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Ohio Delegation Hits
the Hill... Ohio Delegation Hits The Hill... For 2003 National
Legislative Conference
In april, ohio big “i” members were part of over 800 independent
insurance agents swarming the U.S. Capi-tol as part of the 27th Annual
IIABA National Legislative Conference.
Attendees this year heard from Senate Majority Leader Bill Frist MD (R-Tenn.)
on the Iraqi war and continuing battle against terrorism as well as
health care, tort and tax reform. Adding to the insight on top issues
were Senators John Breaux (D-La), John Sununu (R-NH) and Senator Chris
Dodd ( D-Conn.), who was recognized as the 2002 IIABA Legislator of the
Year Award. Young Agents attendees also heard from National Republican
Congressional Committee Chair Tom Reynolds (R-NY) about the importance
of political involvement to their future in the industry.
Ohio attendees met with individual members of the Ohio Congressional
delegation and enjoyed a relaxed chance to mingle with many of them at
an evening reception in the historic Library of Congress. Garnering
widespread support among the Ohio Congressional members was H.R. 1222,
drafted by the IIABA, to reform tax treatment of intangible assets to
allow the write-off of the first $5 million of intangible assets in the
year of purchase, with the remaining to be depreciated equally over 14
years.
Special thanks go to the following legislators who took the time to meet
with Ohio agents or attend the Congressional reception: Michael R.
Turner (R-3, Dayton); Michael G. Oxley (R-4, Findlay); Ted Strickland
(D-6, Lucasville); David L. Hobson (R-7, Springfield); Pat Tiberi (R-12,
Columbus); Steven LaTourette (R-14, Madison Village); Deborah D. Pryce
(R-15, Dublin); Tim Ryan (D-17, Niles); Bob Ney (R-18, St. Clairsville).
Recognition is also deserved for this year’s Ohio Big “I” attendees:
President Bill Herzog, Ashtabula; Vice President Marcia Lawson,
Westerville; Treasurer Bill Somers CPCU, Elyria; District 1 Trustee Dave
Fenner, Columbus; District 2 Trustee Gary Roach, Gallipolis; District 4
Trustee John Watson CPCU, Dayton; District 5 Trustee Steve Shanahan CPCU,
Lima; District 6 Trustee Rick Spreng, Ashland; District 7 Trustee Mickey
Zuber, Independence; District 8 Trustee Denny Rossi CPCU, CIC, Warren;
District 9 Trustee Dave Hazen CPCU, CIC, Salem: Past President Lee
Patrick, Worthington; Joe Patrick, Loveland; Pat Hays, Greenville. Also
attending were Ohio Big “I” Executive Vice President Tom Hardy CPCU and
Communications and Membership Director Tim White as well as lobbyist
Keith Brooks.
VIRTUAL UNIVER OFFERS EXPERT
ADVICE
One of the most-widely used features of the “Virtual University” is the
“Ask An Expert” section. Here, agents can pose questions to the faculty of
the VU. If the question has universal appeal, it may be printed in one of
the VU articles. Normally one of the faculty members will simply respond
to the questioner. Some important caveats on using this feature, though –
questions need to be submitted via e-mail in the format presented on the
VU Website; also, this is not a legal service and in no way replaces
communication with your carriers and others – faculty members of the
Virtual University are simply offering their schooled opinions for
informational and educational purposes. For more information on this
service of the Virtual University, log onto http://vu.iiaa.net/. Following
is a sample topic that was addressed in the “Ask An Expert” section.
The “Wear & Tear” Exclusion
Q: “Our company issued an HO 00 03 10 00 policy and the insured’s daughter
(who is not a heavy girl) was in the shower. She slipped and hit the wall,
breaking out some tiles. Our adjuster noted that there were some signs of
deterioration along the edge of the tub. Based on the condition of the
tile, we believe that very little maintenance has been done to the
caulking. If the wall has deteriorated to the point that minor force
caused damage, would the deterioration exclusion apply?”
A: First of all, to put the claim into context, let’s take a look at the
exclusion, then we’ll make two points concerning the loss. The exclusion
says:
SECTION I – PERILS INSURED AGAINST
A. Coverage A – Dwelling And Coverage B –Other Structures
2. We do not insure, however, for loss:
c. Caused by:
(6) Any of the following:
(a) Wear and tear, marring, deterioration;
First, unlike the general exclusions section of the policy, these “all
risks” exclusions do not include the concurrent/sequential causation
wording of “We do not insure for loss caused directly or indirectly by any
of the following. Such loss is excluded regardless of any other cause or
event contributing concurrently or in any sequence to the loss.”
So, absent this wording, it is immaterial that deterioration contributed
to the loss. The efficient proximate cause was the girl falling against
the tiles. If the tiles just came loose through normal use and began to
fall out, then you’ve got a wear and tear/deterioration loss. That doesn’t
mean that the deterioration won’t affect the AMOUNT of loss payment. It
would be appropriate to deduct the loss of value that can be attributed to
the deterioration...IF we didn’t have replacement cost coverage.
The second basis for coverage is that many claims can be attributed, at
least in part, to deterioration, wear and tear, etc. For example, a frayed
electrical cord results in a fire. The fire damage is covered because it
isn’t otherwise excluded, but the valuation of the claim may reflect the
deteriorated condition of the cord (admittedly a negligible amount with
respect to the entire claim).
The purpose of this exclusion is to preclude coverage just for wear and
tear, marring and deterioration. If the insured attempted to make a claim
for the tile grout shrinking and tiles coming loose, that’s wear and tear
pure and simple. But if an otherwise non-excluded intervening cause (such
as a slippery young lady) results in damage, it’s covered. Certainly that
opens the door for potential fraud or at least intentional loss, but
that’s what happens when we offer extremely broad contracts like this.
This article was reprinted with permission of the IIABA Virtual
University. For additional educational and research items, be sure to
visit the Virtual University at http://vu.iiaa.net.
Court Watch TERRENCE O’DONNELL
FILLS VACANTOHIO SUPREME COURT SEAT
Former 8th District Ohio Court of Appeals Judge Ter-rence O’Donnell was
appointed to the Ohio Supreme Court to fill the vacancy created with
Justice Deborah Cook’s federal appointment to the 6th U.S. Circuit Court
of Appeals. Justice Terrance O’Donnell was appointed to serve until the
November 2004 election in which he will run to serve the balance of
Justice Cook’s term, which expires December 2006. Justice O’Donnell
previously ran against Justice Alice Robie Resnick for the Ohio Supreme
Court in 2000, losing a hotly-contested campaign in which he received
heavy business support against her base support of labor and trial
interests.
U.S. SUPREME COURT OVERTURNSPUNITIVE DAMAGE AWARD
The United States Supreme Court stepped into the debate of large
punitive awards by juries, setting aside a $145 million verdict against
State Farm Mutual Automobile Insurance Company. While the business
community has cheered the decision as “putting the breaks” on “jackpot
justice” (in the words of the U.S. Chamber of Commerce), recent
commentary by various media outlets has put an interesting light on the
decision.
The case was brought by a Utah couple who purchased auto insurance from
State Farm and later was involved in an accident where the driver of
another vehicle was killed. The couple eventually sued State Farm for
bad faith, contending the company did not protect their interests and
purposefully exposed them to loss of everything they owned. The couple
was awarded $1 million for their losses and also sought punitive
damages, including evidence to show State Farm’s conduct was not unique
to their case. The jury returned a $145 million verdict against State
Farm. The U.S. Supreme Court set aside the punitive damages as unfair
because, at 145 times the actual damages award, the punitive verdict was
wildly out of proportion to the actual losses. The Court also offered
new guidelines that will make most punitive damages awards suspect if
they exceed nine time the actual damages.
Interestingly, some media outlets are hailing this as a major
improvement in dealing with business misconduct. The reasoning has gone
that such exaggerated punitive awards overshadow the particulars of the
case for which they are awarded and that under the decision of the U.S.
Supreme Court and these new guidelines, punitive damages can still be
substantial to a company but will no longer be the headline, allowing
for such awards to actually better “shine a light” on the gross
misconduct for which they were intended.
OUT-OF-STATE COMPANIESNOT BOUND BYSCOTT-PONTZER DECISION
A recent Ohio district court decision held that corporations
headquartered outside of Ohio are not held to the standards of the Ohio
Supreme Court’s Scott-Pontzer uninsured/underinsured motorists’
decision.
The controversial Scott-Pontzer decision in 2000 held that all corporate
uninsured motorist insurance policies extended to employees and their
private vehicles. The Ohio Supreme Court held that corporations only
existed through the operation of employees and by extension the word
“you” in a corporate insurance policy extended coverage to employees.
Under the recent district court decision, however, Ohio law does not
extend to companies based outside of Ohio, even if they have auto
exposures in the state. The Scott-Pontzer case was overturned by the
Ohio Legislature, so remaining exposure for Ohio-based employers exists
only for those policies written before the legislative change. However,
industry attorneys estimate this exposure in the millions based off of a
projected 15 year timeframe for which claims can still be filed.
In the same decision (Delphi Automotive Systems v. Harry Slaughter), the
court held that self-insured companies are not required to provide
uninsured motorists’ coverage.
CONSUMER GROUP LEVELS REDLINING CHARGES AGAINST SEVEN INSURERS IN
CLEVELAND
Questioning the fairness of ratings territories, Housing Advocates, Inc.
(HAI) has filed a complaint with the Ohio Civil Rights Commission
against State Farm, Farmers, Nationwide, Erie and State Auto, charging
housing discrimination against Cleveland residents.
The crux of the complaint is that Cuyahoga County, housing Cleveland, is
broken into two ratings territories, one for Cleveland and one for the
rest of the county. HAI claims that the territories are racially-based
and that the result is that Cleveland residents, and subsequently a
disproportionate number of minorities, pay significantly higher
homeowners’ insurance (HO) premiums than do other residents of the
county.
While the group claims that Cleveland residents have been over-charged
for homeowners’ premiums by approximately $34 million over the last
four-year period, they are seeking from the companies through action of
the Civil Rights Commission elimination of the territorial ratings and
$55 million in the return of “discriminatory premiums paid, damages and
other affirmative relief.”
Interestingly, Allstate, which with Nationwide and State Farm, represent
the three largest insurers in the county, was not included in this
complaint. However, the group has indicated that it plans to file more
such complaints against additional carriers and may conduct studies in
other Ohio urban areas similar to the one conducted in Cleveland which
led to the complaint.
An important note to this issue: HAI recently presented their complaint
before a subcommittee of Cleveland City Council and has entered into
agreement with the city to conduct testing for insurance discrimination.
While the testimony did not present any formal study results or other
concrete evidence of biased insurance coverage, it was met with a
receptive audience in the subcommittee. The testing to be conducted by
HAI will most likely consist of calls to carriers and agents in Cuyahoga
County searching for discrepancies in pricing and coverage for what will
be presented as similar potential risks. As is always the case,
consistent procedures in quoting coverage is imperative for all agents
and carriers.
Comp
Corner Curbing Workers’ Compensation Fraud
When we think of fraud, what usually comes to mind first is that which
employees commit. The person who works for pay while at the same time
receiving disability payments is defrauding the system. So is the person
who feigns injury or who misrepresents the extent of injury and/or the
nature and extent of disability in order to receive payments from the
Bureau of Workers’ Compensation (BWC). Others besides workers can also
commit fraud. The lawyer who completes applications for benefits on behalf
of others without their knowledge or consent is committing fraud, as are
medical personnel who bill for services not rendered. Employers have been
known to forge BWC-issued certificates of coverage by altering the
information, deliberately misreport payroll in order to avoid the correct
premium obligation, or knowingly employ someone who is receiving temporary
total disability compensation. Aside from criminal prosecution, BWC can
fine the employer ten times the amount of premium that employers sought to
avoid by deceptive practices. As a business owner/operator, you can do
your part to curb fraud. Here are ten suggestions.
1. The first way to avoid fraud is simply to handle all record-keeping
properly. In the face of considerably higher premiums due to the
vanishing 75% dividends, there is greater temptation to be dishonest.
Set high standards and expect high standards.
2. Try to remain aware of matters affecting your business. If a
situation does not seem right, check it out further.
3. Carefully review job applicants’ references, work history and
background information. Gaps in employment, frequent job changes or some
other irregularities could clue you in to unscrupulous types whose
life’s work is filing fraudulent claims.
4. Educate your employees about the financial impact of your company’s
annual premiums. It is important for them to understand that you are the
one who ultimately bears the cost of workers’ compensation.
5. Identify safety problems through a regular program of safety
management and loss control efforts. Most fraudulent claims arise from
legitimate injuries but the fraudulent aspect gradually evolves over
time.
6. Address employee complaints about working conditions quickly and
thoroughly. Disgruntled employees are much more likely to file
fraudulent claims.
7. A word about “off-the-job” injury claims. Employees sometimes allege
workplace injuries that actually happened at home or someplace else.
Those without private medical insurance may attempt to have it “put on
workers’ comp.” A copy of the initial medical report from the emergency
room or urgent care facility could establish the exact circumstances
under which the incident really happened and when.
8. The BWC makes available a variety of fraud awareness posters, window
stickers, bumper stickers, payroll stuffers, etc. Display the BWC’s
fraud hotline number at your facility.
9. If you suspect fraud, report it by calling 1-800-OHIOBWC. In your
telephone interview with the BWC fraud investigator, be prepared to
detail what you know or suspect. As far as BWC is concerned, merely
suspecting fraud is sufficient for contacting them. All information can
be given confidentially.
10. Utilizing a qualified, private investigator may sometimes be in your
interest. By contracting privately for surveillance and/or other
investigative efforts, the out-of-pocket expense may be worth it,
especially if you are successful in stopping a claim in its tracks.
This article is provided courtesy of The Frank Gates Service Company,
the administrator of the Ohio Big “I” Workers’ Compensation Group Plan.
For more information on this article or on the group plan for your
agency or clients, please feel free to call Julie Younkin at Frank Gates
at 1-800-777-4283.
Associate Members
.
Agents Council for Technology
This Industry is on the Move
To Achieve Technology andWorkflow ImprovementBy Jeff Yates, ACT
Executive Director
I want to make two bold predictions. First, 2003 will mark the turning
point for significant improvements in the technology and workflows
available to independent agents. From this point forward, the
incremental improvements available to agents will continue to multiply
and build upon themselves.
My second, even bolder prediction: our industry’s technology
professionals and advocates will become our heroes for laying the
critical infrastructure that enables the Independent Agency System to
gain significant competitive advantages.
There is a lot of work, investment, and cooperation that must take place
for these predictions to come true, but the key point is that this
industry has begun to move on each of these fronts in a significant way.
I have been in the field a lot in recent months and have become very
encouraged by what I have seen.
Let’s start with the Applied, AMS, Doris, Ebix, and S.I.S. user group
meetings and presentations. At each, the vendor introduced new real-time
interfaces, primarily in the billing, claims, and policy inquiry area,
that generated unbridled enthusiasm among the agent attendees—and that’s
saying something at a technology meeting! The agents were excited
because they saw the industry starting to address the inefficiencies
they have been experiencing in having to deal with separate company
proprietary web sites.
It gets the agents’ attention when they can handle a client billing
inquiry directly from the agency management system in 15 seconds rather
than the average of 12 minutes that it has taken. Carriers, too, save
from these technology enhancements because fewer company employees are
needed to respond to agent and client phone calls.
There were positive stories all over the recent IVANS technology
conference as well. IVANS showcased a number of technology applications
which will help carriers of all sizes implement more efficient real time
interfaces with agents. I was encouraged by the standing room only crowd
of carrier representatives who wanted to learn more about how they could
use IVANS Transformation Station to interface with agents using Applied,
Doris, and AMS systems. In addition, several carriers are working with
Applied and AMS to join the initial adopters. Agents should check their
user group and vendor web sites to learn of the full scope of carriers
and transactions that are available for the agents to implement, because
that list is changing almost daily.
I was very pleased to learn from Applied and AMS agents about the
substantial ramp up of agent commitment to and use of the real-time
interfaces that have become available. Agent implementation of these new
interfaces remains critical if we are to encourage more carriers to come
on board and to add new real-time functions. Applied reports that the
number of agent real-time transactions using Transformation Station
increased 40% in March to 14,000. AMS Services launched its real-time
billing and claims inquiry functions on March 17 and has already signed
up 697 agencies which are initiating 900 inquiries a day! The agents
have started to respond in a big way.
The ACT Download Report was received positively at the recent IVANS
Conference, and the clear consensus of the group was that downloading
remains very important to the agents and improvements need to be made. I
am hopeful that the user groups will use the ACT report as a catalyst to
bring the carriers together with their vendor to address needed
refinements, particularly in the commercial lines area. IVANS also
announced a new capability for the carriers to facilitate agent access
to their downloads on a broadband basis rather than by dial up, which
will result in efficiencies for agents.
An industry panel at the IVANS conference addressed where we take these
recent innovations in the future to make the benefits more extensive for
our distribution system. There was a clear consensus that the carriers
and vendors must continue their efforts to implement the ACORD XML
standards because these will open up much broader opportunities to
communicate electronically in real-time, not only among agencies and
carriers, but with customers.
The panel discussed how we can use these new interfaces which solve
login, password, and web site navigation problems, to facilitate more
efficient access to additional carrier functions, even where a full
SEMCI implementation may not yet be feasible. A great example would be
to provide the agents with a bridge from the agency management system
directly to the company web site location to perform an endorsement. The
panel discussion also made clear that a number of companies need to take
the necessary steps now to position their backroom systems to be able to
perform endorsements with their agents electronically.
The carriers also expressed their frustration with having to perform
their unique company edits multiple times for different agency
management systems, which is another obstacle to the SEMCI interfaces
that agents would like to see. The vendors are in the process of
creating the capability of converting the edits built on their systems
to the industry standards which hopefully will remove this obstacle for
the carriers.
I was also very encouraged to see the continuing enhancements that
vendors are making in their agency systems so that agents can function
more efficiently. These improvements include permitting agents to tie
their e-mails and electronic documents to their client files more
seamlessly and providing integrated solutions to move data between the
agent’s customer web site and agency management system.
The emergence of new technologies and the infectious exuberance at
technology meetings are important, but they are not the primary reason
for my optimism for significant progress in the future. I am seeing
unprecedented cooperation among technology professionals and advocates
to make these improvements happen. I am seeing the agent user groups and
associations work together to an unprecedented degree through
organizations like ACT and AUGIE, and I am seeing carrier and vendor
experts lend their talents to those organizations to further progress. I
am seeing agency principals and CSRs focus on technology and workflow
improvements as an important means to build agency value. These agents
are willing to work with their vendors and carriers to pilot improved
interfaces and are increasingly pressing their vendors and carriers to
address current inefficiencies in agency systems and interfaces.
In short, I believe all of these technology professionals and
advocates—whether they represent agents, carriers, vendors, or industry
organizations— realize the critical role they play to assure the future
competitive position of the Independent Agency System. Having gotten to
know this group of individuals better and better, I am convinced they
will keep this larger goal in mind and will keep a continuing flow of
technology and workflow improvements coming for our distribution system.
If the technology professionals perform as I think they will, my second
prediction will come true. These experts and advocates will become
widely regarded as the heroes of the Independent Agency System because
they will have provided the efficiencies necessary for independent
agents to concentrate on their primary role of sales and valued customer
service, and they will have reduced carrier expenses at the same time.
Jeff Yates is executive director of the Agents Council for Technology,
which is affiliated with the IIABA. Yates can be reached at jeff.yates@iiaba.net.
This article reflects the opinions of the author and should not be
construed as an official statement of ACT.
E&O: Why Risk
Management?
We live in a consumer-oriented society, and insurance consumers
are increasingly seeking to hold insurance agents as guarantors of the
transaction. Moreover, most juries have little, if any, tolerance for
agent error or misconduct.
As an insurance professional, you can minimize the risk of a potential
claim by developing a risk management program that minimizes the
possibility of an E&O claim being made against you, and that maximizes the
potential that, if sued, you will prevail.
In order to be successful, any risk management program must provide for
consistency in office procedures, knowledge and training of employees,
effective file documentation and efficient customer service.
Consistency: Everyone in your agency should handle all transactions in a
similar manner, according to established procedures, which will help
minimize your exposure to claims. Underlying most E&O losses classified as
“inadequate coverage and misrepresentation” is usually a lack of
consistent internal procedures.
Knowledge and Training: The best way for you to assist clients and avoid
losses is to know about changes in regulations and to understand coverage
and exposures. It is also important to know your customer’s business, in
order to reduce claims and to help plan for future exposures.
Take advantage of as many educational programs as possible. Changes in
regulations and technology affect your insureds’ exposures. And
identifying new insurable exposures creates new business opportunities.
Documentation: Memories fade over time. In a credibility dispute between
you and another party, your position will be stronger if you have a
written record regarding the transaction. Document, document, document:
most claims are won or lost on good or bad documentation.
Customer Service: Every insurance transaction is entered into to satisfy a
need. From taking the initial application through renewal or cancellation,
you work hard to produce happy, satisfied clients. If each transaction is
a positive one for the parties involved, there is less chance for
litigation over problems that may later be discovered. To minimize the
potential for claims, you need a system for doing the job right the first
time, and a plan for dealing with things that go wrong.
Consumers have become wary of sales practices, particularly in view of
headlines in major newspapers and televisions programs reporting on
unscrupulous insurance practices. This can account for a sharp decline in
consumer confidence in the insurance industry. To combat this lack of
consumer confidence, you must create a corporate culture in your agency in
which client needs are put first.
A risk management program can yield tangible benefits: satisfied
customers, more time for business, an enhanced reputation and increased
referrals. Most importantly, the biggest benefit of a risk management
program is never being sued (and having to deal with plaintiffs’
attorneys).
The information outline in this article is a guide to policies or
procedures that are considered good minimal business practices and is
provided courtesy of Westport Insurance Corp., the IIAO provider of Errors
& Omissions coverage for its members. It does not include all potential
controls and is not intended to warrant that claims will not be incurred
if guideline elements are followed. This information is based upon general
risk control suggested practices and is not intended to be, or represented
as legal advice.
Industry Insights
OHIO BIG
“I” SUPPORTS LATEST CIVIL JUSTICE LEGISLATION
The Independent Insurance Agents of Ohio has joined with other industry
and business groups in backing the latest effort to bring balance and
fairness to Ohio’s civil justice system.
Senate Bill 80, sponsored by Senator Steve Stivers (R-Columbus), was
recently introduced with support from Governor Taft, Ohio Senate President
Doug White (R-Manchester), and Ohio business leaders. Seeking to strike a
balance of protecting the rights of Ohioans harmed by the negligence of
others while also protecting the rights of defendants targeted in a
burgeoning lawsuit industry, Senate Bill 80 contains provisions to:
¥ Establish a cap for non-economic damages in all tort actions. Current
law provides a two-tier system for medical malpractice claims. For
non-catastrophic injuries there is a cap of $350,000 per plaintiff or
$500,000 per occurrence. For catastrophic injuries, such as loss of limb,
the cap is $500,000 per plaintiff or $1 million per occurrence. The
proposed legislation extends this cap to all tort actions.
¥ Placing limits on punitive damages in all tort actions. Current law
provides no limitation on the amount of punitive damages recovered by a
plaintiff, nor does it distinguish between small and large businesses. The
proposed legislation would limit the punitive damages recoverable to the
amount of economic damages or $100,000, whichever is greater for a large
business, and no more than economic damages or $100,000, whichever is
lesser for a small business. A small business is defined as having 500 or
fewer employees.
¥ Eliminating the Òcollateral sourceÓ rule. Existing law allows plaintiffs
to receive full compensation for the same economic loss from multiple
sources such as medical insurance and workers’ compensation — but
prohibits defendants from informing the jury of these “collateral
sources.” The proposed legislation would allow evidence of “collateral
source” payments to be admitted at trial and considered by the jury in
determining damage awards.
¥ Establishing a Òstatute of reposeÓ for products and construction.
Current law allows liability lawsuits to be filed against manufacturers
for products that are outdated or that may have been misused or improperly
maintained over an indefinite period of time. The proposed legislation
establishes a ten-year time period within which product liability and
construction-related lawsuits may be filed.
¥ Creating an attorney fee provision in all tort actions. Existing law
requires plaintiff’s attorney fees to be submitted to probate court for
approval when those fees exceed the non-economic damage caps in medical
malpractice cases. The proposed legislation establishes a sliding scale
for contingency fees.
¥ Establishing more stringent standards to regulate frivolous conduct.
Under current law, an award by the court may be made only upon the motion
of a party to the civil action or appeal. The proposed legislation permits
judges to impose penalties for frivolous conduct on their own initiative.
Additionally, Senate Bill 80 contains several provisions regarding
asbestos-related claims.
Hearings are being held on Senate Bill 80 and have attracted the
opposition of the trial bar, which has been airing television
advertisements against the proposal. Hearings are expected to continue
through the summer.
ISO ESTIMATES FIRST QUARTER CAT LOSSES AT $1.46 BILLION
P&C insurers are expected to pay policyholders an estimated $1.46 billion
for insured property-loss claims from five catastrophes in the first
quarter — the fifth-highest first quarter in losses since 1994 — according
to preliminary estimates by Insurance Services Offices, Inc.’s (ISO)
Property Claim Services (PCS) unit.
This compares with insured losses of $615 million in first-quarter 2002
and $680 million in first-quarter 2001. PCS estimates insurers will
receive more than 345,000 claims from homeowners and businesses for
first-quarter losses — the fourth lowest in claims among first quarters
since 1998. The five events in the quarter affected 25 states. Three were
winter storms that blanketed 15 states, causing $1.1 billion in insured
property damage. The other two were wind and windstorm events, which
together racked up $365 million in insured losses. At $315 million,
Colorado sustained the highest insured loss in the quarter from a
mid-March winter storm, followed by Maryland at $165 million and New
Jersey at $130 million, while both New York and Pennsylvania each
registered $105 million in property damage.
ISO defines a catastrophe as an event that causes $25 million or more in
insured property losses and affects a significant number of
property/casualty policyholders and insurers. Estimates represent
anticipated insured loss on an industry wide basis arising from
catastrophes, reflecting the total net insurance payment for personal and
commercial property lines of insurance covering fixed property, personal
property, vehicles, boats, related property items, business interruption
and additional living expenses. The estimates exclude loss-adjustment
expenses.
The following table summarizes first-quarter loss and frequency of events:
First Quarter Number
Year Loss Amount of Events
1994 $14.5 billion 8
1995 $ 1.1 billion 6
1996 $ 2.6 billion 11
1997 $860 million 8
1998 $ 1.0 billion 10
1999 $ 1.9 billion 5
2000 $ 1.9 billion 7
2001 $680 million 3
McMAHON MOLD CASE SETTLED
What has been probably the highest profile case involving a mold insurance
claim has been settled, as former Tonight Show sidekick Ed McMahon agreed
to accept $230,000 to settle a claim on his Beverly Hills home. McMahon
alleged toxic mold sickened him and his wife, killed his pet and made the
home unlivable. He originally sued American Equity Insurance Co., two
insurance adjusters and several cleanup contractors for $20 million last
year, claiming his 8,000-square-foot mansion was ruined by a ruptured
plumbing pipe and subsequent mold that was allegedly not dealt with
properly or disclosed to him and his family.
SARS COVERAGE EXCLUDEDIN EVENT POLICIES
Insurance companies are excluding SARS (Severe Acute Respiratory Syndrome)
coverage from policies written to insure conventions, sporting events and
trade shows world wide. The exclusions have been implemented globally and
apply primarily to event-cancellation coverage.
Some insurers had already scaled back or completely quit writing such
policies with the start of the war in Iraq. When these companies re-enter
this market, they are expected to also now include the SARS exclusion.
SARS has not been impacting the “business interruption” piece of standard
commercial insurance policies as of yet, according to various carriers,
since policyholders can only call on those policies if losses stem from
some sort of physical damage.
SURVEY REVEALS ID THEFT WORRIES, HO UNDERINSURANCE
A survey for Fireman’s Fund Insurance Company shows that 90 percent of
homeowners fear identity theft, but few know if it is covered under their
policy. The same survey also revealed that homeowners are concerned about
being sued but often are substantially underinsured.
In the survey results, 97 percent of the homeowners surveyed had heard of
identity theft and nearly 25 percent knew an identity theft victim.
However, 61 percent were unsure whether their HO policy provided coverage
for identity theft and only 11 percent believed that it does. According to
recent government statistics, identity theft jumped 72 percent between
2001 and 2002, from 220,000 incidents to 380,000.
Ninety-four percent of the respondents to the Fireman’s Fund survey also
said there are more lawsuits today than 10 years ago, while 86 percent
said high monetary judgments in personal lawsuits have been excessive, and
67 percent believe they may be personally sued at some point.
However, less than 25 percent had personal umbrella insurance and 44
percent of those who did had a limit of $1 million. Also, while 80 percent
of the respondents said their home market value has increased in the last
five years, only 63 percent said they have increased their insurance
coverage to account for the rise. The main reasons given for not raising
the limits were lack of time to do so, wanting to hold down premiums, and
simple failure to realize they needed to modify the limits.
MEDICAL MALPRACTICEINSURANCE CONTINUES TO GENERATE INTENSE INTEREST
In May, the Ohio Department of Insurance released a mandated report on
medical malpractice insurance and held the first meeting of the Ohio
Medical Malpractice Commission, both of which were part of Senate 281,
enacted last year to address concerns over decreasing availability and
rising costs of such coverage.
While the commission will continue to meet to investigate problems
associated with medical malpractice insurance and to review the impact of
SB281, the report, released through ODI and conducted by Pinnacle
Actuarial Resources, Inc., delivered initial findings with several
recommendations. Components of the report included:
If Ohio creates a patient compensation fund to help curb soaring med mal
costs, health care providers should foot the bill. The report found fault
with the potential patient compensation fund (PCF) suggested in SB281
because it would not cover economic damages or be comparable to current
coverages. It was recommended that any such PCF, to cover excess jury
awards in medical malpractice lawsuits, be voluntary and be open to all
health care providers, so that coverage is available when market forces
have not been able to provide sufficient availability or affordability.
It was also suggested to require all health care providers to secure
insurance coverage of at least $250,000 per occurrence to be eligible for
any PCF coverage and that coverage should begin at $250,000 per occurrence
through the PCF and provide unlimited medical benefits above that amount
up to the recently enacted caps for non-economic damages.
The report findings also backed limiting attorney contingency fees. While
recognizing that such a limitation may not directly impact the cost of med
mal coverage, the report did state that it would put more money into the
pockets of injured persons. A sliding scale was proposed for attorney
contingency fees: 40 percent on the first $50,000 of damages awarded, 33
percent on the next $50,000, 25 percent on the next $500,000 and 15
percent of any amount exceeding $600,000.
Additional recommendations included establishment of a medical review
board to make non-binding determinations on the merits of a claim before
it goes to trial, eliminating some costs from the system; and creation of
an expanded data collection system to monitor instances of medical
malpractice.
The establishment of the medical review board has already received a push
from the Ohio State Medical Association (OSMA), which has indicated it
will push legislation to do so. The OSMA said it will pattern such a
commission off the efforts of other states that have done so as part of
their efforts in combating problems with med mal coverage and that the
legislation will generally follow the recommendations of the Ohio Medical
Malpractice Commission report.
Separately, legislation has been introduced to provide limited liability
protections to doctors who administer voluntary care at their offices,
clinics and outpatient facilities. The measure expands current law
protecting doctors who provide care at an emergency scene or who obtain
signed patient consent to be treated at registered clinics.
Also, the Cleveland Clinic recently lost a bid before the Ohio Supreme
Court for a new trial in a medical malpractice case involving one of its
doctors who was not allowed to testify in his own behalf as an expert
witness because he failed to file a written report as required by Cuyahoga
County court rules.
OAPAC Contributors 2002 .
Department Doings
DENNIS STAPLETON JOINS ODITO HEAD UP LIFE AND HEALTH OFFICE
Big “I” member and former Ohio House Insurance Committee Chair Dennis
Stapleton recently joined the Ohio Department of Insurance as Assistant
Director of the Office of Life and Health Services. In addition to serving
in the House for eight years representing the 88th District, encompassing
Adams, Fayette, Highland and Pike counties, Mr. Stapleton was president of
the Stapleton-Pool Insurance Agency in Washington Court House, which
offered P&C, L&H and annuity products. He also has worked as an agency
manager for Travelers Insurance Company and as an asset manager and
investment consultant for Fifth Third Securities and graduated Magna Cum
Laude from the University of Dayton.
ODI REDESIGNS LOGO AND WEBSITE
If you have visited the Ohio Department of Insurance Website recently,
you will notice two significant changes: the look of the site and the
department’s official logo have undergone facelifts. A quick-link
structure is based in three core sections – Consumer Services, Company
Services, and Agent and Agency Services. The new system is designed to
provide easier access to the most popular pages. The department’s
Website averages nearly 19,000 visitors per week and has won numerous
awards for its accessibility and design. To visit the Website, go to
www.ohioinsur-ance.gov. The new department logo casts the letters ODI
over a geographical design of Ohio with a star dotting the letter “I”
and was designed to convey the department’s “progressive direction.”
BAIL BOND AGENT LICENSE REVOKED
The Property & Casualty license of Cleveland-based bail bond agent
Donnell L. Mitchell was revoked by the Ohio Department of Insurance for
violating agent licensing law. In the order of revocation, several
instances of criminal menacing were cited as well as a determination
that he “was not a person of high character and integrity as required by
Ohio law.” Mitchell was convicted of one misdemeanor count of aggravated
menacing and has had two other such complaints filed against him.
Records also showed that he failed to pay his parent company for bonds
issued in the company’s name. Mitchell did not show for an
administrative hearing on his suitability to hold an agent’s license.
ODI ORDERS MED MAL INSURERTO CEASE UNLICENSED ACTIVITY
First Actual American Insurance Company (FAAIC) was ordered to cease and
desist illegal operation in Ohio by the Ohio Department of Insurance in
April. The order alleges the Oregon-based insurer, which is not licensed
in Ohio, of offering medical malpractice insurance to one or more Ohio
doctors through an unsolicited fax offering a free quote and substantial
savings for medical malpractice insurance. FAAIC has been subject to
similar actions in Mississippi, North Dakota, Oregon and Georgia.
HEALTH PLAN SHUT DOWN
TRG Marketing, LLC, also known as TRG Administration or TRG Health Plan,
was ordered shut down by the Ohio Department of Insurance, the fourth
such order emanating from the Department’s Illegal Health Insurance
Operations (IHIO) Task Force. The Indiana-based TRG Marketing is accused
of collecting more than $10,000 in premiums from three Ohio individuals
and failing to pay nearly $22,000 in medical bills without authorization
to transact business in Ohio as a health insurance company or as a
multiple employer welfare arrangement (MEWA’s). Disciplinary action is
also being pursued against Ohio agents who marketed and sold TRG
products.
FLOOD AND STORM TIPS OFFERED BY ODI
In light of recent storms and the prospects of more from Ohio’s spring
and summer seasons, the Ohio Department of Insurance recently offered
consumers tips on flood insurance and severe weather safety information.
Detailing the National Flood Insurance Program (NFIP), the department
urged Ohioans to contact their agent with questions regarding flood
insurance. Noting that Ohio averages 16 tornadoes a year and has
experienced 47 since 2000, the department also provided Ohio insurance
consumers tips on preparing for severe weather before and after a storm
hits, including in relation to insurance coverage. More information on
these efforts is available at the Ohio Department of Insurance Website
at www.ohioinsurance.gov.
ODI ORDERS UNLICENSED WATERCRAFT INSURERS TO STOP WRITING OHIO
BUSINESS
The Ohio Department of Insurance ordered International Water Marine
Safety Foundation and North American Marine General Insurance Company to
stop writing insurance policies in Ohio. The P/C insurers are not
licensed in Ohio and issued at least two watercraft policies through an
Ohio-licensed agent. The agent was solicited through a fax advertising
boat insurance quotes and sold the policies with knowing the companies
were not licensed in Ohio.
Association and Legislative News Ohio Big “I” Holds
Annual District Meetings; Address SEMCI, Credit Scoring and Civil Rights,
and Protection of Agent Commissions in Liquidations.
The Independent Insurance Agents of Ohio recently concluded annual
district meetings around the state. Hundreds of members joined association
staff and leadership for updates on the state of the association as well
as continuing education approved discussion of three of the hottest topics
in the industry:
• Protection of Agent Commissions in Carrier Liquidations: Recent
insurance company liquidations have seen the Ohio Department of Insurance,
acting as the liquidator, attempt to recover commissions paid to agents by
the insolvent carrier. The Ohio Big “I” has joined a court action to stop
these actions and protect the lawfully earned agent commissions.
• Credit Scoring and Civil Rights: Debate on the usage of credit scoring
has now expanded from the Ohio Legislature and Department of Insurance to
the Ohio Civil Rights Commission with a complaint filed by a Cleveland
housing advocacy group alleging insurance credit scoring is discriminatory
to minorities.
• Single Entry Multiple Company Interface (SEMCI): A critical stage has
been reached in the continuing quest for one electronic system to handle
different insurance carrier services by agents, as new technology emerges
and is being tested by various companies. As the companies continue to
implement software and other upgrades to expedite and speed up electronic
transactions, the time has come for agents to also embrace these emerging
industry tools.
At the meetings, two new trustees were elected to serve terms beginning in
November. Elected as the new District 2 Trustee was Mark Hunter of the
Hunter-Williams Agency in Portsmouth and District 7 selected Dave Myer of
Dawson Insurance, Inc. of Rocky River.
Ohio Big “I” Takes Over Administrationof RLI Umbrella and In-home Business
Products
For years, Ohio Big “I” members have had access to the national program
offering RLI’s Personal Umbrella Policy (PUP) and In-home Business Policy
(IBP). Now, accessing these products will be simpler as the state
association takes over administration of the program. Starting July 1 of
this year, the Ohio Big “I” will administer the RLI program.
The Personal Umbrella Policy provides up to $5 million of coverage with
broad underwriting guidelines for easy qualification for most risks and
features competitive rates and a self-underwriting application that can be
rated in your office and does not require the underlying risk. The In-home
Business Policy is designed for small businesses operated from a person’s
home, which are often excluded under many homeowners’ policies.
For more information on these products, log onto www.ohiobigi.com; more
information will also be sent to members on the administrative
switch-over.
IIABA Asks Supreme Court to Resolve Insurance Consumer Protection Law
Conflict
The National Big “I” has asked the U.S. Supreme Court to hear an appeal of
a decision by the Fourth Circuit Court of Appeals ruling that West
Virginia state insurance consumer protection laws are pre-empted by
regulatory interpretation of federal statutes. The IIABA made the request
for the case review because there are conflicting decisions by appeals
courts and the future of functional regulation is in question. The request
cited a conflicting opinion by the First Circuit in a similar case,
resulting in a “fundamental inequity” as well as concerns that “this
conflict also threatens to disrupt in several significant respects the
bedrock principle of functional regulation on which the Gramm-Leach-Bliley
Act is grounded.”
MARK YOUR CALENDARSFOR THESE IMPORTANT DATES
September 26 is the 2003 Ohio Big “I” Strategic Leadership Exchange,
featuring the association and company panel and other timely discussions
of trends and issues facing our industry. It is a one-day event again
being held in Columbus.
September 21-24 is the 2003 Info-Xchange, the national conference, and is
being held in Las Vegas this year.
The 2004 national InfoXchange will be held in Orlando and in 2005 New York
City. Beginning in 2006, the InfoXchange and National Legislative
Conference will be held together in Washington, D.C. The two
industry-leading events will continue to be held together from 2006
forward, providing agents and other industry leaders to capitalize on the
successes of each forum in a single setting.
OHIO BIG”I” CONTINUUM PROGRAM BRINGS BACK INDUSTRY-LEADING “FAIR PLAN”
SEMINARS THIS FALL
With the hardening of the insurance market, many agents are for the first
time finding themselves using the Ohio FAIR Plan extensively. If you need
a refresher on accessing and using this market, we have the course for you
– brought to you by the Ohio Big “I” in conjunction with the Ohio FAIR
Plan, this CE-approved course takes attendees through the placement of
risks and the available coverages. The courses begin at 1 pm in the
respective cities:
September 23, Zanesville
September 24, Chillicothe
September 25, Miamisburg.
Registration is available on-line at www.ohiobigi.com or by calling
1-800-282-4424.
IIABA POLITICAL PROWRESSHIGHLIGHTED BY ROUGH NOTES
In a recent Public Policy Analysis and Opinion article, Rough Notes
magazine detailed the effective efforts of the National Big “I” on Capitol
Hill over the years, highlighting the unique history of the association in
lining up the country’s top leaders yearly to address the National
Legislative Conference. To quote from the story, “Being asked to address
the IIABA’s Annual National Legislative Conference is a rite of passage
into the senior political leadership.” The article also noted that the
National Big “I” has a long history of effectively working with both
Democratic and Republican leaders, listing an impressive political
cross-section of past and current public officials who have addressed the
legislative conference and helped protect the issues of IIABA members. |
