Insurance Journal

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CALIF. WORKERS’ COMP RATES 14 Insurers Request Rate Raises

VALUING DIVERSITY Diversity Leads To More Sales

COMMERCIAL CONTRACTORS Challenges Loom in 2009

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Business owners shouldn’t be experts in everything. Applied Underwriters® gives them the ability to concentrate on what they know best: their business. We do this by integrating casualty coverages, payroll and risk reduction services, all from one provider. Combine this with insurance carriers that have earned an A.M. Best Rating of A (Excellent), it all equals a client retention rate of over 90%. For more information call 1-877-234-4450 or visit www.applieduw.com.

© 2007 Applied Underwriters, Inc. A Berkshire Hathaway Company.

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Walter Curtis, Master Machinist.

Known for his laser-like precision on the milling machine.

Expects the same accuracy from his workers’ compensation provider.

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Inside This Issue

January 12, 2009 • Vol. 87, No. 1 • West Region

WEST COVERAGE

N12 Special Report Top 100 Agency Profile Ohio-based The Hylant Group — Private, Independent and Free

NATIONAL COVERAGE

8

| New California Licensing Laws Take Effect Laws Now Uniform With Other States

8

| California Workers’ Compensation Insurers File for Rate Increases 14 Insurers Request Increases Greater Than 5%

8

| Surplus Line Association of California Stamping Office Celebrates 70 Years Surplus Line Industry Good Example of SelfGovernment

9

| Washington Workers’ Comp Insurance Premiums Increasing 3% State’s Contingency Reserve Dropped from $1.6 Billion to $900 Million

9

| New State Laws Take Effect in 2009 Highlights of a Few State Laws for the New Year

12 | California Workers’ Comp Premiums Down in 2008 But Indemnity and Medical Average Costs Per Claim Show Significant Increases

N1 | Special Report: Contractors and Subcontractors Challenges Loom for Commercial Contractors in 2009

12 | Oregon Producers Face Fingerprint Rules State Aims To Protect Consumers From Producers With Convictions

N4 | Washington Report FTC Probing Insurers Over Credit-based Homeowners Insurance Pricing

44 | Lifelines in the Storm Pro-Policyholder Developments in 2008

N6 | Closer Look: Employment Practices Liability New Laws, Power Shift in Washington May Increase Workplace Risks

46 | Take Control of Your Workers’ Comp Costs WCIRB Voted To Raise Premium Rates 16%

N12 | SPECIAL REPORT: Top 100 Agency Profile Ohio-based The Hylant Group — Private, Independent and Free

48 | States Rate Poorly on Consumer Insurance Information on Web Best Practice States Prove Small States Can Still Have Excellent Web Sites

N16 | Special Report: Contractors and Subcontractors The Progressively Narrowing Coverage of Additional Insured Endorsements N19 | International Report Economy and Climate Change Top New Year Agenda N21 | Spotlight: 2009 Insurance Industry Meetings & Conventions Directory

IDEA EXCHANGE

DEPARTMENTS 6 N26 10 12

| | | |

Opening Note MyNewMarkets People Business Moves

46 Take Control of Your Workers’ Comp Costs WCIRB Voted To Raise Premium Rates 16%

48 States Rate Poorly on Information on Web Small States Can Still Have Excellent Web Sites

N27 | Minding Your Business Developing a Sales & Marketing Plan, Part 2 50 | Actual Cash Value Versus Replacement Cost Value Navigating the Valuation Quagmire 52 | Valuing Diversity Can Boost Sales Being Pro-Diversity Means More than Legal Compliance 54 | Closing Quote: Eye on Insurance Industry Regulation In Financial Turmoil, Agents and Industry Must Work Together

4 | INSURANCE JOURNAL-WEST REGION January 12, 2009

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Who offers brighter solutions for Umbrella/Excess coverage?

Alan Jay Kaufman Chairman, President & CEO

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burnsandwilcox.com Umbrella Liability

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Capacity Excess

Umbrella /Excess

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Idea Exchange Opening Note

Reading Between the Whines

T

here are several near-constants in an insurance editor’s life when a new year rolls around. There’s the inevitable mistake of putting last year’s date on this week’s article. There’s the frustration of trying to contact sources over the holidays when no one seems to be working. And, there’s the unavoidable debate over what were the biggest insurance stories in the past year.

Rather than pull a few items out of thin air — a wholly unscientific method — we at Insurance Journal decided to do our own research, using our online archives of insurance stories, which we tout as the largest insurance article archives in the world, at least after Google.

We took a look back at the five most-read stories of 2008 on our Web site, www. insurancejournal.com to figure out what readers might consider the most important. Sure, it is a popularity contest based on how many people read the articles — but it’s better than six whiny, overworked editors trying to justify their existence by insisting that their favorites were also the readers’ favorites.

Without further adieu, following were the insurance headlines most-clicked on in 2008: 1.

Liberty Mutual to Acquire Safeco Insurance in $6.2B Deal 2.

Insurance Producers Start to Move Business from AIG to Competitors 3.

5 Execs Found Guilty of Fraud in Gen Re-AIG Trial 4.

Florida Blocks Allstate Insurance from Writing New Business in State 5. AIG Woes Offer Double Benefit for Insurance Rivals What struck us about the list is how the most-read stories The biggest of 2008 are likely to be defining industry issues of 2009. stories of 2008 The most-read piece was a story announcing Liberty involve issues Mutual Group’s acquisition of Safeco Corp., making Liberty Mutual the fifth-largest property/casualty insurer and secondthat will likely largest surety writer in the country. That acquisition created an have a major organization with 15,000 independent agencies — a behemoth impact on 2009. whose every move will likely impact the entire independent agency system.

As might be expected, several of the top five stories involved the insurance giant no one can stop talking about: AIG. No. 2 was an exclusive Insurance Journal report detailing how — despite assurances that AIG insurance subsidiaries are sound — producers across the country had begun moving accounts from AIG affiliates. No. 5 was a Reuters report detailing how AIG’s collapse and fire sale is shifting the dynamics of the insurance marketplace, and boosting the prospects of AIG’s competitors. That dynamic — how the collapse of AIG plays out on the street level — will likely be another major force in the independent agency system in the foreseeable future.

Every year in insurance news springs surprises. Nobody would have imagined the AIG crises until it happened. Surprises aside, it’s a sure bet that for this new year, among the most-read stories of 2009 will be ones involving the insurance giants Liberty Mutual and AIG and their ups and downs.

Finally, although it didn’t make the most-read list (because it was a regional item) but still an important story, was California’s passing of a new law clarifying the definition of an agent versus broker. AB 2956 is sure to affect the independent insurance agency system in 2009 and beyond. State insurance agent associations already have scheduled 2009 classes to explain the law’s implications. Patricia-Anne Tom Happy reading in 2009!

West Editor ptom@insurancejournal.com

Publisher Mark Wells Chief Executive Officer Mitch Dunford

EDITORIAL Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal Vice President/Content Andrew Simpson | asimpson@insurancejournal.com Midwest Editor Sue Mckenna | smckenna@insurancejournal.com East/Southeast Editor Andrew Simpson | asimpson@insurancejournal.com East/Associate 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 Reporter Brian Kern | bkern@insurancejournal.com Columnists Catherine Oak, Bill Schoeffler, Henry Zangwill Contributing Writers Kenneth Auerbach, Mark Garbowski, Jeffrey O’Shaughnessy, Duncan Prince

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 Marketing/Design Assistant Ryan Graef | rgraef@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 Graphic Designer Chris Johnson | cjohnson@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@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 photo by: Eric R. Eggly PointSeven Studios

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio North, 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 copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2009 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication 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-WEST REGION January 12, 2009

FOR QUESTIONS REGARDING SUBSCRIPTIONS: please call 856-380-4176 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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m m

At AmWINS, our job is to be forward thinkers and to never simply accept the preconceived.

Our years of experience with a wide range of markets and industries have given us the expertise to change and improve how things are done. The drive for innovation is how we’ve become a leading wholesale broker in such a short time. We’re just not good at following.

For the AmWINS representative that will help you find the right answers,visit amwins.com. thals py, R: to her tictoof 49, ur44 n.

There’s a better way.

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West Coverage Snapshot

New California Licensing Laws Take Effect T he California Department of Insurance is reminding producers of new licensing laws that took effect Jan. 1, 2009, as a result of the passage of Assembly Bill 2044. Several changes resulted from the bill, including many that were designed to make California’s independent adjuster and public adjuster licensing laws uniform with other states, CDI indicated. Following are the changes: • Continuing Education Requirement: The number of continuing education hours required for public and independent insurance adjusters was amended to 24 hours during a two-year license term.

• Examination Waiver: Agents

licensed in another state that are in good standing and move to California can waive the examination requirement as a condition to obtaining a California license.

However, agents and brokers licensed as non-residents who move to California must still comply with the 12-hour ethics and California Insurance Code course before the license can be issued.

The agent must apply for the resident license within 90 days of canceling their license in the previous home state.

• Personal Lines BrokerAgents: The dates the initial licenses for personal lines brokeragents are effective so that renewals are staggered throughout

the year, rather than all being due at the same time at the beginning of every odd year. If a personal lines broker-agents also holds an additional license qualification such as life or accident or health, the personal lines broker-agent’s renewal date will be changed so that the licensees will only have one renewal date.

• Non-Resident Licensing Fees: The licensing fee for nonresident agents will be the same as the fee to become licensed as a resident producer when applying for the same type of license, regardless of the state the individual holds a resident license.

• Other Independent Adjuster Changes: The Cali-

fornia Insurance Code was amended to reduce the grace period in which an expired independent adjuster license or branch certificate may be renewed from five years to one year.

And, the Code was amended to clarify non-resident licensing requirements for independent insurance adjusters by deleting “in this state” so that the active direction, control, charge or management of the independent insurance adjuster business may occur outside of California.

For information, visit www.insurance.ca.gov/0200industry/0120-notices/upload/ NoticeLegChangesAdjuster Lic2008.pdf. IJ

California Workers’ Compensation Insurers File for Rate Increases

Surplus Line Association of California Stamping Office Celebrates 70 Years

T

T

he California Department of Insurance has approved rate increases for several workers’ compensation insurers.

California Insurance Commissioner Steve Poizner had recommended a 5 percent increase in his rate advisory.

However, several insurers requested increases in excess of 5 percent, including: Ace Property and Casualty Insurance Co. (8.7 percent), Assurance Company of America (6.2 percent); Employers Direct Insurance Co. (17.3 percent), Federated Rural Electric Insurance Corp.

(32.1 percent), Florists’ Mutual Insurance Co. (9.5 percent),

Great American Assurance Co. (10.5 percent), Maryland Casualty Co. (12.1 percent), National Interstate Insurance Co. (12.8 percent), Pacific Employers Insurance Co. (8.6 percent), Springfield Insurance Co. (10.4 percent), Ullico Casualty Co. (6.7 percent), Universal Underwriters Insurance Co. (5.7 percent), Zurich American Insurance Co. (5.8 percent), Zurich American Insurance Company of Illinois (17.4 percent).

To view the Dec. 1, 2008 rate filing approvals, visit www. insurance.ca.gov/0250-insurers/ 0800-rate-filings/0100-ratefiling-lists/rate-filing-approvals/ index.cfm. IJ

8 | INSURANCE JOURNAL-WEST REGION January 12, 2009

he Surplus Line Association of California’s Stamping Office is celebrating its 70th anniversary.

On Dec. 1, 1938, then California Insurance Commissioner Rex B. Goodcell and Assistant Commissioner Harold B. Haas authorized a plan in which the Commissioner would allow surplus line brokers to make filings with a new “stamping office” within the Surplus Line Association of California.

“The establishment of the Stamping Office by the Surplus Line Association constitutes a splendid example of initiative and cooperation on the part of the association,” Commissioner Goodcell wrote. He expressed his appreciation for the association’s assistance and his respect for the self-government shown by surplus line brokers.

In response, the Surplus Line

Association elected to maintain a stamping office in San Francisco to examine and record all filings required by the Insurance Commissioner’s rules and regulations relating to surplus line brokers or by the Executive Committee of the Surplus Line Association.

Today, the SLA is an organization of 3,874 surplus line brokers licensed by the state to negotiate and place insurance with nonadmitted insurers. The association serves as the official surplus line advisory organization to the California Department of Insurance (California Insurance Code Sec. 1780.50 et seq.). With few exceptions, all California surplus line insurance policies must be filed with the Surplus Line Association of California for analysis of regulatory compliance, record keeping, and statistical reporting. IJ www.insurancejournal.com

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Washington Workers’ Comp Insurance Premiums Increasing 3%

W

ashington’s Department of Labor and Industries (L&I) said premiums for workers’ compensation insurance will go up, on average, 3 percent in 2009.

Individual employers could see their rates go up or down, depending on their recent claims history and any changes in the frequency and cost of claims in their industry.

Insurance actuary calculations, based on anticipated injured-worker claims in 2009 and on wage and medical inflation, indicated the need for a 6.3 percent premium increase, generating $119 million. Instead, the decision to implement a 3 percent increase will generate $57 million, with the contingency reserve absorbing the remaining $62 million.

“We recognize the difficult economic environment for business and workers, and wanted to limit the increase as much as possible,” said L&I Director Judy Schurke.

As part of the governor’s economic stimulus package, L&I will be working with business and labor and the governor to evaluate whether more can be done in 2009 to help businesses survive and workers stay employed.

“We want to do everything we can in the short term to help businesses and workers weather the economic recession,” Schurke said.

With the 3 percent increase, average premiums will go up by approximately 2 cents per hour worked. The 2009 rate tables by industry are available online at www.lni.wa.gov.

Washington’s workers’ compensation system is made up of three funds that provide benefits when workers are hurt on the job. The Accident Fund rate will increase 1.8 percent. Employers pay premiums into this fund. The Medical Aid Fund rate will go up by 3.2 percent, and the Supplemental Pension Fund rate will increase 7 percent. Employers and workers contribute equal premiums into the latter two funds.

Schurke noted that the system’s contingency reserve has dropped from $1.6 billion in September 2008 to approximately $990 million in the volatile markets. All workers’ comp insurers maintain contingency reserves. Washington’s contingency reserve has one of the lowest ratios of reserves to liabilities. It currently is 9.7 percent of the total liabilities, which now stand at $10.2 billion.

Washington’s workers’ compensation system provides coverage to about 2.57 million workers and more than 170,000 employers. L&I also oversees workers’ compensation programs that cover an additional 870,000 workers whose employers self-insure.

For information, visit http://www.lni.wa.gov. IJ

www.insurancejournal.com

Summary of New State Laws Following are highlights of a few new state laws that are scheduled to take effect in 2009.

State

Law

Alaska

Ignition Interlock Devices – HB 19, which took effect Jan. 1, 2009, limits driver’s license privileges relating to the crime of avoidance of ignition interlock devices when a person knowingly circumvents or tampers with the device, or rents a motor vehicle to a person who has an ignition interlock limited license. The law provides for court procedures for sentencing relating to convictions of driving under the influence of an alcoholic beverage, inhalant or controlled substance.

California AB 2956 clarified the duties of an insurance agent versus a broker. Prior to the new law, confusion existed within the industry, with consumers, brokers, agents, and courts over what tests could be used to determine an agency versus broker relationship. Now, the law establishes four situations in which the broker presumption is presumed rebutted. Additionally, the law requires brokers to disclose their fees in a written agreement.

Idaho

HB 429 amended existing law relating to motorist insurance, removing reference to certain liabilities arising out of ownership, maintenance or use of a motor vehicle. The law discusses coverage for underinsured motor vehicles, requiring in writing or electronically for the rejection of underinsured motorist coverage, and requiring the insurance carrier to provide the insured with a summary statement.

Utah

New motor vehicle liability policy minimum limits took effect Jan. 1, 2009, noting that policies containing liability coverage may not limit the insurer’s liability under that coverage below: $25,000 because of bodily injury to or death of one person in any one accident; $65,000 because of bodily injury to or death of two or more persons in any one accident (up from $50,000); and $15,000 because of liability for injury to or destruction of property of others in any one accident; or $80,000 (up from $65,000) in any one accident whether arising from bodily injury to or the death of others, or from destruction of, or damage to, the property of others.

Washington Effective July 1, 2009, the terminology used in referencing insurance agents, solicitors, brokers or adjusters will be changed to refer to them instead as producers, adjusters, or title insurance agents. IJ January 12, 2009 INSURANCE JOURNAL-WEST REGION | 9

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West Coverage People

Alice Molasky Arman

Tom Hughston

Chuck Longiotti

Rich Look

Kevin LaCroix

John Degnan

Alice A. Molasky Arman joined Western Insurance Co. as senior vice president of government relations.

Molasky Arman recently retired from the State of Nevada, where she was recognized as the state’s longest serving Commissioner of Insurance serving a tenure from January 1995 until Sept. 7, 2008. While in the position, the state addressed an availability crisis in medical malpractice insurance, privatized the state’s industrial insurance system, instituted the captive insurance program and launched a media campaign to warn the public about the dangers of unauthorized insurance.

The Council of Insurance Agents & Brokers, a trade association representing domestic and international commercial insurance agents and brokers, named Tom Hughston, executive vice president of North Texas-based Roach Howard Smith & Barton (RHSB), to its board of directors. Hughston, whose insurance career spans more than 20 years, joined RHSB in 1991 as a principal and shareholder, and was appointed to the board in 1995. Prior to RHSB, he was with Chubb Insurance.

Aon Consulting named Chuck Longiotti regional director of the Central West region, which comprises Ohio, Michigan, Illinois, and all states west of the Mississippi River. Longiotti brings 27 years of experience in consulting and account management. He comes to Aon Consulting from Mercer, where he was the leader for the western United States region and for Latin America. He also led Mercer’s U.S. West retirement business. He will be based in Irvine, Calif.

The Insurance Marketing and Communications Association named Richard Look president. He is a marketing communications veteran with agency and insurance company experience, and currently serves as vice president of marketing communications for Inventure Inc., a privately owned insurance services company based in West Chester, Pa. Look has served as director of communications for Venture Insurance Programs and was vice president of brand marketing for Commonwealth Risk Services. On the agency side, he served as president of Jenkins Advertising, vice president and account supervisor of McAdams, Richman & Ong, and managed e-marketing initiatives through Kingswood Interactive.

Other IMCA 2008/2009 officers and directors are: Executive Vice President Linda Collins of Arthur J. Gallagher & Co.; Vice President Randall Clinger of SwissRe; Vice President Mitch Dunford of Insurance Journal; and Past President at Large Reg Pierce of Bailey Brand Consulting.

IMCA also appointed three new board members: Zdenka Melnyk of Manitoba Public Insurance, Krista Winters of American Modern Insurance Group and Mark Friedlander of Main Street America Group.

10 | INSURANCE JOURNAL-WEST REGION January 12, 2009

Bankers Risk Management Consultants based in Naples, Fla., named Janet (Riewold) Bordonaro vice president in charge of new business. She will be based out of Naples, but her territory includes the entire United States. Bordonaro spent seven years on Bankers’ sales force covering Florida’s Broward, Monroe and Dade counties from 1996 through 2003, when the Bankers book of flood business was sold. She then joined Fidelity to help transition the business and remained there since. In her new position, she will be working largely through the Bankers family of affiliates, using her relationships with affinity groups and other companies to create new business.

Worcester, Massachusetts-based The Hanover Insurance Group Inc. named Helen Ryan Savaiano vice president, management liability, for commercial lines business. She will develop a business unit that builds on The Hanover’s current employment practices liability (EPLI) offering, to include nonprofit and private company directors and officers, as well as other related coverages. She will work out of The Hanover’s office in Itasca, Ill. Savaiano joins The Hanover from W.R. Berkley Corp. in Chicago, where she held numerous senior-level management positions, most recently, vice president of the company’s small business unit.

The Professional Liability Underwriting Society (PLUS) honored Kevin M. LaCroix with its 2008 PLUS Founders Award and John J. Degnan, with its 2008 PLUS1 Award.

The Founders Award recognizes a PLUS member who has made lasting and outstanding contributions to the Society. The award is presented in honor of PLUS Founder Angelo J. Gioia and other individuals who have contributed selflessly to create PLUS and establish it as the voice of the professional liability industry.

LaCroix is a partner in OakBridge Insurance Services, of Beachwood, Ohio, and an Insurance Journal columnist.

OakBridge is an insurance intermediary focused on management liability issues. He has been involved in directors’ and officers’ liability insurance issues for more than 25 years.

The PLUS1 Award is presented to a person whose efforts have contributed to the advancement and image of the professional liability industry. Criteria include reputation and success in the professional liability industry, history of lectures and service on panels addressing industry topics, activity in professional liability, involvement in PLUS, longevity in the insurance industry, and measure of impact on the professional liability industry.

Degnan is vice chairman and chief operating officer of The Chubb Corp., a role he assumed in June 2008. He had served as chief administrative officer since 2002 and assumed the additional title of chief ethics and legal compliance officer in 2005. He is on the boards of the American Institute for Chartered Property Casualty Underwriters. IJ www.insurancejournal.com

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16th Anniversary West Coast Casualty’s Construction Defect Seminar

West Coast Casualty’s

Construction Defect Seminar May 14th and 15th, 2009

May 14th and 15th, 2009 AMERICA’S A MERICA’S S LARGEST LARGE EST ST . . .

AMERICA’S BEST . . .

AMERICA’S AMERICA A MERICA’S F FAVORITE FAV AV VORITE ORITE . . .

Construction Defect Seminar

West Coast Casualty's Construction Defect Seminar will be held on May 14 and 15, 2009 at the Disneyland Hotel in Anaheim CA. This construction defect seminar is the largest event of its kind worldwide focusing on construction defect and claims. Approximately 1800 attendees will come from in excess of 27 U.S. states and several foreign countries to hear our speaker’s views on emerging issues of construction defects.

MCLE/CE/CLE credits being sought from m 40 40 state insurance departments, state bar r Topics associations, insurance related organizations zations Topics include prosecution, defense, coverage as well as and others (including ethics credits). new technologies and methods of dealing with construction defect related matters. Speakers include judges, attorneys, insurance brokers, claims personnel and experts.

Audience is made up of Judges, attorneys, claims adjusters, experts, contractors, underwriters, MGA’s, wholesale and retail brokers.

“ We speak the language of claims, construction and insurance”

mation Seminar invitation and updated information can be found on the Internet at: www.westcoastcasualty.com

5743 Corsa Ave., Suite #205 Westlake Village, CA 91362 Phone: 818-735-3595 - Fax: 818-735-3596 www.westcoastcasualty.com

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West Coverage News & Markets California Workers’ Compensation Premiums Down in 2008

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he Workers’ Compensation Insurance Rating Bureau of California has completed its report summarizing insurer loss and premium experience through Sept. 30, 2008.

WCIRB said: “California written premium (gross of deductible credits) reported for the first nine months of 2008 is estimated at $8.1 billion, approximately 18 percent below the written premium reported for the first nine months of 2007.

The WCIRB estimates that written premium for all of 2008 will be approximately $11 billion, which is less than one-half of the 2004 total.

“The WCIRB projects an ultimate acci-

dent year loss ratio of 52 percent for accident year 2007. This loss ratio, while still low compared to historical norms, represents a 14 percentage point increase from the estimated accident year 2006 loss ratio and a 23 percentage point increase from the estimated accident year 2005 loss ratio.

“The WCIRB estimates that the average cost of a 2007 indemnity claim will be approximately $46,800. This represents the second consecutive double-digit severity increase after sharp severity declines in 2004 and 2005. This accident year 2007 severity, while still below the pre-reform level, is approximately 29 percent above the 2005 estimate. Both indemnity and medical average costs per claim show significant increases in 2006 and 2007.”

To view the report, visit https:// wcirbonline.org/wcirb/resources/data_ reports/pdf/093008_insurer_exp_report.pdf. IJ

West Coverage Business Moves OnPoint Underwriting, Commercial Insurance Services Atlanta-based OnPoint Underwriting acquired the assets of Commercial Insurance Services, based in Greenwood Village, Colo. Terms of the transaction were not disclosed.

Commercial Insurance Services is led by Bob Hallameck, president, who will retain a management role with the new operation. CIS operations will conduct business as OnPoint Underwriting and continue to operate from its existing offices in Greenwood Village and New Mexico.

The transaction builds upon CIS’ legacy in the tribal gaming and hospitality industry. The Program for Sovereign Indian Nations will remain branded under that name and continue to be offered to all current and prospective agents and brokers appointed by either firm.

Brown & Brown, Charter Insurance Brown & Brown Inc. acquired the assets of Charter Insurance Services Inc. in Albuquerque, N.M. Charter Insurance Services Inc., with annualized revenues of approximately $1.1 million, focuses on property and casualty insurance for individuals and businesses.

Helen Wertheim, Charter’s president, and her team will combine their agency operations with that of Brown & Brown’s Albuquerque office, under the leadership of Scott Jones.

American Pinnacle Partners, Consolidated Special Risk Managers Seal Beach, Calif.-based American Pinnacle Partners Inc. acquired Consolidated Special Risk Managers Inc., a managing general underwriter founded in 1990. Focused on the A&H/Benefits sector,

12 | INSURANCE JOURNAL-WEST REGION January 12, 2009

Oregon Producers Face Fingerprint Rules

T

he Oregon Department of Consumer and Business Services Insurance Division adopted new insurance producer fingerprint rules on Dec. 9, 2008.

Rules OAR 836-072-0001 to 836-072-0045 were designed to protect consumers from producers with criminal convictions.

Fingerprints must be submitted by applicants seeking an initial producer license.

Producers renewing licenses only need to submit fingerprints if they are requested.

DCBS said it could request fingerprints if it is investigating potential violations of the Insurance Code or Oregon laws, it is taking enforcement action against a producer, or if the producer’s identity is in question.

Fingerprints for non-residents seeking or renewing a license could be requested if DCBS questions the producer’s identity or suspects he or she has been convicted of a crime but hasn’t reported the conviction. IJ

CSRM has a presence in the group business travel accident, accidental death and disability, tuition protection, workers’ compensation carve out and scheduled benefit health insurance sectors.

CSRM is headed up by Mary Ann Villarreal, who has been with the company since inception. Under the new ownership, she will continue as president/CEO. Monarch Insurance, Bishop Insurance Hawaii-based Monarch Insurance Services Inc. purchased Bishop Insurance Agency, a division of American Savings Bank. The purchase price was not disclosed.

Monarch will focus on providing excellent customer service to the existing Bishop customers. Positions will be offered to some Bishop employees; and branches will be assessed with the intent of maintaining those serving larger numbers of clientele, according to Monarch.

Monarch is a property and casualty broker. Bishop Insurance is the oldest insurance agency in Hawaii, founded in 1859. IJ www.insurancejournal.com

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Special Report Contractors and Subcontractors

Construction Insurance Brokers Say Building Backlog is Saving Commercial Sector ... For Now But Challenges Could Lie Ahead in 2009 Even With Government Stimulus Package

By Andrea Ortega-Wells

C

ommercial construction insurance brokers from the northeast to the west coast, from Texas all the way to North Carolina, say the market and their business right now are not as bad as might be expected from reading daily news reports.

But 2009 could bring a different story, so some are pinning their hopes on a federal stimulus package to boost construction.

Henry Lombardi, president and CEO of New York-based Allied North America, follows the construction and insurance industries very closely. Since 1979, Allied has served only the construction industry.

“We focus all of our energies, innovations and technology on helping contractors meet their needs and deal with the risks that are inherent to their business, be it insurance, safety, or loss control,” says Lombardi. Even with some heavy economic pressure on both the insurance market and Allied’s core client base, the company expects to exceed $100 million in commissions for 2008.

Lombardi has concerns about what will happen to the construction industry in 2009. “It’s going to be a tough year,” he said.

“Not that any year is easy,” he added, but 2009 in particular will be challenging.

“Contractors in general are going through some tough times,” he said. “Contractors are concerned what revenue will be, how the state and local governments will get the funding to build the infrastructure.”

For now, Lombardi says, commercial contractors have enough “work in process” to keep them up and running for another six www.insurancejournal.com

to nine months. As that works runs off, contractors will have to bid for new work, but the financial crisis threatens the dollars available to fund such projects, Lombardi said. Many of Allied’s civil works contractors are taking a wait-and-see approach, he said. Those contractors are hopeful President-elect Barack Obama will fulfill a promise to shell out funds to states for infrastructure projects.

“The new president has stated he will put forth a tremendous amount of money, $600 billion to $700 billion of infrastructure work, to stimulate the economy,” Lombardi noted. Such funding will help contractors continue to work and generate new revenues, depending on when those funds become available, he added.

Lombardi says regardless, Allied will continue to stay focused on its business model, continue to operate prudently and will continue to use technology to ensure it is there to help its contractor clientele with insurance, loss control, even financing. But given the uncertainty in the market, he anticipates somewhat of a flat year in 2009.

“We recognize there will be challenges,” he said. “It’s going to be a tough year but I think any company that has prudent managers and people who understand that you have to change … I think they’ll be OK.”

Heidemann of San Diego-based Barney & Barney has seen the California housing market tumble, but says commercial construction is still fairly good, at least for now.

Barney & Barney’s construction practice — which consists of 25 insurance professionals and generates about $5 million in construction revenue for the agency — grew in 2008 as well. But like Allied, Heidemann expects the firm will see a slow down in 2009 on construction-related revenues.

“We primarily insure commercial contractors and some developers. We do have some residential contractors as well but most of the book is focused on the commercial infrastructure side,” Heidemann explained.

“We are not expecting any growth, however, we do expect to pick up and add a few clients.”

Even so, he says “we expect to be relatively flat on the construction side.”

Commercial construction is beginning to be affected by the credit crunch but the impact won’t be as great as on residential construction. “There are still a lot of projects out there and there’s still some financing available.”

However, competition for projects for commercial contractors in public works is a lot fiercer, Heidemann said. “Some of the residential contractors have moved into public works so there’s a lot more bidders, more competition for that work. So we are seeing a shrinkage for most clients on what

‘Contractors in general are going through some tough times.’

From the Golden State Construction Practice Leader Paul

continued on page N2 January 12, 2009 INSURANCE JOURNAL-NATIONAL REGION | N1

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Special Report Contractors and Subcontractors Insurance Brokers, continued from page N1

their projections are for 2009.”

California’s budget woes could also impact future work for commercial contractors. “If the state doesn’t resolve its budget crisis that would certainly impact the public works projects in place,” Heidemann said. “So it’s hard to predict what the end of ‘09 will look like. A lot of our clients still have a substantial backlog and that will take them toward the end of ‘09, and then it remains to be seen what the future will hold.”

Heidemann says he hears talk about the possible hardening of the market, but that’s not something he has seen yet. “We’ve seen some flat renewals and in some cases, some reductions, and in some cases a few slight increases because of loss history,” he said.

He’s confident the market will harden, but is not sure when. “Whether it will happen in 2009 remains to be seen,” he said.

Down South For Dallas-based regional broker McQueary, Henry, Bowles & Troy (MHBT), the commercial construction industry is still going strong.

“We are fortunate; the Dallas-Fort Worth area is still a little isolated from it all. The construction industry is still going strong,” said Jeremy Sandusky, an MHBT agent in the firm’s construction unit. “However, in the last couple of weeks we have started to hear our clients are slowing down.” MHBT’s target construction market is typically heavy commercial construction projects and large commercial contractors and subcontractors.

The MBHT construction unit has begun beefing up its prospecting to address a potential downturn in business. “We are qualifying more prospects a little better; we are working a little smarter, keeping the pipeline full with prospects; and we are watching collections and audits,” Sandusky said. “You don’t want to get caught with a construction company that is having some hard times and they are not able to pay their audits or their premiums. That’s something we are watching pretty closely, making sure people don’t

get too far behind which is very important.” While MBHT watches over financials all the time, it’s more important in today’s tough economy, Sandusky said. “It’s something we always watch but we are even watching it closer now.”

As a way to generate additional revenue for its construction unit, MBHT also offers constructionrelated value-added services on a fee basis. “That’s something we are moving more towards, being more of a risk management consultant,” Sandusky said. “If we don’t write their insurance but they want our services then that’s something we are looking more at … attaching a fee to our value-added services.”

Given its success, MHBT has no plans to branch out into other sectors of the construction insurance industry. “We are pretty happy where we are at,” Sandusky said. “We have been very successful … We are big on what works and sticking to your core competencies; if that works, there’s no reason for our unit to go after stuff that we’re not used to going after.”

Southeast Looks Good In the southeastern states, commercial construction companies still have some business on their books, at least for the next couple of years, says Joey Huckaby, vice president of Columbia, S.C.-based Huckaby & Associates.

“Commercial construction in the southeast — with the exception of areas that are already really developed like Atlanta — all through South Carolina, North Carolina and Georgia — you have a lot of open space and the population is growing in those states. So you still have the need for building the Wal-Marts, the Targets and shopping centers,” Huckaby said. “The projects that you are seeing going away very fast

‘We are seeing a shrinkage for most clients on what their projections are for 2009.’

N2 | INSURANCE JOURNAL-NATIONAL REGION January 12, 2009

are the high rise condos on the coast of South Carolina and North Carolina.”

Even if commercial construction begins slowing, Huckaby has an option: the changing labor force has opened the door to selling other coverages, including employment practices liability insurance, to construction firms, Huckaby added.

“You’ll find more construction firms, amazingly, willing to hear you talk about employment practices liability,” he said. “We’ve new laws in every state and federal laws with regard to immigration that put a lot of the onus back on the business owner to actually comply.” In addition, downsizing a work force leads to exposures as well, he added.

“Say you had 100 guys on drywall and now you have to cut it back to 50, well that’s 50 potential lawsuits. They didn’t see that before when we were in the construction boom,” Huckaby said.

“There’s a lot of fear with force reduction and immigration laws right now that you find construction accounts, even though times are tough with their revenue, you find they are finding time to hear about or even add EPLI coverage that maybe they weren’t as interested in before,” he said. “The change in immigration laws and force reductions over the next few years really brings EPLI to the front.”

When it comes to pricing for commercial contractors in the southeast, Huckaby says he sees no sign of a hardening market. “No signs whatsoever in the states we operate in,” he said. “There’s a lot of talk … but not one sign that it’s about to start hardening.” IJ www.insurancejournal.com

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National Coverage Washington Report

FTC Probing Insurers Over Credit-based Homeowners Insurance Pricing

U

.S. regulators have asked nine major insurance companies, including Allstate Corp. and Travelers Cos. Inc., to provide information about how they set prices for homeowners’ coverage.

The Federal Trade Commission said it ordered the companies to provide data about credit-based insurance scores.

An FTC study on automobile insurance released in 2007 found that the scores allowed insurance companies to determine who was likely to be high risk and to charge those people more.

The study found AfricanAmericans and Hispanics tended to have lower insurance scores than whites and Asians and, because of this, tended to pay more for auto insurance.

The other companies queried

about the study for homeowners insurance were Chubb Corp., State Farm Mutual Automobile Insurance Co., Fire Insurance Exchange, Nationwide Mutual Insurance Co., United Services Automobile Association, Liberty Mutual Holding Co. Inc. and American Family Mutual Insurance Co. The FTC said the insurers subject to the order have roughly 60 percent of the homeowners insurance market in the U.S. The affected companies have until April 24, 2009 to respond.

Insurers say the FTC order is unnecessary, costly and risks consumers’ privacy.

“We are disappointed the FTC chose this route, despite the industry’s good faith efforts to work cooperatively to find a sensible,

N4 | INSURANCE JOURNAL-NATIONAL REGION January 12, 2009

tools that enable insurers to prosecure, and cost effective alternavide sound pricing models. We’re tive to provide the data the FTC says it needs to conduct its study,” confident the FTC, just as they found in their auto study, will said David Snyder, American learn the same thing in this latest Insurance Association (AIA) vice examination,” added president and ‘The use of creditSnyder. assistant general The AIA says the counsel. “The use based insurance FTC has demanded of a ‘compulsory scores benefits a information “far process’ does not vast majority of beyond what is allay our serious consumers and is needed, and often concerns about the handling and pro- one of the tools that data insurers do not enable insurers to even collect, to comtection of massive plete their study of amounts of conprovide sound homeowners insursumer data.” pricing models.’ ance and creditThe FTC study based insurance scores.” in 2007 was completed without The FTC order itself can be asking for information from insurfound at: www.ftc.gov/os/2008/ ers, the AIA says.

12/P044804facta.pdf. IJ “The use of credit-based insurance scores benefits a vast majority Reuters contributed to this story. of consumers and is one of the

www.insurancejournal.com

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REVIEW YOUR RISK

Page 6

Closer Look Employment Practices Liability New Employment Laws, Power Shift in Washington May Increase the Risk of Workplace Charges What Insurance Professionals Need to Know to Protect

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s the economy continues to falter and a new Administration takes over in Washington, the workplace is being seeded with new legal hazards for business owners that could lead to an increase in employment charges and lawsuits.

Escalating layoffs, new worker-protection legislation and the expected removal of damage caps in employment litigation will create a more challenging climate for employers.

The cost of defending against an employment complaint may increase and damages awarded to workers could soar to even higher levels.

Employment practices liability insurance (EPLI) — already a must for businesses and institutions of any size — will be even more critical. Now is the time for agents, brokers, risk managers and others to educate their customers about the changes underway and developing trends in the workplace.

Employers should be prepared for a range of employment claims, including allegations of discrimination, wage-and-hour violations, charges of unfair labor practices and retaliation issues. Class action suits and actions stemming from alleged systemic discrimination are also expected to increase.

EPLI More Available and Affordable Even though EPLI often makes sense from a cost-benefit standpoint, many small and mid-sized businesses still do not purchase

N6 | INSURANCE JOURNAL-NATIONAL REGION January 12, 2009

coverage. They understand the need — a study by The Hartford Steam Boiler Inspection and Insurance Co. found that 92 percent believed they would face an employment-related claim or lawsuit sometime in the future. Many mistakenly believe, however, that the coverage is expensive or onerous to obtain.

The reality is that EPLI has evolved from a high-priced option to an affordable necessity.

EPLI coverage is now available in business owner policies or other commercial package policies. Today there is a much wider range of EPLI products available and a separate application and additional underwriting information may not be required. Policies may include specialized EPLI claim services and legal representation.

Outsized Risks for Small Businesses Small businesses in particular face big risks from employment claims. Many don’t have internal resources, such as in-house legal counsel and a professional human resources staff, to establish risk-management policies and procedures. They may not have policy manuals or perform thorough background checks. Even when they do, groundless allegations can be made at any time and are often costly to defend.

The statistics are sobering. From FY 2003 through FY 2007, nearly 395,000 cases were filed with the Equal Employment Opportunity Commission (EEOC). Total paycontinued on page N8 www.insurancejournal.com

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Closer Look Employment Practices Liability

Employment Laws, continued from page N6

more aggressive. President-Elect Obama also will appoint new federal court judges and President-Elect Obama Pledges Support possibly U.S. Supreme Court justices who could have a long-lasting impact on employThose numbers may rise as new laws and ment law in the United States. policies are enacted in the next Congress.

What should employers be concerned Support is expected from the highest levels about? A key issue involves a of government. Several critichange to the landmark cal bills were sponsored or An amendment Americans with Disabilities co-sponsored by Presidenteffective Jan. 1, Act (ADA). An amendment Elect Barack Obama. Many effective Jan. 1, 2009, broadwere passed by the House, 2009, broadens the ens the definition of “disbut failed to win enough definition of ‘disability,” expanding the pool votes in the Senate. With the ability,’ expanding of people who can make a new Congress, they have a the pool of people claim under the ADA. greater chance of becoming Employers may be comlaw. who can make a pelled to make many more The federal agencies claim under the accommodations for workresponsible for workplace Americans with ers. regulations, including the Disabilities Act. With some limited excepEEOC, Occupational Safety tions, disabilities will now and Health Administration include conditions that can be treated, such (OSHA), Department of Labor Wage and as diabetes or carpal tunnel syndrome.

Hour Division, and the National Labor Previously, “partial” disabilities or impairRelations Board are expected to become outs reached almost $520 million.

N8 | INSURANCE JOURNAL-NATIONAL REGION January 12, 2009

ments that could be treated with medication or devices, such as hearing aids, had been exempt from the ADA. Worker-Friendly Bills Abound Another bill banning discrimination on the basis of genetic data has been passed and is expected to go into effect in November 2009. Other proposed measures would make it easier to establish unions; eliminate caps on punitive and compensatory damages; modify the statute of limitations on some discrimination lawsuits; expand workers’ rights; and establish new federally protected classes, such as sexual orientation.

One of the most contentious pieces of legislation is the Employee Free Choice Act. The EFCA makes it easier to establish unions; requires unions and employers to agree to binding arbitration if they cannot reach a collective bargaining agreement in a timely manner; and increases penalties on employers engaging in unfair labor practices. continued on page N10

www.insurancejournal.com

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Closer Look Employment Practices Liability Employment Laws, continued from page N8

Another union-related bill expands the definition of a “supervisor,” making more people eligible to be part of collective bargaining units.

Some proposed legislation would expand workplace protections.

A sampling of proposals includes expanding the Family and Medical Leave Act to include companies with fewer than 50 employees and mandating paid sick leave for employers with 15 or more employees. Others would make it harder to classify workers as independent contractors, rather than employees, and increase penalties for offenders.

Costlier, More Difficult Litigation Several of the workplace initiatives

would likely raise the cost and the likelihood of litigation. The Equal Remedies Act would eliminate the caps that Congress placed on punitive and compensatory awards under Title VII of the Civil Rights Act of 1964 (Title VII) and the ADA. This is particularly troublesome for small and mid-sized businesses, which could be faced with crippling judgments. The burden of proof could also shift, making it easier for employees to prevail in certain circumstances, such as gender-discrimination suits.

Other proposals take a new tack against long-running issues.

For example, an amendment to the Immigration and Nationality Act would prohibit denying back-pay or other monetary relief for unlawful employment practices against undocumented immigrant workers.

Finally, the Ledbetter Fair Pay Act would

overturn the Supreme Court’s controversial decision in Ledbetter v. Goodyear Tire and Rubber Co., effectively eliminating the 180or 300-day statute of limitations for filing a wage-related discrimination claim.

Change Workers Can Believe In While it is difficult to predict how many of these measures will prevail, particularly with the current economic crisis, employers are almost certain to face a more difficult legal landscape. Business and other interest groups will make their positions known on these issues, but the message for insurance professionals and their commercial clients is clear. Unless employers are prepared with formal employment policies, training programs and broad insurance protection, an employment charge or lawsuit could have significant consequences. IJ O’Shaughnessy is a vice president for The Hartford Steam Boiler Inspection and Insurance Co.’s Portfolio EPL program. Phone: 800-472-1866.

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Private,

INSURANCE JOURNAL

TOP100 AGENCIES

Left: Mark Miller President, Ann Arbor Office Regional Vice President, Michigan & Illinois Right: Michael Hylant, CEO

Photos by Eric R. Eggly, PointSeven Studios

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, Independent and Free Ohio-based The Hylant Group Has 12 Locations But Only One Philosophy — Give Customers and Staff What They Need to Succeed

By Ted Huntington

N

o — they’re not quite one of the giant global insurance brocial investments experienced problems, Patrick took back the firm. kerage firms. No — they’re not a small “Main Street” retail In 1987, Mike Hylant’s older brother Steve opened Hylant’s Detroit, agency, either. The Hylant Group is somewhere in between Mich., office. In 1989, Mike moved to Cleveland to open Hylant’s the two (albeit the firm’s resources, revenue and product Cleveland office. Launching the Cleveland office from scratch, Mike line more closely resemble that of a giant broker). was able to grow the Cleveland office to become And, that’s just how the Hylant Group’s top execuHylant’s second largest operation — next to the Insurance Journal tives want to keep it: private, independent and free Toldeo office. Partially due to his success with the Top 100 Agency Profile to conduct business the way they desire.

Cleveland operation, Mike Hylant was tapped as RANKING: No. 7 the new company CEO. The Hylant Group is a family-run operation The Hylant Group’s mission is to balance itself founded in 1935. Three generations later, the firm Agency Name: between being a world-class brokerage firm and now boasts 12 locations and is ranked No. 7 on The Hylant Group remaining a private retail operation. “We enjoy a Insurance Journal’s list of the largest privately-held Headquarters: pretty good niche in the Midwest as a regional broproperty/casualty insurance agencies in the nation.

Toledo, Ohio ker with 12 offices. We are now encroaching on Based in Toledo, Ohio, Hylant has expanded to 11 Year Founded: other areas — a new Chicago office and we’re pushother locations throughout Ohio, Michigan, Indiana, 1935 ing into Nashville, too. We want to be a world class Illinois and Tennessee. One of the keys to the Additional Locations: agency’s growth and success is making sure each 11 other offices in Michigan, Indiana, regional broker that is a viable alternative to the major national brokers.” location operates with the same ideals. As CEO Illinois and Tennessee Hylant calls the firm “a tweener” — somewhere Mike Hylant explains, “We have 12 locations — and 2007 Property/Casualty between a firm with national resources and a local one philosophy.” That basic philosophy is to provide Premium: $691.1 million independent agency. The company is in a position Hylant’s customers what they need — and to pro2007 Property/Casualty to challenge major brokers for a share of their busivide Hylant’s staff with the resources they need to Revenue: $73.4 million ness, Hylant says. serve their customers.

2007 Total Revenue: One move that put them in this position was the Hylant is one of nine children — most grew up $100 million recent hiring of Mark Miller as regional vice presiin the family business. And now there’s a fourth Principal: dent of Hylant’s Michigan and Illinois operations generation of Hylants learning the ropes. Even Mike Hylant, CEO and president of the Ann Arbor office. Miller came though there are now more than 700 Hylant Number of employees: to Hylant from Marsh & McLennan. Miller, who employees, it is still very much a family-run opera700 began his career as a professional hockey player, tion.

Products Offered: hip-checked his way into the insurance industry Hylant’s first job out of college was as a casualty Property/casualty insurance servicwith Marsh & McLennan in 1993. After Marsh’s underwriter trainee with The Hartford in es, employee benefits, program Pittsburgh. He returned to Toldeo to serve as a administration, loss control, wealth problems surfaced a few years ago, he looked to make a move and found a home with Hylant. client executive with the family business. At the management, health care services “Hylant was interested in expanding its footprint. time the agency was going through a transition in They had seen opportunities in the large account arena, but they wantownership. Hylant’s older brother Patrick had bought the firm back ed to bring in people who had ‘been there-done that,’” Miller said. from Dana Corp., which had purchased Hylant in the 1980s. Dana Hylant sees the chance to challenge firms such as Aon and Marsh on Corp. owned Cherokee Insurance Co., and Hylant served as a major retail insurance agency for Cherokee. In 1985, when Dana Corp.’s financontinued on page N14

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Hylant Insurance, continued from page N13

some accounts, he says. Maybe not for the Fortune 100 or 200 businesses, but certainly for the Fortune 200 to 1,000. Miller brings to Hylant the ability to lead them into that rarified air and provides significant insight and depth regarding such accounts.

Diversification Hylant’s services stretch way beyond just those of an insurance agency. In addition to insurance programs, Hylant provides employee benefits, program administration services, loss control, wealth management and health care services. Hylant’s core business is risk management, property/casualty coverages, 401(k) offerings, managing general agency service and health disease management initiatives.

Hylant has regionalized its business with three regional vice presi-

Acquisitions and Organic Growth How did Hylant become one of the largest privately held agencies in the nation? Company executives attribute Hylant’s growth to a combination of smart acquisitions and organic growth. Some offices — ‘We want to be a world class regional broker that is a viable Chicago, for example — have been alternative to the major national brokers.’ totally grown organically. Other offices — Fort Wayne, Ind., for instance — dents who manage their area. All of Hylant’s corporate resources have were brought into the Hylant family. When acquiring an office, been allocated back into each region. The regional vice presidents Hylant looks for an operation that shares its same manner and culmanage their revenue generating operations, and each region has a ture. Once an agency has been acquired, considerable time is spent sales leader and talent managers who oversee personnel training and indoctrinating staff on Hylant’s policies and procedures. other necessary functions within each region.

Craig Markos, president of Hylant’s Columbus, Ohio, operation, Hylant has the resources and staff to be much more than an insurexplains, “The people we hire and the commitment we make to the ance agent to its clients. The firm uses a three-pronged approach to employees is a huge reason for our success.” According to Markos, its customer service. Markos explains: “We want to know where our who has been with Hylant for 17 years, the firm’s employees are clients have been and where they’re going in the future so we can trained to understand the agency’s goals. From there, they are given help them plan for the future. We want to provide solutions to help free rein to make decisions for themselves. “That flexibility allows us our clients reduce costs, reduce risks and improve their overall operto respond swiftly to clients’ needs.” ating efficiency.”

What sets Hylant apart from the competition? Hylant management The firm focuses heavily on hiring specialists in the particular has spent the last five years meshing its systems in order to deliver fields that it serves. This way, if a client requires the service of someone consistent feel to any one customer in any location. The firm has one with a particular specialty — whether it is P&C insurance, the ability to offer relevant value-added resources to all its clients — health care, 401(k) products or pensions — there is no need to seek no matter what their needs and where clients are located. that service outside the agency. “We might have a client executive “Maybe we will bring in resources from our Detroit office or from who is the leader on all fronts for an account, but they will not be Toledo in order to serve our customers’ needs,” Hylant said. “We bring experts in all the fields. Instead, they bring in experts from within in relevant resources to the individual needs of the client. We create the company when they are needed,” Markos said. “Consumers and custom platforms in order to service each customer. If we don’t delivbusinesses are more sophisticated now. They require their insurance er that type of service, then we are providing a disjointed effort.” broker to offer this type of expertise.”

Mark Miller president, Ann Arbor Office, regional vice president, Michigan & Illinois N14 | INSURANCE JOURNAL-NATIONAL REGION January 12, 2009

Expanding Customer Base Acquisitions have played a major role in Hylant’s growth. In addition, the firm places a high emphasis on cross-selling between product lines.

The firm also uses its existing clients to help generate new clients.

“It’s called the ‘wedge’ sales process. To use a football analogy, this is akin to the ‘blocking and tackling’ of sales. This system helps to identify the ideal customers by understanding Hylant’s current customers and their customer relationships,” Hylant says.

Another important feature of Hylant’s organizational structure is the lack of profit centers. According to Miller, this enables Hylant to be more “nimble, more efficient, and quicker to respond” to clients’ needs. “If anyone knew the anguish that goes on with large brokers about revenue sharing and those types of battles, they would be appalled. A lot of the largest clients that are used to doing business with large brokers may not be getting the service they need.

Oftentimes, someone along the chain is unresponsive because they aren’t getting paid for their role in the process. It’s refreshing for me www.insurancejournal.com

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INSURANCE JOURNAL

TOP100 AGENCIES

to see the Hylant model work versus the large broker model.”

Hylant treats its clients as far more than insureds. The Hylant team closely examines the client’s operation. When selling insurance coverage, for example, they don’t simply tell the customer what coverages they will receive and the premium; they examine their existing policies, critique them and provide a real-world scenario explaining what will happen should a loss occur. “We take the policy contract and explain it to them as if we are their CFO,” Hylant says.

Hylant’s focus on customer service is illustrated by its relationship with The Ave Maria Foundation, an Ann Arbor, Michigan-based organization. Ave Maria came to Hylant two years ago when it was trying to purchase a facility in Florida. They found the Florida property market challenging, and looked to Hylant to open some doors for them.

Gordon Leipold, Ave Maria’s HR director, says his organization was impressed with Hylant’s knowledge of the property market and their ability to secure adequate coverage at competitive prices. Since that time Leipold says their Hylant client executive, Terri Mahakian, has proven to be far more than an insurance agent. “We definitely have a 24-7 relationship with Hylant. I have Terri [Mahakian’s] home and cell phone numbers. She is there for me. ... Hylant is the kind of business that works well when relationships work well. The Hylant people go out of their way to build and protect their relationships.”

Michael Hylant, CEO

Over the next five years Hylant would like to double the size of the operation, from $100 million in revenue to $200 million. Given the current economic conditions, Hylant realizes it will be challengDistinct Advantage ing to attain these goals organically. “Our rough playbook is to grow Hylant’s executives believe the firm’s status as a privately-held by 60 percent organically and 40 percent through acquisitions.” organization gives it several advantages over the publicly-traded Hylant is currently in process of expanding into Nashville by national brokers. Mike Hylant notes, “Being private for us is a very disacquiring another agency. Miller also predicts that within the next tinct advantage. We can invest in the business for the benefit of the decade Hylant will probably double the number of locations and customers … ahead of the sales curve.” expand its reach a little more west, south and east.

Miller adds, “At Hylant, we provide clients with objective risk manEven in the midst of the current economic crisis, Hylant’s execs agement advice and service that is 100 percent client-focused so that see opportunities for growth. Miller notes that a lot of the regional we’re not conflicted by Wall Street, the analysts or regulators.” and local brokers are struggling in today’s market and some agencies In addition, Hylant’s employee retention rate is well into the 90 will likely be available for an acquisition. In addition, the national percent range. This greatly enhances the client-agency relationship. brokers may be in cost-cutting mode.

“Our high employee retention rate equals a high level of confidence, By contrast, Hylant is currently investing in its business. It is looking for opportunities where clients may ‘Hylant is the kind of business that works well when relationships work well. be receiving the The Hylant people go out of their way to build and protect their relationships.’ not level of service they need from their competence and experience,” Hylant says. national broker. Hylant’s executives believe their firm may offer the Making the entire business process as simple as possible is imporkind of stability these businesses seek. tant. “We have to be cost competitive,” Miller says, “but if we can Three years ago Hylant commissioned a survey to ask clients if make the client’s life — as far as risk management goes — simple they would be willing to refer their representative to anyone else in and successful, then that’s a pretty good combination.” the business world. The results were astonishing. Ninety-eight percent of the respondents indicated they would be willing to refer Growth for the Future prospects to the firm. Hylant comments, “We must be doing someCurrently, Hylant writes about 60 percent of its business in P/C thing good.” lines but it is striving for more balance with other products such as While optimistic, Hylant knows the future will be challenging. employee benefits. In order to accomplish this, Hylant will rely on “We have met the enemy and it is us,” Hylant said. In other words, its current clients. “We must listen to our clients and their suggesHylant expects the only challenge that could potentially become an tions. We’d like to get to the point where regardless of the economic obstacle to reaching their objectives is Hylant — if they let that hapconditions, we have the capabilities to grow through any market pen. “We aspire to grow and be profitable, no mater what the market cycle.” cycle,” Hylant adds. IJ www.insurancejournal.com

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Special Report Contractors and Subcontractors

Facts About the Progressively Narrowing Coverage of Contractors and Additional Insured Endorsements

By Chris Boggs

T

he three most commonly used additional insured endorsements in construction relationships are the Insured - Owners, Lessees Or Contractors - Scheduled Person Or Organization (CG 20 10); Additional Insured - Owners, Lessees Or Contractors Automatic Status When Required In Construction Agreement With You (CG 20 33); and Additional Insured - Owners, Lessees Or Contractors - Completed Operations (CG 20 37).

Analysis of these forms reveals some intriguing facts.

First, the 11/85 edition of the CG 20 10

extended additional insured status to the scheduled entity not only during the operations but even after the operations were completed (as evidenced by the inclusion of “Your Work”). No one who works with contractor and construction clients is surprised by this statement; this has been a source of tension between insurance professionals and general contractors (and their lawyers) for some time. It is not unusual to still find a contract requiring the CG 20 10 11 85 “or its equivalent” being used. The lawyers and the general contractors have, to some extent, conceded that this option does not exist, yet the contrac-

tual language remains. These parties have agreed instead to accept equivalent protection. Newsflash, the CG 20 10 coupled with the CG 20 37 does not provide “equivalent” protection.

To exemplify how deep the root of this contractual language requirement goes, about 18 months ago I attended a contractors’ liability class sponsored and taught by a major national insurance carrier and designed for agents who insured general contractors. During the class, the instructor stated that the underwriters wanted to review the general contractor’s contractual risk transfer requirements as part of

Common Construction Industry Additional Insured Endorsements General Liability Form

07/04

10/01

CG 20 10

Who is an insured is amended to include … the person(s) or organization(s) shown in the Schedule, but only with respect to liability … caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s) ….

Who is an insured is amended to include … the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.

CG 20 33

(Essentially the same as above.

The only difference is: the endorsement states that coverage ends when the work contracted is complete.)

(Essentially the same as above. The only difference is: the endorsement states that coverage ends when the work contracted is complete.)

CG 20 37

Who is an insured is amended to include … the person(s) or organization(s) shown in the Schedule, but only with respect to liability … caused, in whole or in part, by “your work” … performed for that additional insured …

Who is an insured is amended to include … the person or organization shown in the schedule, but only with respect to liability arising out of “your work” performed for that insured …

N16 | INSURANCE JOURNAL-NATIONAL REGION January 12, 2009

Edition Date 07/98

Who is an insured is amended to include …

Such person or organization only with respect to liability arising out of your ongoing operations performed for that insured ...

03/97

10/93

11/85

Who is an insured is amended to include … the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.

Who is an insured is amended to include … the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.

Who is an insured is amended to include … the person or organization shown in the Schedule, but only with respect to liability arising out of “your work” for that insured by or for you.

(Essentially the same as above. The only difference is: the endorsement states that coverage ends when the work contracted is complete.)

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the underwriting process. As part of that review, they wanted to confirm that the general contractor was asking for the CG 20 10 11 85. I immediately raised my hand and reminded the instructor that they, the insurer teaching the class, didn’t even offer that endorsement to their insureds. I continued on to what I thought was the next logical question, “How can you ask for something you won’t even offer?”

The answer was not at all satisfying or settling. Something like, “Yes, we know we don’t offer the endorsement but we still want to see the request. We’ll take equivalent wording.” (I’m paraphrasing, but this is essentially what was said.) There is no equivalent wording from ISO. There may be some proprietary company form that provides something equivalent, but that is limited to very few carriers (I’m aware of one or two). Surprisingly, there are some specialty carriers that still have the option to use the 11/85 edition, but it can be costly.

Second, the protection extended to

additional insureds was narrowed to apply only to “ongoing operations” when the 10/93 edition was adopted. This change in wording resulted in the removal of additional insured status once the job was done (no completed operations coverage). It was eight years before this loss of additional insured status was fixed with the introduction in 2001 of the CG 20 37.

Third, “arising out of,” was replaced by, “caused … by,” in the 07/04 edition of all three listed forms. This may seem minor, but it may have amounted to another narrowing of applied coverage (although not necessarily the intent of coverage).

Fourth, prior to 1997, ISO provided no specific way to extend additional insured

status to any entity without that entity being specifically scheduled. In 1997, ISO introduced the automatic additional insured edition of the CG 20 10 — the CG 20 33. Additional insured status was automatically extended when a signed contract required the subcontractor to name the general or upper-tier contractor as an additional insured. Underwriting opinion differs continued on page N18

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Special Report Contractors and Subcontractors Contractors, continued from page N17

tract is covered; however, the CG 20 37 regarding the use of this form, then and states that additional insured status is now. Some underwriters want to know or granted only when the entity is scheduled. even control to whom additional insured It can be very easy to forget to schedule the status is granted; others aren’t concerned. entity when on one form (the CG 20 37) it Wording in the CG 20 33 is essentially the is necessary to schedule, and on same as the CG 20 10 another (CG 20 33) it is not neceswith the only major difAnd errors and sary. This also creates a problem ference being the addiomissions probwhen a certificate of insurance tional wording stating lem is created (COI) is issued stating that addithat additional insured tional insured status is provided status ends when the when agents for both the operations exposure work contracted for is depend on this and completed operations claims. completed (no completed form to grant Care is required when an autooperations coverage is additional matic status endorsement and extended to the additionscheduled entity endorsement are al insured). insured status. required to comply with the conAn errors and omistract. Unless the underwriter agrees to sions problem is created when agents allow the entity to be scheduled on the CG depend on this form to grant additional 20 37 (completed operations coverage), issuinsured status: there is no automatic extening a certificate that states this coverage has sion providing completed operations coverbeen extended to the additional insured is age to the additional insured. a misrepresentation of the policy proviThe CG 20 33 says that any entity requirsions. ing additional insurance status via a con-

Discrimination During these unstable economic times, predictions stress increased numbers of layoffs and evictions. Lawsuits alleging discrimination, retaliation and/or harassment are already on the rise – and certain to keep soaring.

Now, more than ever, individuals, entities and businesses require the protection that NAS’ Employment Practices and Tenant Discrimination Liability products can offer against risks inherent with difficult times.

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Reduction in Available Coverage In the past, adding an additional insured by use of the CG 20 10, CG 20 33 or CG 20 37 may have, although unintentionally, extended some coverage to the additional insured; affecting the limits available to the named insured. This coverage extension was apparently not intended when the forms were written, but rather created by the courts. The 07/04 edition of these endorsements appears to have corrected this unintentional coverage extension, limiting coverage to nothing more than the additional insured’s vicarious liability for the actions of the named insured.

A 2007 court case is used to explain the difference between the 07/04 forms and all previous contractor additional insured endorsements in part two of this series to be published in the Jan. 26 issue. IJ Boggs, CPCU, ARM, ALCM is associate editor of MyNewMarkets.com. Phone: 619-584-1100, ext. 137. E-mail: cboggs@mynewmarkets.com.

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International Coverage News & Markets

Economy and Climate Change Top New Year Agenda

By Charles E. Boyle

F

or the moment the economic recession is driving the global stagecoach, while climate change is riding shotgun, but it’s not as bad as it could be.

Reports from Europe point to the fact that the P/C industry’s exposure to the economic crisis is mainly secondary. Analysts expect a rise in fraudulent claims, and more lawsuits targeting financial advisors, banks, investment firms, directors and officers, as well as misrepresentations from policyholders trying to reduce premiums. Direct economic losses have mainly hit company investments, life insurers and those firms like American International Group that set up units to deal in dubious financial products.

Marsh’s London office issued a bulletin indicating that it “expects a sharp rise in the number of UK companies buying fraud insurance protection next year, as the world economy continues to deteriorate.” It also expects the number of insurance “claims notifications relating to fraud to grow in 2009.”

Dean White, a managing director in Marsh’s Financial and Professional Practice, explained: “Historically, when times are hard fraud increases; individuals come under increasing pressure to make ends meet and many businesses are struggling to stay afloat.

In such circumstances, unlawful practices which otherwise would have been viewed as unacceptable, such as the manipulation of accounts, false revenue booking, insider fraud and the selling of information to organized crime, may appear a lucrative option.

“Insurance claims notifications will continue to grow through 2009. Financial institutions will likely lead the league table of victims in terms of overall monetary value, but the scale and frequency of corporate, nonfinancial institution fraud and theft will show the sharpest increase.”

Lloyd’s analyzed the probable effects Bernard Madoff’s Ponzi scheme will have on the professional liability sector. His firm used the hoary technique of paying off old investors with the money coming into the fund from new ones. “The total amount that may have gone to what one banker called www.insurancejournal.com

‘money heaven’ is put at $50 billion,” Lloyd’s noted, “and the losers range from the world’s biggest banks to private individuals.”

The insurance industry’s exposure is based on the fact that much of the money Madoff lost wasn’t directly invested with him. A number of financial institutions, investment funds and money managers, who were in charge of their client’s portfolios, subsequently placed those funds with Madoff. These “feeder funds” are now prime targets for investors (and their lawyers) seeking to recoup some of their losses.

Paul Towler, head of the financial and professional practice at Lloyd’s broker Jardine Lloyd Thompson, explained that the alleged fraud committed by Madoff highlights the need for financial institutions and, in particular, hedge funds, to purchase appropriate professional liability limits.

He also indicated that the fraud could have

a huge impact on the financial institutions insurance market. “The litigious environment that prevails means that it’s inevitable that financial institutions who invested clients’ assets in Madoff’s funds will face actions from disgruntled clients seeking to recover lost monies. Investors will be seeking redress from fund managers on the basis that they failed in their duty of care and failed to carry out adequate due diligence. People have lost so much money; the lawyers will have a field day. Not only are fund management firms exposed but so potentially are their directors.”

As a result, Towler believes that the sheer scale of the fallout from Madoff could seriously affect the financial institutions insurance market’s dynamics, notably the availability and cost of both professional indemnity and D&O coverage. continued on page N20

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International Coverage News & Markets International Coverage, continued from page N19

The Association of British Insurers (www.abi.org.uk) issued a warning that; “people are increasingly putting their insurance cover at risk by cheating to get a better deal.”

The ABI said its members, which include most of the UK’s P/C insurers, “are uncovering a growing number of cases of ‘front end fraud,’

where the customer has lied or failed to disclose material information to get cheaper insurance.”

The ABI selected four of the most common deceptions, as follows: Fronting – where parents add their son or daughter to their motor insurance policy as an occasional named driv-

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er, when in fact they are the main driver. Not disclosing motoring convictions, ranging from a speeding conviction to drunk driving.

Forgetting about previous claims. Under-estimating alcohol and tobacco consumption when applying for life and health insurance.

As far as dealing with climate change, the insurance industry continues to take the lead in supporting efforts to study the phenomenon and to try and find solutions to moderate its effects. According to Munich Re’s report on natural catastrophes for 2008, which it described as “one of the most devastating years on record,” global warming played a significant role in producing the devastation wrought by major weather events.

Cyclone Nargis caused the greatest loss of human life - more than 135,000 people in Myanmar (Burma). In terms of insured losses, Hurricane Ike, one of the six hurricanes that reached the U.S. in 2008, was the most expensive with an estimated $15 billion in insured losses out of a total of $30 billion.

Torsten Jeworrek, a member of Munich Re’s Board of Management, cited the role played by climate change as an important element in rising catastrophe losses. “This continues the long-term trend we have been observing,” he stated. “Climate change has already started and is very probably contributing to increasingly frequent weather extremes and ensuing natural catastrophes.”

An article from Lloyd’s said: “This year’s climate change agenda has, if nothing else, highlighted that next year will be hard going for those wishing to set global agreement for action against climate change.”

The article pointed out that, even though the global economic downturn weighs heavily across the globe, “nearly 200 countries have underlined their determination to agree a target for a new treaty to combat global warming by the end of 2009.”

At the Climate Change conference, held in Poznan, Poland, in early December, 192 countries involved in the United Nations climate talks confirmed their commitment to reductions in global greenhouse gas emissions.

According to Lloyd’s, the cuts should be between 25 and 40 percent by 2020 (from 1990 levels).

The stagecoach is in for a rough ride. IJ www.insurancejournal.com

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2009 Insurance Industry Meetings and Conventions Directory Welcome to Insurance Journal’s 2009 Insurance Industry Meetings and Conventions Directory. The information in this directory is taken from a larger database containing additional information on these and other meetings, including industry-related seminars, conferences and workshops. The online Insurance Journal events database can be found at www.InsuranceJournal.com/events. Meeting planners are invited to add new meetings, conventions and seminars to the database free of charge, all year long.

American Bankers Association www.aba.com ABA’s 2009 Insurance Risk Management Conference Jan. 25-28 Hyatt Regency Bonaventure Weston, FL

Independent Insurance Agents of Houston www.iiah.org Houston Insurance Day 2009 Feb. 19 Marriott Houston Westchase Houston, TX

Independent Insurance Agents of Virginia www.iiav.com IIAV Insurance Day on the Hill Jan. 28-29 Downtown Richmond Marriott Richmond, VA

AAMGA www.aamga.org AAMGA University East & Commercial Property Feb. 20-22 Warwick Hotel Philadelphia, PA

Nevada IIAA www.nv.iiaa.org Nevada 1st Annual Tradeshow Jan. 29 Green Valley Resort-Spa-Casino Las Vegas, NV

Michigan Association of Insurance Agents www.michagent.org MAIA’s 18th Annual Convention Feb. 24-26 Soaring Eagle Casino and Resort Mt. Pleasant, MI

Professional Insurance Agents of NY, NJ & CT www.pia.org PIANY’s MetroRAP Jan. 30 New York Marriott at the Brooklyn Bridge Brooklyn, NY

Professional Liability Underwriting Society (PLUS) www.plusweb.org PLUS Foundation Shots for Charity Feb. 24 Sky Rink Chelsea Piers New York, NY

ProgramBusiness.com www.programbusiness.com Peak Performance Ski Conference 2009 Jan. 21-24 Four Seasons Resort Jackson Hole Teton Village, WY

Independent Insurance Agents & Brokers of New York Inc. www.iiabny.org IIABNY Capital Event 2009 Feb. 2-3 Crowne Plaza Albany, NY

Professional Liability Underwriting Society (PLUS) www.plusweb.org PLUS D&O Symposium Feb. 25-26 Marriott Marquis New York, NY

Independent Insurance Agents of Houston www.iiah.org IIAH CIC Commercial Casualty Institute Jan. 21-24 Crowne Plaza Brookhollow Houston, TX

MyNewMarkets.com www.mynewmarkets.com MyNewMarkets LA Exchange Feb. 4 Sheraton Cerritos Hotel Cerritos, CA

American Conference Institute www.AmericanConference.com EPLI-Employment Practices Liability Insurance Jan. 21-22 The Helmsley Park Lane Hotel New York, NY

NAPSLO www.napslo.org NAPSLO Executive Leadership School Feb. 08-11 Darden School of Business Charlottesville, VA

Independent Insurance Agents of Texas www.iiat.org IIAT Joe Vincent Management Seminar Jan. 25-27 Austin, TX

IIA of Wisconsin www.iiaw.com Arizona Winter Getaway Feb. 9-11 Chaparral Suites Scottsdale, AZ

Insurance Information Institute www.iii.org The Property/Casualty Insurance Joint Industry Forum Jan. 13 The Waldorf-Astoria Hotel New York, NY Independent Insurance Agents & Brokers of America www.iiaba.net 2009 Big I Winter Board Meeting Jan. 14-18 The Westin Mission Hills Resort & Spa Rancho Mirage, CA California Insurance Wholesalers Association www.ciwa.net 14th Annual Wholesalers Industry Day Jan. 15-16 Hilton La Jolla Torrey Pines La Jolla, CA American Association of Managing General Agents www.aamga.org 2009 AAMGA International Seminar Jan. 17-24 Costa Rica, Costa Rica

Windstorm Insurance Network www.windnetwork.com Tenth Annual Windstorm Insurance Conference Jan. 25-28, 2009 Rosen Centre Hotel Orlando, FL www.insurancejournal.com

ACT, AUGIE, & IVANS Meetings Feb. 11-14 Renaissance Tampa Hotel Tampa, FL

NAPSLO www.napslo.org 2009 Mid-Year Educational Workshop Feb. 26-March 1 Renaissance Esmeralda Resort Indian Wells, CA AIMS Society www.aimssociety.com AIMS Society PRO-to-PRO (22nd Annual) Feb. 26-28 Doubletree Hotel - Downtown Nasvhille, TN Combined Claims Conference www.combinedclaims.com 21st Annual Combined Claims Conference March 2-4 Westin Hotel Long Beach, CA Independent Insurance Agents of Houston www.iiah.org IIAH CIC Life & Health Institute March 4-7 Sheraton North Houston Houston, TX

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2009 Insurance Industry Meetings and Conventions Directory

National Conference of Insurance Legislators www.ncoil.org NCOIL 2009 Spring Meeting March 5-8 Hyatt Regency Washington on Capitol Hill Washington, DC

GAMA International www.gamaweb.com LAMP 2008 March 21-24 The Rio All-Suite Hotel & Casino Las Vegas, NV

Independent Insurance Agents of Houston www.iiah.org IIAH CIC Commercial Property April 22-25 Crowne Plaza Brookhollow Houston, TX

PIA of Virginia PIA of Virginia/DC Young Professionals Conference March 6-7 Great Wolf Lodge Williamsburg, VA

C5 www.C5-online.com D&O Liability Insurance March 24-25 Grange City Hotel London, England

Insurance Club of Pittsburgh www.insclubpgh.com Pittsburgh I Day April 23 Pittsburgh Hilton Downtown Pittsburgh, PA

Professional Liability Underwriting Society (PLUS) www.plusweb.org PLUS Medical Professional Liability Symposium March 24-25 Sheraton Chicago Hotel & Towers Chicago, IL

FIWT www.FIWT.com Mid Year Education Conference April 24-25 Holiday Inn Wichita Falls Wichita Falls, TX

IIABA Maine IIABA Maine Annual Convention March 30-31 Wyndham Portland Airport Hotel South Portland, ME

Target Markets Program Administrators Association www.targetmkts.com Target Markets Mid-Year Meeting April 27-29 Baltimore, MD

Peter J. Crosa & Co. www.sshca.net Soft Selling Hardened Claims Adjusters March 9 Los Angeles, CA Peter J. Crosa & Co. www.sshca.net Adjuster Busters: 10 Steps to Building Relationships with Adjusters March 9 Los Angeles, CA AMS Users’ Group www.amsug.org AMS Users’ Group 33rd National Conference March 12-15 Gaylord National Washington, DC Insurance Industry Charitable Foundation www.iicf.org IICF Club 100 Dinner March 12 Cicada Restaurant Los Angeles, CA NAIC www.naic.org NAIC 2009 Spring National Meeting March 14-17 Manchester Grand Hyatt San Diego, CA AAMGA www.aamga.org 2009 AAMGA Automation & Technology Management Conference March 14-17 Crowne Plaza Hotel Mission Valley San Diego, CA Professional Insurance Agents of NY,NJ & CT www.pia.org PIA of CT Annual Convention March 16-17 Foxwoods Resort Casino Mashantucket, CT PIA of Texas Texas Insurance Professionals Convention Cruise March 16-21 Galveston, TX PIA of Connecticut PIA of Connecticut Annual Convention March 16-17 Foxwoods Resort Casino Mashantucket, CT

PIA National PIA National Federal Legislative Summit (FLS) April 1-2 Crystal City Marriott at Reagan National Airport Arlington, VA PIA National PIA National Board, Committee & Affiliate Meetings April 2-5 Crystal City Marriott at Reagan National Airport Arlington, VA Independent Insurance Agents of Virginia www.iiav.com IIAV ACSR Real Time Event April 3 Wyndham Richmond Airport Hotel Richmond, VA Pennsylvania Surplus Lines Association www.pasla.org Annual Meeting April 8-9 Wyndham Gettysburg Hotel Gettysburg, PA Louisiana Surplus Line Association www.lsla.bizland.com LSLA 2009 Annual Convention April 15-17 Paragon Casino Resort Marksville, LA Risk and Insurance Management Society www.RIMS.org RIMS 2009 Annual Conference & Exhibition April 19-23 Orlando, FL Professional Insurance Agents of NY,NJ & CT www.pia.org PIA of NY Long Island RAP April 21 Leonard’s of Great Neck Great Neck, NY

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IIABA www.iiaba.net Big “I” Executive Committee Meeting April 28-29 Marriott Wardman Park Hotel Washington, DC IIABA www.iiaba.net Big “I” Legislative Conference & Convention April 29-May 1 Marriott Wardman Park Hotel Washington, DC Professional Liability Underwriting Society (PLUS) www.plusweb.org PLUS Professional Risk Symposium - EPL, E&O and Fiduciary April 29-30 Manchester Grand Hyatt San Diego, CA IIABA www.iiaba.net IIABA Board of Directors Meeting May 2-3 Marriott Wardman Park Hotel Washington, DC Insurance Brokers Association of Alberta www.ibaa.ca IBAA Annual Convention May 3-6 Fairmont Jasper Park Lodge Jasper, Alberta IBA West www.ibawest.com 23rd Annual Blue Ribbon Conference May 3-7 Mauna Lani Bay Hotel & Bungalows Kohala Coast, HI www.insurancejournal.com

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PIA of North Dakota PIA of North Dakota Convention May 3-5 Ramkota Inn Bismarck, ND Insurance Brokers & Agents of San Diego www.ibasandiego.com San Diego “I” Day May 5 Town and Country Resort & Convention Center San Diego, CA IIA of Wisconsin www.iiaw.com 2009 IIA of Wisconsin Annual Convention May 6-7 Marriott Madison West Middleton, Wis Arizona Captive Insurance Association www.azcia.org AzCIA 6th Annual Conference May 6-8 InterContinental Montelucia Resort & Spa Paradise Valley, AZ Professional Insurance Agents of Indiana Inc. www.indianapia.com 2009 PIA of Indiana Convention May 14-15 Hilton Indianapolis North Hotel Indianapolis, IN PIA of Kentucky PIA of Kentucky Annual Meeting May 14-15 Hyatt Regency Hotel Louisville, KY West Coast Casualty Service Inc. www.westcoastcasualty.com West Coast Casualty’s Construction Defect Seminar May 14-15 Disneyland Hotel and Resort Anaheim, CA PIA of Indiana PIA of Indiana Annual Convention May 14-15 Indianapolis, IN Insurance Industry Charitable Foundation www.iicf.org IICF Annual Western Division Gala Dinner May 16 Four Seasons Hotel San Francisco, CA AAMGA www.aamga.org AAMGA Annual Meeting May 16-20 Boca Raton Resort & Club Boca Raton, FL Acord www.acord.org ACORD/LOMA Insurance Systems Forum May 17-19 Walt Disney World Swan and Dolphin Lake Buena Vista, FL www.insurancejournal.com

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Independent Insurance Agents of Virginia www.iiav.com IIAV ACSR Tribute Day May 20 Capitol & Governor’s Mansion Richmond, VA

The AMS Users’ Group Inc. www.amsug.org AMSUG June Committee/Board/Leadership Conference June 11-14 Hilton Dallas/Southlake Town Square Southlake, TX

PIA of Puerto Rico PIA of Puerto Rico & the Caribbean Annual Meeting May 21 Puerto Rico PIA of Oregon/Idaho PIA of Oregon/Idaho Convention May 31-June 2 Sunriver Resort Sunriver, OR

California Insurance Wholesalers Association www.ciwa.net CIWA Summer Forum & Annual Meeting June 11-12 The Meritage Resort Napa, CA Utah Association of Independent Insurance Agents UAIIA Convention June 11-13 Zermatt Resort Midway, UT

PIA of Nebraska/Iowa PIA of Nebraska/Iowa Convention June 3-4 The Cornhusker Marriott Lincoln, NE

PIA of Washington/Alaska PIA of Washington/Alaska Convention June 12-14 Suncadia Resort Cle Elum, WA

IIAT www.iiat.org IIAT 112th Annual Conference & Trade Show June 4-5 San Antonio, TX PIA of New Jersey/New York PIA of New Jersey & PIA of New York Joint Annual Conference June 7-9 Trump Taj Mahal Casino Resort Atlantic City, NJ Delaware Association of IA&B Delaware Association of IA&B Annual Convention June 9-11 Rehoboth Beach, DE

NAIC www.naic.org NAIC 2009 Summer National Meeting June 13-16 Hilton Minneapolis and Minneapolis Convention Center Minneapolis, MN Vermont Insurance Agents Association www.viaa.org Vermont Insurance Agents Association 103rd Annual Convention June 14-16 Basin Harbor Club Vergennes, VT

Michigan Young Agents www.miyac.org 2009 Michigan Young Agents Council Spring Conference June 10-12 Soaring Eagle Casino Mt. Pleasant, MI

IIA Mississippi www.msagent.org IIA Mississippi June 14-17 Sandestin Beach Hilton Destin, FL

Utah AIIA www.iiau.org Utah AIIA’s 90th Annual Convention June 11-13 Zermatt Resort Midway, UT

Independent Insurance Agents of Virginia www.iiav.com IIAV Annual Convention June 14-16 Williamsburg Lodge Williamsburg, VA

Professional Insurance Agents of Tennessee www.piatn.com PIA of Tennessee Annual Convention June 11-13 Park Vista Hotel Gatlinburg, TN

Association of Wyoming Insurance Agents Association of Wyoming Insurance Agents Convention June 17-19 Cody, WY

IIAA of Arkansas www.iiaar.org IIAA of Arkansas Annual Convention June 11-13 Hiltons of Branson Landing Branson, MO

Florida Association of Insurance Agents www.faia.com FAIA’s 105th Anniversary Convention & Education Symposium June 18-20 Rosen Shingle Creek Resort & Golf Club Orlando, FL

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2009 Insurance Industry Meetings and Conventions Directory

Alabama Independent Insurance Agents www.aiia.org AIIA Annual Convention June 18-21 The Village of Baytowne Wharf Sandestin, FL

Independent Insurance Agents of Houston www.iiah.org IIAH CIC Commercial Casualty July 15-18 Moody Gardens Hotel Galveston, TX

AAMGA www.aamga.org AAMGA University Weekend Aug. 14-16 The Scottsdale Plaza Resort Scottsdale, AZ

IIAB Louisiana www.iiabl.com IIAB Louisiana 107th Annual Convention June 21-24 Sandestin Beach Hilton Destin, FL

IIABA www.iiaba.net IIABA Midwest Young Agents Conference July 16-18 Kalahari Resort Wisconsin Dells, WI

Independent Insurance Agents of Houston www.iiah.org IIAH Ruble Graduate Seminar Aug. 19-21 Hilton Galveston Resort Galveston, TX

IIA Nevada www.niia.org IIA Nevada Annual Convention June 21-23 Harrah’s Lake Tahoe Lake Tahoe, NV

Texas Surplus Line Association www.tsla.org 2009 TSLA Mid-Year Meeting July 19-22 Four Seasons Resort Whistler Whistler, British Columbia

Society of Insurance Trainers & Educators (SITE) www.insurancetrainers.org 2009 SITE Annual Conference June 27-July 1 Hyatt Regency Albuquerque Albuquerque, NM

IIAA Montana www.iiamt.org IIAA Montana 78th Annual Convention July 22-23 Crowne Plaza Hotel Billings Billings, MT

Independent Insurance Agents and Brokers of Arizona Inc. www.iiabaz.com IIAB Arizona’s 75th Annual Convention & InfoXchange Aug. 27-28 Renaissance Glendale Hotel & Spa Glendale, AZ

PIA of Virginia/DC PIA of Virginia/DC Annual Convention & Trade Show June 28-30 Hotel Roanoke Roanoke, VA

Missouri Association of Insurance Agents Leadership Conference July 22-24 Osage Beach, MO

IMCA www.imcanet.com Annual Meeting and Showcase Gala June 28-July 1 Hyatt Olive 8 Seattle, WA PIA of Arkansas PIA of Arkansas 64th Annual Convention July 8-10 Embassy Suites Rogers, AR PIA of Mississippi PIA of Mississippi Convention July 9-13 Perdido Beach Resort Orange Beach, AL National Conference of Insurance Legislators www.ncoil.org NCOIL 2009 Summer Meeting July 9-12 Boston Park Plaza Hotel & Towers Boston, MA Association of Certified Fraud Examiners www.acfe.com 20th Annual ACFE Fraud Conference and Exhibition July 12-17 Bellagio Las Vegas, NV

PIA of Georgia Annual Agents’ Convention & Trade Show July 25-29 Ponte Vedra Beach, FL PIA of Louisiana www.piaoflouisiana.com PIA of Louisiana’s 66th Annual Convention July 25-28 Moody Gardens Hotel Galveston, TX Independent Insurance Agents & Brokers of America www.iiaba.net, www.trustedchoice.com Trusted Choice Big “I” National Championship July 26-30 Dornick Hills Golf & Country Club Ardmore, OK Florida Surplus Lines Association www.floridasurpluslinesassociation.com FSLA Annual Convention July 30-Aug 1 Boca Raton Resort & Club Boca Raton, FL PIA of Wisconsin PIA of Wisconsin 60th Annual Convention Aug. 5-7 Radisson Hotel and LaCrosse Convention Center LaCrosse, WI Vermont Captive Insurance Association www.vcia.com VCIA 2009 Annual Conference Aug. 11-13 Sheraton Hotel and the UVM Davis Center South Burlington, VT

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Independent Insurance Agents & Brokers of Oregon www.iiabo.org 81st Annual IIABO Convention & Trade Show Aug. 30-Sept. 1 Sunriver Resort Sunriver, OR PIA of Minnesota PIA of Minnesota Education Day/Trade Show/Annual Meeting Sept. 1 MN IIABA www.iiaba.net IIABA Big “I” Fall Leadership Conference Sept. 8-13 Hilton New Orleans Riverside New Orleans, LA IIABA www.iiaba.net IIABA Big “I” Education Convocation Sept. 9-11 Hilton New Orleans Riverside New Orleans, LA AAMGA www.aamga.org 18th Annual Under Forty Organization Meeting Sept. 10-12 Kingsmill Resort & Spa Williamsburg, VA IIABA www.iiaba.net IIABA Young Agents Leadership Institute Sept. 11-13 Hilton New Orleans Riverside New Orleans, LA IIABA www.iiaba.net IIABA Board of Directors Meeting Sept. 12-13 Hilton New Orleans Riverside New Orleans, LA

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National Risk Retention Association www.nrra-usa.org 2009 NRRA Conference Sept. 16-18 Renaissance M Street Hotel Washington, DC

National Insurance Conference of Canada www.niccanada.com National Insurance Conference of Canada Sept. 30-Oct. 2 The Westin Ottawa, Ontario

Independent Insurance Agents of Virginia www.iiav.com IIAV Young Agents Annual Conference Oct. 22-23 Fredericksburg Hospitality House Fredericksburg, VA

PIA of Kansas PIA of Kansas 14th Annual Convention Sept. 17-18 Wichita, KS

Independent Insurance Agents of Houston www.iiah.org IIAH CIC Agency Management Institute Sept. 30-Oct. 3 Crowne Plaza Brookhollow Houston, TX

Texas Surplus Line Association www.tsla.org 2009 TSLA Annual Meeting Nov. 8-9 Four Seasons Austin, TX

PIA National PIA National Fall Governance Meetings & Annual Meeting Oct. 1-4 Hilton San Diego Resort San Diego, CA

Professional Liability Underwriting Society (PLUS) www.plusweb.org PLUS Annual International Conference Nov. 11-13 Sheraton Chicago Hotel & Towers Chicago, IL

IIAT www.iiat.org IIAT Small Agency Conference Oct. 4-5 Fort Worth, TX

Independent Insurance Agents of Houston www.iiah.org IIAH CIC Personal Lines Institute Nov. 11-14 Crowne Plaza Houston - Reliant Park Houston, TX

PIA of Michigan PIA of Michigan Annual Meeting Sept. 17 MI NAIC www.naic.org NAIC 2009 Fall National Meeting Sept. 19-22 Gaylord National Resort and Convention Center on the Potomac Washington, DC IIA South Dakota IIA South Dakota’s Annual Convention & Trade Show Sept. 20-22 Ramkota Hotel and Convention Center Sioux Falls, SD PIA of Montana PIA of Montana Annual Convention Road Show Sept. 21-24 Billings and Missoula, MT IIA Iowa www.iiaiowa.org IIA Iowa’s 103rd Annual Convention Sept. 23-24 Sheraton Hotel Des Moines, IA IIAB Washington IIAB Washington 2009 Business Expo & Conference Sept. 24-26 Semiahmoo Resort Blaine, WA PIA of Ohio PIA of Ohio Agency Management and Profitability Conference Sept. 24-25 Columbus, OH Professional Insurance Agents Association of Ohio www.ohiopia.com PIA of Ohio Agency Management and Profitability Conference Sept. 24-25 Hilton Columbus / Polaris Columbus, OH Alliance of Insurance Agents & Brokers www.agentsalliance.com 2009 Alliance Convention & Expo Sept. 24-27 JW Marriott Palm Desert, CA

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American Association for Long-Term Care Insurance www.aaltci.org National Long-Term Care Insurance Producers Summit Oct. 5-8 Atlantic City, NJ NAPSLO www.napslo.org 2009 NAPSLO Annual Convention Oct. 7-10 Orlando, FL

AAMGA www.aamga.org AAMGA Mid-Year Meeting Nov. 12-14 Marco Island Marriott Marco Island, FL IIA of Connecticut www.iiac.org IIA of Connecticut 2009 Annual Convention Nov. 19 Aqua Turf Plantsville, CT

IIAB South Carolina www.iiabsc.com IIAB South Carolina Annual Convention Oct. 11-13 Grove Park Inn Asheville, NC

National Conference of Insurance Legislators www.ncoil.org NCOIL 2009 Annual Meeting Nov. 19-22 Royal Sonesta Hotel New Orleans New Orleans, LA

IIA North Carolina www.iianc.com IIA North Carolina Annual Convention Oct. 11-14 Hilton Head Marriott Resort & Spa Hilton Head, SC IIA Ohio www.ohiobigi.com IIA Ohio Big “I” Annual Meeting & Trade Show Oct. 13-14 Hilton Columbus at Easton Columbus, OH FIWT www.FIWT.com 65th Annual Convention with Golf Tournament and Trade Show Oct. 22-25 Omni Corpus Christi Corpus Christi, TX

NAIC www.naic.org NAIC 2009 Winter National Meeting Dec. 5-8 Hilton Hawaiian Village and Hawaii Convention Center Honolulu, HI IIABA www.iiaba.net IIABA Southern Agents Conference Dec. 11-13 Ritz-Carlton Buckhead Atlanta, GA

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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.

Vacant Property Market Detail: Insurance Specialty Construction Group (www.insurancespecialtygroup.com) offers a vacant property program designed to cover general contractor’s inventory on-hand when written in conjunction with their new starts. Features of this program include the option of both blanket and new starts coverage forms; with wind coverage available in most areas. Additional coverages available include coverage for model homes and their contents, soft costs, flood and earth movement. Minimum premiums begin at $1,000 and deductibles start at $1,000.

Available Limits: $750,000 to $5 million.

Carriers: Unable to disclose. “A” rated by A.M. Best. Admitted.

States: Ala., Ariz., Calif., Fla., Ga., Ill., Ind., Kan., Md., Mich., Minn., Miss., Mo., N.J., N.M., N.C., Ohio, Ore., Pa., S.C., Tenn., Texas, Utah, Va. and Wash.

Contact: Heidi Henn at 678-742-6300 or e-mail hhenn@isgins.com.

Not-For-Profit Senior Living Market Detail: Bunker Hill Insurance Agency (www.bunkerhillinsurance.com) offers the underwriting expertise and high-level service to agents searching for a market for their retirement apartments, not-for-profit skilled nursing homes and assisted living facilities.

Bunker Hill can provide programs with claims-made or occurrence liability coverage, prior acts (nose) coverage, property, automobile liability, and umbrella liability. Bunker Hill offers in-house claims expertise.

Minimum premiums begin at $30,000.

Available Limits: As needed.

Carriers: American International Group. “A” rated by A.M. Best. Admitted.

States: All. Contact: Melanie Hinton at 800-645-7707 or email mhinton@bunkerhillinsurance.com.

Medical Facilities Market Detail: Partners Specialty Group (www.psgins.com) gives agents access to an established health care carrier offering com-

mercial general liability (on the ISO form), professional liability and employment practices liability with sexual abuse coverage for various types of medical facilities around the country. Primary limits of $1 million/$3 million with a sub-limit for sexual misconduct is available. Capacity also allows for excess/umbrella coverage up to $15 million.

Defense expense is outside the limits.

Supplementary payments include disciplinary proceedings coverage and reimbursement for lost earnings. Risk management services are part of this program. Minimum premiums and deductibles begin at $5,000.

Top 10 Most Unusual Searches on MyNewMarkets.com in 2008 1. Exotic Snake and Reptile Breeding Operation 2. Circus Arts Instructor Liability 3. Tailgate Party Bus Operation 4. Sand Rail (Dune Buggy) Operation 5. Dating Service Operation 6. Snow Machine Rentals 7. Tourist Trolley Operator 8. Air Traffic Control School 9. Halfway House Operation 10. Timberland Coverage Available Limits: $1 million to $15 million.

Carriers: Unable to disclose. “A” rated by A.M. Best. Admitted and non-admitted.

States: All except N.M. and Pa. Contact: Michael Cardenas, RPLU at 310-5864742 or e-mail mcardenas@psgins.com.

Surety and Fidelity Bonds Market Detail: Gilbert Trujillo Insurance Services (www.1bondsinsurance.com) offers a broad range of fidelity and surety bond markets. Difficult risks and renewals can be handled with a minimal amount of additional information. They also handle preferred bonds. GTIS has a market for nearly any kind of bond; and they promise to deal only with the agent, not the client.

Available Limits: As needed.

Carriers: Unable to disclose. Rating not pro-

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vided. Admitted and non-admitted.

States: All. Contact: Gilbert Trujillo at 623-695-3334 or email gtrujillo9@cox.net.

Campgrounds & Dude Ranches Market Detail: Hull & Co. Inc. (www.hullco.com) has availability of a new program to insure those risks that cater to outdoor lovers.

Target classes include: campgrounds & RV parks, dude & guest ranches; fishing & hunting lodges; resorts & lodges; outfitters & guides; hunting preserves; trap, skeet & sporting clay; rod & gun clubs; shooting ranges; snowmobile tours; ATV tours; whitewater rafting tours; consulting foresters; and many more. Excess limits and accident policies are available.

Available Limits: Not provided.

Carriers: Unable to disclose. Rating not provided. Admitted and non-admitted.

States: All. Contact: Jodie Faulkner at 303-218-3084 or e-mail jfaulkner@hullco.com.

Contractors General Liability Market Detail: London American Risk Specialists (www.londonamericantx.com) brings agents a commercial general liability market for residential and commercial general contractors. Work done on the GC’s behalf by sub-contractors is covered in this program.

Program allows the option for use of uninsured and underinsured sub-contractors.

Roofing contractors, artisan contractors and general contractors are the program target classes. New ventures are eligible.

Occurrence, sunset or claims made forms are available for use. Minimum premiums begin at $750 for artisan contractors and go up to $4,000 for roofing contractors. Deductibles begin at $1,000.

Available Limits: $1 million to $2 million.

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

States: All except N.H. and N.Y. Contact: Chris Chiodetti at 713-977-7726 or e-mail cchiodetti@londonamericantx.com. IJ www.insurancejournal.com

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Idea Exchange Minding Your Business

Developing a Sales & Marketing Plan Part 2: Designing the Plan

By Bill Schoeffler and Catherine Oak Oak

T

he first part of this two part series described the selfanalysis of the agency’s book that must precede the development of an effective sales and marketing plan.

This is accomplished by reviewing each producer’s book for the type and size of accounts and analyzing what industries or other niches exist.

Producers also needs to evaluate their primary areas of expertise. What have they successfully written before and what centers of influence do they have? They also need to determine if their past experience and success will still be valid in 2009. The first part allows the sales force to understand the current composition of their clients, take a look at their products skills, and identify areas to exploit. The next step is for key sales players in the agency to brainstorm ideas of where they want to go now and how to get there.

Setting the Goals Compiling the individual producer goals creates the sales and marketing plan parameters. Using the data already collected, each producer can then set goals based on his or her sales ability, resources, time and expertise. Producers need to set goals that can make them stretch. The goals should include how much new business will be written and what specific types of business will be approached. The plan needs to take personal goals into account, too.

Their plan should show the starting point and the finishing point of their goals. It is up to the producer and sales manager to define and revise the path that is followed. Adjustments might include ways for the producer to improve the hit ratio, targeting larger accounts and/or how to create a new program to exploit a producer’s talent. These steps or adjustments should be organized into action plans.

Action Plan Development Action plans state the current issue, the future goal and then list a few key tasks or milestones along the way. The action plan needs to clearly define the person responsible for each step and the timeframe to complete the task. These action steps are the step-by-step directions for the sales and marketing plan. Keep in mind that the end result should be fixed. However, the path to reach that goal can be revised and altered along the way based

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Schoeffler

on what seems to work best. The sales and marketing plan should be an ever-changing document.

Monitoring the Plan; Tracking Progress The overall plan and action steps are only as good as their monitoring and management. Tracking progress and holding people accountable ensure reaching the end result. The focus needs to be on the goals set, while being flexible on the path followed. Therefore, performance is evaluated by an understanding that the path is not straight. There will be some setbacks and changes will need to be made along the way.

Monitoring needs to be done by the sales manager and this role is extremely important; more so today than before. Each producer needs to be prepared to describe his or her past results, project what is in the pipeline for the future and describe what has been working and what improvements are needed. The sales manager’s role is to work with the producer to make any adjustments necessary to keep going in the right direction. This would include joint calls and even helping producers take new approaches based on market woes, such as contractor producers moving to road construction versus home building.

Adjustments to the sales and marketing plan can include coaching, mentoring, outside training, telemarketing, advertising, promotion, development of new programs, products or services, or perhaps even new staff. An action plan should be created when these adjustments are necesProducers sary. That way the producer and the agency agree on the steps, responsineed to set bility, timeframe and expected goals that can results.

make them stretch.

Know the Terrain Just like a traveler on a trip, the agency’s sales and marketing plan must be aware of and respond to the terrain. Clients’ needs, insurance companies and the marketplace in general are all out of the control of the agency. The agency needs to understand what is happening and be proactive, or at least respond quickly to these factors.

Market Analysis Agents need to have a clear understanding of what carriers can do for them and how this fits into the overall agency plan.

Insurance companies, it seems, will either be unmoving or totally change things, usually cycling through both approaches. continued on page N28 January 12, 2009 INSURANCE JOURNAL-NATIONAL REGION | N27

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Idea Exchange Minding Your Business Sales & Marketing Plan, continued from page N27

Run a list of all of the carriers with volumes, commission rates (or commissions), loss ratios and contingents received. Analyze how the agency’s book of business stacks up with the existing markets and their products. Compare all the carriers and their products against what the agency has with the top 10 industry groups the agency writes.

Some of the questions that should be asked include: Will volume commitments be met and how will this be done? Are there new markets the firm should seek out? Is the volume spread too thick or too thin? Is the agency maximizing profit sharing agreements?

List in the sales and marketing plan the five most important markets (not necessarily the largest) and the agency’s volume with them.

Write realistic agency production goals next to those numbers. Next, list one or two markets that the agency does not have, but the agency could use. Write down the dates producers will approach them (create action plans by carrier). Finally, list two or three markets the agency has outgrown and should eliminate.

future opportunities with the regional vice Target Clients president or branch manager and the main An agency can have the greatest products underwriter assigned to the agency. Inform and sales force, but unless producers are tarthem about the current status of the agency geting the clients, these assets are moot. Make and its future plans. Find out where the comsure the agency’s capabilities, strengths, prodpany stands now and its plans for the future. ucts and centers of influence match up with the targeted clients. If a new group of clients is Discuss how the agency and the company can do more business together in the future. to be targeted, then create an action plan with the steps required, timeframe The overall plan Summary and who is responsible.

Be proactive not reactive. Firms and action that incorporate an annual planIt’s a Sales Tool steps are only ning process are more efficient, The beautiful thing about a more profitable and highly valued well-written sales and market- as good as its ing plan is that it does not need monitoring and businesses. The choice is yours.

Take the time to plan ahead and to only be used internally. It can management. be successful or be at the mercy be shared with prospects, of the winds of change. IJ clients and insurance companies. Such a plan helps the firm look organized and efficient and makes the agency manageSchoeffler and Oak are partners at Glen Ellen, Calif.-based ment and sales force feel directed and on task. Oak & Associates. The firm specializes in financial and manTake the sales and marketing plan directly agement consulting for independent insurance agents and broto insurance company representatives. Set an kers. Phone: 707-935-6565. E-mail: bill@oakandassociates.com. annual meeting to discuss agency goals and Web site: www.oakandassociates.com.

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We won’t snow you! No matter the weather or the time, our underwriters will pole together to serve your requests 24/7 at www.yates-assoc.com.

Where Service is First!

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If your wholesalers don’t fly when you call, brrrr-ring us your business. We’ll show you why we stand out in a crowd.

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West Coverage News & Markets

Lifelines in the Storm: Pro-Policyholder Developments in 2008

By Mark Garbowski

I

n light of the enormous losses and failures triggered by the financial crisis, companies across the full spectrum of U.S. industry will be looking to their insurance policies for loss mitigation.

Fortunately, developments in several states bolstered policyholders’ ability to defeat insurers’ overbroad interpretation of various coverage defenses. State courts and legislatures limited insurers’ ability to deny coverage on late notice grounds; affirmed policyholders’ right to consequential damages when an insurer’s failure to fulfill its contractual obligations causes the death of a company; affirmed the right to coverage for punitive damages under some circumstances; and strengthened policyholders’ hand in settlement negotiations conducted when the defendant’s insurer has reserved its rights.

New York bolstered policyholders’ rights on three fronts in 2008. The first was the decision in Bi-Economy Market Inc. v.

Harleysville Insurance Company of New York, et al. that allowed policyholders in New York to recover consequential damages from their insurance company, a right long enjoyed by policyholders in other jurisdictions. In BiEconomy, the state’s Court of Appeals held that “it is well settled that in breach of contract actions ‘the nonbreaching party may recover general damages which are the natural and probable consequence of the breach’” and that “when an insured ... suffers additional damages as a result of an insurer’s excessive delay or improper denial, the insurance company should stand liable for these damages.”

In Elacqua v. Physicians’ Insurers, the court ruled that an insurer’s failure to advise a policyholder of a right to independent counsel violated New York’s deceptive business acts and practices law.

Garbowski

Finally, New York Governor Paterson sentation in the policy application. To sucsigned a bill to relax — in certain circumceed in such an effort, the Court ruled, in stances — strict rules that allowed insurance Liberty Ins. Underwriters, Inc. v. Estate of companies to avoid coverage when notice of a Faulkner, that an insurer must prove fraud, claim or occurrence is late, even if the insurer including the elements of materiality and was not prejudiced by the delay. New York actual reliance on the misrepresentation by has joined the majority of states in imposing the insurance company. On the other hand, a prejudice standard for late notice denials the insurer can rescind even if the material when the statute applies. misrepresentation was made in an earlier polOther states had significant Supreme icy application for which the current policy Court decisions regarding insurance issues. was a renewal. Even if the renewal applicaIn January, the Texas Supreme Court tion did not include the misrepresentation, rejected the rule that prejudice is irrelevant the insurer can be entitled to rescission. to late notice and held that “an insured’s failIn Washington, the court in Mutual of ure to timely notify its insurer of a claim or Enumclaw Insurance Co. v. T&G Construction Inc. suit does not defeat coverage if the insurer and Villas at Harbour Pointe Owners Association, was not prejudiced by delay.” PAJ Inc. v. The ruled that an insurer is bound by the factual Hanover Insurance Co. The Texas Supreme findings made as part of a reasonable settleCourt also ruled in Fairfield Ins. Co. v. Stephens ment of an underlying liability claim when Martin Paving, LP, that Texas public policy a coverage determination depends upon does not bar insurance coverage for punitive those same facts. The Washington Supreme damages under some types of workers’ comCourt determined that a good faith settlepensation and employer’s liability insurance. ment between the policyholder and an The Court found that while the Texas underlying claimant establishes the policyLegislature made the policy decision to proholder’s damages for insurance purposes. hibit coverage of exemplary damages in cerThe Court had previously ruled that this tain limited circumstances, it made no such rule applied if the insurer acted in bad faith. policy decision in the context of workers’ In this case, the Court clarified that this rule compensation. Indeed, the Texas Supreme applies even where the insurer had not acted Court found that the Legisin bad faith, and noted lature’s expressed intent is that Several states several other state coverage would exist for exemcourts agreed. strengthened plary damages in the workers’ These developments compensation context. Also, the policyholders’ hand strengthened policyTexas Supreme Court held that holders’ hand in negotian insurer does not have a right against insurance ations to settle suits to seek reimbursement for setagainst them, in their companies. tlement of a claim that is later resistance to insurer held not to be covered unless the policyholddefenses against coverage, and in their er expressly agreed to the settlement and to recourse in the event of insurer bad faith. In the insurer’s right to seek reimbursement. difficult economic times, every boost to poliExcess Underwriters at Lloyd’s, London, et al. v. cyholder rights can prove to be a lifeline. IJ Frank’s Casing Crew & Rental Tools Inc. Maine’s highest court issued an important Garbowski is a shareholder in the insurance recovery pracdecision on insurance company efforts to tice of Anderson Kill & Olick P.C. E-mail: rescind policies based on alleged misrepremgarbowski@andersonkill.com.

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West Coverage News & Markets

Take Control of Your Workers’ Comp Costs

By Duncan Prince

Prince

W

hat’s happened to workers’ compensation reform in California? The 2003 legislation enacted strict medical guidelines, followed the next year with a compensation schedule for medical provider networks and it worked. Workers’ comp costs came down 50 percent almost overnight.

That was then; this is now.

In mid-August 2008, the state’s Workers’ Compensation Insurance Rating Bureau voted to recommend raising premium rates by 16 percent. That’s not all. The Bureau reported that a combination of “medical-cost inflation continues to rise and claims frequency that had been declining has flattened.”

What does this picture tell us?

• Worker’s Comp is an employee benefit. Although workers’ comp has been around for a century, it is misunderstood by employers and employees. Workers’ comp is essentially a company-paid employee benefit, providing employees with medical care coverage, a weekly paycheck and a death benefit if they are killed on the job.

Workers’ compensation insurance really doesn’t function like other forms of insurance. Instead, the employer pays virtually the entire cost of an injury. The insurer advances the employer money to pay medical expenses for the injury, plus the weekly indemnity payments to recovering injured workers.

Clearly, both employees and their employers should recognize workers’ compensation as an employer-paid employee benefit.

• Employers let down their guard.

Like other employee benefits, workers’

port. All too often, an injured employee doescomp needs constant employer attention. n’t hear from the employer and feels isolated.

Unfortunately, when workers’ comp rates Because of the supervisor’s relationship to drop as they did in California, employers an injured worker, he or she is the person seemed to conclude the problem was solved who can do the most to help the individual and, as a result, they let their guard down. get back on the job as soon as possible with a It wouldn’t be the first time that once a crimodified work plan that’s approved by the sis appears to be resolved that we turn our attending physician. Being wanted and makattention to more pressing ing a contribution aids the healing process. issues. When that happens, • Lower workers’ comp costs may be employers tend to give less coming to an end. While the number of attention, for example, to workers’ comp claims has been declining, a investigating job-related low point may have been reached. The averinjuries to identify the cause of age cost of an indemnity claim was up in injury and prevent it from hap2007 for the second consecutive year. pening again.

Employers need to remember that reforms Employers tend to think can — and do — run their course. Workers’ all is well when a bill goes comp is not an exception, even with its welldown about 60 percent, as it defined controls and careful monitoring. has for workers’ comp in the Highly sophisticated and “secure” computpast few years. When this haper data systems become welcome challenges pens, neglect can set in. for hackers. Similarly, it doesn’t take either • The supervisor is employers or workers long to circumvent the key. While the role of the workers’ comp system supervisor is critical to a company’s operaA congressional report, “Hidden Tragedy: tional success, the supervisor’s role in manUnderreporting of Workplace Injuries and aging an injured worker is often overlooked.

Illnesses” explored the decline nationally in Yet the supervisor knows the worker best, the number of workers’ and it only makes sense comp claims, pointing that that he or she should be Employers need to the drop may be caused by involved from the moment remember that claims not being reported an injury occurs. by both employers and As the University of reforms can — and workers. One finding was Santa Cruz states, “Prompt medical care is essential to do — run their course. that the recent changes in the Occupational Safety a quick recovery from an Does anyone think and Health Adminisinjury or illness .... It is the that workers’ comp tration’s recordkeeping responsibility of the procedures “have affected employee’s supervisor to is an exception? the accuracy of the count ensure proper medical of musculoskeletal disorders,” the most comtreatment is obtained.” mon type of workers’ comp claim and an The supervisor’s role includes immediate injury that is difficult to assess and treat. and continuing follow up to ensure the emThe California Workers’ Compensation ployee believes the company cares, is receivInstitute’s study of prescription drug data ing proper care, and knows the supervisor is from more than 166,000 California claims for there to provide understanding and give sup-

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musculoskeletal disorders, “back conditions with no spinal cord involvement,” indicated “higher levels of opioid use are associated with higher costs, as well as a higher prevalence of adverse outcomes such as increased likelihood of lost time from work, delayed recovery and increased attorney involvement.”

Further, the study supported other field work, suggesting “that at higher levels of use, opioids can have an adverse impact on both activity levels and on self-efficiency, and that prolonged administration of pain medication may impede rather than facilitate injured workers’ recovery from occupational back injuries.”

Workers do not live in a vacuum when it comes to job-related injuries and they quickly learn how to circumvent the system. That’s why there is a workers’ comp fraud unit in every district attorney’s office in the state.

Forces are at work helping to drive up workers’ comp costs and rates. What should employers be doing?

1. Give workers’ comp the same attention as other employee benefits. Workers’ compensation is complex, and mistakes and errors occur. When this happens, they default to the benefit of the insurance company.

With heavy workloads, well-meaning auditors do not have time to find audit errors, for example. Employers are paying the bills and need to take responsibility for the audits. If an agent doesn’t have the knowledge or training to analyze and verify audits, find someone who does. If the company’s experience modification factor is higher than you think it should be, don’t assume it’s correct. Find out why it seems high. What’s the lowest possible experience mod for your business? If you don’t know, you will pay far more than legally required, which puts you in a competitive disadvantage.

2. Get the right care for the injured worker. Workers are too valuable to receive anything less than the best possible medical care. Establish a relationship with physicians who understand your business and make sure the person has on file the job descriptions and requirements for each employee. Then, if an injury occurs, the attending physician has helpful information to develop the most appropriate treatment program to get the person back on the job as soon as possible. Working, not sitting at home, facilitates recovery.

If fraud is suspected, pursue a thorough investigation to determine what occurred. www.insurancejournal.com

3. Step up communication about workers’ comp with employees. Far too often, employees get their information about workers’ comp from co-workers, friends and family members —and most of it is hearsay. No employer that wants to serve the best interest of the company’s employees or to control costs should allow this to happen.

The responsibility for reducing workers’

comp costs rests only partially with the state’s system. Unless employers take an active role in monitoring their workers’ comp accounts, it won’t take long for costs to once again become onerous. IJ Prince is a principal and CEO of Invensure Insurance Brokers of Irvine, Calif. E-mail: dprince@ invensure.net.

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West Coverage News & Markets

States Rate Poorly on Consumer Insurance Information on Web

A

national consumer group says state insurance departments vary in the quality of the information they provide consumers online, with differences in the usefulness of information such as the rates and practices of individual insurance companies.

According to the Consumer Federation of America (CFA) “State Insurance Department Web sites: A Consumer Assessment,” state insurance department Web sites in six states were “excellent” while those in 18 states were “inadequate.”

The DOI Web sites in California, Georgia, Kansas, Oklahoma, Texas, and Utah had complete, up-to-date information that is easy for consumers to use, the study indicated. Consumers accessing those Web sites could easily find current price, complaint and solvency information to make wellinformed purchase decisions and could find key information on how to get the best claim settlements as well.

On the other hand, Hawaii, Idaho, Nevada, New Mexico and Wyoming were among the states with the worst ranked DOI Web sites.

Those state’s sites lacked important aspects of information about purchase and claims settlement decisions in auto and home insurance, the study noted.

“At a time when consumers are under

increasing financial pressure, state insurance departments can do their part by making available current information about the rates, solvency, and complaints of individual insurers as well as tips for consumers to use to secure fairer and faster claims settlements,” said J. Robert Hunter, CFA’s director of insurance (and former Texas Insurance Commissioner).

Hunter emphasized states should more widely publicize the availability of their Web sites and related information.

“States with inadequate Web sites do not have to reinvent the wheel. They need only use the excellent sites already in use by other states as a guide for improving their own sites,” he added.

By using information on the best state Web sites, those purchasing home and auto insurance can potentially save hundreds of dollars a year in lower premiums and avoid serious problems settling claims, CFA indicated.

To rank the Web sites, states could receive up to 105 points. Scores of 79 and greater were considered excellent. Scores of 65 to 78 were considered good, but not the best. States with scores of 50 to 64 were considered fair. States that received fewer than 49 points had inadequate Web sites to properly help consumers in shopping and/or claims processing.

States that had current (2008) price data for auto or home insurance received 15 points for each type of coverage. States with older price

State Ratings for Consumer Insurance Information on Web Excellent (6 states): California, Georgia, Kansas, Oklahoma, Texas and Utah.

Good (12 states): Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Maine, Missouri, New Jersey, Ohio, Oregon, and Wisconsin.

Fair (15 states): District of Columbia, Illinois, Kentucky, Louisiana, Maryland, Michigan, Montana, New Hampshire, New York, North Carolina, North Dakota, Pennsylvania, South Carolina, Virginia, and Washington.

Inadequate (18 states): Alabama, Connecticut, Hawaii, Idaho, Indiana, Iowa, Massachusetts, Minnesota, Mississippi, Nebraska, Nevada, New Mexico, Rhode Island, South Dakota, Tennessee, Vermont, West Virginia, and Wyoming.

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information received fewer points. For solvency data, states received 10 points each for auto and home insurance if the information was directly available on the Web site and five points if the site provided links to information available on rating agencies sites, and no points if no rating information was offered. For complaint indices, states received 10 points each for auto and home insurance if the information was available, and no points if the information was not offered. A state received five points for each of the following: offering market conduct exam information, posting consumer alerts, and responding to CFA’s request to verify data in CFA’s report. If state Web sites allowed users to search by either the name of an insurer or agent they received two and a half points for each. An additional two and a half points each was awarded for sites that displayed information about disciplinary actions taken against insurers or agents. Finally, states received up to 10 points for providing claims information.

Looking at the six “Best Practices” states, three of them have smaller populations, showing that all states can reach a level of excellence, the study indicated. Kansas only has links to rating information on solvency and has limited information on claims matters.

Oklahoma does not have auto and home insurance complaint indices on its site. Otherwise the information on its Web site is complete and current, the study noted. Utah offers all necessary information except for market conduct exam results. Moreover, the information Utah provides on insurer solvency is offered only by link, rather than directly on the site.

Of the three larger states using best practices, Georgia’s only problem is that solvency data is not directly available, although the state does provide links to rating agencies for such information, the report noted. Texas’ site was deemed comprehensive and up-to-date except for the lack of market conduct exams online.

California’s site was rated complete and current, but it requires a consumer to use a link to a rating agency for solvency information.

“Consumers need information so they can make an informed choice on insurance, and I’m proud that California is at the forefront of using the Web to provide that information,” said Insurance Commissioner Steve Poizner of his state’s ranking. “As we implement our paperless initiative, in addition to the obvious environmental benefits, we will also be able to put even more www.insurancejournal.com

data online so people can see for themselves information that’s only available in our reading rooms.”

CFA sent its report to all state insurance departments with a letter urging the states that are not yet excellent to improve.

“The best state Web sites contain far and away the most objective and useful information available to consumers,” said Stephen Brobeck, CFA’s executive

director. “Only state insurance departments have the expertise and resources to provide up-to-date information about individual insurers.”

For a list of state insurance department Web sites, visit www.consumerfed.org/pdfs/state _insurance_Web sites.pdf. To view the CFA report, visit www.consumerfed.org/pdfs/state_ insurance_Web sites.pdf. IJ

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Idea Exchange Legal Beat

Actual Cash Value Versus Replacement Cost Value Navigating the Valuation Quagmire

By Henry S. Zangwill

A

s the saying goes, the devil is in the details. And insurance agents would be wise to explain the differences between actual cash value (ACV) and replacement cost value (RCV) to customers. Homeowners’ and commercial property policies typically provide that the insurer is not required to pay more than the ACV of the damaged property until the repair or replaced is completed. The typical policy does not, however, address all of

the issues that could arise in determining the measure of recovery for a loss and when the insured can recover on a RCV basis.

Although property policies provide for payment of “actual cash value,” they are conspicuously silent on how ACV should be measured.

For many years, insurers argued that ACV should be measured by replacement costs less depreciation. That view was rejected by the California Supreme Court in Jefferson Ins. Co. of New York v. Superior Court (1974) 3 Cal. 3rd 398.

In Jefferson, the insured suffered a fire loss to a hotel building that had a fair market value of $65,000. The insurer and insured both agreed that the amount of the loss was $24,102.05.

The insurer, however, refused to pay that sum, contending that the property was substantially underinsured according to the “average clause” in the policy, which provided for a proportionate reduction of any loss unless the building was insured to 70 percent of its ACV.

Zangwill

The insurer’s theory was that ACV, as used in the policy did not mean fair market value, but rather meant the replacement cost of the building less depreciation. The replacement costs less a reasonable depreciation factor was approximately $170,000.

The insured contended that the building was sufficiently insured, asserting that ACV referred to in the policy meant fair market value. The California Supreme Court agreed and held that the term ACV, as used Insurance Code Section 2071 is synonymous with “fair market value,” i.e., “the price that a willing buyer would pay to a willing seller, neither being under any compulsion to sell or buy.” (3 Cal 3rd at 402). See, also, Elliano v. Assurance Co. of America (1975) 45 Cal. App. 3rd 1170.

Under the ACV provisions of a policy, where the damaged property can be repaired, the insured is entitled only to the repair cost — not to any diminution in the property’s fair market value. For example, in Ray v. Farmer’s Ins. Exchange (1988) 200 Cal. App. 1411, a truck collided with the insured’s parked automobile. The repair estimate was approximately $4,000. At the time of the collision, the insured’s car had a market value of approximately $7,100, and after the collision, its salvage value was $1,650. The insured demanded the insurer replace the car or, alternatively, pay the difference, if any, in the car’s market value before the collision and after the repair. The issue presented to the court was whether the insurance policy provided coverage for diminution in the market value of the repaired car because of its status as a wrecked car. The California Court’s of Appeal ruled the policy unambiguously gave the insurer the right to elect to repair the vehicle if the cost to repair to “like kind and quality” was less than the ACV at the time of the loss.

In Owens v. Pyeatt (1967) 248 Cal. App. 2nd 840, the court was confronted with the question whether the insurer’s election to repair is conclusive. The answer given by the court was

50 | INSURANCE JOURNAL-WEST REGION January 12, 2009

yes, provided the repair places the automobile substantially in its pre-accident condition. If it does not, then the automobile is deemed a total loss and the insurer is liable for the preaccident value of the car. Owens did not define “like kind and quality” other than to note that it means “substantially the same condition [as] before the accident.” 248 Cal. App. 2d at 849.

In Ray, supra, the insured argued that the “substantially the same condition” language used in Owens meant that the insurer was obligated to compensate the insured for any diminution in fair market value. Yet the court ruled that “like kind and quality” is not the equivalent of “ACV” at the time of the loss, and that as a practical matter one may assume that any automobile sustaining significant collision damage will lose some market value after repairs. As noted, the court in Ray, ruled that to hold the insurer liable for the automobile’s diminution in value “would render essentially meaningless [the insurer’s] clear right to elect to repair rather than to pay the actual cash value of the vehicle at the time of the loss.” (200 Cal. App. 3rd at 1417).

The fair market value analysis works fine in most cases. Leslie Salt Co. v. St. Paul Mercury Ins. Co. (9th Cir. 1981) 637 F. 2nd 65 addressed the issue when damaged property has no fair market value. The insured in that case was a salt manufacturer. Part of the manufacturing process entailed removing salt from sea water and stacking the salt for drying. Stacking was done with custom-made machine. On a test run, the stacker buckled, collapsed and was destroyed. The court held that although ACV generally means fair market value and replacement cost, that rule does not apply when the insured property, such as the custom-built stacker, has no market.

In a recent unpublished decision, a California court ruled that the insured has the burden of establishing that the damaged property constituted the type of unique property that required valuation by means of a replacement cost test. Century Surety Company v. P&S www.insurancejournal.com

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Fashions, Inc. 2007 WL 1129207. There are no published decisions addressing this issue.

An insured may not recover the costs of replacing property under the RCV policy provisions until the insured actually replaces the property. Diamond v. Ins. Co. of North America (1968) 267 Cal. App. 2nd 415. Nonetheless, most policies allow the insured to first recover on an ACV basis and later claim the RCV benefits by satisfying the conditions of coverage (e.g., repair or replacement within a specified number of days following the loss).

RCV coverage does not require the insured to replace the damaged property at the same location; an insured may recover RCV benefits for damage to his home by purchasing another home at another location. Conway v. Farmer’s Home Mut. Ins. Co. (1994) 26 Cal. App. 4th 1185.

Moreover, absent a specific policy provision, an insured is not entitled to compensation for the cost of complying with new building codes. In McCorkle v. State Farm Ins. Co. (1990) 221 Cal. App. 3rd 610, the insureds filed a lawsuit based on the insurer’s refusal to pay for the full costs of replacing a destroyed garage with one with a concrete floor, as required by modern building codes. The original garage had a wooden floor, and the insurer tendered the costs of reconstruction of the garage with the wooden floor, and refused to pay for the upgrade costs. The Courts of Appeal held that the insurer did not breach its policy obligations by refusing to pay the additional costs necessary to comply with building codes, because the loss settlement clause limited coverage to replacement using “equivalent” construction. In so ruling, the court noted that the purpose of fire insurance is “to compensate for the actual loss sustained, not to place the insured in a better position than he or she was before the fire.” (221 Cal. App. 3rd at 614-615).

Similar results were reached in Breshears v.

Indiana Lumbermen’s Mut. Ins. Co. of Indianapolis, Indiana (1967) 256 Cal. App. 2nd 245, and Bischel v. Fire Ins. Exchange (1991) 1 Cal. App. 4th 1168. But insurers must make certain disclosures if a policy does not cover building code upgrades. Under Insurance Code Section 10103, insurers must furnish policyholders the statement in at least 10 point type: “THIS POLICY DOES NOT INCLUDE BUILDING CODE UPGRADE COVERAGE.” An open issue that remains is whether an www.insurancejournal.com

insurer is entitled to subtract depreciation and deferred maintenance costs from a loss.

Several cases suggest that an insurer may not deduct such costs, at least where the policy does not clearly give the insurer the right to do so. Continental Ins. Co. v. Dunn (9th Cir.

1955) 226 Fed. 2nd 471, 473; Hughes v. Potomac Ins. Co. of District of Colombia (1962) 199 Cal. App. 2nd 239, 252. IJ Zangwill is an attorney in Los Angeles specializing in insurance coverage. E-mail: HSZangwill@Verizon.net.

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Ad Index Idea Exchange Sales Management

National Agribusiness Conventions

N28

American E & S

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www.aesbrokers.com American Reliable

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www.americanreliable.com Amwins Group, Inc.

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Applied Underwriters

56

www.applieduw.com Applied Underwriters

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Burns & Wilcox Ltd

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www.burnsandwilcox.com5 CBIC

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Forensic Imaging and Archiving, Inc.

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Great American Insurance Company

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www.greatamericaneld.com Insurance Innovators

N20

www.iiigroup.com NAS Insurance Services, Inc.

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www.nasinsurance.com National Alliance Production School

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Travelers Insurance

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Universal Service Agency, Inc

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www.universalbonds.com Westrope

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West Anderson & Murison, Inc.

48

www.andersonmurison.com Builder’s & Tradesmen’s Insurance

45

www.btisinc.com IBA West

51

www.ibawest.com Insurance Skills Center

51

www.insuranceskillscenter.com M.J. Hall & Company, Inc.

47

www.mjhallandcompany.com Monarch E & S Ins Services

13

www.monarchexcess.com R. E. Chaix

49

www.rechaix.com West Coast Casualty Service, Inc

11

www.westcoastcasualty.com Worldwide Facilities, Inc.

14

www.wwfi.com Yates & Associates www.yates-assoc.com

43

Valuing Diversity Can Boost Sales

F

diversity climates by providing equitable ederal and state laws make discrimination opportunities for their minority workers can in the workplace illegal and to comply, experience greater profits and a more harmomany companies have developed their own nious workforce. The researchers’ study clearly diversity policies. shows that sales performances for both However, having a policy does not always African-American and Hispanic employees, and mean a favorable diversity climate. to a lesser extent white workers, produce sig“Being a pro-diversity organization is more nificantly larger sales than legal compliance and hiring the ‘right’ per hour in store number of minorities in the workforce,” said “Employees units perceived to Patrick F. McKay of the School of Management have highly pro-diverand Labor Relations at Rutgers University. should not be Does the organization really embrace its poli- sity work climate. pigeon-holed Workplace discies and is diversity really valued throughout crimination can manthe workforce? In other words, McKay said, do into one area; ifest itself in promoorganizations “walk the talk?” rather give them tions that do not folTo find out, McKay and his colleagues, low posted guideDerek R. Avery of the University of Houston access to training lines or selecting and Mark A. Morris of J.C. Penney Co. Inc., and sales studied racial and ethnic differences in employ- favorites, setting hours in an unfair ee sales performances. They chose a large positions.”

American retail company ranked in the “Top 50 manner, and giving assignments to Companies for Diversity” by Diversity Inc. magaminorities that provide them less contact with zine and surveyed 6,130 workers at nearly 750 customers. stores around the country. Their findings were McKay acknowledged that diversity climate published in the summer issue of Personnel applies to all workers regardless of race, sex Psychology. and age.

“A pro-diversity policy starts at the top.

It is important to communicate the value of Leaders have to set the tone and climate all employees and make them feel an importhroughout the organization and support the tant part of the organization. That means putpolicy through practices and leadership,” ting minorities where they might better benefit McKay said. the company. “For example,” McKay said, “a Does a pro-diversity climate have an impact store located where there is a strong Hispanic upon employees? “Absolutely,” McKay said. customer base would benefit by a diverse The study showed that African-American workforce including Hispanic sales people.” employees in stores with high pro-diversity cliThe idea is to use the unique knowledge and mates increased their sales by about $20 per skills employees possess to hour, an annual sales benefit the company. gain of nearly $21,000.

“Employees should not be Hispanic employees pigeon-holed into one area; increased hourly sales rather give them access to by $26, resulting in training and sales posiannual gain of $27,000. tions. It’s a motivationalAlso, white sales attitudinal function. personnel showed Employees, no matter their improvement in their ethnicity, who feel valued sales figures, although Web Resource and are treated well, will not as strongly. be productive and add The bottom line?

The Society for Industrial and profitability to the organiOrganizations that Organizational Psychology zation,” McKay added. IJ foster hospitable www.siop.org.

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1. Emil initially started the company “for the inspection groupies.�

‌email, fax and appearing on insurancejournal.com Email newswire@insurancejournal.com or call Nicola Coghill @ (800) 897-9965 x125 for further info

2. He’s part of only 1% of the population that is neither a lover nor a fighter.

3. Cal Inspection Bureau is celebrating its 20th Anniversary.

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Cvsfbv www.insurancejournal.com

Need more facts? Write to facts@calinspect.com Or call Emil at 818.346.2422 January 12, 2009 INSURANCE JOURNAL-WEST REGION | 53

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Idea Exchange Closing Quote

Eye on Insurance Industry Regulation In Financial Turmoil, Agents and the Industry Must Work Together

Auerbach

By Kenneth R. Auerbach

I

t has been said that “a rising tide lifts all boats.” That also raises the question, what happens to the boat when the tide goes down? The answer is that when the tide falls — or when the waters get choppy — everybody in the boat has to work together to ensure that the boat and all of its occupants remain safe until the tide inevitably rises again.

Our nation’s economy has experienced a deterioration starting with the subprime mortgage mess, followed by a credit crunch, followed in turn by the collapse or bailout of major investment firms. Then, the U.S. government approved a $700 billion rescue plan, with a portion of the funds used to partially nationalize some of our largest banks.

On the day that I was inaugurated president of the National Association of Professional Insurance Agents, the Dow Jones Industrial Average stood at 11,027.51; as I write this, the Dow continues to fall to levels not seen in more than 25 years. This has created a depressed and disorganized market, where value has been lost and remaining values are eyed with skepticism.

We are witnessing the consequences of the failure by federal authorities to prudently regulate the activities of banks and securities firms, and failure to oversee or even know the private capital markets. The failures have been breathtaking in scope and destabilized our nation’s economy.

Good Time for Agents Despite the financial difficulties our nation faces, now is an especially good time to be an independent insurance agent.

While it is clear that our nation is moving through a nasty recession, independent insurance agents should be mindful of their position relative to the other sectors of financial services. Our industry’s fiscal house is in good order. The same cannot be said about banking and securities. Because insurance is prudently regulated by the states and insurers embrace financial soundness oversight and practice disciplines, our sector has remained stable. This is in stark contrast to the questionable activities permitted by federal regulators in the banking, securities and capital markets sectors leading to financial meltdown.

The effective and efficient supervision of our insurance industry by the state insurance regulatory system ensures the financial stability and soundness that protects

54 | INSURANCE JOURNAL-WEST REGION January 12, 2009

insureds, insurance consumers, state general revenues, the U.S. economy, carriers and agents alike.

The advocates of federal regulation of insurance are perversely pointing to insurance (the only financial services sector that has largely been insulated from Despite the the worst of the financial carnage) and say the market meltdown financial proves that insurance should be difficulties our federally regulated. That’s a little like a drunk who caused a bad traf- nation faces, fic accident saying that the other now is an drivers who remained sober need to especially good start drinking and driving.

The plain fact is that this ecotime to be an nomic crisis proves insurance independent should not be brought into the federal system, because federal regula- insurance agent. tors failed so miserably in their responsibilities and obligations to supervise banking, securities and capital markets for financial soundness and the public good. As our friends at the National Conference of Insurance Legislators (NCOIL) aptly suggest, the state insurance regulatory system should serve as a model for reforms to the federal regulatory system for banks and securities — not vice versa.

PIA supports state regulation of insurance and opposes those who want to dismantle the state regulatory system in favor of federal control. PIA applauds and joins NCOIL in its call for an all states authority summit to discuss the future of state insurance oversight, modernization that must take place, and collective efforts needed to reject federal intervention and takeover efforts.

Common Good As insurance professionals, all PIA members nationwide are all in the same boat together. To prosper — not merely survive — we must pull together for our common good.

The general tide of our economy may be receding at the moment, but our boat is strong and solid. That’s not to say that we will always have smooth sailing; no doubt, we will encounter some rough seas. But we are in a much better position to weather the turbulence because we are part of that oldfashioned sector of the economy that remained prudent while others were throwing caution to the wind. IJ Auerbach is the National Association of Professional Insurance Agents president. www.insurancejournal.com

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Sponsors

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For more information or to register for free visit: www.MyNewMarkets.com/exchange Or call 1-800-897-9965 x144

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