MAY 2015 | DELAWARE
AGENT
MISSTEPS How to
REDUCE E&O exposure
INSURER INSOLVENCIES REPLACEMENT OF COVERAGE
IN THIS
FEATURES 8
HOW TO SWIM WHEN INSURERS SINK Minimizing an insurance producer’s E&O exposure due to an insurer’s insolvency has been a longstanding concern for agents and brokers.
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DOES YOUR AGENCY PERFORM THE MIRROR TEST? Ask virtually any agents’ E&O carrier what it sees as its biggest issues/causes for concern, and “replacement of coverage” will likely be in the top three.
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HR SOLUTION© PRESENTS: THE INTERVIEW You’ve posted the job, reviewed the responses and phone-screened applicants. But are your ready for what comes next?
IN EVERY ISSUE 2
Chairwoman of the Board
3
Ask Our Experts
4
Coverage Corner
6
State News
13
IA&B Partners
IBC My Events IBC Advertiser’s Index IBC Classified Ads
Periodical postage paid at Mechanicsburg, Pa. and at additional mailing offices. Ride-along enclosed. Postmaster: Send address changes to Insurance Agents & Brokers, 5050 Ritter Road, Mechanicsburg, PA 17055. Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2015-05, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.
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Copyright 2015. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and/or other professional advisors concerning specific matters before making any decisions. We disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.
IABforME.com | PRIMARY
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CHAIRWOMAN OF THE BOARD’S MESSAGE
INSURANCE AGENTS & BROKERS
E&O CLAIMS HAPPEN
5050 Ritter Road | Mechanicsburg, PA 17055 800-998-9644 | IABforME.com
OFFICERS
T
Chair of the Board
he best-laid plans of mice and men oft go awry. As insurance agents, we know the importance of risk management, and we practice what we preach (some of us better than others!). But despite our best intentions, E&O claims happen. That’s when the support of IA&B comes into play. Like many of you, my agency works with the IA&B Sales Center to secure E&O coverage. There’s peace of mind that comes from relying on fellow independent agents. From relying on agents who focus on loss prevention, not just a policy – and who have the backing of an entire organization that offers loss-control seminars, compliance manuals and legal expertise. In this issue of Primary Agent magazine, you’ll find articles that focus on the E&O risks associated with overly zealous advertising claims, insurer insolvency, and replacement of coverage. Education like this is another component of IA&B’s loss-prevention strategy for its policyholders, so I encourage you to take advantage of it by giving the publication a read. While our agencies are faced by a daily barrage of E&O risks – and although some claims are bound to occur – it’s reassuring to know that we have the support of the “agents’ agency” and the backing of the entire IA&B organization. n
Diana M. Hornung Hanby, ACSR Vice Chair of the Board
Robert S. Klinger, LUTCF, CPIA Immediate Past Chair of the Board
G. Greg Gunn, CIC
MEMBERS Henry “Butch” Bradley, Jr. Forest Hill, MD
E. Stephen Burnett, CIC, ARM Wilmington, Del
Richard F. Corroon, CPCU Wilmington, Del
N. Lee Dotson, CIC, AAI Wilmington, Del
Michael P. Ertel+ Columbia, MD
John B. Hollister Milford, PA
Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, PA
Douglas A. Loesel, CPCU Erie, PA
Michael F. McGroarty, Sr. Pittsburgh, PA
Crag S. Mader
Gambrills, MD
Ann Gallen Moll, CIC Reading, PA
Mark J. Monroe
West Chester, PA
Joseph R. Pastor, CPCU, AAI
Until next time,
Oil City, PA
Richard M. Rankin, CIC Lancaster, PA
April E. Ressler, CIC Altoona, PA
Diana M. Hornung Hanby Chairwoman of the Board
Scott C. Rogers, CPIA* York, PA
Glenn R. Strachan
Ft. Washington, MD
Lawrence A. Wilson, CIC, CPIA, CPCU, ARM** New Castle, Del.
J. Marshall Wolff, CIC, CPCU
Editor’s note: If you’re not a policyholder, visit IABforME.com/MyAgency to learn more about how the IA&B Sales Center can assist your agency.
Easton, PA
* Pa. IIABA National Director ** Del. IIABA National Director + Md. PIA National Director
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MAY 2015
Ask Our Experts This month’s answer was provided by Claire Pantaloni, CIC, CISR, our industry affairs director. Catch Claire in our Human Resources Pitfalls education offering, coming this fall.
Question: We’re rebuilding our website: Are there any restrictions on what we are permitted to advertise?
Answer:
Y
es and no. Here’s the reason: Web designers are there to make you look good. That’s what they’re paid to do, and there’s nothing wrong with that. However, between their zeal to paint you in the best light and their lack of knowledge of the industry, they may unwittingly weaken your E&O defense if a claim is filed against you. Why? The types of statements and promises made on some agencies’ websites can be used by plaintiffs’ attorneys to increase these agencies’ duty of care to their customers. How it works: • An agent’s “basic” responsibility is to procure insurance in accordance with a client’s instructions. • When the agent claims he is highly skilled or an expert and the customer relies on that expertise, this set of facts can create “special circumstances” or a “special relationship.” So if your website is professing that you are “insurance experts,” “provide tailored coverage for each of your customers,” or “make sure that all your customers are properly covered,” your duty of care may now be higher than you think. Good rule of thumb: Do not overpromise!
This is not only true of your website; it also applies to other materials used to promote yourself to the general public (marketing brochures, ads, printed materials) and even verbal representations (e.g. “hold” messages on your phone system). You should expect all these communications to be scrutinized by the plaintiff’s attorney in a lawsuit.
• If you make reference to your carriers in some of your advertising material, clear the advertising with the carrier. It’s often required in the agency contract.
Other important notes when building a website:
• If you collect personally identifiable information for quoting, secure the page collecting that information (see last month’s Ask Our Experts answer on the subject, and talk to your IT provider).
• Watch for misuse of a trademark, or use of copyrighted material without permission.
• Include a Privacy Statement on your website (as required by federal and state law and regulation). n
• Watch for accuracy of the content: If it is developed in-house, make sure that someone proof-reads the material. Vet the source if you are using an outside content developer. • If you refer to other websites or vendors, request consent from the vendor, provide several options, and add a disclaimer relative to the services provided by the vendor. • Add disclaimers that restrict the geographical areas for which content is provided (e.g. list the states where you operate/are licensed). If a response is only valid for one state, say so. IABforME.com | PRIMARY
Have a question? Ask our experts! Rely on our experts to answer your most perplexing questions. Visit the Ask Our Experts section of IABforME.com (find the link in the website footer) to submit your question and review answers to other frequently asked questions. Or email your question to us at IAB@IABforME.com. We look forward to hearing from you.
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COVERAGE CORNER
INDEMNIFICATION AND SOLE NEGLIGENCE Jerry M. Milton, CIC
I
’m the building owner – you’re the tenant. I’m the project owner – you’re the contractor. In either case, when we signed our contract with each other, I called the shots. I’m the indemnitee – you’re the indemnitor. I know that a claim can be brought against me for something you do, something we do jointly or something I do. Therefore, in our contract I had you agree to indemnify me, hold me harmless or save me for any and all losses and claims, including defense costs and expenses, arising out of the acts or omissions of any person or persons. Will you have to indemnify me if a claim is brought against me for your sole negligence if I’m vicariously liable? Yes. What if we are jointly negligent?
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In Maryland and Delaware, yes; in Pennsylvania, maybe. Will you have to indemnify me if I’m solely negligent? In Maryland and Delaware, no; in Pennsylvania – maybe. Pennsylvania has an anti-indemnification statute, but it is very limited. The statute only invalidates agreements entered into by owners, contractors or suppliers under which architects, engineers or surveyors are indemnified for damages or defense costs arising out of (1) their preparation or approval of maps, drawings, opinions, reports surveys, change orders, designs or specifications, or (2) the giving or failing to give instructions or directions provided that failure or giving of directions or instructions is the primary cause of the damage.
MAY 2015
The most frequently litigated issue when dealing with indemnification agreements is that of whether the language is sufficient to shift liability from the indemnitor to the indemnitee when it appears the indemnitee is at fault to some degree. For a party to obtain indemnification for its own negligence, the Pennsylvania courts have held that the contract must contain clear and unequivocal language to that effect. Broad contract language calling for indemnification with respect to “all claims” or “any and all liability” or calling for indemnity “to the fullest extent permitted by law” are legally insufficient to shift liability to the indemnitor for the indemnitee’s negligent acts.
In City of Wilkes-Barre v. Kaminski Brothers, Inc., 804 A.2d 89 (Pa.Cmwlth. 2002), the court ruled there can be no presumption that one party intended to assume the negligent acts of another unless the agreement expresses that intent beyond doubt and by express stipulation. Therefore, a contract calling for indemnification with respect to “any and all liens, charges, demands, losses, costs including … legal fees and court costs, causes of action or suits of any kind or nature, judgments, liabilities and damages of any and every kind or nature whatsoever … arising by reason of or during the performance of work … covered by this contract” was determined to be inadequate to require indemnification for the indemnitee’s own negligence in City of Pittsburgh v. American Asbestos Control Co., 629 A.2d 265 (Pa.Cmwlth. 1993) because it did not express the intent to indemnify the indemnitee for its own negligence in clear and unequivocal terms. The court held that the contract language was sufficient to require indemnification for the indemnitee’s own negligence in Szymanski-Gallager v. Chestnut Realty, 597 A.2d 1225 (Pa.Super. 1991) when the lease called for indemnification of the landlord regardless of whether the injury “be caused by or result from the negligence of lessor, his servant or agents or any other person or persons whatever.” The same conclusion was reached in Hackman v. Moyer Packing Co., 621 A.2d 166 (Pa.Super. 1993) where the Court held that Moyer Packing was entitled to be indemnified for its own negligence under the terms of the contract which provided for indemnification in connection with “any alleged negligence or condition, caused or created, in whole or in part, by Moyer Packing Company.”
In 2004 ISO revised most of their additional insured endorsements to stipulate that the additional insured was an insured but only if “caused in whole or in part by your acts or omissions or the acts or omissions of those acting on your behalf.” Therefore, the additional insured has no coverage for its sole negligence. Do we owe indemnification to an indemnitee for its sole negligence under an “insured contract” in the Commercial General Liability policy? Yes, unless the Amendment Of Insured Contract Definition endorsement (CG 24 26) is added. This endorsement adds “provided the ‘bodily injury’ or ‘property damage’ is caused in whole or in part by you or by those acting on your behalf.”
Indemnification of the indemnitee for its sole negligence? Now the answer is no. Pennsylvania agents, beware! Y’all take care! n
Jerry M. Milton, CIC, teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages. He also serves as our education consultant, working with our CISR, CIC and continuing education programs. Catch him at one of our upcoming seminars: IABforME.com/MyTraining.
Partners.
You and your clients. You and Harford Mutual. We’re committed to protecting their business and building yours. That’s what mutual success is all about.
Explore P&C insurance opportunities at www.HarfordMutual.com 410.838.4000 / 800.638.3669
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STATE NEWS
DEFINING OUR LEGISLATIVE PRIORITY Amending the surplus lines affidavit remains our legislative priority for the 2015 session. As this issue of Primary Agent magazine went to print, we were coming off of a House Economic Development/Banking/Insurance/ Commerce Committee meeting, where our government affairs team testified in favor of House Bill 40. The bill advanced out of committee.
TRACK STATE TRENDS IN INDEPENDENT AGENTS’ MARKET SHARE Learn how independent agents stack up to their competition. Our customary summary of the latest Big “I” market share report is available. The document provides an indepth comparison of various distribution channels and various lines of insurance and Delaware-specific market share data for 2013. IABforME.com/market_share_report
UPDATED ACORD FORMS PROMPT ACTION Revised Personal Auto Applications – 90 DE and 290 DE – are now available on the ACORD website. ACORD corrected the forms, which did not have enough space in the COVERAGES / PREMIUMS section, other blank coverages rows, CODE column, to enter a five-character entry. As a reminder, updating your agency management system ensures that you’re using the most recent ACORD forms, which are introduced periodically. What’s more, updating your agency management system guarantees that you’re not in violation of a licensing agreement. It is a violation to issue prior editions of a superseded ACORD form once a new form is introduced. The obligation stems from the licensing agreement between ACORD and your agency management system vendor (AMS, Applied, etc.). ACORD.org
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MAY 2015
HB 40 is the result of our months of work with legislators and the Department of Insurance. The goal is to “fix” the new notarization requirement for the threedeclination affidavit needed to place business in the surplus lines market. We continue to assert that the requirement is an unnecessary and burdensome step for the producer community that doesn’t provide any additional consumer protections. Stay tuned to Agent Headlines throughout the session to track the progress of HB 40.
ANNUAL CONVENTION ON THE MOVE Our 58th Annual Convention will relocate to the Clarion Resort Fontainebleau Hotel in Ocean City, Md. Join fellow agents, CSRs, company reps and sponsors on June 3-4 for a great mix of fun activities, quality education and peer recognition. The offer for discounted hotel rates expires on Tuesday, May 12. IABforME.com/DEconvention
sustain the agency system.
and independent
Our three-month Internet advertising blitz launches this month. Are you prepared to take advantage of it? Between May 1 and July 31, four million (yes, million) Internet advertisements will target Delaware and Pennsylvania consumers. The message? Independent agents are “free to do what’s right for you.” And all ads include a call to action of visiting TrustedChoice.com to find a local independent agent. The ads will appear as banners on various websites – including WeatherChannel.com, Forbes.com, USAToday.com and Zillow.com. Through “geo targeting,” the ads will aim to reach adults ages 25-54 who are entering life stages, such as purchasing a home or car, getting married or retiring. This $225,000 purchase of Internet advertising is just the cusp of our investment in your agency’s – and the independent agency channel’s – future. To leverage our branding campaign, visit IABforME.com/MyBrand. There you’ll find a web portal (complete with instructional videos) dedicated to:
Advertising – What you need to Branding 101 – What branding is, consider for effectively advertising an as opposed to marketing, and how to established agency brand; how to access prepare your agency to develop (or and customize the Trusted Choice expand) its individual brand while How to take ADVANTAGE of theCampaign advertisements Freedom capitalizing on the national Trusted BRANDING CAMPAIGN – and our investment: Choice brand Community involvement – How Enhance agency’s TrustedChoice.com to enhance your agency’s customerBranding■style guide your – How the profile at agents.TrustedChoice.com focused brand by establishing a place Trusted Choice brand can enhance withinHeadlines your community your agency’s own brand, ■ Follow alongand withhow upcoming Agent articles– and by introduce branding campaign components piggybacking on Trusted Choice to adopt the that Trusted Choicethe brand agents’ nationwide support of local (and even■take advantage of marketing Visit IABforME.com/MyBrand to access the reimbursement funds) resources and learn how Make-A-Wish chapters branding to use them Web presence – What TrustedChoice. com is all about, how online insurance shoppers are driven to the site, and how to increase the chances that they will find you once they land there Consumer education – Where to find vetted consumer content and how to use it to support your agency’s customer-focused brand Social media – How to venture into (or expand your agency’s use of) social media to support your agency’s brand
IABforME.com | PRIMARY
We’ve unveiled this campaign – and corresponding online resources – through a series of Agent Headlines articles. If you missed them, it’s not too late to visit IABforME.com/MyBrand and take advantage of what’s available … including the benefit of our Internet advertising campaign. Let’s brand together! IABforME.com/MyBrand
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HOW TO SWIM WHEN INSURERS By Colleen Murphy and Fallyn B. Cavalieri
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MAY 2015
Buoying agents’ E&O loss prevention for insolvencies
Minimizing an insurance producer’s errors and omissions (E&O) exposure due to an insurer’s insolvency has been a longstanding concern for agents and brokers.
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t is important for agents and brokers to understand what their legal duties are in the specific states in which they are selling insurance, and whether any state statutes exist providing that that they must advise insureds of insurer insolvency (e.g. Mich. Comp. Laws Ann. § 500.8123). This article does not provide legal advice in this regard, but presents a summary overview for educational purposes. According to Higginbotham & Assoc. v. Greer, 738 S.W.2d 45 (Tex. App. 1987), a leading case on insurer insolvency and the liability of an insurance agent or broker, the general rule is that an insurance agent or broker is not a guarantor of the financial condition or solvency of the company from which he obtains the insurance. He or she is required, however, to use reasonable skill and judgment with a view to the security or indemnity for which the insurance is sought, and a failure in that respect may render him or her liable to the insured for resulting losses. Thus, where a policy is procured in a company known to be insolvent, the agent is liable for a loss suffered by reason of such insolvency. On the other hand, where the company was solvent when the policy was procured, its subsequent insolvency generally does not impose liability on the agent or broker. In Greer, the court held that: [A]n agent is not liable for an insured’s lost claim due to the insurer’s insolvency if the insurer is solvent at the time the policy is procured, unless at that time or at a later time when the insured could be protected the agent knows or by the exercise of reasonable diligence should know, of facts or circumstances which would put a reasonable agent on notice that the insurance presents an unreasonable risk.
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Accordingly, it is imperative that insurance agents or brokers determine that the insurer is presently solvent when placing the insurance. This is especially true for any new companies with which you are contracting. Some courts have found that an agent also has a duty to determine that the insurer is licensed in the state or complies with the surplus-lines statutes for the state. Good E&O loss control practices call upon insurance agents and brokers to
CARRIER INSOLVENCY RESOURCES LOOK TO us for guidance on state-specific insolvency law, as well as general information on company rehabilitation and liquidation. IABforME.com/insolvency
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perform such an analysis across the board. The prudent insurance agent or broker will also investigate the excess and surplus lines broker utilized and obtain a copy of its E&O policy. Some courts have held insurance agents and brokers liable for failing to consider and inform the insured of the effects and potential risks of obtaining insurance from an unlicensed carrier. See, for example, Al’s Café, Inc. v. Sanders Ins. Agency, 820 A.2d 745 (Pa Super. Ct. 2003), in which the court held an insurance agent had a duty to advise the insured that by failing to use an insurer licensed in Pennsylvania, the insured was forfeiting the protection – should the insurer be placed into insolvency – of up to $300,000 made available to insureds of Pennsylvania-licensed casualty insurers by the Pennsylvania Property and Casualty Insurance Guarantee Association, and a defense to claims made against the insured. Insurance agents and brokers should advise their insureds in writing as to why the non-admitted or unauthorized insurer is being selected, what they know about the insurer’s financial condition, and note that the state’s guaranty fund will not respond if the carrier becomes insolvent. (Visit IABforME. com/ratings for a sample Excess and Surplus lines waiver letter.) Agents and brokers may also wish to consult with their E&O carrier or E&O counsel to obtain such forms in compliance with the particular laws in a given state.
MAY 2015
Although a majority of courts have found no continuing duty to monitor the solvency of the insurer, a minority of courts have held that an agent has a duty to inform an insured if the agent is aware or reasonably should have been aware of a subsequent insurer insolvency. See, for example, Kinder Mortgage Co. v. Celestine, 635 So.2d 527 (La. Ct. App. 1994), in which a broker “had reason to suspect [insurer] would become insolvent, yet did not notify customers or attempt to find suitable replacement coverage.” In states where insurance agents and brokers have a duty imposed to monitor the solvency of insurers, whether imposed by common law or statute, they must exercise reasonable care, skill and diligence. One or more reductions in the insurer’s A.M. Best’s rating in the last three to five years is a potential indicator of financial difficulty. But A.M. Best is only one source of information to evaluate the insurer’s financial condition. There are a number of other potential financial difficulty indicators in the areas of:
If you are going to monitor the financial condition of insurers and advise only your “best clients,” you are creating an E&O exposure for those clients who do not receive such advice.
• Market conduct (e.g., attempted large-scale mid-term cancellations) • Underwriting and pricing changes (e.g., dramatic increases/decreases in agency binding and/or underwriting authority) • Agency/company transactions (e.g., cash flow problems, slow return of unearned premiums, commissions, etc.) • Claims handling and loss reserving (e.g., denials of obviously covered claims) • Organizational changes (e.g. suspicion of fraudulent or criminal activity)
NOTIFYING CLIENTS OF DOWNGRADES E&O CARRIERS traditionally recommend and expect producers to: • Monitor their carriers’ financial ratings
• Financial conditions/performance (e.g., abnormal results on four or more NAIC tests)
• Notify their clients when the rating drops from a “secure” category to a “vulnerable” category
• Third-party information (e.g., coverage refusals by umbrella/excess carriers over company’s primary coverage)
E&O carriers view this process as due diligence, taking the position that clients put their trust in the agent to place them with a financially secure company.
In those states where an insurance agent or broker has no duty to monitor the insolvency of insurers with which they have placed business, the agency or brokerage may make a business decision to nonetheless do so for its clients. If the agency or brokerage assumes this duty, it should exercise reasonable care, skill and diligence. The general E&O maxim, “There are no second-class citizens/ clients of the agency,” applies here. If you are going to monitor the financial condition of insurers and advise only your “best clients,” you are creating an E&O exposure for those clients who do not receive such advice.
IA&B members have access to two sample letters that can be used to notify clients of company downgrades. To access the letters – and review tips on what not to say when you personalize them – visit our website. IABforME.com/ratings
IABforME.com | PRIMARY
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In instances where the financial condition of an insurer declines significantly, the prudent insurance agent or broker will inform insureds in writing and offer the option, where applicable, of insuring through a more financially stable insurer. (See sidebar on page 11.) When discussing the topic of insurer-insolvency risks, the “state guaranty funds” will invariably come up. Insurance agents and brokers should fully familiarize themselves with their state’s guaranty funds. These funds typically have territorial limits. For example, in New York and Pennsylvania, the funds only apply to policies issued by an insolvent domestic insurer, or a foreign or alien insurer licensed to do business within the state. There are also monetary caps on the amount the funds they will pay out per claim. For example, Pennsylvania’s cap is $300,000 per claim. Moreover, state guaranty funds have short time frames within which an insured may file a claim. In the event of an insurer insolvency, insurance agents and brokers with impacted insureds should promptly contact their E&O counsel and insurers, as well as state associations for guidance.
CARRIER RATINGS AT IA&B, we monitor A.M. Best and other major rating companies for changes in carriers that affect a majority of members. Changes are reported in Agent Headlines Week in Review emails – either in a listing below the association news section or, when they could trigger an agency’s E&O insolvency exclusion, as an industry news article. We do not necessarily track all insurers, so we recommend that you follow ratings information for the specific carriers with which you do business. Access links to rating organizations from our website. IABforME.com/ratings
The insurance agent’s last line of defense with respect to E&O loss control for claims arising out of insurer insolvency is the agent’s own E&O policy. Be sure yours has sufficiently high limits. Be mindful that E&O carriers, as initially influenced by reinsurers, place insolvency endorsements in E&O policies that provide coverage but excludes coverage where the agent places business with an insurer rated below a certain level, such as a “B+.” The phrase “at the time of placement of such coverage” in such endorsements may be interpreted to mean not only when the policy was initially procured, but also at the time of renewal. Accordingly, insurance agents and brokers should diligently check ratings each year. Once again, in the event that a rating change occurs, agents and brokers should minimize a potential E&O exposure by sending the insureds a letter advising of the insurance company rating downgrade and offering the opportunity to submit an application to another insurer. Agents and brokers may consult with their E&O counsel and E&O insurers for sample downgrade letters. (See sidebar on page 11.) n
Are you an experienced insurance professional looking to build your own business? Talk to us about our Exclusive Agent Program. If you’re ready to sell, downsize, retire, or expand your services and products, talk with the business professionals at AAA Mid-Atlantic Insurance Agency. We’d welcome the opportunity to discuss your desire or need for change—and how we can help you attain your goals. Call:
Colleen Murphy is a partner and Fallyn Cavalieri is an associate with the law firm Goldberg Segalla. Murphy focuses her practice on regulatory and professional liability matters in the insurance and reinsurance industries. Cavalieri is a member of the firm’s Global Insurance Services Practice Group, where she concentrates her practice on representing insurers in all areas of litigation. Learn more by visiting goldbergsegalla.com.
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MAY 2015
Judy Dodds
Business Development Manager 302-299-4776 or email at: jdodds@aaamidatlantic.com
©2015 AAA Insurance
PARTNERS PROGRAM
Listed below are those companies that strongly support the independent agency system and Insurance Agents & Brokers. Thank you for your continued sponsorship.
WHAT IS IA&B PARTNERS? The IA&B Partners program gives company and allied businesses the opportunity to demonstrate their commitment of support to independent agents and receive maximum market exposure. As an IA&B Partner, you will also realize the benefits of IA&B membership to help you succeed in the insurance industry.
DO YOU SEE YOUR NAME? To become an IA&B Partner, choose the sponsorship package that matches your commitment of support. Contact the Member Sales Center at 800-998-9644, 717-795-9100 or visit us online at IABforME.com to get started.
PLATINUM LEVEL
BRONZE LEVEL
ACUITY
Aegis Security Insurance Co
Berkley Mid-Atlantic Group
Agency Insurance Company
Donegal Insurance Group
AmWINS Program Underwriters Inc
Erie Insurance Group
ARI Insurance Companies
Harleysville Insurance
Auto-Owners Insurance Company
HM Insurance Group Insurance Agents & Brokers Service Group Inc
Bailey Special Risks Inc Briar Creek Mutual Insurance Company
Liberty Mutual Insurance
Conemaugh Valley Mutual Insurance Co
MMG Insurance Company
Countryway Insurance Company
Millers Mutual Group
Encompass Insurance
Millville Mutual Insurance Co
Foremost Insurance Group
Mutual Benefit Group
GMI Insurance
Penn National Insurance
Goodville Mutual Casualty Company
Swiss Re
Guard Insurance Group
The Main Street America Group
Insurance Alliance of Central PA Inc
United Fire Group
Insurance Placement Facility of PA
Utica National Insurance Group
Keystone Insurers Group Inc Lebanon Valley Insurance Company
GOLD LEVEL
MAPFRE Insurance
Progressive
Merchants Insurance Group
Westfield Insurance
Mercury Casualty PennPRIME Municipal Insurance
SILVER LEVEL
Reamstown Mutual Insurance Company
Access Insurance Company
Rockwood Casualty Insurance
American Mining Insurance Co
State Auto Mutual Insurance Company
Cumberland Insurance Group
TAPCO Underwriters Inc
Farmers Mutual Insurance Company of Western Pennsylvania
The Brethren Mutual Insurance Company
Frederick Mutual Insurance Co
The Motorists Insurance Group
Juniata Mutual Insurance Co
The Mutual Service Office Inc
PSBA Insurance Trust
Travelers
Selective
Tuscarora Wayne Group of Companies
The Philadelphia Contributionship
Zenith Insurance
IABforME.com | PRIMARY
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MAY 2015
by Utica National E&O Program
Ask virtually any agents’ errors-andomissions carrier what it sees as its biggest issue/cause for concern, and “replacement of coverage” will likely be in the top three. After all, how often does an agency replace coverage for a client, moving the coverage from Company A to Company B? It occurs many times in a week, or possibly in any given day, at most agencies.
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any insurance clients carefully watch their insurance costs. At some point, they will express concern about the cost or, at a minimum, advise your agency that they believe they are paying too much for their insurance, adding that they might get coverage cheaper elsewhere. Fearful of losing the account, your agency might remarket the account to several of your other carriers. When you present the “new” proposals to your client reflecting the lower premium, it is possible he or she will focus strictly on the opportunity to save money. However, there’s an important question to answer: Is the premium lower because the coverage is less? NOTE THE DIFFERENCES The key issue as you look to move the account from Company A to Company B is the possibility that the coverage with Company B is not as broad as Company A. If so, are the differences – more so, the reductions – being brought to the client’s attention and his or her signoff secured? The courts often refer to this as the “mirror test.” Attorneys could argue that failure to advise the client of the differences would lead the client to believe the coverages were at least the same.
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Think back over the last several years. Chances are your agency had some clients, personal and commercial, who were adamant in wanting some premium relief. Ask most agency staff when was the last time they moved an account, and they will probably say “yesterday” or “this morning.” It definitely happens with some frequency. In addition, from time to time your agency may need to move an account from the standard to the E&S market. What could happen? Presume you move the account to another carrier where the coverage is not as broad in some areas. The client subsequently suffers a loss that would have been covered by Company A but is not covered or not fully covered by Company B. If this happens, in all likelihood the client will question your agency about why the coverage was moved. The client will probably say that he or she wanted to save money but was not looking to give up coverage. Bottom line, the client may take the position that he or she never would have approved you moving the account if he or she was aware coverage was being given up. There are several areas of possible difference. The more common include sub-limits, the actual coverage grant, specific endorsements, definitions for areas such as “who is an insured,” what is excluded on one policy compared to another, and the carrier’s financial rating. In E&O policies, the scope of the covered professional services can vary greatly from one carrier to another. There have been E&O claims where the retro-date on the claims-made form was advanced, resulting in no prior-acts coverage.
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MAY 2015
E & UH-OH: REDUCE YOUR RISK LEARN MORE strategies to protect yourself and your agency from E&O claims. Our seminars explain how and why agents are sued – and how to minimize exposures through loss-control protocols (like those discussed in this article). E&O Risk Management: Meeting the Challenge of Change • Awards 6 PC credits • Approved for loss-control credit • Offered at a discounted registration fee for IA&B members and E&O policyholders • Available on-demand and in the classroom 10 Ways to Get Sued • Awards 6 PC credits • Approved for loss-control credit • Offered at a discounted registration fee for IA&B members and E&O policyholders IABforME.com/E&Oseminars
ost there when it matters most there when it matters
Direction
Donegal remains committed to our chosen direction for distribution — the independent agency system. Unlike many others in the industry, Donegal has no interest in any other distribution channel. Instead, we focus our energy on consistently delivering greater value to our agents. Staying true to our chosen course of supporting the independent agency system… another way Donegal is “There When It Matters Most.”
To learn more visit www.donegalgroup.com or call Rick Kelley at 800-877-0600.
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THE BEST APPROACH The best approach is to take all the carriers you are considering and put the details on a spreadsheet, noting the various pertinent issues. This will take time, but it will be time well spent. On the spreadsheet, it is crucial to note the differences because simply moving the account and not advising the client of the differences could cause a problem down the road. Some agencies share this spreadsheet with the client and bring to his or her attention the detail the client needs to know. Most importantly, the client sees the differences and can make an educated decision. At a minimum, the reductions between the expiring policy and the other carriers you are considering should be brought to the client’s attention. When the client has made his or her final decision, secure the client’s signature noting which decision was made. This documentation will be vital if a claim occurs and your client finds out he or she didn’t have the coverage the client thought. While your client may chose the lower price with the lesser coverage, your agency should have a defense should a problem occur if the client’s decision is in writing.
E&O: WHAT TO KNOW E&O LAND mines litter an independent agency’s daily operations. Learn how to protect your agency with our members-only E&O prevention resources. We cover hot topics, including granting authority to sign insurance documents, using coverage checklists, dealing with non-English-speaking clients and much more. IABforME.com/EO_prevention
Based on market conditions, from time to time agencies will find it necessary to move coverage from the standard market
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to the excess-and-surplus-lines market. In these situations, the differences can be significant. This issue is further compounded by the fact that it is probable the wholesaler is not providing all of the coverage that was requested. Therefore, be sure to review the E&S proposal, comparing it to the prior policy and to the coverages requested. Identifying the differences is up to your agency to uncover. A GREAT WAYAd TO PROCEED 3281 Summit Perform the necessary comparison when coverage is switched 7.25X4.625 for a client from one carrier to another. This involves PropMan
identifying the differences, bringing those differences to the client’s attention and getting his or her written sign off. This is a great way to keep this issue from becoming a potential E&O problem in your agency. n
The Utica National E&O Program supplied this article. Our IA&B Sales Center is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania. For questions regarding this article or your E&O coverage, contact IA&B at 800-998-9644 or IAB@IABforME.com.
MY AGENCY OUR IA&B Sales Center is an independent agency just like yours. Our licensed agents work with industryleading carriers to find the best deal on coverages for your agency. We also offer help with loss prevention and E&O litigation when the need arises. Watch our two-minute video online to hear from fellow agency owners and principals about how we’re helping them protect their agency. Then contact our E&O specialists to learn how we can help your agency. IABforME.com/MyAgency
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MAY 2015
HR SOLUTION
©
PRESENTS
THE INTERVIEW Coming soon to an agency near you!
Y
ou’ve posted the job, reviewed the responses, phone-screened a number of applicants and now are ready to interview your top candidates. But wait, are you ready for what comes next? This is your big chance – the chance to get it right and ensure a run-away success. Or a chance to be front and center in what ends up being a real “flop.” The Interview is truly your big moment. But don’t worry. If you plan ahead, success is almost guaranteed.
skills and abilities. Make a list of what is needed, things like:
WHERE TO START To ensure that you treat all candidates equally, you’ll want to start with a written list of interview questions that you will use for each candidate.
• Time management
But how to you figure out what to ask? What questions will enable you to determine if your candidates have The Right Stuff? (OK, I’m done with the random movie references) Start with the job. Review the job description to make certain that you have an accurate vision of what is required. During your initial screening process, hopefully you’ve already made certain that your candidates have the right experience. Two years of customer service experience – check! At this point, you’re focusing more on knowledge,
• Communications skills • Flexibility • Initiative • Decision-making skills • Customer focus • Interpersonal skills • Personal effectiveness and credibility • Accuracy/attention to detail • Ability to deal with stressful situations • Problem-solving and analysis • Teamwork For each area, you’ll develop questions that will invite your candidate to tell you about how they’ve handled situations in the past. You’ll ask them to give you truelife examples of their best (and sometimes their worst) moments. Avoid yes or no questions. While I can’t provide you with an exact script to follow, here are some examples using the categories above: • Communications skills o Tell me about a time when you had to carefully plan your
IABforME.com | PRIMARY
means of communicating with a person or group. What were you communicating, and how did you end up doing it? • Flexibility o Give me an example of a time when you had to quickly adjust priorities. • Initiative o Tell me about a time when you had to take it upon yourself to make something happen. • Decision-making skills o Tell me about a time when you made the “wrong” decision. • Customer focus o Tell me about the most challenging customer you’ve had to deal with and how you handled them. • Interpersonal skills o Give me an example of a time when you had to deal with a difficult co-worker. How did you handle the situation? • Personal effectiveness and credibility o Give me an example of a time when you disagreed with someone in authority and knew that you were the one who was right.
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IA&B ONLINE RESOURCES
• Time management o Tell me about a time when you were faced with multiple priorities and limited available time.
EMPLOYMENT ASSESSMENT ASSISTANCE
• Accuracy/attention to detail o Tell me about a task you’ve had that required extreme attention to detail and what you did to keep from making mistakes.
Whether you’re dealing with new hires, internal promotions, teambuilding or even agency perpetuation, profiling services serve to help you make smart, objective and economical personnel decisions. Check out the firms – including the one endorsed and used by IA&B – that offer you a member discount. IABforME.com/ hiring_managing/profiling ———————————————————————————
HUMAN RESOURCES PITFALLS Join two of our finest – Jason Ernest, Esq., deputy CEO and counsel, and Claire Pantaloni, CIC, CISR, industry affairs director – for our Human Resources Pitfalls special topic seminar. Interviewing is among the topics that will be covered at the workshop, which will be presented at the Delaware Annual Convention in June and offered online in the fall. IABforME.com/SpecialTopics ———————————————————————————
BACKGROUND CHECKS Federal law prevents someone who has been convicted of a felony involving dishonesty or breach of trust from working in the insurance industry without first obtaining written permission to do so from the state insurance department. Check out our extensive online resource dedicated to explaining the legal requirement and sharing tools for screening applicants. IABforME.com/ hiring_managing/checks
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• Ability to deal with stressful situations o Tell me about the most stressful work situation you’ve had to deal with and how you handled it. • Problem-solving and analysis o What was the most challenging problem that you’ve had to solve? How did you do it? • Teamwork o Tell me about a time when you were a part of a very effective team. What role did you play, and what made the team effective? Follow up answers by probing for more detail. Questions like: How did that work out? How did you feel about the result? In hindsight, what would you do differently now? You also can present your candidates with situations and ask them how they would handle them. Using a few of our categories again, situational questions look like this: • Communications skills o You are on the phone with a customer who wants something that is outside of company policy (and an exception is not going to be made). How do you communicate this? • Decision-making skills o You are responsible for making a critical decision and know that most of the options will not be well-received by co-workers.
MAY 2015
How do you proceed? (What input do you get? What factors do you consider?) • Customer focus o You are on the phone with a customer who begins to yell at you. What do you do or say? • Teamwork o You are a member of a team and disagree with the direction that they are taking a project. How would you deal with this? BEGINNING AND ENDING THE INTERVIEW Of course, before you launch into these types of questions, you want to make your candidate comfortable. A bit of small talk is fine, and then you can begin by asking some general questions like: “What do you know about our agency?” “What made you decide to apply for this position?” “Tell me a little bit about how you chose your career.” At this point, you may also want to ask a few questions about the education and experience that qualifies this candidate for the position. Toward the end of the interview, you’ll want to make sure you provide detailed information to your candidate about the job, about the agency, etc. To close, give your candidate an opportunity to make a closing statement or two. Questions like: “Why should I hire you?” or “What makes you the best candidate for this position?” or “Is there anything that I haven’t asked you about that you’d like to tell me?” will give them this opportunity. You also want to make sure that you check out some of the more mundane aspects of qualifying for the job: ability to travel (if this is needed), ability to work weekends (only if it’s a requirement for the job) and of course, overall interest in the job now that they know more about it. Also, make sure to give your candidate the opportunity to ask you questions.
New Jersey’s favorite specialty commercial automobile market is now partnering with agents and insureds in Pennsylvania and Maryland. Ask about our 50% Drivecam subsidy for fleets of 10 or more power units. ARI is backed by a Maiden Re ‘aa’ A.M. Best Rated Reinsurance Trust. CONTACT: Brent Bittner, AVP Underwriting & Marketing bbittner@ari-ins.com P: 267-713-1053 J. Tucker Ericson, SVP Underwriting & Marketing tericson@ari-ins.com P: 908-303-1956
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www.ari-ins.com 23
WHAT CAN’T YOU ASK? In most general terms, you shouldn’t ask anything that isn’t related to the applicant’s ability to do the job. To get more specific, the following is a partial list of topics to avoid: • Age (unless you’re requesting for proof that the candidate is old enough to work) • Arrest record (you can ask about convictions but only if it’s relevant enough to result in immediate rejection for the position – see sidebar, page 22, on background checks) • Bankruptcy/credit affairs • Citizenship • Disability • Emergency contact information • Marital status/family information • Ethnic background • Language skills (unless relevant to the job) • Race • Religion • Gender • Sexual orientation • Veteran status • Union affiliation DOCUMENTING THE INTERVIEW Make sure that you have appropriate documentation regarding all candidates and interviews: • Have all interviewed candidates complete an employment application. Even if they provide you with a resume, you should also have a signed application on record. In the unlikely event that an applicant falsifies information regarding their background, the application will serve as legal proof, complete with the applicant’s signature.
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• Document the interview. Keep clear notes so that you are able to compare your candidates once all interviews have been completed and support your hiring decision. MAKE YOUR SELECTION You’ve completed your interviews and now are ready to make the final selection. Don’t rely on your memory. Review your interview notes. Ensure that your opinion isn’t being swayed by something that’s not related to the individual’s ability to do the job. While one of your candidates may be an avid golfer and golf just happens to be your passion, this personal connection doesn’t mean they’re the best person for the position you are seeking to fill. So pick your best candidate – the one with the best experience and the best abilities and skills as demonstrated in the course of the interview (and confirmed through the references that you checked), make the offer and, once it’s been accepted, take the time to get back to the other candidates. Thank them for their time and interest and wish them the best. They may not be your next employee, but if you treat them well, they could become your next customer!
section are: tips for reviewing resumes/applications, a sample application, sample telephone screen information, and much, much, more. And don’t forget, as part of your IA&B membership benefits, support is only a phone call or email away. I can be reached at 610-779-3870 or Karen@mostellerhr.com.
Karen H. DiGioia provided this article on behalf of Mosteller & Associates, IA&B’s contracted human resources consulting firm. Reach out to Karen for more information on interviewing or with other human resources questions. IA&B’s HR Solution© is a compilation of products and services – available exclusively for our member agencies – that simplifies establishing or improving your human resources program. It includes base-level consultation and discounted professional services from Mosteller & Associates. Learn more at IABforME.com/emp_mgmt.
For more detailed information about the interview process, check out HR Solution© (IABforME.com/emp_ mgmt). Included in the interviewing
Coastal Homeowners Insurance ISO HO3/HO6 Immediate Quotes 15% commission on new and renewal business Primary and Secondary Homes are eligible.
MAY 2015
For an appointment, contact:
Sharon Karlsson
Coastal Agents Alliance, LLC
Phone: 201-407-7151 skarlsson@coastalagentsalliance.com
CLASSIFIED
My Events May & June 2015
DATE TOPIC
LOCATION
MAY 5-7
P&C Licensing Study Course
Mechanicsburg, Pa.
12
CISR Agency Operations
Allentown, Pa.
12
E&O: 10 Ways to Get Sued
Baltimore, Md.
13
CISR Agency Operations
Lancaster, Pa.
13
CISR Personal Residential
Dover, Del.
13-16
CIC Life & Health Institute
Hunt Valley, Md.
14
Essentials of Homeowners’ Coverage
Mechanicsburg, Pa.
18-21
CIC Agency Management Institute
Allentown, Pa.
19
William T. Hold: Policy Language Surprises
Wilkes-Barre, Pa.
19-21
P&C Licensing Study Course
Pittsburgh, Pa.
20
CISR Personal Lines Miscellaneous
Salisbury, Md.
28
CISR Personal Auto
Mechanicsburg, Pa.
28
E&O Risk Management
Pittsburgh, Pa.
JUNE 2-3
James K. Ruble Graduate Seminar
Annapolis, Md.
2-4
P&C Licensing Study Course
Allentown, Pa.
3
Flood Seminar
Philadelphia, Pa.
3-4
Delaware Annual Convention
Ocean City, Md.
9-11
L&H Licensing Study Course
Mechanicsburg, Pa.
10
CISR Personal Lines Miscellaneous
Altoona, Pa.
10
William T. Hold: Writing Commercial Accounts
Lancaster, Pa.
11
CISR Personal Residential
Hagerstown, Md.
15-18
CIC Agency Management Institute
Erie, Pa.
15-18
CIC Personal Lines Institute
Lancaster, Pa.
16
CISR Personal Residential
Philadelphia, Pa.
18
CISR Personal Residential
Pittsburgh, Pa.
23
CPIA Position for Success*
Mechanicsburg, Pa.
24
CPIA Implement for Success*
Mechanicsburg, Pa.
25
CPIA Sustain Success*
Mechanicsburg, Pa.
*Attend all 3 CPIA seminars to earn the CPIA designation.
IABforME.com | PRIMARY
A DV E R TI S E M E N TS SOUTHEAST PA PRODUCERS & AGENCIES Professional agency since 1926 located in Feasterville, Bucks County, Pa. Call for confidential information and a review of our services. Contact Ray Reinard at 215-357-8600, Ext. 119.
SALES AGENT/PRODUCER Community Insurance, a thriving independent insurance agency in Lancaster, Pa. is seeking a motivated sales agent. Ideal for a newly licensed agent looking to take that next step or a seasoned producer seeking the most competitive markets in the industry. Bring your P&C and/or Life & Health talents to a proven industry leader. Forward resume and cover letter to: Tom@CommunitySure.com If you would like to place a classified advertisement, please contact Laura Gaenzle at Laura.gaenzle@theygsgroup. com or (717) 430-2351.
AD INDEX AAA Mid Atlantic ..........................................................12 ARI Insurance Company..........................................23 Berkshire Hathaway Guard Ins Cos .............18 Coastal Agents Alliance...........................................24 Donegal Insurance Group .....................................17 Harford Mutual Insurance Co..................................5 IA&B Partners Program............................................13 Interstate Insurance Mngmnt Inc.................OBC Motorists Mutual Insurance Co........................IFC Preferred Property Program.................................19
Ripe For the Picking Let Interstate help you reap the abundance of summer opportunities. Your clients with outdoor businesses need extra protection for the unique risks that the summer season brings. Interstate can cover: • Amusement Parks, Batting Cages, Kiddie Rides, Go-Karts & Bumper Boats • Festivals, Special Events, Parades and Carnivals • Hole-in-One and Fishing Contests and Bowling Tournaments • Sports Camps and Instructors • Horse Clubs, Boarding, Shows and Races • Pet Groomers, Kennels and Trainers • Outdoor Guides and Outfitters Interstate also offers coverages for a variety of other seasonal and non-seasonal businesses with special coverage needs including: • Flea Markets and Vendors • Driving Ranges • Beauty and Barber Shops • Health and Fitness Clubs • Bars, Taverns and Restaurants • Lawn Care and Landscaping Contractors • Janitorial and Window Cleaning Services • Power Washers
Call Interstate for the best coverages for all your hard-to-place risks.
DELIVERS
INTERSTATE Insurance Management Inc. 800.452.0297 | www.interstate-insurance.com