries, serving national and international companies.

USI, Ball Peoples

USI Insurance Services (USI) has acquired Ball Peoples, an employee benefits advisory firm headquartered in Austin, Texas. Since 1975, Ball Peoples INSURANCEJOURNAL.COM

has been providing employee benefits for clients throughout central Texas and across the Southwest. The employees will remain at their Austin location. Terms of the transaction were not disclosed. John D. Collado, USI southwest regional chief executive officer, said Ball Peoples co-owners Thomas H. Ball III and Daniel L. Peoples, and their team will play an important role to further the employee benefits practice throughout the southwest. USI is headquartered in Valhalla, N.Y.

Based in Coral Gables and Plantation, Fla., and Los Angeles, MDW is a multiline insurance products provider. Jeff Weiner, CEO of MDW, and Ivor Bamberger, president of MDW, will join Hub Southeast and report to Christopher Gardner, CEO, Hub Florida. Headquartered in Chicago, Hub provides property and casualty, life and health, employee benefits, investment and risk management products and services from offices located throughout North America.

Acrisure, USA Insurance Brokers

Risk Strategies Co., a privately held, national insurance brokerage and risk management firm, has acquired business insurance specialist Advanced Insurance Underwriters (AIU), headquartered in Hollywood, Fla. Terms of the deal were not announced. AIU specializes in commercial property and casualty insurance with additional capabilities in employee benefits, private client services and other specialty insurance programs. Included in the acquisition is Advanced E&S Group, a managing general underwriter. AIU was founded in 1976 and has additional offices in Miami, Sarasota, Palm Beach, Estero and Marco Island, Fla. In addition to south Florida, its Advanced E&S Group maintains offices in Dallas, Chicago, and Basalt, Colo. In its commercial brokerage and risk management business, AIU serves a cross-section of industries including real estate, construction, hospitality, healthcare, resorts, and clubs among others. AIU specializes in property insurance and

Acrisure LLC has acquired Alaska USA Insurance Brokers’ commercial insurance and employee benefits books of business. The new company will operate under the name Insurance Brokers of Alaska. All commercial lines and employee benefits staff will remain the same and operate out of the existing location. Alaska USA Insurance Brokers will continue to operate as a personal lines insurance agency. Alaska USA Insurance Brokers is headquartered in Anchorage. Grand Rapids, Mich.-based Acrisure is a retail insurance brokerage.

Hub, MDW

Hub International Ltd. (Hub), a global insurance brokerage, has acquired the assets of MDW Insurance Group Inc. and its affiliates, Agents Insurance Resources Inc. and A.I.R. Insurance Marketing Inc. (MDW). Terms of the acquisition were not disclosed.

Risk Strategies, Advanced Insurance

works to develop customized insurance and risk management plans for high-end dwellings, high-rise condominiums and apartment buildings. Combined, AIU has approximately 140 employees. Prior to the acquisition, Risk Strategies had more than 800 employees nationwide. Risk Strategies Co. is a U.S. insurance broker offering risk management advice as well as insurance and reinsurance placement for property and casualty, healthcare and employee benefits risks.

Arthur J. Gallagher, National Ethics Bureau

Arthur J. Gallagher & Co. has acquired National Ethics Bureau Inc. in Carlsbad, Calif. Terms of the deal were not disclosed. Japheth Smellie and his team will continue to operate from their southern California location under the direction of Kevin Garvin, head of Gallagher’s North American affinity operations. National Ethics Bureau, doing business as the National Ethics Association, is a national program administrator that provides insurance products and services for its association members throughout the U.S. It specializes in errors and omissions insurance coverage for business professionals such as insurance agents, investment advisors, real estate agents, tax preparers and bookkeepers. It also offers its members a variety of other association-sponsored products and services. Itasca, Ill.-based Arthur J. Gallagher is an international insurance brokerage and risk management services firm.

JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 15

NATIONAL | Closer Look | High Risk Property

Oakland Warehouse Fire Has Some Insurance Pros on Alert

Photo above: This 2014 photo shows the interior of a portion of the ‘Ghost Ship’ warehouse. Dozens of people died at a party after a fire that started late on Dec. 2, 2016, and swept through the building. Ajesh Shah via AP

By Don Jergler

eople in the business of insuring warehouses, especially those where artists may be tenants, have been on high alert since a deadly fire on Dec. 2, 2016, broke out in a converted warehouse in Oakland, Calif. The so-called “Ghost Ship” warehouse which was also reportedly used as an artists’ colony, was hosting a $10-a-head music performance and party when the building caught fire and took the lives

16 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

of 36 people. The scene reportedly had makeshift stairs and room dividers, making escape difficult.

INSURANCEJOURNAL.COM

It is considered the deadliest building fire in the United States in more than a decade. The first of a series of likely lawsuits was filed in late December by the parents of San Francisco State University student Michela Gregory, a 20-year-old who died in the arms of her boyfriend. The suit blames the building’s owner, chief tenant and others. Gregory and the others at the party “tried to exit the warehouse but were unable to exit due to the unsafe conditions and configuration of the warehouse,” the lawsuit alleges. Converted warehouses are popular in the Bay area, so people like Rich Gobler, corporate vice president in the San Francisco office of Burns & Wilcox, has people at his firm literally taking a hard look at warehouse properties. He said a look outside the warehouse would have given a hint that more was going on there than the landlord may have been letting on. “We are definitely asking more questions, confirming no habitation, taking a quick Google Earth street view,” said Gobler, whose office insures a number of

INSURANCEJOURNAL.COM

warehouses. Historically, the process on properties where the total insured value is under $250,000 has been to ask the landlord what the occupancy is, he said.

‘We are definitely asking more questions, confirming no habitation, taking a quick Google Earth street view ... If we heard that now, we would inspect every time.” In the past, “We wouldn’t have inspected it, we would have trusted them,” Gobler said. But, he added, now if someone says the word “artists,” an instant red flag is raised. “If we heard that now, we would inspect every time.” After such a tragic event, insurance is likely the last thing on the minds of injured victims and their families. But as they look toward the

future, it will become increasingly important to identify all potentially liable parties and hold them responsible for the financial harm caused by this event, according to Omid Safa, an insurance coverage lawyer with Blank Rome LLP. “It’s fair to say brokers and agents who are thinking about selling general liability insurance may ask the question: Are you using the facility even sporadically for this type of event?’” Safa said. If the answer is “yes,” brokers may want to look at including a liquor liability endorsement that would cover bodily injury, he added. The Gregory lawsuit seeks unspecified damages from building owner Chor Ng, principal tenant Derick Almenda and others who lived and used the work spaces and makeshift rooms in the warehouse, and promoted the night’s event. City officials say Ng had a business license for more than two decades on the property and has paid all business taxes. The Alameda County district attorney’s office said it is evaluating whether any criminal charges are warranted in the blaze. The reaction to the fire hasn’t been limited to the Northern California area. Roughly a week after the fire, inspectors acting on a complaint discovered a makeshift nightclub and unpermitted living quarters concealed in a warehouse near Los Angeles International Airport. Authorities searching the two-story building found an illegally constructed dance floor paired with a bar and DJ booth. Haphazard wiring

snaked through walls, and an outdoor staircase capped by a bamboo canopy was flagged as a fire threat. The unlicensed club, called Purple 33, was shut down. The operator, Donald Cassel, who also lived there, was ordered to clear out. The Ghost Ship in Oakland was zoned for commercial use but it actually operated as an art collective and a venue for underground music performances, and home for some dozen itinerant tenants. Oakland fire inspectors and firefighters never inspected the warehouse before the Dec. 2 blaze, Oakland Fire Chief Teresa Deloach Reed acknowledged after the fire. The Ghost Ship may not be the only converted warehouse operating outside of its intended use in the area. According to a Los Angeles Times article, city officials privately estimate Oakland has roughly 50 such illegal communities in various states of repair and with varying safety conditions. Going forward, Safa said he believes that insurance brokers and carriers will be asking a lot more questions when they are dealing with warehouses in areas that tend to have properties with multiple uses. Gobler, too, believes some insurers will be progressive after this lesson. “I assume carriers are going to start putting habitational exclusions on warehouses,” Gobler said. Share this arti-

cle with a colleague. IJMAG.COM/19VK

The Associated Press contributed to this report

JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 17

NATIONAL | MyNewMarkets Contractor’s Pollution Liability Market Detail: Midlands

Environmental Risks Market Detail: James River

Insurance Co.’s (www.jamesriverins.com) primary coverage includes: capacity up to $5 million or $11 million in combination with excess. Target account size is $25,000 - $250,000 (or larger). The FREEDOM PACK package product brings together a variety of casualty and professional coverages for environmental clients. FREEDOM PACK coverages available (individually or in combination with any other) include: general liability (ISO 12/07) – coverage Part A (Occ. or CM); contractors pollution liability – coverage Part B (Occ. or CM); professional liability – coverage Part C (CM); site pollution liability – coverage Part D (CM); products pollution liability – coverage Part E (CM). Excess coverage includes: capacity up to $11 million as a lead excess or as part of a higher excess layer; Follow-form excess; ability to write unsupported business over other carriers. Underlying carrier must be A.M. Best Co. rating A- VI or higher. Target risks include: environmental & heavy com-

mercial contractors; project management including: emergency response; remediation contractors; industrial plant repair & maintenance; mold, asbestos and lead abatement; tank installation and removal; brownfield redevelopment; large construction; excavation and demolition contractors; and waste treatment facility repair and maintenance. Professional liability coverage for: environmental consultants, testing facilities, analytical labs, and health & safety training. Site specific coverage for water treatment facilities, property owners, brownfield redevelopment projects, real estate transactions, and manufacturers is available. Products pollution coverage available to manufacturers and distributors. Available limits: As needed Carrier: James River States: All states Contact: Customer service at 804-289-2700

Admitted Cat Property With Wind

Market Detail: Branch Agency

Solutions (www.branchagencysolutions.com) offers up to $3 million in capacity for offic-

18 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

es, warehouses, light retail, and mixed use properties. Distance to coast requirement. No heavy or industrial classes and no habitational or hospitality considered at this time. Available limits: Maximum $3 million Carrier: Various, admitted States: Calif., Fla., Ga., La., Miss., N.C., S.C., Tenn., and Texas, Contact: Otie Tomlinson at 888-365-7701 or e-mail: otie@ branchagencysolutions.com

Healthcare Professional Liability

Market Detail: Sullivan

Brokers Wholesale Insurance Solutions (www.sbwis.com) will consider virtually any risk in the healthcare space - any class, any hazard group, and any exposure - regardless of loss history or limits required. Available limits: Minimum $500,000, maximum $25 million Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Pete Germain at 213-833-6186 or e-mail: germainp@sbwis.com

Management Corp.’s (www. midlandsmgt.com) coverage is designed specifically for contractor’s, both environmental & non-environmental, who have a pollution liability exposure arising out of a specified type of operation or by contract. Midlands specializes in writing contractor’s pollution liability (CPL) for a variety of contractor’s. Available limits: As needed Carrier: Unable to disclose, non-admitted States: All states Contact: Customer service at 800-800-4007

Non-Profit Organizations

Market Detail: Charity First

(www.charityfirst.com) writes all lines of coverage including workers’ comp for nonprofits and social service agencies. The nation’s best-known and respected carriers provide its products and services, distributed through agents & brokers. Available limits: As needed Carrier: Travelers Insurance Group States: All states Contact: Riley Binford at 415536-8438 or e-mail: riley_binford@charityfirst.com

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News & Markets | NATIONAL

How Flood Risk in U.S. Is Changing: Increasing in North, Decreasing in South

he risk of flooding in the U.S. is changing regionally, and the reasons could be shifting rainfall patterns and the amount of water in the ground. University of Iowa engineers in a new study showed that, in general, the threat of flooding is growing in the northern half of the U.S. and declining in the southern half. The American Southwest and West, meanwhile, are experiencing decreasing flood risk. UI engineers Gabriele Villarini and Louise Slater compiled water-height information between 1985 and 2015 from 2,042 stream gauges operated by the U.S. Geological Survey. They then compared the data to satellite information gathered over more than a dozen years by NASA showing “basin wetness,” or the amount of water stored in the ground. What they found was the northern sections of the country, generally, have an increased amount of water stored in the ground, and thus are at greater risk for minor and moderate flooding, two flood categories used by the National INSURANCEJOURNAL.COM

Weather Service. Meanwhile, minor to moderate flood risk was decreasing in the southern portions of the U.S., where stored water has declined. Not surprisingly, the NASA data showed decreased stored water — and reduced flood risk — in the Southwest and Western U.S., in large part due to prolonged drought. “It’s almost like a separation where generally flood risk is increasing in the upper half of the U.S. and decreasing in the lower half,” says Villarini, and an author on the paper, published in the journal Geophysical Research Letters. “It’s not a uniform pattern, and we want to understand why we see this difference.” Some of the regional variation can be attributed to changes in rainfall. A study led by Villarini published last year showed the Midwest and Plains states have experienced more frequent heavy rains in the past half-century. More rainfall leads to more groundwater, a “higher water base line,” Villarini explains. “The river basins have a memory,” adds Slater, the

paper’s corresponding author. “So, if a river basin is getting wetter, in the Midwest for example, your flood risk is also probably increasing because there’s more water in the system.” Why some sections of the nation are getting more, or less, rainfall is not entirely clear. The researchers say some causes could be the rains are being redistributed as regional climate changes. The researchers hope that their findings could revise how changing flood patterns are communicated. In the past, flood risk trends have typically

been discussed using stream flow, or the amount of water flowing per unit time. The UI study views flood risk through the lens of how it may affect people and property and aligns the results with National Weather Service terminology understood by the general public. “The concept is simple,” says Villarini. “We’re measuring what people care about.”

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Credit: American Geophysical Union A University of Iowa study has found that the risk of flooding is changing in the United States and varies regionally. The threat of moderate flooding is increasing generally in the northern U.S. (red areas) and decreasing in the southern U.S. (blue areas), while some regions remain mostly unchanged (gray areas). The findings come from comparing river heights at 2,042 locations with NASA satellite information showing the amount of water in the ground. The study was published in the journal Geophysical Research Letters. JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 19

NATIONAL | Special Report | Employment Practices Liability

By Andrea Wells

here is no shortage of liability issues hanging over employers these days as the Trump Administration assumes office. Some controversial rules could be rewritten while others could be rolled back or eliminated altogether. Employer issues at stake include wage and hour, joint employer liability, new overtime rules, Occupational Safety an Health Administration (OSHA) electronic reporting, medical leave and disability concerning maternity, gender issues, retaliation and whistleblowers, religious and national origin, privacy, data protection, and social media.

20 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

Which, if any, of these issues could drive change to the employment practices liability landscape is anyone’s guess. Most insurance specialists agree on one thing: there are uncertain times ahead for U.S. employers and employees. One consensus is that the new administration led by President Donald J. Trump will bring with it a more “pro-business” regulatory environment. This could mean less aggressive enforcement from federal agencies such as the Department of Labor. How that will play out in the employment practices liability market remains to be seen. “I don’t think anyone’s really sure what’s going to happen next,” says Laura Lapidus, CNA, risk control director. “No one’s really sure what the new president is going to do.” Experts will be watching to see exactly how and where a “pro-business” environment might affect the employment practices liability market. Aside from proposing potential carve-outs for small businesses under new overtime rules that went into effect on Dec. 1, 2016, and supporting six weeks of paid maternity leave, Trump has not discussed in significant detail how, if at all, he plans to address issues involving workers’ rights. Lapidus says the new administration will have an effect on employers and the EPLI market. “We’re all going to be watching pretty carefully.”

Less Regulation, Enforcement

Most agree that the U.S. Department of Labor and other federal agencies are likely to become less active than they were under the Obama admin-

istration. That could be good for employers, according to Richard S. Betterley, president of Betterley Risk Consultants Inc. based in Boston. Betterley is the writer and publisher of an annual report, Employment Practices Liability Insurance Market 2016, which was released in December. “Assuming the new administration and Congress are employer-friendly, you would assume it would be harder to bring employment practices liability actions as a plaintiff. You would assume that the ability to have those actions dismissed would be higher for an employer, and that the actions might move more toward the state and local jurisdiction,” Betterley says. While that might be good for employers, it might not be good for insurers, he predicts. “When you are working with a federal agency, you generally have consistency across the country. But when you get into the state and local jurisdiction, you are dealing with lots of different entities, lots of different regulation, different cultures, and courts,” Betterley says. “It’s really a story with two sides.” In a December article on the possible effect of the change in the presidential administration on the workplace, the National Law Review wrote: “As a result, we are likely to see an increase in state and local activism on wage and hour and worker-protection issues such as minimum wage, pay equity, and paid sick leave. Significantly, wage and hour-related legislation or rulemaking placing further restrictions on businesses is unlikely under his administration, and existing regulations will possibly be repealed

or scaled back.” While there’s a lot of talk and everybody is watching, it’s way too early to tell, says Thomas Hamm, Aon Financial Services Group, managing director, employment practices liability, national practice leader. “Everybody has some expectations that there will be a huge change,” Hamm says. The Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB) have been the main movers in the employment space, along with the plaintiff’s bar. “They have been very aggressively protecting employees. I think we generally expect that this new administration will be very different in that approach, and they’ll be much more business-friendly.” As a result, Hamm agrees, the industry may see a number of those employee-related initiatives rolled back. “Even things like white collar exemption changes that are going on, those could be rolled back. We don’t know what will happen for sure, but we expect that it’ll probably be much more employer friendly.”

Results on Employment Practices Liability Market

Peter Taffae, managing director of ExecutivePerils based in Los Angeles, said the new Trump administration could bring significant, positive changes to EPLI. In his view, one of the first changes to employer law might be directed at the NLRB’s position on joint employers. The 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 marketing 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.

‘Assuming the new administration and Congress are employer-friendly, you would assume it would be harder to bring employment practices liability actions as a plaintiff.’ 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. The appointment of Andrew Puzder, chief executive of the company that franchises the fast-food outlets Hardee’s and Carl’s, as secretary of the Department of Labor, has the EPL community expecting significant changes that would directly affect the franchise community but will also extend to general contractors, PEOs and most businesses. Taffae anticipates significant changes to the joint employer ruling under Puzder, who has been an outspoken critic of the

continued on page 22

JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 21

NATIONAL | Special Report | Employment Practices Liability continued from page 21 worker protections enacted by the Obama administration. “Andy Puzder has created and boosted the careers of thousands of Americans, and his extensive record fighting for workers makes him the ideal candidate to lead the Department of Labor,” Trump said about his nominee. Puzder has been a vocal opponent against the new joint employer standard set forth by the NLRB. As labor secretary, there are certain immediate steps he could take to undo some parts of the joint employer standard. “My gut is that this will be one of the first things he will address,” Taffae says. Puzder also said the Obama administration’s recent rule expanding eligibility for overtime pay diminishes opportunities for workers, and that significant minimum wage increases would hurt small businesses and lead to job losses. In addition, Puzder has been known to hold what some might call “politically incorrect” views. Puzder’s company, CKE Restaurants, runs advertisements that sometimes feature scantily-dressed women gesturing suggestively. He told the publication, Entrepreneur: “I like our ads. I like beautiful women eating burgers in bikinis. I think it’s very American.”

Political Incorrectness and Employment Practices

While a pro-employer regulatory environment could be good for the insurance industry, Taffae and others in the EPL space see a possible threat stemming from the new Trump administration. “I’m afraid with the new

administration that the tolerance for inappropriate behavior (in the workplace) will lessen,” Taffae says.

‘I think everybody has some expectations that there will be a huge change.’ “We are entering a new era. I see the tolerance on what I think is inappropriate behavior will be lessened, and if that is true, two things will happen,” Taffee says. “One, litigation will go through the roof. Perhaps male middle management will feel they can talk or act in a way that has been unacceptable (toward women) and there will be more violations and more litigation.” There’s also a possibility that those cases being heard in court could be affected by a new standard of political correctness, he says. “Maybe on jury cases, the juries will have less

patience for these types of cases because the threshold of acceptability has been lowered so much.” Lisa Doherty, president of Windsor, Conn.-based Business Risk Partners, says there was a lot of divisive language used during the 2016 presidential election. “It will be interesting to watch. As Donald Trump tends to make political correctness less relevant, I do think you will see more political incorrectness. Whether that translates to employees feeling like they are working in a hostile work environment will be interesting to see,” Doherty says. “We haven’t seen this before ,but one person’s first amendment rights could create another person’s hostile work environment. So where is that line?” Joe Robuck, senior vice president, Financial Services / Executive Liability, Worldwide Facilities in Los Angeles, says it’s been surprising to watch and hear stories of people’s boldness to discriminate. “It seems to be more and more anecdotal. Stories of people deciding that we are now in an environment where people feel more empowered to discriminate.” But what matters most

in the EPLI world is whether that sentiment will translate into claims activity. “I’m just not sure how that’s going to affect claims activity and what role employers will have,” Robuck notes. “There’s always the possibility of employees behaving badly and employers not handling it well. I guess there’s the possibility of employers deciding they could discriminate, too, and certainly that would be a problem.” Robuck says that where employers mishandle sensitive situations, whether protected classes such as persons with disabilities or LGBT and various other minorities, could lead to trouble for employers. “Employees may feel discriminated against, and employers could find themselves in situations where they aren’t handling those situations well, and then there could be claims.” “Discrimination issues, the NLRB, the minimum wage, immigration issues, maternity leave — there’s a number of executive orders that the new president could overturn in his first or second day in office,” Robuck says. “But the question is for the EPLI community: How will all of these things translate into claims activity?” Robuck says that as long as employers are behaving in a way that is positive for employees or in line with the law, then there is no basis for a claim. “But it will interesting to see over the next couple of years how these changes play out and how they will translate into claims activity,” he adds.

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News & Markets | NATIONAL

State Marijuana Laws Are Changing, But Employer Attitudes, Federal Law Aren’t By Bob Salsberg

hanging marijuana laws aren’t necessarily making weed more welcome in the workplace. For now, many employers appear to be sticking with their drug testing and personal conduct policies, even in states where recreational marijuana use is permitted. Others are keeping a close eye on the still-evolving legal, regulatory and political environment. Voters in California, Massachusetts, Maine and Nevada voted on November 8 to approve the use of recreational marijuana, joining Colorado, Washington, Oregon and Alaska, where it had previously been legalized. (A recount of Maine’s close result is scheduled.) More than two dozen states have medical marijuana programs. But the drug is still prohibited by federal law. Here’s a closer look at what it all means for workers and businesses:

Can My Employer Still Test Me for Pot?

Bottom line: You can’t come to work high. You can still be drug tested. You can still be fired — or not hired — for failing a drug test even if you’re not the least bit impaired at work. All the states with legalized recreational pot have exemptions for workplace drug policies. In Massachusetts, the law includes language stating that “the authority of employers to enact and enforce workplace policies restricting the consumption of marijuana by employees” has not changed. “Yes, you may be able to have (marijuana) at home, but that doesn’t mean it’s OK in the workplace,” says Edward Yost, a human resources (HR) specialist with the Society for Human Resources Management.

What about Workplace Safety?

Advocates for marijuana legalization say it was never their intention to compromise safety, a central reason offered by employers for drug testing. “We don’t want anyone to

come to work impaired on any drugs,” says David Boyer, campaign manager for the ballot initiative in Maine. A 2013 survey by the employee screening firm HireRight found 78 percent of employers conducted drug tests either randomly, as a condition of employment, after accidents or for some combination of those reasons. The federal government requires drug testing for some workers, including truck drivers and others in transportation. Quest Diagnostics, which performed nearly 11 million laboratory-based drug tests for employers in 2015, says the percentage of tests coming back positive has shown a modest increase in recent years. Nearly half of all positive tests showed evidence of marijuana use.

Can I Get Fired Even If I'm Not High?

THC, the psychoactive chemical in cannabis, can stay in a person’s system for days or even weeks, experts say — long after the buzz has subsided. “It’s the equivalent of firing somebody who drank a glass of wine on Friday evening and then came to work on Monday,” says Tamar Todd, legal director for the Drug Policy Alliance, who believes employers should reconsider zero-tolerance policies in light of changing laws and attitudes. A number of efforts are

underway to develop an accurate method, akin to the Breathalyzer for alcohol, to measure actual marijuana impairment. Such a test might be useful not only for employers, but also for police and prosecutors trying to determine what constitutes driving under the influence of marijuana in states where recreational pot is legal.

What Should Companies Do?

At a minimum, companies should review their polices, make sure their managers are trained and make clear to employees that marijuana use on or off the job can still land them in trouble, says James Reidy, a New Hampshirebased attorney who advises clients around the country on drug-testing issues. Tina Sharby, chief HR officer for an Easter Seals affiliate with about 1,700 employees in New England, says the organization, which provides services for people with special needs, is monitoring the evolving legal and regulatory environment but is sticking with its drug testing protocols for now. “We have a drug-free workplace policy, and we believe that the current policy we have is effective,” Sharby says. But drug testing and zero-tolerance rules can also make it difficult for businesses with a need to recruit young professionals who may harbor more liberal attitudes toward pot. “We have ski industries out here, and if they really took a hard line on marijuana use, they would have to shut down,” says Curtis Graves, information resource man-

continued on Page 25

JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 23

Idea Exchange

The Competitive Advantage

Loss Ratios – Do They Matter?

By Chris Burand

o loss ratios matter? The old school answer is: “Absolutely! You are crazy for even asking the question!” Of course, loss ratios still matter, but how much they matter and how they matter may no longer be the same. I’ve recently had several agency owners who were selling their agencies advise me that my insistence on their providing loss ratios was a waste of their time. It was a waste of time because the buyers to whom they were talking did not care about loss ratios. If this is true, and I suspect that some buyers do not care about loss ratios, agency acquisitions are in a huge price bubble reminiscent of the highly dubious financial products associated with mortgages in the 2000s. If their message is true, if agency values really are not in a bubble and if the buyers are not simply ignorant, then it means the buyers have deals in place with carriers that pay a lot of money without regard for loss ratios. If this is the case, which I suspect it is in

some situations, then carriers are no longer asking some big players to manage their loss ratios. They are not even holding these large agencies/brokers to be as accountable for loss ratios as they hold their small agencies with $500,000 premium. A double standard has been created. A third possibility is that many agencies are not owned by insurance people. These agencies are owned by money people, whether banks or private equity. These owners often have a quite different perspective toward loss ratios. I have had managers of bank-owned agencies and bank CEOs tell me loss ratios are not important. Period. They’ve been told they are not important by buyers of agencies and sometimes, I suspect, by specific deal brokers of agencies that just want to get deals done. A different attitude exists with some Millennial agency owners, too. Their perspective is just different in that they are not responsible for loss ratios. That is the companies’ job.

Good Loss Ratios

These perspectives and attitudes are just simply bizarre to an old-school person like me because loss ratios clearly still determine profitability for companies and companies are still clearly rewarding agencies well that have good loss ratios, albeit with a few more strings attached.

24 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

My hypothesis is this: Maybe loss ratios do not matter to the extent industry veterans think. Maybe loss ratios do not possess the same historical importance for several related but different reasons and an opportunity exists in understanding this new reality, if a new reality exists. In a sense, if my hypothesis is correct, this development is akin to the theme of the book, “Who Moved My Cheese?” by Dr. Spencer Johnson. The decreased importance of loss ratios is a cheese moving event. Everyone saw the bailout

of the banks. The bailout that through subsidies continues to this day. Bailouts are only necessary for firms run by incompetent people or people willing to take ridiculous levels of risk. People saw that prudent, intelligent business practices are taxed to subsidize incompetent gamblers. Add to this how start-up firms are sold, sometimes before they ever even make a sale much less a profit, for billions simply because of leverage, near zero interest rates, and a monetary supply that has doubled since the financial crises. Now this industry sees insurINSURANCEJOURNAL.COM

ance agencies that are often poorly run and without a real future sold for record prices to firms that promptly alienate the best employees and cannot generate true organic growth (meaning material net organic account growth combined with non-price and non-exposure growth commission/fee growth). An attitude has therefore developed that profitability is nice but not necessary. Companies are contributing to this perspective because the past 12 years have been the most profitable 12 years in the industry’s history (especially if adjusted for the 2008 results of a half-dozen mortgage guaranty insurance companies whose loss ratios were in the tens of thousands that year). There are multiple reasons they are making so much money but one key reason is the world has truly become a safer place because of technology, improved legal environments partially limiting ambulance chasing attorneys, and some luck (the longest period of time without a material hurricane hitting and causing insured wind losses). Technology will continue to cause a decrease in losses and therefore, companies likely will continue to be profitable. Historically, insurance companies struggled to make underwriting money and now that the good ones do not have to struggle, they have reasonably decreased the emphasis on loss ratios. Instead they too are focusing on growth. The Millennial generation is sometimes contributing to this perspective by not differentiating between making a profit and making money developing an unprofitable business but selling it before said business INSURANCEJOURNAL.COM

crashes. Success is defined as “Do I make money?” instead of “Does the company become a viable, profitable, on-going business?” I absolutely am seeing these businesses developed in the insurance industry whether as agencies, support businesses, IT, and even I suspect insurance companies. A fourth contributor is the companies that are not capitalized or rated as well as most industry veterans prefer. But they get their licenses, sell a lot of insurance, and prove that prudence, as most know it, is not required because maybe the state fund will bail out everyone.

De-emphasized Profitability

All these factors, for different reasons, de-emphasize profitability from many angles and maybe loss ratios are both a contributor and a victim of this new perspective. The implications are huge from two angles. The first is that because companies in total are so profitable and because losses will continue to decrease as new technology is installed, agencies simply must sell more. The rewards for doing so, with some strategy, will be great. Do not ignore loss ratios, but true material organic growth with decent, but not great, loss ratios is the Holy Grail in today’s insurance world. The second angle is dangerous. Prudent carriers and agencies are going to be pressured by people and companies, each for their own reasons, that operate without profit. These latter entities will force profit compression for all.

Do not ignore loss ratios, but true material organic growth with decent, but not great, loss ratios is the Holy Grail in today’s insurance world. A strategy will be required to outlast and outlast is key because with all the free money floating around, these unprofitable firms can last longer than reasonable. This includes outlasting and outcompeting buyout firms whose competitive advantage is nothing more than having

continued from page 23 ager for the Colorado-based Mountain States Employers Council. After Colorado became the first state to legalize recreational marijuana in 2012, surveys showed an uptick in workplace drug testing, Graves says. But that trend has begun to shift in the other direction. “Employers who have a zero-tolerance policy maybe shouldn’t apply that to non-safety sensitive workers, because if they do testing on them, they run the risk of inviting an invasion of privacy claim,” suggests Amanda Baer, a Boston-area attorney.

What do the courts say?

Adding to the uncertainty is the scarcity of legal precedent in states that have legalized recreational marijuana. Several cases involving employees with permits to use medical marijuana have

a lot of cash/access to debt. The good news is that such strategies are available and with good execution, this environment provides an ideal scenario in which to have a lot of profitable fun. It is your choice whether to fully engage in this challenge or continue twiddling one’s thumbs that your cheese got moved. Share this article

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Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: chris@burand-associates.com.

reached the courts, and most have been decided in employers’ favor. The most widely cited case is a 2015 Colorado Supreme Court that upheld Dish Network’s firing of a disabled man who used medical marijuana and failed a drug test. The court ruled that a state law barring employers from firing workers for off-duty behavior that is legal did not apply because pot remains illegal under federal law. Similar rulings have been issued in other states including California, Montana and Washington. Share this

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JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 25

NATIONAL | Special Report

2017

INSURANCE INDUSTRY MEETINGS & CONVENTIONS DIRECTORY

Welcome to Insurance Journal's 2017 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 industy-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 databse free of charge, all year long. California Wholesaler Industry Days January 11-13 Hilton La Jolla Torrey Pines La Jolla, CA Thomas Shovlin, thomas@ciwa.net 2017 Big "I" Winter Meeting January 11-14 Hilton Austin Austin, TX Lisa.Johnson-Briggs@iiana.net Data Breach Exposures and Solutions for Main Street Business January 12 Webinar Online Academy of Insurance, an Insurance Journal company Insuring Renewable Energy January 19 Webinar Online Academy of Insurance an Insurance Journal company IIAI Rural Agents/Small Town Agency Conference January 25-26 Holiday Inn - Airport Des Moines, IA PIMA 2017 Annual Meeting January 26-29 Hyatt Regency Coconut Point Bonita Springs, FL Ramona Hopkins, ramona@pima-assn.org MetroRAP January 26 The Roosevelt Hotel New York City, N.Y. ISO Homeowners Endorsements - 2011 to Now January 26 Webinar Online Academy of Insurance an Insurance Journal Company

54th Annual Joe Vincent Management Seminar January 29-31 Renaissance Austin Hotel Austin, TX CatIQ's Canadian Catastrophe Conference (C4 2017) February 1-3 Allstream Centre Toronto, Ontario Carolyn Rennie, Carolyn.Rennie@catiq. com

Houston Insurance Day February 7 Houston Marriott Westchase Houston, TX Independent Insurance Agents of Houston Home-Based Businesses in the Era of AirBNB and VRBO February 7 Webinar Online Academy of Insurance, an Insurance Journal Company 2017 AAMGA University East February 8-9 Hyatt Regency Orlando International Airport Orlando, FL Alyssa Bouchard, alyssa@aamga.org

IIAV Insurance Agents Day on the Hill February 1 General Assembly Richmond, VA Independent Insurance Agents of Virginia Teri Chester, tchester@iiav.com

2017 PLUS D&O Symposium February 8-9 Marriott Marquis Times Square New York, NY Lance Helgerson, lhelgerson@plusweb.org

Independent Insurance Agents of Nebraska Winter Conference February 1-2 Holiday Inn Austin Midtown Kearney, NE Office@biginebraska.org

2017 ICMG Conference February 8-9 Hyatt Regency Grand Cypress Orlando, FL ICMG -- Inter-Company Marketing Group Larissa Fox, administrator@icmg.org

IICF Southeast Division 5th Annual Benefit Dinner February 2 Omni Dallas Hotel Dallas, TX Sarah Conway, sconway@iicf.com

Pro-to-Pro February 9-12 Bohemian Hotel at Celebration Celebration, FL Donna Gray, donna@aimssociety.org

18th Annual Windstorm Insurance Conference January 29-February 2 Renaisance SeaWorld Orlando, FL Michelle Griffin, mgriffin@windnetwork. com

NAPSLO Surplus Lines Management February 6-9 Emory University Goizueta School of Business Atlanta, GA NAMIC Claims Conference February 7-9 La Cantera Hill Country Resort San Antonio, TX Amy Thornburg, athornburg@namic.org namic.org

26 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

2017 Insurance Day on the Hill February 14, 2016 Capitol Building Des Moines, IA Independent Insurance Agents of Iowa IICF Western Division Swing for the Green Fundraiser February 16 Top Golf Scottsdale, AZ Melissa-Anne Duncan, maduncan@iicf. com Finding Your Prospect's Pain.... When there doesn't seem to be any February 16 INSURANCEJOURNAL.COM

Webinar Online Academy of Insurance an Insurance Journal Company 2017 MAIA's Annual Convention February 20-22 Amway Grand Plaza Grand Rapids, MI IICF Midwest Associate Board Trivia for Charity February 22 Old Crow Chicago, IL Mary Cummins, mcummins@iicf.com IICF Western Division March Madness Networking & Fundraising Event February 23 TBA Los Angeles, CA Melissa-Anne Duncan, maduncan@iicf. com When the Dog Bites - Not one of the insurer's favorite things February 23 Webinar Online Academy of Insurance, an Insurance Journal Company IICF Western Division Fat Tuesday Jambalaya Cook-Off Fundraiser February 28 Harrington's Bar and Grill San Francisco, CA Melissa-Anne Duncan, maduncan@iicf. com NAMIC Commercial Lines Seminar March 1-3 Renaissance Chicago Downtown Hotel Chicago, IL Crista Hassett chassett@namic.org Five Hot Coverage Decisions March 2 Webinar Online Academy of Insurance, an Insurance Journal Company NAPSLO Mid-Year Leadership Forum March 6-8 Marriott Harbor Beach Resort Ft. Lauderdale, FL 2017 Ohio Joint Insurance Fraud Seminar March 8 James G. Jackson Training Academy Columbus, OH Mary Beth Robinson, nspii@nspii.com IAIP Region VII Conference March 9-11 Â Hilton Orange County/Costa Mesa Costa Mesa, CA INSURANCEJOURNAL.COM

Regina Lemanowicz, lemanowcz@sbcglobal.net IICF Midwest Division 6th Annual Blazing the Trail Benefit Dinner March 9 Radisson Blu Aqua Hotel Chicago, IL Mary Cummins, mcummins@iicf.com

International Assoc. of Insurance Professionals - Region VI Kristine Smiley ksmiley@bmbinc.com

NetVU17 March 23-25 Music City Convention Center Nashville, TN PIA Connecticut Annual Convention PLRB 2017 Claims Conference March 9-10 March 26-29 Foxwoods Resort Casino John B. Hynes Convention Center Mashantucket, CT Boston, MA Valerie L Berka, vberka@plrb.org AAMGA Automation Conference March 11-14 2017 UFO International Summit Hyatt Regency Atlanta March 27-29 Atlanta, GA Hamilton Chelsea Lenhart, Chelsea@aamga.org 2017 PLUS Medical PL Symposium March 14-15 IAIP Region I Conference Loews Chicago Hotel March 30-April 1 Chicago, IL Princeton Marriott at Forrestal Lance Helgerson, lkhelgerson@hotmail. Princeton, NJ com Kim Fitzgerald, kimfitzrvp@gmail.com Insurance Nexus USA 2017 March 14-15 Swissotel Chicago, IL Marsha Irving, marsha.irving@insurancenexus.com 13th Annual Networks Insurance Public Policy Summit March 15 The Rotunda, Ronald Reagan Building and International Trade Center Washingon, DC Ray Thomas, raymond.thomas@indstate. edu Louisiana Surplus Lines Association Meeting March 15-17 Hotel Monteleone New Orleans, LA IICF Western Division Horizon Award Gala March 16 Natural History Museum Los Angeles, CA Melissa-Anne Duncan, maduncan@iicf. com IAIP Region III Conference March 23-25 Doubletree Hotel Roswell Roswell, GA Nanci Futrell, Nanci@sherrillandcompany. com IAIP Region VI Conference March 23-25 JW Marriott Houston Houston, TX

IAIP Region IV Conference March 30-April 2 Galt House HotelÂ Louisville, KY Angelia Poyner, bapoyner@gmail.com 2017 PLUS Cyber Liability Symposium April 5-6 Hyatt Regency Chicago, IL Lance Helgerson lhelgerson@plusweb.org 2017 PLUS Management & PL Symposium April 5-6 Hyatt Regency Chicago, IL Lance Helgerson lhelgerson@plusweb.org 2017 Federal Legislative Summit April 5-6 Crystal City Marriott at Reagan National Airport Arlington, VA Roxanne Johnson,roxannejo@pianet.org 2017 Spring Governance Meetings April 5-8 Crystal City Marriott at Reagan National Airport Arlington, VA Roxanne Johnson, roxannejo@pianet.org

continued on page 28 JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 27

NATIONAL | Special Report continued from page 27 IAIP Region V Conference April 6-8 Embassy Suites Kansas City Plaza Kansas City, MO Alexis Nixon, anixon@shelterinsurance. com IICF Western Division CAPP Educational Forum April 6 1544 Broadway Oakland, CA Melissa-Anne Duncan, maduncan@iicf. com InsurEXPO17 April 6-7 Research Triangle Park RTP, NC IAIP Region II Conference April 7-9 Meadowbrook Inn & Conference Center Blowing Rock, NC Anita Chick or Ann Suriani achick@senndunn.com NAIC Spring National Meeting April 8-11 Hyatt Regency Colorado at Convention Center Denver, CO meetingsmail@naic.org Sustainable Property and Asset-Based Transactions: Closing Deals & Capturing Market Opportunities April 11-13 Sheraton Society Hill Hotel Philadelphia, PA Jeff Telego, Dybdahl@seipro.org IICF Boston Chapter Spring Fundraiser April 13 Bond at the Langham Hotel Boston, MA Betsy Myatt, emyatt@iicf.com ISO's New Homesharing Endorsements April 13 Webinar Online Academy of Insurance, an Insurance Journal Company NAPSLO Executive Leadership Summit April 18-21 Darden School of Business Charlottesville, VA

You Gotta Say It - Even If You Don't Want To April 20 Webinar Online Academy of Insurance, an Insurance Journal Company FIWT Leadership & Education Mid Year Expo April 21-22 Holiday Inn Austin Midtown Austin, TX RIMS 2017 Annual Conference & Exhibition April 23-26 Pennsylvania Convention Center Philadelphia, PA RIMS Client Services Team, CST@rims.org NAMIC Personal Lines Seminar April 24-26 Renaissance Chicago Downtown Hotel Chicago, IL Christy Hall, chall@namic.org insurEXPO17 April 24-25 Richmond Marriott Downtown Richmond, VA Teri Chester, tchester@iiav.com Spencer 5K FunRun Presented by Sedgwick April 25 Lloyd Hall, Fairmount Park Philadelphia, PA Andrew Miller, 5krun@spencered.org PIA Agent Expo 2017 April 27-28 Rosen Plaza Hotel Orlando, FL Insurance and the Sharing Economy April 27 Webinar Online Academy of Insurance, an Insurance Journal Company IICF Western Division Central Valley Golf Tournament April 28 Fig Garden Golf Club Fresno, CA Melissa-Anne Duncan, maduncan@iicf. com IICF Southeast Associate Board 3rd Annual Cornhole Tournament & Family Fun Day April 30 TBA Dallas, TX Sarah Conway, sconway@iicf.com

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31st Annual Blue Ribbon Conference April 30-May 4 Mauna Lani Resort & Bungalows Kohala Coast, HI 2017 IIAW Annual Convention May 3 Madison Marriott West Madison, WI BIG Independent Group Convention & Tradeshow May 4-7 Renaissance Indian Wells Hotel and Spa Indian Wells, CA Jon Spaugy, events@biginsusa.com Buffalo I-Day 2017 May 4 Buffalo Niagara Convention Center Buffalo, NY NAMIC Directors' Bootcamp 2.0 May 8-10 Wild Dunes Resort Isle of Palms, SC Larry Baile, lbaile@namic.org NICB Special Investigations Academy May 8-11 Sheraton Westport, Lakeside Chalet St. Louis, MO Melitta Kewitz, mkewitz@nicb.org MarshBerry360 Seminar May 9 Harrah's New Orleans New Orleans, LA MarshBerry360 Seminar May 11 Convene New York New York City, NY MarshBerry Autonomous Vehicles May 11 Webinar Online Academy of Insurance, an Insurance Journal Company 2017 TMPAA Mid-Year Meeting May 15-17 Crystal Gateway Marriott Arlington, VA Monica Elischer, monica.elischer@targetmkts.com

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IICF Western Division Casino Night Fundraiser May 18 The Rotunda San Francisco, CA Melissa-Anne Duncan, maduncan@iicf. com Navigating the Non-Owned Auto Liability Mazed May 18 Webinar Online Academy of Insurance, an Insurance Journal Company 2017 AAMGA Annual Meeting May 21-25 Orlando World Center Marriott Orlando, FL AAMGA Headquarters, Info@aamga.org NAIC/NIPR Insurance Summit May 22-26 Sheraton Kansas City at Crown Center Kansas City, MO NAIC Meetings Department, meetingsmail@naic.org g NAMIC Farm Mutual Forum May 23-25 Eaglewood Resort & Spa Itasca, IL Christy Hall chall@namic.org MarshBerry360 Seminar May 23 Swissotel Chicago, IL Connected Claims USA Summit May 24-25 Hilton Magnificent Mile Suites Chicago, IL Emma Sheard, emma.sheard@insurancenexus.com San Diego "I" Day May 24 TBA San Diego, CA European Insurance Forum May 25 Croke Park Conference Centre, Dublin Una Coleman, una.coleman@dima.ie MarshBerry360 Seminar May 25 Cosmopolitan Las Vegas Las Vegas, NV

Three Best Closing Techniques May 25 Webinar Online Academy of Insurance, an Insurance Journal Company IICF Western Division Colorado Bowling Tournament Fundraiser June 1 Lucky Strike Belmar Lakewood, CO Melissa-Anne Duncan, maduncan@iicf. com FAIA 113th Annual Convention & Education Symposium June 8-10 Gaylord Palms Resort & Convention Center Orlando, FL Kidnap, Ransom and Extortion: The Ultimate Executive Protection Package June 8 Webinar Online Academy of Insurance, an Insurance Journal Company PIA 2017 Annual Conference June 11-13 Harrah's Resort Atlantic City, NJ PIA New York/New Jersey 2017 WSSLC Conference June 11-13 Four Seasons Hotel Las Vegas, NV 116th Annual Convention June 12-14 Atlantic Resort Newport, RI SEIP 2017 Executive Summit June 13-15 Hyatt Regency Atlanta Atlanta, GA Angela Oroian, Dybdahl@seipro.org Annual Dinner & Membership Meeting June 13 Wethersfield Country Club Wethersfield, CT Tracy Hearn, thearn@iiac.org PLRB 2017 Western Regional Adjusters Conference June 14-15 Riverside Convention Center Riverside, CA Alissha Watley, awatley@plrb.org

IAIP 76th Annual Convention June 15-17 Hotel Albuquerque Albuquerque, NM Amanda Hammerli, marketing@iaip-ins. org

The Eroding Influence of the Work Comp Experience Mod on Pricing June 15 Webinar Online Academy of Insurance, an Insurance Journal Company IIABL 2017 Convention June 18-21 Sandestin Beach Hilton Destin, FL PIA OR/ID EXPO June 19-21 Sheraton Portland Airport Portland, OR Kim Legato, kimlegato@piawest.com

Your Work Comp Audit is Wrong - Welcome to the Club June 22 Webinar Online Academy of Insurance, an Insurance Journal Company NAMIC Management Conference June 25-28 The Greenbrier White Sulphur Springs, WV Crista Hassett, chassett@namic.org IMCA 2017 Annual Conference and Showcase Gala June 25-27 Scottsdale Resort at McCormick Ranch Scottsdale, AZ Gloria Grove, ggrove@imcanet.com CIWA Summer Forum & Annual Meeting June 26-27 Monterey Plaza Hotel Monterey, CA Thomas Shovlin, thomas@ciwa.net 25th Annual Mid-Year Property and Casualty Symposium July 12-13 Sheraton Hotel Austin, TX Barbara Schoenfeld, bschoenfeld@insurancecouncil.org

IIAT 2017 Annual Conference & Trade Show June 14-17 TBA Fort Worth, TX INSURANCEJOURNAL.COM

continued on page 30 JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 29

NATIONAL | Special Report continued from page 29 The Super Regional P/C Insurer Conference 2017 For the C-Suite Execs of P/C Carriers July 16-18 The Grand Geneva Resort & Spa Lake Geneva, WI Kelly De La Mora, superregional@insurancejournal.com insurancejournal.com 2017 TSLA Mid-Year Meeting July 16-19 Four Seasons Resort Vail, CO Jean Patterson, jptsla@tsla.org NAMIC Agricultural Risk Inspection School July 18-20 Madison Concourse Hotel Madison, WI Christy Hall, chall@namic.org PIMA MidYear Meeting & Trade Show July 20-23 Skamania Lodge Stevenson, WA Ramona Hopkins, ramona@pima-assn.org Certificate of Insurance: You Can't Always Get What You Want July 20 Webinar Online Academy of Insurance, an Insurance Journal Company James K Ruble Seminar July 24-25 Embassy Suites Lynnwood Lynnwood, WA Pam Busch, pambusch@piawest.com Insuring Emerging Trends in Technology July 27 Webinar Online Academy of Insurance, an Insurance Journal Company 49th Trusted Choice Big "I" National Championship July 31-August 3 Annandale Golf Club Madison, MS 47th LAAIA Annual Convention August 2-5 Diplomat Resort & Spa Hollywood Hollywood, FL Soraya Regalado, info@laaia.com NAMIC Leadership Development Workshop August 2-3 Omni Chicago Hotel Chicago, IL Stephanie Guagliardo, stephanieg@namic. org

NAIC Summer National Meeting August 5-8 Philadelphia Marriott & Pennsylvania Convention Center Philadelphia, PA NAIC National Association of Insurance Commissioners NAIC Meetings Events & Travel Services, meetingsmail@naic.org 2017 FSLA Annual Convention August 9-11 OMNI Amelia Island Plantation Resort Amelia Island, FL Jillian Heddaeus, jillian@executiveoffice. org IIA&B of Idaho Annual Conferenceâ€‹ August 13-16 Sun Valley Resort Sun Valley, ID wtippetts@iiabi.org IIABAZ 83rd Annual Convention & Trade Show August 16-17 Talking Stick Resort & Casino Scottsdale, AZ 2017 AAMGA University West August 17-18 The Scottsdale Plaza Resort Scottsdale, AZ Alyssa Bouchard, alyssa@aamga.org How to Adapt to Data Analytics and Predictive Modeling in the Underwriting Process August 17 Webinar Online Academy of Insurance, an Insurance Journal Company Hope I Die Before I Get Old Else Medicare is Going to Knock me Cold August 27 Webinar Online Academy of Insurance, an Insurance Journal Company Business Auto Claims that Cause Problems August 31 Webinar Online Academy of Insurance, an Insurance Journal Company PLRB 2017 Central Regional Adjusters Conference September 6-7 Hilton New Orleans Riverside New Orleans, LA Alissha Watley, awatley@plrb.org Big "I" Fall Leadership Conference September 6-10 Hyatt Regency Chicago Chicago, IL

30 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

Big "I" Education Convocation September 6-8 Hyatt Regency Chicago Chicago, IL ACT Meeting September 7-8 Hyatt Regency Chicago Chicago, IL Young Agents Leadership Institute September 8-9 Hyatt Regency Chicago Chicago, IL NAPSLO 2017 Annual Convention September 10-13 Marriott Marquis San Diego San Diego, CA 2017 Annual Meeting September 13-16 Marquette Hotel Minneapolis, MN Roxanne Johnson, roxannejo@pianet.org 2017 IIAI Annual Convention, Tradeshow & EXPO September 13-14 Prairie Meadows Convention Center Altoona, IA Spencer Gala Dinner September 14 New York Hilton Midtown New York, NY Andrew Miller, galadinner@spencered.org spencered.org BIG MiniVention 5 September 14 Wente Vineyards Livermore, CA Are Water Damage Claims Drowning Your Profits September 17 Webinar Online Academy of Insurance, an Insurance Journal Company

IICF Western Division Insuring the Children Golf Tournament

September 19 TBA Mission Viejo, CA Melissa-Anne Duncan, maduncan@iicf. com James K Ruble Seminar September 20-21 Portland Airport Sheraton Hotel Portland, OR Pam Busch, pambusch@piawest.com

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IICF Ohio Chapter Oktoberfest September 21 Hofbrauhaus Cleveland, OH Mary Cummins, mcummins@iicf.com

IIAV's Annual Young Agents' Conference October 11-13 Norfolk Waterside Marriott Norfolk, VA Carter Lyons, clyons@iiav.com

Mid-Year Convention November 9 Aqua Turf Club Southington, CT Tracy Hearn, thearn@iiac.org

2017 American Agents Alliance Convention & Expo September 21-24 JW Marriott Desert Springs Resort & Spa Palm Desert, CA CGL's Personal and Advertising Injury Coverage September 21 Webinar Online Academy of Insurance, an Insurance Journal Company Gamma Iota Sigma Annual International Conference September 28-30 Hilton Anatole Dallas, TX Noelle Codispoti, noelle.codispoti@gammaiotasigma.org

Interview Right or Else Hire Wrong October 12 Webinar Online Academy of Insurance, an Insurance Journal Company PCI Annual Meeting October 15-17 Sheraton Grand Hotel Chicago, IL

2017 TSLA Annual Meeting November 12-13 Four Seasons Hotel Austin, TX Jean Patterson, jptsla@tsla.org

2017 UFO Annual Meeting October 4-7 Hyatt Regency Toronto Toronto Chelsea Lenhart, Chelsea@aamga.org aamga.org PLRB 2017 Eastern Regional Adjusters Conference October 4-5 Hyatt Regency Jacksonville Riverfront Jacksonville, FL Alissha Watley, awatley@plrb.org Independent Insurance Agents of Nebraska Annual Convention October 4-6 Embassy Suites Lincoln, NE IICF Western Division San Diego Bowling Tournament Fundraiser October 5 Kearny Mesa Bowl San Diego, CA Melissa-Anne Duncan, maduncan@iicf. com MCIEF Annual Conference October 5-6 Hyatt Regency Orlando International Airport Orlando, FL

Motor Carrier Insurance Education Foundation Beth Medina, beth@ibci.net

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17th Annual TMPAA Summit October 16-18 Westin Kierland Resort & Spa Scottsdale, AZ Monica Elischer, monica.elischer@targetmkts.com Los Angeles CPCU All Industry Day October 17 Sportsmen's Lodge Events Center Studio City, CA Paul Cunningham , cunninghamp@gjs. com The New ISO PAP: How Does it Compare October 19 Webinar Online Academy of Insurance, an Insurance Journal Company IBA Sacramento I Day October 24 TBA TBA, CA FIWT 73rd Annual Convention October 26-29 Embassy Suites San Marcos, TX Using CAT Models to Develop Liability Pricing October 26 Webinar Online Academy of Insurance, an Insurance Journal Company 2017 PLUS Conference November 1-3 Marriott Marquis Atlanta Atlanta, GA Lance Helgerson, lhelgerson@plusweb.org ACORD2017 Conference November 8-9 TBA ACORD

IIAI Annual Convention November 13-15 Westin Hotel Indianapolis, IN I PLRB 2017 Large Loss Conference November 15-17 Omni Fort Worth Fort Worth, TX Valerie Berka, vberka@plrb.org Kern County Tradeshow November 15-16 TBA Hot Topics in Cyber November 16 Webinar Online Academy of Insurance, an Insurance Journal Company NAIC Fall National Meeting December 2-5 Hilton Hawaiian Village & Hawaii Convention Center Honolulu, HI

NAIC National Association of Insurance Commissioners

NAIC Meetings Events and Travel Services meetingsmail@naic.org

Making People WANT to Help You

December 7 Webinar Online Academy of Insurance, an Insurance Journal Company IICF Northeast Division 11th Annual Benefit Dinner December 13 Sheraton New York Times Square Hotel New York City, NY Betsy Myatt, emyatt@iicf.com

The Dangers Lurking in Claims Made Forms December 14 Webinar Online Academy of Insurance, an Insurance Journal Company

JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 31

Idea Exchange

Minding Your Business

Business Exit Strategies

By Catherine Oak and

However, exiting business owners face some serious problems. Too often, the bulk of their wealth is trapped in the business and they are discovering that it will not be easy to convert those years of sweat equity and time into cash for retirement. These agency owners become frustrated because they spent too much time chained to a business that is dependent on them. Ultimately, some of them are unable to enjoy the retirement they dreamed of and expected. One must keep in mind that a privately held business is probably the largest, most complex, most time-consuming, riskiest and perhaps least liquid investment a business owner will have. However, it is also the one investment that they have the most control over.

internal sales or those with local/peer buyers. Understanding the value of one’s business is key to creating personal financial goals. Most people expect too high of a price for their business, which means that their personal financial goals will not be met. In these cases, the owners end up working years past when they wanted to retire and then sell their business.

In today’s business world, there is a baby boomer tidal wave happening with business owners exiting their business.

Be Proactive

Bill Schoeffler

very business owner will exit his or her business at some point. The key is — will it be on the owner’s terms or someone else’s? The best time to start thinking about exiting the business is when the owner starts it. The next best time is now. Business exit planning is about defining how and when one exits their business, while maximizing value, minimizing taxes and risk and still preserving wealth. In today’s business world, there is a baby boomer tidal wave happening with business owners exiting their business. A recent survey by Kent State indicated that 75 percent of baby boomers plan to transition out of their business over the next 10 years and 48 percent want to do the same within the next five years.

It is important for agency owners to be proactive in developing an exit plan. The benefits of an exit plan allow agency owners to find a compatible buyer, sell at a higher price, pay less in taxes, effectively transfer relationships, and create a platform for a better life post transaction. Over the years, we have seen many of the same issues come up as agency owners try to sell their business. However, sellers can have a smoother experience if they are aware of the common pitfalls that occur when selling their agency. Planning ahead allows agency owners to achieve their business and personal goals, as well as the potential to create a legacy, while avoiding these common pitfalls.

Valuation

One major problem we see for business owners who decide to sell is a misconception of the value of their business. The biggest problem with valuation is when sellers have too high an expectation of the value of the agency. Yes, there are some agencies that sell to publicly traded brokers and private equity firms at top dollar. However, that is not all transactions, especially for

32 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

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Another issue is when the buyer sells the agency to what they think is the best deal because it is for the most money. Independent agents like to remain... well, independent. Agency owners that sell to large firms often run into a “corporate wall,” which rubs them the wrong way. Weekly accountability conference calls or meetings to justify income and expenses seem foreign to those that have run their own business for years. Often, corporate direction conflicts with the vision of the seller. Understanding the philosophy of the buyer is very important to a successful transition of the business.

Bring in Experts

We have found that those going solo lack preparation and will often have major issues or regrets after selling their business. It is important for agency owners to bring in a good team of experts to guide them

through the process. It's critical to have outsiders with a dispassionate view of the situation to help with the decision-making. For example, most people do not keep current with the tax code. A good CPA can help develop a tax strategy that will minimize the taxes paid when selling a business. A good attorney will make sure terms of the deal follow the current law. A good merger and acquisition consultant will pull all the pieces together so that the seller’s business and personal expectations are met and the right buyer is selected. Transitioning out of one’s business requires planning. But most business owners rarely take the time to learn the steps to tackle this on their own. Visit our website www.agencyperpetuation.com to find out about our webinar on the “10 Fatal Errors in Business Exit Strategies.” There are also other resources to help you learn more about preparing to sell your business. We have also created a program that will guide

agency owners to create their own business exit strategy. Selling a business internally or externally can have great rewards if the sale is done correctly. However, there are also a lot of pitfalls that can ruin the process. For agency owners to have the best experience perpetuating internally or selling their business and to achieve their ultimate personal and business goals, it is important to plan ahead and be aware of common mistakes that can plague the process. The decision to internally or externally sell a business is complex and has many moving pieces. For most, the fact is that the seller is not just selling a business; they are selling everything they have created. They are selling a part of themselves.

Share this article with a colleague. IJMAG.COM/19SX Oak is the founder of the consulting firm, Oak & Associates, based in Northern California. Schoeffler is an associate of the firm. Oak & Associates specializes in financial and management consulting for independent insurance agencies, including valuations, mergers acquisitions, sales and marketing planning as well as perpetuation planning. Phone: 707-9356565. Email: catoak@gmail.com. Website: www. oakandassociates.com

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JANUARY 9, 2017 INSURANCE JOURNAL | NATIONAL | 33

Closing Quote How Brokers Can Help SMBs Reduce Cyber Risk

By John Stephens

nly recently, and mostly due to pressure created in the media by high-profile cyber attacks, executives at large companies have a new awareness of cyber risks to business. As a result, companies are spending more to reduce cyber threats. However, not all companies are created equal. A majority of small- and medium-size businesses (SMBs) are not adequately protecting their systems. Data from Symantec’s 2016 Internet Security Threat Report shows that SMBs have become a big target for hackers. In 2015, phishing campaigns targeted SMBs 43 percent of the time. That’s up 9 percent since 2014 and a huge leap from the 18 percent of attacks that focused on SMBs in 2011. Phishing is typically carried out by email spoofing or instant messaging, and it often directs users to enter personal information at a fake website whose look and feel are almost identical to the legitimate one.

These phishing attacks target SMB employees with access to the SMB’s finances. Malicious email messages sent to these employees that are opened could hijack a company’s financial information and gain access to funds and personal information. Symantec also notes that ransomware attacks are on the rise against employees at SMBs. Ransomware is computer malware that installs covertly on a victim’s computer, executes a cryptovirology attack that adversely affects it, and demands a ransom payment to decrypt it or not publish it. In these attacks, there is a demand for some type of payment before its attacker may free a device. SMBs employees are more vulnerable as are SMBs for the same reason — there are not the same level of resources expended by SMBs for cyber system defenses. As a result, it has become apparent that there is a new growing digital divide between large companies and SMBs when it comes to defenses to cyber attacks. This divide provides a niche area of opportunity for insurers, particularly brokers, to provide value-added service by helping the policyholder select the proper scope and amount of coverage, and defending against ever-growing cyber threats. More than two-thirds of SMBs are unaware that dedicated cyber-insurance exists. Also,

34 | INSURANCE JOURNAL | NATIONAL JANUARY 9, 2017

The pervasiveness of mobile devices has changed consumer expectations.

more than threefourths of SMBs think that their business is safe from cyber attacks, yet 83 percent have no formal cyber security breach response plan. These shocking statistics are occurring at a time when SMBs are often more vulnerable than large companies to the hard costs and after-effects of a data breach. Even worse, SMBs have fewer resources to respond and recover from a breach. The breach response and remedial costs, as well as the media and public relations fallout from an attack, can put SMBs out of business. The majority of SMBs have no knowledge of cyber insurance premium costs, and they do not understand the breach risk or what a cyber policy would cover. Many think that a cyber breach will be covered by their business coverage, although these policies often exclude cyber risk. An insurance broker can give information to a policyholder regarding what products provide cyber risk coverage.

A broker can also educate a policyholder on their liability if a cyber breach occurs. By evaluating a policyholder’s system for coverage, the process will uncover areas of vulnerability to a cyber attack. A broker can work with a policyholder to obtain knowledge about the internal IT structure, media communications and public relations exposure, employee training, security and the cyber issues within the industries that the business works across. In addition, the insurance broker must recognize the needs and understand the IT systems of a policyholder to find the appropriate scope and amount of coverage. This role that a broker can play is vital for SMBs and could make the difference as to whether a policyholder even stays in business. Stephens is a partner in the Los Angeles office of Sedgwick LLP. Email: john. stephens@sedgwicklaw.com. Website www.sedgwicklaw.com. INSURANCEJOURNAL.COM

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