Primary Agent - September 2023

SEPTEMBER 2023

GOVERNMENT RELATIONS ISSUE

KIP WHITE THE IMPORTANCE OF A TEAM APPROACH TO ADVOCACY

EXCLUSIVE MEMBER MAGAZINE

ALSO INSIDE AGENTPAC CONTRIBUTORS E&O CLAIMS ON THE RISE MD CONDO LAW CHANGE

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SEPTEMBER 2023

CONTENTS FEATURED 8

Q&A WITH KIP WHITE Kip White, president of IA&B Member Agency American Insurance and a member of the IA&B of Maryland Government Relations Committee, discusses the value of a team approach to advocacy.

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> > > > 18 JOIN US ON SOCIAL MEDIA: Facebook.com/IABforME LinkedIn.com/company/IA_and_B Twitter.com/IA_and_B YouTube.com/@IA_and_B IA&B Podcasts can be found at:

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, 650 Wilson Lane, Suite 200, Mechanicsburg, PA 17055.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2023-09, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B. Copyright 2023. All rights reserved. No material September 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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MARYLAND CONDO LAW CHANGE Effective Oct. 1 in Maryland, condominium master policies will not cover detached units. Attorney Timothy Brambick provides an update on the statutory changes.

ADVOCACY IN ACTION IA&B Government Affairs Director John Savant shares how one member agent's conversation with IA&B staff led to legislative change.

E&O CLAIM FREQUENCY IS INCREASING Chris Burand shares six key reasons for the recent increase in E&O claims, plus tips for agencies to mitigate their exposures.

MONTHLY 2 MESSAGE FROM THE IA&B CHAIR 3 DON’S DISCUSSION 4 COVERAGE CORNER 6 NEWS & NOTES 20 AGENTPAC CONTRIBUTORS 25 PICS & POSTS 27 STAFF PROFILE 29 UPCOMING EDUCATION IABforME.com |

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MESSAGE FROM THE IA&B CHAIR

PERSPECTIVES ON IA&B’S ADVOCACY If you’re reading this, you’re likely interested in insurance. But, for the purpose of this article, I’d like you to put yourselves in the shoes of a consumer who doesn’t really care about it. Think about that person who never bought insurance, and then has a loss and is left with nothing. Do you ever cringe when an uninsured person starts a GoFundMe page, knowing there was such an easy and affordable alternative?

191 Main Street, Annapolis, MD 21401 800-998-9644 | IABforME.com

IA&B BOARD OF DIRECTORS OFFICERS Sarah Brown, CIC, CRM, AFIS - Chair Keller Brown Insurance Services | Shrewsbury, PA

I appeal to you not to treat IA&B’s government relations work like that apathetic consumer.

Andrew Enders, Esq. - Vice Chair Enders | Harrisburg, PA

In many ways, IA&B does for independent agents what we do for our customers: educate and advocate. Often those efforts go unnoticed or underappreciated. I’d like to brag about some of IA&B’s legislative wins so you can appreciate what they’ve delivered for us recently:

MEMBERS Lisa Parry Becker, CPIA

Bill Purdy

▲ In Pennsylvania, IA&B successfully lobbied for several changes to the Insurance Data Security Act, including exemptions for licensees and the prevention of agent fees.

Greg Bennett

Kent Reynolds, CIC

Kate Dawson, CPIA

David Rivell, CIC, CRM

Len Gieseler, LUTCF

Jason Rodriguez

Bruce D. Kraft, AAI, CIC

Donna Roper

For this important mission to continue, we must contribute to their efforts. There are a few ways you can do that:

Debra McAfee

Candace Shoupe, AAI, AIC

▲ Support your state political action committee, AgentPAC: IABforME. online/AgentPAC

Shayne McIntosh, CIC

Bob Smyrl, CIC

JPI Insurance Associates Dillsburg, PA

Robert L. Smyrl, Inc. Hatfield, PA

Chris Miller, CIC

Michael Thomas

▲ In Maryland, IA&B vehemently opposed a bill to establish mandatory EUIM coverage. While it passed, IA&B secured several amendments to significantly limit its scope. ▲ In Delaware, IA&B successfully pushed for passage of a workers’ compensation exemption bill, introduced in response to IA&B members whose policyholders were impacted by the previous exemption limit.

▲ Support your federal political action committee, InsurPac (for Pennsylvania and Delaware members) and PIAPAC (for Maryland members). ▲ Attend a Big “I” Legislative Conference, held each spring in Washington, D.C. No one else is looking out for our best interests. Do for yourself and your peer agents what you do for your customers every day. After all, there is no GoFundMe page for independent insurance agents.

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INSURANCE AGENTS & BROKERS 650 Wilson Lane, Suite 200 Mechanicsburg, PA 17055

Parry Insurance Langhorne, PA

Famous & Spang Associates Aberdeen, MD Ferri Dawson Insurance Murrysville, PA Evans Hauseman & Richard, Inc. Pottstown, PA Arbor Insurance Group Allentown, PA

McAfee Insurance Agency, LLC Wilmington, DE

Miller Insurance Protection Team Jonestown, PA

Purdy Insurance Agency, Inc. Sunbury, PA Blue Ridge Risk Partners LLC Hagerstown, MD Element Risk Management West Chester, PA Prominent Insurance Svcs Wilmington, DE E K McConkey & Company York, PA CBM Insurance Agency New Castle, DE

Lighthouse Insurance Svcs Gambrills, MD

Michael Papa, CIC, MBA Diversified Insurance Industries, Inc. Hunt Valley, MD

NATIONAL DIRECTORS

Until next time,

Mike Ertel (PIA) AP Benefit Advisors, LLC dba The Jacobs Company | Columbia, MD

Sarah Brown, CIC, CRM, AFIS Chair of the Board

Mark Monroe (IIABA) Griffith Insurance, LLP | West Chester, PA

SEPTEMBER 2023

Diana Hornung Hanby (IIABA) IOA National, Inc. | Wilmington, DE

DON'S DISCUSSION

DON'S DISCUSSION IA&B Legal & Corporate Affairs Director Don Bankus

Are you a member with a question?

Contact Don at 717-918-9204 or DonB@IABforME.com.

of my insureds incurred a cost he feels is the agency’s fault. While I disagree, I do feel bad QUESTION: One and reimbursed the customer $350. Is this OK?

ANSWER: You’ve heard the saying “No good deed goes unpunished.” While your intent genuinely may have been to improve an uncomfortable situation – or simply to try to make the customer whole again – regulators in our three states may view your actions differently. Rather than an act of kindness, they may consider it a violation of the state’s rebating law.

HOW WOULD YOUR STATE VIEW THIS? Delaware: Under the above scenario, applicable Delaware law would prohibit such an act, providing little to no leeway. While Delaware’s producer licensing statute is silent on the issue, its “Unfair Practices in The Insurance Business” statute is unequivocal, and at 18 DE Code, Section 2304(15) provides that: No property, casualty or surety insurer or any employee or representative thereof, and no broker, agent or solicitor shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit or reduction of the premium named in a policy of insurance, or any special

favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified or provided for in the policy, except to the extent provided for in an applicable filing with the Commissioner as provided by law.

Maryland: Again, as it relates to the above scenario, applicable Maryland law would prohibit such an act, providing little to no leeway.

The issue is governed by Maryland’s “Unfair Trade Practices and Other Prohibited Practices” statue at MD Code, Insurance, Section 27-212(b), which provides: Except to the extent provided for in an applicable filing with the Commissioner as provided by law, an insurer, employee or representative of an insurer or insurance producer may not pay, allow, give, or offer to pay, allow, or give directly or indirectly as an inducement to insurance or after insurance has become effective: (1) a rebate, discount, abatement, credit, or reduction of the premium stated in the policy; (2) a special favor or advantage in the dividends or other benefits to accrue on the policy; or (3) any valuable consideration or other inducement not specified in the policy.

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Pennsylvania: Generally speaking, Pennsylvania’s anti-rebating provisions are as restrictive as – and essentially mirror – those of Delaware and Maryland above.

However, in 2018 Pennsylvania amended a portion of the “Pennsylvania Producer Licensing Act” to include the following exception to its anti-rebating provisions: Exception. – An insurance producer may offer or give to an insured or a prospective insured, on an annual aggregate basis [on a calendar year basis], any favor, advantage, object, valuable consideration or anything other than money that has a cost of or a redeemable value of less than or equal to $100, which is not specified in the contract of insurance.

Accordingly, under the above scenario, it would be permissible for an agency to provide the Pennsylvania insured with a gift card, with a value of no more than $100. Keep in mind that the statute does not allow for payment in cash, Continued on page 7

An audio version of this article is also available as a podcast

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ORDINANCE OR LAW – NOT JUST AN OLD BUILDING PROBLEM!

By Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP How many times has an insured responded to your recommendation for Ordinance or Law Coverage with this statement? “I don’t need that – my building is only [fill in the blank with a low number] years old, and it is up to code!” What many insureds don’t realize is that ordinance or law issues plague both old and new buildings. What are the Ordinance or Law coverages that should be considered for every building, and why are they so important?

Before beginning a discussion of 4

Ordinance or Law Coverage, it is important to understand the problem. With the exception of a small amount of coverage for Increased Cost of Construction, the ISO Building and Personal Property Coverage Form (CP 00 10 10 12) states clearly that the cost of repair does not include increased costs attributable to enforcement of ordinances or laws regulating the construction, use, or repair of property. In addition, the Causes of Loss – Special Form (CP 10 30 09 17) contains an Ordinance or Law SEPTEMBER 2023

exclusion. Basically, the policy pays to put the building back the way it was prior to the loss. If anything extra needs to be done to comply with codes, the policy doesn’t pay.

Problems continue on the Business Income and Extra Expense Coverage Form (CP 00 30 10 12). The period of restoration is the period of time during which coverage applies. The period of restoration doesn’t include any increased period required due to enforcement of any ordinance or law.

COVERAGE CORNER There are two primary ISO endorsements used to cover ordinance or law exposures for most insureds.

Ordinance or Law Coverage (CP 04 05 09 17) allows the insured to choose up to three separate coverages. ▲ Coverage A – Coverage for Loss to the Undamaged Portion of the Building ▲ Coverage B – Demolition Cost Coverage ▲ Coverage C - Increased Cost of Construction Coverage If a building sustains major damage, the insured is often required to tear down the entire building. Fears are that it will not be structurally sound if repaired. In some jurisdictions, major damage occurs when a certain percentage of the building is damaged. In others, the decision about major damage is left to the discretion of the appropriate authorities. Imagine your insured, a restaurant, has a fire loss that damages 60% of the building, and the town requires the insured to take down the building before rebuilding. Coverage A pays the value of the undamaged portion of the building as part of the building limit of insurance. Without Coverage A, the policy pays only the value of the damaged 60%. The insured is left without the funds needed to rebuild.

The restaurant will need to pay to demolish the undamaged portion of the building and remove its debris.

That’s where Coverage B comes in. A limit of insurance is chosen for Coverage B and shown on the endorsement.

Lastly, chances are excellent that

the building codes have changed since the restaurant was originally built. Perhaps sprinklers are now required, and the electrical system must be updated. Coverage C gives the insured the additional funds to rebuild differently to satisfy building codes. A limit of insurance is chosen for Coverage C and shown on the endorsement, although a combined limit for Coverages B and C may be an option with many insurers.

There is one more problem to solve.

Had the insured restaurant been allowed to repair the building, the period of restoration would have been six months. Now that the building must be demolished, with the insured needing to start from scratch and rebuild differently, the period of restoration is 12 months.

In order to provide the insured with Business Income and Extra Expense coverage for the extra six months, the endorsement Ordinance or Law – Increased Period of Restoration (CP 15 31 09 17) is needed. This endorsement extends the period of restoration to include the additional time to comply with building codes.

Although the endorsement does not show a specific limit or time period, it is important that the Business Income limit be high enough to cover the insured through this longer period of restoration.

There is one last consideration in writing Ordinance or Law coverage.

Both endorsements include a PostLoss Ordinance or Law Option.

Without this option, the insured will only have coverage to comply with codes in effect at the time of loss.

Codes often change after an area sustains widespread damage, and the Post-Loss Option gives the insured the additional coverage needed to comply with the new changed codes.

IABforME.com |

As one can see, Ordinance or Law is not just an old building problem. It is an every building problem!

Til next time!

Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP is IA&B’s commercial lines education consultant. She works with our CIC and CISR programs, as well as our live CE webinars. Catch her at one of our upcoming courses: IABforME.com/education

An audio version of this article is also available as a podcast

LIVE CE WEBINAR

|

Learn more during next month’s live webinar.

AN HOUR WITH DAVE: ALL-THINGS ORDINANCE OR LAW (PERSONAL AND COMMERCIAL) OCT. 25 2 - 3 PM

CE PA/DE: 1 GEN | MD: 1 PC IA&B Members: $25 (save $30!)

Non-Members: $55

Register today. IABforME.com 800-998-9644, option 1

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NEWS & NOTES

WEBINAR FOR WOMEN

IA&B YOUNG AGENT CONFERENCE

Register today for our upcoming webinar, geared to women insurance professionals. This webinar is part of IA&B’s broader initiative to support women in the industry and follows the sold-out Women’s Conference in March and first webinar for women in June.

It’s back! Register today for the return of IA&B’s Young Agent Conference, Oct. 3-4 at the Cork Factory Hotel in Lancaster, PA.

The Thing About Women … That Make Such Great Leaders Presented by Sara Bradshaw Ray (keynote speaker at IA&B’s Women’s Conference)

The conference will provide two days of professional development and networking to help grow upand-coming insurance agents into successful leaders. All young insurance professionals (and those young at heart) are welcome.

IABforME.online/YAconference

Thursday, Sept. 14 | 11 AM-Noon

CRAB FEAST

There is no cost to attend this webinar, which is available exclusively to IA&B members.

Registration is required.

Connect and unwind at IA&B Crab Feast! Reserve your seat for everyone’s favorite Delaware insurance community tradition.

IABforME.com/ eventregistrations/?eventId=6655 800-998-9644, option 1 Please note: This webinar is designed with women attendees in mind, but it is open to everyone who supports the growth and leadership of women in the independent insurance agent community.

Who: IA&B member agencies and company partners What: All-you-can-eat crabs, shrimp, chicken fingers, fries, and corn on the cob Where: Boondocks in Smyrna, DE When: Sept. 20, 6-9 PM IABforME.com/ eventregistrations/?eventId=6677 800-998-9644, option 1

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SEPTEMBER 2023

INTERN DAY On July 27 – National Intern Day – IA&B hosted 26 impressive interns from our member agencies and company partners at Mid Penn Bank University for our second annual IA&B Intern Day. Interns spent the day learning about our great industry, brushing up on their employment skills, and making connections. The future is bright!

DON'S DISCUSSION Continued from page 3 which the Insurance Department has confirmed. However, as is the case with Delaware and Maryland above, it would be a violation of Pennsylvania law if you were to reimburse the customer the total amount of $350 as referenced in the scenario at the top of this FAQ.

WHAT ARE THE PENALTIES FOR A VIOLATION?

Harford Mutual

Delaware: A fine of up to $1,000 for each violation, not to exceed $100K; possible suspension or revocation of producer license; see 18 DE Code, Section 2308.

Insurance Group is a Ward’s 50® top-performing property-casualty

Maryland: A fine of between $100-$500 per violation; possible suspension or revocation of producer license.

insurance company for

2022 & 2021

Pennsylvania: A fine of up to $5,000 for each violation; possible suspension, refusal to renew, or revocation of producer license; see 40 P.S. Section 310.91.

We partner with independent agents to insure restaurants, contractors, mercantile, and other commercial entities.

FINAL THOUGHTS While it hardly seems fair that simply trying to do a good deed could violate the law, the reality is you could end up in hot water if you engage in such a practice.

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.

Insuring Opportunity through Mutual Success.

HarfordMutual.com 800.638.3669

IABforME.com |

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Q&A with

KIP WHITE Kip White, CPIA, LUTCF is president of American Insurance, a full -service independent agency in Nottingham, MD. He also serves on the IA&B of Maryland Government Relations Committee.

I have found human resources to be the most difficult to stay informed about. It is very important to have a valued employee who can monitor HR regulations and work with employees.

Q. Tell us about your career path. We understand it’s atypical, beginning in law enforcement!

A. I graduated from Towson University in 1981 with a degree in Business Administration. Upon graduation, the corporate jobs that I was offered did not fit with my goals. An acquaintance, who was a Baltimore City Narcotics Detective, spoke with me about his career.

He was very passionate about his responsibilities, and it was something I was very interested in doing. Eighteen months later, I was working next to him in the Baltimore City Narcotics Taskforce.

Being a detective was a very exciting career; however, it was not able to offer me the financial future that I desired.

After several years, I decided to leave the Taskforce to become a Finance and Insurance Manager for the Len Stoler Automotive Group. Even though I found success there, I wanted a career that would allow me to have more control over my future. I left the automotive industry in 1991 and joined Nationwide Insurance. This was my gateway into the insurance industry.

In 1996, after many training sessions, cold calls, mistakes, and successes, I was ready to start my own independent insurance agency – American Insurance. I had many mentors along the way that helped confirm this move, and I was driven by the need to offer services and products to my clients that would fit their needs. I never looked back!

Q. What has been your biggest professional challenge in the insurance industry?

A. As an agency owner, I am responsible for all aspects of a successful business and a satisfied customer base.

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Obviously, another challenge was the COVID pandemic. It required an agency to alter the way business is conducted.

Communications, training, and the agency culture have all changed. I am proud of how American Insurance, my employees, and the insurance industry have been able to adapt to still meet the needs of their clients.

Q. What advice would you give to the newest generation of independent agents who are just getting their start in the industry?

A. Invest in yourself with education and training.

Regulations, and clients’ needs, are constantly changing, just as technology and communications change. You are never too experienced to continue to learn and adapt!

It is important to obtain and nurture contacts and relationships with the best insurance companies available.

Make the financial commitment to grow your agency with quality employees early. They need to feel valued and important to the success of the agency. I believe it is imperative to hire slow and fire fast. You cannot do it by yourself. Get, and keep, the best crew you can to keep the boat afloat!

Q. You’ve been a volunteer leader with IA&B for many years, including terms on the IA&B Government Relations Committee. What prompted your involvement, and why would you encourage others to participate?

A. It is important to make sure independent agents are being treated fairly by government entities, state legislatures, and carriers. We need to work as a team to protect the Independent Insurance Agency distribution

SEPTEMBER 2023

ON THE COVER system and stay important and relevant to our clients and carrier partners.

IA&B has been a key part of my insurance career for over two decades. Time spent with other agents discussing relevant topics is vital to succeed. We are much stronger as a team than as individuals.

Q. We understand you’re an avid fan of Baltimore sports. What’s the most memorable game you have ever attended?

A. I was lucky to see the 1983 World Series baseball games played at Memorial Stadium. I also attended both Baltimore Ravens Super Bowl games. I cannot pick just one memorable game – each of these games was incredible!

Q. When you’re not working, how do you spend your time?

A. Spending as much time as possible with my friends and family is very important to me. I enjoy skiing, boating, fishing, golf, and traveling. Most recently I was able to take a tour on the Danube River. Any travel that includes history or physical activity interests me. I am thankful for the lifestyle I have been able to enjoy as an independent insurance agent.

OCTOBER 3 - 4 LANCASTER, PA

8 GREAT MEMBER BENEFITS 1 Legal & Compliance Resources 2 Classes & Online Training 3 Marketing, Branding & Websites 4 Political Advocacy 5 HR & Hiring Solutions 6 Insurance for Your Agency 7 Industry News 8 Market Access & Carrier Relations QUESTIONS? CONTACT TIM WONDER, IA&B VP-MEMBERSHIP 717-918-9223 | TIMW@IABforME.COM

REGISTER TODAY IN-PERSON CLASSES THIS FALL Sep 12-13 Sep 28 Oct 3 Oct 4 Oct 17 Oct 17-18 Oct 24-26 Nov 9 Nov 30 Dec 13

CIC - Commercial Property Lancaster, PA CISR - Commercial Property Lancaster, PA CISR - Commercial Casualty II Newtown Square, PA William T Hold - Commercial Lines Mechanicsburg, PA CISR - Commercial Casualty I Linthicum Heights, MD Ruble Graduate Seminar King of Prussia, PA P&C Licensing Mechanicsburg, PA CISR - Elements of Risk Mngt Mechanicsburg, PA CISR - Agency Operations Pittsburgh, PA CISR - Personal Residential Mechanicsburg, PA

800-998-9644, option 1 IABforME.com

Call 800-998-9644, option 1 IABforME.online/YAconference

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9

IA&B PARTNERS PROGRAM

OUR FEATURED PLATINUM PARTNER Insurance Agents & Brokers proudly recognizes Keystone as one of its Platinum Partners.

IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

Conferences: From marketing strategy to

prospecting, developing a niche, to learning how to navigate the age of remote work, we’ve covered it.

Our agents serve on panels to discuss what’s working, and not. Combined with our services and mentorship, our agents walk away with the tools and tactics they need to implement strategies that succeed.

Independence works better together.

Keystone is a network of high-performing, independent insurance agencies.

As we celebrate our 40th anniversary, our mission remains the same – helping you raise the bar to greater success. With us, you retain your independence while benefiting from the resources we offer that can’t be obtained elsewhere.

This combination is the “secret sauce” that makes it work. Here are just a few ingredients.

Influence: Our board of directors is made up of

Keystone agents. They influence our direction, services, and offerings to fellow agents. We honor inclusion and perspective – everyone plays a part in where we are headed into the future.

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SEPTEMBER 2023

Thank You Thanks to these partners for supporting the independent agent network.

PLATINUM PARTNERS Acuity Erie Insurance Keystone Millers Mutual Insurance Penn National Insurance Plymouth Rock Assurance Staff: From data and analytics to carrier relations, sales training, and revenue generating solutions, each of our staff brings specialized expertise. With it, Keystone agents can give themselves a raise with new business, benchmark against successful peers, and find solutions to meet recruitment and retention challenges.

"With Keystone, agencies retain their independence – regardless of location – while benefitting from the intellectual capital sharing of our community and national resources they can source locally to their clients. When faced with a complex need, you are backed by hundreds of agents across the country to help you walk through it.”

– Amy Kolbl, State VP, MD and VA.

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Tim Wonder IA&B VP-Membership 717-918-9223 TimW@IABforME.com

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CHANGE TAKES EFFECT OCT. 1

MARYLAND: CONDOMINIUM MASTER POLICIES WILL NOT COVER DETACHED UNITS

By Timothy Brambrick Several months ago the Maryland Legislature passed a bill amending the insurance provisions of the Maryland Condominium Act and Governor Moore has signed same into law. While §11-114 of the Maryland Condominium Act has required that the Associations obtain insurance on the entire condominium including the units less improvements and betterments installed by a unit owner, the new provision provides that the Master Policies will not cover residential, detached units (“cottages”) and that the owners of these units shall carry Homeowners insurance on their units. §11-114 REAL PROPERTY ARTICLE . . . The Council of unit owners shall maintain, to the extent reasonably available: (a) (1) Property insurance against risks of direct physical

loss commonly insured against in amounts determined by the council of unit owners, but not less than any amounts specified in the declaration or bylaws.

(I) For attached or multifamily dwelling units, on the common elements and units, exclusive of improvements and betterments installed in units by unit owners other than the developer; and (II) For detached units, on the common elements; and (e) (2) An owner of a residential, detached unit shall carry homeowners insurance coverage on the entirety of the unit.

By way of background, developers have been establishing condominium regimes and then building single family homes not attached to any other “unit”. This approach permits them to avoid IABforME.com |

local zoning provisions which, for example, set forth minimum lot sizes for new homes. While a zoning provision may require 1 acre lots for single family homes, a “condominium” might be able to build 4 units on an acre. There are already a number of condominiums which are comprised of midrise buildings, townhouses and unattached single-family dwellings and one can anticipate condominium regimes consisting only of unattached “cottages” being established.

From the point of view of property managers and/or the Associations, this will reduce its premium for the Master Policy and obviate the necessity of handling losses which affect these types of units.

Continued on page 17 15

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MD CONDOMINIUMS Continued from page 15 If you are writing a Master Policy, it is reasonable to anticipate that the Association/property manager will contact you if any of the units in the condominium are “cottages” as they will want to provide you with reduced values and obtain a lower premium.

While I suspect this will occur, it would be wise for an agent to check with its Master Policy insureds.

The situation with respect to unit owners of “cottages” is more troublesome as the failure to issue them the correct policy would potentially lead to a unit owner being

under insured. HO-6 forms typically include modest limits for Coverage A and are intended to be adequate to cover Master Policy deductibles and improvements and betterments made by a unit owner. In the event of a major loss, such limits would be inadequate. In this situation, what would a “cottage” unit owner do: walk away from his/her equity in the unit or sue his insurance agent.

Decisions, decisions.

So, if you know (that’s actual knowledge and not equivalent to “pretty sure”) your insured’s unit is in a high-rise or a mid-rise or is

a townhouse, no further inquiry would be necessary and you would reissue the HO-6. But, if you don’t know, check with the insurer you are placing the business with as it may be addressing this issue with its insureds. And, of course, consider checking with your own HO-6 insureds. After all, that’s why you’re getting that big commission on the HO-6s.

Timothy Brambrick, partner with Niles, Barton & Wilmer, LLP, provided this article. You can reach him at 410-783-6342 or tbambrick@ nilesbarton.com.

IA&B MEMBER RESOURCES The amended law, which affects detached units organized under a condominium regime, takes effect Oct. 1, 2023.

Remember: A condominium is a form of ownership, not a type of housing. Download a sample letter to unit owners at IABforME.online/MD-condo-ltr

IF YOU INSURE THE CONDO ASSOCIATION

IF YOU INSURE THE UNIT OWNER

For new and existing business, ask the Association or property manager:

For new and existing business: ask unit owners if their condo ownership is for a detached unit.

1. if they have any detached single-familyhome units, and

For detached single-family-home units, the unit owner must cover “the entirety of the unit” (not just the improvements and betterments and personal property) and needs more coverage than a traditional HO-6.

2. how much property to EXCLUDE from the Association’s master policy (the amount of property coverage attributable to the single-family units) E&O risk – Overinsurance/Overpayment

CONSULT WITH EACH CARRIER TO UNDERSTAND HOW THEY INTEND TO ADDRESS THE CHANGE BY EITHER: • Placing coverage using an HO-3 type policy (if so, consider appropriate endorsements to offer since the ownership is still under a condo regime (e.g. increased loss assessment) or • Increasing Coverage A under an HO-6 with limits sufficient to rebuild the entire unit E&O risk – Underinsurance (incl. Cov. A)

It is more likely that the association will volunteer the information to get a premium reduction.

The law does not include a notification requirement. It is likely, but not certain, that the association will notify unit owners.

Questions? Contact IA&B VP-Advocacy Claire Pantaloni at ClaireP@IABforME.com or 717-918-9202 or IA&B Legal & Corporate Affairs Director Don Bankus at DonB@IABforME.com or 717-918-9204.

IABforME.com |

17

ADVOCACY IN ACTION: How One Conversation Led to Legislative Change

By John Savant, IA&B Government Affairs Director

More often than not, legislative advocacy is all about playing defense – avoiding receiving collateral damage as a result of some other group’s competing legislative agenda. There are countless examples of this – including the recent proposals to eliminate credit and gender as rating factors, and efforts by other lobbying groups to make EUIM a mandatory coverage for auto policies, dramatically increasing premiums in the process. However, one bill in the most recent Delaware legislative session serves as an example of how the day-to-day experiences of a few agents can lead to legislative victories for our entire profession.

In late 2021, an IA&B member from Delaware contacted the association and brought up an issue that one of his policyholders had run into. The account in question involved a family that owned several businesses together, all separate legal entities: a commercial real estate management company, a commercial contracting business, a homebuilder, and a chain of self-storage facilities. All six family members were covered by workers’ compensation through a separate management company and would have preferred to be excluded from workers’ compensation for several of the other LLCs. However, the state of Delaware only allowed up to four officers of an LLC to be excluded from a company’s workers’ 18

compensation policy, and carriers were charging premium using the minimum member payroll for the remaining two family members.

The issue was brought to IA&B’s Delaware Government Relations Committee, a group of IA&B volunteers who meet regularly to discuss proposed legislation and determine what position the association should take on a given bill. During the meeting, several committee members had said they had experienced or heard of similar situations, and it was agreed that IA&B would pursue a legislative solution. A draft bill increasing the number of allowable exclusions for LLCs from four to eight was written – the number chosen in part because it matched the eight executive officer exclusions the law permitted for corporations, and it would therefore likely be an easier sell to legislators.

IA&B’s lobbying team met with industry stakeholders and various government agencies, including the Delaware Department of Labor, to directly address any concerns they may have, and sort them out in advance of the bill’s introduction. Legislators often turn to regulators to help them make sense of issues they may be unfamiliar with, and any last-minute objections or amendments can dramatically slow down a bill’s passage – or halt it entirely.

SEPTEMBER 2023

Fortunately, no major concerns were raised, and the DOL indicated that they would not stand in the way of the bill’s passage. At this point, it was too late to have a reasonable chance of passing before the 2022 legislative session ended in June, so the decision was made to wait for the 2023 session.

In the meantime, with 2022 being an election year, IA&B took the opportunity to tip the scales in our favor by influencing the makeup of the legislature itself.

Between yard signs, mailers, and many other expenses, electoral campaigns cost money. AgentPAC contributed to the campaigns of several key lawmakers with a record of understanding small business owners and supporting IA&B’s position on other insurancerelated issues, boosting their ability to campaign and their chances of being re-elected. Had these friendly legislators lost their election, we would’ve faced an uphill battle to find someone to champion our position on this issue and many others.

sponsors to encourage House leadership to put the bill on the agenda for a vote in the full House in early June.

The bill passed the House with 40 “yes” votes, and one legislator absent, and would follow a similar path in the Senate. Once again, securing the chair of the Senate Banking and Insurance Committee as a sponsor helps to ensure that your bill has its day in the sun.

House Bill 144 would undergo final passage in the Senate on June 20th, just 10 days before the end of 2023 session. It was subsequently signed into law by Governor Carney, a year and a half since the issue originally came up in an IA&B meeting.

In order for any proposal to become an actual bill, it must be sponsored by at least one legislator who is willing to introduce it.

With the new year came a new two-year session of Delaware’s General Assembly, and IA&B’s staff and lobbyists went to work to explain the issue to legislators and secure sponsors. A February 16th meet-and-greet between agents and lawmakers in Dover hosted by IA&B offered an opportunity to bring up the issue with Representative Bill Bush and Senator Spiros Mantzavinos, the chairs of the Insurance Committees in their respective chambers. Both Bush and Mantzavinos had been consistent allies on insurance-related issues in the past, and soon after the meeting, they agreed to sign on as the bill’s primary sponsors.

IA&B’s Government Relations Committee Chair Lee Dotson testified on House Bill 144 when it came up for consideration in committee. Once voted out of committee, IA&B’s lobbying team worked with the IABforME.com |

IA&B’s advocacy team has the expertise needed to move legislation, but it is you, the independent agents, with the crucial firsthand knowledge of where the pain points are for policyholders. We can’t fix what we don’t know is broken. House Bill 144 would not exist without the IA&B members who originally brought the issue to light. So, the next time you encounter a problem due to a certain law or regulation, contact IA&B’s advocacy staff. You might just be the catalyst for future legislative changes that benefit not only yourself and your policy holders, but all fellow agents as well.

Reach IA&B Government Affairs Director John Savant at JohnS@IABforME.com or 717-918-9214.

19

2022 CONTRIBUTORS PENNSYLVANIA President's Club ($1,000+)

Donna Roper E K McConkey & Company

John Hollister

Jeff Fecko

Tod Aronson E R Munro and Company

Kim Troast-Singley Troast-Singley Insurance Agency LLC

Jocelyn Howard

Sarah Ferri

Patrick Kelly

Kelly Insurance Agency Inc

Leonard Garza

Robert Walbeck R E Walbeck Agency Inc

Robert Knowles

Dawne Griffith

Dean Wimmer The Weimer Group

Knowles Assc

Laura Kury

Kevin Kreider

Shannon Blews Hutton-Blews Insurance LLC James Enders Colonial Park Realty Company Greg Gunn Gunn-Mowery LLC Michael Harter E K McConkey & Company John Olkowski E K McConkey & Company

Governor's Club ($500 - $999) David Beck The Weimer Group Frank Ebner E K McConkey & Company

Timothy Ziegler E K McConkey & Company

C W Howard Agency Inc

Collens Wagner Agency

Jay Lemelin

Vision Insurance

Andrew Mackey

Valley Agency Company

Lori Marvin

Senate Level ($250 - $499)

Barr's Insurance

Jeffrey Olsommer

Eugene Bartoli

Assured Partners of Northeastern Pennsylvania

Olsommer-Clarke Ins Group Inc

William Purdy

Purdy Insurance Agency Inc

Connie Bence

Helwig Insurance

Richard Rankin

Murray Insurance Assoc Inc

Sarah Brown

Andy Enders Colonial Park Realty Company

Keller-Brown Insurance Srvcs

Robin Fetterolf-Dunckley Steely & Smith LLC

Wise Insurance Agency

James Fitzsimmons Fitzsimmons Ins Agency Inc

Dillon-Haney Agency Inc

Curtis Unruh

Unruh Insurance Agency Inc

Randall Close

Gregory Zinn

MPF Insurance Inc Ferri Dawson Insurance Group Premier Group

The Insurance Buffet LLC Annie W Metzler Insurance Agency Inc

Michael Landis

Balsbaugh Insurance Agency Inc

Charles McHugh McHugh Agency

Mary McKinley

Wilkinson-Dunn Company

Richard Michael

Michael Insurance Agency Inc

Karyn Miller

Hinkle Insurance Agency Inc

David Murray

Varcoe Insurance Agency Inc

Richard ODonnell

Richard K. O'Donnell, Jr. Agency

Zinn Insurance LLC

Claire Pantaloni

Henry Dunn

Joseph Pastor

Henry Dunn Inc

House Level ($100 - $249)

Karl Elsaman

Mark Christie

Ethan Gibbel

Jeffrey Coup

Lisa Goth

Gary Dix

Christopher Miller Miller Insurance Protection Team

David Gusmar

Rosann Elinsky

Patrick Halcovich

Joseph Reschini Reschini Agency Inc

Halcovich Group LLC

Duane Epting

Jeffrey Glass E K McConkey & Company Lew Kachulis Gilbert's Risk Solutions Douglas Loesel Loesel-Schaaf Insurance Agency Inc

20

Marshall Wolff Kressler Wolff & Miller Inc

Sheeley Insurance Agency

John Dillon

McDowell Associates

Christie & Associates

Gibbel Insurance Agency Inc Charles P Leach Agency Inc Altany Loynd & Lindquist LLC

Coup Agency

Boardman-Hamilton Company Cusumano Insurance Agency Inc Strausser Insurance Agency

SEPTEMBER 2023

Insurance Agents & Brokers Barr's Insurance

Deborah Remaley

Remaley Insurance Inc

John Shields

RJ Lutes Insurance Agency

Mark Sitler

The Hartman Agency Inc

William Slovik

Slovik Insurance Agency

Robert Smyrl

Robert L Smyrl Inc

We sincerely thank everyone below for contributing to AgentPAC in 2022. Your financial support helps make sure your voice, collectively with other agents, is heard during the legislative process, and helps us as we advocate for ways to strengthen agents’ political interests on key insurance and business issues in Pennsylvania, Maryland, and Delaware.

MARYLAND

DELAWARE

Governor's Club ($500 - $999)

President's Club ($1,000+)

Up to $99

Greg Bennett

Lee Dotson

Wolff Insurance Agency Inc

Gary Berger

Bridget Sensabaugh

HMS Insurance Assoc Inc

CBM Insurance Agency LLC

Insurance Agents & Brokers

Blair Mattheiss

Governor's Club ($500 - $999)

Up to $99

Linda McCann

Thomas Svrcek

CSC Insurance Options

Harry Triolo TLC

Delbert Turman

Susquehanna Insurance Mgt Ltd

Tim Wonder

Ryan Cunningham

Kellar Insurance Agency Inc

Jesse Harlan

Colonial Park Realty Company

Famous & Spang Associates LLC

BJ Mattheiss Insurance Inc Bay Shore Insurance Inc

Connie Phillips

Connie Phillips Insurance Inc American Insurance and Financial Services

Jana Van Scoik

Charles Clifton Veirs III

Colonial Park Realty Company

Sheila Wells

Utica National Insurance Group

Scott Kidner

CS Kidner Associates Inc

Peter Wolff

Wolff Insurance Agency Inc

Kip White

Tara Silfies

Hampson-Mowrer Agency LLC

Bellevue Insurance Services LLC

Rebecca Giacometti

Senate Level ($250 - $499)

C Clifton Veirs Agency

Dick Corroon

Senate Level ($250 - $499)

Rick Evans

Butch Bradley

Cheryl Nemith

Bradley Atlantic LLC

Henry Bradley

Bradley Atlantic LLC

Chris Heer

Weymouth Swayze & Corroon Insurance Inc R E Evans Insurance Inc CNC Insurance Associates

Howell Wallace Pratt Insurance

John Yasik

3 Cheers Inc

Poland & Sullivan Insurance Inc

Sandra McNally

Hankin & McNally Insurance Agency Inc

House Level ($100 - $249)

Kent Reynolds

Steve Burnett

Blue Ridge Risk Partners LLC

House Level ($100 - $249) Kimberly Matney

Matney Insurance Services Inc

CBM Insurance Agency LLC

Diana Hornung Hanby

Insurance Office of America

Candace Shoupe

CBM Insurance Agency LLC

Join your fellow IA&B members and support AgentPAC. IABforME.online/ AgentPAC

Timothy Schaefer

Schaefer Insurance Services LLC

IABforME.com |

21

E&O Claim Frequency Is

Incre a s i n g

BY CHRIS BURAND Through my recent discussions with clients and carriers, it is clear to me that agencies are incurring substantially more errors and omissions (E&O) claims. A significant difference exists between the number of claims agency E&O carriers are seeing and the actual number of claims that are occurring because many agencies have made the decision to pay the smaller claims on their own rather than risking their E&O coverage/higher premiums.

As a partial aside, I fully understand the reasoning that causes agencies to pay small E&O claims.

However, I strongly recommend that they do not pay these claims unless they are dead certain the claim is property only and is small. I have a long list of examples of agencies that paid claims they thought were small, or were property only, or were sure that no plaintiff attorneys would ever be involved and ended up incurring large E&O claims they had to pay because they had not submitted the original claim to their carrier.

22

Many reasons exist for the recent increase in E&O claims.

1. Staff Turnover.

Almost everyone has experienced or seen significant staff turnover during the last three years. Staff turnover, all else being equal, increases the probability of E&O claims. An agency incurs increased exposure during the time period when they are training a new employee. In addition, when an employee leaves, the agency loses the account knowledge at the staff level unless the agency has extremely good procedures and documentation in place.

Few agencies practice quality at the required level to avoid this deficiency.

2. Training.

Most agencies train employees through on-the-job training (OJT). In my experience, OJT can work quite well when an agency has relatively good procedures. However, OJT fails when an agency does not have good procedures in place or the producers and staff do not consistently follow those procedures. The major problem that results is that the new employee does not know whose procedures to follow because everyone uses their own procedures.

SEPTEMBER 2023

E&O CLAIM FREQUENCY

Consider the case of an agency that has relatively good procedures. Despite the fact that many carrier personnel and agency producers do not think an account manager’s job is all that difficult, the job entails a lot of detail. I do not know that I have ever seen a procedures manual that contained all the required details. If one exists, it would likely be so large that it would not be usable.

People can learn a lot by watching, listening to, and learning all the unwritten but critical nuances. When training employees remotely, an agency cannot achieve this required level of training. If the agency also has poor procedures, the successful training of a new employee remotely is an utter impossibility.

The net result is a material increase in E&O errors.

3. Poor Claims Service by Carriers.

One hundred percent of the agencies I have surveyed have said claims service has materially deteriorated over the last three years. I have reviewed published surveys that have supported the agencies’ complaints. Poor claims service is a causal factor in the increasing number of E&O claims because agency personnel tend to try too hard to help their clients get their claims paid. They accidentally cross the line and advise their clients in a manner that violates the agency’s carrier contract.

As frustrating as poor claims service is, make sure everyone in your agency is educated as to how far they can go when helping clients with a claim.

In particular, an agent can never, ever advise an insured that a claim is or is not going to be paid.

4. Carrier Lawsuits.

Carriers are suing their agents more often, or at least that is the way it seems. Some of my agency clients have suffered subrogated claims by carriers that involve very technical clauses that have absolutely nothing whatsoever to do with the claim. A good example that I have seen several times involves the prefilled application data provided by the carrier. The carrier, it turns out, is not responsible for the data they provide. If the data is wrong,

IABforME.com |

the agent did not correct the data and a large enough claim results, some carriers are paying the insureds’ claims and suing the agent.

Another example involves a variety of “change in conditions” that have not been reported to the carrier by the agency. The changes often have absolutely nothing to do with the insured’s claim, and even if the changes had been reported, the claim would still have occurred. Yet the carriers are using this “out” to subrogate against their own agents.

5. Increased Workloads.

In this hard market, with all the employee turnover, workloads are simply too high in many agencies. The result is that employees make more mistakes and/or agencies begin cutting corners such as not checking renewal policies. The solution is simple to identify, but in this labor market it is extremely difficult to execute successfully.

6. Surplus Lines.

In this hard market, agents are moving accounts to surplus lines. This increases E&O exposures on multiple levels, especially if an agency has a training weakness, procedure weakness, and/or a new employee integration weakness.

When moving an account to surplus lines, the agency owes additional care to the insured, especially, in most instances, the duty to notify and explain which coverages have been lost. Those disclosures are not always happening.

Additionally, the agency needs to review the forms more carefully because it is surplus lines. A large dark hole of ignorance exists relative to an agent’s duty to insureds when placing surplus lines accounts. I find most newer employees do not know about these additional duties.

They do not understand that surplus lines markets do not have a duty to inform agents or insureds of reductions in coverage or even when the promised coverages are not included in the policy, and as a result employees are not checking policies.

You must always check surplus lines policies. The failure to do so is an E&O claim waiting for an opportunity to occur.

Continued on page 28 23

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STAFF PROFILE

Get to Know …

Claire Pantaloni, CIC, CISR

Years with IA&B: 20+

Role at IA&B: In managing the Advocacy Department, I split my time between public policy efforts and researching and developing tools to assist members in their compliance efforts, but also in benchmarking their agency or analyzing coverage issues. The concept is quite simple: If you don’t know where to turn, we’re only an email or phone call away.

Vice President Advocacy

Best part of your job: Even though the topics we discuss tend to be fairly dry, it is always great to chat with members and see what issues they run into and how we can try to help solve them. After 20 years, it is impossible not to have developed some great personal relationships, so it is a nice plus to be able to do so in a friendly conversation.

What did you do before working at IA&B? I was managing the Paris Branch for MMA, a French insurance company. The position entailed growing profitable production, supervising multiple personal and commercial lines underwriting departments, and handling some VIPs and jumbo commercial accounts.

What keeps you busy outside of work?

I’m an avid reader and a tennis aficionada. Like any parent, I am always fond of watching my son play.

You can reach Claire at: 717-918-9202 ClaireP@IABforME.com

IABforME.com |

27

E&O CLAIM FREQUENCY Continued from page 23

Mitigation What is the best way to mitigate E&O exposures? Use coverage checklists. Next, have high quality procedures in place and make certain everyone is following those.

▲ We have the plans that agencies need.

How do you know if you have good procedures or if your employees are following those procedures? Get an E&O audit.

For personalized service, CONTACT KEVIN HORD, CIC, CPCU, ACLS, MBA

This recommendation may be self-serving because I am an approved E&O auditor with many E&O carriers. But having completed so many E&O audits, I know an audit is an excellent solution. Many times, agency owners have hired me and swore their staff had the education, the agency had the right procedures, and that everyone was following those procedures.

800-998-9644, ext. 209 KevinH@IABforME.com IABforME.online/insurance

However, the audits showed their staff did not have enough education, their procedures were materially inadequate, and in some cases, their staff did not even know the agency had procedures.

If you want to mitigate your E&O exposures, address these points, and take the recommended steps, get an E&O audit. Some E&O carriers offer large premium savings if you have an audit making the audit even more worthwhile.

Chris Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com.

This article has been reprinted with permission from Insurance Journal, Copyright 2023.

VISION A thriving independent insurance agent community.

MISSION STATEMENT To serve as a driving force to champion independent agency success by educating, consulting, advocating, and fostering community in Pennsylvania, Maryland, Delaware, and beyond.

28

IA&B Members: Shopping E&O?

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