PIA TN Winter Edition

Winter 2015 • Tennessee edition

Page 16

how To weaTher a disasTer PIATN members share their experience

inside This issue 13

Rebates, referrals, etc.

19

What we learned from Sandy

23

Your E&O policy And, more …

Now In More States MidSouth Mutual provides regional Workers’ Compensation insurance to customers in 7 states including Tennessee, Kentucky, Arkansas, Mississippi, Alabama, Georgia and North Carolina.

Examples of clients we serve include: HVAC Contractors

Bricklayers

Carpenters

Masonry

Building Suppliers

Electricians

Framers

Insulation

Dozing Services

Plumbers

Dry Wallers

Cabinetry

Road Contractors

Painters

Landscapers

Flooring

Thank You to all the independent agencies representing MidSouth Mutual. We look forward to a great 2015 working with you.

States we serve:

www.midsouthmutual.com Contact Tom Perez at tom.perez@bwood.com or 615-379-8245 Administered by Brentwood Services Administrators, Inc. Proudly serving the members of the Home Builders Association of Tennessee since 1995.

Departments 04 In brief Winter 2015 • Tennessee edition

09 Tech 13 Case law 25 Sales 30 Readers’ service and advertising index 31

Officers and directors directory

Cover story 16 How to weather a disaster PIATN members share their experience

Features 19 What we learned from Sandy How to prepare your clients for the next disaster

23 Your E&O More than just another policy

Statements of fact and opinion in PIA magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents. Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services.

President and CEO of PIA Management Services Inc. Mark LaLonde, CPIA, CIC, AAI; Executive Director Kelly K. Norris, CAE; Communication Director Mary E. Christiano; Senior Magazine Designer Sue Jacobsen; Member Information Manager Jaye Czupryna.

Postmaster: Send address changes to: Professional Insurance Agents of Tennessee, 504 Autum Springs Court, Suite A-2, Franklin, TN 37067.

“Professional Insurance Agents” is published quarterly by PIA Management Services Inc. PIA Management Services, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 12077-0997; (518) 434-3111 or toll-free (800) 424-4244; email pia@pia.org. ©2015 Professional Insurance Agents. All rights reserved. No material within this publication may be reproduced—in whole or in part—without the express written consent of the publisher.

Cover design Roberta Lawrence

In brief

platinum partner profile

Grange Insurance spotlight • Financial strength and stability—Financial strength is one of the most important things to consider when choosing a carrier. With an “A” rating from A.M. Best spanning 50 years and $2 billion in assets, Grange has the strength and stability of a large insurance carrier but with the local, personalized service of a small company.

Grange Insurance is a regional insurance provider based in Columbus, Ohio. With $2 billion in assets, the company offers auto, home, life and business insurance protection. Grange, and its affiliate Integrity, operates through a network of independent agents in 13 states in the Midwest and South. Grange is in the business of protecting people’s lives when and how they need it. Established in 1935, Grange has grown from rural beginnings to a financially stable enterprise that offers independent agents and policyholders the highest level of service and support. For more information, visit grangeinsurance.com.

Grange is 100 percent committed to selling its products exclusively through independent agents. We believe people are best served through the trusted choice and counsel of independent insurance agents.

Why Grange?

There are a number of reasons to consider a partnership with Grange Insurance, including the following:

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• Diverse and personalized products—We offer a variety of competitive auto, home, life and business insurance options that you can tailor to your customers’ needs and budget.

• Ease of Doing Business® —We strive to be the best at providing Ease of Doing Business for our agents and policyholders. We use the latest technology, empower our associates to take ownership in decision making and provide responsive service that helps you be successful and gives your customers peace of mind.

• Claims service—We’re known for our superior, local claims service. Filing a claim is never fun. But, if the time ever comes, our claims team is ready to help our policyholders and claimants through the process so it goes as smoothly as possible. We offer 24/7 claims reporting and weather catastrophe response in 24 hours or less.

• Competitive compensation—We reward you for your commitment to us with competitive compensation and benefits that help you grow your business profitably with ours.

Professional Insurance Agents magazine

platinum partner profile

Mountain Empire Agency spotlight Mountain Empire distributed over $2.5 million dollars in excess profit sharing and growth bonuses to its members.

That $2.5 million is money that is above-and-beyond normal commissions received by MEAA members from our carrier appointments.

Mountain Empire Agency Alliance is a master agency in the largest network of independent insurance agencies in the world, SIAA, Strategic Independent Agency Alliance.

We are not a broker, cluster or aggregator. Our members retain ownership of their agency, and retain their direct contracts with the carriers. SIAA is home to more than 5,500 member agencies that collectively write in excess of $6 billion dollars in premium through some of the most popular and sought-after carriers (e.g., Nationwide, Travelers, The Hartford, Safeco, Liberty Mutual and Grange).

History MEAA is operated through the Price & Ramey Group in Kingsport, Tenn., which opened its doors in 1914. In 2008, SIAA approached Price & Ramey and encouraged the agency to join SIAA as a master agency by starting and managing the Tennessee, Virginia and North Carolina territories. Within a few months, MEAA was formed

by Keith Sims, the owner of Price & Ramey. Since 2008, MEAA has been one of the fastest growing master agencies in the entire nation.

MEAA is now home to more than 85 fully independent member agencies that currently write more than $150 million in premium throughout the region. MEAA attributes its success to our outstanding member agencies, unrivaled support and additional services to their members and the stellar SIAA model of distribution and growth. In fact, at the 2015 annual MEAA meeting,

Why MEAA? All of the members of MEAA/SIAA retain full ownership of their agency and agency’s book of business. Members’ commissions are never touched by MEAA/SIAA, unlike many other networks. MEAA brings additional revenue through quarterly bonuses, local and national level profit sharing, preferred commission schedules and even growth bonuses, all with no minimum premium requirements.

Moreover, MEAA brings direct access to more than 27 of the nation’s top carriers with reduced appointment requirements. Finally, MEAA offers the training and learning center including continuing-education credits; mentoring; stability; and assists members with everything from buying books of business; agency management systems; conventional and digital marketing resources; and daily operations (e.g., hiring new employees or marketing campaigns).

MEAA looks for prospective dedicated agencies that want to grow, larger agencies that are interested in additional revenue sources, and we have the resources with SIAA’s Foundation Program to help an experienced agent build and agency from scratch.

If you are interested joining MEAA/SIAA, please contact Beth Roe, RVP Recruiting NC/TN/VA broe@meaa4u. com or (423) 612-0683 or Robert Wells, Middle/West TN Territory Manager rwells@meaa4u.com or (615) 519-9885, or visit meaa4u.com.

www.piaTN.COM

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news from national

Agent to agent: Facebook advertising Facebook is one of the greatest success stories of our generation. What began as a 2003 project to make a social-network site called HarvardConnections, solely for Harvard students is worth $231.6 billion (according to Forbes as of May 2015).

How did a site designed only for one college turn into a global juggernaut?

The answer is: word of mouth.

Facebook succeeded because of how it got many people to talk positively about it with their friends and build interest among the public. So how does this relate to Facebook advertising? Now that Facebook is the social-media site it has made wordof-mouth marketing significantly

makes it easy for complete strangers and friends of friends to learn more about you and your professional, independent insurance agency.

After realizing its advertising power, Facebook has made some major changes to its News Feed algorithm that heavily impacted the outreach of business pages on Facebook and boosted the value of Facebook advertising.

easier through built-in tools for posts, like “Shares” and “Likes.” It

For more on this article, see the PIA Agency Marketing Guide.

PIA members can read all of the marketing tips in past and present issues of the PIA Agency Marketing Guide on PIA National’s website: PIAAgencyMarketingGuide.com.

Average MLR reaches 92 percent Insurers spent an average of 92 percent of individual health-plan premiums on patient care in 2014, exceeding thresholds set by the Patient Protection and Affordable Care Act medical loss-ratio requirements, according to a recent Urban Institute report.

Prior to the PPACA’s 2010 implementation, the average MLR for all insurers in 29 states fell below the 80 percent figure—but by 2014, every state had an average MLR at or above 80 percent, the report says.

The report used data sent by insurers to the National Association of Insurance Commissioners.

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The PPACA requirement that insurance companies spend at least 80 or 85 percent on patient care was used by some as an excuse to drastically cut agent commissions. Now that the average MLR has reached 92 percent, it is no longer necessary for the Department of Health and Human Services to classify agent compensation as an “administrative expense” under the MLR. PIA has endorsed the Access to Professional Health Insurance Advisors Act of 2015 (H.R.815), which was introduced by Rep. Billy Long, R-Mo., and Rep. Kurt Schrader, D-Ore. The legislation clarifies that producer compensation will not be considered as part of medical loss-ratio calculations under the PPACA.

Professional Insurance Agents magazine

Acquisition Strategy

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The flanking maneuver In military tactics, a flanking maneuver is the movement of an armed force around to the side (or flank) of its enemy to achieve an advantageous position and avoid a frontal assault. Think of Stonewall Jackson’s famous flank attack against the Union XI Corps at the Battle of Chancellorsville, where the Union “fled like chaff before the wind.” While the enemy is well-fortified in one direction, it is slammed at its flank where the armed force sees vulnerability. Skilled commanders prefer to choose a position on the battlefield where natural terrain can protect the flank.

This is how I would describe an injured employee in legal pursuit of his or her employer. The employer has his or her defense against lawsuits fortified by the exclusive remedy provisions of the workers’ compensation law. Sure, the employer will take some direct shots from statutory benefit claims, but lawsuits are not supposed to penetrate the defensive earthworks. That’s when the employee’s military adviser proposes a new avenue of attack. The strategy

unfolds like this: Sue a third-party entity that shows some culpability and it will retreat right into the camp of the employer, bringing the pursuing employee with it.

Tech

dan corbin, cpcu, cic, lutc PIA Management Services Inc.’s director of research

You may recognize this tactic in legal terms as the “third party over action.”

Claims against the employer for such actions could implicate insurance under the workers’ compensation and employers’ liability policy or the commercial general liability policy.

SM

There can be no doubt that all our knowledge begins with experience. – Immanuel Kant Policies are underwritten by Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company, authorized insurers in AL, AR, FL, KY, GA, MS, LA, NC, SC, and TN; BusinessFirst Insurance Company, authorized in FL, GA, KY, NC, SC and TN. ©2015 Summit Consulting LLC | 2310 Commerce Point Drive, Lakeland, FL 33801

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Workers’ compensation The WC/EL policy is designed to respond to a very select type of third party over claim. The employers’ liability section has a specific grant of coverage, which reads as follows: The damages we will pay, where recovery is permitted by law, include damages: 1. for which you [the named insured employer] are liable to a third party by reason of a claim or suit against you by that third party to recover the damages claimed against such third party as a result of injury to your employee;

Sometimes, it’s what’s underneath that counts ®

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We can craft a policy — or a combination of policies — to cover you, while leaving your wallet in one piece.

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For details, contact your local PIA affiliate or PIA National at 800.742.6900 x 382 or visit the PIA Main Street Store at www.PIANET.com

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Professional Insurance Agents magazine

There also is a specific employer’s liability exclusion for this type of claim in the Insurance Services Office Inc. commercial general liability policy. It reads as follows: This exclusion applies whether the insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the injury.

While the WC/EL policy covers the employer for third-party lawsuits based on common-law indemnification (i.e., when 100 percent at fault) and common-law contribution (i.e., when partially at fault), most states don’t allow these lawsuits in deference to their exclusive remedy statutes.

New York happens to be an exception. The 1972 Court of Appeals in Dole v. Dow Chemical Co. permitted joint tortfeasors to pay damages according to their proportionate share of liability. St. John’s Law Review summaries of the case.¹ On June 7, 1969, the George Urban Milling Co. fumigated a grain storage bin with Methyl Bromide, a deadly fumigant manufactured by Dow Chemical Co. The product was labeled as poisonous and highly volatile.

Shortly after the fumigation, Urban directed its employee, Ralph Dole, to clean the bin.

Dole was exposed to the chemical and died as a result on June 11.

Dole’s administratrix-wife, instituted a negligence action, against Dow alone for wrongful death, and pain and suffering, alleging that Dow had failed to properly label its highly dangerous product and had failed to adequately warn and instruct as to its use. Urban was immune from lawsuit by

its employee’s estate under the Workmen’s Compensation Law. In answer to the main complaint, Dow denied negligence on its part and alleged that the decedent had negligently caused his own death.

In addition, Dow commenced a third-party action against Urban for indemnity against any recovery by the plaintiff. Dow alleged that Urban’s negligence was active and primary in that it had “had actual knowledge of the danger in the use of Methyl Bromide and had sole control over its employees exposed to the Methyl Bromide,” yet had created a dangerous and ultimately fatal condition. Dow deemed its negligence, if any, in labeling or warning, to have been passive and secondary, entitling it to implead Urban and recover over [the employer’s protection under the exclusive remedy provision of the WC law]. Dow maintained that it had supplied Urban with sufficient instructions and literature regarding the fumigant’s use.

Ultimately, the Court of Appeals eliminated the active-passive test and permitted Dow to implead Urban under an apportionment of relative responsibility, giving the employee’s estate a flanking run at the employer.

Don’t forget, employers’ liability coverage in New York is unlimited.

a treaty that binds the employer to provide the necessary protection when pursued by the injured worker of the employer. Under these conditions, the employer has voluntarily exposed its flank, so there is no element of surprise.

Of course, the reason the employer is not defending that flank is to derive a benefit in return (e.g., a job to perform). However, the general liability policy will supply much of the resources needed to prevent catastrophe.

There are two treaty provisions that give a third party access to the employer’s resources. One is the hold-harmless and indemnification agreement and the other is the additional insured endorsement.

AMERISAFE successes in TENNESSEE Workers’ Comp for Working People

Since then, a 1996 statutory limitation (WCL Section 11) has been placed on actions for contribution and indemnity, to give access to the unlimited coverage of employers’ liability only in the case of a “grave injury,” as defined in the statute.

General liability By far, the most successful flanking maneuver is accomplished when a discerning third party negotiates www.piATN.COM

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Indemnification It’s common for the employer to agree to hold harmless; pay for defense costs; and indemnify a third party for damages. In other words, the third party is invited to occupy the employer’s position and take what is needed to appease the injured employee. However, even here, there are rules of engagement. Below is a brief summary of the anti-indemnity laws in Tennessee that are applicable to construction projects: Tennessee. An agreement indemnifying and holding harmless a third party for its sole negligence is void.

[T.C.A. § 62-6-123]

dis•tinc•tion di-’sti[ng](k)-shen e

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G

et your business the distinction—and the attention—you need to prosper.

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Find out more about this exciting opportunity. Reach our sales representative at piatn@piatn.com.

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Professional Insurance Agents magazine

Additional insured The simplest way to protect a third party is to loan it your insurance policy by adding it as additional insured, but this protection is not without limitations. For example, current ISO additional insured endorsements state that covered damages must be, “caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf.” This, of course, preserves the defense of the employer’s flank when the third party is solely negligent.

“War is cruelty, and you cannot refine it.”—William Tecumseh Sherman We also know the outcome of war can be unpredictable. You have to cover your flank the best way you can. If you have authorized a breach, you had better have the reserves to hold your ground—maybe an excess or umbrella policy should be in place. ¹ St. John’s Law Review (2012) “Dole v. Dow Chemical Co.: A Revolution in New York Law,” St. John’s Law Review: Vol. 47: Iss. 1, Article 42, p. 200

Rebates, commission sharing and referral fees Over the years, agents and brokers have approached us for advice regarding the dos and don’ts of paying financial incentives to unlicensed persons for the placement of insurance or the referral of potential clients to the agency. Aware of the regulatory environment concerning such matters, they are concerned about the balance between optimizing agency revenue by increasing sales and expanding their client base on the one hand, and conflicting with insurance regulators on the other. We thought that it might be helpful to provide a summary of the various applicable statutes, regulations and counsel opinions on the topic in the states of our readership, including Tennessee.

Rebating Most producers are aware of the term rebating. They also know they shouldn’t do it and that bad things happen when regulators find out it is being done. However, usually, producers conflate the term rebating with the concepts of commission sharing or the payment of so-called referral fees. While the states in our readership have different approaches

case law

robert m. sullivan, esq.

Senior partner of Sullivan & Klein, LLP

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to commission sharing and referral fees,1 all of them have a consistent view of rebating—you should not do it.

By statute in all the states of our readership, rebating generally is defined as, “offering a reduction in premium, providing a monetary inducement or an offer of anything of value as an inducement to purchase insurance.”2 There are some exceptions to the strict application of the statute. For example, the Department of Banking and Insurance’s enabling regulations not only prohibit an inducement to buy insurance from a producer, but also prohibit paying inducements not to buy insurance from a competitor.3 However, New Jersey does allow a producer to make a contribution to charity on behalf of a client, other than a charity, as an inducement.4 In New York, an insurance producer can provide something of value as an inducement to purchase insurance as long as it does not exceed the sum of $25.5 For example, a gift of golf balls or an inexpensive tote bag would not run afoul of the statute.

To further illustrate the concept of rebating, in one Connecticut case,6 an insurance producer placed an advertisement in a local newspaper for a Mother’s Day promotion. The firm ad stated: “Call (name deleted) Agency and mention this ad. You get forty dollars ($40) off your down payment on Auto and Home Insurance …” According to the producer’s testimony at trial, he testified that he intended to waive service fees, not provide a discount in premium.

The court did not buy his story and found that whatever was intended, the producer violated Connecticut’s statute prohibiting rebating.

The referral fee As noted, a concept often conflated with the concept of rebating is the extent to which, if at all, an insurance producer may make payments to an unlicensed person in connection with the marketing and placement of insurance.

To be clear, as a threshold in each state (i.e., Tennessee, New York, New Jersey, Connecticut and New Hampshire), an insurance producer may not pay a commission, service fee, brokerage fee or any other valuable consideration to a person for selling, soliciting or negotiating insurance if that person is required to be licensed to sell insurance in the state.7 Clearly, these statutes are intended to regulate the sale of insurance by ensuring that only persons who are fully qualified and licensed can interface with the public and become involved in the sale and placement of insurance. If producers could share commission with individuals who perform the function that only a licensed producer is allowed to do, a firm would only need to have one licensed producer on staff and could allow unlicensed persons to be paid commissions while also violating the licensing laws. This is inconsistent with the intended regulation and quality control of the sale of insurance intended by the various states.

Can a producer ever pay any consideration to any unlicensed person in connection with the sale of insurance? The answer is yes.

As in any business, there always is a challenge for insurance producers to generate leads to potential insureds and turn those leads into insureds of the firm. Cold calling, knocking on doors and showing up at the Rotary Club

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Professional Insurance Agents magazine

meeting were the old standards and still work. The challenge is in finding that niche market and being able to market insurance to customers of other specific businesses. One useful strategy is to enter marketing alliances with the non-insurance businesses to provide leads for insurance placements, but there are a number of legal issues attendant to these arrangements with which producers must be familiar to avoid conflict with state regulations.8 The states in our readership vary somewhat in their approach to the issue. Three of the states, New Jersey, New Hampshire and Connecticut, have a carve out to their proscription against commission sharing and, in identical language—taken from the National Association of Insurance Commissioners’ Producer Licensing Model Act—provides that producers may pay or assign commissions or pay other consideration to unlicensed persons if those persons do not engage in the actual selling, soliciting or negotiating of insurance in the state and the payment does not constitute rebating under the state’s law. Thus, payment of a portion of a commission to an automobile dealer, a real estate broker or other similar niche market would not, per se violate the statutes, unless the payment also constituted rebating9 and the unlicensed person performed the functions of a licensed producer.

On the other hand, Tennessee and New York did not adopt the provisions of the Model Act carving out an exception to the proscription against sharing commissions. However, what both states did do is permit the payment of so-called “referral fees” to persons who are not licensed in consideration of providing leads or referring potential customers.

The Tennessee statute10 provides that an unlicensed person may refer

business to a licensed producer if the person does not discuss specific insurance policy terms and conditions. The referral source must be compensated for the referral in a fixed account not to exceed $25 if the producer does not employ the referral source. Unlicensed employees of a producer may be compensated only with a fixed nominal amount, but the $25 limitation does not, per se, apply. Most important, is that under the statute, payment of the referral fee cannot be contingent upon consummation of the sale of the insurance product. In other words, the referral fee has to be paid regardless of whether a sale is made.

Similarly, in New York,11 a producer may pay an unlicensed person for “… the referral of a person to licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person …” Like Tennessee, the payment of the referral fee cannot be contingent upon the actual sale of insurance and the referral source cannot engage in any decisions of the insurance product.

Interestingly, in an opinion from the Office of General Counsel of the New York State Insurance Department (now Department of Financial Services),12 the department ruled that payment of a referral fee to an unlicensed person may be contingent on whether a lead or a referral results in the producer providing a quote for insurance. According to the department, paying a referral fee may be made contingent upon proving a quote because in such case, the payment is not “… based upon the purchase of insurance by such persons” as specified in the statute.

Recommendation

they may do and not do in connection with the referral relationship so as to avoid any activities that constitute activity as an insurance producer in violation of the state’s licensing laws.14

This article provides an overview of the pertinent law in each state regarding inducements, payments or other valuable consideration provided to nonlicensees.

Although what constitutes rebating is clear, as we noted, some states have certain narrow exceptions to the absolute prohibition against rebating. These are straightforward.

However, with respect to sharing commissions and payment of referral fees, application of the statutes becomes slightly more fact specific, as is shown by the variant views taken by each of the states in our readership. When contemplating entry into a referral relationship with nonlicensees, we recommend considering the following: a. Review the regulatory environment in your state. Each of the states in our readership have excellent websites containing the actual text of the regulations, statutes and counsel opinions. If any doubt remains, have your proposed relationship reviewed by counsel to opine as to whether you are compliant with state law. b. Make sure your referral agreement is in writing and strictly prohibits the unlicensed partner from engaging in activities that would constitute the sale, solicitation or negotiation of insurance contracts. All the states are clear on this point. You are the licensee and compliance with state law is your responsibility.13 c. Ensure that representatives and employees of the nonlicensee are trained in what www.piaTN.COM

Preparation is the key to success because the violation of insurance laws and regulations, even if unintentional, can make for a bad day.

Sullivan is senior partner of Sullivan & Klein, LLP. He can be reached at (212) 695-0910.

“Survey of the Current Insurance Regulatory Environment for Affinity Marketing Arrangements”–Federation of Regulatory Counsel Journal–Vol. 23, Edition 4–Winter 2012

1

N.H. Rev. Stat. 402:39 (New Hampshire); T.C.A. 56-8-104(8); C.G.S.A. 38a-825 (Connecticut); NY Ins. Law 2324 (New York); N.J.S.A. 17:29A-15 (New Jersey)

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N.J. A.D.C. 11:17A-2.3(c)

4

N.J.A.D.C. 11:17A-2.3(f)

5

N.Y. Ins. Law §2324(a)

Ofili v. Sullivan, 52 Conn. L. Rptr.

739, 2011 WL 4953489 (Sup. Ct., 2011)

6

T.C.A. 56-6-113(a) (Tennessee); N.J.S.A. 17:22A-41(a) (New Jersey); N.H. Rev. Stat. 402-J:13(I) (New Hampshire); N.Y. Ins. Law §2116 (New York); CGSA 38a-702l(a)

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See No. 1 above

N.J.S.A. 17:22A-41(d)(New Jersey); N.H. Rev. Stat. 402-J:13(IV)(New Hampshire)

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T.C.A. §56-6-113(e)

11

N.Y. Ins. Law §2116

New York State Department of Financial Services–OGC Op. 09-04-11

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13, 14

See No. 1 above 1

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How to weather a disaster PIATN members share their experience

t

ommy and Colleen Campbell, owners of A2Z Insurance Inc., Franklin, Tenn., lost their original agency in a fire in February 2014. PIATN reached out to them to see how they are doing today. PIATN also asked them to share their advice on how professional, independent agents can prepare for a disaster or storm.

were lucky to find an office the next day. A2Z Insurance was out of an office, but we have never been out of business.

Tell us what happened to your agency.

Security wise, I feel that we were very prepared for the fire. We have been paperless since 2000 and have an agency management system that houses all our secure customer files off-site. We were insured with a great insurance company that really stepped in to make sure all our burned equipment was replaced. Our condominium, which housed our original office, was rebuilt and sold within nine months of the fire.

We had just gone to bed on Feb. 11, 2014, at 11:15 p.m., when we received a phone call from the Franklin Fire Marshall, who told us our office was on fire. The fire department arrived at the agency within three minutes and extinguished the fire quickly. When I got there that night, I saw many firefighters, fire engines, news reporters and police cars. Even though it was late, I called both insurance companies and a restoration company. The next morning, the restoration company and the claims adjusters had arrived to take care of our disaster by 8 a.m.

We sent the woman who works on our commercial accounts home with a computer and her cell phone and we transferred the office phones to my cell phone. When clients called the office, I sent them to her for service.

We rented a truck and moved all the office’s undamaged equipment into it and Colleen and I started looking for a new office. We found one quickly and moved into it. We 1

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How prepared was your agency for the fire?

How long did it take before you were up and running again?

We were up and running within two days after finding a new office. All we had to do is log into a new computer with our secured passwords to access our customer files.

As I said, we are a paperless office and have a scanner at each workstation, so we scan everything into our AMS and then shred it. With all the security breaches

Professional Insurance Agents magazine

Bekah hutsenpiller PIA’s marketing & communications coordinator

happening across the U.S. and globally, we have multiple passwords to get into each computer.

What did you learn from your experience with the fire?

To be prepared. It can happen to you.

Don’t take anything for granted.

We are prepared security wise and insurance wise. We can speak from experience: It certainly helps to have sufficient insurance coverage for contents and business interruption.

Any advice for other insurance agents?

You think it won’t happen to you, but it will, and it does. Just be prepared in all aspects.

Hutsenpiller is PIA’s marketing & communications coordinator. www.piaTN.COM

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You’re cleared for takeoff.

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ian macartney Flood insurance services practice leader, Marsh

What we learned from Sandy How to prepare your clients for the next disaster Superstorm Sandy—one of the deadliest storms to hit the U.S.—inundated much of Northeastern U.S. with coastal flooding, causing an estimated $50 billion in damages, second only to Hurricane Katrina. As of June 2015, the National Flood Insurance Program had paid out more than $7.9 billion in flood claims for Sandy, with many claims still under review, according to the Insurance Information Institute. Excluding NFIP claims, total property losses from Sandy stand at nearly $19 billion.

Small businesses and homeowners located along the Eastern Seaboard are particularly vulnerable to natural catastrophes such as Sandy, where flooding is a major cause of loss. According to the Federal Emergency Management Agency, the average residential flood claim from 2010 to 2014 was about $40,000, and nearly half of small businesses impacted by a significant storm never reopen, due in part to flooding.

Following Sandy, many business owners were surprised to learn that, despite having windstorm coverage, they were not covered for the damage caused by the storm surge, which at its highest peak measured more than 12 feet. Others quickly determined that the amount of flood coverage provided through the NFIP was insuf-

ficient to cover their claims and many small-business owners learned the importance of procuring business interruption coverage, which is not offered by the NFIP. Professional, independent insurance agents can play a critical role in educating their homeowner and small business owner clients about their flood risks and the available insurance coverage options they may wish to consider.

Review policies Floods are the No. 1 natural disaster in the U.S., resulting in billions of dollars in damage to hundreds of thousands of homes and businesses annually, according to the NFIP. It’s common for insureds to review their business and homeowners insurance policies in the wake of a loss. However, insurance agents should stress that the most important time to review a policy and understand the scope of coverage is before a loss happens. Here are some of the important items you should discuss with your insureds when you review their flood policies with them: • Determine what the policy covers and the flood zone the business or home is in, which can affect the price and type of coverage available.

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• Review limits, types of flood events covered, and what the policy actually covers for various flooding events (e.g. storms, storm surge, rain, and a burst pipe). Types of coverage to consider that address specific flood risks include NFIP, private primary flood, wrap products and excess flood.

• If more than one type of coverage is needed (e.g., NFIP and excess flood) determine how they affect each other in the event of a claim.

• If flood coverage is not in place, make sure to advise on flood risks and other options, including business interruption insurance.

• Consider flood mitigation strategies to potentially reduce losses and coverage price.

Don’t lose grounD in a tough economy The fact is, this is the time to invest in advertising. Now, more than ever, you need to retain existing clients and attract new ones. And, while you may lack the bottomless pockets of direct writers, well-crafted, well-placed, affordable marketing can punch through the noise and get your message out. Whether you’re looking for brand new marketing materials, our customized consumer materials or Spanish-language pieces, Think PIA first for the marketing advantage you still need to succeed.

logon to www.pia.org or call (800) 424-4244.

s •e •r •v •i •c •e •s

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Professional Insurance Agents magazine

Many agents fail to review these issues with their clients until after a loss. By reviewing flood risks and insurance in advance, agents can take a critical step toward preparing their clients for the next Superstorm Sandy or other disaster, in addition to reducing their own errors-andomissions liability.

Misunderstood coverage Thousands of home and business owners purchase flood insurance through the federal NFIP. However, the amount of property and contents coverage available through the NFIP is limited and can quickly erode after a major storm, as many found out after Superstorm Sandy.

This is where excess flood insurance coverage can come into play. Up to $15 million in excess flood coverage for property, contents, and business interruption is available today and can be quoted automatically alongside a client’s NFIP coverage.

Such protection can be the difference between a business owner rebuilding and closing its doors after a major storm. However, confusion exists as to how excess flood coverage works, how to purchase it and how much it costs.

Here are the top four excess flood coverage misnomers that agents should address with their NFIP clients: 1. Misnomer: Excess flood coverage is limited in scope and is expensive.

Reality: Almost 40 percent of small businesses in the U.S. never reopen their doors following a disaster, much of this due to flooding, according to FEMA. Unfortunately, many

insureds do not understand the value of their assets until they have a loss and figure out they are underinsured. The NFIP coverage stops at $500,000 for commercial business owners. In many cases, the extra coverage required to cover the insured’s assets is not a lot, and the premium is reasonable. For small- to midsize businesses, having such coverage in place can keep them up and running after a major flood.

2. Misnomer: The amount of flood coverage offered by the NFIP is sufficient.

Reality: Nearly 25 percent of all flood claims come from low- to moderate-risk areas.

Under the NFIP, commercial property owners can purchase up to $500,000 in building and $500,000 in content coverage, while residential property owners can purchase up to $250,000 in building coverage and up to $100,000 in content coverage.

Those amounts can erode quickly as it only takes a few inches of floodwater to cause tens of thousands of dollars or more in property damage.

4. Misnomer: Because it takes months to bind an excess flood policy, it’s not worth the hassle.

Reality: Due to the growth of automated binding platforms, some excess flood insurance programs offer real-time quoting and binding, available in all 50 states.

Conclusion No one knows when the next Superstorm Sandy will hit, but the several days of torrential rain that contributed this fall to what some are calling a 1,000year flood event in South Carolina serves as a stark reminder that home and business owners along the eastern seaboard remain at high risk. Professional, independent insurance agents serving this area can help ensure that homeowners and business owners stay afloat for the next disaster by educating them about their flood risk and flood insurance coverage.

Macartney is a managing director and national practice leader for flood at Marsh. In this role, he manages Torrent Technologies, a service provider to WriteYour-Own insurers participating in the NFIP and Marsh’s retail NFIP team, which offers advice and support to homeowners and commercial clients around the federal program.

This information is not intended to be taken as advice regarding any individual situation or as legal, tax, or accounting advice and should not be relied upon as such. You should contact your legal and other advisers regarding specific risk issues.

The information contained in this publication is based on sources we believe reliable but we make no representation or warranty as to its accuracy. All insurance coverage is subject to the terms, condition and exclusions of the applicable individual policies. Marsh cannot provide any assurance that insurance can be obtained for any particular client or for any particular risk. Marsh makes no representations or warranties, expressed or implied, concerning the application of policy wordings or of the financial condition or solvency of insurers or reinsurers.

3. Misnomer: Excess flood coverage is not written in conjunction with Write-Your-Own Carriers, therefore the claims process would be difficult.

Reality: The third-party administrator involved for an excess flood coverage loss should work in concert with the NFIP’s claim adjuster to ensure consistent claims review and processing. In many cases, it may be the same company and potentially one person dealing with both claims.

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PIA Tennessee 7.5x10 Date.pdf

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curtis m. pearsall cpcu, cpia Special consultant to the Utica National E&O Program

Your E&O

More than just another policy Purchasing the right coverage is probably one of the most important business decisions you will ever make. Consider this: Your receptionist calls and to say someone is in the front of the office and he would like to see you. Not thinking too much about it, you proceed to the front of the office where you meet an official-looking individual who identifies himself and asks you for proof of who you are. After you provide your identification, the person hands you a piece of paper and states, “Thank you. You have been just been served with a summons.” Then the person leaves and you are left with an official document that has the potential to change your life for a while. While that scenario might sound a little dramatic, often this is exactly how it happens.

Until then, you bought your errors-and-omissions policy and paid the premiums when they were due—not giving much thought to it. Yet, how good is that E&O policy?

Does it cover what you do? What is the quality of the defense counsel you will be assigned? Does the deductible work as expected? Up until you were served the summons, you probably hadn’t thought much about these questions.

While these and many other questions now race through

your mind, for better or for worse, it is what it is. There is not much you can do to change it now.

Absolutely critical As you can imagine, there are a number of E&O carriers currently selling this product. Some have been selling it for decades, while others are relatively new to the market.

Certainly, a carrier with a record of accomplishment of more than 40 years has earned its stripes, making you feel comfortable that you will not see many surprises at claim time. That’s why it is critical that when you secure E&O coverage to protect your agency you realize that no two policies are the same. Not only is possible that the “what’s covered” might be different, don’t count on the “who’s covered” being the same, either.

As you hold that legal summons in your hands, there is no doubt you are hoping what is alleged in the document is covered by your policy. Chances are, if you bought a policy with a premium that sounded too good to be true, it very well may have been because the coverage is not as broad as your previous policy. As with many products, the old, “You get what you pay for” adage applies. Without a doubt, the downside of buying inferior coverage is the

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Agency E&O

potential that the act you are alleged to have committed is not covered and thus not only will you have to defend your agency out of your corporate funds, but will have to handle any judgments out of your agency’s pocket! Equally, without doubt is that the size of the legal costs and average judgments are significant enough to have a dramatic impact on the future of your agency.

Isn’t this what you paid for? As with many policies, up until a claim occurs, the policy is just a piece of paper. How that company performs at claim time is where, “the rubber meets the road.”

Having spoken with (literally) thousands of agents in my 23 years as manager of Utica’s E&O program, it is evident that the anxiety you can experience at claims time is enough to put some over the edge. That’s why you want a carrier that gives you the peace of mind you need and is with you side by side.

You want a carrier that will assign you defense counsel that understands, and is extremely proficient at the legal liability standards and defenses associated with this class of business. This is not your average counsel—rather they are skilled in this specific facet of the law and will work to protect your professional reputation. After all, isn’t this what you paid for?

Has a market for your agency Utica National Business Risk Partners PIAPRO Navigators Rockwood E&S markets Contact

Based with how your case goes, you may be required to pay your deductible.

Are you clear on exactly how your deductible works? Do you have a “lossonly” deductible in which you will only have to pay if a judgment is rendered against you? Or, do you have a combined deductible in which you are going to be required to pay some of the defense counsel costs? Be hopeful that you have the one you thought you did. Unfortunately, if the DEC page did not state how your deductible worked clearly, you could be in for a surprise.

Serious business Buying an E&O policy is serious business—and could be the difference in how (and even if) your agency financially survives a claim. I know what many of you are saying: “I’ve never had a claim.” That’s wonderful! I tip my hat to you! However, I add to that: “Are you good or are you just lucky?” Can you guarantee that in the next year you will not be hit with an E&O claim? Of course you can’t. No one can. Then don’t take the chance. Don’t put your agency at risk by playing Russian Roulette with the business you’ve worked hard to build. Buying the wrong E&O policy could cause that to happen.

Purchasing the right coverage is probably one of the most important business decisions you will ever make.

In your profession as an insurance agent, you work hard to ensure your clients get the benefit of your expertise and experience. Ask yourself this question: Are you doing a better job of protecting your clients than you are of protecting your agency? That’s something to think about, isn’t it?

Pearsall is a special consultant to the Utica National E&O Program.

Sandy Clive, CPIA, 800-875-7428

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Professional Insurance Agents magazine

Five steps to hold salespeople accountable For any industry, one of the biggest issues with managing sales teams is a lack of accountability. Below are five steps you can incorporate into your insurance agency to hold those who sell in your agency accountable for their sales numbers.

Step 3: Keep to a 180-day employment cycle

Step 1: High standards during hiring

Every new hire should have a 180-day employment contract. With a new hire you want to micro-manage his or her activity and review his or her calls and numbers almost daily.

The bottom line is: Ultimate sales numbers don’t lie. If the person falls short in the first 90 days, but he or she has the right attitude and aptitude, course corrections are possible and you should see marked improvement and growth in the second 90 days. If numbers still are abysmal after 180 days, it’s time to cut bait.

Think of your current expectations for your salespeople and double them when you talk to potential new hires. For example, if you expect your salespeople to make 50 phone calls a day, tell the candidates 100. If you expect them to go out and knock on 25 doors a day, tell them 50. If you expect them to work until 7 p.m., tell them 9 p.m. Do you expect them to work on Saturday?

Tell them Saturday and Sunday. Yes, I hear your groans. The point is to test candidates during the interview. You’re looking for hard workers, not skaters or slackers. You can adjust your numbers later, but if you start with average numbers, you’ll get average people to agree to them and then fall short.

Note: You also need to hire attitude and aptitude. You can’t teach work ethic, drive, self-motivation and perseverance—and you can’t teach people who aren’t cut out for it to sell. You need to hire people who are willing to do the hard work and make tons of calls, even cold calls if necessary. Have a tough hiring process and stick to it no matter who the candidate is or how good he or she may seem. Make candidates jump through some hoops. If they can’t take a little heat from you, how are they going to take the heat from potential clients?

Step 2: Hold people to expectations Once you and your salespeople have agreed to expectations, everyone needs to have weekly, monthly and annual goals that translate to daily activity. Are they making the number of phone calls and knocking on the number of doors they need to in order to reach those goals? Are they working on Saturday if that’s what they said they would do? What’s their work ethic? Are they meeting their daily numbers, exceeding them or falling short? Do they show up early and leave late? The key here is, whatever they agree to do, they need to hit those numbers and exceed them to some degree. They also need to work hard on the right activities. If they aren’t hitting the numbers, are they putting in a valiant effort? Do they need help with skills development or time management? Whatever the issue, if they are falling short on their numbers, correct it quickly.

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sales

john chapin President of Complete Selling

All your other producers—even the veterans—also should have a serious 90- and 180-day review. When you look at their last 90 days, if there are problems, they have 90 days to get them corrected. You may not have to be as strict and overt with your good people, but make sure they aren’t getting into a comfort zone; developing bad habits; and/or getting complacent.

Note: To use a sports analogy: The goalie who doesn’t stop the pucks, the pitcher who gives up runs and the quarterback who throws too many interceptions isn’t the starter for long.

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Step 4: Check up on your people In addition to tracking the number of phone calls everyone makes, you also need to monitor your sales calls and visits. This exercise is most successful when it is done without prior notice. What I like to do is call people who are in the field, ask where they are and then meet them and go on a few calls with them. I also walk into someone’s office and say, “Let’s make some phone calls.”

Then I listen. The element of surprise helps because the salespeople who are making the calls and are out doing what they are supposed to be doing won’t be offended and will appreciate the help and insight. The producers who aren’t prepared for the phone calls or are hiding out at a coffee shop, the movies or elsewhere, will hate this.

Note: As with Step 3, you know who your best people are and you can give them more autonomy—surprises aren’t necessary. That said: No one gets a pass on accountability. If people can rest on their laurels, most will. Be careful of being too lax even with your best people.

Step 5: Post sales numbers, use peer pressure

of winners in which the people who are working hard and doing the right things will thrive and the slackers will conform or decide to leave the agency.

The most important part of accountability is to be committed to it and not to let people slide, because if you do, most will.

Chapin is a sales and motivational speaker and trainer. For his free newsletter, or if you would like him to speak at your next event, go to completeselling.com He has more than 27 years of sales experience as a No.1 sales representative and is the author of the 2010 sales book of the year Sales Encyclopedia.

The lunchroom is a great place to post sales numbers. This practice will encourage people with low numbers to raise them and the champions don’t mind friendly competition and push. You also want a positive environment

Online Education

• Pre-Licensing • Training and Education for the New Employee • Continuing Education from CEU.com

www.piatn.com/education Education at your convenience

www.piatn.com/education For more information, call Pam Cass, CPIA, at 800-875-7428

Finance with BARCO, M. J. Kelly’s Premium Financing.

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Professional Insurance Agents magazine

What is the PIA/Penn National Insurance agents’ umbrella program?

Written by agents for agents.

■

Comprehensive excess insurance protection

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Packaged in one easy-to-manage policy

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Affordable rates

Coverage

Payment Plans & Fees

Coverage limits (higher limits may be available)

Flexible payment plans for any policy

■ Up to $10 million for commercial and professional liability

■ Full payment (no installments)

■ Up to $5 million for personal exposures of owners and officers

Core Coverage ■ Business operations — broadened coverage and excess limits protection for agent/agency’s business and employees for liability incurred as a result of normal business activities. Policy provides coverage over an agency’s commercial general liability or businessowners, employers liability and commercial auto.

Key Features

Coverage features

■ Excess over underlying E&O

■ Personal injury

■ Personal umbrella coverage for owners, partners and officers, including members of their families. Sub-limit does not affect total limit.

■ Libel, slander and advertising offense

■ Employment practices liability providing excess limits on a following-form basis.

Sub-limit does not affect total limit.

■ Excess over business coverage ■ Defense coverage outside policy limits ■ Affordable minimum premiums for 9 employees or fewer ■ One source for all excess coverages ■ Blanket protection for most risks ■ Flexibility to meet the needs of any agent, including flexible pay plans

Rating ■ Staff rating for agencies with 9 or fewer employees ■ Excess rated for agencies with 10+ employees or special acceptance categories ■ Refer to state rate pages

■ First-dollar legal defense provided for claims not covered by underlying insurance ■ Professional liability — excess limits protection on a following-form basis for errors and omissions in the course of the agency’s business as an insurance professional. Coverage can be written over occurrence or claims-made forms of a variety of primary E&O carriers.

Coverage features on a following-form basis ■ Full prior-acts coverage ■ Covers any person acting in a capacity as a real estate agent or notary.

■ Options unique to this program: • Personal coverage — broadened and excess personal protection for owners, partners and officers, including members of their families.

(Submit ACORD Personal Umbrella Application.)

• Employment practices liability — excess limits protection for liability incurred by named insured or employees for wrongful employment practices.

Coverage can be written on a claims-made basis over a number of approved EPL carriers.

Maximum available as a sub-limit is $2 million.

(Submit a copy of underlying EPL application.)

■ Two payments — 50% down, one installment of 50% due three months later ■ 40/30/30 — 40% down, two installments of 30% each due every other month ■ Quarterly — 25% down, three installments of 25% each due quarterly ■ Monthly — 20% down, five installments of 16% each due monthly

Available payment plans by premium level ■ Premium up to $1,000 — full payment or two payments ■ Premium of $1,001 to $5,000 — full payment, two payments, 40/30/30 or quarterly ■ Premium greater than $5,000 — any payment option

Applicable fees ■ Service fees: No service fee will be added to the initial payment. A $4 service fee will be added to each installment billing.

Contact Us Contact your local PIA producer. To find yours, visit the PIA Main Street Store at www.PIANET.com

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Professional Insurance Agents magazine

Enhance your ad with the impact of color.

Reach our sales representative at (800) 875-7428. .

Directory

PIATN officers and directors OFFICERS

President Bill Richards, CPIA, LUTCF Community Insurance Greeneville, TN (423) 638-1422 brichards@greatci.com Vice President Greg Augustine, CPIA The Augustine Insurance Group Clarksville, TN (931) 503-0015 gaugustine@aol.com Secretary Herbert Montgomery Clay and Land Insurance Memphis, TN (901) 767-3600, ext. 107 hmontgomery@clayandland.com Treasurer Chris Mills, CPCU, CIC Mills Insurance Agency Nashville, TN (615) 620-4452 chris@millsinsuranceagency.com Immediate Past President John Keisling, CPIA, CISR Keilsing Insurance Agency Byrdstown, TN (931) 864-3116 john@keislingins.com

NATIONAL DIRECTOR

June Taylor, CIC, CPIA, CPIW, DAE Wilkinson Insurance Agency White House, TN (615) 672-4439 june.taylor@wilkinsonins.com

DIRECTORS

Llew Boyd Southern Insurance Associates Chattanooga, TN (423) 296-0626 llboyd@southins.com Adam Cox, CPIA Adler & Cox, Inc. Chattanooga, TN (423) 877-3536 acox@adlercox.com Tom Gernt, CPIA Art E. Gernt Insurance Inc. Crossville, TN (931) 484-3448 tom@gerntinsurance.com Anna Lima-Montgomery, CPIA Montgomery & Associates LLC Brentwood, TN (615) 829-8457 anna@montgomeryassociatesllc.com Mike Morat Mike Morat Insurance Services Memphis, TN (901) 363-8588 mmorat@aol.com Dedric Pearson, CPIA Pete Mitchell & Associates Inc. Memphis, TN (901) 345-6176 dedric.pearson@petemitchellins.com Jeff Puckett Boyle Insurance Agency Inc. Franklin, TN (615) 567-8000 jeffp@boyle.cm Mike Tansil My Team Insurance Murfreesboro, TN (615) 890-4483 mtansil@mileytansilins.com

STAFF

Morgan Murry Director of Convention and Education (615) 771-1177 mmurray@piatn.com Kristopher Fisher Director of Member Services (615) 771-1177 kfisher@piatn.com Bekah Hutsenpiller Marketing Coordinator (615) 771-1177 bekahhutsenpiller@gmail.com

The PIA Branding Program

Advertising that helps set PIA members apart from — and above — their competition. �������������� ���������������

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Local advertising for Local Agents Serving Main Street America

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How does a Professional Insurance Agent separate himself or herself from the pack in a crowded insurance marketplace? Simple.

By taking advantage of PIA’s new print advertising program.

Best of all, this powerful branding tool is available free and exclusively to PIA members, as part of their PIA membership. Company sponsorship of the PIA Branding Program is also free.

PIA has created a series of ten print advertisements that PIA members can run in local publications or print as flyers. These ads focus on the combination of choice and personal support and service that make PIA members Local Agents Serving Main Street America.

Learn More

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These attractive ads can be customized with agency logos and contact information and (optionally) a company logo. There are four general agency ads, two homeowners ads, two auto ads and two commercial lines ads, with numerous variations, sizes, color as well as black and white ads, making a total of 227 ads in all.

National Association of Professional Insurance Agents 400 N. Washington St. • Alexandria, VA 22314-2353 (703) 836-9340 (phone) • (703) 836-1279 (fax) www.PIANET.com • piabrandingprogram@pianet.org

Whether you’re a PIA member now, you’re an agent who has yet to join, or you’re interested in company sponsorship, head on over to PIA National’s website to see the ads and get all the details about the PIA Branding Program: www.pianet.com/piabrandingprogram