Specialty Insurance Blog

Cell Phones & Driving

Of great interest to the insurance industry, statistics indicate that distractions such as talking on a cell phone have a direct impact on auto accidents (and insurance premiums).  According to an article in Insurance Journal (see here):

The National Highway Traffic and Safety Administration (NHTSA) reported in April that 25 percent of all car accidents are caused by distractions. A survey done by Nationwide Mutual Insurance in 2007 indicated that 73 percent of drivers talk on cell phones while driving

A few states, including New York and Connecticut, have instituted bans on cell phone use while driving.  Now, a study from the University of South Carolina has confirmed that communicating on a cell phone while driving can be distracting  (see here).

We measured their attention level and found that subjects were four times more distracted while preparing to speak or speaking than when they were listening

 

Reporting D&O Claims

A recent Business Insurance article (see here) on reporting D&O claims provides an excellent review of a claim reporting problem that could arise prior to an actual claim being made.  Not only does this issue apply to D&O claims, it exists with most other types of professional liability claims.

As noted in the article, virtually all D&O (and other professional liability) policies allow for the reporting of a situation which could lead to a claim prior to an actual claim being made, and the insurer will treat the notice as an actual claim during that policy period.  The problem arises if the notice of the potential situation is, in the eyes of the insurer, not specific or adequate enough to qualify as a claim.  If this occurs, reporting the same situation at a later date, particularly within a different policy, may be difficult.  In the simplest of terms, the solution is to ensure that the timing is appropriate and the information provided is thorough enough to qualify as a claim notice.  This may be quite difficult in certain claim situations.

In addition to discussing the specific question on claim reporting, the article provides a good summary of claim reporting requirements under both D&O and other professional liability forms.

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The Best Advice

Fortune Magazine seems to be on a roll, having printed a series of exceptionally well-written and effective articles.  The latest, called The Best Advice I Ever Got (see here), summarizes comments on the subject from 25 highly successful individuals.  For example:

First, always ask for the order, and second, when the customer says yes, stop talking.  Michael Bloomberg , Mayor of New York City, founder of Bloomberg LP.

Worth the time – we can all learn from these talented individuals.

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An Insurance Agents Duty

An insurance agents basic duty is to procure coverage that is specifically requested by the client, and insurance agents and brokers maintain insurance agents E&O (professional liability) insurance for protection.  Some courts appear to be expanding the insurance agents basic duty to one of an expert, as noted in a recent article in National Underwriter (see here) concerning a case called Hersch vs. DeWitt Stern Group Inc.

This decision is significant in that it is evidence of a continued cementing of the perception in the courts that, in fact, agents and brokers are more than just “order takers.” They are, instead, being viewed more and more as “experts.”

If courts expand insurance agents and brokers duties so they are expected to be experts, and to therefore interpret client needs in addition to responding to client requests, we can expect claims and litigation to increase along with insurance agents professional liability insurance premiums.

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California Earthquake Forecast

Despite a softening market, property underwriters continue to be wary of cat exposed areas.  Not only are the hurricane-exposed Atlantic and Gulf coasts, which get the most media scrutiny, a concern, but California represents a severe earthquake exposure.  According to recent reports from the USGA, the California earthquake exposure is significant.  One report concluded:

California has more than a 99% chance of having a magnitude 6.7 or larger earthquake within the next 30 years (see here).

Another recently released study involved a hypothetical earthquake scenario located in southern California, and concluded:

the earthquake would kill 1800 people, injure 50,000, cause $200 billion in damage, and have long-lasting social and economic consequences (see here & here)

These studies are expected to provide underwriters with additional comfort in writing tougher earthquake exposed property insurance.  Additional information on the earthquake scenario study, both technical and non-technical, can be found here & here.

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State Farm & Crooked Attorneys

We have all heard bits and pieces of the Katrina insurance litigation, and wondered what else could possibly happen and when it is going to stop.  Then the news about some plaintiffs attorneys possibly going to jail.  For an exceptionally interesting description of the plaintiff's attorneys win at all costs approach to the litigation against State Farm, read the Fortune article entitled The Siege of State Farm (see here).  Fascinating, and makes you wonder.

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Privacy & Data Theft – the New EPL?

 

We are hearing more and more about data theft, identity theft and privacy issues, but the reports are beginning to involve small and medium-size companies in addition to larger, national companies  (see here).  Most small and medium-size companies do not buy insurance coverage for data theft.  This may begin to change as the organizations begin to realize their exposure and the low cost of insuring it.

 

Small and medium size companies are generally more vulnerable to data theft because larger companies have been more proactive in responding to the threat.  Insurance agents and brokers may want to consider suggesting coverage for data theft and other technology exposures.  Over time, we expect this to be a more widely accepted coverage - developing very much like EPL (employment practices liability insurance) did in the early days.

 

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Insurance Agents Required to Communicate

Insurance agents and brokers need to communicate effectively with their clients in order to avoid professional liability (E&O) claims.  Another article in American Agent & Broker (see here) refers to a case in South Dakota which turned on this point.  In this case, an important question of fact was whether the agent had communicated to the client that the requested coverage was not provided.

Most insurance agent and broker professionals know that documentation is critical in avoiding insurance agent and broker professional liability insurance claims.  This case goes a bit further in noting a widespread requirement for an affirmative communication from the agent to the client that certain coverage has not been placed.

The court noted that numerous cases have determined that if an insurance agent is unable to procure insurance coverage according to a client's instructions, the agent has a duty to notify the client of his or her failure to do so. Whether the agent in the case at hand breached this duty, the court said, was a question of fact for a jury to consider.

Insurance Agents E&O - Summary

Insurance agents and brokers have seen some softening in the market for insurance agents professional liability (E&O) despite increasing exposures and claims.  A recent article in American Agent & Broker provides an excellent summary of the segment (see here), so a short sabbatical from our sabbatical is warranted.

The article starts with a key point:

There are two types of insurance agencies: those that have had E&O claims and those that are going to

Another key point is made in a more roundabout way: virtually all agents E&O claims are avoidable or defensible if proper procedures and documentation are in place.  Since the average agents E&O claim is over $25,000, and since claims significantly impact premium, putting effort into loss prevention is imperative. Important loss prevention techniques include:

• Documentation is your best defense
• Have a well documented procedures manual
• Monitor to ensure compliance with procedures

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Sabbatical

Due to time pressures, we will be taking a sabbatical on Specialty Insurance Blog.