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SPRING 2012 | VOL. 1, NO. 2

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People You Know. Service You Trust.® Atlanta-based Engle Martin & Associates, Inc. specializes in independent loss adjusting and claims management services. The privately-held firm provides national, comprehensive property and casualty claims services through three distinct divisions: EMA–Loss Adjusting, EMCAS–TPA/Claims Management, EMC–Claims Consulting. The internal controls of Engle Martin Claims Administrative Services (EMCAS) have been certified as being in compliance with the American Institute of Certified Public Accountants’ Statement on Auditing Standards (SSAE16).


SPRING 2012 | VOL. 1, NO. 2

CONTENTS CLAIMS REVIEW Report: Tornado and Hail Risk Extends Far Beyond Great Plains States 8 Head Injuries Most Common Injury in Teen Crashes 10 Fraud Focus: State Legislatures Make Headway in Battle Against Fraud 12 Made-Whole Interpretations Leave Insurers Feeling Empty 14 Sharing Information to Recover Stolen Cargo 18 SPECIAL REPORT Seeing Green: Defining Undefined Loss Exposures 20 Claims Tales from Joplin 22 The Population Cost 28 Tips on Commercial Roofing Evaluations 31 IDEA EXCHANGE Good Faith in Handling First Party Property Claims 32 Temporary Housing Provides a Permanent, Needed Service 34 How to Improve Risk Management with Better Claims Data 36 When to Allocate Defense Costs in Covered and Non-Covered Claims 38 Essentials: Examinations Under Oath 40 2012 Guide to Claims Education & Training 45 Final Offer: Cyber Risks 54

4 Claims Journal | Spring 2012





CLAIMS DEPARTMENTS 6 Opening Note 10 Dollars & Sense 13 People 16 Snapshot 17 Business Moves 42 Web Exchange 43 Calendar of Events 54 Final Offer


Spring 2012 | Claims Journal 5


Seat at the Table


isaster response is at the core of the claims professionals’ mission and purpose. It is in times of disaster when claims adjusters can mean the most to policyholders. As we approach the one year anniversary of one of the most devastating tornado disasters of all time— the EF-5 (Enhanced Fujita Scale) tornado that struck Joplin, Missouri, on May 22, 2011 — the industry and communities nationwide should think about how to better prepare and respond for the next ‘As we look to 2012 catastrophe. we need to work Part of that preparation is ensuring that homeowners and tenants have together as a team.’ coverage in place with adequate limits to restore their lives after a natural catastrophe. Yet, despite the critical benefit that insurance provides in a post-disaster world, many people will continue to forgo purchasing needed coverages. This is where U.S. governmental emergency management teams must step in. But while the Federal Emergency Management Agency (FEMA) makes news headlines for responding — or even not responding — to natural catastrophes, the private sector is often overlooked. FEMA’s top leader says the story of the private sector’s role in disaster response is one that’s often untold. “When we look at the disasters last year, the unreported story was how the private sector was a part of the recovery team,” said Craig Fugate, FEMA’s top administrator. The private sector should be engaged early and often in preparing for and responding to natural disasters like hurricanes, Fugate said. That means teamwork between the federal government and the private industry. “We need to give the private sector a seat at the table,” Fugate told participants at the recent National Hurricane Conference in Orlando. “The sooner we can get private businesses — and government-backed infrastructure — up and running, the sooner communities will recover.” Governmental emergency management teams should work inclusively with all partners to meet the needs of the whole community when responding to and recovering from disasters, he said. Fugate discussed the work that federal, state, local and tribal governments and voluntary organizations do on a regular basis in preparation each year. He also focused his remarks on the importance of engaging the private sector early and often. “Last year proved that the effects of hurricanes can impact areas beyond just the coast,” Fugate said. “As we Andrea Wells look to 2012 we need to work together as a team, with all Editor-in-Chief our partners, the private sector and the public to ensure that communities are prepared no matter where tropical storms impact.”

6 Claims Journal | Spring 2012

Editor-in-Chief Andrea Ortega-Wells | Editor Denise Johnson | Vice President Content Andrew Simpson | Insurance Journal East Editor Young Ha | Insurance Journal Southeast Editor Michael Adams | Insurance Journal South Central Editor/Midwest Editor Stephanie K. Jones | Insurance Journal West Editor Don Jergler | Insurance Journal International Editor Charles E. Boyle | Associate Editor Amy O’Connor | Columnists Steven Plitt Contributing Writers Steven Brewer, Anthony Canale, Kenneth Gilvary, Howard Goldblatt, Hobart Hind, Janakiraman Jagannathan, Paul Koepff, Stephanie Moore, John Schleiter, Jeremy Smith, Lori Widmer

SALES V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 Claims Journal/Southeast Howard Simkin (800) 897-9965 x162 West Dena Kaplan (800) 897-9965 x115 South Central Mindy Trammell (800) 897-9965 x149 Midwest Lauren Knapp (800) 897-9965 x161 East Dave Molchan (800) 897-9965 x145 New Markets Sales Manager Kristine Honey | Classified Advertising (800) 897-9965 x125

MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | Advertising Coordinator Erin Burns | (619) 584-1100 x120 New Media Producer Bobbie Dodge | Videographer/Editor Matt Tolk |

DESIGN/WEB Vice President/Design Guy Boccia | Vice President/Technology Joshua Carlson | Design and Marketing Executive Derence Walk | Art Director Jamie Bethell | Web Developer Jeff Cardrant | Web Developer Chris Thompson |

IJ ACADEMY OF INSURANCE Director of Education Christopher J. Boggs | Online Training Coordinator Barbara Dooley |

ADMINISTRATION Chairman Mark Wells Chief Executive Officer Mitch Dunford Accounting Manager Megan Sinclair |

Cover Photo: © Reuters 2012

FOR QUESTIONS REGARDING SUBSCRIPTIONS: Call: 1-800-897-9965 ex. 144 or You may subscribe or change your address online at Claims Journal, the National Property Casualty Claims Magazine is published quarterly by Wells Publishing, Inc. 3570 Camino del Rio North, Suite 200, San Diego, CA 92108. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. Subscription Rates: Free to qualified readers. Disclaimer: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2012 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Claims Journal is a publication of Wells Publishing, Inc. Postmaster: Send change of address form to Claims Journal, Adam Dunford, 3570 Camino del Rio North, Suite 200, San Diego, CA 92108. Article Reprints: For article reprints: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or Visit reprints for more information.


Tornado and Hail Risk Extends Far Beyond Great Plains States


any of the severe weather events that occurred outside of the Midwest in 2011, like the “Super Outbreak” of tornados that devastated much of Arkansas, Mississippi, Alabama and Virginia, were seen as an anomaly. According to CoreLogic, however, historical data suggests that the frequency and severity of storms is more widespread than commonly believed. CoreLogic, a provider of information, analytics and business services, released a new tornado and hail risk report that analyzes the risk associated with changing tornado and hail weather patterns outside of the narrow corridor in the Midwest known as “Tornado Alley.” Tornado Alley is typically considered to encompass the Great Plains states and surrounding areas, spanning Texas, Oklahoma, Kansas, Nebraska, Colorado, North Dakota, South Dakota and Illinois. The report, “Tornado and Hail Risk Beyond Tornado Alley,” discusses the impact of record-breaking hazard events across the country in the past year, and provides insight into the extent of severe tornado and hail risk in geographic regions beyond the Great Plains. “The apparent increase in the number of incidents and shift in geographic distribution of losses that occurred last year in the U.S. called the long-held notion of risk concentration in Tornado Alley into question, and is leading to changes in

8 Claims Journal | Spring 2012

risk management policy and procedure,” said Dr. Howard Botts, vice president and director of database development for CoreLogic Spatial Solutions. The perceived increase in the frequency and severity of tornado and hail events in recent years could be attributed to a number of factors, including improved observational tools, broadened geographic distribution of modern Doppler radar stations, population growth and migration to suburban areas. Disaster news reporting 24/7 via television, online coverage and social media have affected public awareness and likely heightened sensitivity to severe weather events in recent years. There also is growing scientific evidence that there has been an increase in severe weather outbreaks as the result of rising global temperatures. Beyond Tornado Alley Tornado risk actually extends across most of the eastern half of the United States, rather than being confined to the Midwest. At least 26 states have some area facing extreme tornado risk. Estimated property damage within the Tornado Alley states from 20002011 was approximately $2.5 billion. In comparison, the 16 states located outside of Tornado Alley with the next highest numbers of tornado touchdowns totaled nearly $15.5 billion in property damage.

Those states extend as far north as parts of Minnesota and as far south as Florida. Hail Damage At least 11 states have significant areas facing extreme hail risk, and almost every state east of the Rocky Mountains has some area facing a moderate or higher level of hail risk. The area of highest hail risk extends outward from the central Great Plains to include states as far east as Georgia and the Carolinas. Hail storms in Tornadoes the Tornado Alley nsured losses from the region caused approximately $4.3 tornadoes, hail and high billion in property winds that struck in late damage and nearly February and early March $1 billion in crop may climb into the $1 billion damage between to $2 billion range, according 2000-2011. The 16 to catastrophe risk modeling states with the next firm EQECAT. It is estimated that more highest amounts of than 150 tornadoes touched hail damage outside down in two distinct sysof Tornado Alley tems between Feb. 28 and revealed about $3.2 March 3, EQECAT said. billion in property At least 13 states were damage and $400 affected by the storms. million in crop damMany of the tornadoes age over the same have been rated EF3 on the time period. Enhanced Fujita Scale, acFor a copy of the cording to Risk Management report, visit www. Solutions (RMS). CJ CJ


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Head Injuries Most Common Injury in Teen Crashes

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The $7.8 billion settlement deal struck by BP Plc with businesses and individuals suing over the massive 2010 Gulf of Mexico oil spill could speed up payments to thousands of claimants and offers lawyers a potential windfall in legal fees. BP has already paid out about $6.1 billion to compensate about 220,000 plaintiffs from the Gulf Coast Claims Facility, or GCCF, a trust fund administered by Kenneth Feinberg. The latest settlement will be in addition to that.

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mong the more than 55,000 teen drivers and their passengers seriously injured each year in 2009 and 2010, 30 percent suffered head injuries, including concussion, skull fractures and traumatic brain injuries (TBI), according to a new teen driver safety report released by The Children’s Hospital of Philadelphia (CHOP) and State Farm Insurance. While the report highlights a decline in teen driver-related fatalities in the past six years, researchers are concerned about the burden of motor vehicle crashrelated brain injury on families and the nation’s health care system. Crashes remain the leading cause of death for teens and kill nearly five times as many 15- to 19-year-olds as cancer or poisoning. “Since full recovery from serious head injuries is often not achievable, there can be a significant life-long impact from these injuries on teens and their families,” said Dr. Dennis R. Durbin, lead author of the report and co-scientific director for the Center for Injury Research and Prevention at The Children’s Hospital of Philadelphia. “The brain is the organ that is least able to heal, so prevention is the best medicine.” In 2010, 1,849 fewer teen drivers and their passengers perished in crashes as compared to 2005, according to the report. Researchers said this is a substantial public health achievement for those 10 Claims Journal | Spring 2012

State Farm Insurance averages about 800,000 catastrophe claims annually, with payouts averaging $3.8 billion. In 2008, when State Farm saw more than one million catastrophe claims, those losses totaled an unusually high $6.3 billion. in traffic safety. The researchers noted significant variation in fatality rates among states — ranging from a low of 3.9 deaths per 100,000 teens in Massachusetts to a high of 29.1 per 100,000 teens in Montana in 2009-2010. The average annual fatality rate for all 50 states was 9.5 deaths per 100,000 teens. It’s in this variation that researchers see opportunities to realize further reductions in fatality rates. The dramatic variation is due, at least in part, to the strength of a state’s GDL law, the report indicated. Twelve states implemented comprehensive GDL policy and other programs to reduce their teen fatality rate by more than 50 percent in just six years. Six states — Arizona, Connecticut, Massachusetts, New Jersey, New York, and Rhode Island — have maintained rates of less than 10 crash-related deaths per 100,000 teens since 2005-2006. All six states have comprehensive GDL laws, according to the report. “States with comprehensive GDL laws have lower fatality rates than those with weaker laws,” said Chris Mullen, director of technology research for Strategic Resources at State Farm Insurance. “Primary seat belt laws and teenfocused initiatives to increase seat belt use will also help further reduce deaths and injuries, even if a crash occurs,” he said. CJ

1,600 Texas and Oklahoma experienced a record number of wildfires in 2011. The Bastrop fire in Texas alone resulted in more than 1,600 homes and structures being destroyed and 34,000 acres being burned. Persistent and intensifying drought conditions forecast for a large section of the United States for the coming year is expected to intensify and spread wildfire activity in early 2012.

18 Statistics released by the National Weather Service show that 18 Arkansans died in floods in 2011 — the largest amount out of any state in the nation. The state with the second-highest fatality number resulting from floods was Pennsylvania, with 16. Out of all the surrounding states, Missouri had the highest amount with three deaths.

25,083 A recent report from the National Insurance Crime Bureau (NICB) identified 25,083 insurance claims for theft of copper and other metals compared with only 13,861 identified from the 2006-2008 report — an 81 percent increase. The top five states that generated the most metal theft claims, according to the recent report, are Ohio (2,398); Texas (2,023); Georgia (1,481); California (1,348); and Illinois (1,284).







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State Legislatures Make Headway in Battle Against Fraud By Howard Goldblatt


awmakers in several states are trying to squeeze crash rings that bedevil auto insurers with bogus injury claims. Shady wheel deals steal billions of dollars each year. But reforms have no certainty of passage despite large public benefits, as interest group politics can poison the best proposals. Florida, New Jersey and Michigan are three hotspots. There, staged crash rings and rogue clinics are being targeted. Especially, several bills would whack the recruiters (also called runners) who send the gangs patients. Some of these bills tackle an emerging trend: Parasitic recruiters are badgering real crash vicA proposal aims to tackle the exploitatims for treatment at shady clinics. tion of crash victims and stymie sleazy This scam diversifies the old busitactics aimed at recruiting crash victims ness model of stuffing a car with cronies to sham clinics. Two proposals would who pretend they’re injured to soak auto get rid of unwanted phone calls, knocks insurers. Real crash victims are now on doors, letters and other pushy tactics. cash cows as well. Consumers thus may The temporary freezes would last for receive substandard, inflated or unneces- 30 days after a crash. Often-traumatized sary treatment at sham clinics. victims thus will gain time to choose the Florida. The Sunshine State is best medical and legal options without a ground zero for no-fault fraud in the pushy recruiter bugging them. The proviUnited States. sions would: Widespread stagedRestrict broad Real crash victims are •solicitation crash rings are of crash bleeding no-fault invictims; and now cash cows for surers. Clinics often access to poauto insurance fraud. •liceLimit are shams designed accident reports, solely to churn out which recruiters use dishonest injury claims. Two-car families to identify and locate crash victims. pay a nearly $100 fraud tax each year, the Meanwhile, a separate auto provision Insurance Information Institute said. unrelated to crash rings would make it a Promising anti-fraud reforms passed crime for drivers to illegally lower their as part a larger no-fault bill March 10. As auto premiums by lying about where a result, clinics will face tighter licensing they garage their vehicles. standards. Medical providers convicted Michigan. Two measures could help of fraud could be booted from the noMichigan battle crash gangs. First, the fault system. And insurers will have governor has signed a bill making it a more time to investigate claims before crime to recruit for crash rings, and for paying. The right of insurers to conduct the kingpins to hire recruiters. examinations under oath was reaffirmed. A second measure would create an New Jersey. Shady no-fault clinics auto fraud prevention authority. Michihave sprouted around the Garden State. gan’s lack of a fraud bureau has ham-

12 Claims Journal | Spring 2012

pered efforts to take down crash rings. The unit would fund investigations and prosecutions. Drivers would fund the unit with higher vehicle registrations. There is a broader trend cropping up with greater frequency among states of fraudsters lassoing bona fide crash victims for fake-injury schemes. This is another way for crash gangs to diversify their illicit revenue streams. State houses are taking two counter-approaches: • Block access to crash reports. • Limit solicitation of victims. Texas blocks most solicitation of any kind. Florida limits access to crash reports for 60 days. Georgia forbids reports to be used for “commercial purposes.” But similar bills have fizzled in other states recently. Ironically, police have stymied crash report bills in several states, possibly because they are protecting revenue they earn from selling reports. Protecting crash victims from being victimized needs far more attention, study and protective legislation. The well-being of policyholders and continued large losses for auto insurers both are on the line. CJ Goldblatt is the director of government affairs for the Coalition Against Insurance Fraud. Website: www.


PEOPLE Cincinnati, Ohio-based Great American Insurance Group promoted Aaron Latto to senior vice president. He will lead the property and casualty group’s corporate claims function and will be responsible for oversight of all U.S. and international claims operations, including execution of claims strategy, philosophy and quality management. Latto joined the company in 2010 as a divisional senior vice president in the corporate claims division in Cincinnati. Prior to joining Great American, Latto was a vice president with Travelers Insurance, where he managed the business torts claim organization. Prior to that, he was a lawyer in private practice, with a concentration in nationwide representation of insurers.

Before joining Harleysville, Phillion spent 31 years with OneBeacon Insurance Co.

Pennsylvania-based Erie Insurance promoted Bill Matrogran to vice president of claims training. He will focus on continuing to improve the claims organization’s technical skills and enhancing development opportunities. Matrogran has been with Erie since 1993, and most recently was section supervisor for property and subrogation. In addition, Jim Vrooman was promoted to vice president of crisis prevention and management. He will lead Erie’s business continuity, disaster recovery and facility security groups. He has been with Erie since 2011 and most recently was director of crisis management.

OneBeacon Insurance Group Ltd. appointed Maureen A. Phillips senior vice president and general counsel. Phillips succeeds Brad Rich in this role, who will continue with the company until his retirement later this year. Phillips’ legal career within the insurance industry spans nearly 30 years. She was most recently chief legal officer at Allianz Life Insurance. She also previously worked for Fairview Health Services and St. Paul Travelers.

Edgewood Partners Insurance Center (EPIC) has added Hilton Brown to oversee client claims and advocacy in the company’s Los Angeles and Irvine, Calif., offices. Brown will also provide claims support for sister company PowerGuard Insurance Services, located in Irvine. Brown brings 22 years of claims management and client advocacy experience to EPIC. Before joining EPIC, he spent nine years with Marsh Inc., where he managed client advocacy, negotiations with insurers and adjusters, vendor relations, settlement support, and claims oversight for general liability and property loss throughout Marsh’s western region. Harleysville Insurance named David J. Phillion assistant vice president of planning and analysis. He will be responsible for information technology (IT) finance and budgets, IT governance and process improvement, project management office methodology, and the processing, reporting and tracking of corporate performance metrics.

Ohio-based Mariposa Insurance Services promoted Stacey Henry to vice president of field services and client relations, where she will be responsible for managing all field adjusting operations performed for insurance carrier clients. She is responsible for the deployment of adjusters, managers, quality assurance staff, and all equipment and infrastructure to respond to large natural catastrophes such as hurricanes, wildfires or earthquakes. Henry joined Mariposa in 2005 as review manager and subrogation specialist, and most recently served as senior manager of field services.

John Elbl was appointed vice president of AIR’s Business Development Group. He will assist with service and support for AIR’s commercial insurer clients, as well as aid in developing software and models to better meet the needs of commercial insurers. Elbl joins AIR after 13 years with Zurich Insurance.

Aaron Latto

Bill Matrogran

Jim Vrooman

Pat Van Bakel was appointed chief operating officer of Crawford & Co. (Canada) Inc. In his new role, he is responsible for services supplied to the Canadian property and casualty insurance market. Van Bakel has been with the company for more than 20 years and most recently served as senior vice president, operations, insurer markets.

Hilton Brown

Polygon, provider of temporary humidity control and disaster restoration services with 23 offices in North America, named Jeran Hopkins director of Large Loss. Hopkins will be responsible for directing sales for large commercial losses within North America and play a lead role in Polygon’s catastrophe response programs. He will report to John Campanelli, president of North America and Asia for Polygon, and will be based in the company’s Dallas office. CJ

David J. Phillion

Spring 2012 | Claims Journal 13


Made-Whole Interpretations Leave Insurers Feeling Empty By John Schleiter and Hobart (Hobie) Hind


here is a growing trend among state courts to interpret the made-whole doctrine in ways that have the potential to make it difficult for insurers to effectively exercise their subrogation rights. In recent years, state courts’ decisions have increasingly created hurdles for insurers before they are able to actively pursue recovery for payments made to their insured. These requirements could have a potentially chilling effect on the field of insurance subrogation. The most recent state to join this trend is Arkansas. In 2011, the Supreme Court of Arkansas decided Riley v. State Farm Mutual Automobile Insurance Company 2011 Ark. 256 (2011). In its decision, the court held that before an insurer could initiate an action for subrogation, the insured must be “made whole.” While the made-whole doctrine is not a novel concept in the insurance arena, this court took a very novel and narrow approach as to when an insured has been made whole. The court ruled that there are only two ways to determine whether an insured has been made whole: 1) by a declaration in agreement between the insurer and insured that the latter had been made whole; or 2) by a judicial determination. One of these two events must occur before a subrogation lien can even arise, and premature pursuit of a subrogation action before either one of these events occurs is automatic grounds for dismissal for failure to state a claim, and the possible award of fees and costs in favor of the defendant.

in a property claim is different from that analysis in a medical claim, workers’ compensation claim, liability/indemnity claim and auto claim. Using a typical property claim as an example, if the property carrier has paid 100 percent of the money it owes to its insured under its policy, what valid reason is there for not allowing the carrier to pursue its rights of recovery? Likewise, if an insured is asking for damages that are not provable or not recoverable, why should a valid subrogation claim ever stand behind that claim in pursuit of a tortfeasor?

Ruling Concerns What is troubling about this ruling is that in cases in which insureds refuse to admit they have been fully compensated for an injury, the insurer is forced to have the issue fully litigated before it is able to commence a recovery action. In effect, this opens the door for those insureds to become unjustly enriched by way of double recovery if the insureds receive payment from both the liable tortfeasor and their insurer who determines that it is not worthwhile to pursue litigation to obtain a judicial determination before pursuing a recovery action. The ruling has the potential to create the very outcomes that the laws of subrogation were first created to prevent. In addition, while the Riley case involved a medical payment benefit (hence the word “lien” in this case), it would be easy for courts to apply this case across all lines of recovery within the insurance industry. As all claims professionals know, the analysis of when an insured has been “made whole”

Burden of Proof It is troubling to survey cases in every state that have discussed the made-whole doctrine to see how seldom the courts “drill down” to the core concepts of what “made whole” means within each genre of recovery across the insurance landscape. The court’s ruling in Riley also left unanswered the question of who has the burden of proving an insured has been made whole. While the circuit court ruled that it would be left to the insured to prove that she had not been fully compensated for her injury, the Supreme Court of Arkansas did not address the issue. The issue of who has the burden of proving whether the insured has been made whole is unclear in other states as well. For example, in a recent Montana state court case involving an insured’s action to prevent the insurance company from enforcing its subrogation rights, the court noted that “it appeared” the burden fell on the insurer to prove that the in-

14 Claims Journal | Spring 2012

sured had been made whole, but did not address the issue any further. Poppleton v. United Services Automobile Association, 2011 Mont. Dist. LEXIS 52 (18th Dist. 2011). Determining which party carries the burden of establishing whether an insured has been made whole may have a large impact on whether an insurer decides to pursue litigation for a judicial determination. Other state courts have applied a similarly strict definition of when an insured has been made whole. For example, Montana courts have ruled that an insurer is precluded from bringing a subrogation action when the insured has independently negotiated a settlement agreement with a tortfeasor for less than the insured’s total loss. The reasoning behind the ruling is the same as is applied in Arkansas — the insured was never made whole. Montana Ruling Instructive of the position of Montana courts on this issue is the Supreme Court of Montana’s decision in Swanson v. Hartford Insurance Company of the Midwest, 2002 Mt. 81 (2002). The court ruled that the insurer had no subrogation rights even after noting that the tortfeasor’s “limits of liability exceeded the amount of the settlement reached between the [insured] and the [tortfeasor].” This ruling effectively allows an insured to negotiate a settlement with a third party without giving any consideration to its insurer’s rights to subrogation. By agreeing to settle a claim for less than the total amount of the damages sustained by the insured, the tortfeasor effectively insulates itself from further liability in a subrogation action. This ruling leaves insurers without any recourse to recover payments made and, again, allows for the possibility that the insured will receive double payment. As is evident from this situation, the subrogating carrier, having fulfilled each and every obligation it has to its insured, may still be powerless to seek recovery even when there is no true public policy argument against recovery (one could see a valid public policy argument against recovery where a tortfeasor has very low liability policy limits and where the insured’s uninsured losses exceed those limits).

The National Association of Subrogation Professionals (NASP) is aware of these and other threats to an insurer’s right to pursue subrogation. To this end, NASP’s Amicus Committee has developed and implemented the Subrogation Rapid Response Team (SRRT) to respond to proposed legislation and recent decisional law that has the potential to negatively

affect subrogation rights. For information, visit CJ Schleiter is an attorney and partner in the Chicago office of Grotefeld, Hoffmann, Schleiter, Gordon & Ochoa LLP. Hind is an attorney and partner in the Tampa office of Butler Pappas. Both work extensively on property subrogation matters, are members of the National Association of Subrogation Professionals board of directors.


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Spring 2012 | Claims Journal 15


Before and After: Beatles Poster Value: $3,000 Treatment Cost: $800


he damaged Beatles poster was brought to The Conservation Center due to an impact in which a client inadvertently threw the poster away in the trash. Once recovered, a paper conservator responded to the tears by relaxing the deformations in the sheet where it was torn and crumpled. The poster underwent passive humidification treatment in a Gortex package. It was then placed between cotton blotters to wick away moisture while it flattened under weights. The tears were carefully realigned and mended using Japanese tissue and wheat starch paste, an archival adhesive. The poster was then backed to a secondary mount, which offered structural support for the compromised paper and kept the poster flat. Finally, areas of loss to the printed inks were retouched to reduce the visibility of the damage. CJ

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LWG Consulting LWG Consulting has merged with Newark, N.J.-based Electronic Loss Consultants. Prior to the merger, Electronic Loss Consultants, managed by Stephen Aghaei, offered equipment loss consulting and equipment restoration services to insurance claims professionals primarily along the East Coast of the United States. With this merger, LWG added Stephen Aghaei as a senior technical consultant, based out of the Newark office. Aghaei joins LWG with more than two decades of experience providing evaluation and assessment of electronic and electrical equipment following disasters. Trinity Insurance Services Group Trinity Insurance Services Group, a national independent adjusting and third-party administration firm, has added office locations in Austin, Houston, Dallas and San Antonio, Texas. With the recent purchase and integration of Axcel Claims, the company has an adjusting staff of 65 to handle Texas claims. Mutual Service Office (MSO), Mariposa Insurance The Mutual Service Office Inc. (MSO), a property/casualty rating service bureau, has partnered with Mariposa Insurance

Services Ltd., an independent adjusting firm. For more than 15 years, Mariposa has offered catastrophe and daily adjusting services to insurance companies through a nationwide network of adjusters. Mariposa specializes in daily property and casualty claims and complete catastrophe support.

against losses from individual hurricane events in Hawaii, Puerto Rico and along the Gulf and Eastern Coasts of the United States. Additional details regarding Assurant’s Catastrophe Reinsurance Program for 2012 will be announced after the placement of the program with reinsurers this summer.

Assurant Assurant Inc., a provider of specialty insurance and insurance-related products and services, announced that some of its subsidiaries have entered into reinsurance agreements providing for $130 million in three-year, fully collateralized reinsurance from Ibis Re II Ltd., a special purpose reinsurance company domiciled in the Cayman Islands. Bonds issued by Ibis Re Ltd. in 2009 for $150 million will expire in May 2012. Ibis Re II financed the property catastrophe reinsurance coverage by issuing $130 million in catastrophe bonds to qualified institutional buyers. The coverage complements Assurant’s traditional catastrophe reinsurance, which provides protection from catastrophic storm activity. As a component of Assurant’s comprehensive risk management program, the Ibis Re II reinsurance consists of two separate layers of coverage for protection

Symbility Solutions, MSB Symbility Solutions acquired Marshall & Swift/Boeckh’s (MSB)’s claims division, including contracts, claims employees, software and analytics assets. In consideration for these assets and a cash investment, MSB’s parent company, Decision Insight Information Group, will become the largest shareholder with a one-third equity stake in Symbility’s parent company, Automated Benefits Corp. Symbility Solutions and MSB will integrate their property claims workflow software, claims loss estimating solutions and process analytics. MSB also has entered into a long-term strategic license agreement with Symbility to integrate MSB’s claims estimation data into Symbility’s mobile claims software. Decision Insight is a TPG Capital portfolio company, and representatives of both organizations will join the Automated Benefits’ board of directors. CJ Spring 2012 | Claims Journal 17


Sharing Information to Recover Stolen Cargo


n the past several years, cargo theft has evolved from a regional opportunistic problem to an organized national epidemic. From the 1970s through the mid-1990s, local gangs would target a high-value trailer here and there, and its contents would be distributed back into the local gray market. Nowadays, international crime syndicates use a more organized approach that includes taking orders from gray and black market outlets, conductBy Anthony Canale ing surveillance (and counter-surveillance), and executing thefts professionally and eďŹƒciently at a warehouse or while cargo is in transit. Cargo theft costs the U.S. economy billions of dollars per year and is paid for by manufacturers, retailers, insurers and consumers. To combat this costly problem, the property/casualty insurance industry launched a CargoNet initiative in 2010 as a way to overcome the data-sharing challenges between the public and private sectors. Through collaboration between the National Insurance Crime Bureau and Verisk Crime Analytics, CargoNet helps to prevent cargo theft and to improve recovery rates using secure and controlled information sharing between theft victims, their business partners and law enforcement. The utility and security of the system encourages insurers and policyholders to provide quick, detailed information that can be quality controlled, shared with law enforcement, and made part of the CargoNet database. At CargoNet’s core is a national database and secure information-sharing system managed by crime analysts and subject-matter experts. By applying a synchronized, layered approach, CargoNet exploits the weakness of cargo thieves at multiple points through integrated databases, a theft alert system, task force and investigations support, and a tractor/ trailer theft deterrence program. Since cargo theft incident data collection began in 2010, the amount of reported incidents has grown significantly each year. In 2011, CargoNet collected 1,215 cargo theft incidents from across the United States — a 23 percent increase from data collected in 2010. However, the increase in theft data collected does not necessarily indicate an increase in the cargo theft problem. Instead, it reflects the improved collaboration between the public and private sectors. While data comparisons between 2011 and 2010 may not necessarily provide full insight into theft growth trends, the overall data is still telling. Following are statistics from 2011 and lessons that insurers should draw from the data. Cargo Theft by Location The top states where cargo theft incidents were reported in

2011 include California, Texas, Florida, New York/New Jersey, Illinois, Georgia, Tennessee and Pennsylvania. Top States for Reported Cargo Theft Incidents in 2011 State Reported Incidents California 304 Texas 173 Florida 146 New York/New Jersey 147 Illinois 88 Georgia 76 Tennessee 32 Pennsylvania 29 These states report more reported cargo theft incidents than others, first, because of their geographic locations; these states have a high flow of cargo because they include large cities, active ports, transit choke points and distribution centers. Second, most of these states have dedicated cargo theft task forces, so they are more likely to report cargo thefts than a local police department, although recoveries also are higher. As public safety budgets shrink, such task forces will be under significant budgetary pressure, and the insurance industry must be prepared to find new and innovative ways of supporting law enforcement. Putting better policyholder and claims reporting mechanisms in place is a good starting point. Cargo Theft by Day of Week and Location Type The days with the highest number of reported cargo theft incidents in 2011 were: Friday, Saturday, Sunday and Monday. Days With Highest Reported Cargo Thefts Day Reported Incidents Friday 211 Saturday 195 Sunday 183 Monday 164

Most theft likely occurs over the weekend because most businesses are closed and warehouses are unstaffed, forcing many drivers to hold cargo until the next business day. As a result, some drivers may leave full trailers unattended at truck stops (139 reported incidents), warehouses or distribution centers (122), public parking lots (115), and carrier or terminal lots (94). Understanding that the most critical time in a cargo theft investigation is the first 24 hours, insurers need to assess their capabilities to operate 24/7 to support policyholders. Cargo Theft by Commodity The top product types stolen in 2011 were prepared foods and beverages; electronics, base metals; and clothing and accessories. Top Product Types Stolen in 2011 Product Reported Incidents Foods and Beverages 242 Electronics 224 Base Metals 115 Clothing and Accessories 104 These four commodities have always been near the top of the

list of most-stolen commodities because they are easily sold on the gray and black markets. The past two years have shown an increase in the theft of base metals because of the rise of base metal value within the economic marketplace. Different types and layers of security are needed for different shipments — one size does not fit all. Underwriters can influence such decisions. Cargo Theft by Loss Value The total loss value for cargo theft incidents reported to CargoNet in 2011 was approximately $123 million. Of that total, electronics had the highest total loss value at approximately $58 million; clothing and accessories had the second highest loss value at about $14 million; and prepared foods and beverages had the third highest loss value at approximately $12 million. To effectively mitigate cargo theft losses, information sharing between theft victims, their business partners, and law enforcement must continue to improve. Information sharing not only helps recover stolen cargo, but it also helps transportation companies optimize security measures and prevent cargo theft. CJ Chief of Police (Ret.) Canale is general manager of CargoNet, a division of the Verisk Crime Analytics unit. Website:


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Spring 2012 | Claims Journal 19


SEEING GREEN: Defining Undefined Loss Exposures in Green Construction

As eco-friendly building and renovating increases in popularity, the adjusting community tries to wrap its arms around what exactly constitutes damage.


green heating system that doesn’t heat. LEED-certiThe crux of the complaint was Gifford’s contention that green fied units that meet fewer than half the requirements energy was not more efficient than regular energy options. for certification. Clients suing construction firms The $100 million suit was dismissed because the court found because of lost tax breaks from promised green buildings. that the plaintiffs in the class action suit did not show Welcome to green construction. Even as the green conUSGBC caused them any harm. Still, Gifford has managed to struction movement is taking wing, legal get the industry talking about what constiexperts are warning of the dangerous green and just what is bought when Courts and insurers tutes territory ahead. one purchases a LEED-certified property. Some such territory includes lawsuits What seems to be the most telling statestruggle to define like this: A builder is sued by the client ment by the ruling judge Leonard Sand green construction. because the client lost a tax break for spells out one of the primary issues with Leadership in Energy and Environmental green construction: “Because there is no Design (LEED) certification, because the building ultimately requirement that a builder hire LEED-accredited professiondid not meet the LEED level asked for by the client. Other als to attain LEED certification, it is not plausible that each lawsuits include a luxury condominium complex in Batcustomer who opts for LEED certification is a customer lost tery Park City, N.Y., where its owners are suing developers to plaintiffs.” for $1.5 million for fraud and breach of contract, stating the building isn’t as green as advertised. The Uncertainty of ‘Green’ Probably the most prominent lawsuit was one filed against That speaks to the crux of the green problem. What makes the U.S. Green Building Council (USGBC) by Henry Gifford, a building green and who’s deciding it? That question still owner of Gifford Fuel Savings. He claimed the organization goes unanswered as courts and insurers alike struggle to wrap committed fraud, created unfair competition, practiced definitions around green construction. For a building to be deceptive trade practices and engaged in false advertising. certified as a LEED design, it must meet a checklist of require-

20 Claims Journal | Spring 2012

ments, and the point values assigned to each requirement ers, he said, are writing endorsements and providing property determines the level of certification. insurance specific to the green construction exposures. While Aside from a LEED certification, the definition of “green” such coverage will be at a premium, that premium may be becomes a bit more dicey. According to the California Demodestly higher. Farber has a client currently who will pay partment of Resources Recycling and Recovery (CalRecycle), just 5 percent over a standard endorsement due to the size “A green building, also known as a sustainable building, is and level of green in the building. a structure that is designed, built, renovated, operated or Premiums aside, what constitutes loss seems to be the largreused in an ecological and resource-efficient manner. Green er question. Farber gives the example of an expectation of a buildings are designed to meet certain objectives such as gold-standard building, but having a silver-standard property protecting occupant health; improving employee productivdelivered. “Is the damage based on the loss of the gold, or is it ity; using energy, water and other resources more efficiently; limited to the costs of bringing that up to the gold standard?” and reducing the overall impact to the environment.” he asked. Just what those objectives are and Separating what is a green-related loss what constitutes “resource-efficient” use and a traditional loss is a sticking point for What constitutes a has yet to be defined clearly. many insurers. Jim Cooper, co-chair of the Policyholder Insurance Group at Gardere green-related loss Feds Offer No Help Wynne Sewell LLP, said insurers will often and a traditional loss deny coverage for building defects or when Don’t look to the federal government to clarify things. is often at question. something goes wrong that damages the The Environmental Protection building itself or the product installed. Agency’s own definition of green building, presented in 2008, Cooper, who works with builders and contractors, said he is “the practice of maximizing the efficiency with which hasn’t seen much case law just related to LEED or green buildings and their sites use resources — energy, water and projects. materials — while minimizing building impacts on human health and the environment, throughout the complete The Million-Dollar Question building life cycle — from siting, design, and construction to How do we determine damages? With few cases to turn to operation, renovation and reuse.” for precedent, experts think that answer is a long way from There’s a reason for being vague, and Stephen Del Percio perfected. Cooper said he would examine a defect in this way: thinks it’s a good thing. “Is that the product not working or the product damaging Del Percio, a construction and real estate attorney in New something?” The former is a product claim; the latter could York who blogs regularly on green property issues, thinks be a green claim if “the failure to work properly diminishes the definition should match the needs of the owner and any the value of the building or causes the owner to evacuate the regional circumstances. He explains: “In the desert Southbuilding for a significant amount of time.” west, a green building could be one that doesn’t consume Cooper said many green property policies do cover loss of a lot of water.” He said LEED certification now comes in a use and can cover diminution of value. What he sees as chalregional credit system to address where the building sits and lenging is finding the property damage. what those needs are. Del Percio sees the same problem. “If a building doesn’t Even who is ultimately deciding what the standard is has earn certification, do you look at what the per square foot valquestion marks surrounding it. Lawyers, in Stuart Farber’s ue of a LEED rating is versus a non-LEED? The real problem view, are working out the details case by case and contracthas been there hasn’t been a case where this kind of scenario by contract. Farber, CEO and chair of Preferred Concepts, has played out.” an insurance services and program administration firm, said Without clear parameters, insurance adjusters and the there’s plenty to work out. Including direct financial loss, insurance industry are left to define damages on a case-byzoning and ordinance noncompliance, lawsuits and legal case basis. Forget looking to claims history — according entanglements are beginning to blossom. to Del Percio, there have been only very few claims to date “Many lenders, both mortgagees and in some cases leases, under insurance policies. Most of those claims have related to are requiring a targeted LEED rating,” Farber said. “If that is advanced building systems used in green construction. not met, where’s the breach? Where’s the damage? Who pays The challenge for adjusters and the insurance industry, he for it? And who’s responsible?” said, is to understand what those technologies are, how they Also, the owner of the green building is paying for green work, and what their performance shortcomings have been. construction, Farber said, which comes at a higher price tag. “Most of the issues that sustainable construction presents Materials costs, construction techniques, industrial hygiene, are within new technologies and advanced technologies that and LEED architect/engineering help jack-up the costs people may not have familiarity with at this point,” he added. quickly. All of these elements and more become relevant Contracts, he believes, will be the ultimate deciding factor. when upgrading or building within green standards. “How [green] is defined is going to be in the contract between How this affects insurance is still fleshing itself out. Insurthe owner and professional.” CJ Spring 2012 | Claims Journal 21


JOPLIN How Insurance Adjusters Helped Missouri Tornado Victims Cope By Denise Johnson

22 Claims Journal | Spring 2012


... said Steve Keeney, catastrophe response team adjuster for Shelter Insurance, describing the aftermath of the devastating EF-5 (Enhanced Fujita Scale) tornado with winds more than 200 mph that struck Joplin, Missouri, at 5:41 the evening of May 22, 2011. Emergency responders from 14 states aided Missouri’s fourth largest city after the spring storm wiped out a third of the community, causing 161 deaths. More than 500 residential properties, 35 miles of roadway and 700 city blocks were destroyed. Also, 1.2 million cubic yards of debris had to be cleared from 2,700 lots. Police sought the help of insurance claims adjusters, cross-referencing policyholders making claims with their list of the missing. Dean Welton, catastrophe claims field manager for the Madison, Wis.-based American Family, grew up in southern Missouri. He was on his way to visit field adjusters in Minnesota when he had to turn around and head back to Missouri. Having worked in the catastrophe department since 2003, he’s seen his fair share of devastation, but nothing prepared him for Joplin. It took a day to drive down and another day to get to the scene due to access issues, Welton said. In addition to using its cat vehicle, his company set up shop in local agents’ offices. Many of the hotels were already booked with displaced homeowners, so the adjusters stayed in the neighboring towns of Springfield and Rogers, Ark. “When I first arrived down there, a lot of the local office adjusters and local field management were at one of the offices up on the north side of Joplin,” Welton said. “Usually in other situations, in other tornadoes, you talk to one or two people that have lived through this traumatic situation but in Joplin, it was everybody you talked to. Everybody had felt the brunt of the storm.” According to Welton, half the city was gone. He compared the scene to a war zone. “It was just a situation that, again, in most tornadoes, continued on page 24 © Reuters 2012

Spring 2012 | Claims Journal 23


Claims Tales, continued from page 23

you can see where a tornado hits a neighborhood or hits a certain area of the town, but usually, it’s pretty concentrated the damage is. But with Joplin, it was just like the whole city ... a bomb had been dropped, and just blew. It was like you were watching CNN in a country that was experiencing warlike conditions, and not something a tornado would have happen. It was pretty mind-blowing,” Welton said. “I’ve been with the ‘cat’ department since 2003, so I’d worked several tornadoes, and several of them large, but nothing like this.” Comparing an average catastrophe loss to Joplin, while it usually takes a half-day to locate the perimeter of the loss, it took almost three days because of access issues and the scope of the damage. Welton estimated that claims involving homes that were a total loss were resolved within 10 days to two weeks. Contents losses took longer. Normally, adjusters working catastrophe losses put in 12-hour days. In this case, American Family’s cat team worked 16- to 18-hour days. American Family’s catastrophe response team processed nearly 2,300 claims and paid more than $100 million in property, auto and commercial claims. Keeney, the adjuster with Shelter Insurance’s catastrophe response team, was already in the Joplin area handling hail claims when the skies began darkening that fateful Sunday. “On Sundays, we typically work two or three claims,” Keeney said. “I was on my last one at about five o’clock, just a few miles north of Joplin. It had been an extremely hot and

24 Claims Journal | Spring 2012

humid day. The humidity was so high that you just knew that it was eventually going to result in a rain. It was one of those things in the back of my mind I kept thinking, eventually once it comes, it’ll bring some relief to that humidity and knock it down a little bit. So along about four o’clock or so, I could see that the sky was getting dark, and the storm was coming in.

‘When you start seeing all these people going through what they’re going through, it just kind of takes your breath away.’ “I had just finished my last roof at about 4:30 or 5, and I was staying over in Springfield, Mo.,” Keeney continued. “Rather than come down and hit I-44 coming through the heart of Joplin, I decided to take some back county roads because the storm looked so dark that I thought I would avoid driving through the heavy rain and try and get ahead of it as I was heading east back towards Springfield. Then once I got back to Springfield at about 6:30 and turned the TV on, then [I] realized that what I had [seen] and what I was trying to get ahead of was in actuality the F5 tornado.” Keeney put in 12-hour days and worked Joplin claims for seven months. “I was there right up until the week before Christmas, working three week straight rotation and then five days off, and then back for another three weeks,” he said. “This thing was just like a tsunami of wind that just leveled everything in its path. There was no structure standing; 7,000 structures were leveled — businesses, hospitals, office complexes, apartments, sheds, garage, outbuildings, trees, shrubs. There was virtually nothing left standing,” Keeney said. Elisabeth Sobczak, a trainer with property claims experience, drove Shelter Insurance’s storm van down to Joplin on Sunday evening. She was one of the first to arrive on the scene along with emergency medical personal. “It didn’t seem chaotic. It just seemed like people were trying to get their world back,” Sobczak said. She helped storm victims change tires, and provided food, water and even handed out trash bags so people could collect their belongings. “It would amaze you the value of a Hefty bag. Their possessions are just everywhere and those that were lucky enough to have it, still on their property … were trying to pick through the debris to see what they could salvage, and it was only what they could carry in their arms because they had no place to put it. People were crying, saying thank you because they at least had a place to start collecting their belongings,” she said. Sobczak described holding Joplin residents who needed someone to listen and a shoulder to cry on.

Some Frustration with Payment Delays, Reductions “You hug people and you don’t let go. You let go when you feel them let go,” Sobczak said. The day after, Sobczak described a big black wall cloud that unleashed a powerful rain and hail storm to the already weary Midwestern town. Joplin ended up being under a tornado watch most of the week after the initial tornado struck. “For days on end it just kept looking like another tornado was going to fall out of the sky,” Sobczak said. “People … were just traumatized. Some people didn’t know where to begin. They were very thankful for their lives. There was anger in some.” She described an 18- or 19-year-old girl whose mother was found underneath a car in her house. The teen had to identify her mom’s body. “Here’s a young lady who had to identify her mom,” Sobczak said. “It’s very sobering because it really brings to light people’s mortality.” Larry Potalivo, a catastrophe adjuster with Crawford & Co., a global independent adjusting firm, was assigned to Joplin about two weeks after the EF-5 tornado struck. He stayed there for two months. “I’ve never seen the kind of destruction that I’ve seen there. It was overwhelming,” he said. In the hardest hit area, he saw there were very few homes with walls that were still standing. A hospital was destroyed. “There was just no safe place to be in a house in an EF-5 tornado,” Potalivo said. He described another incident where the powerful tornado threw a car into a family home. “There was a man and his 30-year-old son, and they were in their house. They heard the noise, that freight train sound that continued on page 27


hile insurers responded quickly after the tornado struck Joplin, issuing payments for destroyed homes within weeks, they took longer to resolve contents payouts. According to Ron Richard, a Missouri state senator who sponsored legislation (SB 619) designed to address the issue, there is a loophole in Missouri law regulating how insurers calculate payouts on homes destroyed in disasters. Currently, insurers are required to pay out the full value of a homeowner’s policy for both real and personal property if the home is a total loss and destroyed by fire. But other disasters like tornadoes aren’t covered by that. “Insurers only have to pay what the home is worth at the time of the loss. When the housing market is down, as it is now, people are getting far less for their homes than what they paid on their policies,” Richard said. His legislation also addresses contents claims issues where insureds have no inventory or where it has been destroyed. “They [insureds] also have to provide an itemized list of all their personal property, and justify the value, to receive their personal property coverage from the insurer,” Richard said. “This is simply not right. People who have lost everything — their home, their possessions, in some cases their livelihoods — should get the full value of their policy.” The bill proposes to modify the state statute to include wind or tornado disaster, requiring insurers to pay policyholders the total face value of the policy for loss or damage to a home from any disaster covered under the policy without claiming diminished value on the property. Larry Potalivo, a catastrophe adjuster with Crawford & Co., recommends policyholders keep an inventory list in a safe deposit box to avoid content claims delays. Missouri’s insurance director is reviewing the bill. CJ

Researchers Explore Joplin Residents’ Coping Strategies


he May 22 tornado that hit Joplin, Mo., killed 161 people, and it also affected thousands of others physically and mentally, according to Drury University researchers. The Springfield, Mo., school is analyzing how survivors dealt with the physical, mental and emotional stress in the aftermath of the tornado. The Joplin Project, led by psychology professor Jennifer Silva Brown, and her students, interviewed and submitted surveys to 80 Joplin tornado victims last fall. The researchers hope the questionnaire will help them determine if the victims were suffering from depression, anxiety, post-traumatic stress disorder or other stress-related maladies. “We’re trying to distinguish those who are struggling from those who are resilient and healthy,” Brown said. “We

also look at how survivors coped with the tornado, by asking if they turned to such things as exercise, prayer, interaction with friends or family, and use of drugs and/or alcohol. The ultimate goal is to understand which characteristics promote a healthy adjustment to postdisaster life.” Brown’s students are just beginning to draw conclusions from the resulting statistics. “Those individuals that report the greatest satisfaction with their social support actually report the lowest levels of psychological distress. So they report the lowest levels of depression, anxiety and post-traumatic distress. Those individuals also report the greatest resilience over time,” Professor Brown said. “We can actually say social support is instrumental in fostering psychological help following a disaster.” CJ Spring 2012 | Claims Journal 25


1.2 million cubic yards of debris cleared from 2,700 lots.

Shelter Insurance spent about $72 million on approximately 2,200 Joplin claims. More than 40% of Joplin residents affected by the tornado were tenants who had no renters insurance.

7,000 structures leveled 600 FEMA trailers currently house displaced tenants. More than 500 residential properties, 35 miles of roadway, and 700 city blocks destroyed.


Emergency responders from 14 states came to Joplin’s aid.

Joplin Tornado Losses (as of Jan. 31, 2012)

Claims Received 2,043 8,437 314 6,721 292 1,477 19,284

26 Claims Journal | Spring 2012

Line of Business Commercial Property Residential Property Commercial Auto Private Auto Other Commercial County Mutuals Total

Losses Paid $780,048,881 $503,774,104 $4,197,591 $46,811,709 $13,050,359 $61,789,887 $1,409,672,531

Source: Missouri Department of Public Safety

Lessons Learned After the Storm Claims Tales, continued from page 26

everybody talks about,” Potalivo said. “He grabbed his son and they ran down to the basement, and the next thing he knew his son was pulling him out from underneath the car that had come through their house and into their basement.” Both miraculously survived with minor injuries. Potalivo described the glazed look in the eyes of survivors, which he likened to that seen in soldiers who have suffered through battles with fatal consequences. Potalivo spent two hours with a distraught 74-year-old widow who never dealt with insurance matters before. He sat down with her under a tree and just let her talk through the ordeal. “I get a lot of satisfaction out of helping these people and seeing the look in their eyes when they realize that I actually care about their lives and are trying to get them back together again,” Potalivo said. “That goes a long way to being successful in this business in that when people feel that you care about them, they are going to be much


ore than half of Americans don’t have a home inventory of their possessions, according to a February 2012 survey from the National Association of Insurance Commissioners. This was highlighted by the many Joplin residents who were underinsured when the tornado destroyed homes and apartment buildings. “Some consumer issues we were not able to help people with because they simply did not have an adequate amount of coverage,” said Missouri Insurance Director John M. Huff. Of the 7,000 people who were displaced within the tornado zone, slightly more than 40 percent had no insurance, said Steve Keeney, a Shelter Insurance catastrophe adjuster. “That resulted in the 600 FEMA trailers that are now on the north side of Joplin to house and accommodate those that were displaced,” Keeney said. The insurance issues have spawned a consumer awareness campaign, Huff said. CJ

‘You hug people and you don’t let go. You let go when you feel them let go.’ more inclined to be appreciative and to let their agents and their insurance companies know that this person went out of their way to help me out. It makes me do a better job and makes for a better situation.” . The tornado was the largest insurance event in state history, according to Missouri Insurance Director John Huff. The final payout on insured losses will be just shy of $2 billion. Slightly more than $1 billion had been paid within just 100 days after the tornado struck. “The claims in the personal lines private passenger auto and homeowner claims, those are very close to final resolution. Some of the commercial claims take longer to resolve,” Huff explained. That schools opened in time for the fall semester was a sign of the spirit and dedication of Joplin residents, Huff said. To recognize the city’s rebuilding efforts, President Obama is expected to give the commencement speech to Joplin High School’s 2012 graduating class. CJ Spring 2012 | Claims Journal 27


Weather events and natural disasters seem to be striking the very core of our population as towns disappear and cities are rocked. Yet what’s the real cause of damages? By Lori Widmer


n March 2, 2012, tornadoes ripped through 10 Southern and Midwestern states, killing 39 people. Fueled by a warm winter, the storms leveled neighborhoods and in a few cases, obliterated entire towns. At this writing, the National Oceanic and Atmospheric Administration (NOAA) estimates a total of 42 tornadoes were recorded that day, although numbers are expected to climb as high as 100. Storms are turning more deadly, it would seem. According to data from NOAA, the number of events exceeding $1 billion in damages has spiked from four events in 2010 to 14 events in 2011. Damages in 2010 were in the $50 billion range. In 2011, that number skyrocketed to $200 billion. Why, instead of brushing by metropolitan areas, are tornadoes taking a direct path through towns, destroying entire communities in a few short minutes? No clearer was this demonstrated than in Joplin, Mo., where a tornado struck in 2011, killing 160 people and wiping out nearly one-fourth of the town. The final expected insurance bill for the storm is about $2.2 billion. Likewise in Greensburg, Kan., where in 2007 a tornado leveled the town of 1,574 people, killing 11, damages were $260 million, but the real cost was to the

28 Claims Journal | Spring 2012

community. More than half the residents had to relocate rather than rebuild. Can the increase in devastation and cost be blamed on more violent weather patterns? Not necessarily, say the experts. In fact, there are enough human and economic factors contributing to the rise in storm damage to say that perhaps weather and natural events aren’t necessarily to blame at all. For example, a 2000 U.S. Geological Survey shows that New Orleans is sinking at a rate of one-third inch per year. Warnings had been up long before Katrina came to town about the city’s potential for disaster should a Category 4 or greater hurricane make a direct hit on the city, which is effectively sitting at the bottom of a fishbowl. When Katrina hit New Orleans, it was a Category 3 storm. While many continue to point at failures in the emergency response systems and post-Katrina federal response, the crux of the problem was that the city was, and remains, exposed daily to flood risk not from hurricanes, but from damage to the flood walls that sit above the city, the very walls that were breached immediately following Katrina. Katrina became the costliest hurricane in U.S. history, coming with a damage price tag of $108 billion.

Seismic Population Shifts Much of the increase in losses from perils seen over the past three to four decades is due to socioeconomic factors in the United States, said Mark Bove, senior meteorologist in the Risk Accumulation Department at Munich Re America. He said that as populations move toward coasts and southern locales, that exposes a greater population to hurricane and severe thunderstorm events. Urban and suburban sprawl are also factors, Bove said. With growing populations come dense accumulations of exposure that are more susceptible to the impact of storm damage. “A tornado that 20 years ago would have gone over an open field is now hitting a new residential development,” he said. Increased property values, as well as the increase in real property values and accumulation, also have contributed to higher claims payouts. So has the amount in personal property, as people acquire more high-ticket items and electronics. Electronics in particular, Bove said, have contributed to a rise in lightning-related loss. It’s also about where we build, Bove said. “We have a tendency to build in coastal areas that are vulnerable to storm surge and high winds due to hurricanes, and we also continue to build in flood

plains, as well.” Moreover, some state building codes do little to improve the situation. “Building codes in many states are not sufficient to protect homes from relatively weak windstorms, and some don’t have statewide residential building codes at all,” he added. The state has to enforce the rules it puts in place. However, enforcement hasn’t always been consistent, leading to more exposure. According to the Institute for Business and Home Safety (IBHS), while some coastal states are doing a good job of adopting and enforcing stronger building codes, some are falling far behind. The IBHS report, titled “Rating the States: An Assessment of Residential Building Code and Enforcement Systems for Life Safety and Property Protection in Hurricane-Prone Regions,” said five of the nation’s most vulnerable states garner less than a 50 percent rating in areas such as adoption, enforcement and contractor licensing requirements. Of the 18 coastal

states measured, only Florida, Virginia, and New Jersey scored higher than 90 percent (95 percent, 95 percent and 93 percent, respectively) on the IBHS scale (See “Room for Improvement” on page 30). Costlier Claims, Better Response Steve Hatch, chief claims officer at Zurich North America Commercial, sees population density along the coastlines as areas of concentrated vulnerability. With 139 million people exposed to storm damage and flooding, the effects on claims costs are significant. Hatch thinks it’s a combination of the increasing costs, frequency and magnitude of storms. “We are in a period of heightened severe weather activity as evidenced by the recent serious tornado outbreak which looks similar to what we experienced in 2011,” he said. Supply chain interruption is a cost, he said, as well as demand on much-needed supplies and qualified repair and remedia-

tion contractors. Volume, he said, drives cost. “The challenge is what would have been a less-costly claim becomes more costly and complex because of the time it takes to get even the basic repairs done.” He uses the example of Katrina, where repairs had to wait until water was channeled away from damaged properties and business and homeowners returned to an evacuated and devastated city with limited utilities and municipal support. Still, not all ills can be traced to population shifts. Russ Opferkuch, managing director of Aon Global Risk Consulting, thinks the increase may be slightly overstated. “Are exposures truly increasing or is it that we’re recognizing and quantifying them better or differently?” he asked. “Or is it that things like FEMA flood zone maps are being updated and areas that weren’t in flood zones before are now?” He believes these inherent changes are in part showing

Spring 2012 | Claims Journal 29


up as increased exposures. As Hatch said, preparedness is evolving, as well. As new twists and experiences occur, adjusters add to their best practices and build that experience into their models. Adjusters, he said, have to be able to react quickly, be flexible in handling claims and have specialized knowledge of CATs, including how to communicate with customers when there are power shortages and limited access to telephones or email. “As an industry, if we’re not able to react quickly to that changing environment, it becomes more complicated for our customers and the industry,” Hatch said. Richard Pankhurst, head of claims for PriceWaterhouseCoopers, sees preparedness improving, as well. Pankhurst, who is an expert in flood research, particularly in Australia, said government social cost benefit analyses can be used to create regulations that keep flood areas from being used in ways that could create high losses. That regulation, along with pricing,

helps. Pankhurst said the insurance industry’s supplying of claims history and data has helped the government with the creation of these tighter regulations. He said that pricing of insurance products is another way the industry controls people moving into highly exposed areas. In his ideal world, communication would be at the core of any disaster plan. “If I had communications at my fingertips, the ability to understand and have access to policy information, all the tools I’d need as a claims adjuster, better access to a repair network, mobilization of people in the field as quickly as possible, that to me would be the ultimate,” he said. There’s already a great response by some insurers, Pankhurst said, with companies putting buses with computer stations, cell phone capabilities and satellite uplink capabilities, speeding the claims gathering and response efforts. “The insurance industry has responded in a really nice way with these catas-

Room for Improvement


cross the insurance industry, adjusters and insurers alike are better prepared to respond when disaster strikes. However, damage trends recorded by the Insurance Institute for Business and Home Safety (IBHS) shows a steady increase. According to the IBHS, the reasons are a “disproportionate number” of residents along coastal areas, and the equally disproportionate cost of homes in coastal areas. According to AIR Worldwide data, coastal property values in 2007 are $8.9 trillion, or 17 percent of all insured property in all states. Yet current building codes are lacking. Of 18 coastal states, only three get a near-perfect rating by the IBHS. The organization measured state building codes in 18 coastal states with regard to hurricane damage. The results are shown to the right. CJ

30 Claims Journal | Spring 2012

trophe teams, plus this is how the industry can be a value-added part of the economy — just by helping people.” Hatch said the problem goes beyond national borders. Disasters in other parts of the world can create costly claims in terms of supply chain and business interruptions. The response, Hatch said, must be the same. “When you think about an earthquake or a hurricane, there can economic impacts worldwide regardless; it doesn’t really matter where it happens,” he said. “For a global insurer like Zurich, many of our customers in North America were impacted by the tsunami in Japan. Manufacturers, for example, had significant interruptions in their supply chains. It really demonstrates our global economy and how interconnected commerce is today.” Pankhurst agrees. He said the best response comes from an increased awareness on the ground by everyone involved. “Around the world, the key to disaster recovery is to get the right people on the scene as quickly as possible.” CJ


Tips on Commercial Roofing Evaluations By Kenneth R. Gilvary


ommercial roofing is one of the most demanding areas for expertise in the insurance industry today, as there are millions of commercial structures and hundreds of different roofing systems and variations in application. The history of a building’s roof may have a significant influence on its performance. There may be multiple layers of roofing on a single building, and the materials and their applications have changed over the years. Roofing Systems The three most common roofing systems are built-up roofing, modified bitumen roofing and single-ply roofing. Built-up roofing comprises multiple layers of felt sandwiched together with molten asphalt, and typically covered with a protective coating or a roll-roofing cap-sheet. Built-up systems offer redundancy because of layers of reinforcements. Modified bitumen roofing systems normally comprise a felt base sheet covered with a modified bitumen cap sheet. The modified bitumen cap sheet comprises reinforcement coated with asphalt mixed with a plastic or rubber to make the bitumen more tough and tear-resistant. The modified bitumen is covered with a protective coating such as aluminum-rich paint or granules to protect it from sun exposure. Single-ply roof systems comprise a variety of plastics and rubbers: ethylene propylene diene monomer (EPDM), thermoplastic olefin/polyolefin (TPO) and polyvinyl chloride (PVC). These systems are single-layer applications of roofing sheets bonded along their seams with heat or adhesive. The seam bonds keep water from infiltrating the roofing. Singleply systems are designed for direct exposure to sunlight. When evaluating a roof system it is important to determine the constituents and attachment of the system. Hail Damage Hail storms typically have a predominant fall direction.

The direction can be determined by examining building features on and off the roof. Hail can leave spatter marks on oxidized surfaces, such as electric junction boxes, and often leave evidence of impact as dents in metals such as air-conditioner cooling fins, roof vents and flashing. Roofing surfaces exposed to the predominant direction of hail-fall will exhibit damage first, and this damage should be the most severe. Roofing systems installed over softer substrates are more susceptible to hail than those installed over stiffer substrates, which provide additional resistance to hail. Further, areas of ponded water can accelerate the deterioration of roofing membranes and make these areas more susceptible to impact. Evaluation of large hail strikes against built-up and modified bitumen roof systems often requires the removal of roofing cores, which are transported to a lab. There, the sample is examined under magnification and the bitumen is removed from the core with solvent to examine the reinforcing for strain and tears characteristic of impacts. Hail damage to single-ply roofing systems typically is discernible in the field, but it may be helpful to remove cores from the roofing and examine certain areas with a microscope and/or high intensity backlighting to identify fractures caused by hailstone impacts. Wind Damage A building has widely varying force levels on its roof surfaces, and it is reasonable to expect the most severe wind damage to occur at the windward corners and edges of the roof where wind forces are the strongest. Building codes require more uplift resistance capacity for roofing in these areas. It is not uncommon for roof fastener patterns on shoreline structures and tall buildings to require 50 percent more fasteners along the edges and 100 percent more fasteners in roofing corners than in the field of the roof. If wind forces have reached levels strong enough to damage the common commercial roofing systems, there typically is some combination of lifted, torn, and/or peeled back roofing concentrated where wind forces are the strongest at the windward edges and corners of the roof. Additionally, examine roofing at roof penetrations looking for wrinkles and tears or any other evidence of roof membrane displacement. If roofing failure has occurred at wind speeds less than expected, examine and document the roof system attachment within those areas. Often premature failure occurs due to inadequate fasteners, inadequate adhesion, or some combination of the two. Situations such as these may be significant subrogation opportunities. The layers of roofing, their attachments and their performance tell the story; we just have to know how to read it. CJ Gilvary is a senior engineer at Haag Engineering. Spring 2012 | Claims Journal 31


Good Faith in Handling First Party Property Claims By Denise Johnson


f there is one thing that is the scourge of claims handlers, it is the allegation of bad faith. And contrary to what insured attorneys want their clients to believe, breaches of good faith are rarely on purpose. It’s “usually a sin of omission, rather than commission,” according to Michael A. Troisi, a partner at Rivkin Radler. “It’s not one thing. It’s usually a perfect storm, a confluence of events that allows a lawyer down the road to spin it.” Carriers have a duty of good faith because the policy of insurance is an adhesion contract that is non-negotiable, according to Troisi. Typically, bad faith occurs as a result of a delay in decision or action, an unfair or unreasonable value or as a result of a coverage issue, he added. With regard to day-to-day claims handling, it is difficult to have every piece of paper and log entry dissected. “It’s not possible to do everything perfectly,” Troisi said. “It’s what is reasonable. There is no such thing as a perfect claim file.” If bad faith is alleged, it is usually the result of an error, something missed or a mistake, he said. “The goal is to try to minimize those things.” In addition, there is the difficulty in dealing with insureds who may have unreasonable demands, according to Tony Clark, vice president of the property claims department for Allianz. He recommends claims handlers discuss a difficult situation with a supervisor, even if an adjuster may be operating within his or her authority, when an insured disagrees

32 Claims Journal | Spring 2012

with an insurer’s stance. Adjusters must know an insurer’s claim handling guidelines. “Know them, study them,” Clark said. If a task is set out in the guidelines and an adjuster has failed to do it, the adjuster risks having that error caught in a deposition. It is important to approach each claim with an open mind. “Too many times I see pre-determination made in log entries,” Troisi said. “Avoid pre-determination of coverage until the investigation has been conducted and evaluation has been made.” Common Bad Faith Issues Some issues related to bad faith allegations include claims involving engineers. While both parties may retain an engineer, some adjusters choose to ignore findings of an insured’s engineer. “What you do with that report and how you handle it and what you say about it reflects a fair and balanced investigation,” Troisi said. Bad faith allegations frequently arise out of undue delay. “Delay is the killer,” Troisi said. “Half or more involve delay.” Some carriers are reluctant to pay anything until all issues are resolved. “[Carriers may be] reluctant because some believe it funds a lawsuit against you, doesn’t matter, you don’t want to be in bad faith,” Clark said. Yet another issue involves lowball offers during settlement negotiations. “Pay the insured what you think the claim is worth,” Clark said. “If you don’t, the first thing they will do after a [bad faith] lawsuit is filed is ask. Statutes will put you in bad faith.”

As adjusters gain experience, there can be a problem with documenting the file. While many claim scenarios appear to be similar, it’s important to note the facts unique to the loss under investigation. “When you go into a claim, you know what you have seen … Make sure to document facts,” Clark said. To assist adjusters in avoiding allegations of bad faith, consider the following tips on good faith claims handling: •Don’t ask the insured to do your job. Although there is a cooperation clause, Troisi said an adjuster “still needs to investigate a claim. If you can get something as easily as the insured can, do so.” This is where undue delay can be avoided. •“Pay undisputed amounts early and often.” Troisi emphasizes the importance of reserving rights when there is a question involving coverage. “There is no justification for lowballing an insured in the context of a first party claim,” Troisi said. “Don’t offer less than the estimate.” •Avoid crossing into the underwriter’s role. This happens when there is a crossover between claims and underwriting. •Avoid repetitive and duplicative investigation. According to Clark and Troisi, this is a favorite of policyholder lawyers because they will use it as a sign of undue delay. It frequently happens when there is a change in adjusters or when a file is referred out to counsel. To avoid this, Troisi recommends reviewing the claim file and communicating with counsel on what investigation has been completed and what is still needed. •Provide fair evaluation of the evidence. A claim file should reflect a thorough and fairly balanced investigation. “The file should always reflect how an adjuster has dealt with the evidence an insured has presented,” Troisi said.

‘Good faith claims handling is absolutely synonymous with good business.’ •Don’t handle a claim too fast. Troisi recommended avoiding unexplained delays in a claim file by documenting the cause of the delay. If a claim is handled too fast it could be a sign of prejudgment, as in a no coverage letter prepared prior to a site visit. •Remember loose lips sink ships. The claim file should include facts and reasons why certain action is taken, free of editorial comment. While every company may have a different decision methodology, problems arise when decisions come through in stream of consciousness written emails. •Do what you promise. If an adjuster tells an insured to expect a call, then the adjuster should keep his or her word. •Document. If it is not written, it did not happen, Troisi said. He recommends documenting the file in real time because it reflects that an adjuster is keeping current in the investigation and responding to correspondence in a timely manner. In the end, handling a claim fairly and in a timely fashion reflects an insurer’s respect for its customer. “Good faith claims handling is absolutely synonymous with good business,” Troisi said. “You have a right to be wrong about coverage analysis. It doesn’t mean you committed bad faith. Slipshod investigation, without a fair and balanced investigation equals bad faith.” CJ Clark and Troisi were speakers at the Property Loss Research Bureau’s Large Loss Conference in Chicago.

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Temporary Housing Provides a Permanent, Needed Service for the Claims Industry By Stephanie Moore


he insurance housing industry got its start 23 years ago when a few bright entrepreneurs realized there was a temporary housing need for policyholders who lost the use of their homes. Since the mid-1980s, a lot has changed. The insurance housing industry is helping carriers, adjusters and policyholders in times of disasters, as well as for everyday claims nationwide. The insurance housing industry continues to expand as more and more carriers find the value of temporary housing services essential to their property claims. These services provide efficiency and a choice of options that can be tailored to each claim’s needs. There are a variety of housing options for policyholders that have been displaced from their home. With many insurance housing services available 24 hours per day, seven days per week, solutions are available any time from emergency hotel services to long-term housing, providing plenty of choices for both urban and rural policyholders. Emergency hotel services accommodate policyholders with smaller losses looking to stay as little as one day in a temporary

placement. Most requests for cooking facilities, kitchenettes, pet-friendly rooms and special requirements can be accommodated. Hotels are booked at a preferred rate, ensuring cost-saving for the policyholder as well as the carrier. Long-term housing solutions include single-family homes, apartments, condominiums, townhomes, mobile homes and travel trailers for displaced families who will be out of their home for a minimum of 30 days. Strong temporary housing companies can facilitate and accommodate lease terms starting at one month. Furniture, housewares and appliances, if needed, can be included in a long-term solution. Most temporary housing companies offer financial transaction preferences, such as preferred invoicing methods and security deposit handling to fit the needs of the insurer. Temporary Housing Vendors Why choose a temporary housing vendor versus an adjuster or policyholder setting up housing on their own or using a local realtor? First, there is the benefit of time savings. Temporary housing companies are experts at placing families into short- and

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long-term housing options quickly and efficiently. Most temporary housing companies are able to secure hotel accommodations within one hour and rental accommodations within 72 hours. Temporary housing companies can accomplish this quick turnaround based on many facets — hotel and landlord networks, expert knowledge in facilitating the requested terms and leverage due to volume. Second, there is the cost-savings passed on to the insurance company and policyholders. Volume discounts for hotels, as well as furniture are passed along to the insurance company and policyholder, making it close to impossible for a local realtor or policyholder to be able to secure such unbeatable pricing.

Temporary housing companies can offer assistance to adjusters, carriers and policyholders in times of need. Finally, and arguably the most important benefit is that temporary housing companies are able to fully focus on customer service. Temporary housing companies take the stress off of the adjuster and policyholder by answering questions such as “Where do I go for the night? Will I be able to bring my pets? Or where will I stay while my home is under repair?” A temporary housing company will present an immediate and customized housing solution, putting the policyholder at ease with just one call and providing one point of contact for both adjusters and policyholders. Once the family is comfortably settled in their temporary home, customer service is available 24 hours per day, seven days per week, for any unforeseen situation that arises, making certain the policyholder is under the best of care

throughout the life of the claim. When choosing a temporary housing company, a carrier will want to consider a few key items. Coverage Area — A nationwide company handles more volume and has stronger networks; therefore, can pass on more cost-savings to the adjuster, carrier and policyholder. Customer Service Statistics — The average customer service satisfaction rating should be higher than 90 percent. Time Metrics — A strong temporary housing company should have impressive statistics on their response and placement time metrics. Questions to ask include: “How quickly does this company place a policyholder?” And “Are they available at all hours of the day for customer service for both myself and my policyholder?” Tenure of Established Business — How long the temporary housing company has been in business is important. In most cases, companies that have been in business longest have a proven track record. Catastrophe Services — The temporary housing company chosen should be capable of handling claims at every level, even the volume increase that occurs from a catastrophic disaster, so the adjuster and policyholder will be taken care of with the same exceptional timeliness and service. Temporary housing companies have been assisting the insurance housing industry for years and will continue to play an integral part in the life of property claims across the nation. The choice is left to the insurance carrier and adjuster to decide to utilize the high quality services temporary housing companies offer, which will in turn benefit all those involved in the claim. CJ Moore has been in the insurance housing industry since 2007. She is the sales and marketing director at CRS Temporary Housing, a nationwide provider of temporary housing located in Arizona. Email: Website: www. Spring 2012 | Claims Journal 35


How to Improve Risk Management with Better Claims Data By Steven Brewer and Janakiraman Jagannathan


s insurance carriers strive to achieve better financial results on their homeowners’ business line, it is critical that loss mitigation efforts are proactively managed as an enterprise initiative from both the claims and underwriting side of the business. Every potential claim that can be prevented or mitigated not only helps the carrier, but more importantly delivers a value to the policyholder. Consider how the success and failure of a mission-critical predictive model-based optimization solution for the homeowners’ field inspection program depends on the quality of data points captured by claims adjusters. Setting up the right workflow to capture comprehensive data on the cause of loss, as well as thoroughly analyzing the severity and frequency of past claims that are associated with condition hazard issues, will help carriers appreciate the magnitude of the opportunity and the critical role a claims organization plays in enterprise risk management efforts. The Business Problem U.S. property/casualty insurance carriers spend approximately $200 million per year on homeowners’ inspection programs. Historically, carriers have invested proportionately little resources in optimizing inspection operations. In the past few years, however, as carriers return their strategic focus to profitability, many are looking at their inspection program and finding opportunity to drive financial value by optimizing their approach and by focusing on condition hazards. In 2011, industry research by Marshall & Swift/Boeckh (MSB) revealed that approximately 30 percent of inspection dollars yield an actionable underwriting outcome. Essentially, 70 cents on every inspection dollar gets wasted. The majority of carriers are using random risk selection, simple home-grown guidelines or business rules engines to order field inspections.

36 Claims Journal | Spring 2012

Some forward-looking carriers, on the other hand, have developed predictive models that yield good results on predicting Insurance to Values (ITV) deviations and condition hazards. The carriers that recognized this problem, but have either abandoned the initiative or are currently struggling with the model’s performance have one factor in common: poor data quality. One of the key reasons the carriers failed in their predictive modeling efforts was the fact that critical claims information like cause of loss was not captured on every transaction, and data was not archived in a way that was fit for modeling efforts. MSB has created a framework to help carriers benchmark themselves against different levels of inspection program maturity that is experienced across the industry. The MSB Inspection Optimization Maturity Model outlines the progression path of increasing effectiveness of a carrier’s inspection program. The four dimensions that form the foundation of the assessment model are: Inspection Selection, Data Use, Workflow Integration, and Inspection Method. Each dimension includes steps of increasing sophistication up to a fully optimized approach. While each carrier’s approach is unique and may align to varying levels across each dimension, a carrier’s overall Inspection Maturity Level can be assessed by taking the average rating across all dimensions.

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The ability to rank policies based on ITV and condition hazard risks, select the right set of polices to inspect, identify the most effective inspection method, then use an automated order and fulfillment process represent the optimized state of inspection management. Carriers who advance the maturity levels with the homeowners’ inspection program are transforming their inspection operations into a strategic profit center. Over the next two years, it is predicted that a significant number of carriers will see inspection optimization as a key competitive differentiator and quickly mature their approaches to enjoy the significant financial and operational benefits. Based on a recent survey (250 respondents) conducted by MSB, data showed that 79 percent of the homeowners insurance industry continues to have a significant upside opportunity in optimizing inspection processes. The impact from proactively identifying and mitigating condition hazards is significantly higher than the returns from ITV premium uptick. A company’s predictive model’s ability to effectively identify and quantify condition hazards risks depends on good historical claims data.












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Spring 2012 | Claims Journal 37


When to Allocate Defense Costs in Covered and Non-Covered Claims By Paul R. Koepff


t is commonplace for an insured to incur defense costs with respect to defending against covered and non-covered claims. This may happen, for example, when the plaintiff asserts negligence claims and also intentional tort claims, or where there are claims for conduct that are uninsurable or excluded but other claims that are potentially covered. As the claims are being defended, the amounts incurred in defending covered and noncovered defense costs escalate. Seldom, if ever, does the insured or its defense counsel segregate or allocate defense costs for covered claims and defense costs for non-covered claims. The claims handler for the insurance company must decide whether and to what extent the insurance company will indemnify the insured for defense costs in this situation. Understand the Policy Claims handlers should be The starting point is the policy, which may contain a provision that expressly permits the insurer to allocate defense costs between covered and familiar with applicable policy non-covered claims. Under New York law, an allocation provision controls. language and applicable law See Clifford Chance LLP v. Indian Harbor Ins. Co., 14 Misc. 3d 1209(A), 2006 WL 3821841, at *3 (Sup. Ct. N.Y. Co. Dec. 27, 2006), aff’d, 41 A.D.3d 214, 838 N.Y.S.2d when determining whether 62 (1st Dep’t 2007). Therefore, where the insurance policy specifically provides to allocate defense costs. that the defense costs for covered and non-covered claims must be allocated, the insured must abide by such provision. For example, the current version of the Bermuda Form provides: “If liabilities, losses, costs and/or expenses are in part covered by this Policy and in part not covered by this policy, the insured and company shall use their best efforts to agree upon a fair and proper allocation thereof between covered and uncovered amounts, and the insured shall cooperate with such efforts by providing all pertinent information with respect thereto.” The rationale behind the rule is that an insurer contracts to pay the entire cost of defending a claim that is covered under the policy. The insurer has not contracted to pay defense costs for claims that are not covered by the policy or when another insurer also has an obligation to defend. Under New York law, even absent express policy provisions, it is well-established that under

38 Claims Journal | Spring 2012

an indemnity policy, there is no obligation to indemnify defense costs incurred in defending non-covered claims. See Vigilant Ins. Co. v. Credit Suisse First Boston Corp., 10 A.D.3d 528, 782 N.Y.S.2d 19 (1st Dep’t 2004); Millennium Partners, L.P. v. Select Ins. Co., 24 Misc.3d 212, 882 N.Y.S.2d 849 (Sup. Ct. N.Y. Co. 2009), aff’d, 68 A.D.3d 420, 889 N.Y.S.2d 575 (1st Dep’t 2009). This principle has been followed by courts in other jurisdictions. See, e.g., Security Ins. Co. of Hartford v. Lumbermens Mut. Cas. Co., 264 Conn. 688, 826 A.2d 107 (2003) (Connecticut law). If it is determined that the insured is seeking to recover defense costs for both covered and non-covered claims, then a methodology must be applied to determine how to allocate the costs between the covered and non-covered claims. If the insurance policy provides for a particular allocation methodology, that will control. See Clifford Chance, 2006 WL 3821841, at *2. Methodology On the other hand, where the insurance policy does not provide for a particular methodology, it is not always clear how defense costs should be allocated between covered and non-covered claims. There is little New York case law on the methods to be used in allocating defense costs for covered and non-covered claims, and New York has never adopted a preferred method of allocation between covered and non-covered claims. There are several alternative ways to allocate. One way is to allocate defense costs equally between covered and non-covered claims, assuming there is a reasonable basis for such equal al-

location. Another way is to allocate defense costs pro rata to the number of covered claims and the number of non-covered claims, again assuming there is a reasonable basis for such an allocation. This may be an appropriate method where the costs appear to have been incurred in defending all claims, for example, those costs incurred in taking a deposition. Depending upon the number and nature of covered and noncovered claims, it may be more appropriate to allocate defense costs under a “weighted” methodology, whereby there is an equitable allocation of defense costs for covered and non-covered claims. There may be situations where defense costs are allocated where they were incurred on behalf of an insured and also a noninsured. In this situation, it may be appropriate to allocate defense costs pro rata among insureds and non-insureds. Finally, yet another method of allocating defense costs is to look at the magnitude of damages sought in the covered and noncovered claims, and then make equitable allocation based on the relative value of claims. Whether and to what extent defense costs for covered and noncovered claims are to be allocated could well turn on applicable law. Therefore, in determining whether to allocate defense costs, claims handlers should fully familiarize themselves with applicable policy language and also applicable law. CJ Koepff, Esq., is a senior equity partner at Clyde & Co US LLP in New York. This article contains the personal views of the author only. The content does not necessarily represent the views of the firm or its clients.

Spring 2012 | Claims Journal 39


Essentials: Examinations Under Oath


nsurance companies have an early opportunity to obtain information and material that may be in the insured’s possession regarding a claim through the examination under oath (EUO) process. An EUO is an important investigative tool which permits an insurer to determine the merits of legitimate claims while exposing fraudulent claims and fraudulently inflated losses. The right to acquire an EUO emanates from the insurance contract and finds its origin in the New York By Steven Plitt standard fire policy, which has been adopted by statute in most states. An EUO is not a deposition. There are distinct differences between discovery depositions and EUOs. As an example, during an EUO the insured’s attorney (or other representative) is technically not authorized to ask questions or make objections. In litigation, state Rules of Civil Procedure permit discovery depositions from persons having relevant information and knowledge to the case at issue. Unlike depositions taken in discovery during litigation, the individuals who can be subjected to an EUO is more limited. The insurance company is entitled to examine named insureds, as well as individuals who fall within the policy’s general definition of an insured (e.g., a spouse, family member, business partner, manager, or key employee). Failure to Submit In GuideOne Mut. Ins. Co. v. Rock, 2009 WL 1854452 (N.D. Miss., June 29, 2009) (applying Mississippi law), the insureds

40 Claims Journal | Spring 2012

refused to produce their children for an EUO in a claim involving a fire loss. The court held that the policyholders’ refusal to produce their children for an EUO was not a breach of the homeowner’s policy. The court began its analysis by observing that clauses in insurance policies that require policyholders to submit to an EUO were reasonable and valid in Mississippi. Failure to submit to an EUO when obligated under the policy precluded coverage of the loss as a matter of law. However, the obligation was contractual in nature, and therefore persons with information material to the investigation of a fire loss were not required to submit to an EUO if not required to do so by the policy. The court looked at the definition of insured under the policy, which did not qualify the children as insureds. Where an EUO involves a corporation, an insurance company is entitled to examine officers, managing agents, and in some cases key employees of the insured. This permissive scope exists because a corporation can only act through its officers and agents where the insured under the policy is a corporation. In some cases insureds will refuse an EUO and as an alternative they will offer to provide answers to written questions supplied in advance. However, this is not compliant with the insured’s duty to submit to an EUO under the policy. In some jurisdictions where the insured refuses to submit to an EUO, the insured forfeits the right to pursue the claim in issue. Insureds must attend the EUO on the scheduled date or at least make an attempt to reschedule the EUO as a condition precedent to the claim. At least one court has found that

where the insured repeatedly interposes scheduling conflicts that prevent the completion of an EUO, the insured constituted a “willful and material” breach of the policy. See, e.g., Rosenthal v. Prudential Property & Cas. Co., 928 F.2d 493, 495 (2nd Cir. 1991). Generally, where the insured is unable to attend an EUO for a valid reason, the insured must at least offer to submit to the EUO as soon as possible. However, some courts have held that coverage is forfeited as a result of the insured’s failure to submit to an EUO only in those situations where the insurer can establish that it has been prejudiced by the delay. Courts are split on whether separate EUOs of co-insureds can take place outside the presence of the other insured. An insurance company is entitled to inquire into any matter which is material to the existence and extent of the insurance company’s liability under the policy. Courts have recognized that the relevant inquiry is broad and includes any matter that has a bearing on the insurance loss. Where fraud is suspected, the insurer may be entitled to a more searching EUO. EUO vs. Litigation Faced with having to attend an EUO, some insureds decide to bring a lawsuit against the insurer, instead. This strategy subjects the insured to only one swearing under oath in the form a litigation deposition. The question of whether an insured can avoid an assertion of

non-cooperation by refusing to attend the EUO and subsequently filing litigation was recently considered by the court in Wells v. Farmers Alliance Mut. Ins. Co., 2009 WL 1259977 at *3 (E.D. Mo., May 4, 2009). In Wells, the insurer had sought an EUO from its policyholder. The policyholder filed suit prior to the EUO date and did not appear for the scheduled EUO. Although the court held that the cooperation clause of the policy was valid and enforceable under Missouri law, the question of whether the policyholder breached the cooperation clause by failing to appear for the scheduled EUO was a question of fact for the jury. The court concluded that the jury should determine whether the policyholder satisfied the requirements of the cooperation clause in those situations where the policyholder provided the requested information being sought by the insurer through a litigation deposition accompanied by written discovery presented during the litigation of the case itself. The question arises as to whether the obligation to submit to an EUO is a condition precedent to recovery under the policy. If so, then avoiding the EUO by initiating litigation may not fulfill the condition precedent. CJ Plitt is a nationally recognized expert in insurance law. He has authored numerous insurance treatises and articles, including contributions to Insurance Journal and Claims Journal. He has a national expert witness practice. Email:

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In a Reader’s View

Who Pays for Securities Actions? Directors? Insurers? Michael Klausner, professor of Business and Law at Stanford Law School, has collected data on securities actions, including how many actually are dismissed, how many are settled, and who pays if there is a settlement? Klausner answers these questions at this year’s Professional Liability Underwriting Society’s (PLUS) D&O conference.

Driving Under the Influence of Marijuana Marijuana use is at its highest level among eighth to 12th graders in 30 years, according to a Liberty Mutual and Students Against Destructive Decisions (SADD) study. One in five (19 percent) teen drivers reports that they have driven under the influence of marijuana. In fact, marijuana influence is significantly more prevalent among teen drivers than alcohol, as compared to the 13 percent of teens surveyed who report that they have driven after drinking. The study highlights that many teens don’t consider marijuana use as a distraction to their driving. More than one-third (36 percent) of teens who have driven after using marijuana say the drug presents no distraction. Among the teens who say they have driven after drinking, 19 percent of them believe alcohol use does not present a driving distraction. The story generated a number of comments among readers.

The Evolution of D&O Coverage and Investigations Director and officers liability coverage continues to evolve. Susanne Murray, an executive vice president for Alliant Insurance Services, knows all about this evolution in her work focusing on executive risk liability exposures. In her interview at the recent Professional Liability Underwriting Society’s D&O conference, Murray discusses the evolution of D&O, beginning with how policies are responding to investigations — formal and informal, third party and internal.

Podcast Highlights Farmers’ Paul Quinn Discusses the Role of Social Media in Disaster Communication Paul Quinn, assistant vice president of claims communications for Farmers Insurance, discusses the development of the company’s catastrophe response playbook, social media’s impact on claims communications during a catastrophe and the importance of education in disaster preparedness. Investigating and Evaluating Hail Damage Claims In this Forensic Guide podcast, Jerry Mercer, vice president of the property construction division for Rimkus Consulting Group, discusses issues relating to the evaluation of hail damage for both residential and commercial buildings. 42 Claims Journal | Spring 2012

Robert says: This study seems to be only about attitudes. In order to determine whether marijuana use affects driving, the only scientific basis is a double blind study pitting users under the influence and not under the influence in driving tests. CJ Reader Poll An Arkansas court ruled that Facebook photos could be used as evidence to deny further workers’ compensation benefits. Should social media be used in claims investigations? 0











Yes, if it’s in the public domain it is fair game. 80.7% (736 votes) Yes, in some cases it should be used.

7.57% (69 votes)

No, it’s an invasion of privacy.

9.87% (90 votes)

Not sure.

1.862% (17 votes)

Total Votes: 912



April 2012

July 2012

PLRB/LIRB Claims Conference & Insurance Services Expo The annual conference, offering educational and networking opportunities, offers nearly 100 claims-related sessions in 12 curriculum tracks, including property, casualty, general interest, large loss, property coverage, subrogation, special investigations/fraud, claim management and technology. April 15-18, 2012 Orlando, FL Contact: Valerie Berka, Meetings Manager,, 630724-2227

ACIC General Counsel Seminar Association of California Insurance Companies’ annual seminar provides informative discussions by leading industry speakers from the legal, insurance and regulatory communities. It also offers timely information on a wide range of insurance issues important to insurers and insurance professionals doing business in California. July 25-27, 2012 Las Vegas, NV Contact: Sue Makimoto at 916-449-1370

May 2012 NICB Special Investigations Academy – Basic and Specialized Tracks The SI Academy offers basic and specialized tracks concurrently at the same location and date, with practical information for on-the-job use. Attendance is restricted to the direct (not contracted) employees of member companies, NICB, government agencies and law enforcement. May 7-10, 2012 St. Louis, MO Contact: or contact Melitta Kewitz at 800-447-6282 ext. 7024,

June 2012 PLRB Eastern Regional Adjusters Conference One of a series of regional claims adjuster conferences held in the United States. Network with peers while taking part in educational sessions designed to improve knowledge of core claims issues. (Detailed information on sessions TBA) June 26-27, 2012 Providence, RI Contact: Alissha Watley, Meetings Manager, or 630-724-2228

September 2012 PLRB Central Regional Adjusters Conference One of a series of regional claims adjuster conferences held in the United States. Network with peers while taking part in educational sessions designed to improve knowledge of core claims issues. (Detailed information on sessions unavailable at this time) September 5-6, 2012 Schaumberg, IL Contact: Alissha Watley, Meetings Manager, or call 630-724-2228 NAMIC’s 2012 Annual Convention Annual members conference sponsored by the national property/casualty insurance trade and political advocacy association. (Detailed information on sessions and tracks unavailable at this time) September 16-19, 2012 Grapevine, TX Contact: or call 317-875-5250 ext 1032 CJ

Spring 2012 | Claims Journal 43

How much are these common claim-handling weaknesses costing you?

No manager wants their appraisers, adjusters and estimators passing out blank checks, but if their claim-handling skills aren’t sufficient, the misapplications, oversights and errors they commit could be just as costly. For example, the difference between repairing or replacing a set of kitchen cabinets when adjusting a fire loss can be anywhere from $3,000 to $12,000. And that’s just one example of the kind of misjudgments we see both beginners and experienced professionals make all too often. In fact, we’ve identified five types of weaknesses including: (1) policy interpretation; (2) basic practices; (3) core knowledge; (4) estimating proficiency and (5) technology application that challenge even the most efficient and profitable claims departments. To see which issues are the biggest obstacles for your staff and what to do to eliminate them, call us or visit our website today. / blankcheck C ll Toll-free Ca ee (US U A & Canada) 80 8000-233-7095 A meember mbee of of the Cunn unnningh ingham am Lindsey Group r

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What issues challenge your staff and what to do to eliminate them.




laims Journal is pleased to publish the 2012 Guide to Claims Education and Training. This exclusive resource directory has been designed to help claims professionals find educational and training opportunities to enhance their professional growth. Education and training providers, including insurance schools, associations, various vendors and instructors submitted information on their course offerings, online educational capabilities and correspondence education directly to Claims Journal. Providers were allowed to list up to three programs/courses. While this directory is only a snapshot of the vast array of education and training courses available to the insurance industry, we hope you find it helpful when searching for the right provider for your organization. We look forward to expanding and enhancing this directory in the future and welcome your feedback on how we might improve it. Please send any comments or suggestions about the directory to To submit a listing, e-mail Kristine Honey at:

Organization: AdjusterPro Contact: John O’Brien Email: Address: P.O. Box 1087, Fort Scott, KS 66701 Phone: 214-329-9030 ; Fax: 214-580-5519 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no Course: Texas All-Lines Adjuster PreLicensing Start Date: Any Time Location: Classroom or Online Category: Property Casualty Insurance Designation: No Designation Course: Florida Certified Adjuster (CA) Designation Start Date: Any Time Location: Classroom or Online Category: Property Casualty Insurance Designation: No Designation

Course: Indiana Independent Adjuster PreLicensing Start Date: Any Time Location: Classroom or Online Category: Property Casualty Insurance Designation: No Designation Organization: Affordable Continuing Education Contact: Jessie Booth Email: Address: 2 Corporate Plaza Dr., Ste. 100 Newport Beach, CA 92660 Phone: 949-706-9197 ; Fax: 949-706-9439 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: yes Course: Contemporary Insurance Topics Start Date: Any Time Location: All States Category: Property Casualty & Life/Health Ins Designation: P&C and L&H Insurance Agents

Course: Personal Lines Total Coverage Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents Course: Flood Insurance Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents Organization: Affordable Educators (California CE and Prelicense Training) Address: 41890 Enterprise Cir. S, Ste. 100 Temecula, CA 92590 Phone: 800-498-5100 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes

Spring 2012 | Claims Journal 45

Education and Training Directory Course: Ins. Marketing Issues (Includes Ethics) Start Date: Any Time Location: CA Category: Ethics Designation: No Designation

Course: Life & Health Pre-Licensing Start Date: Any Time Location: Many States Category: Life, Health, Benefits Designation: Licensing Exam Prep

Course: Garage Risks Start Date: Sept 13-14, 2012 Location: Newark, NJ Category: Property Casualty Ins, Surplus Lines Designation: CIW, CMGA

Course: Preferred Practices Start Date: Any Time Location: CA Category: Property Casualty Insurance Designation: No Designation

Course: Property & Casualty Pre-Licensing Start Date: Any Time Location: Many States Category: Property Casualty Insurance Designation: Licensing Exam Prep

Course: Under Forty Organization Annual Meeting Start Date: Sept 20-22, 2012 Location: Park City, UT Category: Property Casualty Ins, Surplus Lines Designation: CIW, CMGA

Course: California Ethics Requirement Start Date: Any Time Location: CA Category: Ethics Designation: No Designation

Course: Property Pre-Licensing Start Date: Any Time Location: Many States Category: Property Casualty Insurance Designation: Licensing Exam Prep

Organization: Agency Management Resource Group Contact: Jackie Abeyta, Director of Mktg. Email: Phone: 916-757-6150 Website:

Organization: American Association of Insurance Services (AAIS) Contact: Joseph S. Harrington, CPCU Email: Address: 1745 S. Naperville Rd. Wheaton, IL 60189 Phone: 630-681-8347 ; Fax: 630-681-8356 Website:

Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes Course: Another Look at Ethics Start Date: Multiple Location: Multiple Category: Ethics Course: Additional Insureds and Certificates of Insurance Start Date: Multiple Location: Multiple Category: Property Casualty Insurance

Educational Offerings: Educational materials for individual insurance line programs Online Courses: no Correspondence Courses: no Course: A variety of materials to support the use of AAIS products Start Date: Any Time Location: All States Category: Property Casualty Insurance

Organization: American Association of Managing General Agents

Educational Offerings: Professional Ins. Designation Programs, Individual Courses, Undergrad Ins. Courses/Programs (Accredited) Online Courses: yes Correspondence Courses: no

46 Claims Journal | Spring 2012

Course: Insurance Automation and Technology Conference Start Date: Mar 2-5, 2013 Location: Scottsdale, AZ Category: Property Casualty Ins, Surplus Lines Designation: CIW, CMGA Course: University West Start Date: Aug 16-17, 2013 Location: Scottsdale, AZ Category: Property Casualty Ins, Surplus Lines Designation: CIW, CMGA Organization: ClaimSchool Contact: Barry Zalma Email: Address: 4441 Sepulveda Blvd. Culver City, CA 90230 Phone: 310-390-4455 ; Fax: 310-391-5614 Web: & Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes Location: At Your Location

Course: Errors & Omissions Loss Control Start Date: Multiple Location: Multiple Category: Property Casualty Insurance Organization: America’s Professor Contact: Dr. Jack Morton Email: Address: 1819 Holborn St., Ste. E, Missoula, MT 59802 Phone: 800-870-3130 ; Fax: 406-549-8560 Website:

Course: Trucking Risks - Advanced Start Date: Oct 29-30, 2012 Location: Nashville, TN Category: Property Casualty Ins, Surplus Lines Designation: CIW, CMGA

Contact: Jeffrey D. Henry Email: Address: 610 Freedom Business Ctr, Ste. 110, King of Prussia, PA 19406 Phone: 610- 992-0005 ; Fax: 610- 992-0021 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no

Course: California Fair Claims Practices Regulations Start Date: Any Time Category: Agency Management Designation: No Designation Course: Insurance Fraud and Weapons to Fight Fraud™ Start Date: Any Time Category: Agency Management Designation: No Designation Course: Insurance Claims For the Property Owner or Mortgage Holder Start Date: Any Time Category: Other Designation: No Designation

Organization: Crawford & Company Contact: Joel Sybert Email:, Address: 1001 Summit Blvd. Atlanta, GA 30319 Phone: 404-300-1251 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no Course: Property Technical Cert (PTC I) Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: PTC Course: Workers’ Compensation Program I-IV Start Date: Any Time Location: All States Category: Workers’ Compensation Designation: Other Course: Basic Workers’ Compensation Virtual Classroom Start Date: See Website Location: Virtual Category: Workers’ Compensation Designation: Other Organization: Discovery Detective Academy Email: Phone: 480-951-6545 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: no Course: Professional Investigator Start Date: Any Time Location: Many States Category: Risk Management & Safety Designation: ARM-Associate in Risk Mgmt Course: Fraud Investigations Start Date: Any Time Location: Many States Category: Risk Management & Safety Designation: ARM-Associate in Risk Mgmt Course: Advanced Interviewing Techniques Start Date: Any Time Location: Many States

Organization: FastrackCE Contact: Brad Nevins Email: Address: 13750 Pipeline Ave. Chino, CA 91710 Phone: 800-544-3605 ; Fax: 909-465-4195 Website:

Organization: First Party Claims Conference Contact: David Barrack Email: Address: 21165 Whitfield, Pl., Ste. 105 Potomac Falls, VA 20165 Phone: 703-433-2520 ; Fax: 703-433-0369 Website:

Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes

Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: no Correspondence Courses: no

Course: Ethics in Insurance Start Date: Any Time Location: Many States Category: Ethics, P&C, Life & Health Designation: No Designation Course: Flood Insurance Made Simple Start Date: Any Time Location: Many States Category: Flood Insurance, P&C Designation: No Designation Course: Understanding Commercial Lines Property & Casualty Start Date: Any Time Location: Many States Category: Property & Casualty Designation: No Designation Organization: First Choice Continuing Education Contact: Justin Genuino Email: Address: 2 Corporate Plaza Dr., Ste. 100 Newport Beach, CA 92660 Phone: 949-706-9463 ; Fax: 949-706-9439 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: yes Course: Ethics in Property & Casualty Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents Course: Property & Casualty Personal Basics Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents

Course: First Party Claims Conference Start Date: Oct 15-17, 2012 Location: Crowne Plaza Hotel, Warwick, RI Category: Property Casualty Insurance, Ethics Designation: 12 CE Credits for Adjusters (multi-line). Open to accountants, agents, attorneys, brokers, engineers & others. Organization: Focal Insurance Contact: Brenda Austin Email: Address: P.O. Box 175 Pomona, NY 10970 Phone: 845-354-2036 ; Fax: 845-354-4779 Website: Educational Offerings: CE, Individual Courses & Pre-Licensing Courses Online Courses: no Correspondence Courses: yes - self-study Course: Property & Casualty Pre-Licensing Start Date: Apr 9–Jul 27, ‘12 (Rockland, NY) Jul 9 – Jul 27, 2012 (Westchester, NY) May 27 – Sep 13, 2012 (Brooklyn, NY) Category: Insurance - P&C; Life Accident & Health & Annuities; Risk Management Designation: Broker’s License Organization: Independent Insurance Agents of Texas (IIAT) Contact: Stephanie Freitag, Education Mgr. Email: ; Address: 1115 San Jacinto, Ste. 100 Austin, TX 78701 Phone: 800-880-7428 ; Fax: 512-469-9512 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no

Course: Business Interruption Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents Spring 2012 | Claims Journal 47

Education and Training Directory Course: Certified Account Manager Program Start Date: see schedule online - Location: Many Cities Category: Customer Service, Technical Knowledge Designation: CAM – Certified Account Mgr Course: Construction Risk & Insurance Specialist Start Date: see schedule online - Location: Many Cities Category: Commercial Property Casualty, Property Casualty Ins, Risk Mgmt & Safety Designation: CRIS - Construction Risk & Insurance Specialist Course: Producer Development Program Start Date: see schedule online - Location: Austin, TX Category: Agency Mgmt, Commercial & Personal P&C, Customer Service, Ethics, Risk Mgmt & Safety Organization: Infinity Schools Contact: Greg Mckewen Email: Address: 1310 Esplanade, Ste. 317 S Redondo Beach, CA 90277 Phone: 800-600-2550 ; Fax: 424-247-9050 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes Course: Unlimited CE Packages ONLY $36.95 Start Date: Any Time Location: Nationwide Category: Property Casualty Insurance Designation: Continuing Education & PreLicense Training Course: Ethics the Guide to Success Start Date: Any Time Location: Nationwide Category: P&C Insurance – 5 Credit Hours Designation: Continuing Education & PreLicense Training Course: Understanding Umbrella Coverage Start Date: Any Time Location: Nationwide Category: Commercial P&C -15 Credit Hours Designation: Continuing Education & PreLicense Training

Organization: Insurance Agents & Brokers Contact: Jessica McWilliams Email: Address: 5050 Ritter Rd., Mechanicsburg, PA 17055 Phone: 717-795-9100 ; Fax: 717-795-8347 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no Course: Insurance Success Seminars Start Date: May 1-3, Aug 7-9, Oct 30-Nov1 Location: PA Category: Sales/Marketing Designation: CPIA – Certified Professional Insurance Agent Course: Pa. Licensing Exam Preparation Start Date: Multiple Location: Pa. - Multiple Locations Category: Property Casualty Insurance Designation: No Designation Course: Compliance Pitfalls and Ethical Responsibilities Start Date: Any Time Location: Anywhere Category: Ethics Designation: No Designation

Organization: Insurance Community Center Contact: Amanda Colby Em: Address: 78-365 Highway 111, Ste. 388 La Quinta, CA 92253 Phone: 805-776-3755 ; Fax: 760-645-6285 Website:

Organization: Insurance Educational Association Contact: Patty Gibson Carlson Email: Address: 725 W. Town & Country Rd., Ste. 430, Orange, CA 92868 Phone: 714-689-0161; Fax: 714-689-0112 Website: Educational Offerings: Professional Ins. Designation Programs, Individual P&C Courses & Workshops Online Courses: yes -Classroom & Onsite too Correspondence Courses: no Course: Online Self Study Start Date: Any Time Location: All States Category: Disability Mgmt, Workers’ Comp Designation: WCCA, WCCP, CPDM Course: Online Instructor Led (Tele-Learning) Start Date: Any Time Location: All States Category: Commercial & Personal P&C, Risk Management & Safety, Claims Designation: ARM, CPCU, AIC, AU, WCCA, WCCP, CPDM Course: Classroom Training including On-Site Custom Classes Start Date: Spring, Summer, Fall Location: CA, AZ Category: Commercial & Personal P&C, Ethics, Life/Health/Benefits, Risk Management & Safety, Sales/Marketing Designation: ARM, CPCU, AIC, WCCA, WCCP, CPDM

Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: no Course: Education Tracks Start Date: Ongoing Location: Many States, Live, Online Category: Commercial & Personal Lines, Employee Benefits, Agriculture & Contractors Insurance Designation: Continuing Education Course: Timely Topics Informational Webinars Start Date: Ongoing Location: Live Online Category: Informational Webinars sharing key resources, information and tools for insurance sales and practice management.

48 Claims Journal | Spring 2012

Course: Principles of Rainmaking - Producer Development Series Start Date: May 2, 2012 Location: Live Online Category: Sales/Marketing

Organization: Insurance Journal Academy

of Insurance Contact: Chris Boggs Email: Phone: 800-897-9965 ; Fax: 619-584-1200 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: no

Course: Practical Workers’ Compensation: What You Need To Know Start Date: On Demand Location: Online Category: Property Casualty Insurance Course: The Proper Care and Feeding of Certificates of Insurance Start Date: On Demand Location: Online Category: Property Casualty Insurance Course: The Real Effects of Granting Additional Insured Status Start Date: On Demand Location: Online Category: Property Casualty Insurance, Sales/ Marketing Course: Practical and Applicable Errors and Omissions Tips Start Date: On Demand Location: Online Category: Agency Management Course: Using Coverage Gaps to Win New Customers Start Date: On Demand Location: Online Category: Property Casualty Insurance Organization: Insurance Training Institute Contact: Robert Secovnie Email: Address: 20 Spruce St., Valatie, NY 12184 Phone: 518-758-6609 ; Fax: 518-758-6693 Web: Educational Offerings: Individual Courses Online Courses: no Correspondence Courses: yes Organization: International Association of Insurance Professionals Contact: Mark Adams Email: Address: 9343 E. 95th Ct S, Tulsa, OK 74133 Phone: 918-294-3700 ; Fax: 918-294-3711 Web: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: no Correspondence Courses: no

Course: Professional Ethics Start Date: Any Time Location: All States Category: Ethics Designation: CIIP- Certified Insurance Industry Professional Course: Long Term Care Start Date: Any Time Location: All States Category: Life, Health, Benefits Designation: CIIP- Certified Insurance Industry Professional Course: Underwriting Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: CIIP- Certified Insurance Industry Professional Organization: International Risk Management Institute, Inc. (IRMI) Contact: Millie Workman Email: Address: 12222 Merit Dr., Ste. 1450 Dallas, TX 75251 Phone: 800-827-4242 ; Fax: 972-371-5120 Web: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no Course: Construction Risk and Insurance Specialist (CRIS®) Start Date: Any Time Location: All States Category: Risk Management & Safety, Sales/ Marketing Designation: CRIS® - Construction Risk & Insurance Specialist Course: Management Liability Insurance Specialist (MLIS®) Start Date: Any Time Location: All States Category: Sales/Marketing, Prof. Liability, D&O, EPL and Fiduciary Liability exposures Designation: MLIS® - Management Liability Insurance Specialist Course: General Insurance CE Start Date: Any Time Location: All States Category: Commercial & Personal Lines, Life & Health

Organization: International Society Of Workers Compensation Specialists Contact: Bill Reynolds Email: Address: 6688 Joliet Rd., Ste. 253, Indian Head Park, IL 60525 Phone: 312-286-1956 ; Fax: 708-401-0755 Web: Educational Offerings: Professional Ins. Designation Programs Online Courses: yes Correspondence Courses: no Course: Certified Injury Prevention Specialists Start Date: Any Time Location: All States Category: Workers’ Compensation Course: Certified Claim Mgmt. Specialists Start Date: Any Time Location: All States Category: Workers’ Compensation Course: Certified Premium Audit Specialist Start Date: Any Time Location: All States Category: Workers’ Compensation Organization: Kaplan Financial Education Contact: Rebecca Ray Email: Address: 1900 Ballpark Way Arlington, TX 76006 Phone: 800-824-8742 Web: Educational Offerings: Insurance & Securities Courses/Programs (Accredited) Online Courses: yes Correspondence Courses: yes Course: Professional License Courses Start Date: Any Time Location: TX Category: Other Designation: Various Course: Real Estate Courses Start Date: Any Time Location: TX Category: Other Designation: Various Course: Inspection Courses Start Date: Any Time Location: TX Category: Other Designation: Various

Spring 2012 | Claims Journal 49

Education and Training Directory

Organization: Missouri State University Contact: Dr. Stan Adamson Email: Address: 901 S. National, Springfield, MO 65897 Phone: 417-836-6686 ; Fax: 417-836-6224 Web: aspx?id=81570 Educational Offerings: Undergrad Ins. Courses / Programs (Accredited) Online Courses: yes Correspondence Courses: no Course: INS 313 - Commercial Insurance Start Date: Aug 2012 Location: Springfield, MO Category: Commercial Property Casualty Designation: CPCU – Chartered Property Casualty Underwriter Course: INS 211 - Insurance Start Date: Spring or Fall each year Location: Springfield, MO and Online Category: Personal Property Casualty Designation: Intro to Insurance Course: INS 415 - Risk Management Start Date: Jan 2012 Location: Springfield, MO Category: Risk Management Safety Designation: ARM – Associate in Risk Management Organization: National Flood Insurance Program - NFIP/FEMA Contact: L. Savino Email: Address: P.O. Box 210, Adelphia, NJ 07710 Phone: 732-625-TEACH Fax: 732-625-0828 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: no Course: FEMA Flood Course Start Date: Call or Email to Schedule Location: All States Category: Property Casualty Insurance Designation: Continuing Education Credits

Organization: New Level Partners Contact: Nancy Langton Email: Address: 100 Overlook Center, 2nd Fl Princeton, NJ 08540 Web:

Organization: Professional Liability Underwriting Society Contact: Deb Ropelewski Email: Phone: 952-746-2580 ; Fax: 952-746-2599 Website:

Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: no

Educational Offerings: Professional Liability Ins. Designation Programs Online Courses: no Correspondence Courses: no

Course: Commercial Lines Insurance Basics (25 course series) Start Date: Any Time Location: All States Category: Commercial Property Casualty Course: Personal Lines Insurance Basics (12 course series) Start Date: Any Time Location: All States Category: Personal Property Casualty Designation: New hire training Course: Business Skills for Account Managers (12 course series) Start Date: Any Time Location: All States Category: Customer Service Designation: New hire training Organization: North American Training Group Contact: Fred Wharton Email: Address: 1293 Beacon Circle Wellington, FL 33414 Phone: 888-884-6284 ; Fax: 561-282-6969 Website: Educational Offerings: Professional Liability Ins. Designation Programs, Individual Courses Online Courses: Yes Correspondence Courses: no Course: Workers’ Compensation Fraud Start Date: Any Time Location: All States Category: Insurance Fraud Course: Auto Insurance Fraud Start Date: Any Time Location: All States Category: Insurance Fraud Course: State Fraud Compliance Training Start Date: Any Time Location: All States Category: Insurance Fraud

50 Claims Journal | Spring 2012

Course: Registered Professional Liability Underwriter Start Date: Any Time Location: All States (Self-study) Designation: RPLU; RPLU+ Course: PLUS International Conference Start Date: Nov 7-9, 2012 Location: Chicago, IL Category: Other Course: D&O Symposium, MLP Symposium Start Date: Check website for dates & locations Category: Other Organization: Quest CE Contact: Jessica Kruse Email: Address: 10850 W. Park Pl., Ste. 1000 Miwaukee, WI 53224 Phone: 877-593-3366 ; Fax: 414-375-3449 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: yes Course: Life Insurance Today Start Date: Any Time Location: All States Category: Life, Health, Benefits Designation: Chartered Financial Consultant, Chartered Life Underwriter, CFP & Insurance Course: A Professional Guide to Ethical Decision Making Start Date: Any Time Location: All States Category: Ethics, Life, Health, Benefits Designation: Chartered Financial Consultant, Chartered Life Underwriter, CFP & Insurance Course: Introduction to Suitability & the Senior Protection Model Regulation Start Date: Any Time Location:All States Category: Life, Health, Benefits Designation: Chartered Financial Consultant, Chartered Life Underwriter, CFP & Insurance

Organization: Sandi Kruise Insurance Training Contact: Robert Kruise Email: Address: P.O. Box 786, Bonita, CA 91908 Phone: 800-517-7500 ; Fax: 619-421-8171 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes Course: Unlimited CE Subscription, $39.95 Start Date: Any Time Location: All States Category: Commercial & Personal P&C, Property Casualty Insurance, Ethics, Life/ Health/Benefits, Risk Management & Safety, Surplus Lines Designation: No Designation Course: Long Term Care Partnership Start Date: Any Time Location: All States Category: LTCP, Life/Health/Benefits Designation: No Designation Course: Ethics and the Insurance Agent (meets Ethics requirement) Start Date: Any Time Location: Many States Category: Ethics, Commercial & Personal P&C, Life/Health/Benefits Designation: No Designation Organization: SNL Center for Financial Education Contact: Maureen Hollar Email: Address: P.O. Box 2016 Charlottesville, VA 22902 Phone: 434-951-7786 ; Fax: 434-984-8038 Website: Educational Offerings: Individual Courses Online Courses: no Correspondence Courses: no Course: Life and P&C Insurance Statutory Accounting & Reporting Start Date: Various throughout the year Location: New York, NY Category: Agency Management, Finance Course: Financial Analysis of Life and P&C Insurers Start Date: Various throughout the year Location: New York, NY Category: Agency Management, Finance

Course: Fundamentals of Insurance Company Credit Analysis Start Date: Various throughout the year Location: New York, NY Category: Agency Management, Finance Organization: Society of Insurance Research Contact: Ed Budd Email: Address: 631 Eastpointe Dr. Shelbyville, IN 46176 Phone: 317-398-3684 Website: Educational Offerings: Individual Courses Online Courses: no Correspondence Courses: no Course: 2012 Spring Seminar Start Date: Apr 23, 2012 Location: University Club - Chicago, IL Category: P&C and Health Designation: Research Course: 42nd Annual Conference Start Date: Oct 14, 2012 Location: Pittsburgh, PA Category: P&C and Health Designation: Emerging Issues & Research

Organization: Success Continuing Education Contact: James Burch Email: Address: 2 Corporate Plaza Dr., Ste. 100 Newport Beach, CA 92660 Phone: 949-706-9453 ; Fax: 949-706-9439 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: yes Course: Personal Lines Total Coverage Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents Course: Homeowners & Automobile Ins. Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents Course: Surplus Lines Compliance Course Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: P&C Insurance Agents

Organization: Sterling Education Services, Inc Contact: Elizabeth Kramer Email: Address: P.O. Box 3127 Eau Claire, WI 54702 Phone: 715-855-0495 ; Fax: 715-835-5132 Website:

Organization: The Agency Trainer Contact: Vickie Morgan Email: Address: P.O. Box 11551, Pueblo, CO 81001 Phone: 719-924-9454 ; Fax: 888-840-1250 Website:

Educational Offerings: Individual Courses Online Courses: no Correspondence Courses: no

Educational Offerings: Individual Courses Online Courses: no Correspondence Courses: no

Course: Workers’ Comp Law & Practice Start Date: Multiple Dates Location: Many States Category: Risk Management & Safety Designation: Continuing Education

Course: Applied Systems Training Start Date: Any Time Location: All States Category: Agency Management Designation: Other

Course: Advanced Workers’ Compensation Start Date: Multiple Dates Location: Many States Category: Risk Management & Safety Designation: Continuing Education

Course: Training Assessments, One-on-One Training, Refresher Training and more! Start Date: Any Time Location: All States Category: Agency Management Designation: Other

Course: Fundamentals of Workers’ Comp Start Date: Multiple Dates Location: Many States Category: Risk Management & Safety Designation: Continuing Education

Spring 2012 | Claims Journal 51

Education and Training Directory

Organization: The National Alliance for Insurance Education & Research Email: Address: 3630 North Hills Dr. Austin, TX 78731 Phone: 800-633-2165 ; Fax: 512-349-6194 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no Course: School for Producer Development Start Date: Oct 9-21, 2011 Location: Dallas/Ft. Worth, TX Category: Commercial Property & Casualty, Sales/Marketing Designation: No Designation Course: Dynamics Sales Training Start Date: Any Time Location: Many States Category: Insurance Sales, Sales Mgmt Designation: No Designation Course: Certified Insurance Service Representatives (CISR) Online & Classroom Start Date: Any Time Location: Internet/All States (1200+ per year) Category: Agency Mgmt, Commercial P&C, Customer Service, Personal Residential & Auto Designation: CISR – Certified Insurance Service Representative Course: Certified Risk Managers (CRM) Online & Classroom Start Date: Any Time Location: Internet/Many States (80+ per year) Category: Risk Management & Safety Designation: CRM – Certified Risk Manager Course: Certified Insurance Counselors (CIC) Start Date: Any Time Location: All States (300+ per year) Category: Agency Mgmt, Commercial P&C, Personal Lines, Life & Health Designation: CIC – Certified Insurance Counselor Course: Certified School Risk Managers (CSRM) Online & Classroom Start Date: Any Time Location: Internet/Many States (60+ per year) Category: Risk Management & Safety Designation: CSRM – Certified School Risk Manager

52 Claims Journal | Spring 2012

Organization: The Institutes Contact: Customer Service Email: Address: 720 Providence Rd., Ste. 100 Malvern, PA 19355 Phone: 800-644-2101 Website: Educational Offerings: Professional Ins. Designation Programs, Individual Courses Online Courses: yes Correspondence Courses: no Course: Associate in General Insurance Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: AINS - Associate in General Ins. Course: Associate in Commercial Underwriting Start Date: Any Time Location: All States Category: Commercial Property Casualty Designation: AU - Associate in Commercial Underwriting Course: Chartered Property Casualty Underwriter Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: CPCU - Chartered Property Casualty Underwriter Course: Accredited Adviser in Insurance Start Date: Any Time Location: All States Category: Agency Management Designation: AAI - Accredited Adviser in Insurance Course: Associate in Claims Start Date: Any Time Location: All States Category: Claims Designation: AIC - Associate in Claims Course: Associate in Risk Management Start Date: Any Time Location: All States Category: Risk Management Safety Designation: ARM - Associate in Risk Management

Organization: The Wedge Group Contact: Marja van Oijen Email: Address: 5729 Lebanon Rd., Ste. 144 Box 410, Frisco, TX 75034 Phone: 214-446-3209 ; Fax: 972-999-0970 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: no Course: iWin: Leader in Fully Integrated Sales Training & Management Solutions Start Date: Any Time Location: All States Category: Agency Management, Sales Managers /Producers, Property Casualty/Risk Mgmt, Employee Benefits, Sales/Marketing Designation: No Designation Course: 3-in-1 Workshop - Million Dollar Producer™, The Wedge®, Red Hot Intros™ Start Date: Any Time Location: All States Category: Agency Management, Sales Managers /Producers, Property Casualty/Risk Mgmt, Employee Benefits, Sales/Marketing Designation: No Designation Course: iWin Train the Coach - How To Run effective CRISP™ Sales Meetings Start Date: Any Time Location: All States Category: Agency Management, Sales Managers /Producers, Property Casualty/Risk Mgmt, Employee Benefits, Sales/Marketing Designation: No Designation Organization: United Insurance Educators Contact: Toni Amell Email: Address: 8213 352nd St. East Eatonville, WA 98328 Phone: 800-735-1155 ; Fax: 253-846-7536 Web: or Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes Course: Dollars and Sense Start Date: Any Time Location: Online or through home-study Category: Life and financial planning Designation: No Designation Course: FEMA National Flood Ins. Program Start Date: Any Time Location: Online or through home-study Category: Flood (PC) Designation: No Designation

Course: Partnership Long Term Care Policies Start Date: Any Time Location: Online or through home-study Category: Long-term care selling requirement Designation: No Designation

Organization: Van Wyhe Group, LLC Contact: Angela Lingle Email: Address: P.O. Box 4130 Waukesha, WI 53187 Phone: 800-326-4741 ; Fax: 800-476-2945 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: yes

Organization: Vale Training Solutions Contact: Tonya Magalei / Ami Thompson Email: Address: 2424 E. Randol Mill Rd., Arlington, TX 76011 Phone: 817-633-4800 ; Fax: 817-633-2922 Website: Educational Offerings: Individual Courses Online Courses: no Correspondence Courses: no Course: Property Adjusting Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: No Designation

Course: Self Defense: Documentation Start Date: Any Time Location: On-Line Category: Property Casualty Insurance Course: Problems When Insuring Condos Start Date: Any Time Location: On-Line Category: Property Casualty Insurance

Organization: WISE Education, Inc. Contact: Carla Coats Email: Address: 1501 Cobblestone Ct. Thorofare, NJ 08086 Phone: 800-577-9888 ; Fax: 856-384-8414 Website: Educational Offerings: Individual Courses Online Courses: yes Correspondence Courses: no Course: Atlantic City “Blitz” Start Date: Oct 18 & 19, 2012 Location: Caesar’s – New Jersey Category: Commercial Property Casualty, Ethics, Risk Mgmt & Safety

Course: Ethics In Insurance Start Date: Any Time Location: On-Line Category: Property Casualty Insurance

Course: Residential Estimating Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: No Designation Course: Casualty Adjusting Start Date: Any Time Location: All States Category: Property Casualty Insurance Designation: No Designation

Claims Journal Advertisers Index ACORD LOMA Agero A.M. Best ClaimExpress Donan Engineering EagleView Engle, Martin, & Associates, Inc. IICF

41 19 9 56 27 2 3

Motion Computing Pilot RGL Forensics The Institutes Vale Training Solutions Wardlaw Claims Services, LLP Weather Forensics

15 11 34 37 44 7 55

39 Spring 2012 | Claims Journal 53


Is the Industry Responding Quickly Enough to Cyber Risks?


’m often asked if the insurance market is capable of providing coverage that responds to the rapid pace at which cyber risks are growing and changing. This is an understandable question if you consider our growing reliance on new technologies such as cloud computing and the development of advanced malware, as criminal gangs and activists seek to use it for profit, intelligence and publicity. The spread of cyber risks in recent years is staggering. The U.K. Information Commissioner’s Office reported a 58 percent increase in data breaches last year. Cyber crime costs By Jeremy Smith the global economy an estimated $388 billion — more than the illegal drug trade. Worldwide, 19 people fall victim to some form of online crime every second, most commonly social network hacking and credit card fraud. Last year alone: 286 million unique variants of malware were reported; there was a 93 percent increase in web attacks; and on average, 260,000 identities were exposed with each data breach as a result of hacking. Cyber Liability Insurance to cover cyber risks first emerged for the U.S. market around 2002, primarily as a result of the state data breach notification laws, starting with California’s SB 1386 — a milestone in corporate data protection requirements. Initially there were two distinct products offered: privacy policies and non-physical business interruption polices. Around five years ago, insurers consolidated these two wordings into one comprehensive off-the-shelf cyber wording. Since then, insurers have been cautious about developing the product further. It’s a difficult task to continue to innovate and broaden coverage when the risks grow each year and there is poor claims experience to draw on. Coverage needs to be sustainable or it’s of no use to anyone in the long-term. Additional cyber solutions have been secured in areas such as payment card industry (PCI) fines, inclusion of third-party vendors, increasing the limit for first-party breach costs and broadening triggers for non-physical business interruption. And now that the insurance market is more experienced, it is time to take a fresh look at the wordings and see where we can look to transfer more of these risks. We also need consistency in wordings so it is possible to build significant limits for cyber programs that comprehensively cover the risks faced by businesses. It is all very well obtaining broad coverage on the primary placement, but if you can’t secure the same coverage on the excess placement, the client won’t get the real

54 Claims Journal | Spring 2012

benefit of the broader coverage. The market as a whole needs to react and innovate as one to address this issue. Often we see the market reacting to new trends. At first, claims resulting from third-party IT vendor security breaches were not covered, but we can now obtain extensions to cover third-party IT vendors. On the other hand, some markets have started to exclude claims resulting from mobile devices due to the increase in cyber crime against smartphones and tablets. New Risks In 2010 we entered a new decade of cyber attacks with advanced persistent threats (APTs) such as Aurora and Nightdragon. These are insidious, targeted attacks over a sustained period of time designed to steal trade secrets and intellectual property. They occur largely without public disclosures and differ from the immediate financial gratification that drives most cyber crime. The insurance industry needs to consider how it will provide coverage for theft of intellectual property and trade secrets to help businesses mitigate this risk. Sometimes the market is too slow to react; the recent cyber phenomenon of hactivism is an example. Hactivists use cyber attacks to promote political and ideological ends. Groups of such as Anonymous, Lulzsec and Antisec have targeted organizations including Sony, Universal, the Central Intelligence Agency, FBI and the UK Serious Organised Crime Unit. It could be argued that Anonymous, which the U.S. government classifies as a terrorist group, could be excluded from coverage by terrorism exclusions. Brokers should therefore try to ensure that the appropriate coverage extension protects businesses from this growing threat. The cyber insurance market is still young, but has already changed a great deal since it began. Continued communication across the insurance market will ensure a constant evolution of risks and products to help mitigate this fast-moving threat. CJ Smith is Willis’ Cyber Liabilities practice leader.

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Claims Journal Magazine - Spring 2012  

Claims Tales from Joplin; Risk Management with Better Data; The Industry's Response to Cyber Liability

Claims Journal Magazine - Spring 2012  

Claims Tales from Joplin; Risk Management with Better Data; The Industry's Response to Cyber Liability