2022 January PIA New Hampshire

January 2022 • New Hampshire

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Looking Forward How COVID-19, flooding and other factors are shaping the industry’s future IN THIS ISSUE 5

Tech and legislation changes

27

Design and construction trends

31 ‘I didn’t have time …’

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DEPARTMENTS January 2022 • New Hampshire

4

In brief

9

Tech

15

Sales

31

E&O

35

Ask PIA

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Readers’ service and advertising index

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Officers and directors directory

COVER STORY 20 Looking forward How COVID-19, flooding are shaping the industry’s future

FEATURE 27 Trends in the design and construction markets Understand the current risks to avoid coverage gaps

Statements of fact and opinion in PIA Magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents.

Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services.

President and CEO Jeff Parmenter, CPCU, ARM; Executive Director Kelly K. Norris, CAE; Communications Director Katherine Morra; Senior Magazine Designer Sue Jacobsen; Editor-In-Chief Jaye Czupryna; Advertising Sales Executive Susan Heath; Communications Department contributors: Athena Cancio, David Cayole, Alexandra Chouinard, Patricia Corlett, Darel Cramer, Roberta Lawrence, Crystal Ringler and Calley Rupp.

Postmaster: Send address changes to: Professional Insurance Agents Magazine, 25 Chamberlain St., Glenmont, NY 12077-0997.

“Professional Insurance Agents” (USPS 913-400) is published monthly by PIA Management Services Inc., except for a combined July/August issue. Subscription rate for members is $13 per year, which is included in the dues; subscription rate for nonmembers is $25 per year. Professional Insurance Agents, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 12077-0997; (518) 434-3111 or toll-free (800) 424-4244; email pia@pia.org; World Wide Web address: pia.org. Periodical postage paid at Glenmont, N.Y., and additional mailing offices. ©2022 Professional Insurance Agents. All rights reserved. No material within this publication may be reproduced—in whole or in part—without the express written consent of the publisher.

COVER DESIGN David Cayole Vol. 66, No. 1 January 2022

IN BRIEF

ASSOCIATION NEWS

What PIA membership means and how it helps you As the premier professional association for independent insurance agents, PIA Northeast has provided excellence to its members for nearly 90 years. Through its strength of association in Connecticut, New Hampshire, New Jersey, New York and Vermont, it advances the independent agency system—in the Northeast and beyond.

PIA’s mission is to recognize, meet, and advance the diverse needs of its membership, and influence the industry by providing the very best education, information, advocacy, and protection possible.

The association’s vision is to be an innovative industry leader that will use its vast knowledge, resources, and expertise to advance the independent agency system.

Do you know everything PIA Northeast does to help the independent agency system? Here is an overview of your association and how it serves you and your agency.

Resolve to take full advantage of your PIA membership this year.

Industry impact PIA Northeast delivers innovations and solutions to address industry challenges. Member agents and brokers demonstrate excellence in leadership, community service, and business acumen.

Growing the industry Carrier appointments. PIA’s carrier relations activities work to build relationships with companies that provide coverage options at competitive prices. This has led to numerous contracts for our member agents. To date, PIA Northeast has helped to secure more than 22,000 carrier appointments.

Workforce pipeline. PIA works to equip the future workforce with the knowledge they need to serve consumers.

Developing leaders. Through insurance-based leadership and board participation, PIA empowers insurance professionals to be industry leaders.

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the largest gathering of insurance professionals in the Northeast with more than 2,000 attendees. Since the pandemic, the association has shifted to online formats to allow insurance professionals to network and meet with each other virtually.

In 2021, PIA Northeast hosted its first-ever Virtual Conference. If you attended the event, you have free access to the content until this summer. Even if you didn’t attend the event, you can view the content on-demand for $29. Access the Virtual Conference at pia.realmagnet. land/virtual-conference21.

Committed support. PIA’s proud heritage of engaging and connecting with agents has grown into a community of members who support and serve one another.

The four pillars To help PIA achieve its mission, it established its four pillars to provide the foundation for goals: Pillar No. 1: Information. PIA Northeast is the authoritative source of information relevant to the insurance industry and its members. It is a trusted source in providing factual and relevant information to members, policymakers, and stakeholders in the insurance industry.

Industry Resource Center. This department provides information for member agents whenever they need it, eliminating hours of research by agents and brokers. PIA Northeast does the research for them.

Carrier rating change notifications. PIA members can receive timely alerts on rating and outlook changes to represented carriers. To take advantage of this PIA member benefit, contact the PIA Industry Resource Center at resourcecenter@pia.org or (800) 424-4244.

Compliance. It’s difficult to keep up with all the changes in the industry. PIA provides notifications, tools, and training for agents to comply with the regulations and requirements of doing business.

Making a difference PIA is proudly affiliated with the Insurance Industry Charitable Foundation, which awards local community grants—to date more than $31 million has been distributed. PIA’s members also have raised more than $5 million to benefit charitable causes in the Northeast.

Publications. Award-winning magazines, newsletters, and resources help members stay on top of industry trends. For the latest information, visit blog.pia.org.

Building a community Prior to the COVID-19 pandemic, PIA Northeast hosted more than 50 networking events each year, including

Pillar No. 2: Education. PIA Northeast helps grow the skills and knowledge of insurance professionals through nationally recognized instructors and designations. As the (continued on page 6.)

State-specific information. PIA tracks business and compliance issues in individual states, so agents can access the most relevant information for where they operate.

PROFESSIONAL INSURANCE AGENTS MAGAZINE

BY THE NUMBERS

TECH AND LEGISLATION CHANGES TO EFFECT THE INSURANCE INDUSTRY The insurance industry evolves a little each year—but some big changes in technology and certain laws may cause it to evolve a little faster in the coming years.

Consider these recent statistics: THE INSURANCE QUESTION: 55% OF SMALL-BUSINESS

owners in the U.S. believe they will have an autonomous fleet of cars in the next two decades.

TOTAL NUMBER OF ACCIDENTS REPORTED 38 for Uber since 2016 11 for Tesla since 2014

800,000 robo-cars

are expected to be produced annually by 2030.

MOST COMMON

accident caused by self-driving cars: Rear-end accidents

Currently, if a self-driving car causes an accident, but there was a driver in the car, the driver is held liable.

But, in completely driverless cars, the liability of accidents is being taken on a case-by-case basis in the courts.

How will this affect the auto insurance industry and insureds who are involved in accidents with these automobiles?

THE INSURANCE QUESTION: AUTOMOBILE COLLISIONS increased up to 6% in western states where cannabis was legalized and regulated for retail sale sooner than eastern states.

MEDICINAL MARIJUANA is legal in 36 states (including CT, NH, NJ, NY and VT)

If there’s no standard for roadside detection of drug-impaired driving, and collisions are known to increase as a result of the legalization of cannabis, how will these legislative changes affect the auto industry?

ADULT-USE RECREATIONAL marijuana is legal in 19 states (including CT, NJ, NY and VT) and Washington, D.C.

THE INSURANCE QUESTION: REMOTE WORK has risen 159% since 2009

CYBERATTACKS increased 151% worldwide in the first half of 2021 compared to the first half of 2020

151%

THERE HAS BEEN a 600% increase in malicious emails as a result of the pandemic

How can we further protect insureds from these risks, as the stakes keep rising while employees work remotely?

600%

PIA.ORG

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ASSOCIATION NEWS (continued from page 4.) unquestionable leader in insurance education, PIA helps agents maintain a competitive advantage in the industry, as well as complying with all license requirements. For more information about PIA’s educational opportunities, visit www.pia.org/EDU.

The association has a 50-year exclusive relationship with Utica National Insurance Group, which is the cornerstone of its E&O offerings. For a free quote, go to www.pia. org/quote/errorsandomissions.php. PIA also offers unique umbrella coverage that goes over an agency’s E&O policy.

Nationally recognized designation programs (CIC, CISR, CPIA). PIA Northeast works with nationally recognized instructors and industry leaders to provide sought-after designations. The programs are designed to grow the skills and knowledge-base of independent insurance agents.

Cybersecurity you can count on. TAG Solutions’ insurance industry-specific cyber program was developed exclusively for PIA members, and it exceeds current regulatory standards. For more information, visit www.pia. org/quote/cyber.php.

State-recognized CE. Agents earn quality continuingeducation credits to maintain their licenses.

Education programs that make sense. PIA develops and delivers relevant education through multiple platforms— including on-site classes, webinars, and class series.

Pillar No. 3: Legislation. Advocacy at the state and national levels to ensure PIA members’ voices are heard by lawmakers and regulators alike. PIA represents members’ interests in state capitals, in Washington, D.C., and with regulators to ensure insurance agents’ needs and positions are understood. Through PIA’s advocacy efforts, individual agents have a powerful voice.

Building relationships with legislators. PIA members meet with state and federal lawmakers to build relationships and credibility. They advocate for the independent agency system and for the protection of their clients.

Bill tracking. PIA members can track hundreds of bills through its PIAdvocacy system. Stay updated on legislation in your state and the region.

Compliance. PIA works with legislators and state agencies on issues of compliance and regulation—making sure members’ needs are taken into consideration.

Lobbyists and political action committees. Four state lobbyists interact daily with decision makers to advocate on behalf of members. Its non-partisan political action committees support candidates and elected officials who advance the independent agency system.

Pillar No. 4: Preservation. PIA Northeast delivers products and services specifically designed for insurance professionals to protect and grow their businesses.

The association cares about protecting and growing the business of its members. PIA provides tools and resources specifically designed for independent agencies.

Errors-and-omissions coverage. PIA works with quality carriers to provide excellent coverage for their business.

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Tools and resources. PIA provides marketing materials, human resource tools, market access, referral programs, consumer-facing products for clients, and other resources for members to grow their business.

Hartford Flood offers PIA members access to flood insurance for their commercial- and personal-lines clients.

This program offers competitive commission levels; a multi-rater quoting system; free flood zone determinations, certified to be accurate; and a dedicated flood sales director assigned to your agency.

PIA Design & Print offers a collaborative design experience tailored for small businesses, insurance agencies and associations. The talented team specializes in print and digital media design that’s engaging and effective. For more information, visit www.pia.org/design&print.

PIA has partnered with AVYST to provide InsurTech sales and risk management solutions. PIA members receive free access to AVYST eForms Wizard bronze level as part of their membership. For more information, visit avyst.com/ partnerships/pianortheast.

Association partners PIA National. Serving agents since 1931, the National Association of Professional Insurance Agents represents agents and brokers in all 50 states, Puerto Rico, and the District of Columbia.

Young Insurance Professionals. Dedicated to developing tomorrow’s leaders in Connecticut, New Jersey and New York. PIA members receive one year of complimentary YIP membership for someone in their agency.

Professional Insurance Wholesalers Association.

PIWA represents New York state insurance wholesalers who serve retail insurance producers with specialty and excess-line markets.

Questions about how your PIA membership serves you?

Call (800) 424-4244 or email pia.org, and one of the more than 65 PIA staff members will help you.

PROFESSIONAL INSURANCE AGENTS MAGAZINE

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ISO 2022 HO Program: Restrictions, endorsements In the last Tech article in PIA Magazine, we examined the ISO 2022 HO Program for enhancements to coverage in the HO policy forms (“ISO 2022 HO Program: Enhancements and limits”). This article will examine the restrictions introduced in the HO policy forms, a new policy form, and new enhancement and restrictive endorsements.

These forms, and the ones discussed in the last article, are proposed to be effective Tuesday, March 1, 2022.

Restrictions of the HO policy Model aircraft and watercraft. ISO introduced a sublimit for model or hobby aircraft and watercraft in the HO policy. The sublimit amount is $2,000, but it can be increased with the HO 04 65 Coverage C Increased

TECH

DAN CORBIN, CPCU, CIC, LUTC Director of research, PIA Northeast

Special Limits of Liability endorsement. On the other hand, liability coverage is enhanced by exception for, “model or hobby watercraft not used or designed to carry people or cargo,” which complements the same exception for aircraft.

Credit cards. The additional coverage titled Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Coverage is removed from

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the policy form. A base limit of $1,000—together with optional increased limits up to $10,000—are made available under the revised HO 04 53 Increased Limit endorsement.

Home sharing. While there is no change in coverage, the mandatory HomeSharing Host Activities Amendatory endorsements have been incorporated into the policy forms and the Personal Injury endorsements.

Cannabis. The 2011 HO policy makes no reference to cannabis under property coverages, but it includes marijuana as a controlled substance under the liability exclusion. The 2022 HO policy addresses cannabis in a more comprehensive manner. The policy has been revised to exclude cannabis as covered

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

property, apart from prescription drugs and goods, or products containing or derived from hemp.

Also excluded is any liability arising out of the use, sale, manufacture, delivery, transfer, or possession by any person of cannabis, regardless of whether such cannabis is considered a controlled substance.

New policy form Enhanced renters policy. An optional alternative to the traditional HO 00 04 Homeowners 4– Contents Broad Form policy is introduced—the HO 00 14 Homeowners 14–Contents Comprehensive form.

ISO developed this new form after surveying millennials about their coverage needs. As presented elsewhere in this article, you can see that cannabis has received attention in the 2022 HO program. I can’t help but think that cannabis has something to do with the development of this form, because the rationale for the selection of coverages in it are a mystery to me.

All risks not excluded are covered perils—which could have been accomplished by endorsement to the HO 00 04—and the contents are settled at replacement cost, which, currently, can be accomplished by endorsement. There is automatic broadened coverage for homesharing host activities (who knew insureds regularly offered their rented premises on Airbnb?) and coverage for motorized bicycles and motorized scooters (coverage that actually makes sense, but could be accomplished by the new endorsement).

Then, there are additional coverages for hard-drive data recovery ($300) and bed bug remediation ($500).

Comparing the special limits of the HO 00 14 with the HO 00 04 for the benefit of the policyholder is

going to be difficult. There is an aggregate loss limit of 10% for selected special property (instead of separate dollar sublimits), and it includes the value of antiques and fine arts (which are not limited on the HO 00 04). There is no property coverage for watercraft; trees, shrubs, and plants; fire-department service charges; loss assessment; collapse; safety glass; building additions or alterations; ordinance or law requirements; and grave markers. There is no liability coverage for service vehicles and certain recreational vehicles; watercraft; loss assessment; and residence employees.

4,492

Ask PIA hits last year

Bottom line—be cautious when offering this new form as an alternative to the HO 00 04 form.

New broadening endorsements Theft for dwelling under construction. ISO introduced a new, optional HO 06 67 Limited Theft-Coverage A and B–Dwelling Under Construction endorsement, which insures theft of property covered under Coverage A– Dwelling and Coverage B–Other Structures to complement the existing HO 06 07 endorsement, which covers the theft of personal property.

Water backup. ISO introduced a new, optional HO 06 95 Broadened Water Back-Up and Sump Discharge or Overflow Coverage endorsement to remove that limitation, providing broader coverage for backups occurring outside the premises. Currently, the HO 04 95 Limited Water Back-Up and Sump Discharge or Overflow Coverage endorsement requires the backup to originate from within the dwelling in which the named insured resides.

PIA’s technical specialists answer: • Legal • Industry • Coverage • Legislative • Regulatory … and other questions fast!

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Log on to pia.org/IRC/askpia.

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Other structure replacement cost. ISO introduced a new, optional HO 06 91 Coverage B–Other Structures Away From The Residence Premises–Replacement Cost Loss Settlement For Buildings endorsement to provide a replacement cost on other structures at another location. Additionally, a new, optional HO 06 92 endorsement provides the same enhancement to give replacement cost for specified other structures. And, the HO 04 43 Replacement Cost Loss Settlement For Certain Non-Building Structures On the Residence Premises endorsement is revised to include replacement cost loss settlement to permanent, built-in outdoor kitchens and cooking facilities.

Other insured locations. Liability coverage for an “insured location” can include another residence, vacant land and a premises used in connection with the residence. ISO introduced a new, optional HO 24 02 Other Insured Location(s) endorsement to cover locations that do not fit the listed categories of an insured location.

Motorized scooters/bicycles. The use of motorized scooters and pedalassisted bicycles has become popular, especially in urban areas. As previously discussed, the new HO 00 14 renters form automatically covers these vehicles for liability. Accordingly, the optional HO 24 13 Incidental Low Power Recreational Motor Vehicle Liability Coverage endorsement is revised to include liability coverage for owned motorized scooters and motorized bicycles, while being used off an insured location.

Additionally, liability coverage in the policy forms that accommodates nonowned recreational vehicles has been expanded to include motorized scooters and motorized bicycles more explicitly, by changing the definition of motor vehicle. However, the insurer can remove this non-owned coverage from the policy by adding the new, optional HO 24 03 Non-Owned Motorized Bicycle and Motorized Scooter Liability Exclusion endorsement.

Email> Reach each PIA department electronically General pia@pia.org

Industry Resource Center resourcecenter@pia.org

Conference conferences@pia.org

Member Services memberservices@pia.org

Design + Print design.print@pia.org

Publications publications@pia.org

Education education@pia.org

Young Insurance Professionals yip@pia.org

Government & Industry Affairs govaffairs@pia.org 116889

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

Cannabis. ISO has introduced two new, optional endorsements to restore some of the coverage removed by the new cannabis exclusions in the policy forms.

The HO 06 01 Limited Cannabis Property Coverage endorsement makes cannabis covered property for certain specified perils. The HO 24 01 Cannabis Liability Coverage endorsement provides broadened liability coverage when damages arise out of the lawful use or possession of cannabis by any person.

New restrictive endorsement Other structure. Suppose the insurer is willing to write an HO policy on the dwelling, but has concerns about an old, dilapidated garage. ISO introduced a new, optional HO 06 21 Specified Other Structure(s) Exclusion endorsement to exclude a described other structure as covered property on the residence premises. Additionally, the endorsement provides the option to also exclude liability coverage for that structure.

There is a lot to absorb in this new HO program. You have a few months to sort it all out before it goes into effect in March—assuming your insurers adopt it.

Corbin is PIA Northeast’s director of research.

Includes copyrighted material of Insurance Services Office Inc. with its permission. Copyright, Insurance Services Office Inc. 2021.

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Build trust and rapport when selling your product You’ve probably heard the sayings that, people don’t care how much you know until they know how much you care, and people need to know, like, and trust you before they’ll do business with you.

The truth is: Until people know you care, most of them will view you simply as a salesperson trying to make a sale. With that in mind, how do you build trust and rapport rapidly to let people know you have their best interest in mind, so you can move toward the sale?

Ideas to build trust and rapport No 1: Treat everybody you meet as if they are a close friend or family member. Imagine your best friend needs your product or service. Would your mindset be the same as if you were talking to a prospect you’ve known for

a few minutes? It should be. When you’re talking to your best friend you will most likely have his or her best interest in mind versus being focused on making a sale.

SALES

JOHN CHAPIN President, Complete Selling

People have a sixth sense, and they know when you are more interested in the sale instead of helping them.

Focus on the other person and what is best for him or her, as opposed to focusing on you, your agency, your product, or growing your business.

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No. 2: Have friendly, relaxed conversations. Keeping with the theme of treating each prospect like a close friend who needs your product or service, imagine what that conversation would be like. Typically, it would be a friendly, relaxed conversation. This is your goal when speaking with prospects. If you are friendly and relaxed, they will most likely be friendly and relaxed eventually (if not initially). People tend to mirror the demeanor of those around them. If you are relaxed, open, conversational, and show you care, usually your prospects will follow your lead.

No. 3: Work on the relationship and the connection before you focus on the sale. Most salespeople are so focused on the sales process, the questions they need to ask, possible objections, and the points they need to make, that they forget to make a personal connection, too. You must focus on the sales process at some point, just make sure you make a personal connection and build some rapport before moving into the sales portion of the call.

When first interacting with someone, I’ve found a good way to make a connection is to think to myself, “I really like this person and really want to help him or her,” and then focus completely on being positive and pleasant in the first few moments of the interaction.

Most salespeople are so focused on the sales process, the questions they need to ask, possible objections, and the points they need to make, that they forget to make a personal connection, too.

No. 4: Make a friend. Your first objective is to be likeable and agreeable. You want to get along with this person, and to make a friend. Often, we want to impress people with how much we know and why they need to work with us. This can lead to us subtly—or not so subtly—debating them over what they think they need and what we know they need.

This causes a disconnect between you and the prospect, and it usually leads to the prospect raising objections such as: I need to check two other places, talk to someone else, or think about it. Instead, when they mention what they think they need, or say what they want, do you best to agree with them initially. Once you’ve connected with them and built some rapport, then they will be more open to your suggestions. Before you can educate prospects and have them listen, or lead them and have them follow, you must have a good connection and rapport.

No. 5: Focus completely on the person with whom you’re speaking. Be present with the person with whom you’re speaking and make sure you are paying close attention, asking good, thoughtful, relevant questions, and listening well. Do not focus on the phone in your pocket, the siren on the fire engine driving by, or the person who just walked in the door. Give the person you’re talking with your undivided attention. Treat the person as though he or she is the most interesting person in the world, but make sure you are genuine when you speak.

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

No. 6: Make sure everything about you sends the right message. Make sure you are perceived as a consummate professional. Speak professionally and intelligently. In other words, use proper grammar and be knowledgeable about your industry. Dress the part and be well groomed, have a good handshake, make good eye contact, and always conduct yourself professionally.

These tips will help you build trust and rapport rapidly and make a good first impression. Once you’ve made that impression, continue the momentum by making a good second and third impression by following up and doing what you say you’ll do when you say you’ll do it.

Chapin is a motivational sales speaker, coach and trainer. For his free eBook: 30 Ideas to Double Sales and his monthly articles, or to have him speak at your next event, go to www.completeselling. com. He has over 33 years of sales experience as a No. 1 sales representative and he is the author of the 2010 sales book of the year Sales Encyclopedia (Axiom Book Awards). Reach him at johnchapin@completeselling.com.

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How COVID-19, flooding and other factors are shaping the industry’s future he last two years have had a profound effect on the insurance industry. COVID-19, dramatic storms, flooding and other natural disasters, and an increase in cyberattacks have all played a part in shaping the insurance industry. What is in the industry’s future?

PIA.ORG

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To help answer this question, PIA Magazine asked PIA National’s Executive Vice President & CEO Mike Becker to discuss the current trends, and how agents need to adapt to be ready for what is next.

The effects of COVID-19 on the insurance industry have been well documented (e.g., the business-interruption claims, the lawsuits, changes to insurance coverages), but are there other effects that haven’t been discussed yet?

There has been a massive acceleration in the adoption of remote work and technology. While some agencies and carriers had been ahead the curve and

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

implementing these kind of changes for years, COVID-19 forced the hand of many businesses.

While we’re navigating through this new normal, the dust still is settling. Agency owners will need to be mindful of office culture, and the impact of creating two cultures: in-office staff and remote staff. On the technology front, this rapid adoption will help agencies expand their tool kits and enable them to better meet the demand and expectations of today’s customer.

Although there’s a risk to team culture if you totally eliminate in-office work, the fact remains that remote work is here to stay. Going forward, some level of remote work will be a permanent feature to retain valued staff and attract top talent.

The change in how we work already is underway. Agents need to master that change and manage it to their best advantage.

What are the lessons COVID-19 has taught insurance industry?

How do independent agents need to continue to evolve to be ready for the next big event/ disaster/pandemic?

One of the main lessons for independent agents is a confirmation: Agents are resilient.

Agents should prepare their own contingency plans to deal with disasters—both by lining up coverages to offer their clients, and providing them with risk management advice, and by developing a disaster plan to prepare their agencies to continue operations. COVID-19 has taught all of us in the industry that the unexpected can and does happen, and we increase our chances for success when we prepare.

COVID-19 has been at the top of people’s minds for almost two years, what else is affecting the insurance industry? How is the industry evolving because of these changes?

Cyber. S&P Global Ratings published a report that stated the pandemic caused economic and insured losses from cyberattacks to skyrocket, which has heightened awareness of the risk and increased demand for cyber security insurance and reinsurance. Cyber insurance prices, “could therefore rise sharply over 2021-2023, even doubling in some cases,” said an S&P analyst.1 Flooding. The increase in recent years in the number, frequency and severity of natural disasters involving flooding points out the need for long-term renewal and reform of the National Flood Insurance Program.

The move toward more risk-based pricing, Risk Rating 2.0, is underway.

At the same time, a nascent private flood insurance market continues to develop, a process that will take years before beginning to have a measurable impact.

What are some of the newer trends that are surfacing?

How is the insurance industry responding to them?

A decade ago, cyber security insurance was primarily a futuristic concept. Since then, the market has developed and matured rapidly in recent years as demand for cyber insurance coverage has soared.

Recently, Aon’s Impact Forecasting team observed that some of the largest catastrophe-loss events this year have shown new, changed patterns that made them more destructive and costly.2 For example, Hurricane Ida was several storms, not just one. And, it did not behave like most hurricanes.

Aon notes that Ida was just the latest tropical cyclone to “show behavioral change prior to making landfall and after coming ashore.” It strengthened, then came ashore in Louisiana with widespread destruction, and then “slow motion and remnant moisture would later spawn record rainfall and subsequent flooding” in the Northeast, particularly New York City.3 Ida served as another example of the critical need to invest in infrastructure modernization. It’s fortunate that the recent federal legislation providing for infrastructure investments was approved, because it comes as the risks of more extreme weather to both coastal and inland properties are rapidly increasing.

How are global changes affecting the insurance industry in the U.S. (and the Northeast)?

We’re coming to the realization that while all risk is local, the source and trajectory of that risk does not respect borders. Risk does not stay static year after year, it evolves and is becoming more dangerous. This poses a big challenge for the insurance industry.

The small businesses that often are targeted by cyberattacks are local, but the source of such attacks knows no boundaries, multiplying the risk.

Another example: coverage issues related to the pandemic may be specific to geographic areas, but the spread of the disease is global. The United States could mostly tame COVID-19, only to have a new strain that developed on another continent make its way here.

These trends have implications for the development of insurance products by carriers and the coverages recommended by independent agents.

What were some of PIA’s most important legislative victories in 2021, and what remains to be accomplished in 2022?

A new Congress was seated early in 2021, initiating a reset of all federal bills.

Early in the year, PIA focused on having legislation reintroduced and moving our issues forward. 2021 began on the heels of major PIA victories in the December 2020 COVID-19 relief package, including the creation of a streamlined forgiveness process for Paycheck Protection Program loans.

In 2021, PIA legislative victories included: • Passage in March of the COVID-19 relief package, which included the PIA-supported $7 billion of additional funding for the PPP and $15 billion for the Economic Injury Disaster Loan program.

• Passage in March of the PPP Extension Act, which delayed the PPP application deadline by several months to give small businesses more time to apply for PPP loans and the Small Business Administration more time to resolve problems with the program and integrate applicable regulatory guidance.

• In April, the U.S. House passed the SAFE Banking Act—a PIA legislative top priority—which would protect insurance agents and carriers from federal prosecution for doing business with cannabis-related enterprises in states in which such businesses are legal. The SAFE Banking Act passed the U.S. House again in September as part of the National Defense Authorization Act, improving its chances of passing in the U.S. Senate.

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• In May, the Biden administration released its budget request for Fiscal Year 2022. For the first time in almost a decade, the presidential budget request did not include cuts to the Department of Agriculture’s federal crop insurance program, the protection of which is a longstanding PIA top priority.

• In July, as a direct result of the hard work of members who participated in PIA’s 2021 Advocacy Day, legislation to fully repeal the Federal Insurance Office was introduced in the U.S. House. The bill has since been reintroduced in the U.S. Senate.

• Throughout the summer, PIA advocated to prevent the lapse of the NFIP, and PIA succeeded in persuading Congress to reauthorize the NFIP on a short-term basis.

In 2022, PIA will continue to advocate for a long-term reauthorization of the NFIP and build support for the Main Street Tax Certainty Act of 2021, which would make permanent the 20% tax deduction presently available to passthrough entities via the tax reform law passed at the end of 2017.

In addition, the federal crop insurance program likely will be reexamined when Congress next considers reauthorizing the farm bill in December 2023.

Until then, PIA will continue to educate policymakers about the important role PIA member agents play in delivering crop insurance to consumers.

Finally, considering the Biden administration’s recent actions to enlarge the power of the FIO to authorize it to collect climate-related insurance data, PIA will continue to accumulate support for legislation to repeal the FIO. As a part of its advocacy, there are occasions when PIA issues statements correcting misstatements on insurance-related topics, including the following: Agents’ commissions on flood policies. Earlier this year, PIA corrected an assertion made by the director of federal affairs for New York City, who

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incorrectly testified before the U.S. Senate Banking Committee that flood insurance agents receive a 30% commission on NFIP policies. PIA issued a statement debunking this.

“That is just not true,” said PIA National Vice President of Government Relations Jon Gentile. “Independent insurance agents are not earning 30% commission for selling NFIP policies.”

Final thoughts?

Tech is our future—computers, tablets, webcams, messaging programs, etc. The customer relationship of the future will rely on both human interaction and technology.

Just as it is possible for independent agents to develop personal relationships with their clients online, it also is possible to foster creative collaboration with remote employees. Remote work and the related digital tools are just that—tools. They should be used to broaden abilities and efficiencies, but they shouldn’t replace the in-person experience entirely.

The COVID-19 crisis has meant that PIA has devised many new ways— and created many new programs— to provide even more assistance to PIA members and their agencies than ever before.

Finally, PIA continues to rack up legislative and regulatory wins and pursue our agenda at the National Association of Insurance Commissioners, and we are doing great work for PIA members with our carrier partners.

Czupryna is PIA Magazine’s editorin-chief.

S&P Global Ratings, 2021 (bit.ly/3FoKTYT)

1

To access, visit “Tools and Resources” at pia.org 116225 919

24

PROFESSIONAL INSURANCE AGENTS MAGAZINE

2

Artemis, 2021 (bit.ly/3Fit9P2)

3

Ibid.

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Trends in the design and construction markets

Understand the current risks to avoid coverage gaps

The complexity of the design and construction industry only has grown in recent years and it has been further impacted by the COVID-19 pandemic. To prosper in such a challenging market, agents and brokers must help their design and construction clients understand changes in the industry, and the current risk environment that firms are facing to avoid coverage gaps.

This article addresses the key trends that we believe will drive professional liability insurance needs for design and construction professionals in 2022.

Renewed focus on health and safety measures The impacts of COVID-19, including a prolonged state of inertia in the design and construction industry have become a real catalyst for change. Today, firms are facing unprecedented new situations that demand innovative thinking and problem solving.

It is likely that the COVID-19 crisis has changed how projects are designed and implemented irrevocably.

Contractors now need to account for new social distancing rules, increased jobsite safety scrutiny, increased construction site sanitation procedures, and lengthened construction schedules due to global supply-chain challenges.

Workplace designs and policies have undergone sweeping changes over a short period of time to implement pandemic-related safety procedures. While some of these changes may loosen over time, many will remain— particularly as the industry looks to bolster resiliency over the long-term, and to mitigate future risk exposures due to unforeseeable events like another pandemic.

Risk management guidance: Architecture and engineering firms responsible for indoor air quality need to educate their clients about the known science of how airborne viruses spread indoors, and the design mitigation measures that can be implemented to reduce that risk. It is essential that firms educate the client about the benefits, costs, and risks of each mitigation measure, so that the client can make an informed decision about the available alternatives. Firms need to document the client’s informed decisions properly, so it is clear the client was educated about the options, and that any selected mitigaPIA.ORG

27

tion solution was approved by the client. Ultimately, design firms will have to ensure that the designed solutions conform with good professional practice.

Economic recovery and labor shortages With an industry this large, it is rightfully complex and economically impactful—when the industry fails, the economy suffers. Yet for decades, pervasive productivity challenges have been well known. Prior to the pandemic, the Lean Construction Institute estimated that 70% of projects were delivered late and over budget,1 and this issue only has been exacerbated by the impacts of COVID-19. In the Associated General Contractors 2021 Hiring and Business Outlook Report, 59% of construction firms surveyed reported they had projects scheduled in 2020 that were delayed to 2021, and 44% had projects canceled outright.2 Labor shortages have plagued the construction industry for years. There is a lack of talent diversity (e.g., women comprise almost half of the U.S. workforce, yet only 3% of the construction workforce3) and evidence of a declining interest by younger generations.4 COVID-19 has worsened the situation.

There are fewer workers in the global marketplace because of the outbreak, and labor shortages in every sector have put pressure on global construction market demand. With growth projections expected, the problem will worsen.

This short-term supply challenge and concerning future pipeline challenge needs to be a priority for policymakers. Federal marketing, training, and investment programs will be needed to improve the construction labor supply shortages. A recent AGC report revealed that even before the pandemic, 54% of those companies seeking qualified workers were struggling to fill positions, and 49% expected it to remain difficult or become more difficult to find qualified workers in 2021.5 Risk management guidance: The construction labor shortage, coupled with projected growth demands in design/construction markets, increases the exposure of all stakeholders in the design and construction industry. Having more projects that may be under time constraints because of the volume and demand while, at the same time, having fewer qualified construction stakeholders, is a formula for mistakes and liability. Stakeholders can manage this risk by leveraging more technology to enhance quality control, and enhanced communications along with rigorous documentation. Making careful decisions with project stakeholders and making sure the relationships can be trusted also will help to mitigate risks.

Supply chains moving closer to home Supply chain weak points, made more apparent during the pandemic, have led to a higher reliance on distribution centers, warehouses, and manufacturing facilities. Businesses and investors are grappling with international gaps in supply, so closer-to-home supply chain infrastructure within the U.S., Canada or Mexico are likely to fill those shortfalls. However, supply-chain disruptions still are likely to happen because of government restrictions on the availability of basic building materials and increasingly complex assemblies and systems.

In addition to the challenges of the marketplace to accelerate construction through immediately available elements and modules, contracts for services and construction also will have to change. Both the licensure regulations that 28

PROFESSIONAL INSURANCE AGENTS MAGAZINE

apply to design firms and the law of contracts will have to adapt to a new normal in design and construction.

Risk management guidance: Whenever there is a shift in supplychain management, it is highly likely that the design team will incur charges related to delays, increased costs, and consequential damages to the project’s stakeholders. It is important that firms: • pay close attention to their internal quality control procedures; • spell out the contractor’s responsibility for the means, methods, techniques, sequences, and procedures of the project clearly; and • limit their exposure to uncontrollable consequential damages created by supply-chain disruptions.

In addition to meeting their own design and deliverables schedules, if firms have a responsibility to interpret the contract for construction for their clients, they need to emphasize the construction team’s adherence to production schedules to avoid unexpected project delays and potential risk exposure.

Opportunity to seize environmental stewardship According to the Global Alliance for Buildings and Construction, 40% of all global carbon emissions come from the built environment.6 As the largest industry source of global carbon emissions, improving the way the built environment is designed, resourced, and constructed could have a positive impact on reversing global warming and the devastating impacts of climate change. Changes,

The reasons for the design and construction industry’s environmental challenges and uncertainties vary, but certain structural weak points contribute to the problem.

For example, half of all U.S. state jurisdictions still use 2009 or older energy codes.9 Enforcement is a separate and troubling overlay as building departments across the country are under-resourced and reliant on hardcopy code books—lacking capacity to operate electronically. Notably, in a COVID survey conducted by the International Code Council, U.S. building department respondents revealed that: • 7% have the capacity to manage code enforcement exclusively electronically; • 40% do not have the capability to conduct electronic/remote plan reviews; • 30% do not have the capability to complete any aspect of electronic/remote permitting; and • 61% do not have the capability to conduct electronic/remote inspection.10 According to data from the National Association of Home Builders, almost 70% of housing stock in the U.S. was built before 1990, and almost 40% before 1970.11 Energy efficient HVAC systems with modern insulation materials, clean energy sourcing, net zero/positive standards, zero codes,12 and resiliency-inspired

practices simply were not available back then—so there is much work needed to optimize physical assets with current-day innovations.

Improving resource use and lowering energy demand are not only the right thing to do for a sustainable future, but these strategies also can lower operational costs for asset owners. Renewable resources are more cost competitive in the marketplace, and they are more energy efficient. They also offer a cost savings opportunity that codes can and should promote.

Risk management guidance: Owners of design firms are under increasing pressure from the global community to deliver projects that are sustainable with the least amount of greenhouse gas emissions. To remain competitive in a marketplace with increased scrutiny and climate consciousness, design firms will need to keep pace with design strategies aligned with sustainability objectives.

Climate resiliency may now be table stakes In August 2021, the Intergovernmental Panel on Climate Change released its latest scientific findings and projections on climate.13 This report, and its five-year research process, is one of the most comprehensive assessments of the earth’s climate system and involves 234 leading climate scientists representing 60 countries reviewing over 14,000 research papers. “Unstable” is how the report describes the status of the world’s climate system. It details the alarming pace of warming and its impact with the highest levels of confidence that: • human-caused emissions have warmed our climate;

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such as the electrify-everything movement, more effective use of Cross Laminated Timber in place of steel,7 or improved recycling practices and public policies of construction and demolition waste, could significantly lower emissions (e.g., a staggering 70-80% of construction and demolition waste currently isn’t recycled).8

www.pia.org (800) 424-4244 resourcecenter@pia.org

29

• global surface temperatures have increased faster since 1970 than in any other 50-year period over at least the last 2,000 years; and • sea levels have risen faster since 1900 than over any preceding century in at least the last 3,000 years.

The key takeaway for design firms is that global warming will continue to increase at least until 2050 regardless of how quickly the world pivots to low or no greenhouse gas emissions, and severe weather should be expected for at least the next 30 years. This startling conclusion and the implications on the built environment emphasizes the need to prepare physical assets (i.e., residential, commercial and public infrastructure) to endure severe weather for the coming decades.

From a professional liability standpoint, it’s also critical that design firms are aware that these new scientific findings may make their way into the courts in claims of negligence. Some courts already have taken a broad view in evaluating whether a design firm should have known of the impacts of climate change and should have adapted designs accordingly. With the release of new climate science at high degrees of scientific probabilities, it is important that design firms seriously consider weather impacts to the physical assets they are designing, regardless of project type or size.

Risk management guidance: Design firms should recognize that they have new climate exposures, and they should institutionalize into their practices rigorous communication protocols for discussing climate risks with their clients early in the process. These conversations should be documented, especially when an owner declines investment in resiliency strategies. In claims of negligence, courts and jurors likely will review documentation including emails, depositions, interrogatories to assess negligence and liability.

Having well-documented conversations of climate risks will help design firms positively position themselves in the event of a claim. Another way to mitigate risks includes negotiating favorable contract provisions in professional service agreements, such as informed consent provisions, disclaimers, waivers of liability, or indemnity language. Shifting risks to those who can manage the risk is essential. A firm also might consider limiting liability provisions on climate-related claims from the owner only, and not third parties. Finally, transferring some risk to an insurance partner that offers broad policy coverage, should be considered.

Victor Insurance Managers Inc., part of Victor Insurance Holdings, is one of the largest and most experienced underwriting managers of specialty insurance programs in the U.S. For more information, visit www.victorinsuranceus.com.

Lean Construction Institute (bit.ly/30f9jVu)

1

Associated General Contractors of America, 2021 (bit.ly/30k1Gh3)

2

Joint Center for Housing Studies of Harvard University, 2019 (bit.ly/3qvOHmX)

3

4

Ibid.

Associated General Contractors of America, 2021 (bit.ly/30k1Gh3)

5

World Green Building Council, 2018 (bit.ly/31TJFGR)

6

Victor Risk Management, 2020 (bit.ly/3c65vsl)

7

World Economic Forum, 2016 (bit.ly/3onyii0)

8

In conclusion Businesses concerned about prospecting and pipelining their future need look no further than these gaps, and they need to seize on these opportunities while also managing risk in this new landscape. Agents and brokers should advise design firms that they should: • be proactive in communicating and documenting conversations and recommendations with clients; • negotiate contracts beginning with strong risk-mitigation provisions to shift risks they cannot control; and • align themselves with a quality insurance program that offers broad coverage and risk management services.

30

Climate change and the pandemic are driving the issues of our time and the design and construction industry. Whether it’s meeting the demand for safe indoor environments, construction materials, or services that mitigate and adapt to climate change, how those materials and services will be provided and by whom is both a challenge and an immense opportunity for design and construction stakeholders.

PROFESSIONAL INSURANCE AGENTS MAGAZINE

Sustainable Design, 20219 (bit.ly/3HeEYaB)

9

International Code Council, 2020 (bit.ly/3cag2Tj) 10

National Association of Home Builders, 2018 (bit.ly/3C25y32)

11

12

Zero Code (zero-code.org)

Intergovernmental Panel on Climate Change, 2021 (bit.ly/3kuS362)

13

‘I didn’t have time ... ‘ Often, we hear that time constraints and the fast pace in an insurance agency make it difficult to take the proper precautionary steps that could prevent, or help mitigate the time and expense of, an errors-and-omissions claim. However, as indicated in this article, the estimated time spent on an E&O claim that results in litigation is approximately 375 hours (see the chart below), which is substantial.

Stage Initial Response to Demand Early Stage of Litigation Written Discovery Depositions ADR Trial Preparation Trial Testimony Totals

Time Requirements of an E&O Claim Activity Est. Time (hours) Review of File with CSR, Producer 5 Notice to the E&O Carrier 3 Copying and Sending Agency File 4 Initial Meeting with D/C 4 Assisting with, Providing Responses 12 Reviewing Plaintiff Responses 6 Deposition Preparation 6 Deposition, Key Members of Agency 8 Mediation or Arbitration 10 Court Order Settlement Conferences 8 Preparation, Each Key Member 4 Attendance at Trial 80

x x x x x x x x x x x x

Est. # of Employees 2 1 1 3 2 1 3 3 1 1 4 3

= = = = = = = = = = = =

Total (hours) 10 3 4 12 24 6 18 24 10 8 16 240 375

In work hours, this is equivalent to losing one of your staff members for more than 48 work days—over two calendar months (in business days). Moreover, what is unquantifiable is the impact to you personally—as you will be distracted during your home-life and work activities by the looming specter of litigation—and the reputational harm to your agency that you worked so diligently to build.

Steps to save time later It is important to document communications with your customers. This takes a few extra minutes per account, but will save you ample time, and a lot of grief, in the end.

Taking the time to ensure that your employees are knowledgeable in their respective areas and are made aware of E&O exposures—and how to avoid them—can save you a significant amount of time. The first line of defense is to ensure that your licensed employees are earning continuing-education credits on topics designed to address areas of E&O exposure. These can be through your state’s insurance association and other organizations. Knowing areas of concern is key to avoiding the risk in the first place. This requires no additional time, as the CE credits are required. It is merely a matter of selecting courses that would benefit the group. Sharing of knowledge is another crucial means to ensure that your personnel stay current and communicate about E&O exposures.

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UTICA NATIONAL

Auditing files to ensure that the coverages requested by the customer were quoted and bound, and that any declinations by the customer were documented clearly, will help to reduce E&O exposure and alert you to areas of concern.

Right now, if you find it difficult to allocate time for activities that will help prevent or mitigate the time and expense of an E&O claim, you will find it difficult to allocate the time and resources for an actual E&O claim. Proper planning and action can reduce the time your agency spends responding to an E&O claim, which will result in a more profitable agency. Taking the time to review, discuss and document the coverages with your customers will save you copious amounts of time.

As the adage goes, time is money.

Anatomy of an E&O claim The time that an E&O claim consumes starts when the agent first learns of an alleged error from the customer. Often, this is in the form of a demand for money or services from the customer’s legal counsel.

This should prompt the following course of action: Reviewing the agency customer’s file. Depending on how long the customer has been with the agency,

31

this may require a significant amount of time to review the file (estimated time: 10 hours).

Sending a notice to the E&O carrier. This will require the agent to fill out the First Notice of Loss form and provide the relevant documentation and claim background to the claim specialist (estimated time: 3 hours).

Copying the agency file and sending it to the agency’s E&O provider and defense counsel. This may be a voluminous number of documents held in archives or, if the agency document system is electronic, may involve printing a significant amount of material (estimated time: 4 hours).

Meeting with defense counsel. Once a complaint is filed, defense counsel will need to meet with you and your employees, normally at least the three— the producer, the office manager and the customer service representative— who handled the account, in addition to the principal of the agency, to prepare a responsive pleading. This can range from a couple hours via telephone to several days of in-office interviews (estimated time: 12 hours).

Moving into the discovery phase of litigation. This is when the attorneys gather and exchange information relevant to the allegations at issue and starts almost immediately after the answer is filed. This can be time consuming depending on the agency management system (archived paper documents vs. electronic document retention); how long the plaintiff had been a customer of the agency (new customer vs. 20-year customer); the nature of the allegations (certificate of insurance with incorrect information vs. dispute on valuation of property that allegedly has been underinsured for several years); and the date of loss (current policy period vs. alleged errors spanning several policy periods) (estimated time: 24 hours). You also will be asked to review the discovery responses of the plaintiff (estimated time: 6 hours).

Completing the deposition testimony. After written discovery is completed, deposition testimony will be taken of the key parties and witnesses. This will require several meetings with defense counsel to prepare for the examination under oath. You should plan on a day of preparation for each member of your agency who will be required to testify (estimated time: 18 hours). The actual depositions may range in length from a half-day to three days—depending on the legal counsel conducting the examination and nature of the allegations (estimated time: 24 hours).

Conducting alternative dispute resolution. In most jurisdictions, the court will require that the parties attempt to resolve their issues through alternative dispute resolution; such as, mediation, arbitration or court-ordered settlement conferences, prior to scheduling the matter for trial. These will require the attendance of the principals of the agency and their legal counsel, at a minimum, and can range in length from a half-day session to several days (estimated time: 18 hours).

Preparing for trial. If the case is not resolved via alternative dispute resolution, then your defense counsel will need to prepare the case for trial. This may take several weeks with frequent interruptions to your business as your staff members are pulled away to prepare for their part in the litigation (estimated time: 16 hours).

Conducting the trial. Trials can run between three days and three weeks (or longer)—the average trial lasting about one to two full weeks—during 32

PROFESSIONAL INSURANCE AGENTS MAGAZINE

which the principal will need to be in attendance, in addition to any personnel who will be examined and cross-examined under oath (estimated time: 240 hours).

The estimated figures for time and number of employees consumed for the various tasks associated with the time requirements of an E&O claim were estimated based on a review of 15 litigated E&O claims and are intended to be representative of the time that may be required should your agency have a litigated E&O claim. However, every E&O claim is unique and may result in more, or less, time being consumed depending on factors including, but not limited to, the nature and value of the claim, age of the claim, agency size, number of parties to the litigation, motivation of the parties and the legal complexity of the issues presented.

Utica National Insurance Group and Utica National are trade names for Utica Mutual Insurance Company, its affiliates and subsidiaries. Home Office: New Hartford, NY 13413.

This information is provided solely as an insurance risk management tool.

Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice, or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided.

You are encouraged to consult an attorney or other professional for advice on these issues. © 2021 Utica Mutual Insurance Company

Learning Is Snow Much Fun! Celebrate the New Year with virtual classes!

PIA Northeast is offering plenty of opportunities in 2022 for independent agents to learn more in a virtual setting and earn continuing-education credits!

Don’t miss these webinars coming up in January: Oops! I Did it Again... Errors & Omissions Claims^FF^UN Thursday, Jan. 6, 2022 | 1-4 p.m. EST

NYCE: TBA | NJCE: 3 GEN | CTCE: 3 PC | CEU: N/A | VTCE: N/A

Commercial Inland Marine Coverage 2022 Tuesday, Jan. 11, 2022 | 9 a.m. - Noon EST

NYCE: TBA | NJCE: 3 GEN | CTCE: 3 PC | CEU: 3 Producer PROD | VTCE: 3 General

Commissions and Service Fees Refresh Wednesday, Jan. 12, 2022 | 10 - 11 a.m. EST

NYCE: TBA | NJCE: TBA | CTCE: TBA | CEU: N/A/ | VTCE: N/A

Personal Lines Cancellations Refresh Thursday, Jan. 13, 2022 | 10 - 11 a.m. EST

NYCE: 1 BR, C3, PA, PC | NJCE: TBA | CTCE: TBA | CEU: TBA | VTCE: TBA

Business Auto: Insureds, Endorsements, and Exclusions Tueday, Jan. 18, 2022 | 9 a.m.- Noon EST

NYCE: TBA | NJCE: 3 GEN | CTCE: 3 PC | CEU: 3 Producer PROD | VTCE: 3 General

Insurance and Ethics - What is the “Right” thing?

Wednesday, Jan. 26, 2022 | 10 a.m.- 1 p.m. EST

NYCE: TBA | NJCE: 3 ETH | CTCE: 3 PC | CEU: 3 Ethics PROD | VTCE: 3 Ethics

Register: (800) 424-4244 • pia.org • education@pia.org

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PIA is here to help you navigate through uncertain times, so let’s make sure you have great errors-and-omissions coverage at a competitive price.

Why PIA Is the Best Choice for E&O • Our professional liability and cyberliability programs are designed for your agency’s needs and risk exposures • Critical coverage options—especially important when many agents are working remotely • Top-rated, stable E&O carriers • Experience & expertise from our team

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Hiring: Employer liability, customer theft and more Hemp and marijuana Q. Under the 2018 Farm Bill, what is the difference between hemp and marijuana?

A. With the passing of the Agriculture Improvement Act of 2018—also known as the 2018 Farm Bill—hemp agriculture and products became legal in all 50 states. Hemp plants are defined as any cannabis plant that has 0.3% or less tetrahydrocannabinol, the chemical that creates the psychological effect of marijuana.

Be aware that just because federal law has legalized hemp products, cannabis exclusions in policies may encompass these products in the same manner as marijuana.—Dan Corbin, CPCU, CIC, LUTC

Employer liability for misrepresentations in the hiring process Q. Suppose an agency hired two new members to its management team.

During the hiring process, both candidates were told, “When the current vice president retires, you will get her job.” Obviously, both applicants cannot get the promotion, but the agency wanted to entice both of them to join the staff and eventually determine who would be the better fit for the vice president’s job later. By doing this, is the agency incurring any liability?

A. Yes! Courts in states across the country have opined on cases that deal with fact patterns similar to this, and they have come to similar conclusions—both negligent and willful misrepresentations made to an employee at the time of hire can lead to the company incurring liability in the event of a lawsuit— including punitive damages.

A few notable cases dealt with explicit, but ultimately false, promises of advancement or misstatements about the company’s health. Here are some examples of the conduct that can lead to a finding of liability against an employer: • a company hiding the fact that the pension plan, specifically asked about in the interview, was due to be eliminated shortly after the new hire’s arrival; • a company misrepresenting its financial health to a hire who specifically asked about it;

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• a company misrepresenting the status of a major lucrative contract with a client (Stehm v. The Nordam Group Inc., OK Ct. App., No. OK CIV APP 94, 2007); and • a company misleading a hire about its executive succession plans (Dowie v. Exxon Corp., 12 Conn.L.Trib. 29).

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In these cases, courts found against the hiring entities, which had to pay for the new hire’s relocation expenses and other costs, and punitive damages.

In general, if in the hiring process, a company makes representations regarding vacation, pay, advancement, bonuses, benefits, etc., the corporation is obligated to follow through on those promises. The same holds for a situation in which an employee asks, “Will you make me sign a noncompete?” and the company representative answers, “No”—the hiring company is bound by that, unless the two parties renegotiate later.

The takeaway message is that employers must be careful about making careless promises to a prospective employee. Just as the law allows employers to take action against employees who misrepresent themselves in the hiring process, the law also protects jobseekers from being misled. A business must be

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careful not to make any definitive representations to a prospective hire that it knows to be false or should know to be false.—Clare Irvine, Esq.

Transgender operators Q. How does a producer address transgender operators when placing auto insurance?

A. According to Bankrate: “In all 50 states, transgender individuals are legally allowed to change the gender on their driver’s license. But, the process can be challenging. Some states require a birth certificate amendment and/or proof of gender-affirming surgery. Other states require a letter from a physician confirming that the individual is or has undergone hormone therapy.”

The process of changing the gender on a driver’s license is different in every state. Some states, such as New Hampshire and Vermont, permit an “X” designation in lieu of “M” and “F” for non-binary, intersex or gender nonconforming individuals. See the following link for information on changing the gender marker on a driver’s license in all 50 states, plus Washington, D.C.: www.bankrate.com/insurance/car/changing-gender-on-license.

Classifying and rating transgenders is not going to be easy. Because this gender assignment is so new, rate filings have not been made in most states. Insurers will need historical loss data for “X” drivers. However, California, Hawaii, Massachusetts, Pennsylvania, North Carolina and Montana have promulgated regulations that remove gender from the auto insurance rating process.

There is no consistency in the treatment by insurers, so you will need to obtain guidance from the insurer with which you are placing the risk.—Dan Corbin, CPCU, CIC, LUTC

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Theft from customer Q. We insure a beauty salon under a commercial general liability policy. One day, robbers walked in and took a $10,000 ring worn by one of the salon’s clients. What will happen if the woman sues the salon for the value of the ring?

A. If the salon is sued under some theory of its negligence, the insurer will be obliged to defend the salon.

If the salon is found legally obligated to pay for the ring’s loss as damages, the loss would be covered under the premises coverage of the CGL. The exclusion found in 2.j. for “personal property in the care, custody and control of the insured” would not apply in this case because the ring was on the customer’s finger (in her control) at the time.

However, if she had been asked to remove the ring—say for a manicure—the exclusion could possibly be invoked by the insurer, in which case the salon would have to look to its available property coverages.

—Dan Corbin, CPCU, CIC, LUTC

‘Active duty’ clarification Q. A company told us that a person in boot camp/basic training is not considered to be on active duty, so it will charge the person for the insurance premium until he or she has passed basic training and becomes active. Is this correct?

A. No. According to the local Army Recruiting Office, a person in basic training is considered to be on “active duty.”—Dan Corbin, CPCU, CIC, LUTC

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