Primary Agent - May 2020 - Pennsylvania

MAY 2020 | PENNSYLVANIA

GREG BENNETT

ON PERPETUATING THE FAMILY BUSINESS

IA&B PRESIDENT ON COVID-19 SUPPORT

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LESSONS FROM TOP EMPLOYERS HOLD HARMLESS & INDEMNITY AGREEMENTS

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IN THIS

6 ON THE COVER: Q&A WITH GREG BENNETT IA&B Member Agent Greg Bennett talks about transitioning into insurance, perpetuating the family business, and post-quarantine vacations.

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8 LESSONS FROM TOP EMPLOYERS

Creating a great place to work helps attract and retain great employees. Take away tips from the nation’s “best places to work.”

18 ANATOMY OF HOLD HARMLESS AND INDEMNITY AGREEMENTS

Gain insights into hold harmless and indemnity agreements and how your customer’s CGL policy may or may not provide coverage for the liability created by such agreements.

IN EVERY ISSUE 2 3 4 8 9 11 26 27 29 29

Chair of the Board’s Message Claire-ification Coverage Corner President’s Message A Tribute to Jerry Milton IA&B Partners Pics & Posts New & Returning Members Training & Education Classified Ads

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8 LESSONS FROM TOP EMPLOYERS

Twitter.com/IA_and_B About IA&B IA&B is the premier resource and champion for independent insurance agents in Pennsylvania, Maryland, and Delaware.

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Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2020-5, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

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Copyright 2020. 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.

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CHAIR OF THE BOARD’S MESSAGE

BOARD OF DIRECTORS INSURANCE AGENTS & BROKERS

HOW WILL WE REMEMBER THIS SPRING OF 2020?

Craig S. Mader Crofton, MD

I

How will you remember this moment in time? Will it burn a time stamp into your mind that will be with you for a lifetime? Most likely, yes. Will we be satisfied with our contributions as an individual, a community, a country, and a world citizen that bring an end to this calamity?

It’s too soon to know how the pandemic and its far-reaching repercussions will end, and by the time it does, the damage it will have caused to families, health systems, and our economy. But history has recorded that times of trial have been met with courage, single-minded purpose, solidarity, and strength – supported by prayer which produces hope!

What I do know is that the insurance industry is a cornerstone of our economy and culture. When state governors ordered businesses to shut down, insurance carriers and agencies were counted as “essential” and “life-sustaining.” As our customers found themselves in moments of crisis, they relied upon us to know and advise them about their policies’ coverage, help negotiate payment grace periods and payment terms, and be honest with them when coverage was not provided. We even found ourselves outside the realm of insurance, advising on loan assistance, taking food, offering help in so many ways.

When this time is behind us, I hope to remember, with pride, that our industry contributed in all the ways possible to support our customers and communities, that we used our time, talent, and treasures to be a light to them.

I pray good health to you, your families, and friends. Let’s continue to do our part!

Respectfully,

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OFFICERS

Chair of the Board Vice Chair of the Board

’ve given considerable thought in constructing this message. This is a time that is truly upsetting the lives of people around the globe, including our country, states, counties, and neighborhoods. No one is immune to the consequences, whether infected with COVID-19 or living with the disruption it has rendered.

While we have no clue what all of the consequences will look like, we are hopeful each day when there is the slightest bit of encouraging news that even hints that we may soon return to normalcy.

5050 Ritter Road | Mechanicsburg, PA 17055 800-998-9644 | IABforME.com

Richard M. Rankin, CIC Lancaster, PA

MEMBERS

Sarah M. Brown, CIC, CRM, AFIS Shrewsbury, PA

Emory Stephen Burnett, CIC, ARM Wilmington, DE

N. Lee Dotson, CIC, AAI Wilmington, DE

Andrew Enders, Esq. Harrisburg, PA

Michael P. Ertel Sr.+ Columbia, MD

Len Gieseler, LUTCF Pottstown, PA

G. Greg Gunn, CIC* Lemoyne, PA

Bryan C. Hanes, JD Hagerstown, MD

Lisa A. Leach Goth, CIC New Bethlehem, PA

Shannon Lipniskis Indiana, PA

Elizabeth H. Martin, CIC Millersville, PA

Mark J. Monroe

West Chester, PA

Michael A. Papa, CIC, MBA Hunt Valley, MD

Jason Rodriguez Wilmington, DE

D. Bradley Rosenkilde Jr. Hunt Valley, MD

Tara S. Silfies, CPCU Bethlehem, PA

Robert L. Smyrl Jr., CIC Hatfield, PA

J. Marshall Wolff, CIC, CPCU Easton, PA

* PA IIABA National Director + MD PIA National Director

Craig Mader Chair of the Board MAY 2020

Don’s Discussion Claire-ification IA&B Vice President - Advocacy Claire Pantaloni, CIC, CISR provided this month’s answer.

Are you a member with a question? Contact Claire to find the answer at 800-998-9644, ext. 604 or ClaireP@IABforME.com.

QUESTION: One of my carriers sent me a revised contract with added provisions about privacy, confidentiality, and data breaches. What is this about?

ANSWER: A few months ago, we addressed the requirement, in some agency contracts, that agencies carry a cyber policy. The question today is both more nuanced and more complicated.

WHY ARE YOU RECEIVING THIS? With the emergence of privacy laws and regulations, now followed by data breach and cybersecurity laws, a growing number of insurance carriers are amending their agency agreements to spell out or draw attention to agents’ requirements.

WHAT DO THE AMENDED PROVISIONS SAY? Despite having the same goal, the provisions have little consistency. Some carriers are very good at striking the right balance. Others draft the language in a way that can inadvertently infringe on agencies’ ownership-of-expiration rights. This is more likely to happen with agreements that: 1. tend to be both very descriptive and prescriptive, 2. don’t recognize that many privacy, data breach, and cybersecurity laws already apply to independent insurance agencies, and

3. don’t appreciate that the language should reconcile new and existing laws, rather than contradict, the American Agency System.

HOW TO ADDRESS THE ISSUE First, read the agreement* and the proposed amended language. Then, understand what the amended language is meant to accomplish, and whether it could infringe on the agency’s ownership rights or conflict with agency operations. If it could, discuss with the carrier that the language could cause you to be in breach of contract if not properly addressed.

In the end, it is important to review what you’re signing and to communicate with your carrier when you have questions. Some carriers come to IA&B before releasing their revised agreement to facilitate its rollout.

When that’s the case, the back-and-forth generally leads to an agreement that balances carrier compliance concerns with agents’ rights and obligations, and we provide an IA&B Seal of Approval.

(Visit IABforME.com/agency_agreements for agreements that already received an IA&B Seal of Approval.)

Regardless, you should always read the agreement. Reading it notifies you of requirements or timeframes that could impact your operations and is the only way to identify issues for your agency.

Have questions on an agreement?

We can explain standard provisions and what insurers are generally trying to accomplish. You can also encourage your carrier to contact us, which, in the end, benefits all members. * Need help navigating the contract?

Visit IABforME.com/agency_agreements for our resource that breaks down the most common agreement provisions and shows sample language to illustrate each section.

This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice.

Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents & Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.

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COVERAGE CORNER

SCOOTER RENTAL: A STORY OF A RIDER’S THUD AND AN INSURANCE DUD

By Kevin C. Amrhein, CIC

T

hud! The pavement shook as the young man spilled off his rented scooter. For a second he lay sprawled out, the scooter in a heap besides him. Both myself and another concerned pedestrian offered aid, but the guy politely refused, got up, forced an embarrassed smile and said he was fine. His torn pants and gashed leg suggested otherwise, but being young, strong, and … eh hem … foolish, he hoisted himself back onto the scooter and rode off into traffic.

I witnesses this incident in downtown Denver, a city in which I used to enjoy walking but am now unable to overcome the constant buzz of scooters weaving in and out of pedestrians and traffic. The same occurs in 100+ other American cities, according to the National

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Association of City Transportation Officials (NACTO).

Go to the website of a scooter rental company, and you may view safety videos where everyone is wearing a helmet and respecting traffic laws. Then visit any metro area that permits these things and see if you can spot a single renter/rider wearing protective gear and/or being overly cautious (from my perspective, the answers are no and no).

But this is, after all, an article about insurance, so I guess it’s time I explain why I’m doing this to you.

Upon downloading its app, rental companies likely require riders to waive any liability (with a possible exception if the rider can prove the accident was MAY 2020

due to scooter malfunction). Others claim to provide insurance for rider liability but don’t adequately explain the terms of coverage.

Thus, it’s safest to assume that the rider is responsible for costs resulting from an accident. Injured riders may look to health insurance (or if on the job, work comp) for coverage regarding personal injury costs. For third-party claims or damage to the scooter itself, let’s examine the coverage – or lack thereof – in the ISO Personal Auto (PAP) and Homeowner’s policies.

ISO PAP This policy does not define the terms auto or vehicle. That said, a generally accepted meaning of auto implies at least

four wheels. In Part A – Liability, the Insuring Agreement must be triggered by an “insured” responsible for an auto accident. The broadest application of the term “insured” in Part A includes you and “family members” while using any auto or “trailer.” Thus, if the rented scooter is not an auto, then the Insuring Agreement isn’t triggered and there’s no liability coverage.

For the sake of argument, let’s say the scooter were considered an auto. If so, there’s still no liability coverage due to an exclusion for use of a vehicle with fewer than four wheels. Further, Part A would not pay to repair/replace the damaged scooter due to an exclusion for damage to rented property.

In Part B – Medical Payments (MP)*, coverage would apply for injuries suffered by you or a “family member” as a pedestrian struck by a rented scooter.

However, any injuries which occur while operating the rented scooter are not covered due to an exclusion for use of any motorized vehicle with fewer than four wheels. (* In PA, this is replaced

by First-Party Benefits Coverage. The presumption of coverage as a pedestrian and no coverage as a rider is the same as discussed for MP.) The broadest coverage in the policy may be available under Part C – Uninsured Motorist. The term vehicle – presumably broader than the term auto – is used throughout this section. That said, as with any situation where coverage may hinge on the application of an undefined term, it’s essential to receive concurrence from the insurer prior to affirming coverage to your insured. The broad definition of “uninsured motor vehicle” in the ISO form may include rented scooters. If so, the policy does not exclude injuries to you or a “family member” as a pedestrian struck by a rented scooter or those sustained in

an accident while riding the scooter, provided it’s caused by an “uninsured motor vehicle” (example – your scooter is hit by a hit-and-run driver).

Damage to the rented scooter is likely excluded in Part D – Damage To Your Auto as coverage for any “non-owned” auto is applicable only if it’s a private passenger auto, pickup, van, or “trailer,” As it doesn’t have four wheels, it’s not likely to be considered a private passenger auto.

Kevin C Amrhein, CIC, is IA&B‘s education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME.com/education.

ISO HOMEOWNER’S POLICY The broad definition of “motor vehicle” includes rented scooters. There is no coverage for damage to the scooter itself due to exclusions in both Section I – Property and Section II – Liability (an exception may apply liability coverage if the scooter is damaged by fire, smoke, or explosion).

Further, this policy likely excludes liability claims for accidents caused by you or a “family member’s” use of the scooter. While the extensive “motor vehicle liability” exclusion does contain exceptions, none clearly apply to the use of a rented scooter. And since the use of the scooter is excluded, this policy also would exclude costs arising from any contractual obligation to protect the rental company.

CONCLUSION Not surprisingly, standard ISO policies are not adequate to cover exposures associated with rented scooters. Prospective renters should: 1) carefully review coverage – if any – available through the rental company, 2) carefully review their personal umbrella policy, and 3) determine with your assistance what - if any supplemental coverage is available.

That’s all for now. Until the next round…cheers!

AN HOUR WITH KEVIN Earn 1 CE credit from new hour-long webinars, featuring the alwaysentertaining IA&B Education Consultant Kevin Amrhein, CIC. Insuring Self-Driving Cars, Scooters & Other Modern Transit Risks MAY 21 2-3 PM

Extra Money for Bills, Beer or Both: Insuring Your SideGig MAY 26 2-3 PM

Register today.

IABforME.com/webinars 800-998-9644, option 1

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Q&A WITH

GREG BENNETT

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reg Bennett is a thirdgeneration managing member of Famous & Spang Associates LLC, an Aberdeen, MD-based independent insurance agency established in 1909.

product that beautified interior spaces.

The change to an intangible, “paper and handshake” product required a shift in thinking and required a new style of delivery to the client.

Q. You have a bachelor’s degree in Wood Science & Forest Products.

What spurred that interest?

Q. Your family finalized its transition of ownership from your father to you and your sister on Jan. 1, 2020.

What lessons learned can you share with other families who are approaching perpetuation?

A. That’s probably the most common question I get when people ask what I majored in. Like many 18-year-old kids, I had no idea what I wanted to do and was told to pursue something I was passionate about. Through what might be a stroke of dumb luck, I was introduced to Wood Science & Forest Products – utilizing sustainable resources to create, design, process, test, market, and sell timber-based product – and the rest is history. Believe it or not, some of what I learned then, I’m still using today in the insurance industry!

Q. Before joining the family business, you spent nearly seven years as an account rep and then territory manager for a building-materials supplier. What was the transition to insurance like?

A. Eye opening! In my naivety, I figured that dealing with people in either industry would be similar. Not entirely so. Previously, I was selling a tangible

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A. Start early, get help, be fair, and trust the process. I think a sale to a third-party buyer can be a fairly quick transaction, but an internal perpetuation plan takes time and needs to be well constructed to ensure the success of the next generation.

I recommended to the family that it would be in our best interest to hire an outside M&A advisor (whom I met at IA&B’s Futures Conference) to coach us through the process and act an executive level coach. As a small agency, it was a big financial decision, but it has changed our thinking, planning, and hopefully, the future trajectory of this agency, which is invaluable. We still meet monthly to discuss ongoing projects, company health, staffing matters, technology, carrier relationships, sales goals, and more.

MAY 2020

Q. What’s the best piece of professional advice that your dad (former IA&B Service Group Chairman of the Board Tony Bennett) gave you?

A. My father always stressed the importance of education. He has continually told me that if you stop learning, it’s time to get out of the business! Despite having a young family at home, I’ve done my best to heed that advice and take as many courses as possible. When I feel like I am hitting a plateau professionally, I know that it’s time for more education. My goal in the next two-plus years is to finally complete my CIC coursework and attempt to tackle the CRM while I’m at it.

Besides education, my father also stressed the importance of service work. As you mentioned, my father served many years on IA&B’s Board and has always encouraged me to be involved with the organization on whatever level I’m comfortable and able.

Q. What has been the hardest part of taking over the business?

A. The hardest part has been the drastic and rapid implementation of change.

We have worked diligently to identify areas of the business that need attention to transform us into a 21st century “best practices” agency. The largest undertaking

has been on the technology side of the business – we analyzed the existing platform, reviewed new options, and ultimately migrated to new hardware and software that allows us the flexibility to access our platforms from anywhere (just in time, too!).

Funny enough, as hard as this change has been, I’ve really enjoyed learning about the new technologies available to independent agents, and how the automation tools are being used to improve the customer experience. I think we will continue to see a rapid change in this area.

Q. Where do you see yourself and your agency in 20 years?

Q. It will be springtime when this interview is published, which makes us think of (a hopefully uninterrupted) vacation season! Any exciting plans for summer 2020?

A. At this time, we are scheduled for two beach trips – one with my parents to Bethany Beach, DE; the other with just my wife and kids to Rosemary Beach,

FL. At this point (and perhaps when published), things are still touch and go, but hopefully we can move beyond quarantine and the confines of the four walls of my house and go somewhere fun!

Get the tools & support you need to better serve your clients!

A. As my wife says, “Retired by 55.” In all seriousness though, I enjoy what I do.

I have a lot to learn, and we have plenty of growing to do. I want to perfect my craft, be a respected business owner in the community, and be able to offer gainful, meaningful employment to many while continuing the legacy of my father and grandfather. Probably most importantly, I want to be able to take care of my family, offer them experiences they will remember for their lifetime, and set our company on a course for three more generations of family to succeed in.

Q. We noticed that you’ve taken several of our live CE webinars over the past year. What do you like about that education format?

With PIN, you can gain access to the nation’s top personal lines insurance companies, expand your product offerings, leverage better pricing, and tap into our team’s expertise and fresh ideas to give your

A. The online courses are an excellent addition to IA&B’s educational offering!

The live CE allows for the introduction of new material in a simple format taken from the comfort of your home or office.

I was excited to find topics that are well outside of the normal offerings, including farm risks and surety. The instructors are engaging, and the moderators are quick to respond to any questions or issues that arise while taking these courses. This is definitely a great solution for agents looking for convenient CE or to expand their personal knowledge.

clients more and to keep you competitive in your marketplace.

Leverage the power of PIN. Become a member.

320 Granite Run Drive Lancaster, PA 17604-3320

Producernet.com 717-581-9284

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PRESIDENT'S MESSAGE

ONWARD & UPWARD: A MESSAGE FROM JASON ERNEST As I write this, it’s early April. We’re several weeks into a rapidly evolving crisis and several weeks away from what we hope will begin a gradual return to business as usual. Although admittedly, with so much uncertainty, there is no way to forecast our future much more than a day at a time.

That being said, please know that IA&B is committed to helping your agency navigate whatever tomorrow brings. We made – and continue to make – modifications to our programs, products, and services to meet your needs.

Our response began with a focus on dissecting coverage concerns and providing telework resources. And in the weeks after, it expanded to communicating regulatory changes, advocating against harmful legislative proposals, and analyzing small-business resources.

On the education front, we rescheduled classroom courses, pushed for extended licensing and designation deadlines, and enhanced our already robust online course offerings. And later this month, we will provide education scholarships so staff at our member agencies can continue learning and earning CE regardless of financial strain.

Speaking with countless members has reinforced that agents are resilient, resourceful, and always keep their insureds in mind.

— Jason Ernest

technology and equipment, into contingency planning. IA&B is looking in to those needs, and we plan offer solutions for our members moving forward.

No matter where we find ourselves when you read this message, know that our team remains available to support you and your agency. I encourage you to rely on us and your IA&B member benefits, now more than ever.

On behalf of the entire IA&B team, I wish you and your family health and safety.

I have been very impressed with the response from independent agents during this ordeal.

Speaking with countless members has reinforced that agents are resilient, resourceful, and always keep their insureds in mind. I’m also aware of some ongoing needs for agents – from

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Jason Ernest, Esq. IA&B President & CEO

MAY 2020

A Tribute to Jerry Milton We lost a legend on April 3. Former IA&B Education Consultant Jerry Milton, CIC passed away just weeks shy of his 80th birthday. His wife, daughter, and son were by his side.

Jerry retired last year, after 25 years with our organization. During that time, he developed and taught our special coverage courses, three-day Commercial Lines School (popular in the 1990s), and later, our on-demand programs and webinars. He also taught extensively for the CIC program.

Jerry’s keen story-telling ability, vast industry knowledge, and genuine good nature made him a perennial favorite instructor of – and a dear friend to – insurance professionals across the nation.

Rest easy, dear Jerry. You will be missed.

Left Column: IA&B Senior Education Director Jess McWilliams posing with Jerry Milton (circa 2015).

Mark Young, of CC Young Insurance, raising a glass with Jerry at an IA&B happy hour celebrating Jerry’s retirement in spring 2019.

Jerry Milton celebrating the retirement of Jim Harrison, a fellow IA&B instructor and CIC education consultant, in summer 2017. ( Jim passed away in late 2017.)

Right Column: Jerry Milton hitting the links at the 2014 Delaware Convention with (left to right) Peter Fitzgerald, of Pennock Insurance Agency; Randy Brown, of Avery W. Hall Insurance Agency; and John Pisauro, of CBM Insurance Agency.

Jerry Milton and IA&B President & CEO Jason Ernest celebrating after Jerry sank a 20-yard office putt in spring 2018.

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IA&B PARTNERS PROGRAM

OUR FEATURED PLATINUM PARTNER Insurance Agents & Brokers proudly recognizes Penn National Insurance as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

OUR MISSION We help people feel secure and make life better when bad things happen.

FEATURED PARTNER Penn National Insurance

HEADQUARTERS Harrisburg, PA

A.M. BEST RATING A- (Excellent)

OUR EXECUTIVE TEAM Christine Sears CEO Robert Brandon president

Pictured left to right: Thomas Korber, vice president – Human Resources; Jacquelyn Anderson, senior vice president, CFO/treasurer; Robert Brandon, president; John Foster, senior vice president – Insurance Operations; and Karen Yarrish, esq., senior vice president, secretary & general counsel.

John Foster senior vice president Insurance Operations

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Karen Yarrish senior vice president, secretary & general counsels Thom Korber vice president, Human Resources

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IABforME.com/Partners2020

Agents know us as: • Vibrant • Innovative • Resilient • Personable • Bold • Persistent

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THANK YOU Thanks to these partners for supporting the independent agent network.

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Diverse array of commercial and personal coverages Penn National Insurance values the relationships we have with our agents as part of the underwriting process and placement of accounts with us. We offer a diverse portfolio of products and services to meet today’s customer needs.

Penn National Insurance (www.pennnationalinsurance.com), founded in 1919, in Harrisburg, Pa., sells property-casualty insurance in 11 states, through a network of more than 1,200 independent agency operations. The company wrote $734 million in net written premium in 2018 on $591 million in policyholders’ surplus, and total assets exceeded $1.7 billion. The company employs approximately 830 people in its 11-state sales and service territory.

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MAY 2020

8 LESSONS FROM TOP EMPLOYERS Adopt Best Practices in Your Agency

By Karen DiGioia

Creating a great place to work helps attract and retain great employees. And it leads to more engaged employees with a greater commitment to your customers and to your agency’s success.

On the following pages, IA&B’s human resources consultant, Karen DiGioia, offers eight tips you can take away from the nation’s “best places to work.”

L

inkedIn. Facebook. Trader Joe’s. Google. Southwest Airlines.

In-N-Out Burger. What do these companies have in common?

They are all companies that made Glassdoor.com’s list of best places to work in 2020. To develop the list, Glassdoor looked at reviews and ratings from current and previous employees. They looked at quality, quantity and consistency of reviews to decide which employers made the cut.

What is it that makes the companies great places to work? Is it about catered meals, on-site gyms, concierge services, lavish parties? Or is it something else? What do these companies have in common?

One common factor admittedly is the size of these organizations.

You’ve got to be big enough to make it onto Glassdoor’s radar. Does that mean that size of the organization is a factor in being a “best place to work?” Let’s look through employee reviews for some of these companies and see what common words and phrases jump out.

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I am hopeful that, as you read this, things on the COVID-19 front have settled down a bit....

If they have or they haven’t, your agency’s ability to weather the good times and the bad times is largely dependent on many of the things we’ve talked about here.

— Karen DiGioia

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Vision. Great management. Fun. Supportive. Community.

Inclusive. Values. Opportunities. Fantastic culture. People-first focus. Work/life balance. Flexible. Leadership cares. Growth and development. Set goals. Communicate expectations.

Transparency. Accountability. Respect. Purpose.

Good news! None of these require a large corporate infrastructure (or huge budget) to achieve. While your agency may never officially make Glassdoor’s cut, this doesn’t mean that you can’t learn from the things these employers do and make your agency a “best place to work.”

Before we talk more about what you can do in your workplace, let’s talk briefly about why it’s worth the effort. There are many advantages of being a great place to work. First, it improves an organization’s ability to attract and retain employees.

In today’s environment where the fight for talent is fierce, better positioning your agency to attract and retain strong employees is critical. Added to that, employees in “best places to work” organizations are more engaged, resulting in greater commitment to both customers and business success. Being known in your community as a great place to work improves the reputation of your company and the strength of your brand.

MAY 2020

So how can your agency be a “best place to work”? If we look again at those key words and phrases listed above and pull them into broader categories, they look something like this:

DEFINE AND COMMUNICATE YOUR AGENCY’S PURPOSE, VISION, MISSION, AND VALUES These are all part of defining why and how you do, or intend to do, what you do. Purpose is your reason for existence.

Your Mission expresses the type of work, the clients you serve, and the level of service that you provide. Vision communicates the dream or where you are going as an organization. Your Values define your culture and talk about how you do what you do. In order to ensure clear and consistent direction for the organization, these all need to be clearly defined and regularly communicated.

SET GOALS AND COMMUNICATE EXPECTATIONS Set goals. Strategic and tactical. Long-term and short-term.

Agency-wide and individual. Make sure your goals are SMART. S = Specific. M = Measurable. A = Attainable. R = Relevant.

T = Time-bound. And don’t just set those goals; communicate them along with the associated expectations.

EVALUATE, MEASURE, AND COMMUNICATE RESULTS CONTINUOUSLY Once you’ve defined goals, ensure that you measure, evaluate, and communicate results continuously. Goals create excitement.

Build momentum by regularly determining the progress that is being made toward those goals and communicating that progress toward those involved. When we watch a baseball game, we know that goal is to win. In order to win, our team needs to pitch, bat, and field better than the other team.

Statistics related to each of these activities is tracked down to the most minute level of detail (can you spell minutiae?). While I’m not suggesting that you need to take it quite that far, imagine how results would change if all your employees understood what was expected of them and understood their progress toward meeting those expectations as well as a baseball player does.

RECOGNIZE. REINFORCE. REWARD. Provide positive feedback and celebrate successes. Reward and reinforce behaviors and outcomes that you want to see repeated.

Too frequently managers focus on performance only when there’s a problem. Look for opportunities to “catch” people doing things right! While constructive feedback is important in order to address deficiencies, positive feedback is a powerful and underutilized tool.

TRANSPARENCY AND ACCOUNTABILITY Transparency starts at the top. Set and model high standards for the organization. Communicate clearly and keep your employees in the loop. Be honest and value honesty from your employees.

You’ve defined your goals and expectations – be willing to admit when you or your organization have fallen short. Hold yourself accountable and hold your employees accountable, too.

INVEST IN YOUR PEOPLE When you outgrow your office, you invest in a larger one.

When you need new hardware or software, you invest in new systems and equipment. But what about employee development and training? When your organization spends money on employees, is this viewed as an expense or an investment? I urge you to think of it as an investment. As the agency grows, invest in management training for your new supervisors and managers to ensure that they have the skills needed to manage their employees in a way that supports your agency’s position as a great place to work. Ensure that you are following competitive and compliant pay practices. Just like your capital expense investments in the organization, these investments in your people will pay off many times over.

BE FLEXIBLE AND MANAGE FOR WORK/LIFE BALANCE I like to think of work/life balance as a teeter totter. During “normal” times (if such exists), the teeter totter is evenly balanced – not tipping too far to either side. At other times, the board tips to one side more than another, then eventually evens back out again.

I’m writing this article in March. Earlier this week, COVID-19 was declared a global pandemic. Schools in Pennsylvania and Maryland recently announced that K-12 schools will be closed for (at least) the next two weeks. Non-essential businesses in many counties are being asked to voluntarily close. I have no idea what our world will look like in May when you are reading this. (What a time for my crystal ball to be out for cleaning!)

I am, however, pretty confident that the past months have required us all to be flexible and adjust work priorities to meet higher demands on the home front. The teeter totter, for many of us, has tipped very far to the “life” side of things. In time, it will even back out. At another point in the future, things at your agency will tip more heavily toward the “work” side due to circumstance – system conversion, unexpected staff absence, sudden upswing in business – at that point, it’s appropriate, within reason, to expect employees to “step things up” on the

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work side. Chances are, if the agency has been flexible with employees, they’ll be more than happy to return the favor.

CREATE A POSITIVE WORK ENVIRONMENT Honestly (I’m being transparent here), all the things we’ve talked about are part of creating a positive work environment. If those things aren’t in place, more superficial attempts at positivity will fall flat.

However, if you’ve got a good foundation in place, there are many things that you can do to make things even better.

Look for ways to have fun at work, and don’t forget that if you’re all working hard, it’s also OK to kick back a little and play hard. A conference room table that converts into a ping pong table? Pizza lunches on Friday? Unexpected early office closing for staff on a day when things are a little slow? Summer picnic? Group outing to throw axes. (That’s a real thing, you know.) What does that look like in your workplace and for your employees? I’m guessing you’ll know better than I do. If you don’t know, get out there and talk to your employees a bit. Find out what would make work a bit more “fun” for them.

In closing, I am hopeful that, as you read this, things on the COVID-19 front have settled down a bit and that life has returned to whatever that vague state we define as “normal.” If they have or if they haven’t, your agency’s ability to weather the good times and the bad times is largely dependent on many of the things we’ve talked about here. I urge you to take steps to make your agency a “best place to work” and promise you that it’ll be well worth the effort!

As always, if you need assistance from an HR perspective, do not hesitate to reach out: karen@ mostellerhr.com or 610-779-3781.

INSURING OPPORTUNITY THROUGH MUTUAL SUCCESS.¨ Harford Mutual Insurance partners with independent agents in Pennsylvania.

We insure restaurants, contractors, mercantile, and other commercial entities.

We’re committed to protecting your client’s business and building yours.

If you’d like to check out the full list and some of the reasons why these are “best places to work” go to: Glassdoor.com/Award/index.htm.

Karen H. DiGioia provided this article on behalf of Mosteller & Associates, IA&B’s contracted human resources consulting firm.

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HarfordMutual.com 800.638.3669

MAY 2020

18

MAY 2020

THE ANATOMY OF A HOLD HARMLESS AND

INDEMNITY AGREEMENT

By Craig Stanovich, CPCU, CIC, AU

Your customers routinely execute hold harmless and indemnity agreements with all manner of entities ... property owners, contractors, landlords, manufacturers, distributors, and many others. In this article, we’ll give you some insight to help you better understand the workings of these agreement and how your customer’s CGL policy may or may not provide coverage for the liability created by such agreements. While interpreting contracts is a matter of law, acquiring a better appreciation of the concepts underlying hold harmless and indemnity agreement may be useful.

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It may be valuable to have a working understanding of [these] agreements as a possible source of your customer’s liability.

— Craig F. Stanovich

20

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our customer emails to you their latest contract for a new project they will beginning shortly. The contract has three pages of insurance (and other) requirements, including the following clause entitled “Indemnification:” To the fullest extent permitted by law, ABC Subcontractors, Inc. agrees to defend, indemnify and hold harmless XYZ Construction, Inc. and Owner, as well as any other parties, which XYZ Construction is required under the Contract Documents to defend, indemnify and hold harmless, and their agents, servants and employees, from and against any claim, cost, expense or liability (including attorneys’ fees), attributable to bodily injury, sickness, disease, or death, or to damage to or destruction of property (including loss of use thereof ), caused by, arising out of, resulting from, or occurring in connection with the performance of the work by ABC Subcontractors, Inc., its subcontractors and suppliers, or their agents, servants, or employees, whether or not caused in part by the active or passive negligence or other fault of a party or caused by the sole negligence of a party indemnified hereunder. ABC Subcontractors, Inc.’s obligation hereunder shall not be limited by the provisions of any workers’ compensation or similar act. ABC Subcontractors, Inc. hereby agrees that One Hundred Dollars and No/ Cents ($100.00) of the Price constitutes the separate consideration for ABC Subcontractors, Inc. indemnity hereunder. Such amount shall be deemed paid out of the first invoice for payment paid hereunder.

MAY 2020

PURPOSE Risk management has traditionally referred to this Indemnification clause as non-insurance contractual risk transfer. That is, the financial consequences of liability are being transferred from one party – the indemnitee – to another party – the indemnitor and that transfer is outside of an insurance policy. In our example, the indemnitor is ABC Subcontractors, Inc. and the listed indemnitees are XYZ Construction, Inc. and the Owner. To use the terms found in ABC’s CGL policy, by the above Indemnification clause, “the insured [ABC] is obligated to pay damages by reason of assumption of liability in a contract or agreement.”

In other words, ABC has assumed, by contract or agreement, the liability of XYZ and the Owner. But let’s put aside why ABC has assumed the liability of others. While understanding the business reasons for agreeing to be responsible may be important, do not let such questions distract from the facts here – ABC has agreed to answer for the liability of the indemnitees.

INDEMNIFY AND HOLD HARMLESS While indemnify and hold harmless are generally considered synonyms1 – there are some slight legal differences that are not important in our example. In general, the terms mean “a contractual provision in which one party agrees to answer for …liability or harm that the other party might incur.”2 It is important to recognize that in the context used, “hold harmless” does not mean that the indemnitor has released the indemnitee from any liability the indemnitee might have directly to the indemnitor. Here, hold harmless is not the equivalent of an exculpatory clause.

of and has nothing to do with additional insured status. This notion is too often misunderstood or confused – including by insurers and attorneys.

Most of the rest of the Indemnification clause is intended to describe when, how, and to what extent ABC is responsible for the liability of the indemnitees. As the above is a rather dense paragraph stuffed with wording we do not see on a daily basis, breaking down a few words and phrases might shine some light on what some of this means and how it works.

“TO THE FULLEST EXTENT PERMITTED BY LAW” This clause is called a “savings clause” and is intended to allow the courts to enforce the portions of Indemnification clause that are not contrary to the law. Absent the savings clause, the court may void the entire Indemnification. The savings clause also recognizes that, despite the bedrock principles of the freedom of contract, certain indemnity clauses are against public policy and void – the courts will not enforce them.

In the construction industry, which our example uses, the majority of states have statutes that limit or outright prohibit certain indemnity provisions. Such statutes are generally called anti-indemnity statutes.

“DEFEND”

Instead, indemnify and hold harmless transfer the liability the indemnitee would have to others. ABC’s CGL policy, definition of “insured contract,” says as much under part f. “… under which you [ABC] assume the tort liability of another [XYZ and Owner] to pay for ‘bodily injury’ and ‘property damage’ to a third person or organization.” [italics added]

In addition to ABC’s promise to indemnify and hold harmless the indemnitees, ABC has also agreed to defend the indemnitees. Here, the Indemnification clause does not address how ABC is to handle its obligation to defend. Some indemnity clauses specify that the indemnitee will choose the legal counsel, etc. In any event, the cost to defend an indemnitee is usually covered by a CGL policy – provided “Liability to such party [indemnitee] for, or for the cost of, that party’s [indemnitee’s] defense has also been assumed in the same ‘insured contract’….”

However, with some limited exceptions, the cost of defending an indemnitee is considered to be damages payable under indemnitor’s [ABC’s] CGL policy – and thus any such expenses reduce the policy limit.3

DOES NOT PROVIDE ADDITIONAL INSURED STATUS

“AS WELL AS ANY OTHER PARTIES”

The agreement by ABC to indemnify and hold harmless XYZ and the Owner does not confer on any indemnitee the status of an additional insured on the CGL policy of ABC. Nor does ABC’s CGL coverage for ABC’s obligation to indemnify XYZ or the Owner result in additional insured coverage for XYZ or the Owner. The definition of “insured contract” in the CGL, which obligates the standard ISO CGL insurer to pay for liability assumed by contract or agreement, is independent

This means that any other parties that XYZ is obligated to indemnify, ABC will also be required to indemnify. The other parties are found in the Contract Documents – which are generally the documents between the owner and general contractor. This “flow down” provision is common in construction contracts – the obligations of the contractor to the owner will “flow down” to the subcontractor – and continue to down to lower tier subcontractors.

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While the ABC’s CGL definition of “insured contract” contemplates this “flow down” and does not require to name or even know the identity of the other party – part f. “under which you assume the tort liability of another party …,” caution is advised here. For example, any obligation to indemnify an architect, engineer, or surveyor for certain professional services is not an “insured contract.” So, while ABC may be required to indemnify such parties, ABC’s CGL insurer will not be required to pay on behalf of ABC damages or costs for certain professional services.

“AND THEIR AGENTS, SERVANTS AND EMPLOYEES” Similar to the above, not only is ABC agreeing to indemnify XYZ and the Owner, ABC is agreeing to indemnify and hold harmless the agents (generally those authorized to act on behalf of the indemnitees), servants (and older term for employee and probably redundant), and employees of XYZ, the Owner, and the other parties found in the Contract Documents. While this broad wording seems to be overreach, such wording is fairly common in indemnity agreements. Again, ABC’s CGL insurer’s definition of “insured contracts” part f. is not limited to specific persons or organizations, whether specifically named or included by category. “Insured contract” coverage applies when assuming the tort liability of “another party.”

“ANY CLAIM … ATTRIBUTABLE TO BODILY INJURY, SICKNESS, DISEASE, OR DEATH, OR TO DAMAGE TO OR DESTRUCTION OF PROPERTY” This means the indemnity claims, including the obligation to defend, must be caused by4 bodily injury or property damage.

This substantially restricts the scope of the indemnity. For example, the indemnity does not obligate ABC to indemnify for delay costs due to ABC’s failure to deliver materials to the site on schedule – if the delay was not caused by damage or destruction of property. On the other hand, the CGL does not provide coverage for all bodily injury or property damage – numerous exclusions apply to the CGL coverage. Note that the indemnity does not contemplate any exclusions. The result is this indemnity is broader than the CGL coverage. While it is a common requirement that “contractual liability” insurance “cover the indemnification” the CGL rarely does so. This means that your customer invariably is assuming liability that will not be insured.

“CAUSED BY, ARISING OUT OF, RESULT FROM …

OCCURRING IN CONNECTION WITH” This phrase is meant to stipulate that in order to trigger the indemnity, the bodily injury or property damage must be

22

linked in some way to the work being performed by ABC or its subcontractors. Phrases such as “arising out of ” usually require only minimal causal connection. This means the link between the work and the bodily injury or property damage may be remote – the work does not need to be the only cause or even the dominant cause of the resulting bodily injury or property damage to trigger the indemnity. While the link to the work does vary by contract, “caused by or arising out of ” is common verbiage to trigger the obligation of indemnity.

“ITS SUBCONTRACTORS AND SUPPLIERS, OR THEIR AGENTS, SERVANTS, OR EMPLOYEES” Contrary to common belief, a subcontractor, such as ABC, is not automatically vicariously liable for the acts of its independent contractors. Therefore, it is common for a subcontractor to agree to indemnity the general contractor or owner for work of lower tier subcontractors and suppliers engaged by ABC (as well as for the subcontractors and supplies agents, servants or employees) – and that is what is happening here.

“CAUSED BY THE SOLE NEGLIGENCE OF A PARTY OF INDEMNIFIED HEREUNDER” This may be the most important portion of the Indemnification clause as it sets forth the scope of the indemnity. Here, ABC has agreed to answer for the liability of the indemnitee even if the indemnitee is solely at fault. This type of indemnity is generally referred to as a “broad form” indemnity – all of the financial consequences of the risk are transferred to ABC. While the indemnity is still triggered only if the work by ABC or its subcontractors is linked to bodily injury or property damage, XYZ or the Owner will still be entitled to indemnity even if the bodily injury or property damage was caused by the sole negligence of XYZ or the Owner.

AN EXAMPLE An employee of ABC is seriously injured at the jobsite. The necessary link to ABC’s work is established as the employee was working at the jobsite at the time of the injury. Also, the cause of the bodily injury is XYZ dropping a beam on the employee’s head. When the ABC employee brings suit against XYZ, the court determines the injury was the result of XYZ’s sole negligence. In the above indemnity, ABC would have to not only defend XYZ, but ABC would have to indemnify XYZ for all of the damages it owes to ABC’s injured employee.

If ABC has a standard ISO CGL policy, the scope of this “broad form” indemnity is included within the definition of

MAY 2020

“insured contract” – ABC’s obligation to indemnity XYZ for damages XYZ owes to the injured employee is covered

by ABC’s CGL policy. However, as with many provisions of the ISO CGL policy, the definition of “insured contract” can be changed by endorsement, restricting the scope of indemnity covered by the CGL policy. For example, the endorsement Amendment of Insured Contract Definition CG 24 26 eliminates coverage for sole negligence indemnity and would not pay on behalf of ABC in the above example. Or the endorsement Contractual Liability Limitation CG 21 39 removes part f. of the definition of “insured contract,” leaving ABC with no coverage for any obligations to indemnify XYZ, regardless of the scope of indemnity.

IA&B ADVOCACY IN ACTION The IA&B Government Affairs team is working with Pennsylvania state lawmakers on anti-indemnity legislation.

Large contractors and other corporate entities increasingly are using indemnification provisions in their contracts that include the shifting of their sole negligence to the co-contracting party. These provisions are seen in many states as being against public policy. At this time, 45 states have enacted some form of antiindemnity statute limiting the enforceability of various forms of indemnity clauses in construction contracts; however, Pennsylvania has not.

The “broad form” indemnity that is being analyzed here is the most onerous indemnity clause for the indemnitor, ABC. Consequently, most, but not all, states would find this “broad form” indemnity to be void and unenforceable in a construction contract. Such prohibitions against “broad form” indemnity are usually the result of a state’s anti-indemnity statute.5 See below descriptions of “intermediate” form and “limited” form indemnity agreements.

IA&B-supported legislation introduced in the Pennsylvania State House of Representatives last fall seeks to change that. House Bill 1887, sponsored by Representative Mike Driscoll (D-Philadelphia), would amend current law to allow only for a limited form of indemnification, exclusively for losses caused by the negligence of the indemnifying party (Indemnifier). Any negligence of the indemnified party (Indemnitee) would bar a claim for indemnification.

“SHALL NOT BE LIMITED BY THE PROVISIONS OF ANY WORKERS’ COMPENSATION OR SIMILAR ACT” The exclusive remedy provision of some state’s workers’ compensation acts prohibit indemnification agreements applicable to injuries to the employees of the indemnitor. For example, even though Maine does not have an anti-indemnity statute, the Maine Workers’ Compensation Act renders void as contrary to exclusive remedy any indemnity agreement purporting to require indemnification from an employer for injuries to that employer’s employees. However, Maine does allow the employer to waive, for purposes of an indemnity agreement, that exclusive remedy protection – provided the waiver is clear and explicit. The above quoted phrase is the type of wording in which an employer has agreed to waive exclusive remedy protection pursuant to the state’s workers’ compensation act and thus the indemnity agreement will not be negated by exclusive remedy.

“($100.00) OF THE PRICE CONSTITUTES SEPARATE CONSIDERATION” Some states require specific or separate consideration, or payment, in order to enforce the transfer of liability in an indemnity agreement. Although not included in our sample indemnity agreement, a few states require a dollar limit within an indemnity clause. continued on page 24

Additionally, because indemnification provisions often are accompanied by a request for additional insured status, IA&B is working with bill sponsors and other stakeholders on an amendment to the bill to include language that would extend the indemnification prohibition to contractual requirements for insurance coverage as well. Without this, it is possible that even though a broad indemnification agreement is invalid, the indemnitee still could be covered through the insurance policy in place, thus, defeating the purpose of the law.

Lauren Brinjac is government affairs director for IA&B. Reach her at 800-998-9644, ext. 607 or LaurenB@IABforME.com.

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continued from page 23

INDEMNITY AND HOLD HARMLESS – INTERMEDIATE FORM INDEMNITY

of ABC for property damage to its own work, ABC will likely be required to indemnity XYZ or the Owner but will not have insurance for this obligation.

Unlike “broad form” indemnity, the scope of “intermediate form” indemnity is restricted to concurrent or shared negligence. In our example, an “intermediate form” indemnity would require ABC to indemnity others only 1) if one of the indemnitees and ABC were both negligent; or 2) if ABC was solely negligent. A typical example of “intermediate form” indemnity might be “… caused in whole or in part by the negligent acts or omissions of the ABC, but excluding the sole negligence of a party indemnified hereunder.

A MATTER OF LAW

“Intermediate form” indemnity can be further divided into additional categories – full indemnity and partial indemnity. In other words, if the indemnitor is obligated to the indemnitor for shared negligence, does the indemnitor have to pay all damages (full indemnity) or a certain share of damages (partial indemnity)? The difference can be substantial – if ABC was 1% at fault and XYZ 99% at fault, under full indemnity ABC would pay 100% of the damages; under partial indemnity, ABC would pay only 1% of the damages.

INDEMNIFY AND HOLD HARMLESS – LIMITED FORM INDEMNITY

INSURANCE COVERAGE Whether the liability assumed by contract, or “‘Bodily injury’ or ‘property damage for which the insured is obligated by reason of the assumption of liability in a contract or agreement,” is covered by the policy turns largely on the policy definition “insured contract.” Stated differently, the CGL policy excludes liability assumed by contract – but adds coverage back via an exception to the contractual liability exclusion – the exclusion does not apply to liability assumed in an “insured contract.”6

24

• “We are working with a client and are interested in protecting him to the best of our ability. I was trying to locate an indemnification or hold harmless agreement and a waiver of subrogation that we can give him to use with his subcontractors.”

• “We need a copy of a standard hold harmless agreement that our insured can have his subcontractors sign.” [emphasis added]

The obligations of the indemnitor in a “limited form” indemnity are restricted to responsibility for the indemnitor’s own fault or own negligence. A typical example of “intermediate form” indemnity might be “… caused solely by the negligent acts or omissions of ABC.”

While the definition of “insured contract” is usually broad, it is sometimes easy to overlook that all of the CGL policy exclusions apply (absent a specific exception for “insured contact” noted within an exclusion) to liability assumed in an “insured contract.” For example, while ABC has assumed liability damage to or destruction of property, ABC’s CGL policy excludes property damage to ABC’s own work – exclusion L. Damage to Your Work. If indemnity is demanded

Troubling aspects of indemnity and hold harmless agreements are circumstances in which insurance agents and brokers are asked to advise customers on the appropriate content of an indemnity or hold harmless agreement. Or worse still, insurance agents or brokers are asked (or volunteer) to draft or supply an indemnity or hold harmless agreement to its customers.

While having a working understanding and the role of such agreements is of value, recognize that such advising or drafting of indemnity and hold harmless agreements is the practice of law. Here are a couple inquiries from insurance agents or brokers that typify the problem:

While having a working understanding and the role of such agreements is of value, recognize that such advising or drafting of indemnity and hold harmless agreements is the practice of law.

— Craig F. Stanovich

MAY 2020

There are no “standard” agreements of this type, and unless you have a license to practice law, you should not be drafting or supplying such agreements.

SUMMARY It may be valuable to you to have a working understanding of indemnity and hold harmless agreement as a possible source of your customer’s liability. Being informed about the basics of such agreements may also be helpful in making more productive your interactions initiated by your customer’s legal counsel.

After all, the less the wording found in indemnity and hold harmless is a foreign language to you, the more productive those discussion will be when you are contacted by your customer’s legal counsel. raig F. Stanovich, CPCU, CIC, AU is C co-founder and principal consultant of Austin & Stanovich Risk Managers, LLC, a risk management and insurance advisory consulting firm that does not sell insurance. Reach him at cstanovich@austinstanovich.com or 888-540-7603, ext. 102.

1 Garner’s Dictionary of Legal Usage, at 444, “The evidence is overwhelming that indemnify and hold harmless are perfectly synonymous.”

2 Black’s Law Dictionary – Eighth Edition – Definition of Indemnity Clause.

3 This is one reason why an indemnitee will also require to be added as an additional insured to the CGL of the indemnitor. The cost of defending an insured is usually a Supplementary Payment and therefore outside of the policy limit. The costs of defending an insured does not reduce the limit.

4 Attributable to means “caused by” Definition of attributable from the Cambridge Academic Content Dictionary © Cambridge University Press 5 While a number of state’s anti-indemnity statutes include an “insurance exception,” this exception generally means the anti-indemnity statute does not apply to an insurance company’s promise to indemnify. The insurance exception does not automatically act to restore the validity of an otherwise unenforceable and void indemnity agreement merely because the scope of the prohibited indemnity falls within the CGL’s definition of “insured contract.”

Nonetheless, some courts have conflated enforcing the requirement to purchase insurance – often additional insured coverage – with enforcing a separate non-insurance indemnity agreement.

6 The Contractual Liability exclusion of the CGL also does not apply if the liability would have been imposed on the insured without the contract or agreement.

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