Insurance Journal

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TEXAS LAWMAKERS TAKE AIM At Insurance Reforms of 2003

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THE PEANUT RECALL CASE Hartford Seeks to Limit Liability

NAIC CONSUMER LIAISON REPS Protecting Consumers’ Interests

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This is my

customer.

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This is my

lunch hour.

This is my

motivation.

This is my

insurance company.

Agents are like everyone else – we just know more about insurance. Like how to get just the right coverage for our policyholders. With Universal North America® I give my customers one-stop shopping with Homeowners and Auto coverage together – and a 15% discount on both. Rock-solid

(866) 338-4262, ext. 6540 UniversalNorthAmerica.com

financial strength, diligent claim service and exceptional support for agents – now that’s my insurance company.

Universal North America Insurance Company is rated A - (Excellent) by A.M. Best & Company.

Insurance products are issued and underwritten by one of Universal North America’s insurance companies: Universal North America Insurance Company or Universal Insurance Company of North America. Issuance of coverage is subject to underwriting review and approval. Products may not be available in all states.

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Texas Mutual Insurance Company

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© 2009

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Chris Rooker M A NAGI NG D IRECTOR H IGGI NBOTHA M & A SSOCIATES

H E R E F O R T E X A S . H E R E T O S T A Y .®

Texas’ leading provider of workers’ compensation insurance

Find out more at www.texasmutual.com or call (800) 859-5995.

Services for non-English speakers are available upon request.

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Inside This Issue

March 23, 2009 • Vol. 87, No. 6 • South Central Region

N12 | Special Report: GREEN Risks Greener Opportunities: Insurers Compete for a Growing Green Industry N16 | Special Report: HOT Markets and Programs Fastest Growing Industries to Focus On

SOUTH CENTRAL

N12

GREEN Risks Insurers Compete for a Growing Green Industry

NATIONAL COVERAGE

9

| Lawmakers Take Aim at Texas Insurance Reforms of 2003 Prior Approval, Standardized Homeowners Policies Proposed

11

| The Nuts of the Peanut Recall Case The Hartford Seeks to Limit Liability

12 | Texas Inspector Failed to Flag Salmonella-Linked Plant Health Department Never Knew It Existed 54 | Liaisons Keep Consumers’ Concerns at the Forefront Protecting Consumers’ Insurance Interests at the NAIC

N1 | Commercial Lines Pricing Drops 3% in Q4 Towers Perrin Survey Finds Price Stabilization N1 | General Liability Losses, Expenses to Rise Rapidly Conning Research Says Profitable Underwriting Performance Not Likely N1 | National Flood Insurance Program Gets Short-Term Extension Expires September 2009; Industry Hopes for Reform Measures N2 | Special Report: HOT Markets and Programs Hot Prospects, and Markets, Come in Unusual Packages N6 | International Report Sports Terrorism, ‘Names,’ Tongues and Mergers N7 | Special Report: GREEN Risks Hybrid Boats and Coverage for the GreenMinded Customer

N2 HOT Markets and Programs Hot Prospects, and Markets, Come in Unusual Packages

IDEA EXCHANGE N19 | Spotlight: Corporate Profiles Advertorial Supplement: In Their Own Words

11 Peanut Recall Case Hartford Seeks to Limit Liability

53 | Legal Beat: What’s in a Name?

Or: A Rose by Any Other Name Is Not an Insured 58 | Closing Quote: Say What You Mean And Mean What You Say

DEPARTMENTS 6 Opening Note 8 It Figures 8 Declarations 10 People N10 MyNewMarkets 56 Business Moves

4 | INSURANCE JOURNAL-SOUTH CENTRAL REGION March 23, 2009

58 Say What You Mean And Mean What You Say

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Idea Exchange Opening Note

A Significant, Positive Difference N

o one will argue that operating an insurance b usiness today is challenging. The recession has put pressure on consumers’ wallets, causing them to consider reducing coverages; credit is difficult to come b y, meaning businesses are feeling financial pressures; and the insurance industry itself has been muddling through the soft market for some time.

With increasing job instability and the value of paychecks and investments going down, consumers may be tempted to cut corners on insurance, according to the Insurance Information Institute (I.I.I.).

Additionally, consumer liaison representatives to the National Association of Insurance Commissioners warn that consumers may become increasingly disgruntled with their insurance providers if they perceive insurers are acting solely in their own best interests in this down economy without regard to the needs and concerns of their customers. The economic “crisis presents the ind ustry with a very important choice: Will it choose to act in the best interests of its customers, rather than its bottom lines, by embracing fair practices that don’t unfairly penalize policyholders, or will it be b usiness as usual?” asks Pamela J. Bolton, a NAIC consumer liaison and director of The economy policy and research for Texas Watch, a consumer advocacy might be tight organization based in Austin, Texas. (See “Liaisons Keep now, but that Consumers’ Insurance Concerns at the F orefront” on page doesn’t mean it’s 54.) not a great time to While there are smart ways to save money on insurance, reassure custhe I.I.I. is alerting the industry and consumers that there tomers that you’re are also mistakes that could result in being underinsured. concerned about “This could result in a financial disaster if there is a fire, their welfare. hurricane, severe winter weather or other catastrophe,” said Jeanne M. Salvatore, senior vice president and consumer spok eswoman for the I.I.I. Independent insurance agents, of course, play an important role and can mak e a significant, positive difference in consumers’ insurance transa ctions. Above all, when it comes to insurance, customers want an insurance agent, as well as an insurance company, that can answer questions and handle claims fairly and efficiently if a mishap occurs.

The economy might be tight now, but that doesn’t mean it’s not a great time to reassure customers that you’re concerned about their welfare. Because unless you’re in touch with your customers, you won’t know when the next opportunity will come knocking.

Publisher Mark Wells Chief Executive Officer Mitch Dunford

EDITORIAL

Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content/ and Interim Midwest/Southeast Editor Andrew Simpson | asimpson@insurancejournal.com East Editor Kenneth J. St. Onge | kstonge@insurancejournal.com South Central Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Patricia-Anne Tom | ptom@insurancejournal.com MyNewMarkets Associate Editor Chris Boggs | cboggs@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Columnists Alan Shulman Contributing Writers Beth D. Bradley, Chantal Cyr, Danny Robbins

SALES V.P., Sales & Marketing Julie Tinney (800) 897-9965 x148 jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 dkaplan@insurancejournal.com South Central Eric Jeter (281) 655-0234 ejeter@insurancejournal.com

Midwest Lauren Knapp (800) 897-9965 x161 lknapp@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 dmolchan@insurancejournal.com

MARKETING

Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com (619) 584-1100 x120 New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classified and Ancillary Sales Manager Nicola Coghill | ncoghill@insurancejournal.com (619) 584-1100 x125 New Media Producer Chad Reese | creese@insurancejournal.com

DESIGN/WEB

Vice President/Design Guy Boccia | gboccia@insurancejournal.com Vice President/Technology Joshua Carlson | jcarlson@insurancejournal.com Graphic Designer Jamie Bethell | jbethell@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com

A D M I N I ST R AT I O N

Accounting Manager Megan Sinclair | msinclair@insurancejournal.com Admin./ Marketing Asst.

Kristina Delavega | kdelavega@insurancejournal.com Cover designed by: Guy Boccia

Stephanie K. Jones South Central Editor sjones@insurancejournal.com

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio N orth, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue cop y, $195 per y ear in the U .S., $295 per year all other co untries. DISCLAIMER: While the information in this p ublication is deriv ed from so urces 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. Cop yright 2009 W ells Publishing, Inc. All Rights R eserved. Content ma y not be photocopied, reproduced or redistrib uted without written permission. Insurance J ournal is a p ublication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052

6 | INSURANCE JOURNAL-SOUTH CENTRAL REGION March 23, 2009

FOR QUESTIONS REGARDING SUBSCRIPTIONS: please call 856-380-417 6 or email subscribe@insurancejournal.com. You may subscribe or change your address online at insurancejournal.com/subscribe.

ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or rbrown@fostereprints.com. Visit insurancejournal.com/reprints for more information.

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South Central Coverage Snapshot

It Figures 0.08 Legislation that would lower the legal blood alcohol concentration limit for the offense of boating under the influence from 0.10 percent to 0.08 percent has been approved by the Oklahoma Senate. The measure also would prohibit children under the age of 12 from operating personal watercraft. Sen. Bill Brown, R-Broken Arrow, author of Senate Bill 902, said alcohol use is the lea ding factor in fatal boating accidents, including several high-profile Oklahoma cases in recent years.

33% A measure passed by the Oklahoma House of Representatives would ask voters to approve a constitutional amendment to cap contingency fees charged by trial attorneys at 33 percent of the first $1 million in damages and 20 percent for higher awards. Oklahomans would be able to vote to reduce the cap on plaintiff attorney contingency fees, allowing the injured party to retain more of the award, if House Bill 1602 by Rep. Dan Sullivan is placed on the ballot.

Currently, contingency fees are capped at 50 percent, in addition to attorney expenses and costs. Attorneys would still be able to collect costs and expenses on top of the conting ency fees collected in a case.

$4.1 Million Texas Mutual Insurance Co. reported that it saved or recovered $4.1 million through its workers’ compensation fraud investigations in 2008. The company said the $4.1 million includes: claimant fraud future savings of $2.2 million; restitution of $39,374 from claimants; restitution of $1.6 million in premium fraud; and prevention of $301,467 in health care provider fraud and abusive billing.

Nationally, fraud across all lines of insurance costs consumers about $150 billion per year, according to the Texas Department of Insurance.

During the past three years, Texas Mutual has secured 48 convictions and saved or recovered $26 million through the company’s zero tolerance for fraud program. The program offers potential cash rewards that lead to arrests or indictments. IJ 8 | INSURANCE JOURNAL-SOUTH CENTRAL REGION March 23, 2009

Declarations Impact of Natural Disasters “I have witnessed first hand the impact natural disasters can have on a community and this state.”

— Texas Rep. Craig Eiland, whose Galveston district was severely damaged Sept. 13, 2008, by Hurricane Ike. Eiland, along with other legislators from the Texas Gulf Coast, have proposed legislation requiring insurance companies to pay into a state catastrophe fund that the companies could tap if they sustain big losses fr om a hurricane or other natural disaster. The Texas Windstorm Insurance Association — the state-sanctioned last resort insurer for some coastal counties — also would have to pay into the reinsurance fund. Eiland maintains insurers would save money by not having to buy and r enew reinsurance year after year from private companies. The insurance catastrophe fund bill is HB 2487. (AP)

A Legal Backwater “They don’t want to come here and be a mark for a la wsuit. …

As long as we are considered a legal backwater, people will not want to come here.”

— Oklahoma Rep. Dan Sullivan, R-Tulsa. Sullivan, an attorney who defends physicians in malpractice lawsuits, authored a bill passed by the state House of Representatives that aims to reform the tort system in his state. Among other things, the bill would would cap noneconomic damages, also known as pain and suffering, at $300,000, require a certificate from an expert that a lawsuit has merit befor e it can proceed in state court and change class-action lawsuit guidelines by requiring litigants to “opt in” to a lawsuit r ather than “opt out.” The bill passed the House on a vote of 61-39. (AP)

Awash in Debt “The flood insurance program is awash in debt, but instead of fixing the program and working to protect taxpayers from future losses, the Taylor bill would double down, adding a whole new costly liability to the program.”

— Steve Ellis, vice president of Taxpayers for Common Sense. The Sierra Club, American Rivers and Taxpayers for Common Sense — all members of the Americans for Smart Natural Catastrophe Policy — are opposing legislation that would add wind insurance coverage to the National Flood Insurance Program. According to these groups, the legislation (HR 1264) introduced again this year by Rep. Gene Taylor, DMiss., would “irresponsibly expose” taxpayers to added financial liability at a time of economic crisis. The better alternative is to incr ease mitigation and environmental protection initiatives that would prevent damage to homes and the environment, according to the groups. IJ www.insurancejournal.com

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South Central Coverage

Lawmakers Aim to Roll Back Texas’ 2003 Insurance Reforms

By Stephanie K. Jones

R

eforms to the Texas insurance regulatory system put in place by Senate Bill 14 in 2003 are under attack by a coalition of state lawmakers who have filed bills to, among other things, return the rate setting process for personal lines insurance to one of prior approval as opposed to the current file and use process.

Other filed bills would: • Standardize homeowners forms; House Bill 340 by Rep. Elliott

‘We made an awful mistake.’

Naishtat (Austin) and SB 102 by Sen. Eddie Lucio Jr. (Brownsville); • Impose a 15 percent limit on the amount insurers can vary rates in a single county; SB 103 by Lucio; • Ban the use of credit scoring in personal lines of insurance; SB 110

by Sens. Lucio, Rodney Ellis (Houston) and Van de Putte, and co-authored by Sen. Wendy Davis (Fort Worth); and • Direct the Texas Department of Insurance to study the use of data mining techniques by insurance companies in Texas; SB 1157 by Davis.

Senate Bill 91, by Sen. Leticia Van de Putte of San Antonio, would return the state to a prior approval system, albeit one that is “streamlined,” according to Van de Putte. “The insurance commissioner would have a maximum of 60 days to either approve it or deny it. If the commissioner does not disapprove a rate before the deadline, then the insurance comwww.insurancejournal.com

pany can use it,” Van de Putte said at a press conference in Austin.

“A couple of sessions back the legislature was talked into a different insurance regulatory system,” Van de Putte said. “We were told if we had a file-and-use system it would make easy for competitors in the market, that there would be more products and more insurers coming to our state. … “We made an awful mistake” and rates did not go down, she added.

House Bill 1594, authored by Rep. Rafael Anchia of Dallas, is a companion bill to SB 91. It would give the commissioner 120 days to approve or deny rate filings. “There’s a 120 deemer peri-

od where if the insurance commissioner fails to act within that 120day period, then the rate is deemed to be approved,” Anchia said. Anchia stressed that the bill is not “anti-insurance company.”

Jerry Johns, president of the Southwestern Insurance Information Service, took issue with Van de Putte’s and Anchia’s assessments. “Under the current file-and-use system, Texas consumers have more choices when it comes to the cost of insurance and the various products that are available,” Johns said. “Returning to government control of rates, discounts and products give insurers no incentive to compete in the marketplace because insurance

Dunford

Texas Sen. Leticia Van De Putte of San Antonio becomes one size fits all, and that is simply not a consumer-friendly environment.”

Texas traditionally has had some of the highest homeowners insurance rates in the nation. IJ

Comparison of Texas Average Homeowners Premiums

A

ccording to the National Association of Insurance Commissioners’ report, the state wide average annual premium for an HO3 policy (HO-B policy eq uivalent) in Texas was $1,409 per year in 2006 compared with the nationwide average of $804. The Insurance Council of Texas, however, pointed out that the report compares the premium of an HO3 policy (HO-B) with other states, b ut in Texas in 2006, only one third of policyholders owned an HO-B policy at that time. Today, its use is down to 15 percent, the ICT said.

ICT noted that a report released b y the Texas Department of Insurance (TDI) placed Texas third behind Florida and Louisiana for homeowners rate costs in 2006. TDI’s 2007 report shows Texas homeowner rates dropped .7 percent from 2005 to 2006, w hile the NAIC shows a gain of 2.7 percent.

Year 2002 2003 2004 2005 2006 2007

Homeowners Average Statewide Premium $1,232 $1,249 $1,244 $1,222 $1,214 $1,205

% Change Over Prior Year

NA 1.4% -0.4% -1.8% -0.7% -0.7%

Homeowners Average Statewide Policy Size $142,400 $151,400 $161,100 $169,000 $181,500 $193,700

% Change Over Prior Year

NA 6.3% 6.4% 4.9% 7.4% 6.7%

Source: Insurance Council of Texas

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South Central Coverage People

Luke Proctor

Peter Gale

Douglas R. Jones

Katherine Nolan

Michael S. Cox

Kimberly Muesse

Luke Proctor has been named president of Signature Select LLC, a new retail insurance subsidiary of Wichita, Kan.-based IMA. Proctor joined The IMA Financial Gro up in 2003 in the management development program, eventually focusing on strategic planning and special projects.

Signature Select LLC was formed to provide personal insurance services and business insurance solutions for small- to mid-sized organizations. The new subsidiary merges the employees and assets of the IMA Priv ate Client Services and IMA Community Business departments.

Signature Select is based in Wichita, with a presence in Dallas; Denver; Kansas City and Topeka, Kan., and is seeking licensure in all 50 states.

Louisiana Workers’ Compensation Corp. (LWCC) announced Peter Gale has joined the company as senior vice president of insurance services.

Gale brings 23 years of commercial insurance experience with such companies as AIG, Kemper Insurance, Fireman’s Fund Insurance and Brown & Brown. For 28 years, he has resided in the Seattle area, where he served as president of R.F. Mattei & Associates, and vice president and b usiness technology executive for Eagle Insurance Companies (now Seabright), a former Kemper subsidiary.

Gale holds the designation of Associate in Risk Management.

Independent insurance brokerage firm and Assurex Global partner, Dallas-based Roach Howard Smith & Barton (RHSB), appointed Douglas R. Jones vice president and principal. Jones specializes in insurance coverage for technology companies and will lead the expansion of RHSB’s services to the technology community.

Jones has more than 20 years of experience in risk management coverage and services, assisting clients through developmental periods, including emerging growth, IPOs, global expansions, and mergers and acquisitions. He also has knowledge of technology, telecommunications, media and life sciences, as well as an expertise in highly targeted insurance products such as cyber liability, directors and officers, and errors and omissions liability.

Prior to joining RHSB, Jones served as executive vice president at a Dallas-based insurance agency, where he headed the technology and D&O liability divisions. Jones’ professional designations include Chartered Property and Casualty Underwriter and Associate in Risk Management.

The Woodlands Financial Group Inc. (TWFG), a retail and managing general agency headquartered in The Woodlands, Texas, added Charles Locke as its new vice president of claims. Locke brings more than 35 years of insurance experience in claims management, insurance adjusting and appraising.

Locke began his insurance career as an independent adjuster for State Farm. Most recently, Locke was a pro-

10 | INSURANCE JOURNAL-SOUTH CENTRAL REGION March 23, 2009

gram director for Aggressive Insurance Co. Prior to that, he led the claims department for Texas Select Lloyds Insurance Co.; developed and administered the company’s catastrophe preparedness and response program; and provided back-up to the Florida Select and California Select CAT programs.

TWFG also added Katherine Nolan as its new chief operating officer. Nolan brings more than 15 years of insurance management experience with P&L, strategic planning and operational execution accomplishments.

Throughout her career, Nolan has served in numerous management and executive roles including division president and executive vice president of Affirmative Insurance Holdings Inc. She led the strategic planning and integration of five acquisitions while helping to build the organizational structure, recruiting and hiring talented emplo yees, and spearheading the consolidation of the business operations. Also, as a prior program manager overseeing insurance programs in five states, Nolan was directly responsible for overall growth and profitability.

Texas-based Homeowners of America Insurance Co. announced that Michael S. Cox has joined the firm as vice president and director of marketing. Cox has more than 12 years of insurance industry experience, with most of his career spent in property and casualty focused on personal lines.

Prior to joining Homeowners of America, Cox worked with Safeco Insurance as a regional sales manag er in the Louisiana and Oklahoma markets. Additionally, he has worked for AIG Agency Auto as a regional sales and marketing manager in the Texas, Colorado and New Mexico markets.

Kimberly J. Muesse with Lockton Companies Inc. in Houston, Texas, was named the Accredited Customer Service Representative (ACSR) of the Year by the Independent Insurance Agents & Brokers of America (the Big “I”).

Muesse joined the Lockton team two years ago and has more than 25 years of experience in the insurance industry.

Muesse has demonstrated her commitment to continuing education by earning all three ACSR designations. She earned the personal lines designation in June 1991, the commercial line designation in October 1994 and the life/health designation June 2004.

The Big “I” said Muesse stood out among the candidates for the ACSR of the Year honor because she consistently goes beyond the call of duty. Her professionalism, time management skills and exceptional work ethic were among the many attributes that were highlighted in letters recommending her to the prestigious award.

The Accredited Customer Service Representative program is a joint effort of the Big “I”, the American Institutes for CPCU (AICPCU) and the Insurance Institute of America (IIA). IJ www.insurancejournal.com

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South Central Coverage News & Markets

The Nuts of the P eanut Recall Case

By Chris Boggs

T

he story of the salmonellatainted peanut products distributed by Peanut Corp. of America (PCA) is one of the highest-profile food recall cases in recent memory, and one that holds a number of interesting side stories for the insurance industry.

One is the fact that so many states were touched by the recall, which started in late January.

Schools, hospitals and other institutions across at least a dozen states were linked by the recall of tainted peanut products. But the bigger story to keep an eye on is what the courts will say about the recall now that the company’s liability insurer — The Hartford — has sued PCA to limit the liability from the outbreak. The suit, filed in federal court in Virginia, contains a number of arguments worth discussing.

There are two reasons for the interest in The Hartford suing PCA to establish the extent of their liability: 1) Such a pre-emptive strike by an insurance carrier is rare — suing to establish liability; 2.) It’ll be curious what legal theories and policy boundaries Hartford will ask the court to establish.

Hartford may try to limit or deny coverage by: • Asserting PCA’s actions were intentional and/or illegal; • Limiting coverage by using a “batch clause” or condition (if one exists); or • Limiting or defining coverage by establishing the jurisdictional definition of an “occurrence.”

Intentional or Illegal Acts Salmonella-tainted peanuts and peanut butter products supplied

by PCA may have caused at least eight and possibly nine deaths in www.insurancejournal.com

the United States, according to Associated Press reports. As many as 1,900 products have been involved. The swirling question of who knew what and when sounds very political.

Did anyone with authority know about the tainted products?

Were they aware but apathetic to the potential for injury? Was there a conspiracy to hide the truth or any other intentional actions?

“Yes,” seems to be the answer to each of these questions.

Federal Food and Drug Administration (FDA) officials reported that Lynchburg, Va. based PCA knowingly shipped tainted products from its Blakely, Ga., plant. Internal e-mails from PCA’s president to plant managers reportedly instructed them to send out tainted peanuts regardless of the risk because of the lost revenue represented in contaminated food. The Federal Bureau of Investigation (FBI) has joined the investigation looking for criminal wrongdoing.

If the processing, shipping and selling of the salmonella-tainted products were intentional or, worse, criminal, how might the insurance policy respond?

The answer revolves around the definition of an “occurrence,” the application of the expected or intentional injury exclusion, and, more broadly, the concept of legal liability in relation to insurance protection.

Insurance Services Office’s (ISO’s) commercial general liability (CGL) policy defines “occurrence” as: “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Does shipping products known to be or at least suspected of being tainted with a food-borne bacteria qualify as an “accident?” Even if such act quali-

fies as an “accident,” is the CGL ed sicknesses are known to FDA designed to protect the insured officials, and there are probably from knowingly committing an hundreds or thousands more that illegal act? did not make the connection “Accident” is not defined in the between the peanut butter they CGL; as such it is assigned its ate and the diarrhea, nausea and common or legal meaning and use cramps they felt until the news when debatreports and ing coverage. recalls began.

MerriamSalmonella Webster’s is proven to Dictionary of cause sickness Law defines and even A ‘batch clause’ serves to “accident” in death. Any limit all product liability part as: “an entity that claims arising out of one unexpected, knowingly production run — a batch usually sudsends tainted — subject to one per den event product out that occurs for mass conoccurrence limit. without sumption intent or volishould tion although “expect” some sometimes injury or through carelessness, unawaredeath to occur. Again, Hartford ness, ignorance or a combination may be within the policy proviof causes.” sions to deny PCA’s claims.

FDA officials purport to have There is little doubt that PCA evidence that PCA acted in reckis legally liable for any and all less disregard for the health and injuries suffered from the distribusafety of the consumer by shiption of the tainted peanuts (it may ping salmonella-tainted products even be criminally liable). under orders from its president. If Hartford just wants to establish, PCA did, in fact, knowingly place up front, its extent of liability for tainted products in the marketthe actions of PCA. If Hartford’s place, any injuries suffered were policy provisions are similar to not caused by an “accident” and ISO’s, it is possible that Hartford thus do not qualify as “occurmay owe no duty to defend or rences” under the CGL policy pro- indemnify PCA for any injuries or visions. Hartford can legitimately damages. deny coverage.

Hartford’s second bullet is the The Batch Clause CGL’s “expected or intended Enforcing a batch clause, if one injury” exclusion. Certainly PCA exists, would not likely require didn’t “intend” to injure anyone as court involvement because it is a evidenced by a June 2008 e-mail contractual policy provision. sent by the company president, “I Although defining a “batch” may go through this about once a be difficult, as it appears PCA’s week, I will hold my breath – distribution of tainted peanuts again.” But it’s logical to assume and peanut products may, accordPCA should or could have “expect- ing to AP reports, go as far back as ed” injury to occur.

2006.

More than 650 salmonella-relatcontinued on page 12 March 23, 2009 INSURANCE JOURNAL-SOUTH CENTRAL REGION | 11

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South Central Coverage News & Markets Penut Recall, continued from page 11

A “batch clause” serves to limit all product liability claims arising out of one production run — a batch —subject to one per occurrence limit. If 300 people are sickened by one “batch,” those 300 are considered part of one occurrence. In essence, the bad batch is the occurrence, not the injuries.

Defining a “batch” and thus limiting coverage is the least likely of the options being pursued by Hartford, but, it might be an option.

The Definition of ‘Occurrence’ Courts use four legal theories to identify when bodily injury or property damage occurs.

Each jurisdiction looks to its own case law and legal precedent to decide which of these theories applies in a particular case: 1. “Injury-in-fact theory”: Courts subscribing to this theory consider the date of any actual injury (the day the nail was driven into the electrical wire) as the date of the “occurrence,” regardless of the discovery or manifestation of the injury;

2. “Manifestation theory”: The date the injury becomes evident is the date of “occurrence;” 3. “Exposure theory”: Courts consider the dates of exposure to be the dates of the “occurrence;” or 4. “Continuous trigger theory”: This is also known as the “triple-trigger” theory; multiple occurrence dates (and thus multiple policies) may be involved based on: the date of first exposure; dates of continuous exposure; and date of manifestation.

The “continuous trigger theory” generally applies to pollution and like claims with longer exposure and manifestation periods.

Hartford likely wants the court to direct which theory of occurrence applies, should it be required to defend and/or indemnify PCA. As stated previously, there is evidence that PCA knew about the presence of salmonella as far back as 2006; ISO’s CGL states that it will only pay for “bodily injury” or “property dam-

age” that occurs during the policy period. It further states that it will not pay for any injury that was known by the insured to have occurred prior to the policy period.

Knowing the legal date(s) of occurrence will direct Hartford which policy(ies) will respond.

Hartford wants to limit the dates of occurrence to as few policy periods as possible to lower its potential liability. Also, because the umbrella will likely be called upon, Hartford would probably like to keep the current policy out; it provides the highest total limits.

It’s Still a Guess Exactly what Hartford is attempting to charge or establish is not yet clear; Hartford has not made its legal plans public. Nevertheless, this discussion may serve to answer the questions some have of how Hartford could possibly deny or limit coverage. IJ Boggs is associate editor of MyNewMarkets.com.

Texas Inspector Failed to Flag Salmonella-Linked Plant

By Danny Robbins

A

Texas agriculture inspector failed to note that a peanut plant at the center of a national salmonella o utbreak was operating without a state health department license, despite at least three visits in the y ears before hundreds of people got sick, according to interviews and documents obtained by The Associated Press.

The inspector responsible for certifying the plant to process org anic products noted after each visit that the plant operated b y Peanut Corp. of America in Plainview, Texas, had such a license when it didn’t. Noting that the plant failed to o btain a license would have alerted the state health department, which for years had no record of the plant and didn’t send its own inspectors there until recently. When the plant was finally inspected earlier this year, Texas health officials found dead rodents, rodent excrement and bird feathers in a crawl space above a production area, leading them to order a recall of all prod ucts the plant had shipped since 2005.

Tests have since shown that ground peanuts at the Plainview plant were contaminated with the same strain of salmonella that sic kened more than 650 people, is suspected of ca using at least nine deaths, and led to one of the larg est product recalls in U.S. history.

Salmonella has also been detected in peanut samples from a Georgia plant operated b y PCA, which has filed for bankruptcy.

Texas Department of Agriculture spokesman Bryan Black said if the lack of a license had been properly noted, the department would have denied it organic certification and notified the Department of State Health Services. Beca use the Plainview plant was not licensed, state health officials have said they had no record it existed and never sent their own inspectors to the facility to check for possible food safety problems. All food manufacturers in the state are required to obtain a license from the state health department.

The inspector, Gaylon Amonett, was fired on Feb. 13, 2009, the day after state health officials ordered the recall. Amonett, a 22-year TDA employee who worked out of the agency’s Lubbock office, acknowledged that he checked “yes” to the question of whether the Plainview plant had records showing it was in compliance with health codes on w orksheets he completed for inspections in 2005, 2006 and 2008. The reason he checked “yes” the first time, he said, w as because a plant manager told him an application for state health department licensing had been completed and was in the hands of Peanut Corp. officials at the company’s headquarters. He said he continued to check “yes” in succeeding years because he assumed that the license w as granted.

Associated Press writer Betsy Blaney contributed to this report from Lubbock, Texas.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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National Coverage News & Markets

Survey: Commercial Lines Pricing Drops 3% in Q4 T he commercial lines insurFourth quarter CLIPS findings ance market showed more indicate that product lines and signs of price stabilization in the market segments experiencing the last quarter of greatest reduc2008. tions in pricing ‘The underlying Commercial over the last deterioration in insurance prices few years — underwriting saw just a slight most notably results, coupled with workers’ comdecline of 3 percent during the pensation, unprecedented fourth quarter of property and investment losses, 2008 compared to are contributing to a large accounts a year ago — rep— may have slowing of pricing resenting the begun to stabideclines.’ smallest reduclize. tion in the past The survey eight quarters — according to also revealed that pricing reducTowers Perrin’s commercial lines tions in those areas are now generinsurance pricing and profitability ally in line with activity in other trends survey (CLIPS). commercial lines, with the excep-

tion of specialty lines, where, consistent with recent quarters, price changes remained fairly flat.

The survey also show that accident-year 2007 loss ratios deteriorated 7 percent relative to 2006, and that accident-year 2008 loss ratios rose an additional 12 percent versus 2007. The deterioration is a continuation of a five-year trend as, overall, prices have eased 11 percent since 2004, despite ongoing increases in loss inflation.

“The underlying deterioration in underwriting results, coupled with unprecedented investment losses, are contributing to a slowing of pricing declines,” said Jeanne Hollister, Towers Perrin managing principal and proper-

ty/casualty insurance practice leader for the Americas region.

“Although the property and casualty industry remains strongly capitalized in the aggregate, we expect that the surplus declines in 2008 will result in increased conservatism in companies’ risk appetite. We believe that this, in turn, will lead to a gradual, general firming of prices throughout the balance of 2009.”

Towers Perrin’s CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. The survey track the differing trends in pricing across region, line of business, and account size on a quarterly basis. IJ

General Liability Losses, Expenses Likely to Rise Rapidly

National Flood Insurance Program Gets Short-Term Extension

T

C

he general liability line of insurance has produced industry-wide combined ratios below 100 percent for the past two years, but this profitable underwriting performance is unlikely to continue, analysts say.

General liability losses and expenses are expected to increase faster than premium increases in the next couple of years, according to a new study by Conning Research and Consulting, “We project that the next couple of years will see a moderating in general liability premium reduction, gradually leading to a modest increase by 2010,” said Mark Jablonowski, analyst at Conning Research & Consulting.

However, losses and expenses are forecast to grow more quickly, analysts say, with a resulting rise in combined ratios reaching 107 percent by 2010.

“In the longer run, the future of www.insurancejournal.com

the general liability insurance market will play itself out between the cumulative effects of small to moderate losses and the rising prospect of mega-risks,” Jablonowski said.

The Conning Research study, “General Liability: Staying Relevant (and Profitable) in the New World of Risk,” identifies the issues facing the market.

“History has shown us a cyclical increase in general liability losses in periods following recessions,” said Stephan Christiansen, director of insurance research at Conning. At the same time, longer term secular trends point to an increase in both smaller claims and larger mega risks. “Longer term, the best prospects for general liability insurers may come from expanding the model of specialization in risk that has already proven to be a successful differentiator among companies.” IJ

ongress passed a measure extending the National Flood Insurance Program through Sept. 30, 2009, under the omnibus appropriations bill.

The NFIP extension was set to expire at 11:59 p.m. on March 6, but Congress passed a continuing resolution to extend funding to federal programs under the omnibus bill, including the NFIP through March 11. Then on March 11, Congress passed the omnibus bill, which ensures a temporary extension of the NFIP until further reform can be debated.

If the NFIP had expired, agents and brokers would have no longer been able to write, renew or endorse NFIP policies.

“Allowing the program to expire would have very negative consequences for policyholders and also for the nation’s econo-

my,” said David A. Sampson, president and CEO of the Property Casualty Insurers Association of America.

Insurers and other industry groups hope that more work will be done to provide a longterm solution to problems that have plagued the NFIP for years.

“We will work closely with the House and Senate to advocate a long-term extension that preserves the program’s viability and does not needlessly expand its scope into other areas, such as windstorm insurance, where coverage is already available through private industry or state programs,” Sampson said. IJ

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Special Report HOT Markets and Programs

HOT Prospects Come in Unusual Packages MyNewMarkets.com’s Top 10 Oddest Market Searches and Requests

By Christopher Boggs

A

“hot” risk from an agent’s view is the one sitting on his or her desk demanding immediate attention. Sometimes those hot prospects aren’t business owner policy or even standard-carrier-eligible; in fact they can be pretty darn strange.

MyNewMarkets.com, Insurance Journal’s Web site designed to bring agents and brokers/wholesalers together, sees its share of odd risk types and req uests. A review of the market request forum at any given time will produce some very “unique” risks. Remember, unique is code for bizarre, weird or just unbelievable. But no matter how unique the risk, there is usually a market willing to supply the needed protection.

Insurance Journal’s editorial staff reviewed the forum posts for the past se veral months and selected the 10 most unusual market requests/searches applying highly scientific methodology — if it ma de us shake our collective head, it made the list.

From 10 to one, here are the strang est market requests from the past few months: 10. Timberland 9. Halfway House Operation 8. Air Traffic Control School 7. Tourist Trolley Operator 6. Snow Machine Rentals 5. Dating Service Operation

4. Sand Rail (Dune Buggy) Operation 3. Tailgate Party Bus Operation 2. Circus Arts Instructor Liability 1. Exotic Snake and Reptile Breeding Operation

and underwriting guidelines for a few of the listed risks. For example, Risk Placement Services Inc.’s Vice President of Property Bob Hecht stated that both ACE and Axis have a lumber industry-related risk specialist, making them good markets Stump the Market for the strangest risk number 10 — timIn an attempt to stump the mark et, the berland. list above was sent to several brokers Questions about coverage availability for across the country. The insight provided halfway house operations (#9), air traffic by the respondents was enlightening, and control schools (#8) and dating service the coverage availability for even the operations (#5) produced valuable understrangest risk was intriguing. writing information in addition to marketZach Mather, a broker in CRC’s related data. Halfway houses were broken Alabama office, said, “We into two categories prior can always find a market.” ‘Unique’ is code for to the discussion of covThis seems to be true. The erage availability; the bizarre, weird or combined panel successdiscussion of air traffic fully provided markets for just unbelievable — control schools focused nine of the risks presenton the professional liabut no matter how bility exposures; and the ed, although no single broker/wholesaler claimed ‘unique’ the risk, unusual sexual assault to be able to find coverage exposure faced by datthere is usually a for all 10. The sand rail ing services were dis(dune buggy) operation cussed. market willing to was the only market none Placement for halfway supply the needed houses depends on the of the five respondents said they could or would type of operation, protection. place. according to Ken Beyond a simple “yes, we will write the Kukral, president and CEO of coverage,” or “no, not something we want;” International Excess Companies in each of the brokers provided more Richmond Heights., Ohio. Kukral stated, detailed information regarding markets continued on page N4

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Her expertise is protecting the environment. And your clients.

–Karen Companion, Assistant Vice President LIU Environmental

Yes, there’s an Environmental insurer that’s as responsible as you are.

Of all the reasons Liberty International Underwriters has become a leading specialty lines insurer, what truly sets us apart is our instinct to do the right thing. We meet your needs quickly, consistently, and responsibly. Together, we can provide the best products for your clients. We don’t just value our relationship with you. We work at it.

For specific information about the types of risk we write, visit liu-usa.com/environmental. Liberty Mutual is rated A by A.M. Best.

Responsibility. What’s your policy?

EXCESS CASUALTY & UMBRELLA • E&O • D&O • PRIMARY CASUALTY • FIDELITY • ENVIRONMENTAL • CONSTRUCTION • MARINE • ENERGY

All products written by member companies of Liberty Mutual Group. © 2009 Liberty Mutual Group.

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Special Report HOT Markets and Programs HOT Prospects , continued from page N2

Managers and also one of Lloyds’ “General Star and HCC Insurance Co. have errors and omissions programs. a detention facility program that could do Dating service operations presearly release halfway houses. If it is a drug ent a unique professional liability and alcohol halfway house or a homeless challenge, Parrish said, noting, “I’ve shelter/halfway house, we could go to seen several dating services in the Evanston Insurance Co, Lloyd’s or Red past five years or so, and never Mountain Insurance Co.” found one that anyone was willing Joshua J. Parrish of Arrowhead Wholesale to cover due to the possibility of Insurance Services’ executive and professexual assault exposional risk division in San Diego, said he can proPremium may not sure and lack of background screenvide professional liability ing.” for a halfway house oper- be the only mini“For the most ation providing substance mum required by part we have a marabuse recovery, but not ket; it is just a matfor a convict early release the underwriter. ter of if it is large house. “I would write a Some markets enough to meet the halfway house with Midrequire a miniminimum premium Continent GA, a wholethreshold,” stated sale servicing (no retailer mum of units in Walt Sams, a marapplications) MGA that the operation. keting representawrites for ProNational/ tive with ProAssurance.”

Appalachian Underwriters Inc. His Kukral and Parrish also zeroed in on the point is well-taken; because of the professional liability markets that would unusual nature of those and other and could entertain an air traffic control like risks, underwriters generally school. Parrish said, “If they’re looking for expect a minimum premium to take on educators’ liability, my favorite market for such unusual risks. that is United National.” Kukral reported Premium may not be the only minimum that he would approach Aviation Insurance

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required by the underwriter. Sams reported that in order for a tailgate operation (#3) to gain coverage, his markets require the insured to have a minimum of three units in operation.

Snake and Reptiles But what of the No. 1 strangest risk; who will write an exotic snake and reptile breeding operation? Kukral led Insurance Journal to Lester Kalmanson Agency Inc. A review of this specialty agency’s Web site is a walk through weird — it says so on the site. The home page contains pictures of alligators, zebras and a rhinoceros — what better place to find coverage for snake and reptile breeding.

The old adage, “One man’s trash is another man’s treasure,” can be rewritten for use in the insurance world too.

“One agent’s weird is another agent’s livelihood.” Even the bizarre have a home — somewhere. IJ Boggs is associate editor of MyNewMarkets.com. Phone: 619584-1100 ext. 137 Email: cboggs@mynewmarkets.com. www.insurancejournal.com

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International Coverage News & Markets

Sports Terrorism, ‘Names,’ Tongues and Mergers

By Charles E. Boyle

A

re professional sports the next terrorist targets? The terrorist attack on Sri Lanka’s cricket team in Lahore [Pakistan] “highlights the vulnerability of sporting events to terrorist disruption,” warned Dr. Gordon Woo, terrorism risk expert at Risk Management Solutions (www.rms.com). “A characteristic of terrorist behavior is learning from success elsewhere.”

Woo stressed that “with concern rising over copycat attacks on other major sporting events,” their insurance coverage is liable to become increasingly expensive, including the 2012 Olympic games in London.

Arsene Wenger, the French manager of the Arsenal Football [Soccer] Team, added his concerns. He noted that sports, especially international competitions such as the Football World Cup, are high-profile events. His own team has received threats, but hasn’t publicized them.

As a result, sports make tempting targets for “extremists.”

Woo noted, however, that the “terrorism insurance market has softened considerably since 2003, when FIFA securitized the risk of the 2006 Football World Cup being cancelled.”

The end of more than 20 years of litigation may be in sight, following a recent UK Appeals Court ruling in favor of Lloyd’s against claims of fraud by former individual ‘names.’

As Lloyd’s [www.lloyds.com] explained, the latest judgment upheld a July 2008 ruling that struck down “a claim brought by 50 names against Lloyd’s alleging that the description of reinsurance to close (RITC) in Lloyd’s brochures and its verification forms back in the 1980s was fraudulent.”

In that decision, Justice David Steel, found that Lloyd’s had not made any false representations with regard to RITC and that there was no evidence that Lloyd’s had acted dishonestly.

He also held that the claim was “unquestionably an abuse of process.”

However, the Court of Appeal found that the names’ application to appeal was “totally without merit” and was “just part of the continuing abuse of process of the court by dissat-

N6 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

isfied names who are perpetually trying to find new ways of accusing Lloyd’s of fraud.”

Lord Justice Longmore made the decision even more emphatic, stating that the litigation pursued by names “must now come to an end.”

He held that extended civil restraint orders against the 50 names, preventing them from pursuing fresh litigation, must remain in place.

Lloyd’s General Counsel Sean McGovern called the decision a “complete vindication of Lloyd’s position through a decade of litigation,” adding that it “marks the end of perpetual litigation trying to reopen matters that have been definitively laid to rest by the Court on a number of occasions.”

Lloyd’s not only won its court case, it also insured a coffee taster’s tongue for £10 million ($13.78 million). The coverage on Gennaro Pelliccia, Costa Coffee’s Italian Master of Coffee, continued Lloyd’s centuries-old tradition of accepting unusual risks.

Pelliccia is glad to have the policy. He explained that his 18 years of experience enables him to distinguish between thousands of flavors, and to “search out any defects, which help guarantee Costa’s unique Mocha Italia blend.”

Lloyd’s noted that the “average tongue has approximately 10,000 taste buds, which means Costa has in effect insured each of Pelliccia’s taste buds for £1,000 (approximately $1,400).

He’s not unique; over the years Lloyd’s has insured other tongues, notably for wine tasters and wine merchants. A Dutch wine maker, Ilja Gort, even insured his nose for £5 million ($6.32 million).

Sompo and NipponKoa, two major Japanese property/casualty insurers, have announced preliminary merger plans, as the trend toward consolidation continues. Japanese insurers are trying to reduce costs in order to cope with decreasing demand and an aging population.

The merger of the two would create a company with premium income of more than 2 trillion yen ($20.7 billion), putting it third in the Japanese non-life insurance industry with 25 percent market share. They would have a market value of about $10 billion. IJ www.insurancejournal.com

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Special Report Green Risks

Innovative Boats Need Innovative Agents Hybrid Boats Offer New Way to Sell Coverage to the Green-Minded Customer

By Chantal Cyr

H

ybrid boats are hitting the market and the growing popularity of hybrid and electric boats have directly impacted what boaters expect from their insurance. According to the NMMA boater registration report (Feb. 4, 2008) and U.S. Census Report (2006), one in 10 American families owns a boat.

Understanding new marine technology could help an independent agent land new boat and yacht customers and possibly grow the books of other personal insurance products.

Climate change, carbon footprint and biodiesel are all words and phrases that have become part of today’s lexicon as everyday Americans are constantly reminded about what they are putting into the environment.

As the new administration came into office, environmental issues have gained even more attention.

Increased focus on the environment, a slowing economy and record high fuel prices have all led the marine industry to develop new, innovative products. During the past few months, green boating has been grabbing headlines. Most of the news has surrounded electric boats, which use no fuel at all, and hybrids, which use an integrated propulsion system made up of fuel and electricity. Some hybrids even included solar Hybrid boats have panels like Island Pilot’s new DSe trawler. and yachts Boats from Frauscher will likely and Sea Ray have begun expand in implementing parallel hybrid systems powered popularity

by Steyr motors into one over the next of their models. These motors function much few years. like those found in hybrid cars. Eventually, it appears boat and yacht manufacturers will have a hybrid option in their lineup of vessels with the ability to both save on fuel and deliver the performance many boaters want.

What can an independent agent do to let www.insurancejournal.com

Cyr

customers know that they have what it takes to properly insure one of these innovative boats and yachts? There are four steps agents can take, with minimal investment, to gain the trust and loyalty from boaters interested in the newest technology on the market.

Talk to boaters about mechanical breakdown coverage. Early adopters are often the ones who want the newest gadget and the most innovative technology on the market. However, some of them might be anxious about the durability of new systems that are being used. Mechanical breakdown coverage that is included in some boat and yacht policies could ease the mind of an early adopter who is looking forward to

mixing water with electricity. Taking the time to find a carrier that includes this coverage can build trust with a customer through a shared understanding of what matters most — being able to get the boat back in the water quickly should something break without a major out of pocket expense.

Understand which carriers know boats and yachts the best.

Matching customers with insurance carriers that have highlevel claim service will build loyalty with that customer should the unfortunate event of a claim occur. If an auto or home adjuster who is not a boat expert visits a boater that has a claim, are they going to believe that carrier or agent has any idea continued on page N8

March 23, 2009 INSURANCE JOURNAL-NATIONAL REGION | N7

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Special Report Green Risks Innovatice Boats, continued from page N7

what’s best for their watercraft? Probably not.

This factor is even more important with boaters who are more sophisticated and have made the investment in new, more complex technology. Partnering with carriers that have a good understanding of the innerworkings of the various applications of “hybrid” technology will help deliver a positive experience for the customer.

Provide tips and information focusing on customers’ environmental interests. Someone buying a hybrid boat may not only be an early adopter of new technologies, but they may be paying serious attention to how they can reduce their environmental impact. Connecting with customers about two of their passions, boating and the environment, could help to develop a loyal relationship with that person. This also creates an opportunity to inform customers about new environmentally friendly behaviors for boating, home maintenance or car care to include in their life and the insurance implications of doing so.

Get out of the of fice and attend a local boat show, if possible. Some of the best feedback heard from agents is how they have made connections in the marine industry and are regularly updated on some of the latest trends at local sho ws. Meeting boat dealers at shows will let them know the insurance agent is committed to the marine industry and is a name that the dealer’s customers can trust. Dealers appreciate this because they can then set a customer up with an agent they know ensuring the customer has a good boat-buying experience.

Hybrid boats and yachts will likely expand in popularity over the next few years. Instead of waiting to learn about them after they have flooded the market, use this time to take a leadership position in understanding these vessels. Doing so now could help to provide a competitive advantage for an agency by delivering knowledgeable service to the consumers who are buying them. IJ Cyr is vice president of the boat and y acht division for Travelers. She joined Travelers in 1986 and has more than 13 years of experience in the marine industry.

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New Markets The following markets were selected from the MyNewMarkets database of 25,000 coverages and programs. To find additional markets, or to submit markets, go to www.MyNewMarkets.com.

Misc. Medical Malpractice Market Detail: NAS Insurance Services

Inc. (www.nasinsurance.com) gives agents the ability to provide stand-alone medical

malpractice coverage. Coverage can also be provided packaged with general liability, and excess liability up to $5 million is also available. Special features include incident reporting and full prior acts coverage. The policy can be endorsed to make defense in addition to the limits of protection and to extend coverage for sexual abuse and molestation up to the full limits of lia bility. Punitive damages are automatically included where insurable by law. Surgery centers, MRI facilities and dialysis centers are also eligible. Minimum premiums begin at $2,000 and deductibles start at $1,000.

Available Limits: $1 million to $3 million (with the availability of excess coverage).

Carriers: HCC and HCS. “A” rated by A.M. Best. Non-admitted.

States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., D.C., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Maine, Md., Mass., Mich., Minn., Miss., Mo., Mont., Neb., Nev., N.H., N.J., N.M., N.Y., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., Wis. and Wyo. Contact: David Leventhal at 818-808-4464 or e-mail dleventhal@nasinsurance.com.

Golf Courses and Country Clubs Market Detail: Fairway Underwriters Inc. (www.fairwayunderwriters.com) allows agents access to an insurance program for daily fee golf courses and country clubs.

Fairway’s Club Champion CMP policy can now be extended the same coverage to selected distressed courses which are for sale, in foreclosure or in receivership.

Program highlights include: tee to green property coverage, herbicide/pesticide pollution liability, non-reporting equipment coverage, rating based on rounds played, along with many other coverages. Workers’ compensation, umbrella liability and directors’ and officers’ coverage are also available.

Some coastal courses are eligible for wind coverage. Minimum premiums begin at $2,500.

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Available Limits: As needed.

Carriers: QBE. “A� rated by A.M. Best.

Admitted.

States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., D.C., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., La., Maine, Md., Mass., Mich., Minn., Miss., Mo., Mont., Neb., N.H., N.J., N.M., N.Y., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., W. Va., Wis. and Wyo. Contact: Fran Coulter at 800-662-2141 or e-mail fcoulter@fairwayunderwriters.com.

Private Money Lenders REO/FP Market Detail: Innovative Risk Solutions Inc. (www.irs-incorporated.com) offers agents a source for their private lending clients in need of an REO and “forced placed� coverage market.

Private, non-bank lenders need a market for property protection when/if the mortgagor fails to secure the correct property protection. In this program, rehab property and vacant property are acceptable. Policies can be administered online and the insured has instant access to an Evidence of Insurance. Monthly billing is available. Deductibles begin at $2,500.

Available Limits: Up to $100 million.

Carriers: Lloyd’s. “A� rated by A.M. Best. Nonadmitted.

States: All. Contact: John Watt at 954-931-4795 or e-mail jwatt@irs-incorporated.com.

Mortgage Broker/Banker Professional Liability Market Detail: Gresham & Associates (www.greshaminc.com) has facilities for mortgage broker/banker professional liability which includes sub-prime loans and prior acts coverage. Investor required errors and omissions coverage is also available through a Special Mortgage Bankers Bond naming the investor as the loss payee. Minimum premiums begin at $2,500.

Available Limits: $1 million to $5 million.

Carriers: Unable to disclose. “A� rated by A.M. Best. Non-admitted.

States: All. Contact: Art Hays at 888-473-7444 or e-mail ahays@greshaminc.com. IJ

Submit your company’s property/casualty markets to the industry’s leading searchable database at www.mynewmarkets.com. www.insurancejournal.com

Miscellaneous Professional Liability 24 Hour Gas / Convenience Stores Commercial Property Lessor’s Risks Commercial Umbrella Non-profit Director’s & Officer’s Liability

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Special Report Green Risks

Greener Insurers Compete for a Growing Green Industry

By Andrea Ortega-Wells

J

im Henson’s famous Kermit the Frog said it the best, “it’s not easy being green.” Today’s property owners and insurers understand that while it’s not easy, being green can be profitable.

The green building market is steadfastly growing even in tough economic times.

“The green building movement is alive and well despite current economic conditions,” says Fireman’s Fund’s Steve Bushnell, the first property/casualty insurer to create insurance coverages specifically for green buildings.

While Fireman’s Fund Insurance Co. released the industry’s first green commercial building insurance product endorsement in October 2006, the insurer is no longer alone on this front as a number of other insurers have since developed green insurance products in both personal lines and commercial lines.

Marsh’s “Green Built Environment in the United States” report updated in December 2008 says there’s a growing interest among insurance companies in green building.

Insurance companies such as AIG, Zurich, CNA, Travelers, Liberty Mutual and Chubb — to name just some — already have green insurance coverages on the market.

“The U.S. Green Built Marketplace continues to grow at a rapid pace,” the Marsh report concludes. “There is increasing interest by the insurance marketplace in understanding the risks and benefits of building green.”

Christine Alderman, new products and services manager for Chubb Personal Insurance, agrees and believes as the green industry conN12 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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Opportunities tinues to evolve so will the insurance industry and its product offerings for the green sector.

“I think that we will see more of a market for green and green rebuilding products as well as insurance,” Alderman said.

Growing Green Market By 2013, the overall green building market (both residential and non-residential) is expected to more than double, which could offer opportunities for insurance companies and their agents.

Today the green building industry is estimated to be 10 percent to 12 percent of the current commercial and institutional building market, or about $36 billion to $49 billion. But McGrawHill estimates the industry will grow to represent 20 percent to 25 percent of new commercial and institutional construction starts, or from about $96 billion to $140 billion in size.

And these estimates could perhaps be on the low end, the U.S. Green Building Council (USGBC) says.

Even in a dismal U.S. economy, recent studies and reports point to green building as one of the bright spots. The USGBC reported that in 2008, the numbers of both Leadership in Energy and Environmental Design (LEED)-registered and LEED-certified projects doubled — from about 10,000 registered projects at the end of 2007 to more than 20,000 by the end of January 2009.

Some 75 percent of commercial real estate executives — including developers, rental building owners, brokers, architects, engineers and others — say the credit crunch will not discourage them from building green, according to Turner Construction Co.’s “Green Building Barometer.” In fact, 83 percent said they would be “extremely” or “very” likely to seek LEED certification for buildings they are planning to build within the next three years.

While in years past, the majority of green commercial buildings could be found in federal or state office buildings, that’s no longer the case, says Fireman’s Fund Bushnell.

Green building has “spread to the private www.insurancejournal.com

sector and office buildings …. hotels, multifamily, hospitals, public and private schools,” Bushnell says. “We’re seeing that the green building movement has become well entrenched and has spread to nearly everyone who owns a building.”

The greening of existing buildings is one of the fastest growing areas in the green building movement as well.

Studies indicate commercial property owners have an interest in updating their existing stock of buildings in many green ways. More than 80 percent of commercial building owners have allocated funds to green initiatives, according to “2008 Green Survey: Existing Buildings,” a survey jointly funded by Incisive Media’s Real Estate Forum and GlobeSt.com, the Building Owners and Managers Association International and the USGBC. And 45 percent of commercial building owners say they plan to increase sustainability investments this year.

Homeowners also are looking to buy green properties or green their current properties as a way to save money and protect the environment, studies suggest. Some 70 percent of homebuyers are more or much more inclined to buy a green home over a conventional home in a down housing market, according to McGraw-Hill Construction’s 2008 SmartMarket Report, “The Green Home Consumer.” That number is 78 percent for those earning less than $50,000 a year, the report claims. The report also notes that 56 percent of respondents who bought green homes in 2008 earn less than $75,000 per year; 29 percent earn less than $50,000.

“Homeowners are increasingly conscious of the need to preserve natural resources and protect the environment,” said Alderman of Chubb, which introduced its Masterpiece GreenWise Upgrade coverage option in February 2009. This product will pay the difference between rebuilding the house as it was

and rebuilding green. “Homeowners are increasing recognizing the economic value of going green, as it can save them thousands or tens of thousands of dollars over the long haul,” she said.

Green Commercial Markets In the commercial property insurance sector, in particular, Marsh notes that more carriers have entered the marketplace with increased capacity and varying products.

One insurer to recently enter the green market is CNA Insurance.

In early March, CNA introduced its EcoCare commercial property upgrade extension endorsement, which will allow policyholders to repair or replace damaged property using environmentally responsible and resource efficient materials and processes.

“The green initiative is all around us,” said Katie Wilson, who helped develop CNA’s new EcoCare property endorsement. She said the insurer decided to create the endorsement because of customer demand.

Today’s customers are searching for more green alternatives in the event that they have a loss, she said.

While the EcoCare product is the first green product to come from CNA, Wilson says more green coverages are in the works. “The building product is really our first launch,” she said, noting the coverage applies to any property coverage across the enterprise. “But I think what you’ll see from us is probably more green products tailored for industry groups and maybe even some different customer groups,” she said.

Determining proper values to avoid being underinsured at the time of a loss or to a void being charged too much premium is a critical aspect in the process of obtaining green cover-

‘The green building movement is alive and well despite current economic conditions.’

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Special Report Green Risks Greener Opportunities, continued from page N13

age, Marsh wrote in its “Green Built” report.

Examples include valuing the cost of vegetative roofs and alternative water and energy systems, which can be difficult to value because they often involve new materials and technologies, the broker wrote.

Liberty Mutual’s Ann Butterworth, lead underwriter for the insurer’s commercial property green building coverage, agrees and advises agents to consider the possibility of coverages gaps for green upgrades after a loss. This is more important considering today’s trend of commercial property owners that want to go green in the future.

“Most of the normal commercial insurance policies are written on a replacement cost basis,” Butterworth says. “That policy is only going to replace that product that they currently have. It’s not going to upgrade them for the additional costs that it might be to go green.”

Another thing agents should consider is changing state or federal building codes, especially in states like California. “We know that those [codes] are changing,” she said, adding that some codes require or will require customers to rebuild green after a loss. “And if they don’t have the correct coverage on their insurance policy, they will end up absorbing that cost themselves,” Butterworth said.

Liberty Mutual introduced its commercial property coverage for green buildings just a year ago and Butterworth says the product has been “attracting attention.”

However, she’s surprised that more businesses are not buying it, especially given the changing regulatory land-

scape. “We’ve definitely had some great success with a number of prospects and our old clients, but we haven’t sold as much as you might have expected, given the fact that every day in the press you keep hearing about all this new green building,” she said.

Butterworth advises agents to help their insureds understand the cost differential between typical run-of-the-mill building products and green products.

While some say that cost differential is leveling off, most green products will still cost more, as high as 25 percent more in some instances, Butterworth said.

This might make the case for why they need to purchase the green coverage, she says.

‘We will see more of a market for green and green rebuilding products as well as insurance.’

First to the Market As a number of insurers have jumped into green insurance products in the past year, the first to launch green coverage was Fireman’s Fund.

Today Fireman’s Fund offers green coverages for both personal lines and commercial lines, including products to insure green homes and endorsements to upgrade green after a loss, green coverages for commercial buildings and manufacturers, and coverages for green cars, both personal auto and commercial auto.

According to Bushnell, the green coverage product that has displayed the most success thus far has been its green upgrade product, which provides coverage for upgrading with green materials or green products following a commercial property loss.

“That product has been very popular in the marketplace,” Bushnell said. “We launched in 2006 and the premium associated with the accounts that purchased it at that time was about $5 million through 2006. At the end of 2007, the premium was $20 million. We expect that the premium when we have all of our yearend numbers for 2008 will be $100 million.”

Bushnell said when the insurer first launched the initial green property coverage endorsement in 2006 he believed green properties would be a better risk than those that were comparable non-green risks. So far, that’s proven to be true, he said.

“We’re probably smarter on risk elements of

N14 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

green buildings than we were when we launched the product,” he said, “but overall, we do believe that green buildings are better physical risks than traditional buildings.”

So far, the loss experience on green properties has backed up Bushnell’s belief. “We’ve had just a handful of losses with all the accounts that have purchased the coverage and most of them have been relatively easy to adjust and settle,” he said.

Whether a green risk is a better risk remains to be seen, said Charlie Kingdollar of Gen Re at the Golden Gate CPCU All Industry Day. Kingdollar, who was a participant on a CPCU panel discussing green risks, says he knows of 14 insurers with green property coverage endorsements today and some are giving away the coverage or offering huge premium discounts because they believe green properties are better risks. But Kingdollar is not convinced that green risks are better insurance risks.

“No one really knows at this stage,” he said.

“For instance, for insulation, people are using denim that has a fire retardant on it. W ell how long does the fire retardant last? Is it eq uivalent to fiberglass insulation?” he asked.

Overall, he believes green products are here to stay, but he thinks the jury is still out on whether they’re better risks, and he questions whether they’re worth the huge premium discounts — some as high as 40 percent — that some carriers are offering.

“It is such a new field that I think the one thing that we have learned most clearly is that we have to stay on top of this,” Liberty Mutual’s Butterworth said. “It is an evolving market and it requires a lot of attention.”

Right now, all indications are that green risks are better but most of the evidence is anecdotal, Butterworth adds. There are not enough green buildings and there hasn’t been enough time to study their exposures, she said.

“But over time we will be able to do more studies and the USGBCs of the world will be able to prove that a green risk is better,” Butterworth explained. IJ www.insurancejournal.com

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Special Report HOT Markets and Program

Fastest Growing Industries to Focus On Top 7 High-Growth Industries’ Risks and Unique Exposures

By Chris Boggs

P

lanning for the “upside” must Management, Scientific and be closely monitored; begin now. The soft insurance Technical Consulting Services (5416) • If the employee works from home, one market will end, and the rebo und Entities in need of professional a dvice of two specific homeowners’ policy from the financial bottom will and assistance seek the help of pra ctitionendorsements may be required; and happen. But don’t try to predict when, just ers from this industry. The most common • Consulting firms, especially smaller get out in front and plan for it. clients for these consultants are b usiness ones, will require an agent who can walk or manufacturing operations, and municithem through contractual risk transfer The U.S. Bureau of Labor Statistics (BLS) issues. lists those industries Management, Scientific and Technical Consulting Individual and Family Services (6241) expected to Services As America ages, more and more people experience This industry is expected to grow by around 22 percent by will seek and require the assistance of an the fastest 2016. Source: U.S. Bureau of Labor Statistics individual or family non-residential servgrowth ice professional. However, services offered between now pal and governmental by this industry are not limited to older and 2016. entities. Scientific and people; nonresidential social assistance is Because of technical consultants proalso available to children, those diagnosed the nature of vide more specialized with mental retardation or persons with those indusexpertise than managedisabilities. Counseling, day care, advocacy tries, the curment consultants. Specific and recovery help are some of the services rent financial knowledge, experience this industry offers. The BLS expects the crisis will do and/or training are number of workers employed in this field little to temrequired of these consultto increase between 25 percent and 30 perper growth, ants. Growth in this cent — mostly in the government sector. and some may even be pushed ahead faster industry is expected to be aro und 22 perWith municipal outsourcing on the rise, by the state of the economy. cent. Approximately one out of every four many private individual and family service Seven of the fastest growing industries professional consultants is self-employed, operations are likely to open to meet the are: 1) management, scientific and techniand 75 percent of consulting firms are onegrowing demand. Some insurance and risk cal consulting services; 2) individual and or two-person operations. Insurance covermanagement exposures agents and brokers family services; 3) home health care servicages and risk management needs for this should consider for non-governmental es; 4) securities, commodity contracts and industry include: entities providing these services are: other financial investments and related • Professional liability or errors and omis• Professional liability (for counseling and activities; 5) facilities support services; 6) sions protection (differs based on consultother professional services); residential care facilities; and 7) independing specialty); • Employment ent artists, writers and performers. practices liabiliEach of those seven presents unique Individual and Family Services ty protection to insurance and risk management exposures Workers employed in this industry will increase include thirdbeyond just the “vanilla” property and genbetween 25 percent and 30 percent b y 2016. party coverage; eral liability coverages.

Source: U.S. Bureau of Labor Statistics • Fiduciary liaAfter a brief description of ea ch indusbility (if helping try (taken from North American Industry • Kidnap and ransom coverage if workwith finances or Classification System - NAICS), the following internationally; managing proping paragraphs list the unusual insurance • Employment practices liability insurerty); and risk management needs faced by each ance providing third-party protection; • Coverage for of the seven industries. NAICS codes are • Fiduciary liability if advising on or sexual abuse and sexual harassment; parenthetically provided for reference. handling money; • Accident and health protection for This information will allow agents to plan • Due to the number of self-employed those being cared for and any volunteers for the upside pursuit of these growth consultants and small consulting firms, that may be hurt; markets. workers’ compensation requirements must N16 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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• Directors and officers coverage; and • The insured should be fully licensed and trained as per state and/or federal guidelines.

Home Health Care Service (621610) Individuals requiring in-home skilled nursing services will search out these entities. The range of services offered by a home health care operation includes: per-

sidered work-related and an exception to workers’ compensation’s “coming and going” rule. This needs to be discussed with the client; and • Some type of licensing of the b usiness may be required.

Securities, Commodity Contracts and Other Financial Investments and Related Activities (523) This classification encomHome Health Care Service passes a wide The number of employees in this field is expected to grow by between 23 percent and array of finan28 percent. Source: U.S. Bureau of Labor Statistics cial services including investment banking, commodities brokers, sonal care serv- trust officers and portfolio managers. The ices; homemak- economic downturn is not permanent, so er and compan- this will likely soon return to a gro wth profession. The BLS anticipates 25 percent ion services; to 30 percent growth in the number of physical therapy; medical social services; these professionals in the next seven years. medication administration; medical equipFinancial advisors in this class work under ment and supplies training; counseling; 24relatively high stress. About one-in-three of hour home care; occupation and vocational these financial advisors are self-employed. therapy; dietary and nutritional services; Some of the special insurance coverages speech therapy; audiology; and high-tech and risk management issues to be explored care such as intravenous therapy. The numinclude: ber of employees in this field is expected • Professional liability; to grow by between 23 percent and 28 per• Fiduciary liability and/or a dishonesty cent; and about one-third of these employbond; ees work part-time, according to the BLS. • Workers’ compensation needs must be Insurance and risk management considclosely analyzed. A high percentage of erations include: workers in this industry are self-employed.

• Medical malpractice coverage; Depending on the legal structure and the • Sexual assault and harassment coverage; subject statute, • Crime and/or even one-man fiduciary coverage Securities, shops may (depending on the Commodity Contracts, require protecservices being Financial Investment tion; and offered); Activities •Another work• Workers’ com- The industry will grow ers’ compensapensation cover- by 25 percent to 30 pertion issue is age — especially cent in the next seven occupational critical if the years. Source: U.S. Bureau stress. Because home health of Labor Statistics these profesagency pays the sionals work under high stress, any stresshealth care providers as independent conrelated injury or illness may be considered tractors; they may still be employees for compensable. workers’ compensation purposes. Lifting injuries may be prevalent; Facilities Support Services (561210) • If the health care professional works for Many businesses contract out their mainmore than one patient in any given day, the travel between patients will likely be concontinued on page N18 www.insurancejournal.com

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Special Report HOT Markets and Programs Fastest Growing Industries, continued from page N17

products and/or making speeches or public provide residential care and personal care tenance and other services such as janitoriappearances for which they receive a fee. services to facility-housed patients sufferal; general maintenance; trash disposal; The BLS anticipates 10 percent and 12 pering from many physical and mental issues, guard and security services; mail ro uting; cent growth in the number of individuals including those who: live with mental reception; laundry; and other related servengaged in these activities. About 30 perretardation; require on-going medical care ices. BLS anticipates a 20 percent gro wth cent of writers and 62 percent of a ctors are in this particular area. Employees working self-employed. in this industry may be unskilled or uneduA few of the unique insurance issues cated, or working it as a second job. Those faced by these free spirits includes: providing guard and security services may • Workers’ compensation coverage (a require special licensure. This industry majority are self-employed and need the tends to provide low pay and few, if any, protection); benefits. Special insurance considerations • Media professional liability protection; include: • Inland marine coverage for an artist • Fiduciary liabil- Facilities Support Services whose work is in a gallery or otherwise on ity/dishonesty This sector expects to grow by 20 percent by display; bonds; 2016. Source: U.S. Bureau of Labor Statistics • Disability income coverage; and • Professional (any age); suffer from a mental health issue; • Although not a property/casualty coverliability (i.e. law enforcement liability for age, health insurance is also a ma jor expoor are elderly and desire group living but guard services); sure for these individuals. do not require continuous medical treat• Bailee’s coverage; ment (retirement home). Also included in • Because many workers are working in Completing the Top 10 this broad classification are employees of this industry as a second job, attention Rounding out the BLS’s top 10 growth children’s homes, “boot camp” facilities, must be paid to the benefits offered under industries are: 8) computer systems design half-way homes and orphanages. BLS anticworkers’ compensation in relation to the and related services operations; 9) museipates a 22 percent growth in this area. loss of wages from the primary job (if the ums, historical sites and similar instituSpecial insurance coverages and risk employee is unable to work it). This extentions; and 10) child day care service management issues include: providers. Each • Professional liability (for medical, counof these creates seling or other professional services); • Employment practices liability insurance its own unique exposure and with third-party coverage included; has individual • Fiduciary liability (if helping with risk managefinances or managing property); ment needs.

• Coverage for sexual abuse and sexual harassment; • Accident and Residential Care Facilities health coverage for This industry group is expected to increase those being cared by 22 percent through 2016. for and volunteers; Source: U.S. Bureau of Labor Statistics Independent Artists, Writers and and Performers Planning for the post-crisis boom? If not, • Directors and officers coverage.

The number of individuals working in this let this information provide some ideas on sector is anticipated to grow by 10 percent to the up and coming hot markets.

Independent Artists, Writers and 12 percent. Source: U.S. Bureau of Labor Statistics Once an agent looks beyond the usual Performers (711510) coverages, the highlighted industries are The NAICS description of this code sion generally only exists in states with a interesting and unique. Becoming wellstates that this industry is comprised of second injury fund; and not all of these versed and knowledgeable in these indusindependent/freelance individuals engaged states provide this additional protection. in performing in artistic productions; creat- tries can give any independent property/casualty insurance agent a head ing artistic and cultural works or producResidential Care Facilities (6232, start toward growth. IJ tions; or in providing technical expertise 6233, 6239) A wide range of operations is anticipated necessary for these productions. This industry also includes athletes and other by this particular classification. Facilities Boggs is associate editor of MyNewMarkets.com. Phone: 619celebrities exclusively engaged in endorsing 584-1100 ext 137. E-mail: cboggs@mynewmarkets.com. and employees working in this industry N18 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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Dear Reader: Every business has a stor y to tell. For many corporations, small and large, that story ties closely to the personal lives of their founders. Throughout Insurance Journal’s history, we have come to know and appreciate many of the unique stories in our industr y.

And year after year, we have watched as our advertisers’ and readers’ companies have grown and changed.

As a leading industry news and information source, we are not able to profile all of the corporations that cross our path. Our position as journalists sometimes mak es it difficult as well. Consequently, we have created this special supplement to allow our clients, and some of the corpor ations you may work with on a daily basis, to tell their story ... in their own words.

We hope you find this supplement interesting and informative.

Best wishes from all of us at Insurance Journal.

Mitch Dunford CEO Insurance Journal mdunford@insurancejournal.com

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When it comes to insuring educational institutions, knowledge is power. That’s why Travelers has underwriters who specialize in insuring schools, from the grounds to the staff. It’s our IndustryEdge approach, which provides experts from the field and industry-specific coverages, such as Educator’s E&O Liability and global coverage for students studying abroad. For insurance that’s in-synch with educational institutions, contact your local Travelers Commercial Accounts Representative.

3/18/09 9:17 AM

Š2008 The Travelers Companies, Inc. All rights reserved. The Travelers Indemnity Company and its property casualty afďŹ liates. One Tower Square, Hartford, CT 06183

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travelers.com

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Announcing the formation

After nearly a century of providing for the workers’ compensation needs of America’s small businesses, EMPLOYERS® is venturing into new territories once again. Our successful acquisition of AmCOMP has forged two great companies into a single unit that has made us stronger, deeper and more fully prepared to advance our vision of being the workers’ compensation insurance leader for America’s leading small businesses.

Here are just a few of the many benefits of being appointed with EMPLOYERS t Financial Strength—As many insurers face the erosion of their financial strength in this difficult economy, EMPLOYERS’ long-time commitment to conservative investment practices, and sound business strategies, have enabled us to remain a well-funded, steadfast partner to agents and policyholders. This strength is reflected by the A- (Excellent) rating awarded by the A.M. Best Company to all our operating subsidiaries. t Stability & Dependability—EMPLOYERS has never left a market it has entered. t Effective Loss Control Programs—EMPLOYERS offers free loss control and OSHA seminars to help agents achieve their continuing education goals. t Expanded Operating Area—Through this acquisition, EMPLOYERS now serves the workers’ compensation needs of your clients in 30 states.

Copyright © 2009 EMPLOYERS. All rights reserved. Workers’ compensation insurance and services are offered through Employers Compensation Insurance Company, Employers Insurance Company of Nevada, Employers Preferred Insurance Company and Employers Assurance Company (also known as AmCOMP Preferred Insurance Company and AmCOMP Assurance Corporation, respectively). Not all insurers do business in all jurisdictions.

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of a more perfect union.

The History of EMPLOYERS® The Fund transformed into a private mutual insurance company.

Expanded operations into Texas and Arizona.

Converted to a stock company and completed an IPO. Listed on the New York Stock Exchange as EIG.

2000

2006

FEB. 2007

With roots stretching back to 1913, EMPLOYERS has a heritage and history unlike any other workers’ compensation insurance company in the United States.

1913

2002-2005

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State Workers' Compensation Fund ("The Fund") established in Nevada.

Doubled premium, increased policy count nearly 20% and converted to a mutual holding company.

Acquired AmCOMP, EMPLOYERS operates in 30 states.

2002

2007

Acquired assets of Fremont Comp and entered CA, CO, ID, MT and UT; established key distribution relationships with strategic partners WellPoint and ADP.

Expanded into Florida, Illinois and Oregon.

LEARN MORE ABOUT EMPLOYERS AT www.employers.com OR CALL 888-682-6671.

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Idea Exchange Legal Beat

What’s In a Name?

Or: A Rose by Any Other Name Is Not an Insured

Bradley

By Beth D. Bradley

A

mong the issues that plague coverage lawyers is that of a misnamed, unnamed or mischaracterized insured. All too often in insurance policies, corporations are designated as assumed names, partnerships as individuals in corporations, or the names simply do not match the insured. The problem is compounded when there may be several related entities, all of which are insured or intended to be insured. A related problem exists when the addresses are wrong or the insured’s business is not accurately described.

These issues are also problematic for agents.

As the intermediary between insurer and insured, fingers may If an entity is point at the agent not named, it from either direction if there is a mistake.

Even when the may have no named insured is correctly named, the type coverage. of entity can determine coverage. Managers of a limited liability company are insured, executive officers and directors of the corporation are insured, and spouses of partners in a partnership or joint venture are insured. If an entity is not named, it may have no coverage whatsoever. Misstating the form of an entity, be it corporation, partnership or sole proprietorship, can also lead to disastrous consequences.

For example, the policy itself provides that no coverage is included for a partnership that is not named in the declarations. Accordingly, a partnership that is misnamed as a corporation or sole proprietorship may have no coverage. And, while coverage is afforded for directors or officers of the corporation, in their individual capacity, if the corporate status is not revealed, this same coverage may not exist.

Under the standard ISO general liability form, the policy provides limited coverage for newly acquired or formed organizations, but www.insurancejournal.com

only for 90 days unless they become named insured. Even this coverage, however, does not extend to unnamed partnerships.

A twist on these issues is created b y the complaint allegation rule. If there are entities that might otherwise be entitled to coverage, they may not be if the pleadings do not match the policy names or reveal the corporate relationship. On a related note, failure to include the proper address or addresses for the insured may also impact coverage, especially where an endorsement limits coverage to designated premises or projects. Similarly, failure to properly describe the operation may limit coverage, if there is an endorsement for designated operations, or may lead to a claim from the insurer, if an unknown operation, for which no premium was charged, leads to coverage.

A Claim of Negligence?

Many of these problems may be corrected by reformation especially if the mistake is unintended. But reformation requires mutual mistake and is an equitable remedy. And, all litigation is costly. Failure to properly name the insured is more likely to give rise to a claim of negligence on the part of the agent, and a possible indemnity claim if the insurer is left holding the bag for unexpected insureds.

Liability policies are not the only ones impacted. In Grain Dealer’s Mut. Ins. Co. v.

McKee, 943 S.W.2d 455 (Tex. 1997), the insured was a corporation of which John McKee was the president and sole shareholder. The court concluded that a business auto policy did not provide coverage for McKee’s daughter. While the UM/ULM endorsement included as an insured any “family member” as a named in-

sured, the court concluded that this language is not ambiguous and that a corporation is an entity separate and apart from the sole shareholder and could not have family members.

Ownership of autos is another area ripe for unintended consequences under commercial auto policies, where coverage may be determined by ownership of the auto.

In Houston General Ins. Co. v. Owens, 653 S.W.2d 93 (Tex. App. – Amarillo 1983, writ ref’d, n.r.e.), Ralph Owens formed a trucking company, Ralph Owens Trucking Co. Inc. The corporation engaged in the trucking business, but the trucks were owned individually by Owens. As the individually owned trucks were traded for replacements, the replacements were acquired in the corporation’s name.

Although Owens testified he requested that the agent procure coverage in the names of both the corporation and Owens, individually, the primary policy was issued in the names of both entities but the umbrella policy was issued in the name of Ralph Owens only. The insured prevailed at trial, proving he had requested the coverage and establishing that the agent was acting on behalf of the insurer, but the case then proceeded to appeal.

On appeal, the court reversed, finding that while coverage existed under the umbrella based on a provision stating that any insured in the underlying was also an insured, the insured had failed to prove that the settlement was actually an amount it became legally obligated to pay because of an accident. The entire mess likely would have been avoided had the insured been properly named in the policy. IJ Bradley is a partner in the Dallas law firm of Tollefson Bradley Ball & Mitchel LLP.

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South Central Coverage News & Markets

Liaisons Keep Consumers’ Insurance Concerns at the Forefront Loss of Faith in Insurance Providers Would Affect Sales, Advocates Say

By Patricia-Anne Tom

I

nsurance agents, brokers and regulators should be aware that when it comes to insurance, consumers are concerned with such issues as the use of credit scores in determining rates, purchasing policies over the Internet, compensation and disclosure, claims handling and fraud, among others, according to the 2009 consumer liaison representatives to the National Association of Insurance Commissioners (NAIC).

The consumer liaisons should know. Even though they hail from diverse backgrounds, the advocates all have one thing in common: They represent the interests of the insurance consumer on state and federal levels.

Credit Scoring Concerns A key topic the representatives hope to discuss with the NAIC and see Congressional action on is the use of credit scores.

“We have already seen credit scores having an impact on interest rates charged to consumers on their credit cards and loans. If insurers continue to use credit scores in determining risk levels, premiums will increase and consumers may be forced to reduce the insurance carried to protect their financial assets,” the University of Texas’ Karrol Kitt said. “The use of credit scores in determining premiums needs to be fully vetted as to its true effectiveness in risk analysis.”

Other representatives including the University of Minnesota’s Daniel Schwarcz, University of

Georgia’s Brenda J. Cude and Texas Watch’s Pamela J. Bolton, also expressed concern about the use of credit scores for underwriting, especially given the current economy when many consumers’ scores are going down.

“The credit crisis has already lowered the credit scores of thousands. As lenders lower credit limits and increase rates, consumers are seeing their credit scores suffer through no fault of their own,” Bolton said. She noted the “grave” situation has been documented by several mainstream media outlets, including the Wall Street Journal, Fox News, Bloomberg and others.

Bolton expressed doubts that the insurance industry would adjust for changing credits scores because of the economy. Yet if

insurers don’t somehow take into account differences between changes in credit scores due to the consumer’s actions versus general economic conditions, consumers and insurers “will be worse off,” Cude warned.

“It is already very difficult to explain to consumers how their credit score could be related to their access to insurance and the price they pay,” she said. “It will be even more difficult to explain that when the drop in the credit score is due to, for example, their credit card company lowering their credit limit when the consumer’s behavior hasn’t changed in any way.”

And insurers that don’t pay attention or try to take advantage of the economic situation could pay a price. “One outcome will

The 17 recently appointed consumer liaison r epresentatives to the NAIC for 2009 are: Betty Ahrens Executive Director for the Iowa Citizen Action Network Amy Bach Executive Director for United Policyholders Birny Birnbaum Executive Director for the Center for Economic J ustice Pamela J. Bolton Director of Policy and Research for Texas Watch Brendan M. Bridgeland Director for the Center for Insurance Research Brenda J. Cude Professor at the University of Georgia Evelyn Dacalos Gay (Langga) Project Director for the Elder Rights Project, Georgia Leg al Services Bonita A. Kallestad Attorney at Law for Mid-Minnesota Legal Assistance, Western Minnesota Legal Services Karrol Kitt Associate Professor at the University of Texas at Austin Sonja L. Larkin-Thorne Avon, Conn.

Kevin P. Lembo State Healthcare advocate for the State of Connecticut, Office of the Healthcare A dvocate Kevin Lucia Assistant Research Professor at Georgetown University Sally Baker McCarty Insurance and Advocacy consultant with the National Hemophilia Foundation, Hemophilia of Indiana S. Colleen Repetto Fair Insurance Rates Daniel Schwarcz Associate Professor of Law at the University of Minnesota Law School Gregory D. Squires Professor of Sociology and Public Policy and Public Administration at George Washington University Howard Goldblatt Director of Government Affairs for the Coalition Against Insurance Fraud 54 | INSURANCE JOURNAL-SOUTH CENTRAL REGION March 23, 2009

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insurance transactions, the representatives said. Because independent agents sell products representing multiple insurers, “consumers can benefit from having more choice in their insurance protection, that is several policies to review for their insurance needs,” Kitt said.

“A trustworthy, ethical and truly independent agent who Keeping the Faith offers unbiased advice and guidIf consumers lose faith in their insurance ance is an invaluable tool for conproviders that will no doubt affect sales, especially transactions that take place via the sumers in our increasingly comInternet. Many consumers prefer to purchase plex insurance marketplace,” Bolton said. insurance coverage over the Internet. Web But University of Minnesota’s Schwarcz insurance purchases can be easy, as long as cautioned against the independent agency the Web site is consumer-friendly, providing system, especially when contingent commispolicies that are understood, Kitt said. The sions are involved. “When it comes to continprocess also has the potential to increase the gent commissions and any sort of differential transparency of the insurance marketplace. compensation paid to an agent I think is But when Web sites are used primarily as independent, I think there lead generators, consumers needs to be closer regulatory aren’t being served. And if scrutiny to that,” he said. He sites don’t offer services con- ‘Regulators don’t noted that in his research, he’s sumers expect from their seem to have a found that with a “lot of pro bexperience with other good idea about online transactions, such as what role they want lems on the regulatory side, whether there’s less robust being able to check paythe market to play ments made, file claims, or and what role regu- competition in insurance markets or claims handling, continmake changes in their policy lation should play.’ gent commissions are at the online, they could be disroot of a lot of problems. And I couraged, Cude said. think it’s a joke to think that disclosure Furthermore, the economic recession solves that, because even you if have effective could cause consumers to drop coverages. disclosure, the underlying discontinuity in “Consumers already don’t understand what information from person to person when they’re buying when they buy insurance and using an intermediary or independent interhow rates are set. If that’s true, they don’t know what they’re giving up when they drop mediary is not a good solution.”

Schwarcz said in 2009, he would encourage their insurance coverage. … Unfortunately, the NAIC to examine commissions and dismany consumers probably use [the Web] simclosure. “It’s incumbent on regulators to ply to find the lowest price — which does think more carefully about when disclosure not always mean they have found the best insurance product to meet their needs,” Cude makes sense and when it does not.” added. “The question is how many conEnsuring Insurance Works sumers and which ones will drop insurance The Center for Economic Justice’s Birny coverage and which coverage? And if consumers have lost confidence in financial insti- Birnbaum said his group is interested in the debate over state versus federal regulation, tutions, the impact will be greater.” “and looking to see where consumers can get the best regulatory treatment. … Right no w, Independent Agent Value the federal proposals are very anti-consumer.”

That’s why an independent insurance Birnbaum said while state-based regulaagent can play an important role in consumer likely be a continued erosion of consumers’ faith in financial institutions,” Cude said.

“This crisis presents the industry with a very important choice: Will it choose to act in the best interests of its customers, rather than its bottom lines, by embracing fair practices that don’t unfairly penalize policyholders, or will it be business as usual?” Bolton asked. “Only time will tell.”

www.insurancejournal.com

tion has its problems, “consumers still have better protection [with state-based regulation] than with any hypothetical federal approach that we’ve seen. Having said that, we could certainly design a federal regulatory or national regulatory scheme that w as better than what consumers get now with the state-based treatment. But that doesn’t seem to be on the table just yet.”

He believes the debate will be ongoing. Part of the problem, Birnbaum said, is that the states and the industry don’t seem to know what they really want. “On the one hand, the states say, ‘we don’t want the feds to regulate insurance,’ and yet there’s a flood insurance program, there’s a terror insurance program, they want a natural catastrophe insurance program, there’s a crop insurance program.”

The industry, too, doesn’t want the government to control its business, but it wants the government to step in when it comes to risks the private market has no interest in, such as flood insurance. “I know insurance companies want a handout whenever they can get it. But regulators don’t seem to have a good idea about what role they want the market to play and what role regulation should play,” Birnbaum said.

“There’s no reason for private market not to be offering flood insurance or terror insurance or catastrophe insurance,” he continued.

“It’s done in other countries, and the governments in those other countries provide a backup in the event of a mega catastrophe.” IJ Insurance Journal editors Stephanie Jones, Andrew Simpson and Ken St. Onge contributed to this story.

March 23, 2009 INSURANCE JOURNAL-SOUTH CENTRAL REGION | 55

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South Central Coverage Business Moves CAA, Ed Berrong Insurance Agency, Bridges Group Austin, Texas-based Combined Agents of America LLC (CAA) has expanded outside of Texas with two new members, Ed Berrong Insurance Agency, headquartered in Oklahoma, and Bridges Group Inc., based in Kansas.

A family-owned agency, Ed Berrong Insurance Agency was founded in 1948. Based in Weatherford, Okla., it serves Oklahoma and surrounding states with a full line of insurance products, including home, auto, business, life and health, while specializing in oil and gas. For 14 consecutive years, Ed Berrong Insurance has been selected by the Independent Insurance Agents & Brokers of America (IIABA) as a Best Practices agency.

Since 1894, the Bridges Group has served the region surrounding Norton, Kan., with a range of insurance products, including home, business, crop, farm and ranch, auto, health, and other financial services. Since 2004, Bridges Group has been selected by the IIABA as a Best Practices agency.

Founded in 1997, CAA now has 40 independent insurance agency members located throughout Texas, Oklahoma and Kansas.

Pacific Specialty Pacific Specialty Property and Casualty Co., the Texas affiliate of California-based Pacific Specialty Insurance Co. (PSIC) has expanded its slate of preferred tier residential property insurance products in the state of Texas.

Effective March 1, 2009, Pacific Specialty began offering new discounts and more options on its existing HO-4 and HO-6 programs. In addition, the company released its comprehensive HO-3 homeowners policy with preferred rating and coverage.

On average, homeowners who switch to Pacific Specialty save $200 annually on their homeowners insurance, the company said in its announcement.

The homeowners HO-3 policy offers referential rating for qualifying preferred tier policies and will cover homes up to $700,000 in dwelling value. The unit-owners (HO-6) and renters (HO-4) policies offer referential rating for qualifying preferred-tier policies and cover personal property up to $300,000 (HO6)/$150,000 (HO-4).

The new program for Texas is an extension of the company’s preferred residential offerings in Arizona, California and Nevada.

56 | INSURANCE JOURNAL-SOUTH CENTRAL REGION March 23, 2009

Capitol County Mutual Fire Insurance Co. The Texas Department of Insurance reported that Capitol County Mutual Fire Insurance Co. notified policyholders that their industrial fire insurance coverage will end effective with the policy monthly anniversary date in May 2009. TDI fined Capitol County for bad faith and other claims violations in the wake of Hurricane Rita in 2005. The company was also hit with a number of policyholder lawsuits.

TDI said consumers who have received notice that their policy will be non-renewed should begin shopping for new insurance immediately.

University of Houston-Downtown The Texas Higher Education Coordinating Board has approved a proposal by the University of Houston-Downtown (UHD) to offer a Bachelor of Business Administration degree in Insurance and Risk Management.

The new degree program is designed to develop career professionals for the insurance and risk management industry, enhance the industry’s public image, and conduct research of interest for the insurance industry and consumers, said Don Bates, dean of UHD’ s College of Business.

The new degree plan will be offered through the new UHD Insurance and Risk Management Center (the Center), which will be located in the new College of Business building located at 1021 North Main.

UHD alumnus David deRoode, Houston chief operating officer of BancorpSouth Insurance Services, approached Bates two years ago about the shortage of young, educated people pursuing a career in insurance and the growing void of talent within the $800 billion industry existent in Texas.

The Bates-deRoode team started discussions with insurance industry leaders to see if they had any interest in developing a regional insurance and risk management program, what the program should include, and whether the industry was willing to support the program. Bates calculated the startup costs and set $150,000 as a fundraising goal. By March 2009, $340,000 in cash or pledges had been raised, with fundraising continuing.

The first classes will be offered next fall and registration will begin this spring. Industry professionals will teach the classes. IJ www.insurancejournal.com

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Idea Exchange Closing Quote

Say What You Mean Agents Should Act With Character and Integrity in Everything That They Do

By Mitch Dunford “I meant what I said, and said what I meant …”

A

lthough that quote was written in 1954 by Dr. Seuss in his book “Horton Hears a Who, ” it is a powerful reminder today to act with character and integrity.

“Horton Hears a Who” tells the story of Horton the Elephant, who hears a small speck of dust talking to him. It turns out the speck is a tiny planet, home to a city called Whoville that is inhabited by microscopic-sized people known as Whos. The Whos ask Horton (who cannot see them but can hear them) to protect them from harm, w hich Horton promises to do — despite opposition from the other jungle animals who believe Horton has lost his mind. As it becomes more difficult to protect the Whos, Horton is enco uraged to leave the Whos to fend for themselves. Yet Horton stands behind his promise, declaring, “I meant what I said, and I said what I meant, an elephant is faithful 100 percent.”

Horton’s motto is a good reminder for all of us. There is little debate on where we find our country economically. The auto industry is in crisis; financial markets are a mess; the unemployment rate is growing daily; banks are closing; foreclosures are at an all-time high; and ba d economic news continues. Despite the constant diet of ba d news and stark economic realities we are left to deal with, if y ou look at the situation through the clear lens of truth, you’d find that what led us here was not a crisis of cash, b ut a crisis of character.

Decades of dishonesty, greed and the notion that chara cter doesn’t matter have caught up to us. As business leaders, politicians and others in positions of trust have relied upon the crazy notion that competency is everything and personal integrity is expendable, we find ourselves reaping the fruits of that ideology — and it’s not good.

Integrity and trust are fundamental principles of leadership and power, and are the foundation of a strong economy.

Our unique economic system is tied to freedom, and freedom is tied to responsible and ethical behavior. When we allow in ourselves and in our leaders a pattern of irresponsible behavior, we give up our freedoms in an effort to repair the damage. And as our freedoms erode, so does our unique economy.

You have chosen to work in the insurance

58 | INSURANCE JOURNAL-SOUTH CENTRAL REGION March 23, 2009

Dunford

industry. While others seek to minimize risk y ou embrace it.

You study it, you calculate it, you even profit from it. You are now, and have been for hundreds of years, our economy’s last line of defense. You make it possible for businesses to open and grow, for loans to be made, for new inventions to come to market, and for young peo‘The insurance ple to buy their first car or their first home. Without you and your indusindustry is one of try, the way of life we have grown the most lucrative accustomed to would come to a professions in the grinding halt. world. But with that Inside the insurance industry, there opportunity comes is tremendous potential for growth, a responsibility.’ both personal and financial. The industry is one of the most lucrative professions in the world. But with that opportunity comes a responsibility: to act with integrity and with character in how you do business. Our economy cannot afford to lose confidence in our industry.

To close a sale, there may be temptation to not fully explain a policy’s new conditions or exclusions. There may be temptation to suggest coverage exists that really doesn’t, and then to blame someone else for the error when the claim is denied.

Our industry must resist temptations to deceive.

It starts with a personal decision in ea ch of us to do the right thing: to value our character, reputation and the important role our industry plays in the health of our economy more than money. To say in our quiet moments, “I meant what I said, and I said what I meant.”

There is astonishing power when a single person makes a single, honest decision. It can be contagio us. As dishonesty breeds mistrust, honesty gives rise to trust, and trust provides the foundation for more honesty. It starts with one, each one of us doing the right thing for the right reason.

A government “stimulus” package will not save us. A bailout of AIG or GM will not solve the underlying problem. Instead, the quiet personal resolve to act with character and integrity in everything we do, and to demand the same behavior in our leaders, will lead to long-lasting, positive change. There is still something noble in the American spirit. I believe in us. I believe in our character as Americans to dig deep and to dig out of any problem, to do the right thing, and to do the extraordinary. IJ Dunford is CEO for Insurance Journal’s parent company, Wells Publishing Inc. E-mail him comments at mitch@insurancejournal.com. www.insurancejournal.com

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