October Louisiana Agent Newsletter by Independent Insurance Agents & Brokers of Louisiana

IIABL STAFF

Benjamin Albright

Chief Executive Officer, President balbright@iiabl.com (225) 236-1357

Jeff Albright

Consultant

jalbright@iiabl.com (225) 236-1366

Karen Kuylen

Director of Accounting & Finance kkuylen@iiabl.com (225) 236-1353

Jamie Newchurch

Director of Insurance Programs jnewchurch@iiabl.com (225) 236-1350

Kathleen O'Regan

Director of Communications & Events koregan@iiabl.com (225) 236-1360

Karson Roberts

Communications & Events Administrator kroberts@iiabl.com (225) 236-1351

Lyra Roberts

E&O Administrator lyra.roberts@iiaba.net (225) 236-1352

InsurerReductionsIn PropertyCoveragesRaise AgentE&OConcerns

This article discusses rising insurance premiums, hidden coverage reductions, and E&O risks for agents, with deductible and roof coverage examples

JEFFALRBIGHT

IIABL CONSULTANT

Increased property insurance claim costs and resulting financial losses have caused insurers to raise premiums and reduce coverages.

Premium increases are self-evident. Coverage reductions are not so easily discerned because insurers are not transparent to policyholders when they reduce coverage, and usually do not inform agents appropriately.

Any time that an insurer reduces coverage on a renewal policy, and the policyholder is not informed, the agent has an increased exposure to E&O claims.

Following are examples of some of the ways that insurance companies are reducing coverage, and some suggestions as to how your agency can manage their E&O risk.

Deductibles

In recent years, most insurance companies have added wind & hail, named storm, or hurricane deductibles, to policies in south Louisiana. Most wind deductibles range from 2%5% and occasionally higher. More recently insurers are applying these deductibles to policies in north Louisiana and around the country.

Roof Endorsements

The biggest problem property insurers face is that most policyholders expect their insurance company to replace their roof at some point after a storm. Policyholders no longer expect to pay for a roof out of pocket. In addition, claims experience has clearly shown that roofers are greatly exaggerating “30-year roofs.” The reality is that in the brutal heat and sun of Louisiana a roof is only good for 10-15 years. In an effort to manage this problem, insurers have started putting actual cash value (ACV) roof limitations on property policies so that they only have to pay the depreciated value of the roof and not replacement cost. Another approach is the use of a depreciated roof schedule that defines the payout percentage as the roof ages. From an agent E&O standpoint, a schedule is probably better than ACV because the loss payout is clearly defined and unambiguous

Continued from page 6

Water Damage Limitations

One of the most common and most expensive causes of property loss in property insurance policies is water damage from a burst water pipe. A common Homeowner’s claim is water damage from a burst hose on the washing machine. Some insurers have started excluding water damage on their property policies or limiting coverage with a reduced sublimit. Agents need to be on the lookout for such endorsements and advise policyholders appropriately. Policyholders can manage this risk very effectively by installing smart leak/flood detectors and water-shutoff valves to prevent or mitigate water damage.

Animal Limitations

Some Homeowner’s insurers have started managing their liability exposures by excluding or providing a reduced sublimit for animal exposures. Many Homeowner’s policies will exclude coverage for farm animals like cows, horses, pigs, etc. Some insurers exclude coverage for dog bite claims, exclude coverage for certain breeds of dogs, or provide a reduced sublimit for animal liability claims.

Other Structures

Homeowners policies provide coverage for “Other Structures.” In order to reduce their exposure, some insurers have started excluding wind coverage on some of these other structures including sheds, awnings, fences, and patio covers. Agents need to consult with their policyholders about their exposure and coverage for such other structures.

Ben Albright December

2023

The greatest single E&O exposure for agents is when an insurance company reduces coverage on a renewal book of business by change in policy form or addition of a limitation/exclusion endorsement. Reductions in coverage on numerous policies puts the agency at serious risk. Agencies must monitor changes in coverage on established books of business and when renewal policies have significant reductions in coverage, the agency should notify policyholders and offer to counsel them or provide alternative coverage options if the coverage reductions cause concern for the policyholder.

Commercial accounts tend to have more customized coverages and potentially subject to limitation or exclusion endorsements. Agencies should conduct coverage comparison analysis on renewal quotes/policies to make sure that renewal coverage has not been reduced from the expiring policy, and that coverage is adequate for the policyholder’s needs. A strong commercial proposal form should provide substantial disclosure and disclaimer language to help put the policyholder on notice and protect the agency from E&O exposure. AI-powered policy analysis tools can automatically extract and analyze policy data to identify coverage gaps, exclusions, or limitations. They can also compare policies from different insurers to identify similarities and differences. Some examples include Insurify, Exdion, and Policy Pal for analysis and coverage recommendations. Check out some of the additional resources on Catalyit’s Data Analytics Guide.

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NewChangesAhead: Contractor’sBoardUpdates InsuranceRequirements

This article outlines updated insurance certificate requirements for licensed home renovation contractors, emphasizing compliance for agents and certificate specifics

TA 340 - Revised October 24, 2024

In an effort to protect consumers by better regulating contractors practicing without appropriate insurance coverage, the contractors licensing board (LSLBC) has, again, updated their requirements around insurance coverage notification for home renovation contractors. This change should only affect the three types of home renovation contractors which need to be licensed by LSBLC: Home Improvement Contractors, Residential Home Contractors, and Mold Remediation Contractors. Contractors and insurance agents should receive this letter from the contractors board detailing the changes, but IIABL wanted to provide a brief summary for our members.

For agents the key points in the policy change are:

1. LSLBC is once again requiring that they be listed as a certificate holder on the insurance certificate.

Certificate Holder information: Louisiana State Licensing Board for Contractors (or LSLBC) 600 North Street Baton Rouge, LA 70802

2. Certificates only need to be provided during initial application or renewal of the contractor’s license with LSLBC and at renewal of the insurance policy. Agents should not have to send certificates for every contractor in their book at this time.

3. The certificate should include the below specific wording relative to the contractor’s license type.

NEWCHANGES

a. Home Improvement Registration – “The Commercial General Liability Policy represented on this Certificate of Insurance provides general liability coverage for home improvement contracting operations subject to the terms and conditions of the policy ”

b Residential License – “The Commercial General Liability Policy represented on this Certificate of Insurance provides general liability coverage for residential home contracting operations subject to the terms and conditions of the policy ”

c Mold Remediation License – “The Commercial General Liability Policy represented on this Certificate of Insurance provides general liability coverage for mold remediation operations subject to the terms and conditions of the policy ”

For additional details about the different types of residential contracting licenses and their insurance requirements, please reference IIABL Technical Advisory 301.

Educate,Cover&Compare WithTheRLIPersonal UmbrellaPolicy

This article highlights RLI's personal umbrella insurance, offering essential added liability coverage beyond standard policies for unexpected events.

JAMIENEWCHURCH

IIABL DIRECTOROF INSURANCE PROGRAMS

Life can change in an instant. A personal umbrella insurance policy helps protect your clients against the unexpected events that can wreak havoc on their family, finances, and their future. The Big “I" has the market you need, RLI's stand-alone personal umbrella! RLI is rated A+ by A.M. Best and has partnered with the Big I for 30+ years!

RLI's PUP stands atop the existing homeowner and auto insurance to provide an extra layer of personal liability protection for the insured and their household. With the current state of the insurance market, RLI allows the insured to maintain their auto or home coverage with any company they choose, provided they agree to maintain the mandatory minimum underlying coverage limits. See application for underlying coverage requirements.

Educate Your Customers About the Benefits of Personal Umbrella Insurance

Your customers might not be aware that their current auto and homeowners insurance policies may not be enough to cover a lawsuit or judgement against them. A personal umbrella policy will substantially increase your customer’s overall liability coverage beyond the basic coverage provided under homeowners and auto insurance policies. Below are some real-life scenarios on the benefits of a personal umbrella policy.

Incident: In Louisiana, an insured’s teenage son was driving his younger sister and her friend when he lost control of the vehicle and hit a telephone pole. The friend permanently lost the use of her right arm and suffered severe brain injuries resulting in permanent brain damage. Outcome: The claim was settled for more than the insured’s auto policy would cover. Without the Personal Umbrella Policy, the insured would have had to pay $1 million out of their own pocket.

PERSONALPOLICY

Continued from page 14

Incident: The insured hired a friend to replace and install a new dock on the lake behind his house. During the construction, the friend requested some trees be removed in order to get the old dock out of the water. The insured used a backhoe to knock down the trees. In doing so, a limb hit the friend on the head and neck. Outcome: The underlying insurance coverage limits were paid out, but there was still a balance of $800,000 for the claim. The RLI Personal Umbrella policy paid out the remaining $800,000, avoiding any out-of-pocket expenses for the insured.

Cover Your Clients with the Big "I" Personal Umbrella

The RLI PUP program can provide protection for the insured and their household. The policy may be written either in the name of an individual, in the names of both spouses, or in the names of two unrelated individuals as long as they reside in the same household. The insured's spouse and members of the insureds household who are relatives or are in the insureds care and custody are insured under the policy.

YourSpookiestInsurance QuestionsAnswered

This article dives into spooky insurance stories, like a denied cleanup claim for a deceased tenant pollution exclusions can haunt

BENALBRIGHT IIABLCEO&PRESIDENT

October is spooky season, and people must be getting into the spirit, because we’ve gotten some seemingly Halloween-themed questions from members. One called me to get advice on a claim. Their client owns a building which is leased, and the tenant unfortunately died and wasn’t found for some time. The insurer is now denying a claim to remediate the bodily fluids which had seeped into the wood of the structure based on –cue scary music-a pollution exclusion!

Well, agents have asked me about a lot of claims scenarios, but this was a new one, on me. So I turned to Virtual University (our national database for insurance questions and knowledge) for help. VU can be a great resource if your agency has a question on underwriting, claims, or any of the other spooky horrors that insurance can throw your way: Association for Independent Agents | Virtual University. As it happens, VU had an article on exactly this subject:

I See Dead People...Are They Covered?

Author: VU Faculty

While it's an unpleasant topic to consider, sometimes people pass away in their homes and their bodies are undiscovered for weeks. Decomposition can lead to decay and loss of body fluids. Similarly, the clean-up costs for firearms-related suicides can cost thousands of dollars. Are these clean-up and removal expenses covered by homeowners policies or is coverage removed via the pollution exclusion?

Here are three recent questions received by our "Ask an Expert" service:

SPOOKYINSURANCE

"My insured had a tenant die in one of his units. The body went undiscovered for a few weeks and there was a good deal of decomposition of the body. Some of the bodily secretions were absorbed into the floor and a specialized firm was called in to clean up the apartment at a cost of $6,000. The insurer has denied coverage under the pollution and "fungus" exclusions. I know of another company that has paid this type of claim but am looking for ammunition to argue for coverage with this insurer."

"We had a property claim where a person died in an apartment and decomposed a bit before discovery, causing property damage to the rental unit. In the past, they had had a suicide and the carrier covered the loss. Our carrier is citing a biological pollution exclusion in their policy as a reason to deny the claim. I maintain that the damage is water (fluid) damage and we are at odds. Exclusions exist for a purpose, does anyone know what this particular exclusion was designed to address? I'm sorry I do not have the form number. Also, would there be coverage under an HO tenants form?"

"A MA agent had a problem where a client died...and unfortunately wasn't discovered immediately (10 days had elapsed). The person started to decompose on the wall-to-wall carpeting. The agent called the insurer asking if the restoration/cleanup vendor could begin work. The bodily fluids kind of create a 'biohazard' mess. The client wanted an answer before work began. The company adjuster said 'go ahead.' Of course that adjuster now has a 'memory lapse' and claims he never authorized the cleanup.

SPOOKYINSURANCE

Continued from page 18

"The company wants to deny this HO-3 claim under the 'pollution' exclusion. After some argument by the agent who said he had called to get permission, the insurer states they are 'making an accommodation' but that it isn't really covered. Number one...it appears they 'waived' their right to deny the claim by giving the go-ahead. There was no reservation of rights letter.

"Number two...do you have any ammunition of court cases regarding this supposed 'pollution' claim? I remember years ago one of my Maine agents had such a problem...but that was when the policy excluded 'contamination'...and with some discussion they decided that the intent of the exclusion was not for this type of loss.

"I don't believe the intent of the pollution exclusion is for this type of loss. Can you lend some specific examples should this happen again? I told the agent to take the accommodation...then a precedent is set for future situations anyway! But, a more specific example for future reference would be helpful."

Although you'd think this has been litigated before, under either homeowners or commercial property (or BOP) policies, I couldn't find any readily available court cases, at least using the search terms I tried. I ran this by the VU faculty and their divergent responses are provided below.

Read the rest of the article here.

ScaryInsuranceHorror

StoriestoTellintheDark

This article warns of reallife insurance horror stories, like Joe's crash that went from bad to worse due to minimal coverage prepare wisely!

CHRISTINE LACAGNINA

TRUSTEDCHOICE AUTHOR

It doesn’t have to be Halloween to hear horror stories, or at least not in the insurance world. If you’re lacking the proper coverage when disaster strikes, the situation can quickly and easily turn into a much bigger nightmare. That’s why it’s so important to be prepared for the worst, even when things seem eerily peaceful. Fortunately, an independent insurance agent can help you find the exact coverage you need to help you rest easy.

Sadly, these folks didn’t have a happy ending to their stories. Check out a few recaps of some insurance horror stories that turned dramatically worse without adequate coverage, and how having the right insurance could have easily helped save the day for all of them.

A Truly Horrific Crash

When Joe first signed up for car insurance, he wasn’t anticipating that he’d ever have to actually use it one day. To avoid the legal penalties, he purchased just the bare minimum amount of coverage required in his state. With protection from a liability standpoint, he figured he was ready to hit the road and never look back. As long as Joe kept paying his monthly premiums on time, it never occurred to him that anything could go wrong.

It never occurred to him until one day when Joe had to go pick up groceries during a heavy rainstorm. As thunder cracked and lightning flashed overhead, he greatly misjudged the amount of time it would take to bring his car to a stop on the wet pavement, and wound up slamming into the back of a brand new BMW that was waiting for the light to turn.

The woman in the BMW got severe whiplash, and the trunk and rear bumper of her brand new luxury car were completely crushed. Joe’s ten-year-old Honda Accord was totaled, and even though his airbag deployed, he still suffered a broken collarbone and a broken wrist from his hand slamming against the dash.

INSURANCEHORROR

To make matters worse, since Joe was automatically at fault for the rear-end collision, his measly minimum auto insurance didn’t fully cover the incident He ended up having to pay a large chunk of the expenses out of his own pocket, further adding insult to the injuries If only Joe had been more prepared

How Better Car Insurance Could Have Helped

Though all car accidents are tragic to some extent, the one Joe was involved in didn’t have to turn into the absolute nightmare it did. If he’d been covered to a fuller extent, his bank account wouldn’t have had to take a massive hit. For starters, with collision coverage, Joe would’ve been covered for the damage to his own vehicle. Collision coverage protects drivers from the following:

Collisions with other vehicles

Collisions with objects like trees, signposts, fences, and buildings

Single-car accidents like skidding and running off the road

Without collision coverage, Joe was stuck paying out of pocket for the replacement of his own vehicle. If he’d worked with his independent insurance agent to purchase adequate collision coverage ahead of time, he could’ve saved himself a lot of money, and a throbbing headache.

INSURANCEHORROR

Also, if Joe would have increased the limits under the bodily injury liability section of his policy, the injuries to the woman in the BMW would have been fully covered. Bodily injury liability coverage reimburses for expenses arising from injuries you cause to a third party while operating your vehicle. Since injuries are often expensive, it’s critical to have adequate coverage. Coverage includes medical payments, ambulances, and more.

A Terrifying Workplace Incident

Once upon a time there was a small retail business that didn’t bother to purchase workers’ compensation insurance. Despite coverage being mandatory in most states, the owner of the business was infamous for performing sketchy operations all around. So when it came to protecting his team, he figured the safety video shown when they were first hired was good enough.

But one day that theory was put to the test. As workers were busy gathering customer orders in the warehouse at the back of the store, the forklift suddenly malfunctioned when it was extended to its fullest height. The two workers operating the forklift fell several feet down to the concrete floor, crushing the two other employees who’d been trying to help them from below. All the workers had to be rushed to the hospital and treated for serious injuries including broken bones, deep cuts, and a couple of concussions. That’s when the business’s owner ended up with a real nightmare on his hands.

INSURANCEHORROR

Without workers’ comp coverage, not only did the hospital bills have to come directly out of his own pocket, but the families of the injured employees also sued. He finally learned his lesson, though it was already much too late.

How Workers’ Compensation Could Have Helped

If the retail store’s owner would have purchased workers’ comp like he should have before ever hiring employees, he could’ve saved himself a great deal of trouble Workers’ comp is designed to protect employees from illness, injury, or death while performing job-related activities, but it also protects business owners from a legal standpoint if an incident happens.

Workers’ compensation covers the following:

Medical care: Workers’ comp reimburses employers for medical care of their employees, including doctors’ office and hospital visits, rehabilitation treatment, medications, diagnosis fees, long-term treatments, and more.

Employee wages: Workers’ comp provides reimbursement of hourly or salary wages that an employee loses while out of work due to workplace injury, illness, or disability.

Legal protection: If an injured or deceased employee’s family sues the business, workers’ comp offers protection by covering attorney and court fees, as well as settlements the business may be ordered to pay.

Benefits: In the event of a disability or death of an employee, workers’ comp may pay out a lump sum benefit. If the employee was killed, the benefit would be paid to their dependents.

Funeral costs: If an employee dies on the job, workers’ comp may provide reimbursement for final arrangements and ceremonies.