Binder Vol. 42 No.4 Winter 2017

Page 12


AWARENESS HAL HUNT - Program Manager - National Hangar Insurance Program

After 30 years in the aviation industry as a pilot and underwriter I’ve come to the conclusion that pilots and agents have a lot in common. To be proficient, both professions require years of experience, practical application, the ability to react quickly or think on your feet and strong situational awareness. The USMC defines situational awareness as, “the ability to identify, process, and comprehend the critical elements of information about what is happening with regards to the mission.” Simply put, knowing what is going on around you. Marine recruits are improving their combat situational awareness through practice and preparation. This training is designed to enhance their ability to pick up on environmental cues and apply them to a given scenario. Three out of the top 5 causes leading to general aviation mishaps are due to a loss of situational awareness. These are low altitude operations, controlled flight into terrain and loss of control in flight. Improved situational awareness will lessen the risk of all 3 and as mentioned above, can be improved through practice and preparation. Pilot preparation starts with pre-flight planning and consists of an AIS brief, weather brief followed by, route selection, performance calculations, filing a flight plan and conducting a thorough preflight. Similarly for an agent, preparation begins with policy review, coverage analysis, obtaining an updated application and analyzing changes. The execution phase occurs during the meet-


ing with the insured and can be no less stressful than an airborne emergency. Lack of preparation for a pilot can result in death or serious injury. Lack of preparation for an agent can seriously injure your business or that of the insured. The following article will improve agent situational awareness and discuss 3 of the top 5 triggers for error and omissions (E&O) claims and techniques to avoid having one of these claims. We will discuss failure to recommend a coverage, failure to adequately explain policy provisions and failure to adequately identify exposures. Failure to recommend a coverage is probably the easiest trigger to eliminate through preparation. Look over the declarations page of the policy and run down through the coverages. Are the limits adequate? Is there a coverage missing? An example might be cyber liability coverage. Are you offering your insured a cyber liability policy? According to Kaspersky Labs the average cost of a “small” business data breach is $86,500. Most small companies don’t think it will happen to them but according to Property and Casualty 360, 62 percent of all cyber-attacks hit small to mid-sized businesses. How about earthquake coverage? Have you offered flood? Have you offered business interruption coverage? According to Blue Drop services, 40% of businesses fail to re-open following a disaster due to the lack of or mis-

calculated business interruption insurance. Does your insured have a business interruption from dependent properties exposure? Example: Your insured operates a flight school and they have contracted with another company to provide students with simulator time. The simulator gets destroyed and there isn’t another viable alternative for this training. Until the simulator is back up and running your insured could be out of business. Does your insured have equipment breakdown? One simple and full proof method of making sure no coverage is missed is to use a checklist. Our website has an excellent checklist to get you started. Failure to adequately explain a policy provision can be just as important as not recommending a coverage. Policy provisions are clauses in an insurance contract that lay out the exact conditions for which coverage is provided and for what amounts, along with exclusions and other restrictions. First and foremost understand what type of form you are selling. At National Hangar, we sell only a “special” form. If it’s not specifically excluded, it’s covered. Take a few moments to review the exclusions and property and costs not covered provisions. Does the policy have a water exclusion that excludes back up of internal sewers and drains? Ours does not, but this exclusion could be significant given the fact that water damage is our second leading cause of loss. Does the

policy have a roof resurfacing endorsement that limits the roof coverage to actual cash value instead of replacement cost? Or worse yet it does not cover cosmetic damage. Does the policy have a coinsurance provision that you need to explain? Make sure you review and explain the limitations section of the policy as well. An insured may believe he has a $1,000,000 limit for his business personal property only to find out that there is a limitation on how much he can recover for certain items like precious metals and alloys. Just because the policy has the recommended coverage doesn’t mean it has an adequate limit for that coverage. Does the insured understand the “vacancy” provision or the term “specified cause of loss?” Similar to the coverage checklist, creating your own policy provisions/limitations/exclusions checklist is a great way to quickly discuss the issues, cover them thoroughly and protect yourself and the insured while doing it. Failure to adequately identify exposures makes up almost 10% of EO claims and it can be the most challenging of the 3. It can be difficult to know if an insured has provided all of the required information to allow you to do a proper analysis. Albeit burdensome, obtaining a signed updated application from the insured every year is a great way to catch changes and also provides you with an opportunity to reanalyze the risk. Consisten-