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MAY 2016

In This Issue 

Does Your Agency Perform the Mirror Test?

What to Know About Boat Insurance

Planning a Tradeshow Booth




Shirley Almany

……..……………....……..… Presidents Corner …………………....….… Performing the Mirror Test ………………... By The Numbers ….….…………...…….… What to Know About Boat Insurance ….… Our Partners

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Planning a Tradeshow Booth ………………....

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Word Scramble ……...…….…………..….…

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………………………..……….… TDI Enforcement Actions …….……..….…. The Last Word …………………………….…

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Texas PIA’s Annual Convention & Trade Show May 19-21, 2016

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Hotel Contessa, site of the 2016 PIA Annual Convention. This 4 star all-suites hotel is right on the Riverwalk. It’s a 10 minute walk to the Alamo and 1 block from the Briscoe Western Art Museum. With it’s rooftop pool and hot tub, full service spa, and the delicious Las Ramblas restaurant, you may choose to never leave the hotel. THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

The Hotel Contessa On the Riverwalk San Antonio Go to For more information and to Register Shirley Page 3

Ask virtually any agents’ errors-and-omissions carrier what it sees as its biggest issue/cause for concern and “replacement of coverage” will likely be in the top 3. After all, how often does an agency replace coverage for a client, moving the coverage from Company A to Company B? It occurs many times in a week, or possibly in any given day, at most agencies. Many insurance clients carefully watch their insurance costs. At some point, they will express concern about the cost or, at a minimum, advise your agency that they believe they are paying too much for their insurance, adding that they might get coverage cheaper elsewhere. Fearful of losing the account, your agency might remarket the account to several of your other carriers. When you present the “new” proposals to your client reflecting the lower premium, it is possible he or she will focus strictly on the opportunity to save money. However, there’s an important question to answer: Is the premium lower because the coverage is less?

Note the Differences The key issue as you look to move the account from Company A to Company B is the possibility that the coverage with Company B is not as broad as Company A. If so, are the differences – more so the reductions – being brought to the client’s attention and his or her (continued on page 6) THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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signoff secured? The courts often refer to this as the “Mirror Test.” Attorneys could argue that failure to advise the client of the differences would lead the client to believe the coverages were at least the same. Think back over the last several years. Chances are your agency had some clients, personal and commercial, who were adamant in wanting some premium relief. Ask most agency staff when was the last time they moved an account and they will probably say “yesterday” or “this morning.” It definitely happens with some frequency. In addition, from time to time your agency may need to move an account from the standard to the E&S market. What could happen? Presume you move the account to another carrier where the coverage is not as broad in some areas. The client subsequently suffers a loss that would have been covered by Company A, but is not covered or not fully covered by Company B. If this happens, in all likelihood the client will question your agency about why the coverage was moved. The client will probably say that he or she wanted to save money, but was not looking to give up coverage. Bottom line, the client may take the position that he or she never would have approved you moving the account if he or she was aware coverage was being given up. There are several areas of possible difference. The more common include sub-limits, the actual coverage grant, specific endorsements, definitions for areas such as “who is an insured,” what is excluded on one policy compared to another, and the carrier’s financial rating. In E&O policies, the scope of the covered professional services can vary greatly from one carrier to another. There have been E&O claims where the “retro-date” on the claimsmade form was advanced, resulting in no prior-acts coverage.

The Best Approach The best approach is to take all the carriers you are considering and put the details on a spreadsheet, noting the various pertinent issues. This will take time, but it will be time well spent. On the spreadsheet, it is crucial to note the differences because simply moving the account and not advising the client of the differences could cause a problem down the road. Some agencies share this spreadsheet with the client and bring to his or her attention the detail the client needs to know. Most importantly, the client sees the differences and can make an educated decision. At a minimum, the reductions between the expiring policy and the other carriers you are considering should be brought to the client’s attention. When the client has made his or her final decision, secure the client’s signature noting which decision was made. This documentation will be vital if a claim occurs and your client (continued on page 14) THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Luxury Suites on the Riverwalk

The Takata airbag recall has dominated the headlines lately. Given the shear volume of vehicles in the United States that are affected, it will take years to replace all of the defective airbags. I’m not sure how this will play out, but injuries and deaths have occurred and it has the potential to influence insurance rates. You might want to encourage your customers to take it seriously. Let’s look at the numbers. different automakers are involved, but more could be added. Vehicles involved include model years from



potentially defective air bags need to be recalled worldwide. of those are in the United States. Approximately

airbags have been replaced to date.

The cost to Takata is substantial. A record civil penalty of up to sessed against Takata. (Of that,

was as-

is a cash penalty, with an additional

charge if Takata fails to meet its commitments.) Takata has estimated recall related costs could exceed


injuries have been reported across all auto makers. deaths have occurred to date. While injuries and fatalities are rare, they do happen. As a service to your customers, use the following website to determine whether their vehicles are affected. In addition to airbag recalls, visitors can also quickly determine if a specific vehicle has not been repaired as part of a safety recall in the last 15 years. THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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A survey by one insurer found that 29 percent of all boat owners did not have a separate watercraft insurance policy. This could be a mistake. Many boat owners mistakenly think their homeowners or personal auto policy will provide coverage; however, the standard homeowners policy limits property damage coverage for boats to $1,500—far less than the value of most recreational boats. Further, the standard homeowners insurance policy excludes coverage for any liability that may incur arising from “ownership, maintenance, use, loading or unloading” of watercraft. If your customer has a smaller boat, they might be able to obtain the liability coverage they need with an endorsement to their homeowners policy. But if it is a larger craft, they will need a specialized boat insurance policy offers property coverage to protect the investment in their boat, along with the liability coverage needed to protect them from catastrophic lawsuits.

What Watercraft Insurance Covers Like a homeowners policy, watercraft insurance contains two parts: liability coverage and property coverage. The liability portion covers the insured for injuries or property damage they or an insured family member cause to another person through boating activities. Liability limits under boat insurance policies usually range from $15,000 to $300,000; yacht policies can provide from $300,000 to $2 million in coverage. To ensure there is enough coverage to protect (continued on page 10) THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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their assets in case of a serious lawsuit, you might advise them to insure part of their liability exposure through a personal liability umbrella. The property portion covers the insured for property damage to their own boat. Most boating-related claims—and therefore, most of the premium costs—involve property damage to their own boat. Suggest to you customers buying brand-new boats to insure it for its purchase price. For older boats, an examination of boating “blue books” or an appraisal by a marine surveyor can help determine its worth. Where the boat is docked and operated will also affect how much coverage will cost. Expect to pay more to keep a boat in hurricane-prone Florida than in California, for example. Operating a boat primarily in saltwater exposes it to more of the elements and makes it more vulnerable to damage over the long term than a boat operated in fresh water. The length of the boating season in your area also enters into the equation. A boat on Lake Ontario has a shorter operating season—and lower risk exposures—than one on Lake Mead. You might explain to your customer that an underwriter will look at their your boating experience, the size of the boat and their motor vehicle records (because a bad driver will generally be a bad boat captain) to evaluate the risk posed. Taking a boating safety or other boatingrelated course can reduce the risk of accident and might lower insurance costs. Be sure the boat policy you are offering your customer covers the trailer and the boat’s motor. Offer endorsements to provide coverage for personal belongings stored on the boat, dinghies and fishing gear.

Drowning accounts for two-thirds of all boating deaths—even more if deaths with unknown cause are excluded—but does not account for the same fraction of deaths for all types of boats. Personal watercraft (PWC) accidents are more likely to result in blunt trauma injuries (in part because of speed). But another important reason why PWCs have fewer drownings is because most states require personal watercraft operators and passengers to wear life jackets. Other boaters are less likely to wear their life jackets, however. Coast Guard observational studies have found overall life jacket wear rates of 17.4 percent for all boaters excluding PWC operators. Among those in power boats, only 3.9 percent wore lifejackets. Among boating accident victims who drowned, 84 percent were not reported as wearing a life jacket. To protect life, ensure everyone in your boat has—and wears!—their lifejacket.


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the lower price with the lesser coverage, your agency should have a defense should a problem occur if the client’s decision is in writing. Based on market conditions, from time to time agencies will find it necessary to move coverage from the standard market to the excess-and-surplus-lines market. In these situations, the differences can be significant. This issue is further compounded by the fact that it is probable the wholesaler is not providing all of the coverage that was requested. Therefore, be sure to review the E&S proposal, comparing it to the prior policy and to the coverages requested. Identifying the differences is up to your agency to uncover. A Great Way Perform the necessary comparison when coverage is switched for a client from one carrier to another. This involves identifying the differences, bringing those differences to the client’s attention and getting his or her written sign off. This is a great way to keep this issue from becoming a potential E&O problem in your agency.

by Curtis M. Pearsall, CPCU, AIAF, CPIA President – Pearsall Associates, Inc. and Special Consultant to the Utica National E&O Program


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A regular feature at our convention is a Mock Errors & Omissions Trial, written and directed by Thomas O’Connell, from Gauntt, Koen, Binney, Woodall & Kidd, LLP, in The Woodlands, Texas.

This year, the mock trial is called: “THE BUGATTI CAPER.” The Bugatti Veyron is one of the fastest and most expensive production sports car ever made, and serves as the background for our Mock Trial. Mr. O’Connell’s firm handled an actual case in which a Bugatti car that was purchased for $1 million and insured for $2 million was driven into Galveston Bay by the owner/insured in 2009, claiming he was startled by a giant bird that caused him to veer off of the I-45 feeder road into the salt water of the adjacent causeway. After it was declared a total loss, he filed suit against the insurance company and the insurance agency when the claim was denied. What the insured didn’t know was that a group of teenagers driving adjacent to the car on the main I-45 freeway was taking a video on their cell phone at the exact same time as the crash. The video became a You-Tube sensation, and as a result the insurance company and agency were able to stumble upon the video. Unfortunately for the insured, noticeably absent from the video was the presence of the bird during the crash. Although as referenced the insured filed suit against the insurance company and the agency, it was eventually dropped and the insured plead guilty in criminal court of wire fraud. But what might have happened if the case wasn’t dismissed and it proceeded to a jury trial? In this fictional account of a jury trial showing just that, the Mock Trial includes the shady insured, our hero-insurance agent, an ex-con that claimed he was hired by the insured to torch the car before the accident, a chaw-chewing wrecker driver, and a mechanical expert that testifies on the effect the salt water had on the still-running car left by the insured, all played by members of the audience. This riveting Mock Trial, which includes both the audience themselves as participants and the actual video of the car crash, is must-see entertainment. Be sure to include this Mock Trial class (which includes 3 hours of CLE) in your registration. Space is limited… so sign up now! Thomas F. O'Connell, III Mr. O'Connell's practice includes defending professionals in errors & omissions claims statewide in Texas since 1986. He is also approved Texas panel counsel for numerous insurance carriers. Typical cases involve defending professionals in negligence, fraud, and deceptive trade practice lawsuits. Those clients include real estate agents and brokers, insurance agents, real estate inspectors, appraisers, mortgage brokers, builders, directors, and other professionals in various types of claims. He also handles numerous types of insurance defense-related cases, including commercial auto/trucking, CGL, EPL, P&C, and D&O related claims. THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Wow! How fun is that? And . . . how exactly do you accomplish building a wonderful booth that makes people want to stop and chat for a few minutes? No matter who we are or what our industry, we all use certain steps to plan a booth.

Implement the Plan That takes more forethought that we might imagine. Here are some suggestions that will help: 

Take advantage of theme specific tradeshows (i.e. MardiGras)  Understand the dimensions of the booth. 10x10 sounds bigger than it is.  Tap into the creativity of your staff. You might be surprised how many of the insurance professionals you work with everyday are talented “closet” artists.  Expect the unexpected. Be sure to have plenty of extra batteries, powerstrips, network cables and anything else that might need to be replaced (or loaned to the booth next to you).  Safety First. Booths have been known to fall over and lights to get hot enough to burn. Try to keep the booth space free of unnecessary obstacles.  Always man the booth, always. Plan to have enough staff to cover the booth continuously in shifts. Standing on your feet for hours is hard on the back. Be sure to build in plenty of breaks. THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Adhere to the Budget There are plenty of known costs associated with conventions and tradeshows. Anticipating other less obvious expenses can be difficult. For example, when working in other states, you can’t just duct tape a power cord to the floor. 5 union employees will do it for you and you will pay union scale. In another example, in the months following 9/11, I wasn’t going to have enough time to ship my trade show give-away items through Customs because they were months behind. I had to order them (logoed hockey pucks by the way) in Canada and pick them up after I crossed the border resulting in additional expense.

Assemble the Crew Many hands make the load light. Hopefully you will have enough crew that no one will be overloaded. Here is our team responsible for the booth’s give-aways this year.

Bob — Head of Web Based Product Acquisition

Joe — Quality Assurance / Taste Tester

Helen and Jeff — Hat Specialists

Whether you’re a novice or an old hand at this sort of thing remember to have fun putting the booth together. This year’s PIA Trade Show leaves a lot of room for imagination. And we’ve heard a lot of enthusiastic ideas. Hope to see you there having fun. THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Arrange each of the following anagrams to form a single insurance related word. Keep in mind that the anagram is not a clue. It has nothing to do with the insurance related word. Send us your answers to be entered in a drawing to win a fabulous CASH prize! Feel free to call us if you’re stuck.

972.965.2025 Email to: or fax to 972. 307.7888

























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Here’s the answers to last month’s puzzle. Remember there’s a $50 prize for the first person to






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(214) 618-2365

(832) 375-0787

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Thomas, Mary Date of Action: 9/15/2015 Location: Center Action Taken: Indicted Violation: Insurance Fraud, State Jail Felony Reid, James Date of Action: 9/14/2015 Location: Houston Action Taken: Indicted Violation: Misapplication of Fiduciary Property-Elderly, Third Degree Felony Solis, Leocadia Date of Action: 9/11/2015 Location: Dallas Action Taken: Sentenced to 10 years deferred adjudication, 160 hours community service and ordered to pay $31,041.59 in restitution. Violation: Insurance Fraud, 3rd Degree Felony

Contact Us Need more information on the benefits of membership? Have a question about member services? Give us a call: Texas PIA & Young Insurance Professionals 3632 Frankford Rd 200B Dallas, Texas 75287 (972) 862.3333

Lockett, Michelle Date of Action: 9/9/2015 Location: Houston Action Taken: Sentenced to 5 years deferred adjudication and ordered to pay $44,800.00 in restitution. Violation: Theft, State Jail Felony Coronado, Juana M Date of Action: 9/3/2015 Location: Dallas Action Taken: Sentenced to 10 years deferred adjudication, 160 hours community service, fined $2,000.00 and ordered to pay $31,041.59 in restitution. Violation: Insurance Fraud, 3rd Degree Felony Graves, Kenneth Date of Action: 9/3/2015 Location: Corpus Christi Action Taken: Sentenced to 7 years incarceration and ordered to pay $128,918.46 in restitution. Violation: Misapplication of Fiduciary Property, Second Degree Felony White, Sara Date of Action: 9/2/2015 Location: El Paso Action Taken: Indicted Violation: Misapplication of Fiduciary Property, State Jail Felony

Timing has a lot to do with the outcome of a rain dance. The Insurance Sage



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Last word

This will be my last chance to invite you to join us at the 2016 Texas PIA Convention and Trade Show in San Antonio, May 19—21. Everyone that’s anyone will be there… I hope to see you... Go to our home page… and get all the information you need… You can come to the convention and register there, but on line registration is half price. Plus, call your company marketing rep and ask for a discount code that will cut the registration price in half again! This is going to be our biggest convention ever. Partners and Exhibitors have taken all the Trade Show booths available… and agent registration is ahead of last year. The “Meet Me at the Fair” theme will make it fun. Exhibitors will set up carnival type games with prizes. We’ll have mini corny dogs with Shiner Bock Mustard and other treats and beverages. Finally… I’ve told you this before… but it’s worth repeating: On Saturday, May 21st at 5:15 PM there will be a drawing for a $1,000.00 cash prize. Only agents and their staff will be eligible… so your odds of winning should be pretty good. To enter the drawing, you will need to have your entry card validated by having each booth punch it… then drop it in the hopper at the Young Insurance Professionals booth (#10) or hand it to any Volunteer with a Red Vest, before 5:00 PM on Saturday. Oh yes… There’s a Skeet Shoot & Golf Scramble on Thursday, the 19th with the President’s Welcome Reception that evening. If you have questions or need help registering, call me: 972.862.3333.

Texas connection may 2016  
Texas connection may 2016