November 2018 Louisiana Agent

L O U

NOVEMBER 2018 LOUISIANA

AGENT NOVEMBER 2018

A publication of the: Independent Insurance Agents & Brokers A publication of the Independent Insurance Agents of Louisiana of Louisiana

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S I A N A A

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A publication of the: Independent Insurance Agents & Brokers of Louisiana

IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com Francine Berendson Director of Communications & Events fberendson@iiabl.com Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com

In this issue:

Workers Comp Success Story ..................................... 5-8

Gift Giving To Your Clients ......................................... 10-12

IIABL Board Meeting Summary ................................... 13-14

Louisiana: Least Affordable Auto Insurance ................. 15

Shopping for Insurance .............................................. 16 – 18

Karen Kuylen Director of Accounting kkuylen@iiabl.com

Ask Mike Hired & Non-Owned Autos ......................................... 19-26 NIAFA Sues Over NY Reg ........................................... 26

Simple, Affordable Texting Solution ............................ 28-29

Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com

Rate & Rule Filing ...................................................... 29

How E&O Losses Can Be Prevented ............................ 31-36

Jamie Newchurch Insurance Services jnewchurch@iiabl.com Lisa Young-Crooks Executive Assistant lyoung@iiabl.com

Welcome New Members ............................................. 34

Calendar ................................................................... 35

IIABL Partners ........................................................... 37

IIABL Board & Officers ............................................... 38

Workers Comp Success Story Leads the Way for Automobile Reform by: Johnny Beckmann, III Assured Partners

In the 1980s, the Workers Compensation market in Louisiana melted down. It was a perfect storm of bad economics caused by a Louisiana oil & gas bust, weak WC laws which encouraged over utilization, and a dysfunctional residual WC market of last resort. Insurance companies pulled out of the Louisiana WC market, premiums skyrocketed, and companies with tough exposures had serious trouble finding coverage. Everyone agreed the WC system in Louisiana was broken and causing pain for everyone involved.

Then a funny thing happened. Business, labor, lawyers, and the insurance industry went to the Louisiana Legislature and demanded solutions. Sure, there were plenty of disagreements and a few fights along the way, but over several years, the Louisiana Legislature passed laws to reform the residual WC market of last resort, reduce legal battles over WC benefits, reduce overutilization, and improve safety.

As a result of these legislative changes, WC claim experience improved, many new WC insurance companies came into the Louisiana, and WC premiums have steadily decreased over the past 20 years. Today, the Louisiana WC market is healthy and competitive and is an amazing success story of how insurance markets can

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be dramatically improved by creating the right environment.

Louisiana is now facing an automobile insurance crisis.

The cost of auto insurance has been high in Louisiana for years, but we now pay the second highest average auto rates in the country. More importantly, we are starting to have difficulty finding coverage for more difficult auto risks. For example, there are no insurance companies writing new log trucks in Louisiana.

As a result, log truck operators are moving to Mississippi or shutting down. Other heavy commercial trucking accounts are also having trouble finding coverage.

This availability problem will only get worse.

Expensive automobile insurance is a problem. But when insurance companies stop taking our money and stop writing insurance…that is a much bigger problem!

The Louisiana automobile insurance market is melting down…just like the WC market did in the 1980’s. We should learn a lesson from the amazing success story of workers compensation insurance and make changes to improve the automobile insurance market environ-

ment.

The problem is simple. Louisiana has a tort problem. All you have to do is turn on the TV or drive down the interstate to see the problem. If you are in an automobile accident, you are supposed to get a big check! Right? Louisiana accident rates and property damage claim rates are just slightly higher than the national average. But our bodily injury claim rate…how often we say we are hurt and should get a big check…is almost double the national average. Are we more fragile than people in other states? It has been that way for many years. No wonder insurance companies don’t want to do business in our state and auto rates are so high!

The solution is also simple. The Louisiana Legislature needs to pass significant tort reforms.

People who are seriously hurt by a negligent driver deserve compensation. But everyone in an automobile accident should not expect a big

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check. Unless we all demand tort reforms from the Louisiana Legislature, the automobile market will continue to melt down, or‌we could fix the problem, the way we fixed the WC problem in the 1980s.

This article originally appeared in the LUBA News publication.

Woman Sues Hospital in New Mexico for Resuscitating Her A New Mexico woman who was brought back to life is suing the hospital for violating her rights.

The Albuquerque Journal reports lawyers for Jamie Sams filed a lawsuit last week in New Mexico state district court against Santa Fe’s Christus St. Vincent Regional Medical Center.

The lawsuit filed on behalf Sams, a writer known for books on spirituality, says the hospital and a doctor who was treating her are to blame for her going into cardiac arrest. The lawsuit says Sams was given a painkiller even after she told staff she was allergic to it.

Court documents say the negligence was compounded when hospital personnel resuscitated her, something she did not want.

Christus spokesman Arturo Delgado declined to comment.

Sams is seeking an unspecified amount in damages.

Source: Insurance Journal

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Gift Giving Over the Holidays Doesn’t Need to be an Extravagant Expense You are thankful for your clients. Show your appreciation.

December is fast approaching. The holidays are time of good cheer. You've had a good year. Your clients made this possible. You want to have a long-term relationship with all of them.

What could you do over the holidays?

Greeting cards Sending holiday cards seems the obvious choice.

You might think in the digital age, paper holiday cards have gone the way of cassette tapes and VHS recorders. You might be surprised. According to a December 2017 CNBC report, 1.5 billion seasonal holiday cards were sent the previous year.

Here are three guidelines.

1. Thanksgiving. If you want to avoid being caught in the tsunami of holiday cards your client gets in December, try sending a Thanksgiving card

instead.

2. Timing is everything. A successful Bay Area manager once explained: “People remember the first card they get each holiday season.” Get yours out shortly after Thanksgiving.

3. Personalization matters. If your card is sent by a service with your name printed inside, it screams “untouched by human hands.” Get all team members to sign each card. Hand address them. Use stamps.

What else can I do?

Obviously you aren’t going to give cash to a client. It screams kickback. The financial industry has rules regarding the giving and receiving of Continued page 12

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gifts. Gifts should be nominal. FINRA rule 3220 references $100 as a value. Your firm likely has rules. Here are some ideas: 1. Invite some clients to (your) holiday party. Clients become friends and vice versa. If you entertain at home, invite a few clients to attend. Your professional relationship isn’t discussed during the event. They are friends.

This simple act of kindness can have enormous benefits. They may reciprocate by inviting you to their holiday party. You get to meet their friends.

This is a good reason to hold your holiday party early in the season.

2. Holiday open house. Here’s another at home event. It works if you are friends with lots of clients. Consider having a noon to 5 p.m. holiday open house at your home. People stop by as they run their errands or on their way to another event. They stay a short while and exchange holiday greetings.

3. Gift to their charity. They have a favorite cause. You are peripherally involved because they transfer gifts of securities. They’ve made the charity an IRA beneficiary. You make a modest charitable contribution in their name.

4. The coffee mugs. This requires some judgment, because it might be salesy. Your firm produces a tasteful line of logoed accessories that don’t look cheap. You but them a pair or foursome of mugs, wrapping them nicely. If they put them into use, they see the firm name daily.

5. Food items. They are coffee fans. You buy an unusual type of whole bean coffee. You present it as a gift.

6. Framed photo. They attended a client recognition event earlier in the year. They sent you a photo from their vacation. Either way, they look great. Maybe you somehow get a photo of their pet. You get a high-quality copy

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made professionally, then find a good frame at Ikea or someplace similar. People love photos of themselves.

7. Tickets to the holiday concert. Most communities have one. Tickets are nominally priced.

You are planning on going too. You present them with a pair, along with an article talking up the event.

You are invited to a party at their home What greater compliment can someone pay?

You are an invited guest. You will meet their friends. You need to bring a house present. Being smart, you avoid the obvious blunders. You don’t bring wine to an alcoholic or sugar cookies to a diabetic.

Champagne. Can you ever have enough over the holidays? You want true champagne, from that region in France. Stick with a recognizable brand name.

Large format bottles. Wine does come in bigger sizes than double bottles. Bottles containing three liters (four bottles) are

often called Jeroboams. They make a statement. (These are not boxed wines or jug wine!) Ask your wine store to look out for them and tell you when they arrive. Look for something from Argentina, Chile or California. Ideally at $50 or less.

On both of the above ideas, be sure to attach a gift tag.

Flowers. Send them in advance. It will help with their decorating. They will know they came from you.

Ornament. If they have a wonderfully decorated tree, bring along a fancy ornament that’s been elegantly wrapped.

They should remember you for years afterward.

Gift giving over the holidays doesn’t need to be an extravagant expense. You are thankful these people are your clients. You want to show your appreciation.

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IIABL November Board Meeting Summary The IIABL Board of Directors met on November 9, 2018 at the Hilton Garden Inn in New Orleans.

IIABL President, Johnny Beckmann, reported to the board about the IIABA Leadership Conference in September, the IIABL Executive Committee meeting in October, and the development of workforce development resources for member agencies available at www.BigIHires.com. Beckmann reviewed the IIABL Strategic Plan and advised the board that excellent progress has been made in implementing the plan. Beckmann observed that the Big I websites (www.IIABL.com) have tremendous resources for our members but expressed frustration that many members are not aware of these important resources. Finally, Beckmann thanked the board members for their personal commitment and financial support of our federal political action committee, InsurPAC. IIABL Secretary-Treasurer, Brenda Case, reviewed the 2017-2018 annual CPA Financial Audit with the board. Hannis T. Bourgeois issued a

clean financial audit report. The IIABL Finance Committee reviewed the audit in detail with the CPA and recommended that the board approve the audit. On a motion by Brother Marine with a second by Robert Riviere, the audit was approved by the Board without objection.

IIABL Legislative Chairman, Mike Scriber, discussed the 2019 Legislative Agenda with the board. IIABL lobbyists Jeff Albright and David Tatman expect a low-key session next year because it will be a fiscal session where legislators are only allowed 5 regular bills and it is also an election year when most legislators want to avoid controversy. IIABL does expect that House Insurance Committee Chairman, Kirk Talbot, will bring some automobile (tort) reform bills originating out of the High Auto Rate Task Force. Jeff Albright represents IIABL on this task force.

Continued page 14 Louisiana Agent 13

Independent Agents Service Corporation (IASC) President, Brad Bourg, brought a proposal to the board to endorse ePayPolicy as a credit card and ACH payment processor for our members. ePayPolicy works well for agencies and passes the processing fees to the policyholder so that the agency receives the full premium payment. Several IIABL board members are using ePayPolicy and report excellent results. On a motion by Lydia McMorris with a second by Brenda Case, endorsement of ePayPolicy was approved by the Board without objection.

Independent Agents Service Corporation (IASC) President, Brad Bourg, brought a proposal to the board to endorse Highflyer HR payroll services.

Highflyer HR can provide member agencies with excellent payroll services, they do NOT sell insurance, and IIABL has negotiated an exclusive IIABL member benefit…Highflyer HR will provide IIABL members with their human resources website (which normally cost $50-$150 per month) for FREE. The board discussed the Highflyer HR proposal. On a motion by Brenda Case with a second

by Don Stiel, the IIABL Board approved Highflyer HR payroll service without objection.

IIABL CEO, Jeff Albright, updated the board on strategic initiatives being developed by a coalition of Big I state associations known as IA Action Partners. Big I state associations are developing member resources in the following areas: •

Independent Market Solutions – market access programs for small agencies and start-up agencies.

•

Independent Agent Technology Solutions – cutting edge “InsurTech” solutions for independent agencies.

•

IntellAgents – would class independent agency performance benchmark information and agency management consulting.

•

www.BigIHires.com – independent agent workforce development to hire, train and retain world class agency personnel.

•

Consolidated and/or coordinated Big I state association management to maximize resources for our members.

Technology Solutions and requested an initial $30,000 budget to join other Big I state associations in developing technology solutions for independent agents. The first initiative will be development of agency cyber security solutions. On a motion by Bret Hughes with a second by Brenda Case, the IIABL Board approved the $30,000 Independent Agent Technology Solutions budget without objection.

IIABL National Director, Lee Schilling, presented the TrustedChoice.com Search Engine Optimization (SEO) Proposal to the board. For the past four years, IIABL has spent $15,000 - $30,000 each year optimizing online search results for IIABL members. Hundreds of online content pages and key search words have been optimized for lines of insurance, specific products and for specific Louisiana communities. This SEO program has increased the number of successful searches and consumer referrals to IIABL member agencies from TrustedChoice.com. Lee Schilling suggested that IIABL continue with the TrustedChoice.com Gold Level SEO proposal. The board discussed the relative merits of the SEO program. On a motion by Robert Riviere with a second by Eugene Montgomery, the IIABL Board approved the TrustedChoice.com Gold SEO program by a vote of 241.

IIABL CEO, Jeff Albright updated the board on efforts to improve the Louisiana automobile insurance market. IIABL is working on a three-phase strategy. We are currently working on building a broad-based business coalition in support of automobile insurance (tort) reform. Next, that coalition will be involved in electing good business candidates that will support automobile insurance (tort) reform in the fall of 2019 elections. Finally, if we are successful in the elections, the coalition will pass automobile insurance (tort) reform legislation in the Louisiana Legislature in the spring of 2020.

Efforts to build the business coalition are progressing well and will be expanded in the future. Work has already started on the 2019 elections.

The IIABL Board of Directors will meet again on January 25, 2018.

Albright discussed the launch of Independent Agent

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Louisiana is least affordable state for auto insurance, IRC asserts Frequent claims and litigation are factors behind the high cost of auto insurance in Louisiana.

Louisiana ranks number one on a list of least affordable states for auto insurance, according to a new study from the Insurance Research Council (IRC).

In a statement, the IRC said that reasons for the state’s high insurance rates include the frequency of auto accidents and resulting injury claims, “as well as the prevalence of attorney involvement and litigation.”

According to the IRC, a division of The Institutes, Louisiana’s affordability index (2.64%) was the highest in the U.S. from 2011 to 2015. The affordability index is the ratio of average expenditures on auto insurance to median household income.

pared with 10% countrywide), the IRC said.

Factors driving affordability of auto insurance “The affordability of auto insurance is an important issue in Louisiana and many other states,” said Elizabeth Sprinkel, CPCU, senior vice president of the IRC. “As policymakers seek to address this issue, it is vital to have an understanding of the cost drivers that underlie variations in the cost of auto insurance for consumers.”

Highest bodily injury liability claim frequency One factor behind the high cost of insurance in Louisiana is the frequency of auto accidents and resulting insurance In 2017, Louisiana had the highest bodily injury (BI) liability claim claims, the IRC said. In frequency in the country (1.75 claims per 100 insured vehicles, al2017, Louisi- most double the countrywide rate of 0.90 claims per 100 insured ana had the vehicles). highest bodily injury (BI) liability claim frequency in the country (1.75 claims per The report, “Auto Insurance Affordability: Cost 100 insured vehicles, almost double the countrywide Drivers in Louisiana,” combines information rate of 0.90 claims per 100 insured vehicles). from IRC closed-claim research and other sources and is part of IRC’s ongoing research In the IRC’s opinion, another important factor “is the into the factors driving the affordability of auto propensity of Louisiana claimants to hire attorneys and insurance. file lawsuits.” Among 2017 BI claims, 54% of Louisiana claimants hired attorneys, compared with 48% of claimants in other states. Moreover, Louisiana claimSOURCE: PROPERTYCASUALTY360◦ ants were 60% more likely to file lawsuits (16% comLouisiana Agent 15

Shopping for Insurance...We Have Met the Enemy and He Is Us Last week I did a Kiplinger interview about shopping for homeowners insurance focused, of course, on how to save money…as are virtually all consumer articles about insurance. I tried to make a point of how important it is to understand that you can’t compare prices in isolation. It is impossible to make a rational purBill Wilson, CPCU, chasing decision without considering what that price ARM, AIM, AAM buys you in the form of coverage and exclusions. It would be like buying a car online based solely on the name of the manufacturer and a price.

Then this morning I get a link to an article by the Texas Department of Insurance that says:

How to Shop Smart for Insurance 1. Shop Around Yes, it’s that simple. Make sure to check prices

for home and auto policies at least every three years. Insurers want your business, and you often get the best rates when you’re willing to switch companies. You can also get sample rates at www.HelpInsure.com.

Sorry, but no, it’s NOT that simple. You would think a regulator charged with reviewing policy forms would know that. This does NOT help consumers “shop smart.” In fact, it makes it far more likely that they will choose poorly, thinking that price comparison is the only criteria for buying insurance.

The first statement in this advice piece says, “We have a few tips to help you get the protection you need at the best price.” None of their tips necessarily get the consumer “the protection you need” because they don’t caution about the differences in protection provided within different quotes.

I did a sample price quote at the link they provided and found premiums ranging from $250 to $2,500 for the same quote. There’s no way, for

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the factors used in the quote, that you could have that kind of premium differential. That tells me the quoting system is likely worthless and, worse, misleading and misrepresentative of the carriers’ programs. Who is being served by this kind of system?

Just two days ago, I made a blog post about the bad advice that permeates the internet and media on whether or not someone renting a car should buy the loss damage waiver (LDW), lamenting that much of the erroneous insurance advice comes from within the insurance industry itself in the form of advertising and well-intentioned information from insurance regulators and others.

How can we expect mainstream media outlets to write accurately about the insurance industry when we don’t do it ourselves?

William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of InsuranceCommentary.com. He retired from the Independent Insurance Agents & Brokers of America in December 2016 where he served as Assoc. VP of Education and Research and was the founder and director of the Big “I” Virtual University for over 17 years. He is the former Director of Education & Technical Affairs for the Insurors of Tennessee and, prior to that time, he was employed by Insurance Services Office, Inc. He is a graduate of the Illinois Institute of Technology with a B.S. degree in Fire Protection & Safety Engineering.

Louisiana to Get Another $164 Million in BP Oil Spill Restoration Grants Louisiana is getting $161.4 million in restoration grants from the 2010 BP Gulf of Mexico oil spill to restore two barrier islands and a headland in the Terrebonne Basin.

The work will restore Timbalier and Trinity islands, which “are currently at a critical minimum width in some areas,” and the West Bell Headland.

“Additionally, this proposal includes funding to enhance plans for the long-term sustainability of the entire length of Louisiana barrier islands,” the National Fish and Wildlife Foundation said.

In addition to Louisiana, three other Gulf states are getting a share of an additional $280 million in restoration grants from stemming from the BP spill.

The foundation is getting $2.5 billion over five years for restoration projects. The money’s coming from criminal damages paid by BP PLC and drilling company Transocean Deepwater Inc. The latest grants are the sixth round and bring the total so far to $1.3 billion.

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IIABL Director of Education, Mike Edwards, CPCU, AAI is your source for technical questions.

Contact Mike at medwards65@aol.com or 770.402.1011

Subject:

Hired & Non-Owned Autos

Q. I wonder if you could clarify a couple of questions about hired & non-owned auto coverage.

First, does the coverage apply only to the business, or is the employee covered also? Second, where a particular account has no owned autos, would it be better to place the hired & non-owned auto coverage with the CGL/BOP, or the BAP?

A. In the view of many coverage experts, the vast majority of commercial insureds have at least

some exposure from hired and non-owned (“H/NO�) autos, so I am glad to see that you want to be well-versed this important subject. Below are excerpts and comments from coverage forms developed by the Insurance Services Office (ISO). Proprietary forms may be different. The two coverage forms being analyzed are the Business Auto Policy (BAP) [CA 00 01 10 13], and the Businessowners (BOP) Hired & Non-Owned Auto Liability endorsement [BP 04 04 01 10].

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ISSUE #1: Definition of “Hired Auto”

Business Auto Policy

ISSUE #2: Definition of “Non-Owned Auto.”

CA 00 01 10 13

Business Auto Policy

Named Insured: Smithco (“you”)

CA 00 01 10 13

Section I – Covered Autos

Named Insured: Smithco (“you”)

A. Description of Covered Auto Designation Symbols

Section I – Covered Autos

Symbol 8 – “Hired Autos Only.” Only those "autos" you lease, hire, rent or borrow. This does not include any "auto" you lease, hire, rent or borrow from any of your "employees", partners (if you are a partnership), members (if you are a limited liability company) or members of their households.

A. Description of Covered Auto Designation Symbols

Named Insured: Smithco (“you”)

Symbol 9 – “Non-Owned Autos Only.” Only those "autos" you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes "autos" owned by your "employees", partners (if you are a partnership), members (if you are a limited liability company) or members of their households but only while used in your business or your personal affairs.

BP 04 04 01 10 Hired & Non-Owned Auto Liability (endorsement)

Businessowners Policy

D. The following additional definitions apply:

Named Insured: Smithco (“you”)

2. "Hired auto" means any "auto" you lease, hire, rent or borrow. This does not include any "auto" you lease, hire, rent or borrow from any of your "employees", your partners or your "executive officers" or members of their house-holds.

BP 04 04 01 10 Hired & Non-Owned Auto Liability (endorsement)

Businessowners Policy

Examples of “Hired Auto” exposures: Example 1: Jill Smith, owner of Smithco, flies to a business convention in Orlando, and rents a car.

This is one of the most common hired auto exposures for many businesses.

D. The following additional definitions apply: 3. "Non-owned auto" means any "auto" you do not own, lease, hire, rent or borrow which is used in connection with your business. This includes "autos" owned by your "employees", your partners or your "executive officers", or members of their households, but only while used in your business or your per-sonal affairs.

Examples of “Non-Owned Auto” exposures:

Example 2: Smithco rents a 24-ft. box truck for 30 days, in conjunction with their relocation plans.

Example 3: Jill lets Jennifer, one of her employees, use the box truck over the weekend, while she is moving into a new house. Jennifer drove trucks while she was in the Army, so Jill is not worried about allowing Jennifer to use the truck. Even though the truck will not be used for Smithco business over the weekend, it is still considered a “hired auto.”

Example 1: Smithco employee Jack occasionally uses his Ford F-250 to run business errands on behalf of Smithco. For many businesses, this is a common and often overlooked auto exposure.

Example 2: Jack allows Jennifer to drive his F250 to the local office supply store to pick up the new filing cabinets that have just arrived.

ISSUE #3: WHO IS AN “INSURED”?

Continued page 26 Louisiana Agent 20

Business Auto Policy CA 00 01 10 13 Named Insured: Smithco (“you”) Section II – Covered Autos Liability Coverage A.1. Who Is An Insured The following are "insureds": a. You for any covered "auto". b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:

(1) The owner or anyone else from whom you hire or borrow a covered "auto".

This exception does not apply if the covered "auto" is a "trailer" connected to a covered "auto" you own.

(2) Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household.

for a covered "auto" owned by him or her or a member of his or her household.

Businessowners Policy Named Insured: Smithco (“you”) BP 04 04 01 10 Hired & Non-Owned Auto Liability (endorsement) B. For insurance provided by this endorsement only: Paragraph C. Who Is An Insured in Section II – Liability is replaced by the following: 1. Each of the following is an insured un-der this endorsement to the extent set forth be-low: a. You; b. Any other person using a "hired auto" with your permission; c. For a "non-owned auto": (1) Any partner or "executive officer" of yours; or

(5) A partner (if you are a partnership) or a member (if you are a limited liability company)

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(2) Any "employee" of yours; but only while such "non-owned auto" is be-ing used in your business; and 2. None of the following is an insured: b. Any partner or "executive officer" for any "auto" owned by such partner or of-ficer or a member of his or her house-hold; d. The owner or lessee (of whom you are a sublessee) of a "hired auto" or the owner of a "nonowned auto" or any agent or "employee" of any such owner or lessee; or

(2) BOP: Smithco is an insured under the endorsement [B.1.a.]. Jill is covered as a permissive user of a hired auto [B.1.b.].

Example 2: Smithco rents a 24-ft. box truck.

(1) BAP: Smithco is an insured for any covered auto [A.1.a.].

(2) BOP: Smithco is an insured under the endorsement [B.1.a.].

Example 3: Jennifer borrows the box truck for personal use over the weekend.

Comments: Who Is an Insured for Hired Auto Exposures:

(1) BAP: Jennifer is covered as a permissive user of a hired auto [A.1.b.]

(Refer to Issue #1, Examples 1,2,& 3.)

(2) BOP: Jennifer is covered as a permissive user of a hired auto [B.1.b.]

Example 1: Jill rents a car in Orlando when she attends a business convention.

(1) BAP: Smithco is an insured for any covered auto [A.1.a.]. Jill is covered as a permissive user of a hired auto [A.1.b.]

(3) Note: A hired auto used for personal, nonbusiness use is still considered a hired auto. The requirement that the auto is “being used in your business� only applies to “non-owned au-

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tos” [B.1.c.(2)] , and not to “hired autos.”

ty, 591 So.2d, 342 (La. 1991). The Court said: “Under its generally prevailing meaning, ‘borrow’

Comments: Who Is an Insured for Non-Owned Auto Exposures (Refer to Issue #2, Examples 1&2.)

Example 1: Jack occasionally uses his Ford F-250 on company business.

(1) BAP: Smithco is an insured for any covered auto [A.1.a.]. However, Jack is likely not an insured, since permissive users are covered only in autos that Smithco “owns, hires, or borrows.”

Most experts would agree that Smithco did not actually “borrow” Jack’s truck. In general, courts tend to require some degree of supervision or control in order for something to be considered “borrowed.” [Black’s Law Dictionary 9th Ed.: “Borrow: To take something for temporary use.”]

The Louisiana Supreme Court addressed the meaning of the term “borrow,” as the term is used in the BAP, in the case of Schroeder v.

connotes the acquisition of temporary possession, dominion or control of a thing, not merely the receipt of some benefit from its use by another person. For example, when a person uses his auto to pick up a prescription for a sick friend, he may confer a significant benefit on the invalid, but no one would say that the bedridden friend had ‘borrowed’ the auto used for the errand.”

In addition, even if Jack’s F-250 did qualify as auto borrowed by Smithco, he is still not an insured.

The BAP excludes both “The owner or anyone else

from whom you hire or borrow a covered auto" [A.1.b.(1)], as well as “Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household. [A.1.b.(2)].

(2) BOP: Smithco is an insured under the endorsement [B.1.a.]. Jack is not an insured, since he is excluded as “The owner or lessee (of whom you

Board of Supervisors of Louisiana State Universi-

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are a sublessee) of a "hired auto" or the owner of a "non-owned auto" or any agent or "employee" of any such owner or lessee.” [B.2.d.]

Example #2: Jennifer uses Jack’s F-250 to pick up filing cabinets at the office supply store.

(1) BAP: Smithco is covered for its vicarious exposure as employer arising out of a covered auto.

[A.1.a.]. But since Smithco did not “borrow” Jack’s truck, there is no coverage for any permissive user of the truck, which would be Jennifer in this case.

(2) BOP: Employees (other than Jack – as owner of the truck) are insureds for the use of non-owned autos. [B.1.c.(2)] Jennifer is an insured, Jack is not.

ISSUE #4: GAPS & SOLUTIONS. From a purely coverage standpoint, a side-by-side comparison of the hired and non-owned auto coverages of the BAP and BOP indicates that they are very similar. However, there are other issues to

examine from a practical view between coverage under a BAP vs a BOP for the hired and nonowned exposures.

Situation #1: Employees as insureds. Employees such as Jack who use their own autos on company errands are not insureds in either the BAP or the BOP. In addition, in the BAP, employees such as Jennifer who use a co-employee’s auto (Jack’s F250) on company business are not insureds, but are insureds under the BOP. If coverage was written in the BAP, endorsement CA 99 33 10 13 Employees As Insureds would cover both Jack and Jennifer. The coverage is provided in one sentence: “Any employee of yours is an "insured"

while using a covered auto you don't own, hire or borrow in your business or your personal affairs.”

Situation #2: Employees rent cars in their own name. Many employees who travel and rent cars do so in their own names, using their personal credit cards, with reimbursement from their employer later. For a rental car to be considered a “hired auto” in both the BAP and BOP, it must be rented by “you” – which is Smithco, as Named In-

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sured. If the Rental Agreement shows the renter as Jill, Jennifer, Jack, etc., some insurers – not all – maintain that Smithco did not actually rent the car. BAP endorsement CA 20 98 10 13 Employee Hired Autos provides that “An employee of yours is an "insured" while

operating an auto hired or rented under a contract or agreement in an employee's name, with your express or implied permission, while performing duties related to the conduct of your business.” There is no equivalent endorsement in the BOP program.

“Who Rented This Car – Employer or Employee?”

Donald Damick, an agent with Nationwide Insurance Companies and past president of NAIFA New York State, said in an affidavit accompanying the lawsuit: “This rule puts me in an impossible situation because as a licensed life insurance agent I am required by New York [insurance law] and by my contractual obligations to act as an agent of the insurer, not customers or insureds. In fact, I can lose my NYDFS license - and thus my livelihood - if I do not follow the state’s insurance statutes. And now I can also face penalties under [the regulation’s] best-interest standard.”

Situation #3: Physical damage coverage for rental car.

In the BAP, Hired Car Physical Damage coverage can be written using symbol 8. The BOP program has no coverage option or endorsement to provide such coverage. The only option would be to purchase LDW/CDW coverage from the rental car company.

The new regulation is set to come into effect in August 2019. It will force brokers to prioritize the interests of the consumer and dictates that compensation to the sales agent will only be allowed if it “does not influence the recommendation”. According to InvestmentNews, NAIFA’s lawsuit argues that the insurance sales standard contradicts existing New York insurance law.

Situation #4: Policy limits. BOP policies are subject to an occurrence limit, and an annual aggregate, for liability claims. The BAP is subject to only an occurrence limit.

New York Financial Services superintendent Maria T. Vullo has described the regulation as “prudent, fair and reasonable – and just simply the right thing to do”. In a statement on November 16, she said: “Given the vital role that insurance products play in providing financial security to New Yorkers, it is essential that providers not be influenced by a producer’s financial incentives, adhere to a higher standard of care, and only recommend insurance and annuity products that are in the consumer’s best interest.”

These materials are intended for educational purposes only and should not be relied upon as legal advice. Please consult a qualified attorney for legal advice.

NIAFA Sues Over New York Insurance Sales Regulation The National Association of Insurance and Financial Advisors – New York State Inc. (NAIFA) has sued New York’s Department of Financial Services over a new regulation that requires insurance agents and brokers to take “only the interests of the consumer” into account when selling life insurance and annuity products.

However, Damick argued the regulation enforces a standard of conduct that “effectively requires the agent to become a fiduciary to the consumer”. In his affidavit, he said: “"The regulation imposes a duty on the agent to recommend products based solely on what is suitable for the consumer, and mandating that no other interest, including an agent’s compensation, may be considered by the agent when providing that recommendation.”

SOURCE: Insurance Business America (IBA)

According to an InvestmentNews report, NAIFA filed the lawsuit in the New York Supreme Court on November 16, arguing that the state’s Department of Financial Services exceeded its authority with the rule and placed insurance sales professionals in difficult legal waters by forcing them to prioritize their customers ahead of their firms.

NAIFA is not alone in fighting the regulation. The trade association joins the Independent Insurance Agents and Brokers of New York Inc. and the Professional Insurance Agents of New York State Inc. in filing a lawsuit against the insurance sales rule.

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Steve Anderson

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How to Create a Simple Affordable Texting Solution with SimplTxt

It has become a foregone conclusion that agents and brokers need to manage text messaging as part of their communication mix. We have known for a while this was coming. However, the actual implementation of adding text messaging into the organization’s workflow has been a bit more complicated.

I have written several times about text messaging with suggestions on how to adopt this communication channel within your organization. You can review those articles here, here, and here.

I’ve also talked about texting in two episodes of The Digital Broker Podcast. In episode 11 we talked about The Rules of Engagement, and in episode 12 we talked about How to Implement. You might want to listen to each of these for more detailed information.

Several texting options are available, including management system platforms that have added integrated text messaging as a communication option. These options may be the best for your organization to implement.

Today, I’d like to share with you a new inexpensive text option created by my podcast co-host Ryan Deeds. Ryan saw the problem with managing and documenting text messages within an insurance organization and started thinking about how to create a simple, affordable platform that any size organization could easily implement.

The result is SimplTxt. How SimplTxt Works When you sign up with SimplTxt, you choose a local phone number to use for both inbound and outbound texting. This is the number you provide to all your clients who want to use text for communication. Once you choose your number, any text received by that number will be delivered to an email address you specify. Any email sent to

[ClientPhoneNumber]@simpltxt.com will be delivered as a text message coming from that number.

So, you can now text your customers using email – no software training needed. Just email [cellnumber]@simpltxt.com (ex 6155551212@simpltxt.com) and SimplTxt will automatically turn that email into a text message.

When they reply, you will receive it as an email.

You can also add an attachment such as a photo or document.

For documentation purposes, both the inbound and received emails can be attached to the client file, just like any other email. This is a process well ingrained into your current agency workflow.

You can test the service now at no cost by emailing [YourCellNumber]@simpltxt.com. No sign-up required. You will receive a reply to your email address used to send the email. You can add an attachment or reply with a photo.

Following are some benefits of using the SimplTxt platform: •

SimplTxt centralizes all texts messages for compliance monitoring.

•

Uses your existing email system, so there is not another platform to learn.

•

Easy client file attachment process for documentation purposes.

•

Employees will no longer have to expose their phone numbers.

•

An easy way to increase client engagement.

Once an employee emails a phone number, any responses will come back automatically to that employee who originated the communication. If the number is texted without your organization originating it, the email will be sent to the central email you listed during the setup process.

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Payment plans start at $10 monthly for 300 text messages. Other plans are available for $15 monthly (500 messages) and $20 (1,000 messages). All plans are month to month, so there is no long-term commitment.

As I said previously, there are various options for implementing text messaging within your organization. I wanted to share this with you today as another option that might make sense for you to explore.

Company

Coverage Type

Overall % Impact:

Overall $ Impact:

Number of Policyholders:

Changes

Hanover American Ins Co Revised Rate

4– Homeowners Connections Home Product

+2.5%

$329,081

5,640

New: 2/1/2019 Revised: 2/1/2019

Markel American ins Co Market Insurance Co

19-Commercial Automobile

+15.4%

$202,203

486

New: 7/1/2019 Renewal: 7/1/2019

Great Northern Ins Co Pacific Indemnity Co

19-Commercial Automobile

+13.60%

$536,759

287

New: 2/1/2019 Revised: 2/1/2019

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Agent’s Questions About Errors and Omissions, and How E&O Losses Can Be Prevented

By: Mary LaPorte, CPCU, CIC, LIC, CPIA

Q:

Our commercial lines department is discussing the possibility of requiring signatures on all new business applications, even if the carrier did not require a signature. Some of us feel it is a best practice, but we have gotten a lot of pushback, especially from producers.

There does not seem to be an easy way to get the signatures, and there is not a signature line on most of the commercial ACORD applications. We have avoided obtaining signatures for years, so we are

not sure it is worth the hassle. Can you share your thoughts on this?

Lincoln, Maryland

A:

Lincoln, for many years it has been the practice in most agencies to obtain signatures on commercial applications only when required by the carrier. A signed application was typically required for professional liability, D&O coverage or other non-standard lines. Because of increased litigation in recent years, many agents have started to require that all applications be signed, regardless of the carrier’s requirement.

This is now becoming the best practice for all

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agencies. The courts recognize a signed application as part of the contractual insurance transaction, so signed applications bear more weight in E&O situations. Think about this: if there is incorrect information on an application which appears to be a material misrepresentation, how does a carrier know if it is the customer’s misrepresentation or yours? If, in fact, an applicant lied during the application process, you would want to demonstrate that you were still trustworthy!

Only some of the Commercial ACORD application sections include a signature line, such as the ACORD 125 Applicant Information Section.

The standard has been to have the insured sign any page with a signature line and then initial each of the other pages. That might work well for a 5-10 page application, but some commercial applications can be 40, 50 pages or more!

Another challenge has been determining at what point in the process the signature should be obtained. Might the producer go back out to the insured’s location to obtain signatures on an app after they obtain an order to bind?

Some agencies require the producer return to the customer with binders and/or certificates of insurance and obtain the signature at the same time. Any way you look at it, it could be less than convenient.

Technology to the rescue. Many agencies today are already enjoying the convenience of electronic signatures. This works very well with commercial applications. Once the producer obtains an order to bind, the account manager or CSR can finalize the application and forward it to the customer for electronic signature. To encourage getting the signed app back quickly, the request could state: “binders and certificates of insurance will be

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IIABL NEW MEMBERS

Harvest Insurance Agency Shirley Patterson Winnsboro, LA 318.435.5643 sheila@harvestcrop.net

Insurance Advisors, LLC Nolan Venable Lafayette, LA 337.988.9059 nolan@insuranceadvisorsoffice.com

For information on membership contact: Jamie Newchurch, jnewchurch@iiabl.com, 225.236.1350

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Webcasts E&O Risk Management December 4, 18, 20 Available on Demand

Ethics December 13, 18, 20, 28

Available on Demand

Flood December 20

Available on Demand

Virtual University

December Webinars

December Lightning Learning:

4—Flood Insurance 5—Home Business Versus Home Insurance 12—Catastrophe: The Coverage Expertise You’ll Need When It Matters Most 18—Tricks to Fix: Closing Coverage Gaps in Home, Work and Auto

Premium Leakage

6th— What Does Your Under-

writer Mean by "Premium Leakage" 19th—Why are Exclusions Excluded?

Commercial & Personal Lines Courses Click above for courses & dates for 2018

Seminars 2019 IIABL Spring Education Conference— March22. Baton Rouge Save the Date!

Events IIABR January Installation of Officers & BOD

IIAGNO Past President’s Luncheon—12/13/2018

On-Demand Webcasts

Pre-Licensing

Click here for the course catalog of all of the on-demand webcasts. Reminder– all of the IIABL online courses do not require a test for CE Credit

Online prelicensing 3 optional study packages Click here for additional information

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forwarded upon receipt of the signed application.�

That should promote a timely response from the customer. From an E&O standpoint, the customer could never deny ever seeing the application or not having an opportunity to read it, since the electronic signature process allows a copy to be retained by the customer.

Electronic signatures are widely accepted countrywide, as supported by the Electronic Signatures In Global and National Commerce Act (ESIGN). Consider using the electronic signature process to aid in obtaining signatures on all applications.

Mary LaPorte is a consultant and educator with a strong background in Errors & Omissions loss prevention.

Forward your E&O questions to marylp@lpinsuranceconsult.com.

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GOLD LEVEL

SILVER LEVEL

BRONZE LEVEL

ACCIDENT FUND

AMERICAS INSURANCE

BANKERS INSURANCE

EMC INSURANCE

EMPLOYERS

FCCI GROUP

FOREST INSURANCE

GULFSTREAM P&C

HOMEBUILDERS SIF

IROQUOIS SOUTH, INC.

LANE & ASSOCIATES

LUBA WORKERS’ COMP

MARKEL FIRST COMP

RPS COVINGTON

STONETRUST INSURANCE

SUMMIT CONSULTING

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IIABL 2018—2019 BOARD OF DIRECTORS & OFFICERS

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