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September 2017

Hurricane Harvey: Special Edition Unprecedented “Harvey Didn’t Discriminate” What Agents Need to Know Fighting Fraud Help After Harvey: For Your Clients After the Storm: E&O Lessons


In This Issue Unprecedented

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Uncharted Territory: Chemical Plants + Hurricanes

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From PIA's National Director in Texas

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Harvey: What Agents Need to Know

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Fighting Fraud

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HB 1774: New Law Generates Rumors

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After the Storm: Insurance Agents E&O Lessons Learned

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You’re Covered: Help After Harvey

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Back in Business: Help After Harvey

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Texas News Round-Up

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May 17 - 19, 2018 2018 Texas PIA Annual Convention & Expo Arlington Sheraton Hotel & Arlington Convention Center Arlington, TX

Mark your calendar for our 2017 Texas PIA Christmas Party Friday, December 8, 2017 Dave & Buster’s Houston, TX Further details to come. And watch for announcements about new educational opportunities coming in 2018. Texas PIA P.O. Box 700877 Dallas, TX 75370 (972) 862-3333

Shirley Almany Our hearts go our to everyone impacted by disaster over the last 30 days. Unprecedented damage was seen in Houston and surrounding areas, and the path to recovery stretches long ahead. In this issue, we have made every effort to address the myriad of concerns that face independent agents in the aftermath. This includes comprehensive resources for you, your staff, and of course, your clients. Many were affected by Harvey, and are turning to you for assistance. I urge you to review and share the many useful pieces included in these pages. Even if you were not directly impacted, it’s important to know how to help prepare your agency and your clients for any future disasters. Education is one of the most important things the independent agency system offers to Texas and our nation. I recently returned from the 2017 PIA Fall Governance Meeting and be assured that it’s not just agents across Texas who care, it’s the entire community of independent agents. We are not alone!


Shirley Page 2

PIA National Meeting We’re just returning from the 2017 PIA Fall Governance Meeting held September 13th —16th in Minneapolis, Minnesota. Newly elected officers were installed, who will serve one-year terms beginning October 1, 2017 and run through September 30, 2018.

David Gorman, President Elect Local Agents Helping Texas

Shirley Almany, PIA of Texas president, presenting a gavel to David Gorman, our president elect who will take office on October 1, 2017

Shirley Almany, president, David Gorman, president elect and Gary Blackwell, PIA National president receiving a $2,500 check from Texas PIA for the PIA Disaster Relief Fund.

Texas PIA Awarded Membership Growth Award

Shirley Almany receiving a 2017 PIA Membership Growth Award from PIA National PastPresident, Robert Hansen.

Shirley Almany, president, David Gorman, president elect, Vicki Reece, executive director, with our 2017 PIA Membership Growth Award.


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Unprecedented Harvey smashed ashore as a Category 4 hurricane Friday, August 25th near Rockport, Texas, a town left devastated. It was the strongest storm to hit the U.S. since 2004 and broke a 12-year record span in which the nation avoided being hit by a system ranked Category 3 or higher on the fivestep Saffir Simpson scale. Flooding 28,000 square miles in the Houston area equates to “the size of Lake Michigan,” according to Brad Kieserman, vice president of disaster services operations and logistics for the American Red Cross. The 51.12 recorded inches of water in the Mont Belvieu suburb east of Houston breaks the previous 1978 record of 48 inches for a single storm on the U.S. mainland during Tropical Storm Amelia in Medina, Texas. As Harvey’s winds died down, trouble for Texas was just beginning as days of flooding rains across the heart of U.S. energy production threatened the country’s fourth-largest city and left farmers struggling to save horses, cows and crops, of thousands displaced from their homes and countless businesses closed. In addition to the energy threat, crops and livestock struggled to cope with rising waters, while airlines have canceled flights at multiple Texas airports. “Parts of Houston, will be uninhabitable for weeks and possibly months due to water damage, mold, disease-ridden water and all that will follow this 1,000-year flood,” said AccuWeather president Joel Myers. It’s far too early for a definitive estimate of the damages caused by Hurricane Harvey, while floodwaters swamped large swaths of the Houston area and beyond, into far eastern Texas and Louisiana. But three independent estimates from people who specialize in disaster and risk management show that the storm is likely to be the most expensive or second-most expensive natural disaster in the United States since 1980, the earliest year such comparable data was kept by the National Centers for Environmental Information. These early estimates paint a grim enough picture, and may certainly rise.


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Tallying the Damages

70 Death Toll

FEMA News Video

The death toll on both humans and animals would undoubtedly have been much higher without the heroic work of many local, state and national organizations, both professional and volunteer. This video shows the 36th Sustainment Brigade, Army National Guard, assisting the New Jersey Task Force 1, Urban Search & Rescue unit as they conducted high water rescue flooding in Wharton on August 31st.

Officials now blame at least 70 deaths on Harvey. Many of those deaths confirmed in 11 Texas counties happened when people were caught in quickly rising floodwaters or lost control on water-logged roads, emergency management officials said. It includes Sgt. Steve Perez, 60, a 34-year veteran of the Houston Police Department, who drowned in his car on the way to work. Six family members including four children were killed when a van they were riding in was swept into a bayou as floodwaters rose in Harris County. Officials said floodwaters have caused delays in responses to medical emergencies that resulted in deaths as well; including the first death reported in the storm — a man who died in a fire in Aransas County. Another person died of a heart attack Sunday in Montgomery County, as rescue workers were delayed in getting to his address by road and flood conditions left by Harvey's massive rainfall.

500 Rescues

FEMA News Photo

Members of FEMA's Urban Search and Rescue Nebraska Task Force One (NE-TF1) remove an infant from a rescue boat in the aftermath of Hurricane Harvey.

The number of rescues the Texas National Guard has made so far in the Houston area, according to the Texas governor’s office. At least 4,200 people have been saved by the U.S. Coast Guard, and urban rescue teams from the Federal Emergency Management Agency have saved at least 2,500. Thousands more people have been saved by other entities, including the Houston Police Department, the Harris County Sheriff’s Department and private citizens.

1,700,000 Homes Damaged Hurricane Harvey inflicted damage on 1.7 million homes that could top $11.5 billion in insured losses, according to CoreLogic Inc.

364,000 FEMA News Photo

Registered for Assistance

To date, people who have registered for assistance with the Federal Emergency Management Agency (FEMA).


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People in Shelters

This is the estimated number of people displaced from their homes and taking refuge in temporary shelters as of August 30th, according to Texas state and emergency officials. Red Cross officials said they expected that number could swell. Some returned to public housing complexes inundated with sewage and mud. More than 50,000 went to government-paid hotels, some far away from homes and schools. Others moved in with family and friends. Harvey did not discriminate, inundating exclusive neighborhoods and low-lying apartments for the poor, and was blamed for at least 70 deaths. Most of the evacuees at the George R. Brown Convention Center were lower-income, but some were from wealthier areas.

Dominick Del Vecchio: FEMA News Photo

The 1-800 FEMA registration number digitally displayed in the Houston Convention Center, a place being used for disaster survivors to register for disaster assistance.

Now, about 1,500 remain at the convention center, and several said they were homeless, disabled or from public housing. About 2,800 were at the NRG Center, another convention center that opened after George R. Brown reached double its original capacity.


Without Power

Customers without power according to the Energy Department.

120,000 People with No Water Residents in Beaumont on August 31st without water.

900 Calls per Hour

Kenneth Wilsey: FEMA News Photo

FEMA personnel at the Caribbean Area Division (CAD) volunteer to participate in a program that enables FEMA employees to augment staff in Registration Intake in response to Hurricane Harvey when survivors’ calls exceeds the call center capacity and a rapid staffing increase is needed.

Volume of calls that poured in per hour to call centers around Houston at the height of the disaster.

24,000 National Guard Troops The number of National Guard troops deployed to assist in relief efforts, including all of Texas' members as well as some from other states. The Texas governor said these troops will be needed for months to search homes and restore the state to order. Jacinta Quesada: FEMA News Photo


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$190 Billion

Cost Estimate

Hurricane Harvey could be the costliest natural disaster in U.S. history with a potential price tag of $190 billion, according to a preliminary estimate from private weather firm AccuWeather. This is equal to the combined cost of Hurricanes Katrina and Sandy, and represents a 1% economic hit to the gross national product. “When you look at the number of homes that have been mowed down and destroyed and damaged, this is going to be a huge catastrophe that people need to come to grips with,” Abbott said on “State of the Union” on CNN. “It’s going to take years for us to be able to overcome this challenge.” Abbott said Trump and Congress made it clear that the president’s initial request for $7.85 billion “is just a down payment.” The governor said more than 5 million people were affected by the storm, and both the population and geographic size involved is larger than that of Katrina, which hit Louisiana in 2005, and Hurricane Sandy, which hit the northeast in 2012, combined. "I’ve got every confidence that Congress will deal with this in a timely way," Energy Secretary Rick Perry, a former Texas governor, told reporters aboard Air Force Two. He said he had "no idea" how much money will be needed. President Donald Trump vowed that the government’s response to Hurricane Harvey would serve as a model for disaster recovery. “We want to be looked at five years, 10 years from now, as this is the way to do it,” Trump said Tuesday as he and first lady Melania Trump received a briefing on the storm response at a fire station in Corpus Christi, Texas. Elaine Duke, the acting director of Homeland Security, said the agency is pulling about 1,000 workers off their regular jobs to instead focus on the storm. Trump emphasized the scale and cost of the recovery effort in a meeting with officials in the state’s underground emergency command center, unleashing a string of superlatives. “Probably there’s never been anything so expensive in our country’s history. There’s never been anything so historic in terms of damage and in terms of ferocity, he said, later adding, “Nobody’s ever seen anything this long and nobody’s ever seen this much water.”

Barry Bahler : FEMA News Photo

Harvey “sounds like such an innocent name,” Trump said, “but it’s not innocent, it’s not innocent.”

See source information for this article on page 24


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Uncharted Territory: Chemical Plants + Hurricanes “It seems like Harvey came with a plan to follow the chemical industry on the Gulf Coast,” said Sam Mannan, director of the Mary Kay O’Connor Process Safety Center at Texas A&M University. “This whole thing is testing how well we have thought through our safety systems and programs and how robust the plants are.” On August 31st a Houston-area chemical plant was hit by explosions overnight after floods caused by Harvey knocked out power supplies needed to refrigerate volatile peroxides. Fifteen police officers were treated at the hospital for smoke irritation from the plant. Earlier evacuations of the site and surrounding community prevented more serious injuries. The plant is owned by French chemical company Arkema SA. The incident underscored the risks confronting the industry after dozens of chemical plants shut down in the path of the storm from South Texas to Louisiana, knocking out more than half of U.S. production of some of the most-used chemicals and plastics. About 61% of U.S. ethylene production has been shut due to Harvey, according to PetroChemwire. While Gulf Coast chemical plants are designed to withstand hurricane force winds and floods, Harvey has put the industry into uncharted territory, according to Mannan. “I don’t know if anybody is ready for this level of flooding,” he said. One complicating factor post-Harvey is the urban sprawl gradually engulfing chemical plants, according to Andrea Sella, a professor of inorganic chemistry at UCL university in London. “Because accidents are unusual, planners can come to underestimate the severity of what are likely to be quite rare events,” he said by email. Seven first responders who sued Arkema Inc. in Texas court won a same-day temporary restraining order that the chemicals maker preserve evidence, including air-quality samples taken at its plant after fumes from a series of explosions sent police and medical personnel to the hospital.

FEMA: Video

View FEMA video outlining response team efforts, recovery operations, and humanitarian aid statistics throughout the duration of the hurricane relief efforts as of 04 Sept. 2017.

The first responders are seeking more than $1 million in damages from the chemical company — which ordered a mandatory evacuation of everyone in a 1.5-mile radius of its Crosby, Texas, facility. The suit alleges that Arkema knew the chemicals at the plant had to be refrigerated and that if they were not, they would “break down and ignite.” Yet the company failed to take precautions to avoid the situation and lied to the public about whether the chemicals were toxic, according to the suit. First responders, the suit alleges, “relied upon these representations and suffered serious bodily injuries as a result.” See source information for this article on page 44


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PIA Disaster Fund Helping Texas Main Street Businesses The PIA Insurance Foundation is raising funds to provide relief grants to Main Street business owners who were adversely impacted by catastrophic flooding resulting from recent hurricanes. The PIA Disaster Relief Fund, a project of the PIA Insurance Foundation, is soliciting charitable donations and providing relief grants to Main Street businesses that may be facing gaps in the insurance coverages or other assistance available to them. Grants are available in areas of Texas covered by Federal or state declarations of disaster related to the flooding events that resulted from Hurricane Harvey. “Our hearts go out to the people of Texas who are experiencing what may be the worst flooding in their history,” said PIA National Executive Vice President & CEO Mike Becker. “When disasters strike, PIA members are there to help. The PIA Insurance Foundation is happy to do its part to help people in Texas recover from these unprecedented floods.”

I want to donate.

I wish to apply for a relief grant.

The PIA Insurance Foundation is a licensed as an IRS 501(c)(3) charitable organization. Funds in this grant program are for those who face serious gaps among insurance coverages (where applicable), FEMA grant/aid funds, and funds available from other government and/or charitable organizations. Our goal is to support quicker and more complete recovery for Main Street businesses after such events, which in turn help to create more successful and resilient communities going forward. Please complete the application in full. Be sure to provide current contact information. Retain a copy of the application before sending it. We require information on the individual applying for a grant, as well as on their relationship to the business or property for which the grant will apply. If you have any questions or need further information, please contact:


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From PIA's National Director in Texas Harvey 'didn't discriminate' when wreaking havoc. by Denny Jacob, In the coming weeks and months, the true scale of Hurricane Harvey's destruction will be revealed. However, for some the full extent of Harvey's damage will never be quantified. Far too many individuals and families have lost it all — cars, homes, loved ones and the belief that they will ever truly be safe again. Jimmy C. Beathard considers himself pretty lucky in the grand scheme of things. His lake house was surrounded by a foot and-a-half of FEMA: News Photo water, but because he sealed his doors and the gaps in the bricks with silicon, not a drop of water got into his house. His boat came loose during the storm; now it's just a matter of retrieving it. "Those are minor things compared to house flooding," Beathard reflects. He's lived in the city of Conroe, Texas, most of his life and has seen his fair share of extreme weather during his 40 years in the insurance business. Yet none of it, he says, compares to Hurricane Harvey. "It was incredible, and I wouldn't wish it on anyone," says Beathard, agency principal of Beathard Insurance and Texas’ National Director for the National Association of Professional Insurance Agents (PIA). "Where I live, in a 72-hour period we received about 32 inches of rain. “That's a heck of a lot of rain," he adds, with some needed good humor. Self-described as a “cut-to-the-chase” kind of guy, Beathard doesn’t mince words when asked how he got started in the insurance industry. "I needed a job," he quips. Beathard became involved with Texas PIA around 2002, and Texas PIA president around 2008. He currently has a staff of 12 throughout his four Texas offices — two in Crown, one in Huntsville, and one in Willis. Hurricane Harvey slammed into Texas on Friday, Aug. 25. Days of relentless rain and highpowered winds sent numerous areas reeling in the Lone Star State. On Monday, Aug. 28, Beathard says nothing was moving, everything was flooded and no one was getting out except for emergency vehicles; on Tuesday, the rain continued to pour and people from in and out of state began to help the displaced. By Aug. 30, despite it all, the sun was out, the water had started to recede, and people were finally beginning to move around. This week, "I think the story is still being played out,” he sighs. Getting in front of a deluge of claims A longtime insurance professional, Beathard knows it pays to be proactive in times of disaster. Following an extreme weather event, especially one of such magnitude, establishing communication with clients is priority one. For Beathard, his phone lines “have been burning up." "We're trying to get in front of the backwash of claims,” he says, noting that his people have already spoken with some 400 insureds. Beathard estimates that he has handled about 88 claims so far and knows they'll continue to trickle in. The bulk of the claims to come will Continued on Page 42 TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Harvey: What Agents Need to Know Even the best policies won’t protect your people against fear and unease in Harvey’s aftermath, but this is an opportunity for independent agents to shine as clients turn to you for help. Acting as their advocate and walking them through the claims process is the best way for you to assist others in this difficult time. The Texas Department of Insurance (TDI) has issued several bulletins encouraging insurers to be lenient with their insureds. The bulletins are in response to the proclamation by Gov. Greg Abbott declaring a Visit the PIA of Texas website’s disaster as a result of Harvey. President Donald Hurricane Harvey Resource Center for Trump additionally issued a major disaster declaraupdated information and valuable links. tion for the state and ordered federal aid in the recovery efforts. The governor’s proclamation “directs that all necessary measures, both public and private, be implemented to meet that threat,” according to TDI. TDI offers the following guidance:






“It is the opinion of the Texas Department of Insurance that it is inappropriate for insurers to re-rate, cancel, non-renew, or refuse to provide coverage due solely to a policyholder’s status as a victim or evacuee of Hurricane Harvey. Further, it is not reasonable to change a policyholder’s rating classifications or increase their insurance rates solely because they are a victim or evacuee of Hurricane Harvey. “TDI reminds all persons, including adjusters, building and repair contractors, and insurers, that pursuant to Insurance Code §543.001, an insurer or its representative, or any other person, may not misrepresent the terms and provisions of a policy. Further, as stated in 28 Texas Administrative Code §5.9970(d) and (e), persons insured under a homeowners or dwelling policy are entitled to have their home repaired by the person of their choice.” “Under Insurance Code §542.003(a), an insurer engaging in business in this state may not engage in an unfair claim settlement practice. Not attempting in good faith to effect a prompt, fair, and equitable settlement of a claim submitted in which liability has become reasonably clear constitutes an unfair claim settlement practice under Insurance Code §542.003(b)(4).” “With the possible relocation of hurricane victims and other personal hardships sustained by residents of counties covered in the governor’s proclamations, the Texas Department of Insurance reminds carriers of their obligations under §559.103 of the Texas Insurance Code. These obligations apply to the writing of personal insurance in this state, including the writing of personal insurance for Texas residents affected by the hurricane. “Section 559.103 allows an insurer to grant an exception to an insurer’s rates, rating classifications, or underwriting rules for an applicant for insurance coverage or an insured for an extraordinary event. The section also requires that an insurer provide reasonable exceptions for a consumer whose credit information has been directly influenced by a catastrophic illness or injury; by the death of a spouse, child, or parent; by temporary loss of employment; by divorce; or by identity theft, on written request Continued on Page 15


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“The Texas Department of Insurance urges insurers to avoid placing additional burdens on victims or evacuees of Hurricane Harvey and encourages insurers to accept verbal requests in lieu of written as stated in §559.103. Section 559.103 applies to personal insurance, which includes personal automobile, residential property, residential fire and allied lines insurance policies; or a noncommercial insurance policy covering a boat, personal watercraft, snowmobile, or recreational vehicle.” Regarding “insurers contemplating changes in classification of commercial auto vehicles from local to intermediate or long haul, cancellation or nonrenewal of policies, or refusal to provide coverage due solely to participation in the relief effort. The Texas Department of Insurance is of the opinion that in instances where insureds or potential insureds are temporary participants in the relief effort of Hurricane Harvey, it is inappropriate for insurers to re-rate, cancel, non-renew, or refuse to provide coverage due solely to that participation.” “In the current disaster circumstances, the Texas Department of Insurance reminds carriers that Insurance Code §4101.002(b) and §4101.101 authorize carriers to immediately use nonresident and emergency adjusters to handle claims. These provisions are discussed at:” “With the relocation of hurricane victims and other personal hardships sustained by residents of counties covered in the governor’s proclamations, TDI encourages carriers to use all available means to provide prompt and immediate relief to those residents and policyholders.” “Insurance Code §4101.251 prohibits licensed adjusters from adjusting a loss related to roofing damage on behalf of an insurer if the adjuster is a roofing contractor or otherwise provides roofing services or roofing products for compensation, or is a controlling person in a roofing-related business. The section also prohibits a roofing contractor from acting as an adjuster or advertising to adjust claims for any property for which the roofing contractor is providing or may provide roofing services, regardless of whether the contractor holds a license under this chapter.”

Click here for a full list of Harvey-related TDI bulletins. Dealing with Loss Modeling firm AIR Worldwide has estimated that industry insured losses from wind, flood, and storm surge combined are expected to exceed $10 billion with approximately $3 billion of the losses resulting from winds and storm surge. These estimates do not include losses to the National Flood Insurance Program (NFIP). AIR’s property loss estimates for flooding from Harvey capture losses from inland flood both on and off the floodplain based on simulated event scenarios that reflect uncertainty in precipitation observations, river flows, and modeled levee failures. The modeled hazard intensities reflect the maximum estimated river flows and maximum excess runoff intensities during the event from Aug. 25–31, 2017. Included in the estimates are onshore residential, commercial, and industrial properties and their contents, automobiles, and time element coverage (additional living expenses for residential properties and business interruption for commercial properties; the estimates do not, however, include contingent business interruption losses resulting from the closure of oil refineries in the region). The range in AIR’s loss estimates reflects uncertainty in the payment of additional living expenses resulting from relocation, time spent in secondary housing, lost wages, loss of electricity, and damage to contents. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Brace for Post-Harvey Storm When the floodwaters finally start to recede in the aftermath of Hurricane Harvey, hundreds if not thousands of insurance adjusters will be heading to Texas and surrounding areas to begin adjusting billions of dollars in losses. With the amount of devastation an onslaught of claims will create a secondary storm for our industry. Small becomes magnified: After hurricanes, what might otherwise have appeared as small coverage issues are magnified by the number of claims for which they are relevant. For example, a dispute over when policyholders are entitled to payment of overhead and profit (typically 20 percent of repair costs) may not have significant value under normal circumstances, but for storm damage valued in the billions, the issue becomes very significant. Causation: Wind, Water or Something Else?: These heavy wind and water conditions are certain to bring disputes over causation. What damage was caused by the wind versus the water versus something else, like a pre-existing condition? Given the extent of flood damage resulting from Harvey, proving wind damage will be particularly important for policyholders who Before you go to Texas did not purchase flood coverage. Overwhelming volume: Whenever there is a catastrophe like a hurricane, insurers are inundated with policyholder claims. While a property insurer may face a few hundred claims a week under normal circumstances, a hurricane results in hundreds of thousands of claims made essentially all at once. Properly adjusting so many claims within a reasonable timeframe in accordance with statutory requirements is a daunting task. To get it done, insurers must rely on temporary personnel and third party contractors. Of course, these same resources are in high demand by multiple insurers. And neither insurers nor claims adjustment companies keep hundreds of adjusters on payroll on the offchance a hurricane might strike (policyholders would not want to pay the premium increase that would result from such a business model). Hence, hurricanes require insurers and third party providers to staff up in a short period of time, including hiring brand new adjusters. And because demand is high, adjusters try to adjust as many claims as possible each day (to not only maximize their own income, but also to reach as many policyholders as possible, all of which want to get their claims adjusted as quickly as possible).

Considerations for Out-of-State Adjusters 1. How will you travel to the impacted areas? 2. Where will you stay and how far away will it be from the areas you need to reach? 3. How will you travel around the area? 4. What will you eat and drink while there? 5. How will you charge any electronics? 6. Will your cell phone or computers have service in the area? 7. How will any curfews affect your ability to travel into some of the areas? 8. Do you need permits to access different areas within the CAT zone? 9. What kind of support will your office be able to provide while you’re in Texas? 10. How will you contact your policyholders?


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Auto Claim Deluge While homeowners’ insurance policies almost always exclude flood damage, comprehensive auto policies do cover flooding. The typical household in Houston has two cars, and Mayor Sylvester Turner urged residents to “hunker down” as Hurricane Harvey made landfall, hoping to avoid a replay of the tie-ups and crashes that killed about 100 people fleeing Hurricane Rita in 2005. That means few people moved their cars out of harm’s way before the flooding started. Texas drivers are not required to have comprehensive auto insurance — the type that covers flood and other types of damage. People holding only the legally required insurance — liability coverage for damage done to other people’s cars — will not have valid claims, Mr. Stillwell said. Auto insurers were already bracing for another bad year when the downpour started in Texas, producing potentially hundreds of thousands of new claims. “We do know that approximately 100,000 claims have come in” as of Thursday, said Matt Stillwell, manager of governmental and regulatory communications at the Insurance Council of Texas, a trade association.

Drones v. Harvey Helpful


Fleets of commercial drones are primed to hover over the destruction from Tropical Storm Harvey in an unprecedented test of unmanned aircraft’s ability to assess billions of dollars in damage for the insurance industry and accelerate payouts for harried policyholders.

Aviation regulators imposed a prohibition on hobbyist drones and other civilian aircraft flying in the area affected by Tropical Storm Harvey after concerns were raised about potential interference of rescue efforts.

“Harvey is an opportunity to see whose drones are capable and whose are merely toys,” said George Mathew, chairman and chief executive of Kespry, a drone company based in Menlo Park, California. “Harvey is a seminal moment for the industry.” Harvey marks the second major hurricane since the Federal Aviation Administration (FAA) loosened restrictions on drones last June, allowing greater use for filming, inspecting facilities and other commercial activities.

The Federal Aviation Administration issued the new restrictions following one of the worst natural disasters in recent history as rains continued to pummel parts of Texas. Air Force Major General James Witham called the potential that a small civilian drone might interfere with a military plane aiding in the relief “a big deal” during a recent Pentagon briefing. Disasters can draw hobbyists who use small drones to take photographs or videos or just observe activities.


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Industry executives said Harvey could well end up being the biggest U.S. auto-salvage operation on record after Harvey dumped more than 50 inches of rain on parts of the nation’s fourth-largest city. Just how many vehicles in South Texas were walloped by Harvey is not yet known. Cox Automotive, owner of the Autotrader online automobile market and Kelley Blue Book car valuation service, has estimated that between 300,000 and 500,000 vehicles were severely damaged or destroyed. That translates to potential losses of between $2.7 billion to $4.9 billion. Your Role in Recovery Your phone rings, and it’s your customer in a crisis. There’s been a disaster. Your client has turned to you because you are the human face on the otherwise gigantic monolith that is, in their mind, insurance. You are the one they have a relationship with, and they’ve grown to trust your counsel. You want to be of service to your client, but you know it’s the insurance company that actually manages the claim. Take heart. Even as an independent insurance agent you have an important role to play in helping your client through the claims process. Whether you’re selling or servicing policies, the insurance game is all about relationships. That means a glitch in the claims process can leave your clients with a bad opinion of you, even if you have no control in the matter. After all, your customers came to you because they needed to protect their assets. If something goes wrong, they may conflate their frustration with the provider with you. This is to say, don’t underestimate the role you play in helping the claims process go smoothly for your client. The path for good service is clearly marked for a captive agent. The insurance company they work for instructs them on how to handle a claim. For the independent agent, things get a little murky because every company has a different philosophy and follows different procedures. That said you can still manage your client relationship by:   

Providing your customer with good advice. Directing your customer to the appropriate people. Working to keep your customer’s rates competitive.

Try to guide your client through the claims process with their insurance company. Your extra effort will likely be the bright spot in an otherwise stressful experience, which may be rewarded with referrals that generate new business. Your clients will have plenty of concerns when filing a claim. They may want to know:     

Who to contact about the claim. Who evaluates their losses. How quickly they can expect compensation. How filing a claim will affect their rates. Whether the insurance company can cancel their policy.

Familiarize yourself with the insurance company’s claims process so you can answer these questions. You may also want to explain that your client’s claims history impacts how their policy pays out. The connection between customer satisfaction and the claims process cannot be overemphasized. See source information for this article on page 44


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Memo from FEMA U.S. Department of Homeland Security Washington, D.C. 20472


September 6, 2017


Write Your Own (WYO) Principal Coordinators and the National Flood Insurance Program (NFIP) Servicing Agent


NFIP Clearinghouse


Flood Response Office – FICO Number 682 Hurricane Harvey – Houston, TX

The NFIP Bureau and Statistical Agent have established a Flood Response Office (FRO) to service policyholders impacted by Hurricane Harvey. The FRO will coordinate with the WYO Companies and the NFIP Direct Servicing Agent to provide guidance, define the scope of coverage, and assist with the re-inspection of losses. The FRO is operating at the following location: NFIP Flood Response Office 6150 Richmond Ave Suite 235 Houston, TX 77057 The FRO operating hours are Monday through Friday, 8:00 a.m. to 5:00 p.m. and Saturday, 8:00 a.m. to 12:00 p.m. (noon). The point of contact at the FRO is iService NFIP General Adjuster Tony Sarradet. The temporary telephone number at the FRO is 703-635-8258. cc: Vendors, IBHS, Government Technical Representative Required Routing: Claims, Underwriting


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Fighting Fraud Disaster can definitely bring out the best in people as they demonstrate their resiliency and capacity to care for those whose lives have been devastated. But it also creates opportunities for fraudsters to take advantage of the situation. "Claims and fraud will touch every line and type of insurance, and that is typical with what we've seen with every major natural disaster that’s occurred in recent memory," says Dan Draz, principal of Fraud Solutions, which is headquartered in Naperville, Ill. "Someone will try and exploit a very bad situation for personal gain." For your agency and clients, here are some of the common types of fraud to emerge after a catastrophe like Hurricane Harvey: No. 1: Can I sell you a used car? Some enterprising crooks will find a way to purchase flooded vehicles, clean them up and then resell them as "used" cars. In this case it really is buyer beware. Definitely check the vehicle inspection number (VIN) to see what type of prior damage the vehicle sustained and what kinds of repairs it may have had in the past. Doing some simple checking with a service such as CARFAX, it’s easy to learn the rest of the story about the used vehicle you’re considering purchasing. No. 2: Adjusting the loss Staff adjusters and independent adjusters are already on site setting up appointments with policyholders and meeting with them to review and adjust their losses. Staff adjusters and independent adjusters usually represent a specific insurance company. There is no charge to the policyholder for their services. Public adjusters purport to represent the policyholder and may charge them as much as 15% of the total value of the insurance settlement for their services according to the Insurance Information Institute. In some cases a state insurance department will establish percentage limits that public adjusters may charge. "Some public adjusters may try to exploit the confusing flood aftermath with insurance schemes," advises Jim Quiggle, director of communications for the Coalition Against Insurance Fraud (The Coalition). "Most are honest, but the bad apples could be a big problem for insurers and desperate homeowners."Quiggle adds that "crooked adjusters will swoop in from out of town and knock on doors, seeking contracts they’ll turn into inflated repair claims that spike their commissions. They may be unlicensed in Texas, and prey on homeowner desperation to put their lives back together." Policyholders should also be cautious about the contractors public adjusters recommend to them. "Public adjusters might charge an illegally large fee and then disappear without managing the claim," cautioned Quiggle. "Some may refer homeowners to shady contractors who pay the adjuster a kickback. This illicit deal-making can leave the luckless homeowner with shoddy or inflated repairs the insurer might not cover." "Claims will be paid as promptly as possible to help make distressed policyholders whole," adds Quiggle. “Insurers then may return for a closer look at paid out claims that displayed bright red flags of a possible con. If a claim is an obvious dodge, the insurers may investigate before paying out. These are situational decisions that insurers may have to make amid watery havoc they’re trying to manage.”


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No. 3: Fraudulent business claims Businesses may also try to take advantage of the situation by filing false claims based on inflated inventories, exaggerated lost wages or revenues, workers’ compensation claims or disability claims, says Draz. "Fraudulent claims could also be filed for losses associated with looting or other activities." Business interruption claims require documentation to support the claim and can take several weeks to compile. The adjuster will want to know what the average sales are, the amount of inventory involved and other specific details to provide a full picture of the business and the losses sustained. No. 4: You’re cancelled! One of the frauds currently making its way across Texas involves robocalls telling policyholders that their premiums are past due. The FTC says that homeowners and renters have been getting calls saying they need to submit payment immediately to maintain their coverage. Alert your insureds that this is a scam! Let them know that neither you nor your carriers use this process to communicate about their flood insurance policies. In fact if their payment had been past due they would have received several pieces of mail 90, 60 and 30 days before the policy expires. If your client receives a call regarding a flood policy, direct them to:  Hang up the phone. Don't press 1 to speak to a live operator or any other key to take

your number off the list. Just hang up.  Then contact your agency or insurance company immediately to verify the information.  Or call 1-800-638-6620 if you have a policy with NFIP Direct. FEMA also has a Disaster Fraud Hotline to report fraud: 1-866-720-5721. No. 5: Beware of storm chasers

View video from I.I.I.

Fraudulent contractors will also prey on homeowners. Interestingly, after a large catastrophe, people who have no business working as contractors think they can make a lot of money by pretending to do all sorts of home repairs. These bad actors should not be confused with legitimate companies that are insured, bonded, have welltrained staffs and may be from out of town because they are part of a much larger network and are bringing in additional resources to help a local company that is inundated by the amount of work to be done.

Some things for policyholders to keep in mind when it comes to working with contractors: You decide which contractors to work with for any repairs. Do not feel pressured to sign a repair contract. Get more than one bid for any work so you know the value of the job. Never pay cash or write a check for the full amount of the contract up front. Most companies will allow you to pay in installments or wait until the work has been completed satisfactorily before making the final payment.  Get referrals and check references. Ask if they are members of any trade associations and then verify that information on the organization’s website or by calling them directly.    


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  

Check with the Better Business Bureau to see if any complaints have been filed against that company. Ask if they are licensed to work in Texas. Don’t sign any blank contracts.

No. 6: Policyholder fraud Sadly, some insureds will try to take advantage of the situation when working with an insurance company. "Some flooded homeowners will try to soak their insurers," explains The Coalition’s Quiggle. "Insurers will do their level best to make homeowners whole; though will be on high alert for cons once rebuilding starts and claims start pouring in." Quiggle gives some examples of the kinds of fraud adjusters should be aware of as they handle their claims. "Floodwaters may sweep many possessions away, giving dishonest homeowners a chance to claim they lost expensive bling they never owned. Phantom or inflated jewelry, big-screen TVs, sound systems and other goods all could be claimed." Other types of policyholder fraud involve staged claims for a non-event. "There might be damaged claimed that never happened, such as water never actually reached their residence and yet they file a water damage claim," says Draz. "There may also be potential healthcare claims associated with floodwater, mold, viruses and the like, or injuries associated with the flooding itself." "The vast majority of claims will be honest and forthright," adds Quiggle. "Yet natural disasters inevitably inspire opportunists to exploit the vast flooding with inflated claims for damage and ruined possessions. These people may assume insurers are stretched too thin to look deeper into their phone claims. The goal is a quick buck at insurer expense." No. 7: The kindness of strangers One of the first scams to arise early after a major catastrophe involves individuals who are collecting money for hurricane relief. People are extremely generous at times like this and willing to contribute whatever they can to help those who have lost seemingly everything. Fraudsters may reach out online, on the telephone, via email or even face-to-face, using the same approaches as legitimate organizations. Any charity or group that does the following should probably be avoided:    

Can’t prove that the contribution is tax exempt. Thanks you for a donation you don’t remember making. Pressures you into contributing. Asks for cash donations or requests that money be wired.

Federal prosecutors will lead a new Houston-based group created to help law enforcement agencies respond to the inevitable wave of fraud and other criminal activity set off by Harvey’s punishing rains. They emphasize that the easy availability of personal information and documents on the internet has widened criminal activities and potential victims to anywhere in the U.S. The new working group was intended to combine Justice Department prosecutors, FBI and other federal law enforcement agents with Texas and Louisiana state officials in a team aimed at quickly identifying criminal trends and deploying resources for investigations and prosecutions. Houston-based acting U.S. Attorney Abe Martinez, one of the top officials in the new working group, said storm victims had already suffered devastation and “the last thing that victims of the damage need is to be victimized again.” Continued on Page 43 TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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HB 1774: New Law Generates Rumors Know the Facts About Texas House Bill 1774 Texas House Bill 1774, which took effect September 1st of this month, requires policyholders to provide advance notice to their insurer, before filing a lawsuit against them. The legislation also makes changes to requirements for inspections related to a lawsuit, recovering attorney’s fees, and statutory penalty interest. Here are the key facts to help put your clients’ minds at ease: 

RUMOR: Some policy holders were incorrectly told that they needed to file their claim prior to the 1st, as the new law would change the manner in which their claim would be handled.

FACT: HB 1174 does not change how to file a claim or how your carrier will process and settle your claim. As always, as independent agents we recommend that our clients file claims as quickly as possible, but do not worry about filing before September 1! It will have no impact on your claim getting paid. 

RUMOR: Some are under the misapprehension that the new law in some way will impact their legal protections.

FACT: Policyholders don’t lose any protections under HB 1774. According to Joe Woods, vice president, state government relations for the Property Casualty Insurers Association of America (PCI), “The new law does not bar access to the courts nor does it prevent consumers from retaining legal counsel. Consumers still have all legal remedies available under the consumer protection laws in the event an insurer engages in bad faith conduct. The Texas Department of Insurance is available to handle any complaints about insurers. The new law does not take away any right to sue and does not diminish any cause of action that a person has against an insurance company,” Woods said in a PCI press release. 

RUMOR: Most people aren’t sure if the new law will affect them or not.

FACT: The law impacts those people who have issues AFTER filing their claim with their insurance company and choose to take their insurance company to court.

FEMA: News Photo

Texans have enough real issues to deal with post-Harvey. Give your clients the facts about HB 1774, and one less thing to worry about.

It’s important to know that the vast majority of all claims are settled without litigation. In Texas, the number of claims that go to court is less than three percent, according to Alex Winslow, director of communications for the Texas Trial Lawyer’s Association. So why pass this law if such a small percentage of claims are legally disputed? The answer is because the system was being abused by several law firms in certain counties in Texas, taking advantage of consumers, and causing major problems for the entire insurance industry. If this wasn’t fixed by the state legislature by passing HB 1774, insurance premiums would have to rise to deal with the abuse, hurting all consumers across the state. Continued on Page 43


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After the Storm: Insurance Agents E&O Lessons Learned by Sally Coombs, Editor’s Note: This is a republication of a January, 2013 article by Sally Coombs, who was then with Fireman’s Fund Insurance Co, which is now integrated into Allianz Global Corporate & Specialty (AGCS). More often than not, a second wave of claims against insurance agents by their clients follows a natural disaster.

FEMA: News Photo

As parties find themselves without the coverage they expected after a catastrophe, it appears to be a natural reflex for them to look to their insurance agents and brokers to fill the perceived gap. Sometimes, this second wave, for whatever reason, is just a ripple.

It's a natural reflex for insureds to look to their insurance agents to fill perceived coverage gaps. For the most part, the types of allegations and claims that surface after an individual loss (such as a house fire) are the same we see after a catastrophe, just on a greater scale because of the number of people impacted—failure to procure a certain kind of coverage, failure to place coverage at all, failure to obtain adequate limits, or failure to advise certain coverage was necessary. But there are certainly best practices that can minimize the resulting exposure and enhance the likelihood of a successful defense. To some extent, the claims following the string of hurricanes we experienced in 2004 and 2005, and particularly after Katrina, or Ike, have their own characteristics. The number, severity, and landfall of hurricanes vary from year to year, but certainly exposure exists in most eastern and Gulf coastal areas during every season. Therefore it is useful to look at the common causes of E&O claims, along with suggestions about possible ways to prevent or minimize the losses. It will be impossible to completely eradicate claims by clients who feel they lack the insurance coverage they needed to compensate them following a natural (or manmade) disaster, just because we operate in a very litigious society.

Agency E&O in a Disaster: How to Avoid Errors While Helping Insureds The fact that a claim is made does not necessarily mean that there is liability on the part of the agent, as there are often viable defenses to such claims. Following certain “best practices” can help to eliminate some of the problems that lead to claims in the first place, enhance the prospect of a successful defense, and reduce the impact of the claims that are made. Before we embark on a discussion of the actual claims patterns, however, we want to ask the agency force:


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How Prepared Are YOU? Agents live and work in the same communities as their customers, and are just as vulnerable to the effects of a hurricane or other natural disaster. Not surprisingly, a number of agents saw their offices seriously damaged, destroyed, or made inaccessible after Katrina, Ike and Sandy. What was a surprise following Katrina and Ike was the number of agents that completely lost all of their records, did not have them backed up, and had no plan in place to resume business as rapidly as possible. This made defense of claims that were made against them particularly difficult, especially as key employees dispersed and were hard to contact. The key is planning for recovery. While many agents’ clients have disaster recovery plans, those same plans may be deficient among the agents. Disaster recovery planning is not new. There are many vendors available that provide temporary staff, technology, communications, connectivity, space, and power recovery after the unthinkable happens, relatively inexpensively. However, many agents don’t perceive an exposure because they “are not near a flood plain”, “don’t live near the coast”, or “have never been sued by a client”. The fact is an agency needs a recovery plan, including off-site data storage, to cope with post-disaster losses, not just to aid in their own defense, but to keep their business running efficiently.

Wind and Flood Coverage Problems It can’t come as any shock that following a hurricane, most E&O claims arise from some problem with wind or flood coverage, especially as the standard market restricts its writings in hurricane prone areas, making it necessary to obtain coverage through special markets, wind pools and the NFIP. Let’s look at some of the specific issues:

No coverage in place at the time of the storm–delayed submission or failure to submit paperwork.

Coverage is not effective in wind pools, the Fair Plan, or NFIP until the application AND premium payment are received by the Plan. Many of the claims we have seen involved instances in which the insured agent took an application and premium payment from their client, and then for some reason delayed sending it in, or simply failed to do so at all. In other instances, it appeared that the paperwork was mailed, but the Plan claimed to never have received it, and there was no proof of mailing in the agent’s file, or follow up to see what had happened when the policy was not timely received. By the time the problem was detected, either a moratorium was in effect (as the storm approached the area), or the storm had hit and the damage was done. Beyond making sure that clients understand exactly when their coverage is to become effective (such as when the carrier receives and accepts the risk, when premium is paid, after any applicable waiting period, etc.), having clear written (and enforced) procedures in place for processing, placing and tracking business is essential for any agency. It sounds simple, but breakdowns in communication and process are a frequent cause of E&O claims.


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Evidence of Insurance provided at close of escrow before premium paid and submitted.

Banks or other lenders typically require that insurance is procured to protect their collateral, and want assurance that required coverage is or will be placed before they will proceed with closing on real estate transactions. In a number of instances, agents provided binders or other evidence of flood or wind coverage at the time of closing, before the premium was paid. However, while this practice is appropriate when a standard homeowner’s policy is involved (because coverage can be bound by the agent without payment of the premium), no coverage placed with the wind pool or flood plan is effective until the premium is actually paid and submitted to the Plan. Further, the agent has no authority to bind the Plan to coverage. Thus, when the storm(s) struck just a short while later, there was no coverage in effect and the Plan(s) would not honor the unauthorized binder. The banks and property owners claimed that the binders led them to believe that coverage was actually in place, and that they did not understand that coverage was contingent on premium payment. Had they understood this, they claimed, they would have immediately tendered payment so coverage became effective. The error made is understandable, and also preventable. The agent can provide the coverage quote and other evidence of coverage that will be in place once the premium is paid, with clear notice that the coverage will not, in fact, become effective until that happens and the application and payment are received by the plan. If there is a waiting period that may apply, this should also be noted. Of course, when the agent receives the premium, they should promptly submit it with the request for coverage to the plan, keep a record of the transmittal, and track on diary until policies have been issued and received.

No contents coverage on wind or flood policy.

In some instances, the agent in question simply misunderstood that when a carrier moved to exclude wind coverage from the homeowners’ policies they wrote in hurricane-prone zones that the restriction also applied to contents coverage. While they diligently replaced dwelling coverage in the applicable wind pool, contents coverage was not included, and when Katrina struck, the involved customers were consequently without wind coverage for their contents. More often than not, though, there was no record in the agent’s file of a specific request for contents coverage, or no indication this had been offered and declined. When the client found themselves without contents coverage after the hurricane(s), they looked to their agent, raising a variety of allegations: that a specific request was not acted on; that the agent should have pointed out the need for the coverage; that the agent should have understood the client wanted/needed the same coverage they had on their homeowners policy, etc. These claims are difficult, as while the reality may be that the clients only procured the insurance their lender required (the dwelling coverage), they rarely will admit that is the case. Likewise, the nature of the relationship an agent has with his or her client may not place them in a position of having any duty to advise the client of the coverage they should have. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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However, having no documentation at all to counter the claims by the client can impair the ability to defend the agent, especially given the propensity of juries to “side” with the party they perceive to be a victim when there is an uncovered loss. Therefore, legal duty questions aside, it may be advisable for agents to document offers of coverage, automatically provide quotes for contents coverage when dwelling coverage is requested, quote wind and flood coverage, and then maintain documentation when the client declines the coverage offered. In addition to greatly enhancing the chances of a successful defense of an E&O claim, this practice could also increase agency revenues as customers accept the additional coverage offered.

No flood coverage at all.

This is very similar to the situation involving the lack of contents coverage. As has been highly publicized, many parties have claimed that they did not have flood coverage because their agent allegedly told them “they did not need it,” either because the homeowner’s coverage they had in place covered “hurricane damage,” or because it was not “required.” (Lenders require flood coverage to be in place typically only when property is in Flood Zone A). As in the case of contents coverage, the agent may not have a legal duty to offer the coverage to their client. However, if a written offer was made to every client in areas potentially subject to flooding, with the rejection of the coverage documented, it is very likely that many of the suits that arose would have been easily defended.

No coverage for other structures or pool cages.

Citizens (in Florida), state wind pools, the Fair Plan and the NFIP have specific rules regarding how coverage applies to separate structures, docks, or as we most commonly saw, pool enclosures. In some instances, coverage must be separately applied for the structure to be insured, or specifically requested at the time of application. It is extremely important to stay on top of each Plan’s requirements and procedures, make sure that you ask the client the appropriate questions when taking an application, and document all conversations and transactions to avoid problems.

Inadequate Limits Insurance limits that are insufficient to cover the clients’ damage has long been one of the top causes of E & O claims, whether following on the heels of a catastrophe or not, but are magnified following a disaster because of the spike in construction costs that typically follows an event involving damage to many parties. There are a number of problems that commonly arise.

Inadequate dwelling or contents limits overall.

For the most part, we would like to say that it is the client’s obligation to assure that the coverage they purchase is adequate to meet their needs. When the client specifies the limits to be obtained, there is generally no responsibility on the part of the agent to confirm that the amount procured is inadequate. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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It is when the agent supplies the limits or assists in their calculation that problems can arise. Then, the agent will likely be held to a standard of using reasonable care to assure that the limits selected are “correct.” When they turn out to be insufficient, they are subject to attack by the client. Here are some of the more common problems we have seen in the limits arena: 

Agents estimate the square footage used to calculate replacement cost without verifying the correct amount.

Agents calculate replacement cost using a replacement cost estimating system, and do not adequately account for upgrades in the client’s property, or using the short form calculator instead of the more detailed format.

We have had clients say they asked for higher limits, and instead of turning the request into the carrier, the agent has told them that the amount generated by the “cost estimating” system is the maximum the carrier in question would offer, without referring the request to the carrier.

Agents set limit based on purchase price, or ask for a real estate appraisal. The problem with this approach is that the cost to rebuild is not the same as appraised value, and the purchase price can be higher or lower than that cost. (This could also lead to limits that are too high, in that appraisals typically include the value of the land on which the property sits.)

Owners advise the agent that they have engaged in property renovations, but this information is not forwarded to the carrier, and the limits are not reviewed for the adjustment that may be necessary because of upgrades.

In other instances, the agent maintains higher limits were suggested, but were declined by the customer, yet there is no written documentation in the agent’s file of either the offer or the rejection.

The limits on the wind or flood policy are lower than those on the Homeowners policy.

We understand that the limits on the policies obtained are often the amounts the client requests, or are the minimum amount the client is required to carry by their lender. We also realize that while the homeowners’ limits may be automatically increased by the carrier over time, this is not the case with the wind or flood policy. We are not suggesting that there is necessarily a legal duty on the part of the agent to assure the limits are consistent, but a “prevention” best practice would be to have clear documentation regarding how the limits were established, sending a letter to the client that they should let you know if they desire higher limits at any time, asking whether an adjustment is desired on the wind or flood policy when adjustments are made to the HO limit, and documenting the response. The main point to keep in mind when it comes to assisting a client with the establishment of limits is that if they end up being inadequate, you will be the first party they turn to for recovery of the difference. Attention to detail, accuracy and documentation are all critical, as well as employing the assistance of the carrier are all practices that will help minimize the impact of the E&O claims that will inevitably follow.

Coverage bound outside of carrier guidelines.


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Because carriers tend to limit their exposure in catastrophe prone areas, it is very important that agents with binding authority be very familiar with their carriers’ guidelines and appetite to assure there is no violation of requirements. A fair number of the claims we have received over time are those by the carriers seeking recovery from the agent for the losses they sustained when the agent bound them to a risk that was ineligible for coverage and they were consequently required to respond to a claim. Commercial Claims: The vast majority of claims we see after a catastrophe are generated by personal lines accounts. However, we do see some activity in the commercial arena. The more common problems leading to claims: 

No business interruption coverage

No coverage for off premises power failure

Lack of flood coverage at a particular location

Application of a coinsurance penalty because limits were inadequate

Inadequate limits because a policy has been changed from a blanket limit to a specified location limit, and the specific location limit is inadequate.

Do you employ the use of a written exposure checklist to aid you with identifying the coverage a commercial risk may require? Do you put all quotes and proposals in writing, and document any time the coverage is rejected by the client? Are all of the binders you issue authorized by the carrier, and if they are issued by an intermediary broker or the carrier, are they consistent with the coverage requested? Do you review applicable forms, and compare the policies issued with the coverage requested? These are all practices that may help minimize any E&O claim you may face.

Join Texas PIA Now If you’re not yet a member, discover the benefits! Membership in Texas PIA is an investment that provides tangible benefits & services, saving you time and money so you can increase your agency’s bottom line. As a member of the Texas Professional Insurance Agents, you are also a member of the National Association of Professional Insurance Agents and have access to a variety of valuable benefits and information that can support you in the growth and success of your business. Our focus is entirely on you, the professional Texas agent. Member Benefits Include: 

Insurance products to sell

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Together we’ve formed an alliance of experts to deal with any type of issue or question you may face. Visit for more information. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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You’re Covered: Help After Harvey What your insureds need to know. As Harvey victims begin their return to damaged homes and property, here is information you can share to help them cope with not only their insurance claims, but their entire recovery process. The Texas Department of Insurance has established resources for homeowners dealing with post-disaster. Here are some helpful links for your clients.

Get help: Consumer Help Line: 1-800-252-3439, 8 a.m. to 8 p.m. Monday to Friday and 8 a.m. to 5 p.m. Saturday and Sunday. Call us if you need information, have a complaint, or can’t locate your agent or company. Mobile Unit Location: visit us or your insurance company to get help filing a claim. FEMA Disaster Recovery Center: get help with disaster assistance at their website. Help after Harvey: get more tips and information at our website. FAQs: answers to common questions about homeowners insurance policies and filing claims due to a disaster.

For updated information from TDI visit their



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Home after Harvey: Safety First

FEMA: News Photo

Safety should be the first priority when returning to a home or business. Do not enter unstable buildings or structures that need to be cleared for re-entry by local authorities. Before entering the structure, walk around the exterior to make sure there are no major holes or other signs of collapse, loose pipes or downed wires that could pose a danger. Beware of broken windows and doors, since they may allow snakes, alligators and other wildlife to enter the premises.

If there are fuel oil or propane tanks, make sure to turn off the fuel valve on the tank. Natural gas should be turned off at the meter. Only enter buildings during the day, since there will be many hazards that may not be visible at night. Never use candles for temporary lighting because of the fire risks. Use a flashlight or batteryoperated lantern. “Turn off your main water valve, as well as the main electrical box,” cautions Don Carson, executive vice president and managing director for Burns & Wilcox, a large personal insurance wholesale broker and underwriting manager in North America. “It is also important to be cognizant of any safety issues that may cause further damage to the home or occupants.” Toxic plumes, dead animals and moldy debris are also a safety concern. Refineries are spewing pollutants as they restart. Homeowners risk dangerous mold and contamination from household chemicals. And there’s a heightened threat from a dozen or more polluted Superfund locations around Houston that may have been under Harvey’s water. Texas and U.S. officials have warned residents to stay away from smoke plumes and flood water. Leslie Fields, director of environmental justice with the Sierra Club, ticked off a list of hazards, including dead animals in flood water, gasoline from sunken cars, and potentially leaks from a former paper plant that contains cancer-causing dioxin. Do not enter any buildings with sagging ceilings, large cracks in the walls or floors, or areas where the walls are out of alignment, since the structure could be unstable. Pregnant women, young children, those with compromised immune systems or individuals with other health issues should avoid being in flooded structures. Mold can begin to form in 24-48 hours with enough moisture and humidity, and given the trillions of gallons of water involved with Hurricane Harvey, it won’t take long for interiors of structures to become compromised. Removing wet materials and allowing air to circulate in the structure will help to mitigate some of the growth. Safety also applies to what is worn in the building. Heavy work or thick-soled rain boots provide greater protection against exposed nails, popped boards, mountains of debris and unexpected encounters with some wildlife. Heavy rubber or leather gloves, long pants and long -sleeved shirts will also provide protection against some of these dangers. Damage Assessment While all homeowners will be anxious to begin the clean-up process, it’s important to catalogue the damage as you go. “Take as many pictures as you can,” adds Carson. “This will aid in the insurance claims process. Photographic evidence of all visible damage, the height of the flood waters and flood levels in and around your house, and damaged contents is extremely helpful.” Shooting video of the damage inside and out of the structure will TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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also aid in capturing the extent of the damage. After everything is photographed, damaged property should be separated from undamaged property in order to be reviewed by the carriers. Flood policies require that damaged property be organized and examined by the carrier; however homeowners policies only require that the damaged items be shown to the carrier. Take a careful inventory of what was damaged. Insurers will ask for documentation, but will understand that much of the documentation may have been lost in the flooding. Proof of loss needs to be sent within 60 days after a loss, and must be signed and sworn to for claims filed under homeowners or flood policies. The Texas Department of Insurance (TDI) has already asked insurers to waive the time requirement, so homeowners should check the TDI website for updates. Unplug any electric appliances like televisions, computers, stereos and microwaves, since there could be a power surge when the electricity comes back on, causing further damage. Some electronics can actually be cleaned and restored if they are not turned on, so unplugging them could reduce replacement costs as well. Starting the Clean Up Wet contents such as books, clothing, furniture and other items should be removed from drawers, cabinets and shelves and laid out to dry if possible, since some can be cleaned and restored. Open dresser and cabinet drawers to allow air to circulate inside and to keep the drawers from sticking together. FEMA: News Video

View video describing how residential debris should be separated when cleaning a home.

Hard surfaces can be rinsed with clear water and then cleaned with standard cleaning products and disinfectants. Many people mistakenly believe that everything should be cleaned with bleach, which is corrosive and can cause even more damage.

Some homeowners will hire restoration or other contractors to assist with the cleanup. Insurers may recommend companies, but the homeowner makes the final decision as to who is hired. Make sure to check references before hiring any contractors. And read our article “Fighting Fraud” in this issue for tips on avoiding scammers. For those homeowners attempting to handle their own cleanup or volunteering to help others, the Restoration Industry Association offers some guidelines. Post-Harvey Insurance Claims Even though insurance adjusters can’t get in until flood waters have receded, it helps to reach out and let your agents know your home and vehicle have sustained storm damage. That helps insurers know both where to go to look for damage, and where to find you in the coming days and weeks to more quickly assist you. Another reason to act fast: Insurers often handle claims on a first-come, first-serve basis, said J. Robert Hunter, director of insurance for the Consumer Federation of America. Consumers likely need to make several calls. (Ideally, policy numbers and agent contacts would have been part of an emergency "go bag.") The resources from TDI listed above may be able to assist you if you are having trouble locating that information.


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Homeowners: You may have several kinds of coverage. In addition to a primary homeowners insurance policy, some homeowners may also have separate wind damage coverage via the Texas Windstorm Association, and flood insurance with the National Flood Insurance Program or a private insurer, Worters said. Even if you don't have flood insurance (only about 12 percent of homeowners do), call your home insurer, said Peter Kochenburger, deputy director of the Insurance Law Center at the University of Connecticut School of Law. Homeowners policies specifically exclude damage related to flooding, but water and wind damage are separate issues. (For example, you could be covered for water damage resulting from wind damage to the roof, or a flying tree branch that broke a window, he said.) "Don't assume you don't have coverage," he said. Auto: The comprehensive portion of your auto insurance typically would cover flooding and other storm-related damage, up to the vehicle's market value, Worters said.

Dominick Del Vecchio : FEMA News Photo

About 15% of Texas motorists don’t have vehicle insurance, even though liability insurance is mandatory in the state. Of the remaining 85% of motorists, three-quarters of them carry comprehensive coverage, which would include protection against flooding, on their policies.

Travel: Texans currently traveling should reach out to their travel insurance provider, if they bought a policy for their trip. The "trip interruption" portion could kick in for policyholders who need to cut short their travels due to the hurricane damaging property, said Megan Singh, project management director for insurance marketplace Squaremouth.

Save receipts: Your homeowners policy may include "additional living expense" coverage that provides reimbursement for immediate expenses like emergency repairs, temporary housing and meals, Kochenburger said. Ask your agent about that coverage. Insurers often reimburse those expenses quickly. What Does Flood Insurance Cover? Flood insurance covers both the building and contents inside, but it doesn’t cover the land the dwelling is located on. There may be limited coverage for basements, crawlspaces, lower floors and enclosed floors of elevated buildings. Dwelling coverage will cover property up to $250,000 and contents coverage insures up to $100,000 of personal property. Flood insurance is not a valued policy and does not pay more than the policy limit for any losses. Building coverage includes:        

The building and its foundation. The electrical and plumbing systems. Major systems like central air conditioning equipment, furnaces and hot water heaters. Some appliances such as refrigerators, cooking stoves and built-in appliances like dishwashers. Permanently installed carpeting over an unfinished floor (e.g., wood, cement). Window blinds. Permanently installed paneling, wallboard, bookcases and cabinets. A detached garage (up to 10% of building property coverage).


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Coverage for contents includes:       

Clothing, furniture and electronic equipment. Curtains. Portable and window air conditioners. Portable appliances such as microwaves and dishwashers. Clothes washers and dryers. Food freezers and the food in them. Certain valuable items such as original artwork and furs (up to $2,500).

What Doesn’t It Cover? There are a number of damages and expenses a flood insurance policy will not cover. These include:      

Currency, precious metals and valuable papers like stock certificates. Damage caused by moisture, mildew or mold that could have been prevented by the homeowner or renter. Property and items outside of the dwelling such as trees, plants, wells, septic systems, walkways, decks, patios, fences, hot tubs, seawalls and swimming pools. Financial losses due to business interruption or loss of use of the insured property. Most self-propelled vehicles — e.g., cars, motorcycles, four-wheelers, etc. Damage from sewer backups unless there is a flood in the area and the flood is the proximate cause of the sewer or drain backup.

Homeowner Responsibilities Homeowners may not be aware that most policies have a section entitled “duties after a loss” that outlines insureds’ responsibilities. First, they should report the claim as soon as possible under the flood or homeowners policy by contacting their agent or the company that sold them the policy. Carriers are sending large numbers of adjusters to the area and even if owners don’t have a flood policy, they should still report the loss, since the actual cause of the damage will determine whether or not there is coverage. Homeowners are also responsible for mitigating any additional damage to their property. If a tree fell on the roof, it should be removed and the roof tarped or repaired to prevent additional damage from rain and other elements. Broken windows should be repaired, replaced or boarded up for the same reason. Water should be removed from the floors and wet carpets should be taken from the building to reduce mold growth and enable them to dry more quickly. Any items moved outside to dry that are still salvageable should be put into a secure area to protect them from theft. Keep track of any expenses incurred to repair or replace property, since these will be submitted as part of the insurance claim. Call you agent with questions. Your Texas independent agent is there to do everything he or she can to put you on the path to recovery. See source information for this article on page 44 TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Back in Business: Help After Harvey Hurricane Harvey brought destruction to businesses, stealing all the inventory of many and leaving others with collapsed structures. At the same time, many business owners and their employees are simultaneously dealing with damage to their homes and personal autos. How quickly it’s “business as usual” for any commercial client depends on the extent and type of punishment Harvey dealt out, the pre-disaster planning and business leadership’s resourcefulness in the aftermath. To follow is advice for all impacted businesses, including your clients and potentially your own agency. The Human Element The steps to business recovery aren’t identical to personal recovery, but just as the safety and well-being of the family members is paramount, the safety and well-being of the business’s human resources is the first and most important consideration. Regardless of the business size, whomever is the de facto human resources director should take the following recommendations, offered by Ralph Petti, president of Continuity Dynamics Inc. 1. Immediately respond and take action. HR should have the authority to do what they need to do to get things done as a part of the overall process. 2. Account for all employees. Pursue all avenues to account for employees. Contact family members as agreed upon in the protocol, maintaining control and staying calm. 3. Focus on employee well-being. Provide a conduit for employees to reach out to the company. Keep a record of HR activities involving employee outreach, provide a report to management regarding ongoing events and maintain employee contact, as necessary following the event. Let the employees know that the company is absolutely there for them. 4. Contact supply-chain partners. Assure them that the company has their best interests in mind. 5. Provide for counseling resources. Encourage employees to provide feedback, and keep management in the loop. 6. Provide for return to work. Determine when employees will be able to return to work, and communicate this information clearly. 7. Provide for injured employees. Discuss options for succession planning if they cannot resume duties and someone else needs to take their place. 8. Provide for families of deceased employees. Be sensitive of any anniversary dates or memorials. Be consistent in your memorials, such as scholarships or charitable funds, for all employees so no one is slighted. Engage clerical personnel if necessary, and agreed by all parties. Address financial needs. What should employers consider about pay and work obligations they can take to avoid long-term repercussions for failing to protect employees? Wage payment, leave issues and staffing are probably the three biggest labor issues an employer will be facing, said Kim Rives Miers, a Littler Mendelson shareholder in Dallas. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Until businesses resume operations, employers affected by Harvey have a few options they could consider, said Donald Schroeder, a partner at Foley & Lardner in Boston who specializes in employment law. Employers should explore whether they can relocate operations from Houston, Schroeder said, and they should look at their leave policies — or even consider imposing a mandatory leave. He also said employers should assess any policies that affect whether or not non-exempt employees are required to use paid time off during the shutdown period. “Communication with the workforce is critical,” Schroeder said. “Employees may assume they are being paid by the company even though they are not able to report to the company’s location due to flooding or, worse yet, complete destruction of the company’s offices and/or their residences.” Schroeder said a company’s failure to communicate about compensation and other matters “can potentially lead to multiple wage and hour problems down the road.” “This is not your typical hurricane,” Miers said. “People will be out for such an extended period of time, employers will be forced to make hard decisions.” Federal labor laws only entitle hourly workers to compensation if they are working, even if they are not working because a worksite is shut down or if an employee decided to evacuate. Yet, there could be exceptions during a major weather event. Employers could consider on-call time and companies must pay for remote work. Employees who are on salary, or exempt workers, must be paid their wages, even when an employer shuts down its operations. With salaried workers, employers may require them to use vacation or sick time, depending on the company’s policy. Miers said Littler Mendelson is advising clients to examine their leave policy and follow it carefully — and also apply it equally. Still, employers faced with the aftermath of a disaster can be flexible. “You need to create your plan and stick to it,” she said. “In these extreme circumstances, we are encouraging employers to be flexible, but they need to be fair and consistent with this flexibility.” She added: “We don’t need to be so afraid of breaking the law, we aren’t doing the right thing by employees.” Mandatory leave can be a tricky area for employers. Employers do not have to pay hourly workers, or have a non-exempt status, if they are not working, which would dramatically affect a large number of workers affected by the devastation. They can also be required to use paid time off and sick days. Medical leave is also common during such incidents. Other issues employers should consider are employee assistance programs, property and casualty claims, worker’s compensation inquiries, benefits continuation options and tax reporting duties. Consider the emotional toll on employees. Your business was hit by a hurricane; that means your employees’ homes were likely affected, too. Hurricane Harvey displaced an estimated one million people. While getting your business back up and running is a priority for you, consider the impact of the storm on your colleagues. Following a natural disaster, it’s important to keep the lines of communication open and be flexible with employees as they deal with damage to their homes. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Cleaning Up Safely Employers and employees should take preventive measures to ensure safety during recovery and clean up, advises the Texas Department of Insurance, Division of Workers’ Compensation. Here are some tips to ensure that you and your employees stay safe while assisting with getting the workplace back in shape: 1. 2. 3. 4. 5.

Evaluate the worksite Check for exposure to hazards Follow good work practices Keep traffic safety in mind Provide for personal protection

For details on each of these steps see the full article, “5 things to do to keep employees safe while cleaning up after a hurricane” by Rosalie L. Donlon in Staking Your Claim Securing insurance proceeds and FEMA assistance is crucial to the recovery process. To help address some inevitable issues, and to assist with the initial insurance claim and FEMA application processes, we recommend the following guidance. Obtain and Review Your Insurance Policies. To begin with, it is crucial to obtain, review and evaluate all potentially applicable insurance policies for coverage. Understanding your rights and obligations requires a thorough review of the policies to determine what coverages may apply. Property insurance is the most obvious source of coverage, but do not overlook auto policies, marine cargo policies, pollution policies and, for those facing potential third-party claims, liability policies. Also that your policies may also be subject to other requirements, such as statutory requirements, that could impact the terms of your coverage. When reviewing your insurance policies, note any deadlines and calendar those dates with reminders set several weeks before the deadline. First, calendar the policy deadlines for you to give notice, file a sworn proof of loss, and file suit if you disagree with the insurance company’s coverage determination (note the deadline to file suit might be years in the future). Any tasks that must be completed within a “reasonable” amount of time should be done as soon as practicable. Missing deadlines can be fatal to an insurance claim. Assess All Possible Coverages. With respect to storm -related damages, “first-party” policies such as commercial property policies are the ones most likely to provide coverage for business or property owners’ own losses. Although residential policies frequently exclude flood loss, flood may be covered under commercial policies. Even when flood is not an insured peril, there may be coverage when another, covered cause contributes to or ensues from the loss, such as wind, power outage, storm surge or area-wide impacts. In addition to providing coverage for physical damage to an insured’s property, many commercial property policies also include coverage for losses due to the interruption of the insured’s normal business activity due to damage to utilities, customers, suppliers, infrastructure and other critical, or dependent, properties. These extended coverages may apply even if the insured’s own property was not physically damaged. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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For example, depending on policy wording, damage to certain suppliers or customers may result in covered “contingent business interruption” losses. This may be critical to businesses whose supply and customer chains are disrupted as a result of damage to and closure of transportation infrastructure, including roads, railroads and even intercostal waterways. Similarly, disruption of power and other utilities may trigger losses insured by service interruption coverage. As well, curfews, prohibitions against entry and physical obstructions to roads may trigger civil authority or loss of ingress/egress coverage. A thorough review of the insuring provisions is critical to determine whether, and the extent to which, such coverage may apply. Place All Insurers on Notice. Even if you have not yet identified all of your losses, or determined that a policy might apply, provide notice as soon as possible to any insurance company under whose policy you might seek coverage. Do not assume you do not have coverage. Give notice anyway. Notice is just that: notice to your insurance company that you might have a claim. It does not need to be too detailed at first, so there is no reason to delay in providing notice. Be sure to precisely follow the directions in each insurance policy regarding notice, and be aware that different policies might have different notice requirements. Pay close attention to your notice deadline, the person or organization you have to notify, and the required form of notice. Insurance agents may be best positioned to provide the notice, so consider consulting with your agent for assistance. Document and Mitigate Your Losses. Carefully documenting losses, especially before you undertake any cleanup efforts, is critically important for evaluating the loss. This includes not only property that was damaged during the storm, but also any property rendered unusable in the days following the storm—for example, inventory exposed to moisture. Take notes and photographs. Keep a log of all actions taken. Track expenses for professional fees, mitigation and clean-up costs. Establish separate accounts to track losses. Save all repair receipts and other records of additional expenses made necessary by storm-related damage. Put your smartphone to use: When it’s time to assess the damage and begin rebuilding, put your smartphone to use. Take pictures and video to capture the damage to your business. As an added measure, take pictures of paper receipts during your rebuilding efforts as a backup. It’s an easy way to help you document your expenses that can contribute to your deductible. It’s wise to also make a back-up copy. You might also have an obligation to preserve and protect the property from further losses, including mitigating additional damage. Because such steps are required, mitigation expenses are covered under property insurance policies. For example, if a building is flooded, policies require the insured to take necessary steps to dry out flooded areas, and therefore provide reimbursement of such mitigation expense, subject to certain limits. Lastly, the insurer may have salvage rights to damaged property and stock, so it is important to preserve any salvageable property to the extent possible. Detail Your Business Interruption and Contingent Business Interruption Claims. Business interruption coverage reimburses insureds for lost profits during the time that the business was interrupted because of an event (like rain and flood). Contingent business interruption provides coverage for business interruption losses due to damage to customers or


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suppliers. This distinction often raises complex loss issues such as pre-storm preparation costs, extra expenses and expenses to reduce loss, mitigation requirements and indemnity period calculations. The biggest challenge in securing coverage for either of these types of insurance is valuing and documenting the loss. It is crucial to keep detailed records documenting when and how your business was interrupted. Engage Experts. It is usually prudent to engage professional claim consultants, such as forensic accountants, particularly where you have business interruption loss. Additional experts may be needed to model the unique financial aspects of your business. Their professional fees and other mitigation expenses are frequently covered under property policies, subject to sub-limits. Usually, public adjuster fees are not covered. Follow the Policy to Preserve the Claim. After notice of loss, most property policies also require that the insured later submit a sworn “proof of loss” to catalogue the damages. Although this is usually done after reaching agreement with the insurer on the amount of the insured claim, policies sometimes require the insured submit a proof of loss within a fairly short time after the event. Insurers are usually amenable to extending these deadlines if requested, but make sure that any extensions are memorialized in writing. Government Funds Might Be Available for NonProfits Providing Critical Infrastructure and Essential Services. Most people know that FEMA frequently provides funds to state and local governments and individuals. But FEMA and other government-based programs are also potentially available for certain not-forprofit organizations that provide critical infrastructure and The SBA is providing disaster loans essential services. Critical infrastructure and services and business counseling for people include: hospitals and other medical-treatment facilities, and businesses affected by Hurricane fire, police and other emergency services, power, water Harvey. Visit their website for more and sewer utilities, educational institutions, libraries, information and application links. museums and zoos, community centers, senior citizen centers and day-care centers. The program and application process can be complicated and daunting—and strict time limits apply. But a successful applicant can see FEMA reimburse no less than 75 percent of the eligible costs for emergency protective measures and permanent restoration costs, including debris removal and infrastructure repair or replacement. FEMA does not, however, pay for business interruption losses, and grant recipients must reimburse FEMA for any benefits that are duplicated by other sources such as insurance. As individual business and the community pull together there’s no reason why you can’t pull through this and emerge stronger than ever. Be


Harvey may seem like a freak occurrence. But it’s the third catastrophic flooding event this region of 6.5 million people has experienced in three years. Before the next disaster strikes Texas businesses need to: Develop a business continuity plan. Obviously, it may not be possible (or safe) to work during a hurricane. However, depending on the effects of the storm, you may be able to resume business at an alternate location — if you’ve planned in advance. Before a storm hits, review your employees’ contact information to ensure it’s up to date. It may be a snap to reach people on social media, email, by phone or TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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text, but consider how power outages, cell service and even email servers might be affected by a natural disaster. In addition to your employees, you should also make sure your suppliers and partner companies are available. If your supply chain is disrupted by the same natural disaster — or another one that doesn’t directly affect you — you might still have to deal with the fallout. Consider contingent business interruption (CBI) insurance to protect against disruptions in your supply chain. Get the right types of insurance, and review periodically. Business interruption insurance will cover expenses your business incurs if you can’t operate due to a hurricane or other natural disaster. Review your limits periodically to ensure you’ve got adequate coverage. It’s easy to underestimate what you need to try and save money — in reality, business might resume just a few days after a storm hits, but you could feel the effects long after it.

Click on image to download FEMA’s Business Infographic with advice for your business clients on being resilient.

Typical property insurance covers the effects of natural disasters like lightning damage or wind damage. But it doesn’t cover damage caused by flooding. Hurricane Harvey dumped an unprecedented 51.8 inches of rain on parts of Houston, which is more rain than the city usually accumulates in a year. Many businesses in the storm’s path did not have flood insurance, which means there may be few options for filing flood-related claims. Business owners should look to the federal government’s National Flood Insurance Program, which can issue policies that cover businesses in the event of a flood. Organize and protect your records. In the days leading up to a forecasted hurricane or other severe weather, you’ll likely want to spend it preparing for physical damage, preparing to evacuate and making sure that your family and your employees’ families are safe. You don’t want to spend it scrambling to organize your policy files. While most of the information you need is on the web, make sure you know can easily access it from your phone. You might also want to print out backup copies of policies and carry them with you so you can reach out to insurers after the event. Purchase backup power supplies. You can minimize business interruption by investing in a standby generator and uninterruptable power supplies (UPS). This is an especially worthy investment if you own a business that sells perishable goods (e.g., flowers or food). Disaster Preparation for Agents While you’re most likely awash with posthurricane claims and concerns, it’s not too soon to be planning on how to help all of your clients be even better prepared for the future. If your clients weren’t fully covered for Harvey’s damage, you need to work with them to ensure they have the right coverage for any future disasters. Many business and homeowners who live along or near the Texas coast should have flood insurance. Traditional insurance covers fire and windstorm damage, but not flooding. Once a tropical storm becomes a hurricane, the Texas Windstorm Insurance Association can no longer sell windstorm policies, and the same is true for most private insurance agencies. Good customer management begins before the trouble hits. Now more than ever you know how important it is to work with your client to: Continued on Page 43


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From PIA's National Director in Texas, continued from page 11

revolve around flood damage for property and physical damage claims for automobiles, he says, but Beathard expects to see a fair number of commercial property damage as well. Like many others, Beathard is keeping himself occupied to move past the pain of the long road ahead. In addition to trying to run a business, he's reaching out to other agents and lending a helping hand wherever he can. "Whenever the telephone rings next," he says, he’ll be on deck to counsel his next client. Conroe, which is located about 40 miles north of Houston — which received the brunt of Harvey's wrath — suffered considerable damage. In this city alone, there are three shelters and about 7,000 displaced individuals and families. "Conroe was named the fastest growing city in the U.S. just two months ago," Beathard notes. It is full of hard-working people, the majority of them of middle-class income level. Not that income truly matters when a hurricane of Harvey’s magnitude comes crashing in. "The flood didn't discriminate," says Beathard. "It didn't matter if you were wealthy, middle-class, poor, it didn't matter." Nor do trivial matters such as race or where you’re from, when it comes to helping your friends and neighbors during the recovery effort — which has only just begun. In many areas, the entire contents of people’s homes are piled high on the curb for garbage collection.

Jimmy Beathard, Texas PIA's

Texas may not have an immediate timetable for recovery, but Beathard remains positive. "We feel like we'll rally and we'll come back from this," he says, pridefully. "Life in this part of Texas is slowly but surely returning to normal. It may take us many years to get where we were, but See source information for this article on page 44


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From Fighting Fraud, continued from page 22

The National Center’s team of operators will answer an expected crush of complaints in the coming months, while its core of federal prosecutors and agents will help the Houston-based group to identify criminal activities that span areas far from the flood zones. “We recognize that much of the fraud may occur in areas far removed from the disaster,” said Corey R. Amundson, the acting U.S. attorney for the Middle District of Louisiana and the executive director of the National Center. Disasters like Hurricane Harvey do bring out the good in people, as evidenced by the outpouring of support — financial, practical, emotional and otherwise — that we’ve all seen this week. However, there will also be a few folks who want to game the system and use it for their own nefarious purposes. Being a little cautious probably isn’t a bad thing in this case. See source information for this article on page 44 From HB 1774: New Law Generates Rumors , continued from page 23

HB 1774:    

Does not apply to claims with the National Flood Insurance Program (NFIP). Does not apply to claims with the Texas Windstorm Insurance Association (TWIA). Applies to claims made under an insurance policy providing coverage for real property, such as homes and other buildings. The legislation also applies to claims made under the Fair Access to Insurance Requirements (FAIR) Plan Association.

RUMOR: Some lawyers added fuel to the fire, tweeting “sky-is-falling” rhetoric which led to additional confusion.

FACT: The only valid reason to file a claim prior to September 1st is to possibly benefit from a higher interest rate. In an opinion piece published on Insurance Journal affiliate, Claims Journal, Gary Wicket, an insurance trial lawyer and a partner with Matthiesen, Wickert & Lehrer, S.C., stated: “The only valid reason to file a claim before September 1 is that an insured could possibly benefit from the old interest rate of 18 percent as opposed to the statute’s new interest rate of 10 percent (Prime is 5 percent currently, plus 5 percent under the statute). That interest rate only comes into play, however, in the rare case that a lawsuit against the insurer is filed, that suit goes to trial, and there is a finding of delay in payment under the Texas Prompt Payment Statute found in the Texas Insurance Code, § 542.051, et. seq. Therefore, the hysteria revolves primarily around a needle in a haystack, with lawyers tweeting sky-is-falling rhetoric in order to get their names out there for public consumption.” See source information for this article on page 44 From Back to Business: Help After Harvey , continued from page 41

  

Cover their exposures. Identify appropriate deductibles and policy limits. Recommend suitable endorsements.

In the coming weeks and months insurance will be top of mind for many Texans, so it’s the ideal window to meet and discuss these issues while it’s fresh. Your personal and business clients will appreciate a proactive approach to disaster preparedness as they are all too aware of the possible consequences post-Harvey. While we all hope that we don’t have to deal with anything as severe anytime soon, the importance of maintaining adequate coverage is crystal clear. See source information for this article on page 44


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Source Materials: Unprecedented “Texas' troubles are just starting as Harvey weakens, stalls”, by Brian K. Sullivan, Jen Skerritt, Bloomberg, August 26, 2017, “Harvey Update: Trump Vows Model Recovery; Thousands Rescued; Deaths, Costs Increasing”, by Jennifer Epstein and Toluse Olorunnipa, August 29, 2017, “Tallying Massive Costs of Harvey to Victims, Insurers, Taxpayers and Economy”, August 31, 2017, “House is said to plan vote on Harvey funds in mid-September”, by Anna Edgerton, Laura Litvan, August 31, 2017, “Harvey Leaves Texans to Clean Up Amid Health and Environmental Dangers”, by Todd Shields and Jennifer A. Dlouhy , September 4, 2017, “Gov. Abbott Says Texas Relief Bill May Top $120 Billion”, by Ben Brody, September 4,2017, “Harvey to be costliest natural disaster in U.S. history, estimated cost of $190 billion”, by Doyle Rice, August 30, 2017, USA Today “Hurricane Harvey wreaks historic devastation: By the numbers”, by J.J. Gallagher, September 1, 2017, ABC News Uncharted Territory: Chemical Plants + Hurricanes “Arkema Plant Fires Underscore Chemical Industry Risk Management Challenge”, by Jack Kaskey and Ania Nussbaum , September 1, 2017, “Texas 1st Responders Sue Arkema Over Post-Blast Fumes”, by Michelle Casady , September 7, 2017, Harvey: What Agents Need to Know “Texas Regulators Offer Guidance to Insurers on Harvey Response”, August 29, 2017, “Staying safe: A Hurricane Harvey survival guide for claim adjusters”, by Patricia L. Harman, August 28, 2017, “Property Insurers Should Brace For Post-Harvey Storm”, by M. Scott Incerto and Adam Schramek, August 30, 2017, “Texas Insurance Dept. encourages leniency for insureds in Harvey's wake”, by Christine G. Barlow, CPCU, Rosalie L. Donlon, August 29, 2017, “AIR Worldwide Estimates $65B – $75B in Texas Property Damage from Harvey Flooding”, September 7, 2017, “Car Owners Inundate Insurers With Claims After Hurricane Harvey”, by Mary Williams Walsh, August 31, 2017, NY Times “Insurance Agent’s Role in the Claims Process”, August 10, 2017, “Seeing your way to better Harvey insurance claims management”, by Dr. Bev Adams, September 5,2017, Fighting Fraud “Finding fraud after Hurricane Harvey”, by Patricia L. Harman, September 5, 2017, “New Texas Task Force Formed to Investigate Hurricane-Related Fraud”, By Stephen Braun and Michael Biesecker, September 8, 2017, HB 1774: New Law Generates Rumors “Law’s Ambiguity a Source of Mixed Messages Over Texas Cat Claims Statute”, by Stephanie K. Jones , August 30, 2017 , “As Houston floods, many are worried about Texas’s controversial new insurance law”, by Ella Nilsen, August 29, 2017, “New Texas Law for Harvey Victims starting September 1st”, by Rahim Virani , August 30 2017, You’re Covered: Help After Harvey “Returning home after Hurricane Harvey”, by Christine Barlow, August 31, 2017, “Harvey's cleanup list: Toxic plumes, dead animals, moldy debris”, by Todd Sheilds, Jennifer A. Dlouhy, September 1, 2017, “How to navigate insurance claims, post-Hurricane Harvey”, by Kelli B. Grant, August 28, 2017, “5 things to know about insurance coverage after Hurricane Harvey”, by Patricia L. Harman, August 29, 2017, Back in Business: Help After Harvey “Hurricane Harvey: Insurance Implications ”, by Vincent E. Morgan, Tamara D. Bruno , September 1, 2017, “Harvey's destruction will test employers' pay, leave policies”, by Erin Mulvaney, September 1, 2017, “How HR can help following disaster”, by Alan Goforth, August 25, 207, “7 tips to speed business insurance recoveries from Hurricane Harvey”, by Finley T. Harckham, September 1, 2017, “Lessons for Independent Insurance Agents from Hurricane Harvey”, August 29, 2017, “What businesses can learn from Harvey and Irma before the next hurricane”, by James W. Gow Jr., CPCU, AU, September 12, 2017,


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Texas News Round-Up Insurance Professionals, Meteorologists to Kick Off ‘Hurricane Tour’ Texas insurance experts and meteorologists will be touring the Texas coast to inform the public about hurricane awareness and new legislation aimed at mitigating storm damage and related insurance costs...more Texas Leads in America's Race to Build More Homes According to new research by Trulia, Texas is leading America's homebuilding race with Austin, Dallas and Houston collectively on track to build 130,000 new homes this year — an amount that would be more than 10% of all permits in the U.S ...more Judge Throws Out Obama Rule Hiking Overtime Pay A federal judge in Texas on Thursday struck down an Obama administration rule that would have extended mandatory overtime pay to more than 4 million U.S. workers, siding with business groups and 21 states that had challenged it...more Texas Researchers Testing System that May Help Prevent Wrong-Way Driving Researchers are moving in the right direction, developing a system that makes sure drivers who go the wrong way are easier to alert and track. The study is part of national efforts to address various parts of connected vehicle technology, considered a precursor to fully autonomous vehicles ...more Waiting Period Suspended for Harvey-Related Claim Payouts for Totaled Vehicles Texas Gov. Greg Abbott has suspended a state statute in ordered to help facilitate the payment of insurance claims for vehicles that were totaled by Hurricane Harvey, the governor’s office said...more Number Drops but Texas Still Has Highest Rate for People Without Health Insurance The number of people without health insurance in Texas continues to decline, but the state still has more residents without coverage than anywhere in the nation. U.S. Census Bureau data released Tuesday shows Texas’ 2016 rate of uninsured at 16.6 percent. That’s down from 17.1 percent in 2015 and 22.1 percent in 2013...more Hurricane Harvey-Caused Oil, Chemical Spills Dwarfed by Katrina’s More than 22,000 barrels of oil, refined fuels and chemicals spilled at sites across Texas in the wake of Hurricane Harvey. The spills, clustered around the heart of the U.S. oil industry, together rank among the worst environmental mishaps in the country in years, but fall far short of the roughly 190,000 barrels spilled in Louisiana in 2005 after Hurricane Katrina — the last major storm to take dead aim at the U.S. Gulf Coast...more Robot Adds to Security at Posh Houston Shopping Center The robot, designed by Silicon Valley-based Knightscope, is one of nearly 40 patrolling shopping centers, parking lots and business properties across the country. The company expects that number to reach 100 by year’s end...more Some Insurance Adjusters Camping Out in Texas after Harvey To process tens of thousands of auto and property claims with losses already well into the billions of dollars, insurance companies have adjusters camping out across Texas. The Houston Chronicle reports in one case, the adjusters — many of whom are called in from out of state due to the magnitude of the effort — are living in tents....more Do you have news to share? Email with your story.


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