NAVIGATOR - Risk Placement Services, Inc.

THE
NAVIGATOR
Winter 2016
2015 RPS Property Update
Co-Authors:
Wes Robinson
National Property President
RPS Brokerage
James Rozzi, CPCU, ASLI
Area Senior Vice President
RPS San Francisco
Cheers! We have finally made it to the end of the year and it
is time to get serious about the year ahead.
If you had a great 2015 then 2016 will provide you with the
opportunity to do even better and try and replicate the success
you had the year prior. Even if you had a banner year, we are
sure we all would agree that 2015 was a bit of a struggle given
the adverse market conditions we operated in. If 2015 wasn’t
what you hoped it would be, the good news is that the year
is over and you can turn the page and start focusing on new
goals!
Even though this article is meant to give you an update on
the E&S property marketplace, we hope that when you read
this you have had a chance to relax, recharge your batteries,
and celebrate the Holidays with family and friends. The New
Year is a special time of year for us because regardless of how
the year ended, it is great to remember how we got to where
we are today and get excited about where we may be headed.
If you are a Star Wars fan, “May the Force Be With You” in
your year ahead.
State of the Market
As most readers of this publication will surely know, we are
in one of the softest and most competitive environments in
recent history. Interestingly, this was exactly the case this time
last year and we wondered what 2015 would yield in terms of
rates and profitability for the P&C industry. Well, another year
of benign loss activity and a deluge of capital into the market
have allowed the record-surplus amounts of 2014 to remain
intact and keep the industry in an extremely healthy position
with the ability to deploy this capital at a relatively low cost.
The minimal investment returns the industry is presently
facing normally means insurance rates must increase for the
industry to maintain the low Combined Ratio required during
these low-return periods. The influx of capital (alternative
and traditional) into the market is preventing this customary
relationship to work freely, and instead rates remain as
competitively priced as ever. Until insurance companies start
to creep above the 100% Combined Ratio mark this trend
will continue. Statistics for 2015 are not published as of this
writing, but even with all of the flooding in Texas and South
Carolina this year, the Combined Ratio is still expected to be in
the upper nineties. Of note, the Excess & Surplus segment of
the P&C industry typically performs about 6 points better than
the general P&C industry.
As retail and wholesale brokers, we are impacted only in that
our revenues are tied generally to the rate environment of the
overall industry unless we are on fee agreements, which most
accounts are not. The wonderful nuance about this market,
though, is that it allows for a great deal of creativity to provide
options and solutions for our insureds, enabling us all to retain
our renewals and to bring in more new business. At RPS we
have been able to grow our business organically in what most
would consider one of the most difficult markets to accomplish
this. When the average renewal with CAT exposure is down
10-30%, it requires an awful lot of new business to make up
the difference, and we have done exactly that. Our success is
directly attributed to the truly great support of our retail agents
and brokers and the trust they put in us to deliver the most
competitive product in a market full of competitive products.
In the following sections, we wanted to highlight a few of the
key industry segments, as well as some general trends that are
taking place across the larger property market.
Multi-Year Deals
We have seen a great demand for this on CAT exposed deals.
These range from a true multi-year policy without cancellation
clauses, to single-year policies that have rate guarantees
subject to certain criteria like loss ratios. The former is often
referred to as a Multi-Year Single Limit (MYSL) and works well
on large CAT exposed accounts, while the latter is more of
a friendly agreement that there will be a status-quo renewal
as long as there are no surprises on either end. Clearly, the
disadvantage of these products in the past year or two is
that the insured may be locked into a rate that is now abovemarket when the policy matures. If the insured can appreciate
the long-term commitment and truly view the contract as a
partnership, then it is a beneficial risk management tool and
has a stabilizing effect on the cost of their insurance over time.
Hab Corner
If you were to chart rate activity on habitational business
with rate activity in the broader property market over the last
few years, you would have seen that there was very little
correlation. I can remember a few years ago when the property
market was softening, hab rates were still on the rise. Even
over the bulk of 2015, if your average national hospitality risk
was down 14% at renewal your similar national hab account
was only down 10%. The hab world beat to it’s own drum
these last few years and that was primarily driven by the lack
of carriers willing to deploy primary capacity on this class of
business. Worse yet, the carriers that were in the market were
not offering the most flexible terms or deductibles so unlike the
rest of the marketplace, hab was not a buyers market.
I believe this will all change in 2016. Carriers who have
traditionally stayed away from hab are going to be looking for
new market segments and new sources of revenue. We saw
this on a limited basis throughout the last quarter of 2015 and
I suspect the number or carriers considering hab through niche
regional programs or in open market brokerage will continue
to increase in Q1 and Q2 of 2016. As a result of increased
options for buyers and more regional niche offerings, rates in
the hab world are going to trend much like those in the broader
property arena.
The key to success in the hab world will continue to be
through differentiation. I am pleased to tell you that RPS has
renewed our Hab Facility after two successful years of operation
and we have added in some great enhancements in 2016 that
make our offering more unique and reward clients who take
an active role in risk management and loss mitigation. Please
contact your local RPS office for more details about some of
the exciting changes to our hab program.
Insurance Linked Securities (ILS)
There has been much chatter in the marketplace about
Alternative Capital. What is this anyway, where does it come
from, and what interest does it now have in our market? To
simplify this answer, think of it as investing in Hurricanes.
Banks and pension fund managers are always looking to find
new investments, and the insurance industry provides an
opportunity to realize a good return on their investment while
not having any correlation to the rest of the market they are
invested in. From their viewpoint, it is a smart way to spread
their risk: in non-hurricane years they have a great return, and
if their capital is tapped to pay for a hurricane, it still only
represents a small proportion of their total capital investments.
To say ‘Alternative Capital’, though, is a little misleading these
days since it represents over $60 billion of the available capital
in the marketplace, and that number appears to be growing
every year.
Public Entity Update
The Public Sector remains one of RPS’ top industry classes
and we are proud to have such a strong presence in this
business. The superior construction, stable values year to
year, and low attritional loss ratios makes this a desired class
of business from the carriers’ perspective, creating ample
competition and certainly making it a buyers’ market. The CAT
exposed risks are seeing the most benefit from this market,
enabling them to use their savings to purchase additional
limits to further protect their city’s, county’s, or school’s assets.
Lower percentage deductibles have become more common,
and many accounts are seeing the introduction to Deductible
Caps, which provide a maximum deductible amount to the
Public Entity in the event of a major catastrophe. We suspect
the market will continue to trend in this direction at least in the
near-term for this industry based upon what we have seen on
the early renewals in 2016.
Multi-Family Update
This segment of the market is currently following the broader
market characteristics in that rates are trending downward,
and terms are expanding outward. The non-CAT accounts are
experiencing about a 5-10% reduction, while the CAT exposed
accounts are seeing typically a 10-15% reduction. As always
with multi-family accounts, individual loss experience will
determine if your mileage varies from the overall market trends.
The RPS Habitational Facility continues to experience great
success with steady growth in 2015. The most success has
come from the larger accounts that can entertain a $100,000
or greater AOP Deductible and have on average about a
$500,000 premium amount for the Primary layer. Not every
account has these characteristics, and we continue to make
improvements to this as we grow it, so please inquire with
your local broker to find out more details.
Hit List
1. Bound a $200M Wood Frame over Concrete Podium
Builders Risk. The project was a 3 Year Term and
coverage was placed with two carriers on an All Risk
Including Flood and EQ basis. Inclusive of CA EQ.
Terrorism
The private insurance market for Terrorism and Political
Violence is flush with competition. Within minutes, a $100M+
limit quote can be produced for our clients, with nearly a billion
dollars in capacity available in any given risk outside of the
key hot zones. The marketplace has done a wonderful job of
addressing this unique risk and has offered a viable alternative
to the US Government backed TRIA. These standalone
Terrorism policies do not require the US Government to declare
an event an Act of Terrorism (politically this is very difficult to
declare), there is no size requirement for an event, and very
often there is no deductible on these policies. Hiscox, Beazley,
XL, Ironshore, AIG, and Lloyd’s all have great products out
there, or this can be quoted online with RPS in our proprietary
Terrorism platform.
4. Secured an 11% rate reduction on a long term renewal
of CA apartments with a TIV of just under $400M.
Coverage is placed on an All Risk Including Flood and
EQ basis including CA EQ.
Flood
Flood continues to be one of the most closely underwritten
catastrophic perils by the E&S Property market. The
unpredictability of flooding makes it difficult for underwriters to
gauge their true exposure, so they often restrict their flood limits
to something manageable. The events this year in Texas, then
of course more recently in Columbia and on the coast in South
Carolina once again remind us this exposure is real and does
not necessarily require a high hazard flood zone for property
to be vulnerable. The NFIP program continues to owe the US
Treasury billions of dollars, yet remains the most affordable
outlet for primary flood insurance in high hazard flood zones.
We are seeing more solutions in the private market for NFIP
equivalent products, but their viability remains hit or miss
depending on the risk.
2. Bound a $700M schedule of wood frame garden style
apartments in the Western United States. Coverage was
placed through our Hab Facility on a Manuscript Form
on an All Risk Including Flood and EQ basis at a rate of
approximately $0.16 ground up.
3. Secured a 16% rate reduction and a 3% EQ Deductible
on a large DIC placement with a TIV of $200M in Zone
E in CA. As an option, the client also considering buying
a multi year single aggregate limit.
Summary
RPS has continued to grow and build our Property platform
in the most challenging of rate environments due to hard
work, creativity, market relationships, and most importantly
our support from the retail agent and broker community. For
that, we are greatly appreciative and will always have our
finger to the pulse of the market to ensure we deliver the most
superior products, service, and expertise available. Thank you
for continued support, and have a wonderful and successful
2016.
2015 RPS Casualty Update
By Bill Wilkinson
National Casualty President
RPS Brokerage
RPS Casualty Practice closed 2015 above $500M. We have
grown 9% organically; quite an achievement in a soft market
environment. Fueling our growth is new business production,
increased exposures (payroll and sales) and the uptick in
construction activity nationally. We have seen a large increase
in audit additional premiums for the first time since 2008. The
success is also attributed to the hard work, dedication, sharing
and collaboration of the team and our winning culture. We
continue to specialize in the following areas:
•
•
•
•
•
•
•
•
•
•
Construction
Manufacturing
Real Estate
Energy
Environmental
Public Entity
Higher Education
Hospitality
Sports Venues
Transportation
The market is as soft as I’ve ever seen it in my 26 years in
the insurance industry. Many new carriers have entered with
no legacy issues which is holding rates down. On renewals we
are seeing 5% rate decreases on average. When competing for
new business we are able to secure 15-20% rate decreases
on desirable classes of business. Until the carriers don’t realize
an underwriting profit we will continue to see rates deteriorate.
Regardless of rate deterioration, you can grow in this market
with proper planning and execution.
We have solutions for the following classes however there is
limited capacity:
Class of Business
NY Construction
Due to New York labor lawaction over claims
E-Cigarettes Manufacturers
Due to the unknown and latency
and Distributors
issues
Bar/Tavern
Due to liquor liability and
assault and battery related
claims
Due to assault and battery
Apartment Risks
related claims
Trampoline Parks
Due to frequency and severity of
losses involving children
Football Helmet Manufactures Due to concussion related
claims
Weight Loss & Energy Drinks Due to increase in fatalities and
heart attacks stemming from
consumption of these products
Trucking
Due to large increase in auto
liability losses
Opportunity for Growth
We continue to build proprietary products and programs that
are exclusive to RPS that are market differentiators. Our two
newest product offerings are as follows.
General Liability Coverage for Registered Student
Organizations (RSOs)
Many universities are seeking this coverage to carve
the student exposure out of the universities insurance
program. The universities will then allocate the cost
of insurance back to the RSO. We have two distinctly
different offerings:
• We are providing a very broad coverage option that
includes coverage for liquor liability, hired and nonowned auto and a per club limit. There is no assault
and battery exclusion and no abuse and molestation
exclusion. The minimum premium for this option is
$100,000.
• We provide a less broad option that does not provide
liquor liability and hired and non-owned auto. There is
also an exclusion for assault and battery and abuse and
molestation. The minimum premium for this option is
$50,000.
Both of the above options are provided by the
same A-rated carrier who offers a $1/2/2 limit with a
$1000 per occurrence deductible. The target student
population is 15,000 however we can consider
smaller student bodies. This product does not cover
fraternities or sororities as they are typically covered
by national Greek programs.
We believe there are very limited carriers offering
this product, especially the product with the enhanced
coverage options provided in the first example, above
Residential Project Specific and WRAP Coverage
Details of this product are as follows:
• Eligible new construction projects: single family and
multi-family dwellings, mixed use structures, condo’s
and light commercial
• Target Project Size: $2M to $50M million construction
value
• Geographic Territory: Nationwide with the exception of
AK, HI, LA, southern NV and NY
• Maximum Term: 36 months (can provide 48 months
subject to reinsurance approval)
• $7500 minimum premium for project specific and
$10,000 for WRAPs
Other Features
• “Pay as you build” feature allows the builder/policyholder
to only pay for completed operations coverage and
structural defect warranty coverage at the time of sale.
• Completed operations coverage for the length of state
mandated liability
• Repair work coverage included
In addition, the RPS program development team
is working on a number of exclusive RPS programs
that will be available in the near future. For more
information regarding the RPS casualty team please
contact your local RPS casualty expert.
designed to respond when no one is home and often connect
to a central security system. Generally, there are two types:
• Flow-based devices monitor water flow in the pipes,
allowing water to flow continuously for a set volume
or length of time.
• Sensor-based devices are placed in high-risk
locations, such as near artwork or appliances that
use water. Sensors signal the valves to close when
they get wet or fall below a critical temperature.
Devices can be used in combination for maximum protection.
If your home is not equipped for holistic detection, point-of-use
devices can be applied directly to the supply lines of toilets,
sinks, dishwashers, washing machines and more. Vendors
such as Water Security Solutions can advise on appropriate
device choices for your needs.
What Precautions Can I Take to
Prevent Water Damage in my Home?
By Rob Eck
Manager, Personal Lines
RPS Standard Lines
When it comes to homeowners insurance claims, water
damage from a plumbing leak is six times more likely to occur
than fire, and seven times more likely than theft. Here are just
a few real-life examples:
• A wedding celebration had to be relocated after a
pipe in a third-story bathroom leaked throughout
the first and second floors of the home.
• A leaking air-conditioning unit destroyed a painting
when water saturated the drywall behind the
canvas.
• A vacation home was destroyed when a frozen
pipe ruptured. Water ran continuously for several
days, dumping thousands of gallons and turning the
basement into a swimming pool.
In addition to costly damage and overall frustration, these
scenarios share a common theme: They could have been
avoided or minimized significantly.
Take Advantage of Technology
In most cases, the severity of water damage relates to
whether someone was home or not. Had immediate steps
been taken, the homeowners involved could have used a mop
to eliminate or lessen the damage.
Whole-house water shut-off systems can detect or prevent
water damage due to plumbing malfunctions or leaks. They are
More Mitigation Measures
Other things you can do to reduce the likelihood of water
damage include:
• Have a caretaker check on your secondary home
every day. A walkthrough should include every floor
and room with a water-consuming appliance.
• During sub-freezing temperatures, have rooms
checked twice a day.
• Replace your washing machine’s rubber hoses with
steel-braided ones, and replace them every ten
years.
• Have a maintenance service agreement for airconditioning units and water heaters. Ideally, they
should be checked on a semi-annual basis.
• Inspect water-supply lines under sinks and appliances
regularly. Replace inexpensive plastic tubing and
valves with metal or steel-braided connections.
• Install a basement sump pump. If you have one
already, keep a back-up power supply. Examples
include systems with battery back-up or ones
powered by water pressure.
• Install a permanent back-up electrical generator to
power the critical systems in your home, such as the
furnace, alarm system and sump pump.
• Schedule an annual inspection of your roof and
flashing. Caulk joints around doors and windows
should be inspected as well.
• Clean gutters and drains twice a year to ensure that
water from rain storms is channeled away from your
home quickly.
Insurance Considerations
Even with a mitigation plan, damage can occur. Work with
your agent to ensure that your homeowners policy limits reflect
the breadth of your assets, and choose a provider that supports
proactive measures to safeguard your property.
Understanding For-Hire Trucker
Exposures
By John Altizer, CPCU, CIC, AIS:
Senior Underwriter
RPS Charlotte
While understanding trucking exposures and how to
underwrite and price for truckers may seem esoteric to those
who don’t deal in the trucking segment on a routine basis, the
process and approach is really quite cookie-cutter in nature.
This article will give you a basic guide to underwriting truckers’
exposures and their typical coverages.
Consider that most truckers purchase the below lines of
coverage:
Auto Liability
While this coverage is intended to cover third party property
damage and bodily injury claims like any personal or business
auto policy, the possibility of a large shock loss or even a
catastrophic policy limit loss is a much more likely event with
truckers. Truckers who cross state lines are required by the
Federal Motor Carrier Safety Admin. to carry $750,000 CSL
in coverage ($1M for some hazmat cargo and even $5M for
some really nasty hazmat cargo). The vast majority of truck
customers (shippers) contractually ask for $1M CSL and we
routinely provide quotes at that limit. Truckers also secure UM/
UIM/PIP coverages depending on the state of garaging. The
rating basis for liability coverage can be scheduled per unit
pricing, a rate per 100 miles driven, or a rate per $100 freight
revenue generated. Which one of these is used depends on
the size of the fleet and the confidence we have in accurate
historical mileage or revenue data. Factors that impact liability
pricing and/or acceptability are:
•
•
•
•
•
•
•
•
Losses
Years in business
Driver commercial driving experience
Driver age
Garaging state
Motor vehicle report violations and accidents
Maximum normal operating radius
Federal analytical data in the public domain (SAFER,
FMCSA, CAB, etc)
Carriers’ rates will give more or less emphasis on these
variables, depending on their underwriting model. This line of
coverage can vary between $3,000 to $10,000 per tractor/
trailer, depending on risk/driver profile and state.
Physical Damage
We routinely include coverage for comprehensive (sometimes
specified perils) and collision coverages. Though there is a
full range of deductibles available from $500 to $5,000, the
vast majority of truckers select $1,000. The credit for higher
deductibles brings only marginal improvements in pricing, and
deductibles below $1,000 may not be acceptable to some
insurers. Unlike business auto, this coverage is rated on the
current stated value of the equipment. The insured may wish
to consult an appraiser or readily available appraisal guide
in determining the true value. The stated value should be
decreased each renewal to account for the equipment’s annual
book value depreciation. Lower valued or older equipment
frequently falls outside the appetite of insurers. Many carriers
add coverage enhancements such as:
• Basket deductible with cargo
• Single deductible (only 1 deductible applied if
tractor and trailer involved in same occurrence)
• Disappearing deductible for loss-free years
•
•
Lease/loan gap coverage
Higher towing limits (towing and storage bills can
often exceed the equipment repair or total loss bills)
This line of coverage can vary between 2-7% of the stated
amount of the insured equipment, depending on driver and
risk profile, state, and requested deductible.
Cargo
This is a third party legal liability form in which the carrier
adjusts the claim directly with the owner of the cargo. Subject
to exclusions and limitations, the policy pays for loss or
damage to cargo in the insured’s care, custody, and control,
as described in the bill of lading that accompanies every load.
Since this is an uncontrolled line of business, policy forms and
rates vary dramatically, so understanding the coverage form is
critical. There are several trailer types that enable carriers to
readily group their specific commodity appetites:
•
•
•
•
•
•
Dry van
Refrigerated
Flatbed
Tanker
Intermodal
Dump
The exposures, rates, and underwriting are different for
each of these classes. Most truckers carry $1,000 or $2,500
deductible with a requested limit of $100,000 per load.
Frequently, the nature of the commodity or a contractual
requirement may call for higher limits as high as $500,000
or $1M per load. Many commodity types and requested
high limits fall outside of carriers’ appetites. Such policies
typically find coverage in the London markets, sometimes
on a layered basis. Carriers are particularly sensitive to target
theft commodities that are readily converted to cash such
as electronics, cigarettes, liquor, pharmaceutical, copper,
and designer brand apparel to name a few. Carriers are also
sensitive to older refrigerated trailers which are more prone
to break down. This line of coverage starts at around $500
per power tractor for a dry van load and can go much higher
depending on risk/driver profile, requested limit/deductible,
and nature of commodities hauled.
General Liability
Most truckers do NOT ask for this coverage, despite it
being a relative bargain compared to the coverages previously
discussed. While the annual premium for a typical truck with
$1M occurrence is easily less than $750, the exposures and
the expected losses are nearly non-existent. The true liability
exposure for the trucker is on-the-road and covered by auto
liability. Typical trucker GL claims can include:
•
•
•
•
Third party injury in the trucker’s yard
Loading/unloading claims that go beyond the
loading/unloading definition within the auto liability
form
Erroneous delivery of products
Use of mobile equipment
Usually GL is requested only due to a contractual requirement
of a shipper.
Excess
Most truckers do NOT ask for this coverage as it can be
expensive. Again, contracts the insured enters into are normally
the catalyst for seeking this coverage, though insureds that
have had past claims near or above their auto liability limit do
see the wisdom in securing excess limits. Many carriers can
quote an additional $1M in liability limits on the auto policy,
saving the insured the trouble of approaching the non-standard
excess marketplace on a monoline basis. Typically, the cost per
tractor for $1M excess of $1M primary lies between $750
and $1,500 annually, depending on loss history and other
variables discussed above on auto liability. Additional layers
can be secured at a decay factor of between .50 and .60,
capping out at some minimum premium per million after about
$5M excess. Coverage can be sought as excess auto liability
only or as a full follow-form umbrella sitting over underlying
auto liability, general liability, and employers’ liability.
As with other types of insureds, prior loss history is a critical
component to proper underwriting. Frequency (expressed
as accident rate per unit or per million miles) and severity
are equally important. A loss ratio of around 50-60% is
considered borderline profitable. Multiple claims by the same
driver do create a separate problem. Careful review of loss runs
allows the underwriter to further evaluate problem drivers,
identify preventable crashes, isolate small nuisance claims,
verify continuity of coverage, and remove losses that were
subrogated.
Unlike most other businesses, insurance for the trucker can
be one of the top three expenses on their income statement.
The pressure to obtain the best coverage for the lowest price
is particularly intense with this class of insured. Other large
expenses include fuel and fuel tax, monthly truck payments,
payroll, repairs/maintenance, and tolls. But costs are not the
only pressures facing today’s trucker. While they have an
incentive to run a safe, efficient, and profitable operation, they
must balance those goals with such external pressures as:
•
•
•
•
•
•
A chronic nationwide driver shortage
State and federal regulators
Competition (lower freight rates)
Time-sensitive loads
Legal environments by jurisdiction
Finding loads (sales)
Recent analytics and information technology available to
regulators are screening out the least safe operators at an
accelerating rate. New in the industry are telematics or onboard ‘black boxes’. These devices collect real time data
and serve to monitor driver behavior, manage trip progress,
maintain required driver hours logs, monitor and manage
equipment maintenance, and act as reliable data in defense
of claims.
Nothing is Ever Simple; the Perils
of Adding Additional Insureds to
Medical Malpractice Policies
By Sarah Dore, CPCU
Area Senior Vice President
RPS Healthcare
Confucius said, “Life is really simple, but we insist on making
it complicated.”
A lot of us would say that is true about insurance too. We
take a simple concept of wanting to protect assets or meet
a financial responsibility and by the time we are done we
have created a muddled mess. Today’s medical malpractice
policies are so full of additional features and benefits that
they have become their own form of a third party professional
package policy. Policies can be 60+ pages before we tailor
them with all of the modifications and endorsement activity.
And speaking of modifications, the explosion of demands that
additional insureds be added to policies is perplexing at the
least and downright alarming in many cases.
Let’s start with some background. The first thing on a
declarations is who is insured or the named insured. The
named insured pays the premium, chooses limits, makes
changes, receives notices and generally is in charge of making
all of the important decisions about the policy on behalf of who
is covered. And that is the key. Who is covered? In medical
malpractice policies, there can be additional named insureds
(ANI), insureds and additional insureds (AI). The distinction
is critical. ANIs typically are primary owners of the named
insured entity. For example, The Main Street Clinic is owned by
5 physician owners. Those five physicians are ANIs. But Main
Street also employs five nurses. Those five nurses are insureds.
And then there are non-owner physicians or independent
contractors; all are exposing the named insured, Main Street,
to liability.
So what is the big deal? Insureds are only covered when they
are performing professional services on behalf of the named
insured. This distinction is critical when managing exposure to
loss. Without this language, a named insured could wind up
picking up the liability exposure for these insureds regardless
whether the insured is working on behalf of the named insured
or not.
And then there are additional insureds (AI). AIs are none of
the above. AIs are third parties who are not defined as ANIs
or insureds on the policy. These third parties have requested
and been granted coverage under the named insured’s policy
in case the AI is named in a claim against the named insured.
Examples of AIs include: a landlord may request AI status
as specified in a lease agreement on a physician’s policy.
Staffing agencies often have to grant AI status to the facilities
where they are placing personnel. Third parties with financial
interests in the named insured may request and be granted AI
status, for example mortgage and auto lenders.
There are two ways to address AIs on a policy. Either
on a blanket basis or a specified (named contract) basis.
Obviously it is easiest to add a blanket AI endorsement but
this may not be the best approach for medical malpractice
policies. Traditionally, the specified contract approach has
been preferred, but with the increase in requests for AI status,
blanket endorsements are becoming more common.
Granting AI status takes careful underwriting on the part
of the broker and company underwriter. It starts with the
contract that is mandating the AI status. Sound contract
wording is a must. The contract’s hold harmless clause needs
to be reviewed. Is it bilateral? Are the provisions of the named
insured’s contract closely tied to the contract wording for
services to be provided?
Why should we care whether AIs are added? The most
important reason is that adding AIs dilutes the named insured’s
limits of liability and gives rights to the AI third party, namely
indemnification, without any obligations or duties under
the policy. All of the responsibilities remain with the named
insured.
There could be a conflict of interest. In the event of a claim,
the AI may want their own counsel. Their defense strategy may
be in conflict with the named insured. It is not uncommon for
hospitals to have a different, often adversarial, defense strategy
from the staffing agencies or physicians with whom they have
contracted. The named insured’s policy should never respond
to the AI’s own independent negligent acts. Not granting AI
status means the all parties maintain their own policies and
the ability to defend themselves unencumbered.
The AI and named insured also need to think about the
insured versus insured exclusion. By being an AI on the named
insured’s policy, an AI bringing suit against the named insured
could trigger the exclusion and be denied coverage altogether.
Thus, by demanding AI status, the AI is actually defeating the
purpose of their request for protection in the first place.
There are other pitfalls that should be avoided or at least
mitigated. When provided on a “primary and noncontributory”
basis, the named insured becomes responsible for the entire
claim with no potential contribution from the AI. When a waiver
of subrogation is requested, the named insured is prevented
from any chance to pursue recovery of any policy proceeds
from the AI. Finally, because granting AI status means notifying
the AI of policy cancellation, the insurer must often go to extra
lengths to provide proper notice to a party where there is no
relationship. It is an extra obligation and annoying.
Making well-informed decisions about AIs is critical to
providing the right medical malpractice coverage. Contracts
are ever more complicated. It is incumbent upon all parties to
make sure that AI status is granted only after careful review of
the contracts to make sure that ultimately the named insured
is protected first and foremost. That may mean saying no to
the AI request and explaining in cogent terms why. It may also
mean granting AI status but modifying the contract to make
sure that the named insured is fully protected.
CONGRATULATIONS
Congratulations to Sarah Dore on her retirement! Her
Healthcare knowledge and expertise, as shown above,
will be greatly missed!
Want To Become A Specialist?
How About Professional Liability
By Robert Ciuffreda
Area President
RPS Plus Companies
When I speak to young people embarking on a career
in the insurance business my first recommendation
is to become a specialist. Specialization has been a
key in business over the last several decades; be it in
the medical, legal, computer or virtually any field of
endeavor. Why not insurance?
The appealing aspect about being a generalist in our
business is you never run out of prospects. However,
becoming proficient in such a wide spectrum of
exposures is inherently filled with challenges. First,
there is the overwhelming knowledge of insurance
forms and coverages necessary to writing such a
commercially diversified group of insureds. If you are
fortunate in placing the account, there are always
updates in coverage, changes of vehicles, attention
to claims and others required throughout the year.
Although servicing and contact with your clients is
vital, it detracts from the time you have to solicit
new business, the lifeblood of our industry. Finally,
upon renewal, you must deal with the other countless
number of generalists that have targeted your account.
What if I told you that once you have bound the
account, the next dealing you would most likely have
with your insured would be the renewal discussion.
Additionally, your client would not interpret this
lack of communication as abnormal as long as your
renewal terms met their expectations. In other words,
all your time every day would be dedicated to sales!
And, the chances you would have competition on the
renewal would be modest. Sound too good to be true?
Well it isn’t!
Becoming proficient in any discipline requires
dedication, time and effort. Most retailers are not well
versed in the nuances of Professional Liability due
to the claims made nature and non-standard policy
forms. Knowledge of the coverages, combined with the
understanding of the marketplace from a competitive
basis can leapfrog you above the field. How do you
achieve this nirvana? Find a specialist MGA like RPS
Plus Companies to assist you. We have the products
and take special care to share our expertise with our
retailers.
Currently we have several programs dedicated
exclusively to Professional Liability. Our Lawyers
Program is underwritten by the Markel Insurance
Group. It represents the state of the art coverage
combined with competitive pricing. Our underwriting
staff prides itself on assisting our brokers, detailing
the specific highlights of our program and how it
compares to the incumbent’s coverage. Additionally,
our retention rate on this program is in excess of 90%,
facilitating the renewal process. The average premium
on our lawyers book exceeds $17,000. Commissions
are liberal and commensurate with production goals.
An even less crowded marketplace exists in the
Insurance Agents E&O arena. Besides the agent
organizations like PIA, there are only a handful of
brokers that specialize in this field. We have facilities
to assist you in writing any size of agency throughout
the entire country, as well as propriety programs with
both admitted and non-admitted markets that include
Markel, XL and QBE. Depending on the size and the
specific type of agency, we can custom fit a coverage
proposal for any of your prospects. Additionally, we
would be more than happy to offer you a quotation for
your own agency if you so desire.
“I’m from the government and I’m here to help you.”
Bet you’ve heard that myth before; but in the case of
Title Agents Professional Liability, it’s a fact! Over the
last ten years many states have required abstractors,
title and escrow agents to carry E&O insurance. The
list grows each year to the benefit of our program.
RPS Plus Companies has been a leading provider of
this coverage for the last 20 years. Unlike most of our
competitors, our current program with XL is admitted
in most states. This combined with our excellent
form and competitive pricing gives us a leg up on the
competition.
Business Abroad
By Ryan Collier
President
RPS Executive Lines
On November 19th, Mike Roy, RPS CIO, and I attended
the 2015 Lloyd’s Meet the Market event in Warsaw, Poland.
We met with the Polish development team that produced
RPScyber.com to discuss future products for online distribution
but took some time to attend this gala affair that had 375
attendees from England, Poland, and Lithuania and 2 from
the United States. The keynote speaker, Inga Beale, discussed
Cyber Insurance, The Opportunities of Digital Technology
within Insurance and Emerging Risks.
Pictured to the right are:
• Ryan Collier, RPS Executive Lines
• Inga Beale, Lloyd’s Chief Executive Officer
• Witold Janusz, Lloyd’s General Representative and
Country Manager for Poland
Contact your local RPS office today for more
information about our products and services.
Two Pierce Place • Itasca, IL 60143
866.595.8413 Contact_Us@RPSins.com
RPSins.com
Risk Placement Services—YOUR wholesaler of choice!