Specialty Insurance Blog

Lawyer Conduct Appalling

We in the insurance business often hear stories of lawyers not conducting themselves in the most upstanding fashion. This is certainly driven by some insurance people’s dislike of being on the receiving end of attorney’s aggressive action. However, the actions of three plaintiff’s attorneys involved in the Fen-Phen suit, and recently suspended from practicing law, is appalling (see here and here). The suspensions were the result of the attorneys’ overwhelming greed, leaving less than 23% of the final settlement for plaintiff’s. What is even more amazing is found at the end of one of the articles (see here): A (former) judge profited from the settlement and increased payments from the settlement for a friend, and the amounts were not insignificant.... Read more →

Federal Regulation of Insurance

The Non-Admitted and Reinsurance Reform Act of 2006 (HR 5637), important to insurance agents and brokers and to insurers as well, passed the House of Representatives about an hour ago by a vote of 417 to 0. The bill is designed to improve and streamline the regulation of non-admitted (surplus lines) insurance and reinsurance (see here, here, here and here for background & related info). Why is this important? Two reasons, at least. The bill will make the placement of surplus lines business more efficient, particularly the payment of taxes on multi-state risks. The bill is one more step the feds are taking to either take over the regulation of insurance or force the states to regulate more effectively. Gramm-Leach-Bliley... Read more →

Homeowners Underinsurance

Insurance agents and brokers handling homeowners insurance should watch for underinsurance, and this issue has been getting some press. According to a recent article in the Wall Street Journal (see here or here, $$$), the housing boom has resulted in significant underinsurance for homeowners. The data is based on a survey to be released soon by Marshall & Swift/Boeckh LLC. Key points: 58% of houses are undervalued for insurance purposes many insurers have been quietly cutting back what their policies cover guaranteed replacement cost coverage has virtually disappeared Most standard homeowners insurance policies provide only extended replacement cost, which offers up to 20% or so more than the face value of the policy if extraordinary events push up rebuilding costs,... Read more →

VC Firms Get Sued

Private equity (or venture capital) firms have exposure from both the investors in their funds and from companies they invest in, and insurance agents and brokers with private equity clients might want to make sure they are properly covered with professional liability (E&O) insurance and directors and officers (D&O) insurance. A good example is a suit against two private equity firms alleging breach of fiduciary duty and fraud (see here at PE Week). The coverage provided for defense costs is as important as the coverage for loss in these types of cases, as the complexity of the relationships and allegations burns many legal hours. There is also an excellent discussion of increased D&O exposure from hedge and private equity funds... Read more →

Surplus Lines Report

AM Best has released its latest annual report on the surplus lines insurance market (see here). The market study, completed annually, again confirms the surplus lines market’s continued superior financial performance. Some key findings Surplus lines premium were $33 billion in 2005, virtually flat from the prior year The surplus lines market is growing faster than the commercial lines market. It has increased its share of the commercial lines market from 4% in 1985 to almost 13% in 2005 With a 93.2 combined ratio, the surplus lines market outperformed the commercial market (at 100.9) by more than 7 points The surplus lines market has outperformed the overall industry by an average of approximately 10 points As it has for many... Read more →

Contingents & PIA

The PIA has taken an aggressive step for independent insurance agents and brokers against Zurich’s proposed settlement involving contingent commissions by filing a brief opposing the settlement (see here and here). The Zurich settlement (see our prior posts here and here) involves potential disclosure and contingent commission requirements that could affect many independent agents not involved in the original suit against Zurich. PIA: The alleged abuses that led to these settlements were not committed by Main Street insurance agents. Regrettably, this settlement agreement and others like it attempt to create a remedy for alleged wrongdoing and then impose it on those who were not involved in any wrongdoing. The Zurich settlement includes a provision requiring the company to support legislation... Read more →

Are Insurers Responsible?

Liberty Mutual is running an ad campaign on responsibility (see here), but the execution is misguided and might cause customers to reflect negatively on the industry as a whole, particularly insurance agents, brokers and other insurers. The basic tag, “Responsibility. What’s your policy?”, is a good theme (see here and here). But the theme appears in other forms. For example: Yes, there’s an insurance company that’s as responsible as you are (see here) I also heard this tag on the radio this morning. It may lead one to consider all the other insurers, who by inference are not as responsible as you. Which immediately leads one to consider whether Liberty is telling the truth, and to consider whether they are... Read more →

#1 Med Mal Allegation

The number one allegation in medical malpractice insurance claims against physicians is failure to diagnose, according to a study by a medical liability insurer (see here). In addition, undetected cancer is involved the most in claims alleging failure to diagnose. eSpecialty Insurance is your specialty insurance expert. We have developed a streamlined marketplace to provide multiple proposals from a range of competitive insurers, along with expertise to help you evaluate your exposures and choose the best combination of comprehensive coverage and price. We look forward to working with you. Read more →

More on D&O and Options Backdating

The backdating of options has affected a number of public companies, and will be impacting the D&O (directors & officers) insurance market (see our prior post). McDermott Will & Emery has written a summary of the options backdating issue and the potential D&O coverage implications (see here). A few key point made in the summary: An investigation is likely not a coverage trigger If there is reason to suspect that circumstances have occurred that could result in a claim, it is imperative that notice of a potential claim be provided to the D&O insurer during the policy period Future D&O coverage is likely to exclude coverage for options backdating Note that the last point may be moot because, in many... Read more →

Referral Fees

There is no definitive answer to when and how insurance agents and brokers may pay referral fees to unlicensed individuals or organizations. Insurance agents and brokers may pay referral fees in some circumstances as long as they do not resemble commission splitting, but the requirements and restrictions vary by state according to a recent article in Independent Agent (see here, only for subscribers). We will not go into detail with this article as it is not available to non-subscribers, but two states with quality regulation provide some general guidance. The New York Insurance Department provides a recent and excellent legal analysis of this issue for New York risks (see here, or here and here for older analysis). In New York... Read more →