JANUARY 2021
WENDY DEIBLER SHARES LESSONS IN LEADERSHIP
AGENTS' E&O UNDER PRESSURE
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CONTENTS
JANUARY
2021
FEATURED 4
HOME RENOVATIONS & FAULTY WORKMANSHIP IA&B Education Consultant Kevin Amrhein, CIC advises on coverage considerations for contractors’ improperly performed work.
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> > > > > 12
Q&A WITH WENDY DEIBLER IA&B Member Wendy Deibler, CIC, CPCU, LUTCF shares her road to independent agency owner and the lessons she learned along the way.
AGENTS’ E&O UNDER PRESSURE After years of stability, the agency E&O liability market is poised for a shift. Experts weigh in on market changes, policy considerations, and risk management.
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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 # 2021-01, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B. Copyright 2021. 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.
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CHAIR OF THE BOARD’S MESSAGE
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CLAIRE-IFICATION
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WELCOME NEW MEMBERS
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NEWS & NOTES
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PICS & POSTS
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UPCOMING LIVE WEBINARS
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CHAIR OF THE BOARD’S MESSAGE
RESOLUTIONS & RESOURCES Happy New Year to each of you! As we relish a fresh start, or re-start after the 2020 lambasting, I encourage you to lean on your agents’ association. The IA&B team has been hard at work on a number of initiatives to help member agencies meet their 2021 goals. In 2021, IA&B will provide a cornucopia of initiatives to improve your access to resources and to enhance your competitive position. IA&B’s website will be totally overhauled, bringing you userfriendly access to resources such as carrier contract information, producer agreement tools, and agency procedure templates.
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 Craig S. Mader, Chair Crofton, MD Richard M. Rankin, CIC, Vice Chair Lancaster, PA
MEMBERS
Also, of particular note, IA&B will focus on Independent Market Solutions (IMS) and Work At Home Vintage Experts (WAHVE). IMS will bring you alternative carrier markets. And I can vouch for WAHVE, which connects member agencies with “pre-tired” insurance agent professionals who are licensed and ready to work remotely to fill staffing gaps. Watch for an informational webinar this month.
Gregory H. Bennett
Sarah M. Brown, CIC, CRM, AFIS Shrewsbury, PA E. Stephen Burnett, CIC, ARM Wilmington, DE N. Lee Dotson, CIC, AAI
Wilmington, DE
Andrew Enders, Esq.
Harrisburg, PA
Len Gieseler, LUTCF
Pottstown, PA
If you or your employees included professional development as a new year’s resolution, you’re in luck. IA&B transformed its continuing education courses from the classroom setting to online presentations, which so many members utilized throughout this pandemic. Hands down, IA&B offers the best in the business.
G. Greg Gunn, CIC
Lemoyne, PA
Bryan C. Hanes, JD
Hagerstown, MD
Jason R. Hess
Coraopolis, PA
Lisa A. Leach Goth, CIC
New Bethlehem, PA
Finally, I suggest reading the feature article on page 12 for an indepth look at the agents’ professional liability market. There are a lot of unknowns ahead of us as the repercussions of 2020 shake out, and in uncertain times, it can help for agencies to have a reliable agency partner of their own. Please consider utilizing IA&B for your E&O and take advantage of what IA&B has negotiated in terms of rates, discounts, and comprehensive coverage.
Christopher J. Miller, CIC
Jonestown, PA
Hang in there! We wish you and your team a happy, healthy, and prosperous 2021. Respectfully,
Michael A. Papa, CIC, MBA Hunt Valley, MD William H. Purdy
Sunbury, PA
Jason Rodriguez
Wilmington, DE
D. Bradley Rosenkilde Jr.
Hunt Valley, MD
Tara S. Silfies, CPCU
Bethlehem, PA
Robert L. Smyrl Jr., CIC
Hatfield, PA
J. Marshall Wolff, CIC, CPCU Easton, PA
NATIONAL DIRECTORS Michael P. Ertel Sr. (PIA) Columbia, MD
Craig S. Mader Chair of the Board
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Bel Air, MD
JANUARY 2021
G. Greg Gunn, CIC (IIABA) Lemoyne, PA 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:
One of my employees is moving across our state line (from Pennsylvania into Maryland). With the pandemic, most staff is working from home. Can he keep his resident license in our state or not?
ANSWER: This question calls for a two-prong answer: How do you determine the “home state” or “resident state” for purposes of licensing? Our three states (Pennsylvania, Maryland, and Delaware) all mirror the Model Act and allow licensees to choose between their principal place of residence and their principal place of business when selecting the home state. So, in your example, your producer doesn’t need to change his resident license and can continue to work for your Pennsylvania agency with a Pennsylvania resident license even if he now resides in Maryland. Does working remotely for an out-of-state agency change your “principal place of business”? No, it does not. We verified with our three states’ insurance regulators that they had a consistent approach to this situation, and they all unequivocally stated that a worker who is working remotely from an out-of-state home location would still be considered to have his or her principal place of business where the agency is located. In addition, here are two things to remember when dealing with a resident “home state”: The license “home state” will drive where the Continuing Education (CE) credits must be taken (or at least where the courses have been approved for CE so that the credits can be assigned to the correct state). Some states have a different definition of “home state,” so it’s always important to check both states’ licensing laws if you’re dealing with an employee with a license outside our three-state footprint.
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.
WELCOME NEW MEMBERS Christopher R. Boyle Agency Oakdale, PA O'Connor Insurance Group LLC McDonald, PA
RETURNING MEMBER Duane Jackson Insurance Agency Inc. Union City, PA
NEW PARTNER Pathpoint
Have a question about your member benefits? Contact: Tim Wonder, VP-Membership 800-998-9644, ext. 351 TimW@IABforME.com
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COVERAGE CORNER
HOME RENOVATION PROJECT? INSURANCE CONCERNS & THE ‘RANDO RENO’ GUY By Kevin C. Amrhein, CIC “If I ever have to quarantine at home again, then doggone it, I’m going to do it with my dream bathroom!” Since COVID, millions of people, stuck in their homes for longer than they ever dreamed possible, took note of their surroundings, made lists, and fueled a nationwide explosion of home renovation projects. Your insured – I’ll call him ‘Kevin’ – is ready for the big bathroom renovation and wisely decides against doing any of it himself. He now has two options: 1) hire a licensed contractor, request
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proof of insurance, and receive a written warranty of work or 2) hire the cheapest guy out there who is unlicensed, has no insurance, and offers no warranty. Which option do you think he’ll choose?
OPTION 2? REALLY? OH, FOR CRYIN’ OUT LOUD, KEVIN Kevin pays a random guy to reno the bathroom, which requires the removal and installation of plumbing and electrical fixtures, floor coverings, and wall coverings. The job is completed, Kevin pays JANUARY 2021
the ‘rando reno’ guy cash, and the problems begin. After experiencing damaging leaks and dysfunctional electrical, Kevin has the work inspected. It’s determined that all work was improperly performed and must be torn out and replaced. Kevin tracks down ‘rando reno’ guy who says he has no insurance, no money, and can’t fix the problem. Since he spent his savings on the project, Kevin’s broke and unable to fund the needed repairs. Kevin files a claim with his homeowner’s insurer.
IS THE DAMAGE INSURABLE UNDER AN ISO HO POLICY? To summarize: among other things, the policy excludes loss to property described in Coverages A and B caused by “faulty, inadequate or defective … design, specifications, workmanship, repair, construction, renovation, remodeling…” There’s an important exception worth noting: “However, any ensuing loss to such property described in Coverages A and B not precluded by any other provision in this policy is covered.” Thus, the adjuster affirms coverage, subject to the deductible, for portions of the wall and floor damaged by the leak, as well as the cost to tear out the leaking pipe. He also affirms that nothing else is covered, leaving Kevin to figure out how he’ll come up with the cash to cover the cost of removing and replacing the remaining defective plumbing fixtures, electrical fixtures, floor, and wall coverings.
IF KEVIN WENT WITH OPTION 1, ALL IS WELL … RIGHT?
®
Sometimes, even reputable contractors are responsible for faulty workmanship. In a perfect world, the written warranty will kick in. In the event it doesn’t (validity issues, limited reimbursement, etc.), the contractor may look to his GL policy for help. Assuming the contractor has an unendorsed ISO CGL, a review of that policy’s exclusions could make finding coverage for Kevin’s loss difficult. Based on the nature of this project, the CGL adjuster likely would cite exclusion l – Damage To Your Work – as justification for denial. In summary, absent any compensation volunteered by the contractor
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Continued on page 7
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NEWS & NOTES CONGRATULATIONS, RACHEL We extend our congratulations to Rachel Ferrell, CISR, commercial lines account manager with Insurance Associates Incorporated in Newark, DE. She received the 2020 IA&B CISR Designation Scholarship last January and completed her designation by late October. “I wanted to further my career, and I felt that the CISR designation was the best place to start,” shared Rachel. Rachel took her first CISR seminar in February, and then shortly after, COVID-19 forced the cancellation of all inperson seminars. By April, IA&B launched an alternative – live CISR webinars. Rachel took the transition in stride, continuing her coursework online. “I loved the virtual seminars,” she said, citing access to more topics without the need to travel. “They were all great, but Elements of Risk Management was my favorite. It really opened my eyes to current topics in the industry.” There’s no stopping Rachel, who already is working toward her next designation. “I’m a huge proponent of continuing education,” she said. “Since our industry is always evolving and changing, it’s best to stay fresh and in the loop. You can never know too much!”
HIRING IN 2021 WEBINAR Looking to hire in 2021? Join us for a complimentary, members-only webinar on staffing tips and trends, presented by Rick Morgan, of Work At Home Vintage Experts (WAHVE). IA&B President & CEO Jason Ernest, Esq. will host the webinar. Tuesday, Jan. 12 11 AM-Noon
IABforME.com/WAHVE
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DE REGULATOR’S LEGISLATIVE PRIORITIES The Delaware state General Assembly will convene on Jan. 12 to begin a new two-year legislative session. In preparation, the Delaware Department of Insurance (DOI) late last fall met virtually with IA&B and other insurance industry stakeholders to outline its legislative priorities – many of which the DOI could not address in 2020 due to the abbreviated legislative session. Auto insurance – clarify that if payment is tendered within 30 days after the end of the policy period or cancellation date, the policy will be renewed; revise the method for an insured to contest a nonrenewal or cancellation from a hearing process to a review by the Commissioner; extend protections against unfair rating practices related to a service member’s deployment within and outside of the country Property insurance – require 30 days’ notice of cancellation of a property insurance policy, except in instances of nonpayment when at least 10 days’ notice will be given Assignment of benefits – limit a property insurance policy’s assignability of rights and benefits only to those persons who have legal authority to represent an insured Viatical settlements – remove the bond requirements for viatical settlement brokers and update a statutory reference from “life settlement brokers” to “viatical settlement brokers” Interstate Insurance Product Regulation Compact (IIPRC) – authorize Delaware to join 45 other states in the IIPRC, which creates uniform product standards for individual and group annuity, life insurance, and disability income insurance products.
TRIPRA DISCLOSURE ENDORSEMENT The Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) Disclosure Endorsement now carries an amended effective date of Jan. 1, 2021. The revised date fulfills the policyholder disclosure requirements for the federal share of reimbursement for eligible insured losses as provided in the Terrorism Risk Insurance Act of 2002 and subsequent amendments, including the Terrorism Risk Insurance Program Reauthorization Act of 2019. JANUARY 2021
COVERAGE Continued from page 5
or recovered via legal recourse, Kevin is left with the limitations in his HO policy discussed previously.
PICS & POSTS Facebook.com/IABforME LinkedIn.com/company/IA_and_B Twitter.com/IA_and_B
SO...WHAT SHOULD THE INSURED DO? Always, always, always go with option 1. There’s no substitute for a written, enforceable warranty of work. Further, while a GL policy may be limited regarding damages resulting from faulty workmanship, some damage caused – such as that to property not considered the contractor’s work, caused by actions of another party (e.g. subcontractor) or caused to the homeowner’s personal property – may be covered.
TAKEAWAYS FOR THE AGENT You simply cannot remind your insureds often enough: Only hire a licensed, insured contractor and verify such. Advise insureds to inquire about a warranty including information regarding how it is funded. The insured should be skeptical of any “guarantee” or anything offered by the contractor that isn’t specifically referred to as a warranty. Note – for certain projects, some states may have rules regarding warranties of work. For example, a limited warranty may be mandatory but subject to waiver, mandatory only for a licensed contractor, or other rules. For information, the insured may wish to contact the appropriate state regulatory agency. Advise insureds to tell the contractor of the intention to have work inspected by an independent party for compliance and integrity assurance. Advise insureds that they should not rely upon a homeowner’s insurance policy to adequately cover any costs resulting from faulty workmanship. That’s all for now. Until the next round … cheers! Kevin C Amrhein, CIC, 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.
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Q&A with
WENDY DEIBLER Wendy Deibler, CIC, CPCU, LUTCF is president and owner of Deibler Insurance Associates Inc., a full-service independent agency in Carlisle, PA. Q. How did you get your start in the insurance industry? A. It was not an intentional career choice. In high school, I had an interest in secretarial work and completed an internship at IBM during my senior year. It was then that I realized I really enjoyed office-type work. Ironically, the first interview I went on was with an insurance company, and I took a job typing policies … back when it was all carbon. From there, I moved up to receptionist and took incoming calls from the various agencies. A local agency owner was impressed with me over the phone, so he took a chance on me – paid for me to get licensed and trained me to be a CSR/agent. If it weren’t for him, I am not sure that I would have continued on in the insurance industry. Q. What prompted you to switch from the carrier side to opening your own independent agency? A. After working in several agencies as a CSR, I had a friend recommend an underwriting position at an agricultural insurance company. It was a fabulous opportunity, and I learned a lot. Unfortunately, a few months later the carrier was acquired by a Texas-based company, and those who did not relocate were laid off. I was searching for a job and still unsure about my future, and then I went to ERIE Insurance. I quickly learned that ERIE was a phenomenal company, and I wanted to stick it out and see what my options for advancement would be. Luckily for me, there were a lot of people who saw potential in me. They gave me opportunities to move up in the company and groomed me to be a district sales manager.
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As I worked with the agencies in my district, I learned a lot from them and realized I had an interest in sales and dealing directly with customers. My hope was to one day buy an ERIE agency, but there weren’t any for sale in the area. Later, as a district sales manager, I was tasked with recruiting additional agencies in areas with lower market penetration, including Carlisle. Having been born and raised in Carlisle and knowing that an opportunity to buy an existing agency may not come to fruition, I took the big leap and decided to start a scratch agency with ERIE. So I gave up my company car, nice salary, annual bonus, and health insurance and started a scratch agency, where I had no income, no health benefits, had to pay rent, buy a car, etc. I was thinking, “What the heck did I just do?” It was clearly a leap of faith. Q. What have you found to be the most challenging and most rewarding aspects of being a small-business owner? A. As far as challenges, I had several, with the largest being management. I thought I was decent at sales, but recruiting, managing, and the day-to-day human resources part I was not so good at. Another challenge was keeping all the balls in the air. I had to learn to delegate and let go of certain responsibilities, which was very difficult. I eventually learned that the recruiting and hiring aspect is crucial if you are going to delegate. I am thankful today to have such a wonderful, loyal, and dedicated staff who I am highly confident in, which makes delegation easier.
JANUARY 2021
ON THE COVER Q. Your team includes several young staff. What advice can you offer for finding, recruiting, and hiring new talent? A. I have had better success finding and hiring people by word of mouth. I can teach anyone insurance, but I cannot teach the qualities that make a great employee and customer service agent – honesty, integrity, ethics, morality, great customer service/people skills, communication skills, the ability to work well with others, and loyalty. So those are the things I look for first. It’s hard to get to know someone from one or two interviews, but seeking candidates from people I know has proven to be more effective. Friends, family, and customers are not going to recommend someone who would not be a good fit.
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Q. This issue of Primary Agent will be released in the new year. As a business owner, insurance producer, and/or community member, what lessons did you take away from a turbulent 2020? A. Learning that you never know what’s around the corner, and knowing how to adapt, and adapt quickly. I never had any employees working from home, so when the stay at home order came down, I had to change a lot of things fast. But my staff was so cooperative that it came together quite quickly. I was worried that customer service to our clients would suffer, but my employees adapted well and didn’t miss a beat. I continued to come to work, by myself, and quickly learned how much I need that interaction with my employees – it was a very lonely place without them. I was happy to have everyone back together in the summer, but with the recent increase in COVID-19 cases, everyone is working safely from home again. Q. Any new year’s resolutions for 2021 that you’d like to share? ‘Tis the season!
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JANUARY 2021
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AGENTS’ E&O UNDER PRESSURE
By Andrea Wells
The agency errors and omissions liability market has enjoyed stable market conditions for years. But that could be changing as agents and their insureds attempt to balance emerging risks in a changing insurance market.
The year 2020 [saw] changes in terms, pricing, capacity, carrier exits and even pandemic-related exclusions to the agency E&O market. “We have seen some changes to deductible structures or increased deductible amounts. We have seen some carriers who have increased premium in what we would call exit pricing. We have seen new business moratoriums and new exclusions,” according to Elizabeth Whitney, head of the U.S. Agents team at Swiss Re Corporate Solutions. “We’ve even had one carrier announce that they were leaving the market.” While the mantra of agency E&O risk management is “document, document, document,” for 2020 it could [have been] “COVID, COVID, COVID,” she said. “It has really created a lot of uncertainty and disruption in the agency E&O markets.” Mark R. Angelucci, resident senior vice president and E&O segment leader for Utica National Insurance Group, describes today’s agency E&O market as “nuanced.” It’s a tale of two markets, he said.
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JANUARY 2021
FEATURE So far, more established agency E&O markets have remained consistent in renewal terms and conditions, according to Angelucci. Utica, which began insuring agency E&O in 1966, is the longest-standing insurance agency E&O program in the country, he said. “But among less established markets, we’re seeing certain markets take hard lines in terms of the limits they’re willing to put out. We’ve seen some rate increases, and even some communicable disease exclusions on policies.” The communicable disease exclusion on an agency E&O policy is new and in Angelucci’s view likely not necessary. “While some professional liability policies cover obviously BI and PD, this one doesn’t,” he said. “I think what they’re trying to do is say, ‘Well, if there is a lawsuit brought against an insurance agent for lack of professional services, or performance, that emanates from a communicable disease, the policy is not covering it,” he said. “But at that point, you’ve got to ask yourself, what are you covering?” he asked. “It’s like excluding fire from a commercial property form,” he said. “I’m scratching my head a little bit over that, but I think what manifests is, a reluctance to provide the coverage.” At this point, the agency E&O market is facing more carrier exits than entrances, Angelucci said. That’s a significant change from just two and a half years ago, where the market saw more carrier entrances than exits, he noted. For the nation’s most populous state, agency E&O market is ever-changing, according to Alan Smith, president and CEO of WIAA Group, based in Rancho Cordova, Calif. WIAA Group is comprised of four organizations, including the Western Insurance Agents Association, a trade association for independent insurance agencies. “Historically in California, there haven’t been a lot of longterm agency E&O players,” Smith said. “Right now, Safeco is probably the longest-term player.” In the past 15 years, WIAA’s E&O program, which includes about 700 agencies, has moved from Reliance to Fireman’s Fund to Munich Re, and now to Arch, Smith said.
HARDENING INSURANCE MARKET HEIGHTENS E&O RISK Among the biggest challenges in the agency E&O market is the stress the current property/casualty market is putting on agents. “Agencies are in a vice with the hardening market on one side and the disruptions caused by the pandemic on the other,” said Brent Winans, vice president of Clear Advantage Risk Management in Delray Beach, Fla., who
has served as an expert witness on over 100 agent E&O cases across the country. “Because of the hard market, many policies are being non-renewed or renewed with higher premiums and less coverage. Policies which were with standard carriers are now being forced into the surplus lines market. Agents are scrambling to get quotes on their renewals,” Winan said. That has placed an enormous new workload on agents. “They are doing all of this while their own operations are dealing with the pandemic,” he said. “It is easy to see how agency mistakes can multiply in this pressure cooker.” One of the big dangers for agency E&O is failure to meet the “mirror test,” Winans said. “That means, is the new policy at least as good as the old one? While laws vary from state to state, if an agent replaces an old policy with a new one, generally the insured is entitled to assume that the new policy is as broad as the old one. If the new policy isn’t, the agent is generally required to tell the insured of the new restrictions,” he said. Winan said that agents sometimes do not read all of the exclusions and limitations in the policies they sell. “The mirror test is especially important when dealing with E&S markets where the nonstandard exclusions in the policy may take real expertise to understand,” he added. “It’s an enormous danger to the agent who’s getting quotes at the last minute,” he said. “The E&S broker may send the quotation with a list of forms and exclusions, but not the actual forms,” he said. “And the agent doesn’t request copies, and only talks to the insured about the limits and the premium and gets a binder. The next day there’s a claim and it’s not covered but would have been covered under the old policy … that could be a problem,” he said. “Whenever you put more stress on the system, there’s more possibility for mistakes in the system. Agencies want to do all they can to lean against that so they protect both their insureds and their agencies.” As “boring as it sounds,” failure to procure coverage is always the number one claim in agency E&O, Angelucci, said. “In turbulent times like these, where carriers are attaching communicable disease exclusions to both admitted coverage placements, as well as excess and surplus lines. Where certain capacity levels are restricted. Rate increases, terms and conditions are being adjusted,” he said. “It’s important for agents to really, carefully, look
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at renewal policies, particularly terms and conditions, and be very complete in their communication to their policyholders, as to what may have changed.”
they don’t have first dollar defense.” Also, compare optional coverages, he said.
Be on the lookout for changes, Angelucci advised. “Agents need to be very vigilant about making sure the terms and conditions are either what was requested by the policyholder, or that they are consistent with the expiring terms and conditions.” If they are forced to move a policy due to pricing or non-renewal, look carefully at the new policy. “We do see a lot of E&O claims coming from moving a policy from one carrier to another, and something was overlooked, usually a sub-limited coverage.” For example, in homeowners’ policies that can be something like jewelry coverage. “One carrier will offer jewelry coverage up to $25,000 without a schedule, but the next carrier will only offer it up to $10,000 and they need any values over $10,000 scheduled. The agent doesn’t catch it, doesn’t produce the schedule, and then there’s a loss.” Angelucci says agents need to be “very thoughtful and very methodical” in policy checking processes and communication to the policyholder.
WHAT TO LOOK FOR IN E&O If shopping in today’s market, Steven Pettersen, WIAA Group’s senior vice president, who oversees the organization’s E&O department, recommends that agents first look at differences in admitted versus non-admitted agency E&O policies. “Non-admitted is where we’re seeing the most change right now,” he said. “The exclusion and endorsements we’re seeing for COVID are being added to the nonadmitted policies, not the admitted.”
Jason Rogers, senior vice president for specialty insurance at Gallagher Affinity, agrees. “As the overall cycle continues to harden and change, we always advise our clients that it’s important that you’re partnering with an advisor, a broker who’s weathered the storm before,” Rogers said. “Those brokers that have the technology capabilities or more importantly, the market relationships that you need to really navigate what is a complex marketplace and a complex landscape.” Like agents do for their clients, due diligence and homework on their own agency E&O advisor and carrier is critical, he advised. “Make sure they have the capabilities that meet your needs.” Another important thing to consider is the agent’s relationship with their E&O carrier. “As the market changes, we always advise it’s important to keep long-term carrier relationships.”
PANDEMIC CLAIMS It’s too early to say how the pandemic will impact the agency E&O market, says Angelucci, but it’s a topic everyone wants to discuss. “We’ve seen some claim activity from COVID-19, no question,” he said. “However, our claim frequency is pretty consistent this year, with what we thought this year would look like, before the pandemic.”
Second, he recommends taking a close look at the agency E&O coverage available on various forms. “Look at the first dollar defense, defense outside the limits. Those are huge factors that a lot of agents may or may not look at when they’re comparing E&O policies, and first dollar defense is a huge asset to have when comparing policies.” Also, he recommends taking a look at deductible options. “We’ve been seeing deductibles as low as $500, but we’ve also been seeing that some carriers are increasing their minimum deductibles to $5,000, even $10,000 to create a smaller premium for the policy. But an agent is going to have to fork over $10,000 if a claim occurs, especially if
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WIAA’s Smith added that risk management advice is critical to consider as well. “I would be very fearful of buying agency E&O insurance from a source that can’t give any risk management advice.”
From wildfires, hurricanes and tornados, to civil disobedience and COVID, there [was] a lot going on in 2020, Angelucci said. But any impact to agency E&O will come after the dust settles. “When a hurricane hits, the hurricane is over in six, 12, 18 hours. As a carrier, you assess the damages and you start to tally up your losses,” he said. But the pandemic is still going on. “We’re in the middle of the pandemic, whether we’re closer to the beginning, or closer to the end, I don’t know,” he said. “But it’s still early, and agency E&O is a line that takes a long time for claims to really manifest.”
JANUARY 2021
FEATURE CONTINUED One risk management tactic that agents have implemented is a COVID disclaimer, according to Christopher Boggs, executive director, risk management and education for the Big I. In his opinion, that’s not a good idea. “It’s a bad idea because when you disclaim a specific exposure, you’ve ignored every other exposure out there,” Boggs said.
How are procedures being followed? “When everybody is in the office, you can walk up to Sam the CSR and check, and make sure that they’re making all of the appropriate notations in the agency management system, that their workload is current,” he said. “That can be a little more challenging in a remote environment.”
“You’ve decided for the client what’s important,” he said. In an attempt to protect the agency from COVID-related E&O risk, agents have opened themselves up to other E&O risk situations. A COVID disclaimer is too narrow, he said. “That’s problematic from an E&O perspective because you have decided for the insured what’s important to them without mention of the fact that you’ve got these other 57 exclusions or limitations in the policy,” he said. If something happens that’s not COVID related but the agency failed to mention other exclusions because of their focus on COVID, problems could arise, according to Boggs.
Also, given a harder insurance market, it is important that agencies keep up with any change to their carriers’ underwriting guidelines.
He recommends that agencies use very broad disclosures to better protect against agency E&O risks. “A disclaimer saying every policy has exclusions and limitations and the agency has done its best to find coverage,” he said. “Also, agents need to make sure they disclaim only the markets they know about, their own markets,” he said. “Theoretically, you can buy any type of coverage if you’re willing to pay for it. But the only markets as an agent that I can go to are the ones that I am appointed to go to, and those with which I have a relationship, so I can’t tell about the whole insurance market and that’s part of the disclaimer language. As an agent, you have to explain to clients that the only places you’ve checked are the agency’s companies.”
REMOTE WORK AND THE RISKS One newer agency E&O exposure is remote work. “I know many agencies are back full-time in their offices, but I also know many are back split time; maybe half the staff comes in a couple days a week, the other half of the staff comes in another couple days of the week, just to promote physical distancing,” said Angelucci. As a result, he says underwriters are asking more questions. “Some of the things that we’re asking agents to make sure they’re paying close attention to is validating the productivity of their remote work staff,” he said. “Are people falling behind on endorsement requests, renewal information, checking policies, things of that nature?”
“Now that you’re working remotely, do you have a staff meeting where you’re covering changes in carrier underwriting guidelines, or appetite so that you’re effectively communicating those to all staff members,” he said. “Those are some of the loss control tips we’re putting out and some of the conversations we’re having with agents on renewals.” Andrea Wells is a veteran insurance editor and editorin-chief of Insurance Journal Magazine. Reprinted with permission. © 2020 Insurance Journal
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