FEBRUARY 2022
DONNA ROPER ON HER CINDERELLA-STORY CAREER PATH
EXCLUSIVE MEMBER MAGAZINE
ALSO INSIDE INSURING VACANT COMMERCIAL PROPERTY
YOUR CUSTOMERS’ NEEDS OUR RANGE OF OPTIONS We offer your customers a menu of coverage options. From food spoilage loss to cooking equipment protection and more, we’re prepared to serve your restaurant customers. Trust in Tomorrow.® Learn more today. To find out more about what we can do for you and your customers, contact David Wehr, Sales Manager, at david.wehr@grinnellmutual.com. AUTO | HOME | BUSINESS * Products available in Pennsylvania only
grinnellmutual.com “Trust in Tomorrow.” and “Grinnell Mutual” are registered trademarks of Grinnell Mutual Reinsurance Company. © Grinnell Mutual Reinsurance Company, 2021.
FEBRUARY
2022
CONTENTS FEATURED 4
REPLACING PROFESSIONAL LIABILITY REQUIRES ATTENTION TO DETAIL Agency E&O-prevention expert Curtis Pearsall shares considerations when remarketing your customers’ professional liability coverage.
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> > > > 10 JOIN US ON SOCIAL MEDIA: Facebook.com/IABforME LinkedIn.com/company/IA_and_B Twitter.com/IA_and_B YouTube.com IA&B is the premier resource and champion for independent insurance agents in Pennsylvania, Maryland, and Delaware. Periodical postage paid at Mechanicsburg, PA and at additional mailing offices. Postmaster: Send address changes to Insurance Agents & Brokers, 5050 Ritter Road, Mechanicsburg, PA 17055. Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2022-2, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B. Copyright 2022. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and/or other professional advisors concerning specific matters before making any decisions. We disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.
Q&A WITH DONNA ROPER Donna Roper, VP of Operations/Principal at IA&B Member Agency McConkey Insurance & Benefits, shares her Cinderella-story career path and offers tips on team building, recruitment, and retention. VACANCY: HOW REMOTE WORK SHEDS NEW LIGHT ON AN OLD CONDITION Do you know exactly how a vacancy condition is triggered and if it applies to a loss? IA&B Education Consultant Kevin Amrhein delves into these timely coverage questions.
MONTHLY 2
PRESIDENT’S MESSAGE
3
CLAIRE-IFICATION
6
NEWS & NOTES
16
PICS & POSTS
19
GET TO KNOW...
21
UPCOMING LIVE WEBINARS
IABforME.com |
1
PRESIDENT’S MESSAGE
A SIMPLE SOLUTION IN COMPLEX TIMES As we forge ahead in uncertain times, keeping those things in our control simple may be the key. I’d like to suggest you take a look at IA&B’s market access program – Independent Market Solutions (IMS). It allows members a quick and easy way to expand their markets, without the pressures that come with direct carrier appointments. Simplicity comes in carriers like Attune and V3 with cutting-edge online platforms that allow you to quote quickly on your own. With Attune, you get a robust small commercial market; with V3, a comprehensive workers’ compensation product. Both can allow IA&B agents to expand their commercial appetite. It’s also simple to place niche risks, like jewelry and hospitality coverage, through IMS. And standard carriers like Travelers, Progressive, and MetLife give you an easy way to expand your agency mix. Through a quick and easy application process, you have access to any or all of these carriers. You get extremely competitive commission rates on the business you write, and there are low to no production requirements – much less stressful than those requirements you have when directly appointed. IA&B built IMS – which is a partnership of 14 state associations like IA&B – at the request of members and will continue to expand it. As this program grows, it will represent a significant book of business. That aggregation of business will benefit all agencies that are writing in this program. You can learn more at IABforME.com/market-access-for-yourcustomers/#IMS and then sign up at IMSaccess.com. Since this is a state-run market access program, you can reach out to us at any time with questions, feedback, and suggestions. IA&B Vice President – Membership Tim Wonder is managing this program and can be reached at TimW@IABforME.com or 800-998-9644, ext. 351.
INSURANCE AGENTS & BROKERS 5050 Ritter Road | Mechanicsburg, PA 17055 191 Main Street | Annapolis, MD 21401 800-998-9644 | IABforME.com
IA&B BOARD OF DIRECTORS OFFICERS Richard M. Rankin, CIC, Chair Lancaster, PA D. Bradley Rosenkilde Jr., Vice Chair Hunt Valley, MD
MEMBERS Gregory H. Bennett
Sarah M. Brown, CIC, CRM, AFIS Shrewsbury, PA Andrew Enders, Esq.
Harrisburg, PA
Len Gieseler, LUTCF
Pottstown, PA
Jason R. Hess
Coraopolis, PA
Lisa A. Leach Goth, CIC
New Bethlehem, PA
Christopher J. Miller, CIC
Jonestown, PA
Michael A. Papa, CIC, MBA
Hunt Valley, MD
William H. Purdy
Sunbury, PA
Kent Reynolds, CIC
Hagerstown, MD
Jason Rodriguez
Wilmington, DE
Donna Roper
York, PA
Candace Shoupe, AAI, AIC
New Castle, DE
Tara S. Silfies, CPCU
Bethlehem, PA
Robert L. Smyrl Jr., CIC
Hatfield, PA
Michael Thomas
Gambrills, MD
Sheila Wells, CIC, CISR
Rehoboth Beach, DE
J. Marshall Wolff, CIC, CPCU Easton, PA
NATIONAL DIRECTORS
Best,
Michael P. Ertel Sr. (PIA) Columbia, MD G. Greg Gunn, CIC (IIABA) Lemoyne, PA
Jason F. Ernest President & CEO
2
Bel Air, MD
FEBRUARY 2022
Diane Hornung Hanby (IIABA) Wilmington, DE
CLAIRE-IFICATION
CLAIRE-IFICATION IA&B Vice President - Advocacy Claire Pantaloni, CIC, CISR Are you a member with a question? Contact Claire to find the answer at 800-998-9644, ext. 604 or ClaireP@IABforME.com.
QUESTION: Can a producer filing for bankruptcy jeopardize his license?
ANSWER: In the case of bankruptcies, our three states are fairly consistent in their interpretation of the statute. Here is how our Delaware, Maryland, and Pennsylvania insurance regulators currently handle producers’ bankruptcies.
DELAWARE
MARYLAND
PENNSYLVANIA
Business bankruptcies or personal bankruptcies involving funds held on behalf of others must be reported to the Delaware Department of Insurance (DOI). If it is a personal bankruptcy that does not involve funds held on behalf of others, the DOI does not need to be notified.
If it is a personal bankruptcy only, the Maryland Insurance Administration (MIA) would not require to be notified. The requirement to notify the MIA only applies to business bankruptcies.
According to the Insurance Department, if it is a personal bankruptcy only, there shouldn’t be any problem with the license renewal. However, as in Delaware and Maryland, if the individual has failed to pay state income tax or is behind in child-support payments, there could be some ramifications: the producer licensing statute contains similar provisions as the other two states. If the Pennsylvania Department of Revenue indicates that the producer is non-compliant with state taxes, then the Insurance Department likely will take action unless the producer has entered into an agreement with the Department of Revenue to come into and maintain compliance.
On the other hand, failing to comply with an administrative or court order imposing a child-support obligation, or failing to pay state income tax or comply with any administrative or court order directing payment of state income tax can cause serious problems as they are, by statute, acceptable reasons for denying a license. Such issues should be addressed with the bankruptcy attorney and the DOI upfront. Losing a producer’s license after filing for bankruptcy would be both devastating and counterproductive for all parties involved by depriving the producer of his ability to earn a living.
The failure to pay state income tax or a child-support obligation, however, also would trigger the Maryland producer licensing statute and could jeopardize a license renewal. If there are taxes owed to the State of Maryland that are not the subject of a repayment agreement, the Comptroller’s Office will notify the MIA, and the licensee will not be allowed to renew his/her license. For child-support obligations, notification from the child support agency results in the suspension of the producer’s license until the obligation is resolved. Any producer contemplating an individual bankruptcy should voice these issues with the bankruptcy attorney and/or discuss it upfront with the MIA in order to prevent any fallout. IABforME.com |
As a result, it is best to err on the side of caution and pay close attention to any state income tax debt as well as any child-support obligation with the bankruptcy attorney before proceeding. As in Continued on page 5 3
REPLACING PROFESSIONAL LIABILITY REQUIRES ATTENTION TO DETAIL By Curtis M. Pearsall, CPCU, AIAF, CPIA
Much has been written about pricing increases, with professional liability probably most heavily impacted. This is prompting agencies to remarket the coverage, hoping to secure better pricing and terms. This can be fraught with problems unless your agency has a strong focus on details. What makes management of liability troublesome is that there is virtually no standardization of carriers’ coverage forms. 4
Consider these key issues:
MARKETING TIMEFRAME
THE APP
Allow sufficient time to propose the coverage, as the marketplace is currently difficult to predict.
Accuracy is critical, so have the client complete the app. At minimum, ask the questions and document the answers accordingly when meeting with the client. Ask the client to review and sign the app to ensure the information was taken down correctly. Information may have changed since last year, so be sure the app reflects current information. FEBRUARY 2022
REVIEW THE CARRIER PROPOSAL Ensure the coverage requested is the coverage proposed – which is difficult to do without reviewing the proposal. Secure a specimen form to identify any issues, especially reductions, which need to be
COVERAGE CORNER
brought to the client’s attention. Provide the client with the specimen form to enable them to review it and identify any issues of concern. Concern should be heightened when the coverage is reduced. Coverage issues that can vary from one carrier to another include, but are not limited to, the following:
WHAT ACTIVITIES ARE COVERED/ EXCLUDED? Significant differences involve the description of covered professional services/covered activities. Providing the client with a specimen form will be especially helpful if a problem subsequently develops. Just because the activity is mentioned on the application does not mean coverage for that exposure is being provided. Review exclusions with the client to determine, to what degree, those exclusions are of concern.
DEFENSE COSTS AND HOW THEY WORK Defense costs can apply “in addition to” the limit of liability or “within” the limit of liability. The basic duty is to obtain the coverage requested. The customer makes the decision as to what to purchase. It would be better to offer the options and let the customer decide. Create a paper trail. Documenting these discussions in an email to the insured is critical.
DEDUCTIBLE OR SELF-INSURED RETENTION A deductible can apply to defense costs and the judgement, or possibly only require payment of the deductible if the client is determined to be liable. A self-insured retention may require the client to handle their defense until the limit is reached. Make sure your client understands their obligations at claim time.
Utica National Insurance Group provided this article, written by Curtis M. Pearsall, CPCU, AIAF, CPIA. IA&B is a proud and exclusive agent of the Utica National E&O Program for Pennsylvania, Maryland, and Delaware. Visit IABforME.online/ insurance or call 800-998-9644, option 3 to learn more. This information is provided solely as an insurance risk management tool. Utica Mutual Insurance Company and the other member insurance companies of Utica National Insurance Group (Utica National) are not providing legal advice, medical 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
WHO IS INSURED? This is a common area where professional liability policies can vary from carrier to carrier.
IS THERE ‘FULL PRIOR ACTS’ OR A ‘RETROACTIVE DATE’? Professional liability is typically written on a claims-made form. There have been many large E&O claims dealing with a misunderstanding of this coverage form. The retroactive date will play a key role in whether there is coverage for a specific incident. Secure full prior acts coverage. If the professional liability contains a retroactive date, bring it to the customer’s attention and explain the significance.
CLAIRE
Continued from page 3 the other states, contacting the Insurance Department ahead of time could be helpful as well. Note that the Pennsylvania Insurance Department is in the process of an internal review (as of November 2021) and may make some changes in the future. Finally, also keep in mind that in all three states, carriers have latitude to deny an appointment to an individual
IABforME.com |
with a personal bankruptcy, if they so choose, independently from the license. This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice. Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents & Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/or any other government documents cited in this document.
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NEWS & NOTES
EDUCATION SCHOLARSHIP WINNERS
MEMBER BENEFIT HIGHLIGHT
Congratulations to the winter 2022 IA&B insurance education scholarship recipients. The scholarships were awarded in January and will allow member agency staff to attend CIC and CISR courses, CE webinars, and a licensing study course.
CIC COURSE SCHOLARSHIPS Williams Insurance Agency Inc. Rehoboth Beach, DE The Jacobs Company Inc. Columbia, MD
All IA&B member agencies in Pennsylvania and Delaware are eligible for the Trusted Choice Marketing Reimbursement Program (MRP) through our affiliation with the Big I. Take advantage of this member benefit, and put money back in your pocket. New for 2022: Members who take advantage of digital cobranding (for social media ads, online ads, etc.) can now be reimbursed at 75%, rather than 50%, up to $750. These funds are available to all members, even those who used the digital marketing incentive funds in 2021. https://trustedchoice.independentagent.com/stateresources/reimbursement-state/
Zinn Insurance LLC Lebanon, PA
CISR COURSE SCHOLARSHIPS Christie & Associates Pittsburgh, PA Historic Square Agency Erie, PA Zinn Insurance LLC Lebanon, PA
CE WEBINAR SCHOLARSHIPS The Jacobs Company Inc. Columbia, MD
SALE OF IA&B BUILDING
Ziemba Insurance Agency Dallas, PA
LICENSING STUDY SCHOLARSHIP Beth M. Weaver Good's Insurance Agency Inc. Leola, PA IA&B introduced the insurance education scholarship program in 2018 to support the future of the independent agency system. The program aims to develop new talent and support existing agency staff through insurance education. Each year, IA&B awards about $10,000 in scholarships. Scholarships are available for licensing study courses throughout the year. Applications for the next round of scholarships for full designations, designation courses, and CE webinars will be available this summer. IABforME.com/IAB-education-scholarships 6
Thirty years ago, IA&B built the 20,000+ square foot building at 5050 Ritter Road in Mechanicsburg, PA (a suburb of Harrisburg). At the time, the organization had over 50 employees and a dedicated print shop. By 2021, IA&B had a staff of 23, outsourced printing, and had consolidated significantly. No longer using as much of the building, IA&B recently began renting half of it to a tenant. Last summer, that tenant offered to purchase the building. After much consideration and discussion, the IA&B Board of Directors agreed to the sale. The decision was made in the best interest of IA&B members to optimize the use of staff resources, have an appropriately sized building, and position the organization for the future – whatever that may bring. Currently, IA&B staff is looking at new office space in the Harrisburg-area, while maintaining its office in Annapolis, MD.
FEBRUARY 2022
As IA&B President & CEO Jason Ernest shared in his lateDecember email to member agency principals: Our address may change, but our dedication to our members will not. IA&B is, and always will be, a member-centered organization.
NFIP FACES EXPIRATION, AGAIN
Meanwhile, the Insurance Commissioner approved the PCRB’s proposal to create two new class codes: support staff of volunteer ambulance corps and volunteer fire companies. They impact policies effective on or after April 1. See PCRB Circular No. 1773 for more information.
DE CONTRACTOR REGISTRATION ACT
As this issue of Primary Agent went to print, the National Flood Insurance Program (NFIP) was set to expire on Feb. 18. The program most recently was extended in early December when President Biden signed into law a continuing resolution to keep the federal government funded. This marked the 18th short-term extension since the program came up for renewal in September 2017. Watch Agent Headlines for updates.
In case you missed it, late last year the Delaware Department of Labor (DOL) provided guidance to help clients comply with providing proof of workers’ compensation insurance under the Delaware Contractor Registration Act, which took effect July 1, 2021.
PA WORKERS’ COMP UPDATES The Pennsylvania Compensation Rating Bureau (PCRB) late last year proposed loss costs and related rating values that average a -6.25% change effective April 1. At the time of this writing, the Insurance Department was reviewing the filing. Watch Agent Headlines, and monitor PCRB.com, for updates.
Intended to reduce worker misclassification, the law triggered compliance issues with businesses related to providing appropriate proof of workers’ comp coverage. As a result, the DOL provided IA&B with a Q&A that addresses some of the most common issues they’ve experienced. Learn more and access the Q&A by visiting IABforME.com and searching “Delaware Contractor Registration.”
o
s’ C
ion
We distinguish our Workers’ Compensation coverage by providing value-added services before, during, and after a claim. Upfront loss control measures Responsive claims handling Facilitation of quality medical care (when an accident does occur) We’ve been successfully protecting our policyholders and their employees since 1983. Browse all of our products at www.guard.com.
APPLY TO BE AN AGENT: WWW.GUARD.COM/APPLY/ Our Workers’ Compensation policy is available nationwide except in monopolistic states: ND, OH, WA, and WY.
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Q&A with
DONNA ROPER Donna Roper is Vice President of Operations/Principal at McConkey Insurance & Benefits in York, PA. She also serves on the IA&B Board of Directors. Q. Tell us about how you got your start in the insurance industry! And how did your career path unfold? A. Like most people in the insurance industry, it was not my original career choice (in fact, my degrees and certifications were in psychology), but I landed here by good fortune and a bit of a Cinderella story. I was a stay-at-home mom with two young children and had decided to get back into the workforce. Having moved to the area from Texas, I didn’t know a lot of people here, so I took a job as a temporary employee with McConkey, hand-addressing invitations to their 100th anniversary party. Several months later, the agency was looking for a receptionist to fill in while theirs was out on sick leave. The position became permanent, and I gladly took it. McConkey took a leap of faith with me, as I did with them, and after about a year, I was promoted to Administrative Supervisor. Not only did that role include supervising the Admin team, but it also included serving as the IT person, HR resource, and manager of accounting. I did a lot of studying in the evenings for those roles, as I had never been exposed to any ofThree them.generations... It was such an exhilarating challenge! From there, my role continued to expand as the agency grew. I was given opportunities that I would have never dreamed of if I were designing my career. I lead the organization through the installation of a true network system and was instrumental in designing our current office space. When asked over the years about my ultimate career goal, even from my days as the receptionist, I would always answer that I wanted to be a partner in the organization. I was told that it was a lofty 8
goal, as I was not a revenue generator. But I worked hard to prove my worth, and eventually McConkey took yet another chance on me. That dream came true, and I am now the VP of Operations. I truly started at an entry level position, as a temporary employee addressing envelopes, and have worked my way up. I love to share this story with our new employees as a real example of how persistence and hard work can take them far in their career with our organization. Q. As vice president of operations, what does your typical workday look like? A. There is no such thing as a “typical workday” for me, and that is what I love about my job. I do start off each day by meeting with our CEO and HR Director. This gives us focus on what issues are pressing and how we can continue to advance the company. From there, I am in touch with all the divisions that I oversee. We work hard to hire and develop strong managers, so they make my job easy. I have a direct line of oversight to HR, IT, Finance and Accounting, Administration, and Compliance. And, operationally, issues with the building and its maintenance. These days [interview occurred in late December 2021] our office is working on a remote schedule, where employees are given the flexibility to come into the office if they choose, but most are working from home. I have elected to work full-time in the office, to make sure that all is running smoothly in-house. I spend probably half my day in front of a camera these days, on Teams and Zoom meetings with my coworkers.
FEBRUARY 2022
ON THE COVER Q. One of your focuses is on team building. What tips can you share with other agency principals who want to build a more cohesive team?
Q. Tell us about your charity of choice, Second Wind Dreams!
A. I could talk about team building all day, as this is one of my passions. One key tip is communication, which is imperative in building and leading a team. At McConkey, we have found success in over-communicating, especially during the pandemic. With a hybrid workforce, we must work even harder at communicating, but it pays off with a strong, cohesive team moving in the same direction.
A. Giving back to the community is so important to McConkey. One charity that I am involved in is called Second Wind Dreams. This non-profit organization works to change the perception we have of the elderly. They have a stellar training program that teaches geriatric sensitivity to caregivers. In addition to that, they have programs that fulfill dreams of seniors, granting them the opportunity to do activities they have only dreamed of doing.
Communications should be positive and encouraging, recognizing the strengths of each team member. When you lead with optimism, it brings energy to your team. I always say, “See the challenges as opportunities,” and I truly believe that. Challenges give you the chance to grow and conquer obstacles that you never thought possible. My team has heard this line many times over the years!
One dream fulfillment that I was involved with created the opportunity for an elderly gentleman that had sacrificed his career in music to provide for his family. His dream was to be an orchestra conductor, and Second Wind Dreams gave him the chance to just that during a dress rehearsal. The smile on his face and the tears in the orchestra’s eyes were a sight to behold.
Another key tip is setting up a mentoring program, whether it be formalized or informal. I promise the time you put into mentoring your team members comes back to you a thousand-fold.
Q. When you’re not working, where would we find you and what would you be up to?
Q. Industry perpetuation is top of mind these days. What have you found most successful for recruitment and retention? A. At McConkey, we have found a lot of success with building our team from the ground up. We’ve invested in our future by putting together programs that effectively train smart, young professionals. Our well-established intern program has led to great hires. We were fortunate to offer three paid internships this past summer and always look forward to our interns returning during their college breaks. These interns are given meaningful projects and many opportunities to learn the insurance business.
A. When I’m not working, you can probably find me in the kitchen at home. I love to cook and am always experimenting with new recipes and techniques. I have three grandkids who are learning to love to cook too, and one of my favorite things to do is teach them family recipes. These are the same recipes that I taught my own children, and that my mom and grandma taught me. Family traditions and stories are important to me. I guess my mentoring carries over from the office into my home life!
We also have entry-level positions in each division, trainees or assistants, who start with the basics and work hard to get their insurance licenses. IA&B has been such a valued partner with us on this, providing excellent education and licensing courses for our employees. Once the assistants are licensed, they are given their own book of business to service and are well on their way to a rewarding career in insurance. We are very fortunate at McConkey to have a great retention rate with our employees. I will credit that to our career path counseling, mentorships, and fantastic employee programs. We like to keep everyone engaged here, with creative and fun ways to get involved in the agency. IABforME.com |
Donna and her grandchildren
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: y c n a c a V
s d e h S k r o W e t o m e R w Ho n o i t i d n o C d l O n a n o t New Ligh Do you know exactly how a vacancy condition is triggered and if it applies to a loss? On the following pages, IA&B Education Consultant Kevin Amrhein delves into these timely coverage questions.
BY KEVIN C. AMRHEIN, CIC, CBIA 10
FEBRUARY 2022
VACANCY
“Remote me in or check me out.” - A common demand during America’s ‘Great Resignation’
Here are a few things you already know: ▲ In the last year, millions of people quit their jobs, turning some already-depleted workplaces into ghost towns. ▲ Of those employed, millions have resisted return-tooffice mandates, demanding a continuation of remotework policies indefinitely. ▲ A shift to remote work is contributing to soaring commercial office vacancies with no clear picture as to when/if they will recover. Pivoting to a discussion on coverage, here are a few things you already know: ▲ Many standard commercial property insurers don’t like insuring vacant spaces. ▲ Insuring a vacant commercial property can be challenging, pricey, and from a coverage standpoint, lacking. ▲ If enforceable, a policy’s vacancy provisions are confusing and punitive. Perhaps you count yourself among the few who know exactly how a vacancy condition is triggered and will apply to a loss. If not, you’re not alone. The number of inquiries I’ve received within the last year, many from industry pros whom I hold in high regard, has been staggering. It’s been a few years since I’ve written about this issue, and considering the continued decline of occupancy among the hardest-hit sectors of commercial property ownership
IABforME.com |
– namely service (including office) and retail – I thought a refresher in order. The form language cited in this article is from the ISO’s Building And Personal Property Coverage Form (CP 00 10 10 12).
LOSS CONDITION #6 – VACANCY I’ve had the unique opportunity on many occasions to ask rooms full of people to say in a word or two what they think the word “vacant” means in general terms. Unsurprisingly, “unoccupied” is the most common response. When applied to the meaning of “vacant” as described in the policy, the good news is that they’re right. The bad news is that they’re wrong. Ummmm … huh? While insureds won’t react well to any punitive insurance policy condition, expect frustration to be exacerbated when the condition seems to defy conventional wisdom. Considering what many people believe “vacant” means, this loss condition appears to do just that. Yuck. We must prepare to meet resistance when explaining this condition. Due to the punitive nature of its enforcement at loss time, it’s imperative that our explanation is clear and acknowledged. Continued on page 13
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Thank You A sincere thank you to our Platinum Partners.
Interested in becoming a partner? Reach out today. Tim Wonder, IA&B VP-Membership 800-998-9644, ext. 351 | TimW@IABforME.com
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FEBRUARY 2022
VACANCY
WHAT ‘VACANT’ MEANS WHEN THE INSURED IS A TENANT Part a.(1)(a) of the vacancy loss condition states the following: When this policy is issued to a tenant, and with respect to that tenant’s interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations. In this subsection, a notable source of confusion is the undefined term “customary.” One can easily foresee an argument between the business owner and claims adjuster as to how much stuff is needed in the space for the business to operate. Should the latter be victorious, the space is considered vacant. It’s worth noting at this point that, depending on the date the loss occurs, there may be no enforceable penalty. More on this later.
WHAT ‘VACANT’ MEANS WHEN THE INSURED IS A BUILDING OWNER OR GENERAL LESSEE Part a.(1)(b) of the vacancy loss condition states the following: When this policy is issued to the owner or general lessee of a building, building means the entire building. Such building is vacant unless at least 31% of its total square footage is: (i) Rented to a lessee or sublessee and used by the lessee or sublessee to conduct its customary operations; and/or (ii) Used by the building owner to conduct customary operations. Perhaps most notable is the unusual square footage threshold percentage and the inevitable uncertainties over how precisely it’s to be measured. Further, the undefined term “customary” appears again in this subsection. It’s within this form language that conventional wisdom is most obviously challenged. Specifically, it is entirely possible that an occupied building is considered vacant.
IABforME.com |
For example, consider a commercial building with four suites of equal square footage. Your insured owns the building and occupies one suite for office space. The other suites are rented to various tenants. Over time, the tenants non-renew and eventually all remaining suites are vacated, leaving the owner’s office as the building’s sole occupant. Only one fourth of the building’s square footage is occupied, falling short of the 31 percent threshold.
A NOTABLE CAVEAT: BUILDINGS UNDER CONSTRUCTION OR RENOVATION Perhaps the insured feels confident that occupancy will not be an issue and decides to move forward with construction of its new commercial building. Or perhaps the insured took advantage of low interest rates/federal grant programs to make substantial renovations. In either case, the language in Part a.(2) ensures that the condition will not apply to a loss: Buildings under construction or renovation are not considered vacant.
WAYS TO CHANGE WHAT ‘VACANT’ MEANS Endorsements may be available. For example, ISO’s Vacancy Changes endorsement (CP 04 60) may be used to keep the vacancy condition dormant by decreasing the square footage requirement to as low as 10 percent. This endorsement would be an ideal solution for the owner of the four-suite building used in the prior example. Note that occupancy is a required trigger. Thus, a policy written for a building that is unoccupied would not benefit from this endorsement. Another possibility is to request an endorsement commonly referred to as a vacancy permit. For example, some standard property insurers may offer a permit endorsement which keeps the vacancy condition dormant and allows the current cover to extend to an unoccupied building subject to additional terms and premium. Continued on page 14
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VACANCY
WHAT HAPPENS WHEN THERE’S A LOSS Should a covered loss occur within 60 days of the building becoming vacant, there is no penalty. Should a covered loss occur at a building which has been vacant for more than 60 consecutive days, a punitive adjustment will be made to the amount payable. In some cases, the adjustment will reduce the amount payable by 15%. In other cases, the adjustment will reduce the amount payable to zero. The determining factor is the cause of loss as described in Parts b.(1) and b.(2):
Ensure that discussions with prospects and insureds address the condition and obtain acknowledgement that the policy’s interpretation of the term “vacant” supersedes any generally perceived meaning. That’s all for now. Until the next round … cheers! Kevin C Amrhein, CIC, CBIA is IA&B‘s education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME. com/education.
If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs: (1) We will not pay for any loss or damage caused by any of the following, even if they are Covered Causes of Loss: (a) Vandalism; (b) Sprinkler leakage, unless you have protected the system against freezing; (c) Building glass breakage; (d) Water damage; (e) Theft; or (f) Attempted theft. (2) With respect to Covered Causes of Loss other than those listed in b.(1)(a) through b.(1)(f) above, we will reduce the amount we would otherwise pay for the loss or damage by 15%.
TAKEAWAYS FOR THE AGENT
CP COVERAGE COURSE Learn more about commercial property coverage conundrums during next month’s live webinar. Member price is only $75. COMMERCIAL PROPERTY – DIRECT VS. INDIRECT DAMAGE MAR 31
To say the Vacancy Condition is punitive and will cause significant financial damage to the insured if applied to a loss settlement is entirely accurate. This thing is bad news. Understand that the condition is impartial as to why the vacancy occurred. Whether it’s due to the newness of a recently completed building, horrible economic conditions, seasonal risks, or any other circumstance, the application of the condition is unchanged. Reach out to property carriers to inquire about solutions such as endorsements designed to change the meaning of “vacant” and/or curb the severity of the condition.
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LEADER OF THE Craig Mader, a long-time AgentPAC contributor and IA&B leader, shares what drives his support. “When you realize that the state government, which oversees and regulates our businesses, is making uninformed decisions based on hearsay that impacts each of us, you have to play defense. That comes in the form of advocacy. The only way of achieving that is to financially support our advocates and their efforts. If you profit from this business and desire to grow your asset (your agency), you cannot do it alone. We must support advocates who understand the Independent Agency system. Your livelihood may be in more danger than you realize.” AgentPAC is IA&B’s state-based, bipartisan political action committee which supports the election of candidates and legislators who understand the issues important to the independent agent and broker community. Support of these candidates who are critical to IA&B’s government affairs work would not be possible without AgentPAC contributions from engaged IA&B member agents. Join the effort and learn more about AgentPAC by visiting IABforME.com/ political_advocacy.
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STAFF PROFILE
Get to Know … Jessica McWilliams IA&B Education Senior Director
Years with IA&B: I have been with IA&B for nearly 24 years – over half of my life! I started with IA&B (PIA at the time) straight out of college. I literally grew up here!
Role at IA&B: I have spent my entire tenure within the Education Department. I started as an Education Manager, booking speakers and traveling about 100 days a year. I now oversee the Education Department.
Best part of your job: The people. If the pandemic has taught me nothing else, it surely showed me how important people are in my work life. I love our members, education participants, and faculty. I’ve missed seeing them all over the last two years and have enjoyed reconnecting in recent classroom programs. I’m also extremely blessed with the best team and work family!
Favorite sports team: Pittsburgh Steelers!
Favorite vacation spot: Anywhere with sun and water, whether it’s a beach with waves (and no sharks) or a lake with a boat and fishing!
You can reach Jessica at: 800-998-9644, ext. 503 JessicaM@IABforME.com
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We have a better option – a complete, customizable Agency Procedure Manual (APM). It’s a collection of electronic documents insurance agencies can use to formalize business procedures and policies.
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E D U C AT I O N SCHEDULE FEBRUARY 2022 Register today! 800-998-9644, option 1 IABforME.com/education LIVE WEBINARS DATE TOPIC
TIME
Feb 2
CISR-Life & Health Essentials
8AM-3:45PM
Feb 8
Agent’s E&O: Duties, Best Practices, Operations, Workflows, and Certificates
1-4 PM
Feb 9
CISR-Commercial Casualty I
1-4 PM
Feb 10
Homeowners in Real Life: Tales of Claims & Coverage
9AM-12PM
Feb 10
Is This Stuff for Real? Understanding & Insuring Emerging Risks
1-4 PM
Feb 15
That’s Personal: Home & Auto Exposures Your Insured Doesn’t Share (and Why That’s Bad)
9AM-12PM
Feb 15
Flood Insurance, FEMA, and the NFIP
1-4 PM
Feb 15-16 CIC-Commercial Casualty Institute
8AM-5PM
Feb 17
Planting the Seed: Agent Strategies to Get and Keep Agribusiness Insureds
9AM-12PM
Feb 17
Chris Amrhein’s “Adventures in Aging”: Social Security and Other Retirement Income Solutions
1-4 PM
Contributing editors: Jennifer Ross Megan Fioretta Sarah Jacoby
Feb 22
Certificates of Insurance and the Coverage Issues that Go With Them
9AM-12PM
Feb 22
Lurking: Surprises in the Contractor’s CGL Policy & Endorsements to Watch Out For
1-4 PM
Sales Account Executive: Laura Gaenzle laura.gaenzle@theygsgroup.com 717-430-2351
Feb 23
CISR-Agency Operations
8AM-3:45PM
Feb 24
The Evolution of Ethics in Insurance
9AM-12PM
Feb 24
Contracts Agents Should Read
1-4 PM
PRIMARY AGENT Editor: Karen Robison KarenR@IABforME.com 800-998-9644, ext. 606
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