May 2013 - Independent Insurance Agent

A MONTHLY PUBLICATION FOR THE MEMBERS OF THE INDEPENDENT INSURANCE AGENTS OF INDIANA
May 2013
IIAI Hosts NAAIA Annual Meeting
The Independent Insurance Agents of Indiana hosted the annual meeting of the National
African-American Insurance Association, Indianapolis Chapter, on Thursday, March 21
at the Big I Headquarters in Indianapolis. The Indiana Big I and NAAIA have formed a
strong partnership over the last several years under the guidance and leadership of Henry
Pippins from Grain Dealers Mutual.
Commercial Lines
Feature
ISO Commercial General
Liability Filing - Part Three
Page 7
Property-casualty
Feature
Study Reveals Growth
in Property-Casualty
Insurance Market
Page 12
Legislative Feature
Affordable Care Act
Update
Page 16
NAAIA Indianapolis was extremely pleased to have the founder of NAAIA National, Jerald
L. Tillman, LUTCF attend and participate in its meeting and install its officers for 2013.
Tillman had high praise for the Indianapolis chapter.
“NAAIA National is so proud of our 13th newest chapter, NAAIA Indianapolis, which is
our fastest growing chapter in the United States,” said Tillman. “Under the leadership of
Henry Pippins and the current board members, they got off to a tremendous start that has
impacted the local community with a partnership with the Indiana Big I, local colleges, and
several community organizations.”
“We measure success of our chapters based on membership growth, professional
development, and community service. They have graded A+ in all three categories,”
continued Tillman.
The officers for NAAIA Indianapolis are:
• Scott Davis, President
• Valentine Jideonwo, Vice President
• Gloria Ellis, Secretary
• Deanna Roberts, Treasurer
2013 NAAIA
Indianapolis
Officers - (l-r)
Scott Davis,
Gloria Ellis,
Deanna
Roberts, and
Valentine
Jideonwo
Scott Davis, President and CEO of Williams and Associates Insurance in Indianapolis, was
sworn in as the president of NAAIA Indiana for 2013. “As president of NAAIA of Indiana,
it is with honor, thanks and humility that we owe thanks to our founder/visionary Jerald
Tillman. More than a decade ago, he realized the need and shared benefit of serving with
like-minded professionals, who desire to strengthen the insurance profession through
community service, post-secondary educational assistance for prospective African
American insurance majors, community outreach and NAAIA membership professional
development,” Said Davis.
“I look forward to building on the many successes our local chapter has made through
a goal of increased participation and support of numerous events. These include our
Scholarship Fund, Annual Bowling for Scholars Event, Annual Golf Outing, Annual Gala,
and Christmas Adopt-a-Family Initiative. We will continue to support these ventures,
while maintaining focus on the core needs of our membership through partnering with
local organizations for educational and professional development,” he continued.
“I also want to thank the Indiana Big I for your unwavering support of our organization, as
we strive to build a better industry for now and generations to come,” concluded Davis.
For more information on becoming a member of or supporting NAAIA, please go to their
website at www.naaia.org.
(l) Jerald L. Tillman, LUTCF, Founder of HAAIA and Henry Pippins

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CONTENTS
A Monthly Publication for the Members of the
Independent Insurance Agents of Indiana
The IIAI staff has direct phone extensions,
which are listed below, when you dial into
either of the association’s numbers:
(800)438-4424 or (317)824-3780.
NAME
EXTENSION
Suzie Dodds 206
dodds@bigi.org
Steve Duff, CAE 208
duff@bigi.org
Carol Dulle 216
dulle@bigi.org
Linda Gray 213
gray@bigi.org
Kelly Lonberger 214
lonberger@bigi.org
Gwendolyn Mason 210
mason@bigi.org
Ted Mast 209
mast@bigi.org
Tracey Moore 201
tmoore@bigi.org
Nicole Murrell 205
murrell@bigi.org
Jen Rochester 211
rochester@bigi.org
Steve Urban 201
urban@bigi.org
Carol Watson 203
watson@bigi.org
FOCUS is a monthly publication of the
Independent Agents Services Corp., a
subsidiary of the Independent Agents
of Indiana, Inc.
Publisher Steve Duff
Editor Carol LeMay Watson
Printing, Layout & Design
Elite Printing • 317-257-2744
For advertising information, questions
or comments please call:
(317)824-3780 or (800)438-4424
Fax: (317)824-3786
www.bigi.org
Email: bigiinfo@bigi.org
Cover Story
1 IIAI Hosts NAAIA Annual Meeting
IIAI feature
5 Have You Contributed to IPAC Yet?
COmmercial LInes feature
7 ISO’s Commercial General Liability Filing –
Part Three – New Endorsements
8 ISO Commercial Property Changes –
Part 4 – New Endorsements
property-Casualty Feature
12 Study Reveals Growth in Property-Casualty
Insurance Market
property Casualty trends Feature
15 NOAA Predicts Greater Flood Risk This Spring
legislative feature
16 Affordable Care Act Update: Fees, and Taxes, and
Higher Health Insurance Premiums: Oh My!
business income feature
21 Business Income Coverage for NonProfits
cap feature
22 Agency 2020 to Provide Vision for Agency of the Future
Agency Management feature
23 Phenom or Fraud?
forms & substance feature
24 Delivery Exclusions, Landscapers and Valet Parking
business Auto/Garagekeepers feature
25 Care, Custody or Control and Separation of Insureds
COmmercial LInes/CGL feature
27 Why the BAP and CGL Should Be Written by the Same Insurer
personal LInes feature
27 The REAL Value of a Renter’s Policy (and EXPERT Advice)
Big “I” Info/IIAI News
4 Employee Profile
4 YAC Promo
18 2012 IIAI Sponsors
19 Education Calendar
19 In Memory
32 Amerisafe Inc.
31 Burns & Wilcox
11 & 20 EMC Insurance
22 Geneva Insurance Co.
13 HCC Public Risk
27 IASC Premium Finance
14 Indiana Farmers Mutual
ADVERTISERS
25 Indiana Municipal Ins.
14 J.M. Wilson Corp.
2 Keystone Insurers Group
20 Pekin Insurance
26 Secura Insurance
6 Society Insurance
10 West Bend Mutual

IIAI News
Who is our newest employee?
You might recognize her.
IIAI is proud to introduce Jen Rochester as our new Marketing
Manager. Jen began her insurance career over a decade ago in her
home state of Wisconsin and has been actively involved with IIAI since
moving to Indiana six years ago.
You might recognize her as a fixture of the Young
Agents Committee, a part of the IIAI convention
committee and a regular presence at industry events
throughout the year. Please join us in welcoming Jen!
Jen Rochester
rochester@bigi.org
317.228.3029
4 www.bigi.org

Have You Contributed to IPAC Yet?
IIAI Feature
Beginning with the April 2013 issue of
Focus, the IIAI began publishing regular
updates of contributors to our state
political action committee, IPAC. You
will note in the accompanying list, an
additional six corporate and individuals
contributed to IPAC during the past
month (the new contributors are listed
at the end of each list). To date, IIAI
members have contributed $4,870 in
personal and corporate contributions to
IPAC. This is much appreciated and a
good start to the year, but frankly, not
enough. If you have not contributed, we
need you to do so today!
IPAC supports state legislative
candidates who share the same beliefs
and philosophies as our members,
regardless of party. If you have not
contributed to IPAC, the IIAI urges you
and members of your staff to go to
our website, www.bigi.org, print out a
form and send it in. IPAC can receive
corporate and/or personal contributions
-- and no amount is too small. In fact, if
we could get just $50 from each of our
member agencies per year, we would
have well in excess of $50,000 per two
year election cycle to contribute. And,
this figure is exclusive of personal
contributions.
The IIAI and our industry need your help
-- contribute to IPAC today! And, make
sure your name and/or agency’s name is
on this list next month.
2013 IPAC Contributors
(through April 11, 2013)
Corporate Contributors
Dale State Agency Inc.
Edward Matthews Insurance Assoc., LLC
Hammond National Company
Hoosier Associates, Inc.
Howard Insurance, Inc
Insurance Center
Jackson-McCormick Ins & Risk
Management
James Allen Ins Brokers, LTD
McGowan Insurance Group, Inc.
Mettler Agency Inc.
Pinnacle Insurance Group of Indiana, Inc.
Poe & Associates, Inc.
RMD Patti Ins. & Financial Svcs.
Tatem & Associates
New Corporate Contributors --
March 20 through April 11
Alexander Insurance Agency
Haywood and Fleming Associates
ISU Insurance & Investment Group
Kervan Insurance Agency
Individual Contributors
Anderson, William A.
Anderson Insurance & Wealth Mgmt Inc
Anton, Jr., Michael R.
Anton Insurance Agency, Inc.
Duff, Stephen
IIAI
Dulle, Carol
IIAI
Easley, Gregory A.
RMD Patti Ins. & Financial Svcs.
Eovaldi, Debra
Old National Insurance
Gard, Roxanne
Rothschild Agency
George, David W.
George Insurance Group
Gescheidler, Daniel
Hammond National Company
Hamstra, Brooke D.
Wetzel Insurance Agency
Jackson, S. Todd
Jackson-McCormick Ins & Risk Mgmt
McGovern, Thomas J.
Old National Insurance - Mishawaka
Patton, Barbara L.
Anton Insurance Agency, Inc.
Schoen, James
Hoosier Associates, Inc.
Schultheis, Kenan L.
Schultheis Insurance Agency Inc.
Sroufek, Kerry M.
Anton Insurance Agency, Inc.
Uber, Bonnie
MJ Insurance, Inc.
New Individual Contributors --
March 20 through April 11
Munoz, William
Silcox Insurance Services
Wolcott, Vickie
M.J. Schuetz Insurance Services
Indiana Agent
and Company
Marketplace
Mark your calendars
now for THE event for
independent insurance
agents in Indiana!
November
4-6, 2013
The Westin Hotel
Downtown Indianapolis
2013
Annual
Convention
For more information
contact IIAI at
(317) 824-3780 or go to
www.bigi.org
www.bigi.org
5

Commercial Lines Feature
© 2013 Society Insurance
No waiting period.
Small detail. Big difference.
Some insurance companies say your customer’s power has to be out for at least 72 hours before they’ll
be reimbursed for loss of business. But we both know a business starts losing money the second it loses
power. That’s why our coverage kicks in immediately. If you agree that details like these can make a big
difference, give us a call at 888-5-SOCIETY or visit societyinsurance.com.
6 www.bigi.org

Commercial Lines Feature
ISO’s Commercial General Liability Filing –
Part Three – New Endorsements
by Christopher J. Boggs, CPCU, ARM, ALCM
Insurance Services Office’s (ISO’s) four
major filings in commercial property,
business auto, businessowners
coverage, and commercial general
liability (CGL) make 2013 a big year for
insurance professionals. These articles
focus on the changes that begin taking
effect this year in the commercial general
liability forms and endorsements. (View
Part One and Part Two)
Newly Introduced Endorsements
Primary and Noncontributory – Other
Insurance Condition (CG 20 01).
This is a new optional endorsement
introduced in response to contractual
wording found in many construction
contracts requiring coverage extended
to the additional insured be provided
on a “primary and noncontributory”
basis. This endorsement alters
the Other Insurance Condition to
specifically state that coverage
provided to an additional insured
is, in fact, provided on a “primary
and noncontributory” basis. This
endorsement applies when:
• The additional insured is a named
insured on another policy; AND
• A written contract or agreement
requires the named insured’s policy
to be primary and to not seek
contribution from other insurance
available to the additional insured.
The endorsement applies to the CGL
only, not any umbrella that may be
attached. Whether and how much of an
www.bigi.org
additional premium applies is subject to
the insurance carrier.
Editorial comment: ISO states that this
does not impact coverage. I disagree.
There will be a later article exploring
the primary and noncontributory
requirement.
Additional Insured – Owners, Lessees
or Contractors – Automatic Status
for Other Parties When Required
in Written Construction Agreement
(CG 20 38). For use with the CGL, this
endorsement allows additional insured
status to be extended to an upper tier
party as required by a contract, but who
may not be a direct party to the contract.
For instance, the contract between
the general contractor and a lower-tier
subcontractor may require the sub to
extend additional insured-level coverage
to the property owner (who is not a party
to the contract between the GC and the
sub). This endorsement would allow the
extension of additional insured status
to the owner without the need for a
specific listing. An additional premium
applies to this endorsement and varies
by company.
Total Pollution Exclusion for
Designated Products or Work – CG
21 99. Used with either of the Products/
Completed Operations Coverage Parts
(CG 00 37 or CG 00 38), ISO classifies
this endorsement as an “additional
underwriting tool” for insurance carriers.
The endorsement does not replace the
optional Total Pollution Exclusion – CG
21 98, it can
be used in
place of the
CG 21 98. The
key difference
between the CG
21 98 and the
new CG 21 99 is
that the CG 21
99 applies to a
pollution event
(as defined in
the form) from a
specific product
or work making
this exclusion
narrower than
the CG 21 98
which applies
to any and all
pollution event (in effect giving broader
coverage).
Liquor Liability – Bring Your Own
Alcohol Establishments – CG 24 06.
In the first section of this article the
revised CG 21 50 and CG 21 51 were
introduced and discussed. ISO intends
this new endorsement, CG 24 06, to be
used as an attachment to the either of
the Liquor Liability Coverage Forms (CG
00 33 or CG 00 34) to specifically extend
coverage to Bring Your Own (BYO)
establishments. Remember, coverage
for these types of establishments is now
included in the base CGL wording.
Amendment of Personal and
Advertising Injury Definition – CG 24
13. This endorsement removes coverage
for “oral or written publication, in any
manner, of material that violates a
person’s right of privacy,” from the list
of covered offenses in Coverage B –
Personal and Advertising Injury (it does
not affect Coverage A). ISO couches
this as an additional underwriting tool.
Violation of a person’s right of privacy
may include, for example, the use of a
picture or likeness without permission.
This is a reduction in coverage when
used by the underwriter.
Designated Location(s) Aggregate
Limit – CG 25 14. This endorsement is
intended for use with the Liquor Liability
Coverage Part (CG 00 33 or CG 00 34).
The current Designated Location(s)
General Aggregate Limit endorsement
(CG 25 04) is used for and applicable
to the CGL only. The purpose of this
endorsement (just like the CG 25 04)
is to allow the aggregate limit to apply
separately to each location where liquor
is served. However, losses that cannot
be attributed to a specific location are
subject to the general aggregate.
As stated, a later article will address the
“primary and noncontributory” requirement
commonly found in construction contracts.
Following that, we return to highlighting the
various form and endorsement changes
ISO has made to the commercial auto
coverage and the BOP.
Christopher Boggs is the director of
education for the Insurance Journal
Academy,
7

Commercial Lines Feature
ISO Commercial Property Changes –
Part 4 – New Endorsements
by Christopher J. Boggs, CPCU, ARM, ALCM
The commercial property changes
presented in ISO’s filing begin taking
effect on April 1, 2013 (effective dates
differ by state). This presentation of the
filing is split into four parts; parts one
and two discuss changes to various
policy forms. Part’s three and four of this
article introduce and discuss changes
being made to various endorsements.
Thirty-two endorsements are altered
by or introduced in ISO’s upcoming
commercial property filing. Some
changes are made to assure the specific
endorsement dovetails with changes in
a coverage form (see previous articles);
other endorsements alter coverage
grants; and some are new (and very
important).
New Endorsements
Deductibles by Location – CP 03 29.
A new option introduced by ISO in this
filing is the ability to have separate
deductibles by location. Insured’s now
have the option to specify deductibles
by:
• Site (for insureds with multiple
locations); or
• Building (for insureds with multiple
buildings at one location or multiple
buildings at multiple locations).
Deductibles apply separately per location
even if the damage was caused by one
occurrence. The deductible could be the
same for each location or it could vary.
The available options are somewhat
flexible.
Specified Business Personal Property
Temporarily Away from Premises – CP
04 04. This new optional endorsement
extends coverage to business personal
property (BPP) temporarily away from the
described premises. Two requirements
must be met for this coverage extension
to apply: 1) the BPP must be away
from the premises as part of the daily
business activities; and 2) the BPP
must be in the care, custody or control
of the insured or an employee of the
insured. Laptops and other like BPP
are the main focus of this endorsement.
Coverage under this endorsement is
activated by: 1) describing the BPP in the
schedule (either by item or by category);
and 2) entering a limit of coverage in
the schedule. Other provisions of this
endorsement include:
• The endorsement does not cover BPP
possessed by salespersons (except at
a fair, trade show or exhibition);
• Coverage is not extended to stock or
other business products (except at a
fair, trade show or exhibition);
• Coverage is not extended to BPP
in the care, custody or control of a
common or contract carrier or a bailee
for hire;
• Theft from a motor vehicle is covered if
specified evidences of theft exist;
• The coverage territory specified in
the underlying form applies to BPP
covered by this endorsement; and
• When there is an overlap in coverage
with another section of the underlying
policy, the insured can elect payment
under whichever provision provides
the greatest amount of coverage.
Higher Limits – CP 04 08. This new
endorsement allows the insured to
increase limits for certain property by
attachment of the endorsement in lieu
of using the declarations to increase
limits. Several coverage grants limited
in the policy can be increased by noting
such increase in the declaration; this
new endorsement allows the insured
to increase these limits by use of the
endorsement rather than depending on
a note/change in the declaration. This
endorsement does NOT replace and
shall not be used in place of specific
limit-increasing endorsements (i.e. debris
removal, newly acquired property, and
others).
Increase in Rebuilding Expense
Following Disaster (Additional Expense
Coverage on Annual Aggregate
Basis) – CP 04 09. Finally, a commercial
property endorsement addressing the
increase in all building costs (materials,
labor, etc.) following a communal
disaster. This endorsement is triggered
when all the following apply:
• The event causing the covered loss
either: 1) results in the declaration
of a state of disaster by federal or
state authorities; or 2) occurs in close
temporal proximity to the event that
resulted in the declaration;
• Labor and/or building material costs
increase as a result of the disaster
causing the cost to repair or replace
the insured building or structure to
exceed the limit of insurance;
• The insured actually repairs or
replaces the building; and
• During the policy term, the insured
notifies the insurance carrier within 30
days of any improvements, alterations
or additions to the building which
increases the replacement cost by 5%
or more (allowing the insurance carrier
to adjust the limit).
Key features of this new coverage
include:
• To be protected by this endorsement,
the building must be scheduled on the
endorsement;
• The maximum amount of additional
coverage is determined by applying
a specific percentage to the limit of
insurance for specific insurance or to
the value of the building (adjusted for
coinsurance) when insurance is written
on a blanket basis. If the damage is
caused by a peril with a sub-limit, the
percentage is applied to the sub-limit;
• The additional coverage is reduced
proportionally if the property is
underinsured;
• A portion of the endorsement’s limit
can be used to cover debris removal;
• If ordinance or law coverage (CP 04
05) is included in the underlying policy,
a portion of this additional coverage
can be applied towards the increased
cost of compliance (Coverage Part C);
• A separate amount of coverage applies
to newly acquired or constructed
buildings based on the highest
percentage listed in the schedule;
• The coverage limit is an annual
aggregate limit; and
• Any expenses payable under this
endorsement are reduced by expenses
covered under any business income
8 www.bigi.org

ISO Commercial Property Changes – Part 4 – New Endorsements...continued from page 8
Commercial Lines Feature
or extra expense coverage form that is
part of the policy.
Exclusion of Loss Due to By-
Products of Production or Processing
Operations (Rental Properties) –
CP 10 34. This new endorsement is
to be attached to policies issued to
owners and tenants of rental premises.
Property damage caused by the tenant’s
business operation is excluded by
this endorsement; essentially, this is a
business risk exclusion. ISO’s restaurant
example follows: Damage caused
by the long-term presence of grease
released by the tenant restaurant’s
cooking operations as the presence and
“distribution” of grease is a part of the
business operations and is not accidental
and unexpected and is thus excluded
from coverage. According to ISO, the
endorsement’s genesis is a Washington
State Court of Appeals finding: Graff v.
Allstate Insurance Company. The case
involved a methamphetamine lab and
the damage the “cooking” caused the
rental property over a period of time.
The insurer denied the claim, the court
disagreed. This new endorsement acts to
exclude all such damage caused by the
“by-products” of the tenant’s operations.
Again, it is attached to both the tenant’s
and the landlord’s policy so that neither
can be called upon to pay for the
“expected” damage.
Limitations on Coverage for Roof
Surfacing – CP 10 36. This new
coverage option allows insurance
carriers to limit the valuation on “roof
surfacing” to actual cash value (ACV),
even when the remainder of the building
applies replacement cost as the valuation
method. Additionally, the endorsement
excludes “cosmetic” damage to the “roof
surfacing” caused by wind and/or hail.
• “Roof surfacing” means: shingles,
tiles, cladding, metal or synthetic
sheeting or similar materials covering
the roof. The definition includes all
materials used to secure the roof
surface and all materials applied to
or under the roof surface for moisture
protection (this includes roof flashing).
• “Cosmetic” means: marring, pitting
or other superficial damage that alters
the appearance of the roof surface
but does not prevent the roof from
functioning normally.
Discharge from Sewer, Drain or Sump
(Not Flood-Related) – CP 10 38. This
newly available endorsement provides
coverage for damage and business-shut
down loss (business income loss) caused
by the discharge of a sewer, drain or
sump. Key features of this endorsement
include:
• Coverage is provided for physical
damage to covered property
caused by the discharge of water or
waterborne material from a sewer,
drain or sump ON the described
premises.
• If the insured carries any time element
coverage (business income and/
or extra expense), this endorsement
adds the discharge from sewer, drain
or sump on the described premises to
the list of covered causes of loss.
• The limits for this new cause of
loss are sub-limits indicated in the
endorsement. Separate sub-limits can
be chosen for direct physical damage
and time element coverage. The
insured also has the option to use the
total of the sub-limits as the annual
aggregate limit.
• The endorsement does not extend
coverage to the discharge from a
sewer, drain or sump caused by
flood (these are included in the newly
worded flood endorsement CP 10 65).
• There is no coverage if the sump pump
failure is caused by a power failure,
unless the policy is endorsed to cover
power failure.
• No coverage is provided if the
discharge results from the insured’s
failure to properly maintain or repair
the equipment.
• The endorsement does not cover
the cost to repair the sewer, drain
or sump; only the cost to repair the
damage caused by the release (or the
income lost) up to the chosen sublimits.
Theft of Building Materials and
Supplies (Other than Builders Risk)
– CP 10 44. This new cause-of-loss
endorsement introduced by ISO allows
the insured to extend theft coverage
to building materials or supplies on
or within 100 feet of the premises.
The endorsement applies when these
materials are intended to become a
permanent part of the covered building
or structure. It can be used only when
the Cause of Loss – Special Form (CP 10
30) is used without a theft exclusion. The
endorsement is not intended to be used
with the builders risk forms.
Equipment Breakdown Cause of Loss
– CP 10 46. ISO’s new coverage option/
cause of loss – equipment breakdown
is available only when the insured is
protected by the special cause of loss
form. Equipment breakdown becomes
an additional covered peril when this
endorsement is attached. Provisions
found in this endorsement include:
• “Breakdown” means: Failure of
pressure or vacuum equipment;
mechanical failure (which includes
rupture or bursting caused by
centrifugal force; or electrical failure
including arcing; (the definition is
subject to limitations));
• “Covered equipment” means:
Equipment built to operate under
internal pressure or vacuum;
electrical or mechanical equipment
used to generate, transmit or use
energy; communication equipment;
and computer equipment (this is
programmable electronic equipment
used to store, retrieve and process
data and associated equipment
providing communication input and
output functions). (There are limitations
that apply.);
• Coverage for direct damage is subject
to the limit of insurance applicable to
the equipment;
• The covered equipment is considered
part of “covered property;”
• When business income or extra
expense coverage is included,
the loss is limited to time element
limit of coverage in the form; this
endorsement does not offer any
additional coverage;
• Coverage for ammonia contamination
and hazardous substance is limited
to the lesser of: 10% of the limit or
$25,000; and
• The insurer has the option to suspend
coverage.
When this endorsement is used, the
equipment breakdown coverage is
subject to the same coverage terms,
conditions and limitations applicable to
every other covered cause of loss.
continued on page 11 ...
www.bigi.org
9

Commercial Feature
Your customers deserve a
Silver Lining. ®
When something happens to your customer’s home, car, or business, it
may not be a disaster. But no matter what it is, your customers always
deserve fast and fair service from their insurance company.
West Bend provides a Silver Lining, no matter what the claim may
be. When the scoreboard at the Panther’s little league field was
struck by lightning, it was important to get it fixed in time for the
championship game. So that’s just what we did.
Sometimes little things mean a lot. And every day, when something
bad happens to someone, West Bend makes sure your customers
experience the Silver Lining. Because the worst brings out our best.®
10 www.bigi.org

ISO Commercial Property Changes – Part 4 – New Endorsements...continued from page 9
Commercial Lines Feature
Suspension or Reinstatement
of Coverage for Loss Caused by
Breakdown of Certain Equipment – CP
10 47. In concert with the CP 10 46,
ISO introduces the CP 10 47 to allow
the insurance carrier to suspend and/or
reinstate equipment breakdown coverage
as per the conditions found in the CP 10
46 endorsement.
Food Contamination (Business
Interruption and Extra Expense) –
CP 15 05. Business income and extra
expense losses resulting solely from food
contamination have been excluded in
the past; but ISO now gives insureds the
option to purchase coverage to protect
against business income and/or extra
expense losses resulting from such food
contamination. This is an important new
coverage option. Key provisions of this
endorsement include:
• Coverage is triggered when: 1) the
insured is ordered closed by the
applicable governmental authority (i.e.
the board of health); and 2) the closure
is the result of the discovery of or
suspicion of “food contamination.”
• “Food contamination” means: An
outbreak of food poisoning or foodrelated
illness arising out of: 1) tainted
food distributed or purchased by the
insured; 2) food improperly processed,
stored, handled or prepared by the
insured; or 3) food contaminated by
virus or bacteria transmitted by one or
more employees of the insured.
• The policy pays: 1) the insured’s
expense to clean equipment (as
required by the governmental
authority); 2) the cost to replace
food actually or suspected to
be contaminated; 3) the costs
of employee medical tests and
vaccinations (this does not pay
what would be paid by workers’
compensation; 4) the loss of business
income beginning 24 hours after the
insured receives the notice of closure;
and 5) additional advertising expenses
incurred to restore the insured’s
reputation.
• A specific limit is chosen and entered
into the endorsement. This limit is an
annual aggregate limit. A separate limit
is required for advertising expense if
the coverage is desired.
• The policy does not cover the costs
of fines or penalties imposed by
the regulatory authority (these are
business risk expenses).
Editorial Changes
Four other endorsements receive
updating or editorial changes in the
upcoming filing, but none of these
alterations result in any coverage
change. These endorsements include:
• Increased Cost of Loss and Related
Expenses for Green Upgrades (CP 04
02);
• Windstorm or Hail Percentage
Deductible – CP 03 21;
• Vacancy Changes – CP 04 60; and
• Loss Payable Provisions – CP 12 18.
Christopher Boggs is the director of
education for the Insurance Journal
Academy
Cross-Sell Strategy #21
EPLI COVERAGE
“ Addressing the growing
concerns of clients can
grow your business.”
Paula Hutchinson, Kansas City Branch
Senior Marketing Representative
Employee lawsuits are more likely to occur than a
fire. Include EMC’s Employment Practices Liability
coverage to make certain your clients are protected
from all the risks they may face. It’s just one of the
many reasons policyholders Count on EMC ® .
Cincinnati Branch: 800.732.5595 | Home Office: Des Moines, IA
www.emcins.com
© Copyright Employers Mutual Casualty Company 2013. All rights reserved.
www.bigi.org
11

Property-Casualty Feature
STUDY REVEALS GROWTH IN
PROPERTY-CASUALTY INSURANCE MARKET
Independent insurance agents outperformed captive agency carriers in several areas.
The Independent Insurance Agents & Brokers of America
(IIABA or the Big “I”) has released the results of the 2013
Market Share Study (based on 2011 data) which reveal
that after years of market contraction, all property-casualty
insurance premium lines grew. The study also showed that
independent agents and brokers (collectively “IAs”) were well
positioned to capture a substantial piece of the market going
forward.
This is the 17th year the Big “I” has contracted with A.M. Best
Company to supply it with year-end industry market share and
company expense data. The Big “I” analyzes this data annually
to assess the state of the independent agency system.
“The Big ‘I’ is pleased to announce that, despite the market
fluctuations and challenges of recent years, the independent
insurance agency system remains stable, strong and growing,”
says Bob Rusbuldt, Big “I” president and CEO. “Many carriers
that weathered the storm of market contractions for several
years were able to successfully bounce back.”
The market share study revealed that many regional and
national IA carriers expanded their market shares by
impressive double digits and that overall IA shares grew in
several states. More good news also showed that regional IAs
outpaced market growth in many business lines across the
country.
“This annual study provides the most accurate picture of what
is occurring with property casualty insurance distribution
because it separates out the direct response companies from
the captive agency companies,” notes Madelyn Flannagan,
Big ‘I” vice president of agent development, education and
research. “Unique to the Big ‘I’ study, A.M. Best separates out
the affiliates of groups which use different distribution systems
and places these affiliates in the appropriate distribution
category wherever the company group uses separate affiliates
for this purpose.”
Other findings from the Market Share Study include:
• IAs outperformed captive agencies carriers in personal
lines and grew premiums by nearly the same amount
as direct response carriers largely due to impressive
performance in homeowners, where IAs outperformed the
captive agencies;
• IA carriers also benefited greatly by a huge surge in
commercial premiums, which climbed by 5% in 2011. IA
carriers also captured $8.4 billion in additional premiums
in 2011, which represents 74% of the entire $11.4 billion
growth in that market.
• IAs still control a majority of the entire p‐c market,
writing 57% of all premiums, including a third of all
personal premiums.
• IAs still dominate commercial insurance sales, which
resurged in 2011, growing $11 billion or 5% more than 2010.
• IAs grew premiums and/or market share in several states
and IA share remains strong in many states overall. In many
states, IAs dominate both personal and commercial lines.
• IAs are as efficient as other models. While IAs as a group
may have higher efficiency ratios compared with captive
and direct 2011 writers, Private-Passenger there are several Auto IA carriers with personal
auto efficiency Direct Premium ratios that % Share rival % these Premium challengers. Growth As noted
Written
2010 to 2011
in past reports, this proves that management, not the model
National itself, is the key $11.3 driver. B 6.7% ‐2.7%
Regional $44.4B 26.3% 1.2%
• Exclusive Many Big “I” Best $81.8 Practices B 48.4% firms continued 0.3% to grow in
Direct $29.3B 17.4% 7.5%
the face of recent weak markets and are doing well now that
TOTAL $169.0B 100% 1.6%
the p‐c market appears to have turned around. Agencies
that are easy to do business with, use improved access to
technology and leverage the confidence and customization
The overall p‐c market rebounded strongly in 2011, growing far faster than the o
communicated through the Trusted Choice® brand have
economy. Total p‐c premiums grew by $17.4 billion, or 3.7%, in 2011 over 2010
the potential to enjoy robust growth in every state and every
and independent agency companies and agents captured their fair share of this
product line.
maintaining control over nearly 57% of the total p‐c market in 2011. Independen
It
wrote
is helpful
$10.5 billion
to look
more
at a
in
couple
total premiums
of specific
in 2011
lines/areas
than they
to
did
see
in 2010.
how the IA market is performing. The chart below shows the
overall Regional share independent of property/casualty agency companies production grew premiums in 2011. the Total most, increasing
property production and by $6.4 casualty billion premiums over 2010 grew levels, by and $17.4 national billion, IA companies or increased
3.7 premiums percent by in $4.1 2011 billion. over (Note 2010 that levels. 2010 Independent data shown in this agency report reflects data
companies has adjusted and relative agents to the maintained data shown control in last year's over nearly report and 57 may not match
percent published of last the year.) total property and casualty market in 2011,
writing $10.5 billion more in total premiums in 2011. While
direct Direct response carriers grew were premiums able to by grow $2.4 their billion, premiums, which is an the impressive 7
channel increase over still controls 2010, but only the channel slightly still more controls than only 7 percent slightly of more the than 7% of t
total market. market. While exclusive agents wrote $3.0 billion more in 2011, it was not enou
prevent their market share from slipping a fraction of a percentage point.
Exclusive
Agent Direct
Writers
34%
Overall Share of P‐C Production
2011
Direct
Response
Writers
7%
Regional
Agency
Writers
29%
National
Agency
Writers
28%
Copyright © 2013 Independent Insurance Agents & Brokers of America, Inc. All rights reserved.
All data in this report is the property of A.M. Best and is reprinted with its permission.
12 www.bigi.org

market they controlled in 1995.
Exclusive $43.8B 18.3% 4.1%
Direct $2.1B 0.9% 4.4%
Regional IA carriers have increased 8.1 percentage points since 1995, increasing TOTAL $239.4B 100% 5.0%
2 to3 percentage points every five years.
Property-Casualty Feature
Direct‐response writers are steadily increasing share, up 6.5 points since 1995 to National independent agency premiums grew by $4.1 billion, to close at $111.6 bill
STUDY now account REVEALS for 13.6%. While GROWTH continuing to trail IN regional PROPERTY-CASUALTY IA carriers and captive Regional IA
INSURANCE
carriers wrote $ 4.3
MARKET...continued
billion more, despite their smaller
from page
market
12
size, clos
carriers considerably, direct response leads over national IA carriers by 4.2 total of $76.1 billion in premiums in 2011. Exclusive agency writers booked $1.7 bil
The percentage chart below points. illustrates a 17 year study of personal lines captured more than more in 2010, than for their a total previous of $43.8 billion. share Even of this direct growth, response, slightly which controls
market share. Exclusive agency carriers/agents have seen improving than 1% of their market, market grew share. premiums, However, albeit no by a channel relatively gained small $88 or million.
their National market IA carriers share have dip lost below almost 506 percent. percentage In points addition, of market regional share since lost more than one percentage ppoint of share, and IA carriers
IA 1995, carriers now accounting have seen for their only 9.4% market of the share market. continuously This translates grow to almost to a still continue to control 78 percent of the market.
26.3 40% decrease percent in of national the market IA share in during 2011. that period.
59.4%
18.2%
15.3%
17‐Year View of Personal Lines Share
National IA Regional IA Exclusive Agency Direct Response
7.1% 8.5%
54.8% 53.0%
50.0% 49.3%
21.8% 23.3%
26.1% 26.3%
15.0% 12.7% 12.9%
13.6%
11.1% 9.6% 9.4%
1995 2000 2005 2010 2011
$250
$200
$150
$100
$50
$0
2.0
42.1
Commercial Lines in Billions
2.1
43.8
107.5 111.6
71.7 76.1
2010 2011
Direct Response Writers
Exclusive Agent Direct
Writers
Regional Agency Writers
National Agency Writers
In the commercial lines arena, after three consecutive years
Copyright of contraction, © 2013 Independent commercial Insurance Agents lines & Brokers grew of by America, 5 percent Inc. All rights in 2011, reserved.
increasing All data this by report $11.4 is the billion property of to A.M. a Best total and of is reprinted $239.4 with billion. its permission. All
channels saw premium growth, but regional agency writers
All of the data in the Big “I” report come from A.M. Best and
is printed with its permission. More information on the study is
available by request or online at: www.independentagent.com/
Resources/Research/MarketShareReport.
Copyright © 2013 Independent Insurance Agents & Brokers of America, Inc. All rights reserved.
All data in this report is the property of A.M. Best and is reprinted with its permission.
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www.bigi.org
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13

Personal Lines Feature
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14 www.bigi.org

Property Casualty Trends Feature
NOAA Predicts Greater Flood Risk This Spring
The next three months are expected to be a mix of flooding, drought and warm temperatures nationwide.
River flooding is expected to be worse this
spring compared to last year, the National
Oceanic and Atmospheric Administration
says in its three-month flood outlook
released today.
North Dakota has the greatest risk of
flooding, says NOAA, whose outlook
covers April to June and comes during its
Flood Safety Awareness Week.
North Dakota ranked as the eighthhighest
state for National Flood Insurance
Program claims at 1,532 in 2011, the latest
year for which data is available, according
to the NFIP. That year, it also had the fifthgreatest
number of NFIP claim payouts at
$93.1 million.
Homeowners insurance policies typically
exclude flood protection. With a 30-day
waiting period for flood policies to take
effect, now is the time for individuals
and businesses to review their insurance
coverage, says Karen Marsh, deputy
director of the individual and community
preparedness division for the Federal
Emergency Management Agency.
Moderate-to-Major Flooding
NOAA predicts moderate and major
flooding for the Red River of the North
between eastern North Dakota and
northwest Minnesota, as well as the Souris
River in North Dakota. In addition, 20,000
acres of farms and roads are at risk for
flooding in northeast North Dakota, where
there is a 50% chance that the Devils and
Stumps lakes will rise 2 feet.
Minor-to-Moderate Flooding
In addition, this year’s late-winter snowfall
may cause minor to moderate flooding
in the upper Mississippi River basin and
upper Missouri River basin, depending
on rainfall and the speed of snowmelt,
NOAA says. The upper Mississippi River
basin covers southern Wisconsin, northern
Illinois and northern Missouri; and the
upper Missouri River basin, includes the
Milk River in eastern Montana, the Big
Sioux River in South Dakota and the Little
Sioux River in Iowa.
Parts of several other states in the
Southeast and along the lower Mississippi,
middle Mississippi, lower Missouri and
Ohio river basins may experience minor
flooding this year, NOAA says. They are:
• Arkansas
• Alabama
• Georgia
• Illinois
• Indiana
• Eastern Iowa
• Kansas
• Kentucky
• Louisiana
• Mississippi
• Missouri
• Ohio
• Tennessee
Temperatures and Precipitation
Most areas of the country are expected
to have warmer temperatures than usual,
while cooler temperatures are anticipated
for the Pacific Northwest and extreme
northern Great Plains, according to NOAA.
In addition, rainier conditions are likely
in the Great Lakes and Ohio Valley area,
while drier-than-normal conditions are
expected for parts of the West, Rockies,
Southwest, Texas, Gulf Coast and Florida,
NOAA says.
Drought
Despite flood risks for many U.S. areas,
51% of the continental United States—
comprised largely of central and western
regions—is in a moderate-to-worse
drought, according to NOAA.
Ed O’Lenic, chief of the operations branch
for NOAA’s Climate Prediction Center,
notes that the continuation of last year’s
drought in several areas is due, in part, to
previous conditions.
“The drought that we accumulated over the
last five or six years in the middle part of the
country and also the Southwest is going to
take a long time to remove,” he says.
In addition, NOAA says the Florida
panhandle and areas of Texas, California,
the southern Rockies and Southwest
are at risk of developing new drought
conditions.
But NOAA also expects drought
conditions to improve—though not be
eliminated—in several areas, including
parts of northern Alaska, the Carolinas,
Georgia, the northern and central Great
Plains, and the Midwest.
Victoria Goff is IA online editor.
www.bigi.org
15

Legislative Feature
Affordable Care Act Update
Fees, and Taxes, and Higher Health Insurance Premiums: Oh My!
By Jerry Rhinehart, CIC, CLU, ChFC, RHU, Panama City, FL
January 1, 2014 is the first day for the
major implementations of the Affordable
Care Act (ACA). This law, dealing primarily
with national health care reform, will affect
millions of U.S. citizens, legal immigrants,
and any business that has 50 or more
full-time employees. Many look forward
to this law’s full enactment; many do not.
Whatever your views, it is important to
understand how the law will impact you,
your family, and virtually every business in
this country. One key fact to understand:
when a business is discussed in the context
of the ACA, it means any and all employers.
Some examples include the large privately
owned manufacturing plant in your town,
the small family-owned restaurant you visit
periodically, the publicly-traded national
technology company in which you own
stock, the non-profit hospital in your town,
your local school district, your church, your
state government, etc.
An important term to be aware of and how
it works as it relates to the ACA is “Federal
Poverty Level” (FPL). In 2014, the ACA
definition and qualification rules concerning
FPL will affect millions of individuals,
families, and businesses. Here is how it
works. If an individual’s (or family’s) income
is below 400% of FPL in 2014, they will
be eligible for a premium subsidy for the
mandated Qualified Health Plan (QHP). In
2013, the annual income threshold at 400%
FPL is:
• $94,200 for a family of four,
• $62,040 for a family of two, and
• $45,960 for a single individual.
The income thresholds are indexed to increase
each year. The more an individual’s (or family’s)
income falls below 400% FPL, the larger the
potential premium subsidy. If the income
is above 400% FPL, there is no chance of
a premium subsidy. Subsidies can only be
received through the Exchange (now referred
to as the Marketplace). The Congressional
Budget Office estimated in May of 2010 that
the average annual premium subsidy would be
$3,970 in 2014. They have recently revised that
number to be $5,510.
Starting in 2014, the ACA states you must
purchase a QHP. If an individual chooses not
to purchase an approved plan, they will be
subject to a penalty (minor exceptions exist).
Here is how the penalty works. In 2014, the
penalty (actually referred to as a “shared
responsibility payment” in the ACA) for an
individual would be the greater of $95 for
the entire year or 1% of the gross income.
As an example, for a person that has a gross
annual income of $50,000, the penalty would
the greater of $95 or $500. Remember this
is an annual penalty. The premium for this
individual’s QHP may be $500 per month for
this same individual! The dollar amount of the
penalty and the percentage is scheduled to
increase in subsequent years. Complex rules
concerning the penalty calculations for families
with minor children dependents also apply.
As an example, what about an individual (or
family) whose income is below 133% FPL
in 2014? For the family of four, that income
level is $31,322. For the family of two it is
$20,628, and it is $15,282 for an individual.
They will qualify to be on Medicaid. This
will be their QHP. There will be minor
payments (premiums and out-of-pockets).
One interesting item to keep in mind under
this Medicaid/ACA rule: Income is the only
determining qualification for Medicaid under
this provision; assets are not counted. Both
income and assets are examined when one
tries to qualify for Medicaid as it relates to a
stay in a Skilled Nursing Facility.
How does the ACA impact an employer?
There is no chance of a penalty to any
employer that has less than 50 full-time
employees (FTE) for the entire calendar year.
A FTE is one that works 30 hours or more in
a week. An employer with 50 or more FTEs
(referred to as a large employer) probably
needs to be concerned. First, what is the rule
for a large employer that does not provide
a QHP to its employees in 2014? If any
FTE receives a federal subsidy through the
Marketplace for their QHP (see the 400%
FPL rule above), the employer will have
an annual penalty of $2,000 for all FTEs.
However, the employer gets to deduct 30
FTEs from this calculation. The penalty is
pro-rated monthly.
Here is an example: ABC, Inc. has 65 FTEs
for all of 2014 and does not provide a QHP.
At least one FTE receives a subsidy for the
entire 12 months. ABC will have an annual,
non-deductible penalty of $70,000 (65 - 30 =
35 x $2,000 =$70,000).
How about an employer that has a
substantial number of part-time employees?
Well, the ACA has a complicated
“measurement” formula that will require
the employer to calculate the employment
hours of all part-time employees. Consider
this: at first glance an employer that has
40 FTEs would not be thought of as a
“large employer” under the ACA. However,
assume the same employer has 20 (or so
part-time) employees. After the required
“measurement” the part-time employee’s
hours may very well push this employer into
“large employer” status. Any and all parttime
employees that receive a subsidy will
have NO penalty impact on their employer.
Only FTEs receiving a subsidy cause penalty
concerns to the employer. And, as stated
earlier, any penalty to a large employer
that does NOT provide coverage, is only
calculated on the full time employee count
exceeding 30.
What if the large employer does provide a
QHP for the entire 12 months in 2014? Well,
the employer might still have a penalty. The
rule is very complex, but basically provides
that a FTE would be eligible for a subsidy if:
1) They are under the 400% FPL rule, and;
2) The employer’s provided coverage is
not broad enough. For example, the
insurance may not pay at least 60% of
covered health care expenses for the
typical population, or;
3) The cost of employee’s required
premium for the QHP is deemed to be
“unaffordable”.
What is “unaffordable”? If the employee’s
portion of the “self-only” coverage exceeds
9.5% of “household income”, then it is
“unaffordable” as per the ACA. Should this
happen (and using the example above), the
employer’s penalty would be the lesser of
$70,000 (65 - 30 = 35 x $2,000 =$70,000)
or $3,000 for every FTE that received a
subsidy. Let’s assume 15 FTEs received a
subsidy. Then the calculation would be 15 x
$3,000 = $45,000. So the employer penalty
would be the lesser of $70,000 or $45,000.
In this example, the employer may be paying
$500,000 annually for the coverage on its
65 FTEs. That premium would still be taxdeductible
to the business, but any and all
penalties are never deductible.
So, is a penalty certain for the large employer
that does not provide health coverage in
2014? No, but unless their employees are
high paid - over the 400% FPL rule - the
chances are very high. And, the FPL rule in
this situation states “family income”. Does
an employer know what the employee’s
spouse earns? Even thinking about asking
that question will make the HR department
cringe! What about the chance of a penalty
concerning the large employer that does
provide a QHP? A way to avoid any penalty
would be to make certain the premiums are
not “unaffordable”. This would mean the
employer pays such a large portion of the
FTEs “self-only premium” that the remaining
portion it is not “unaffordable” to the
employees. It will be essential for business
owners to review the various options
with their financial professionals: CPAs,
attorneys, and health insurance agents.
What will premiums and coverage look like
in 2014? This will be of little surprise to
virtually everyone: premiums will be higher
than in 2013. Many are speculating at least
16 www.bigi.org

Legislative Feature
Affordable Care Act Update...continued from page 16
a 20% increase. Why that much? First,
consider the generally broader coverage for
all QHPs -- individual, small group and large
group. They will look alike in their minimum
coverage. The various states have the right
to require additional mandated coverage, but
they cannot strip down a plan from that set
as minimum levels by the ACA. So, here is
a basic list that health insurance carriers are
using in their premium calculations:
1) Broader coverage than now;
2) No lifetime, nor annual dollar limits on
coverage;
3) No underwriting, no pre-existing
questions;
4) Guaranteed issue and guaranteed
renewal;
5) No out-of-pocket cost for preventive visits;
6) Children staying on the parent’s plan until
age 26 (some exceptions); and,
7) Health insurance carriers are being
charged several billion dollars in additional
taxes.
Are there other areas that might make the
premiums higher? Yes, one is the recently
announced Transitional Reinsurance Fee
which will be imposed on all health insurance
carriers. It will be passed along to the
individual or group plans. The monthly fee is
$5.25 “per-head” in 2014 (or $63 annually).
Let’s assume you have a business that
currently provides coverage for your 40
employees. You pay 80% of the employee’s
premium and none of the spouse and
dependent cost. In addition to the coverage
on your employees, you have 30 covered
spouses, 60 covered dependents, 5 COBRA
qualified beneficiaries, and 5 retirement
employees. That is 140 covered “heads”
x $63 = $8,820 for 2014. That amount
would be added to the employer’s renewal
premium. The three-year imposed fee drops
to $42 in 2015 and then $26 in the last year.
Most of this fee will go back to the health
insurance carriers to financially assist them
with the potential financial loss in the early
years of the ACA due to guaranteed issue,
adverse selections, etc. So the fee will
increase the overall cost of the QHP.
Another increase in premiums allowed by the
ACA will cause concern to tobacco users.
The carriers that file to write QHPs in 2014
can only use certain rating criteria. First,
what can they not use? No gender rating, no
underwriting questions; thus no pre-existing
condition exclusions. OK, what can they use
to determine rates?
• Age: Older individuals can be charged
more than younger ones, but a maximum
of 3 to 1 ratio;
• Geographic area: Premiums can be
higher in certain cities; e.g. higher for New
York City residents than Rochester, NY
residents;
• Family composition: family of 3 or 4 can be
charged more than an individual or family
of 2; and
www.bigi.org
• Tobacco usage: maximum of 1.5 rating
factor.
Concerning the tobacco usage, note that it
does not state “smoking”. It simply states
“tobacco” which would encompass any and
all forms of tobacco usage. How does this
surcharge work? Assume the annual cost for
your current health insurance plan in 2013 is
$5,000. Next year it may very well be $6,000
due to the reasons listed earlier in this article.
However, should you use tobacco the carrier
may surcharge your base premium as much
as 50% ($3,000 in this example) and your
new premium is now $9,000. Understand, a
carrier may use a 1.5 factor; some will use
the maximum, some may not.
Another interesting bit of recently released
information: those applying for an individual
policy cannot receive any FPL subsidy on the
tobacco surcharge portion. So, in the previous
example, should the individual be eligible for
a subsidy, it can only be calculated on the
non-tobacco portion ($6,000), not the tobacco
surcharge portion ($3,000). If the tobacco user
is part of an employee group, the same nonsubsidy
rule applies unless he/she enrolls in a
“tobacco cessation” program. It is interesting
that the surcharge applies to tobacco usage,
but is silent on marijuana or illegal drug
usage. Additionally, there have been no
specific rules released on how the agent/
company determines the tobacco usage and
what would happen should the applicant
make a “misrepresentation” concerning this
rating factor. With life insurance, the carrier
generally will require a urine exam and should
there be a misrepresentation, the carrier can
rescind the contract in the first two years.
One additional release from Health and
Human Services (HHS) that occurred in
late December of 2012 dealt with coverage
on “dependants”. Everyone is probably
aware that in 2010 the ACA mandated
health insurance coverage be extended to
dependants until their age 26, with minor
exceptions. Now we have new “guidance”
concerning the dependants. Starting in
2014 all large employers (50+ FTEs) must
extend coverage to dependents until age
26, or there will be a financial penalty to the
employer. There is no real change in the
language except for the financial penalty
language. It was not specific in the original
law that an employer would have a penalty
should coverage not be extended. One
additional newsworthy rule in the same
release was that an employer is not required
to extend coverage to the spouse of an
employee. It will be interesting to see how
large employers approach this “spouse
coverage” exception.
The ACA is still “evolving”. The 2500+ page
law was silent on numerous specific rules.
While the law stated a particular provision,
many times it did not give the exact amount
of the fee, tax, or penalty relating to the
provision. Frequently the law states: “to
be determined by the Secretary of HHS.”
Additionally, numerous lawsuits were filed,
such as one that resulted in the “penalty if
no dependant coverage to age 26” (above).
Thus, clarification was expected on many
fronts. So, expect more exact rules and
definitions to be released in the spring and
summer of 2014. It is not clear how (or if)
these soon-to-be-released announcements
may impact our insurance premiums in 2014
and the years that follow.
Employer Responsibility / Penal3es (2014)
So … Let’s Review – Potential Employer Penalty
Under 50 FTEs 50+ FTEs -­‐ No QHP 50+ FTEs – Provides QHP
-­‐ No chance of
ANY penalty
-­‐ Chance of a tax
credit for certain
size groups
-­‐ One FTE receives FPL
subsidy through the
Marketplace and ‘ER will have
a $2,000 annual penalty on
ALL FTEs, excluding the first
30 ‘EEs. Penalty pro-­‐rated
monthly.
EXAMPLE: 100 ‘EEs. One ‘EE
receives a subsidy. 100 – 30 =
70 x $2,000 = $140,000
(“Shared Responsibility
Payment” … which is not
deducZble).
-­‐ Same rule as to the leO, but
penalty is the lesser of:
-­‐ 1) Did ‘EE receive FPL
subsidy? 2) Is the plan broad
enough (60%)? 3) Is ‘EEs
required porZon of premium
for QHP deemed “unafford-­able”?
If fail on any*, $3,000
for EACH qualifying ‘EE.
EXAMPLE: 100 ‘EEs. 30
qualifies. 30 x 3,000 = $90,000
(or lesser of table to leO).
17

IIAI IIAI
2012 News
IIAI SponSorS
AS AS oF oF AuguST 1ST 2012
PREMIER
PREMIER
DIAMOND
DIAMOND
IASC
PLATINUM
PLATINUM
BRONZE SILVER
BRONZE SILVER
GENERAL
GENERAL
GOLD
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GOLD PLUS
GOLD PLUS
Since
H
M
HASTINGS MUTUAL
I N S U R A N C E
1885
C O M PA N Y
www.hastingsmutual.com
Since Since
H H
M M
MUTUAL
MUTUAL
HASTINGS
HASTINGS
I N S U R A N C E
I N S U R A N C E
18851885
C O M PA N Y
C O M PA N Y
www.hastingsmutual.com
18 20 20 www.bigi.org
ThAnk You For All oF oF Your SupporT!

May
1 Commercial Update - 2013 Indianapolis
1 ICRB Classification Nuts & Bolts Indianapolis
2 Commercial Update - 2013 Columbus
7 Risk Management ** South Bend
8 Risk Management ** Indianapolis
16 Commercial Update - 2013 Fort Wayne
17 Commercial Update - 2013 South Bend
18 Commercial Update - 2013 Merrillville
17-19 CIC – Commercial Property Indianapolis
August
2013
Education
Calendar
14-16 CIC – Life & Health Indianapolis
21 NFIP Flood Seminar Indianapolis
27 Insuring Toys & Collectibles/Personal Auto Issues South Bend
28 Insuring Toys & Collectibles/Personal Auto Issues Indianapolis
29 Insuring Toys & Collectibles/Personal Auto Issues Columbus
IIAI News
In Memory
Michael J. Richard
Mar.21,1965-
Jan.30,2013
MISHAWAKA -
Michael Joseph
Richard, 47,
of Mishawaka,
PROFESSIONAL LIABILITY
passed away
COVERAGE IS IS IN IN THE DETAILS
9 Risk Management ** Evansville
suddenly in his
15-17 CIC – Commercial Property Fort Wayne
home, Wednesday, January 30, 2013.
At At Burns & & Wilcox, Mike no no detail was detail born is is too too March small small 21, to to go 1965 go unnoticed. in To To
21 CL Agents School (CGL / Commercial Auto) ** Indianapolis
ensure we we match Mishawaka, your your clients a with son with the of the Joseph proper A. and professional
22
23
CL Agents School (CGL / Commercial Auto) **
CL Agents School (Commercial Crime / Risk Mgt)
Indianapolis
liability coverage, Phyllis we we look look (Claeys) at at every every Richard. possible He grew scenario. up From in From
Indianapolisdata data privacy to to miscellaneous Mishawaka and errors graduated and and omissions, from Marian
medical
malpractice to to architects High School and and in engineers, 1983. He our our was expertise a graduate
across
a wide a wide breadth of of of
categories
Thomas Moore
makes College
certain in
nothing
Kentucky
June
is missed.
near Cincinnati, Ohio. Mike lived in
As As an an international company, our our relationships provide us us
12-14 CIC – Personal Lines Indianapolis
the Cincinnati area before returning to
unlimited access to to the the broadest range range of of markets. So So if you if you
18 New Laws - 2013 Columbus
Mishawaka in the 1990’s to join the
need need to to find find the the right right policy policy in in a flash, a flash, work work with with the the largest
19 New Laws – 2013 Evansville
family business, Schindler-Richard
independent wholesale broker – – Burns & & Wilcox.
Insurance Agency. Following the sudden
20 New Laws – 2013 Indianapolis
death of his father, Joe, in July of 2012,
25 New Laws – 2013 Fort Wayne
Mike
became
Personal
President
of the Agency.
Professional
26 New Laws – 2013 South Bend Mike was a member Risk Risk of Management St. Joseph
Services
27 New Laws - 2013 Merrillville
Catholic Church in Mishawaka where
he served as one of their organists
Indianapolis, Indiana | | 317.810.0722
toll toll free free 800.833.9443
since
|
high
fax | fax school.
317.810.0723
He was a member
July
indianapolis.burnsandwilcox.com
of Knights of Columbus Council # 1878
in Mishawaka. He enjoyed traveling
and particularly liked spending time in
Chicago. Mike loved flower gardening
and built beautiful fountains and ponds
in his backyard. Music and caring for
his yard were truly his favorite activities.
Mike’s surviving family includes his
mother, Phyllis Richard and her long
time companion, Michael Wettergren;
his two brothers, John Richard and
Tim Richard; two aunts, Pat VanRie
and Marlene Kwasny, several cousins,
and many friends in the Chicago and
Cincinnati areas.
www.bigi.org
19

Agency Management Feature
GOING
AUTO
HOME
BUSINESS
LIFE
HEALTH
Write for a company that
continually searches for ways to
become the easiest company
for your agency to communicate
and do business with.
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• Competitive Rates
• Competitive Commissions with Unique Commission Earning Opportunities
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• Profit Sharing (1-Year Agreement with Lock-In Option)
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• Co-op Advertising Program
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• Easy-to-Use Raters for All Lines of Business
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• Qualified Field Representation
• Training Department with CEC Classes
• Life, Annuity, and Health Specialists
• Unique Coverage Enhancements Available like Pet Insurance, Water & Sewer Line
Breakage, Equipment Breakdown, and many more!
• Agent-Friendly Intranet Site
• 24-Hour Claim Call Center with 4-business-hour call-back Guarantee
• Catastrophe Team with Mobile Claim Office
• And, there’s much more!
Pekin Insurance • Beyond the expected. ®
2505 Court Street • Pekin, IL 61558 • 800-322-0160 • Extension 2394 • pekininsurance.com
beyondtheexpected.com
Retention Strategy #12
LIFE INSURANCE SALES
“ A life insurance
sale can make a
customer for life.”
Lora Buske, EMC National Life
Life Sales Representative
The more coverages clients have with you, the
less likely they are to switch agents. EMC National
Life is committed to making life sales simple with
easy-to-understand products and online services
to speed the sales process. It’s just one of the
many reasons policyholders Count on EMC ® .
Cincinnati Branch: 800.732.5595 | Home Office: Des Moines, IA
www.emcins.com
© Copyright Employers Mutual Casualty Company 2013. All rights reserved.
20 www.bigi.org

We recently got this “Ask an Expert”
question from a member: “What is the
business Income exposure for a nonprofit
organization? We understand the
extra expense component but are having
trouble with the business income part.”
Keep reading to learn that business
income is often a LOT more than just lost
profit.
Q: “What is the business Income
exposure for a non-profit organization?
We understand the extra expense
component but are having trouble with
the business income part.”
A: Business income insurance covers
profit and continuing expenses. Unless
you’re Microsoft, it is very common for
continuing expenses to be far more
than lost profits, even with for-profit
organizations. In addition, there is a need
for extra expenses to expedite recovery.
Below are some VU faculty observations.
Faculty Response
HUGE. Use non-profit worksheets. Take
a careful look at the impact a non-profit’s
inability to function will change their
ability to receive local, state or federal
funding. Separately, many non-profits
occupy space funded under bond issues.
The insurance requirements in the bond
issue financing agreements are onerous.
Faculty Response
They have operating expenses that
continue plus payroll.
Faculty Response
I think it really depends on what the
source(s) of income is/are for the nonprofit.
Faculty Response
It depends on the source of funding for
the non-profit. If they raise some of their
funding themselves, then they have the
same BI exposures as any “for profit”
business.
For example, if they have fundraisers at
their site/building, and it is damaged/
destroyed, their ability to raise funds
during the time of repairs (“period of
suspension”) is impaired. In cases where
non-profit groups have dances, dinners,
concerts, etc. at their site, this is a
significant exposure.
Also, they may raise money based on
Business Income Feature
Business Income Coverage for NonProfits
Author: VU Faculty
selling things (“products”). If they have
received a shipment of these items
(cookies [think Girl Scouts], seeds,
cookbooks, calendars, Christmas
wrapping paper, etc.), and this property
is destroyed, they would likely suffer a
loss of income, especially for items tied
to a specific time of year, like Christmas
wrapping paper, since they may not be
able to obtain another shipment in time to
complete the sale/delivery.
Faculty Response
You may wish to begin by making a
distinction between a non-profit and a
charity. There are many non-profits that
have income, significant income. Trade
associations (such as the Big I), citizen
associations (like AARP) are non-profits
that take in a lot of money and file reports
of their “income” every year. That income
is used to provide services for members
or others either in the current year or the
future. If a non-profit had to cease its
operations because of a loss they could
lose income that could be replaced by
business income coverage.
Faculty Response
Its income is the donations. If the
donations stop because of a loss there is
coverage under BI.
Faculty Response
If a non-profit organization lost revenue at
a two week fundraising event because a
fire damaged the building that housed the
event, would the organization not want
to receive payment for more than just its
expenses associated with the event – i.e.,
the loss of income from that event?
Faculty Response
“Profits” for a non-profit, such as a
charitable organization, can be measured
as the collected dollars the organization
can distribute to the recipients of the
charitable gifts. If an event causes direct
reductions in the amount of dollars
collected for redistribution, and that event
is a covered loss under the appropriate
Property forms, then you have a Business
Income loss.
Faculty Response
While a nonprofit may not have an profits,
they certainly would have continuing
expenses. That is covered by the
Business Income form. Both the Business
Income and Extra expense are crucial
for any nonprofit that is dependent on
their location (i.e., daycare, residence
for developmentally disabled, etc.). Just
because they do not have a profit does
not exclude all of the coverage from both
of these coverages. In addition, they may
have an accumulated surplus that is for
all practical purposes (except hopefully in
the eyes of the IRS) a “profit.”
Faculty Response
The business income calculation is net
profit plus continuing expenses. There
is no net profit but there are continuing
expenses during the recovery period.
Additionally, any kind of “store” sales
will be interrupted. Also, memberships,
fundraisers, and income generating
activities may be interrupted. A good
starting point for a combined business
income and extra expense limit is 15%
- 20% of revenues. It is imperative they
have a contingency plan for their disaster
recovery or they may not survive.
Faculty Response
“Profit” is revenue minus expenses. You
can be a nonprofit and still have “profit”
depending on what you do with the
revenue. It’s possible that revenue can be
substantial and expenses, via donations
and volunteering, can be minimal. That
creates insurable “profits” though legally
these funds are diverted to other uses.
www.bigi.org
21

CAP Feature
Agency 2020 to Provide Vision for Agency of the Future
Program will offer member agencies a chance to win free custom services and products.
Project CAP is launching Agency 2020, a
year-long program to provide the vision
and resources necessary for independent
agencies to compete in the next decade
and beyond.
Agency 2020 (https://projectcap
marketing/com/agency2020/) will
emphasize all aspects of business
operations for an independent agency.
The program will provide specific tools,
techniques, technology and counsel for
independent agencies by highlighting the
ongoing experience of spotlight agencies
selected to receive complimentary
products and services:
• Human resources consulting for
recruiting and staffing
• Leadership training
• Change management
• Perpetuation training
• Brand assessment
• Insurance education
• Information technology consulting,
software and hardware review
• Financial consulting
• Sales consulting
• Process management
• Business intelligence training
• Interior design and signage
As the spotlight agencies implement
these new products and services
throughout the year, Project CAP will use
each phase as an opportunity to educate
and inform all independent agents about
the benefit of that product or service in
their respective business.
These highlights will be shared in print
and electronic media, as well as through
national and local industry organizations.
By following the transformation of the
spotlight agencies, all independent
agencies will learn how to apply the
featured products and services to their
own businesses.
Agency 2020 is an opportunity for
your member agencies to learn about
the latest products, services and best
practices to take their businesses to the
next level.
To sign up, they can go to the
Project CAP website (https://
projectcapmarketing/com/agency2020/)
to submit an application. A panel of
representatives from program sponsors
will be evaluating the applications and
awarding a grand-prize winner and finalist
winners later this year.
YOU + GENEVA INSURANCE = SUCCE$$
• NO CREDIT SCORING
• NO LATE FEES
• WEB-BASED RATING
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Now offering INCREASED LIMITS
We’re looking for great partners to share in our success.
Interested in learning more? Contact Christine Flory, CIC at (317) 642-8755
Financial Stability Rating of A Exceptional
22 www.bigi.org

Agency Management Feature
The average producer is literally wasting
tens of thousands of dollars a year quoting
on accounts they have either little chance
of writing or shouldn’t even be trying to
write. Why? Simple. They have no real
clue how much their time is worth, how
much of it they waste, how many accounts
they solicit with little or no chance of
closing, and how many quality accounts
they never approach because they have
used up all their time and effort chasing
accounts that will earn the agency little or
nothing.
Simon and Garfunkle once sang: “I feel
I’ve been fakin it; not really makin it!”
How many producers could claim that as
their theme song?
I remember watching my friend Chris
Burand stand in front of a group of agents
at a seminar, showing a PowerPoint slide
of “What it Costs to Quote.” His numbers
were solid, yet the prevailing reaction of
the audience was disbelief. “Oh, come on,
that can’t be right” muttered more than
one attendee. Basically, they didn’t want
to believe the average producer is literally
wasting tens of thousands of dollars a
year quoting on accounts they have either
little chance of writing or shouldn’t even
be trying to write.
How could anyone waste such amounts
and not know it? Simple. They have no
real clue how much their time is worth,
how much of it they waste, how many
accounts they solicit with little or no
chance of closing, and how many quality
accounts they never approach because
they have used up all their time and effort
chasing accounts that will earn the agency
little or nothing. Maybe they’d rather not
know.
Try this simple test. Call a meeting of
your producers, and ask each, without
referring to any other resources, to write
down their individual numbers for closing
ratio, average commission per account,
persistency or other key determinants of
whether they are kicking butt or just “slip
sliding away”. (If you are a producer, pull
out a piece of paper right now and write
down your own numbers.)
Too often the answers will be qualified
with terms such as “around”, or “about”,
or “roughly”. Translation – they have no
clue. And when someone has no clue
about the key determinants of whether
Phenom or Fraud?
Author: Chris Amrhein
they are “makin it” or “fakin it”, which one
do you think they are doing?
Am I being unfair? Consider. Do you
think Kobe Bryant can’t tell you his
shooting percentages, number of assists,
and minutes played? (If he can’t, the
newspapers will tell him following every
game. Maybe principals and sales
managers should take a tip from the
newspapers.) When Jack Nicklaus was a
regular on the PGA tour, he could not only
tell you his scores, he could also describe
the shots he played on every key hole in
every tournament he’d ever played. And
what professional baseball player can’t
quote his current batting average? These
athletes know their livelihood depends
upon knowing exactly how they are doing
in the key benchmarks that are used
to determine success or failure in their
chosen profession.
Why should producers be any different?
Let’s take the baseball example a step
further. Batting averages are calculated
based upon total at bats (minus walks
and intentional sacrifices). Basically, if you
walk up to the plate, it counts. When a
producer determines closing ratio, have
they counted every single attempt (every
appointment, every meeting, every lunch)
that might have resulted in a sale? Or
are the figures skewed by only counting
(usually in hindsight) “serious” attempts?
Isn’t that akin to a baseball player arguing
many at bats shouldn’t be counted against
his average since, after all, “the manager
knows I can’t hit left-handed fastball
pitchers”?
If you really want to get serious about
baseball hitting productivity, you ignore
batting average in favor of slugging
percentage, which measures not just the
hits, but what kind of hit it was – single,
double, triple or homer. A player who
has 200 hits, half of which are for extra
bases, is clearly more productive than a
player who had 200 singles. The parallel
for producers would be to measure not
just pure closing ratio, but how productive
each sale could have been.
For example, if a producer has a closing
ratio of 30 percent, resulting in an average
commission per account of $8,000,
is that good or bad? The answer isn’t
determinable from those facts. You need
to know what the potential production
could have been if the producer had
called on the best accounts instead of
the most convenient. Also, does the
$8,000 in commission represent the
total value of the account, or did the
producer settle for only a small piece of
the potential (by failing to offer additional
coverages such as umbrellas, floaters,
financial products and risk management
services)? A baseball player knows when
he approaches the plate his productivity
can range from zero (an out) to maximum
(a home run). Every producer approaches
an account knowing the minimum
possibility (no sale), but how many know
the maximum? In other words, will they
be celebrating a single when they could
have hit a homer run? $300, 000 in
commissions may sound good, but not if it
should have been $750,000 with the same
number of at bats.
No more delays. No producer should ever
have to wonder if they are good. They
should know!
Makin it or fakin it – nostalgic tune or
agency theme song? Your call, coach.
Chris Amrhein, AAI
Co-Chief Fun Officer
www.InsuranceIsFun.com
www.bigi.org
23

Forms & Substance Feature
Delivery Exclusions, Landscapers
and Valet Parking
PAP Delivery Exclusions
The current ISO PAP excludes the use of
an auto as a public or livery conveyance.
Older ISO versions excluded
transporting property for a fee. However,
some company forms exclude “delivery.”
Depending on the precise wording of
the exclusion and the interpretation of
the word “delivery,” these policies may
exclude far more than the ISO forms.
For example:
“We do not provide Liability Coverage
for…any insured while maintaining or
using any vehicle while that insured is
employed or otherwise engaged in any
business of delivery including but not
limited to the delivery of newspapers or
magazines, food or any other products
unless such use is incidental to your
business of installing, maintaining or
repairing furnishings or equipment, or for
farming or ranching.”
An insured was a student who was
working for a law firm. His duties
involved handling the mail room,
cleaning the kitchen and conference
rooms, and delivering papers for the law
firm when needed. He worked about 25
hours a week and averaged one to two
deliveries a day. He was responsible for
an at-fault accident which was denied by
the insurer, citing the above exclusion.
We do not believe that this would be
excluded by the current ISO “public or
livery conveyance” exclusion because
the insured is not holding his vehicle
out to the general public for hire. If the
carrier’s delivery exclusion above
is read literally, there may not
be any coverage. Which raises
the question, if you’re an agent
whose vehicle is insured under
this policy, does it exclude an
accident that occurs while you’re
“delivering” a policy to
an insured?
Read the complete ISO PAP
analysis, including an argument
that the insured’s loss is not
excluded, on the Big “I” Virtual
University.
The CGL and Damage Caused by
Landscapers
A lawn maintenance company was hired
to fertilize a residential client’s lawn. The
lawn was damaged by the application of
the incorrect fertilizer and needed to be
replaced. The carrier denied the claim
based on the determination that the lawn
was part of “your work” and excluded. Is
this correct?
Our “Ask an Expert” service has received
two questions involving this type of loss.
Since this is the season when much of
this work begins, it’s important to be
able to counsel your insureds as to what
their CGL policies may or may not cover.
The CGL has several workmanship
exclusions to avoid turning the policy
into a warranty or performance bond.
Most likely, one or more CGL exclusions
apply to these types of losses.
For example, if the damage occurs
during the application, CGL exclusions
j.(5) or j.(6) probably apply. All they
require is damage to the property of
others caused by the insured or a
subcontractor. Exclusion j.(6) specifically
mentions work that is “incorrectly
performed,” which would be the case
when the wrong fertilizer was used.
If the damage takes place after the
operation is completed, exclusion L.
would apply. “Your work” is defined to
include “work or operations performed
by you or on your behalf.” The spreading
of the wrong fertilizer was the insured’s
work, and it resulted in property damage
to a third party (their lawn) for which the
insured is legally liable.
Read about these and other exclusionary
policy provisions on the Virtual University.
PAP Coverage for Valet Parking
Normally, the PAP covers permissive
users. However, there is an exclusion
for anyone “employed or otherwise
engaged in the ‘business’ of…parking…
vehicles designed for use mainly on
public highways.” So, does the PAP
provide coverage for valet parking at
a restaurant or hotel? Let’s complicate
things: How about valet parking of a
rental car?
Again, permissive drivers are generally
covered under the ISO PAP. However,
this only applies to “your covered
auto,” which is primarily a declared
or “temporary substitute” auto, not a
nonowned auto rented on vacation or
on a business trip. The valet’s ISO PAP
would also not respond because of the
“auto business” exclusion.
This exclusion in the owner’s PAP might
or might not apply.
For a more complete review of the
potential coverage gap presented by
valet parking, including a look at an
important exclusion for physical, go to
the Virtual University.
Bill Wilson is director of the Big “I”
Virtual University.
24 www.bigi.org

Business Auto/Garagekeepers Feature
Care, Custody or Control and Separation of Insureds
In the article, “The ‘Work You
Performed’ Exclusion,” (http://www.
independentagent.com/Education/VU/
Insurance/Commercial-Lines/Auto/
Liability/WilsonWorkmanship01.aspx) it is
pointed out that damage to a customer’s
auto during an ongoing operation, absent
garagekeepers coverage, is often denied
due to the care, custody or control liability
exclusion. However, this might not always
be the case if the Separation of Insureds
provision controls.
Q: “Our insured is a garage. A customer
left his vehicle to have the tires rotated. An
insured employee got into a service truck
to leave and backed into the customer’s
car. The insurer denied coverage under
a business auto policy citing the care,
custody and control exclusion and paid
the claim under the garagekeepers
coverage. We argued that the exclusion
did not apply in that the custody and
control of the vehicle was not being
exercised by the auto policy, the care
custody and control was being exercised
by the garage liability coverage since the
vehicle was parked on the premises and
not being serviced by the service truck.”
A: In the article, “The ‘Work You
Performed’ Exclusion,” it is pointed
out that damage to a customer’s auto
during an ongoing operation, absent
garagekeepers coverage, is often denied
due to the care, custody or control liability
exclusion. However, this might not always
be the case if the Separation of Insureds
provision controls. Here is the exclusion in
the current ISO form:
Care, Custody Or Control
“Property damage” to or “covered
pollution cost or expense” involving
property owned or transported by the
“insured” or in the “insured’s” care,
custody or control. But this exclusion does
not apply to liability assumed under a
sidetrack agreement.
Note that the exclusion applies to THE
“insured” against whom the claim is
made. In this case, the claim is against
the employee for hitting the car and the
customer’s car was presumably not in HIS
care, custody or control, so the exclusion
doesn’t apply to him. He simply ran into
it just as he might run into anyone’s auto
anywhere. If he had been working on the
customer’s car, then it would have been in
his CCC and garagekeepers would be the
appropriate coverage for the claim. Here is
the definition of “insured”:
“Insured” means any person or organization
qualifying as an insured in the Who Is
An Insured provision of the applicable
coverage. Except with respect to the Limit
of Insurance, the coverage afforded
applies separately to each insured who
is seeking coverage or against whom a
claim or “suit” is brought.
The “separation of insureds” provision
in the definition further supports the
contention that the employee who was
negligent in damaging the customer’s
car is covered under the BAP since
the customer’s car was in the CCC of
the named insured/business and the
employee is separately insured for
damaging a vehicle not in his CCC.
The Program of
CHOICE
for Indiana’s Public Entities
Property, Liability & Workers Compensation for Indiana Cities & Towns
We will work with your Insurance Agent
Risk Management Services & Resource Material
Bill Horn
Indiana State Manager
P 317-843-9105 | E bill.horn@indianamip.com
indianamip.com
www.bigi.org
25

Project CAP Feature
© 2011 SECURA Insurance
Success is finding an advantage.
Today, the faster you move, the more likely you are to succeed. Agents know this. That’s why so many
choose SECURA to help their business grow. Call 1-800-558-3405. Write your own success story. SM
Commercial Personal Farm Specialty
26 www.bigi.org

Commercial LInes/CGL Feature
Why the BAP and CGL Should Be Written by the Same Insurer
Author: David Thompson
A tree trimmer has his CGL policy with one
insurer and his BAP policy with another
one. There is an accident involving his
bucket truck so, of course, each insurer
is pointing at the other one for coverage.
This and other situations illustrate why it is
usually a good idea to insure both policies
with one carrier.
Q: “Small claim but a royal pain. Tree
trimmer has a bucket truck that was
shifted by wind and it started to sink into
the ground on one side, causing it to hit a
corner of the pool cage. $1,700 total claim.
The ISO form CGL is stating it is an auto
and therefore not covered, the auto carrier is
stating it is mobile equipment and therefore
not covered. The auto carrier has agreed
to pay half if the GL carrier will also. GL
carrier says great, their share is $850 and it
is a $1,000 deductible, so no recovery. Auto
carrier says the GL carrier must agree to
pay or they won’t. Auto carrier has a $500
deductible, so the insured may get $350 from
them. Both carriers tell me they have no way
to properly insure this loss. Any suggestions?”
A: Two observations. First, this is a
textbook case of why you should try to
put BAP and CGL with the same carrier.
Second, the claim is either covered by the
BAP or not; no 50% deal. Same for the
CGL. Assuming the bucket truck was not
moving down the highway and was set up
for work (raising the workers up and down),
it sure looks like a CGL claim to me. See
the policy wording below:
This exclusion does not apply to:
(5) “Bodily injury” or “property damage”
arising out of:
(b) the operation of any of the machinery
or equipment listed in Paragraph f.(2)
or f.(3) of the definition of “mobile
equipment”.
f. Vehicles not described in Paragraph a.,
b., c. or d. above maintained primarily for
purposes other than the transportation of
persons or cargo.
(2) Cherry pickers and similar devices
mounted on automobile or truck
chassis and used to raise or lower
workers; and
(3) Air compressors, pumps and
generators, including spraying,
welding, building cleaning, geophysical
exploration, lighting and well servicing
equipment.
While driving down the road, a bucket
truck claim is a BAP claim. Once set up for
operation, it’s CGL While a motor vehicle is
not subject to MV laws, this chart applies
(http://www.independentagent.com/
Education/VU/SiteAssets/Documents/PDF/
AutoVsMobileEquipmentChart.pdf )
Here are two other articles that demonstrate
why it is usually a good idea to place CGL
and BAP coverage with the same insurer:
• “Loading and Unloading...CGL or BAP?”
http://www.independentagent.com/
Education/VU/Insurance/Commercial-
Lines/CGL/Definitions/FacultyHandTruck.
aspx
• “Is It BAP or CGL?” http://www.
independentagent.com/Education/VU/
Insurance/Commercial-Lines/Auto/Other/
FacultyBAPCGL02.aspx
www.bigi.org
27

Personal Lines Feature
The REAL Value of a Renter’s Policy (and EXPERT Advice)
Author: VU Faculty
While “expert” sites are proliferating on
the net, it pays to get advice from real
subject experts. Below is a question
and answer provided at a well-known
consumer insurance web site. Compare
their response to the question to that of
some of our faculty.
Q: “I was a renter in the same
residence for nine years, and had
an accidental fire which severely
damaged one room. Not only did our
landlords ask us to leave, but now their
insurance company is coming after us
for the claim. (We received none of this
money, by the way.) We did not have
renters insurance, which I am being
led to believe would not have covered
the dwelling, only the contents or my
personal belongings. I have never heard
of this, and I haven’t recovered from my
own losses. What are my rights and what
can I do to stop this?”
A: You’re right in believing that renters
insurance only would have covered your
personal belongings. Insurance for the
structural space you are living in should
be covered under your landlord’s policy.
Even if your landlord has not purchased
landlords insurance, this does not mean
that liability lies with you. According
to [Here the site names an insurance
company that shall remain anonymous
(despite their indirect connection to
Peter Sellers) because we can’t believe
that someone there actually said this.
- Ed.], the fact that you do not own the
property means that you are not legally
liable for damage done to it. You should
ask your landlord’s company to give you
the rule in writing that allows them to
come after you for payment.
Disclaimer: We are consumer journalists,
not financial planners or insurance
brokers. So, while we try our best
to answer your questions, nothing
we say should be interpreted as a
recommendation to buy or sell any
insurance product, or to provide other
financial or legal advice.
Faculty Responses
To quote Perry White of the Daily Planet,
“Great Caesar’s ghost!!!” Imagine the
potential liability of an insurance agent
if he/she gave this kind of advice! They
have a disclaimer (see above) that they
are only consumer journalists...if so,
why not stick to consumer issues as
opposed to technical advice? Makes you
wonder if some states would prohibit
this as an unlicensed activity...either
insurance or law. In any case, several
of our faculty members couldn’t resist
writing to the “journalist.” Below are their
emails (edited so as not to violate any
community decency standards)...note
that the last one reveals a critical renter’s
policy coverage that’s often overlooked.
Faculty Response
It’s clearly possible that if she had
purchased a homeowners (renters)
policy on her belongings, the policy
would have also responded for the
structural damage caused in the fire.
If she had been negligent in causing
the fire, perhaps by way of allowing an
unattended pan of grease to cause the
fire, then she would in most cases be
deemed to have been negligent and
the “renters” policy would respond for
the subrogation papers the insurance
company has sent her. Clearly, the
insurance company covering the building
feels there is some negligence on the
part of the tenant by way of “coming
after her,” as the article states. Even if
she is not negligent in the fire a renter’s
policy would DEFEND her in the claim
and defense costs alone can easily
bankrupt many apartment dwellers.
When I lived in an apartment over 30
years ago, a tenant in another building
on the complex left an unattended
charcoal grill he had just started to
answer the phone. After 20 minutes
on the phone, he noticed an “orange
glow” coming from his living room and
smelled smoke. His grill had caught the
balcony upstairs on fire, spread to the
roof eaves, and shot down an un-firestopped
attic space. To make a long
story short, the entire 16-unit apartment
building was a total loss, along with the
contents of all 16 tenants, none of which
(according to local news accounts) had
any renters insurance. The tenant soon
discovered that he was responsible for
the destruction of a $600,000 apartment
building and all of the tenant contents.
He was fortunate no one was hurt.
Since an HO-4 policy typically includes
just $100,000 in liability coverage (some
“renter’s” policies only include $25,000
coverage), this illustrates why someone
living in a multiple-unit building like an
apartment or condominium unit has a
great need for a personal umbrella policy
in an amount at least equal to the cost
to replace the building and all of its
estimated contents values.
Your statement of “You’re right in
believing that renters insurance only
would have covered your personal
belongings” is not correct and would
lead one to believe that a “renter’s
policy” ONLY covers personal
belongings, which is certainly not the
case. Liability and defense coverages
are some of the most valuable coverage
provided in the typical “renter’s
insurance” policy.
Faculty Response
I was very disappointed in the reply
made in your Q&A column of June 23,
in regards to a renter who experienced
fire damage to both her personal
property and the landlord’s building.
The reply indicated that damage to the
landlord’s building was not covered by
a renter’s policy. Actually, the industrystandard
renter’s policy (“HO-4”) does
have coverage under the Section II
Liability provision for property damage
to the property of others, if the insured
(renter) is legally liable. There is specific
coverage for what the insurance industry
refers to as “fire legal liability.” That is,
if the tenant causes fire damage to the
landlord’s building, the tenant’s HO-4
renter’s policy will cover the fire damage,
up to the Section II limit of liability,
usually $100,000.
Even if the landlord had insurance,
that does not relieve the tenant of
responsibility. After the landlord’s insurer
pays the claim, the insurer will seek
recovery against any party which might
have negligently caused the damage
(known as “subrogation”). If the tenant’s
negligence caused the fire, the landlord’s
insurer will in all likelihood seek recovery
28 www.bigi.org

Personal Lines Feature
The REAL Value of a Renter’s Policy (and EXPERT Advice)...continued from page 28
from the tenant (whether or not the
tenant has insurance). However, if the
landlord has waived subrogation against
the tenant, his insurer cannot bring an
action against the tenant.
It was also stated that a person isn’t
legally liable for damage to property if
they don’t own it. That is ridiculous! If
someone hits your new car, would you
expect that they aren’t liable because
they don’t own it?? On the contrary, you
would expect the negligent party to pay
for the damage to your car, rather than
your own insurance company. That’s
pretty much how the landlord would feel.
Overall, I do enjoy your web site.
Faculty Response
Just a quick note about the response in
the June 23 Q&A article at your web site...
First, a renter’s policy (commonly
called an HO-4 Tenant’s Form) does,
indeed, cover damage to the occupied
unit, typically up to $100,000, under
the Liability section of the policy.
Normally, damage to property in your
care, custody or control is not covered,
but an exception is made for this and
other situations.
In fact, when I have trained agents in
the past, I often make the point that the
best candidate for a personal umbrella
policy is a renter or condo owner who
can negligently burn down the building
in which they reside, along with the
contents of others...not to mention the
potential liability for loss of life. It’s the
liability insurance in a renter’s policy
that is of the greatest value, not the
meager coverage typically provided on
personal belongings.
In addition, because apartment dwellings
live in such close proximity, when it
comes to potential claims for invasion
of privacy or wrongful entry, they are
even more likely candidates for personal
injury protection than insureds who
own their own single family residences.
Accidentally walking into another
apartment, entering because you heard
something you thought was a call of
distress, or being accused of being a
“Peeping Tom” are all examples of where
personal injury coverage, typically added
by endorsement, can come in handy.
www.bigi.org
Second, with regard to the statement
“According to [anonymous company],
the fact that you do not own the property
means that you are not legally liable for
damage done to it. You should ask your
landlord’s company to give you the rule
in writing that allows them to come after
you for payment.”...
I can’t believe that a [anonymous
company] representative made this
statement...most likely what he/she
said was you usually cannot be held
liable for damage to property you OWN,
not property you do not own. As far
as asking for the “rule” in writing that
allows them to come after you, you’ll
find that “rule” in every freshman law
book in the country...it’s a fundamental
legal principle that you have the right to
recover for damages negligently caused
to you or your property.
So, the landlord’s insurance company,
under the right (by common law or
contract) of subrogation, has every
legal recourse against the tortfeasor
as does the landlord. Most commercial
property policies, though, allow the
landlord to waive this right...so,
ultimately, it’s up to the landlord as to
whether the insurer can pursue this
claim. The way this works in most
cases is that the landlord’s property
insurer pays for the damages, then
subrogates for recovery from the
negligent person’s liability insurer.
The response in this article is completely
inaccurate and a disservice to those
who view it. Even though you have a
disclaimer on the page, I suspect it
would be in the best interest of [web
site] to remove or revise this article. I
hope you will take this “criticism” in the
spirit in which it was intended...to give
notice that you have content with factual
errors in order for you to be able to
better serve your visitors and avoid any
liability that may be incurred.
If I or any of our expert faculty can be of
assistance to you in the future, please
feel free to let me know. [Web site] is an
excellent site for its intended audience
but, like all of us, we’re not perfect
and we can make mistakes. I hope this
information helps.
Related Court Case and
Commentary
The following is commentary provided
by Don Malecki on Tennessee Supreme
Court case:
A RENTAL OF A UNIT
SHOULD REQUIRE PROOF
OF INSURANCE
Who Knows How Large
Those Losses Can Be?
If a condominium owner rents or leases
his or her unit, it might be saving the
lessee a lot of pain, grief, time and
expense if, instead of merely making the
lessee accountable for any damages, the
rental or lease agreement were to also
require proof of insurance. The reason is
that whenever an insurer has to pay for
loss to the property caused by someone
other than the named insured, one can
almost count on an action being filed by
the insurer in subrogation.
A case in point is Travelers Property
Casualty Company of America v.
William Wesley Terry, No. M2005-
020350-COA-R3-CV, Tenn. App. 2007.
Briefly, the insurer filed a subrogation
action to recover damages resulting
from a fire that damaged the
property of its named insured, the
condominium association.
The fire and resulting damages in excess
of $1.2 million were allegedly caused by
an unattended candle in a unit which,
at the time, was being rented pursuant
to a monthly rental agreement. This
rental agreement made no mention of
property or liability insurance. What it
did require was that the tenant was to
repair any damage that resulted from his
negligence.
In its complaint, the insurer alleged
that the tenant lit a candle in the
bedroom and left it unattended.
As a result, the fire damaged the
building and the common areas. (This
insurer did not provide coverage for
the contents or furnishings of the
individual units.)
continued on page 30 ...
29

Personal Lines Feature
The REAL Value of a Renter’s Policy (and EXPERT Advice)...continued from page 29
The Decision Backfires
Temporarily
The tenant not only denied liability but
also filed a motion for summary
judgment which, interestingly, was
granted by the trial court based on the
finding that the so-called “Sutton coinsured
anti-subrogation rule,” which
was adopted by this court in another
case, precluded recovery against the
insured as a matter of law.
The insurer appealed maintaining that
this rule was inapplicable because the
tenant was not in privity of contract
with the insurer or its named insured,
association. In other words, there
was no direct contractual relationship
between the insurer or the association
and the tenant. When this relationship is
lacking, there is no privity.
The court explained that this “co-insured
subrogation rule” had it origin in a
1975 case where a landlord’s property
insurer sued a tenant and his young
son, claiming subrogation rights for a
fire caused by the son. The jury returned
a verdict against the father. On appeal,
the Oklahoma court of appeals held that
the insurer had no right of subrogation
against the father. The reason, the court
explained, was that the law considers a
tenant to be co-insured of the landlord,
absent an express agreement between
them to the contrary—comparable to
the permissive-user feature of
automobile insurance.
As it turned out, the case was remanded
back to the trial court for further
proceedings, because the court could
not conclude whether the tenant was a
co-insured or had a justifiable reason
to believe he was a co-insured under
the association’s property policy. This
decision was based on the fact that (1)
the tenant did not have a contractual
relationship with the association and
therefore was not in privity with the
association or its insurer, (2) there was
proof that the tenant’s rent payments did
not go toward fire insurance premiums,
(3) the rental agreement did not
induce the tenant to believe he would
benefit from the association’s property
insurance policy, and (4) to the contrary,
the rental agreement specifically
provided that the tenant “shall be
responsible for damages caused by his/
her negligence and that of his/her family
or invitees and guests.”
The costs of the appeal were assessed
against the tenant.
Analysis
It is surprising how many times a
tenant of a rental agreement or lessee
of a lease agreement has been able to
escape the subrogation attempts of
insurers by maintaining they are coinsureds.
It happens a lot. In fact, this
particular court stated that there were
only two cases in the past decade
where subrogation was permitted
against tenants. It is still risky to have a
rental or lease agreement that does not
address waivers.
Who would have thought that through
a renter’s negligence, a loss of $1.2
million could result? It does not appear
the unit owner thought about the
enormity of a potential loss—given that
he only required the
renter to repair any
damage stemming from
his negligence. Then
again, maybe the renter
was a millionaire.
This case did not
mention whether the
unit owner maintained
insurance. Surely,
if the building and
common areas
sustained $1.2 million
in damages, and the
candle was within the
unit, the unit’s furnishings should also
have been damaged or destroyed.
In any event, the kind of insurance the
unit owner might have recommended
of the tenant could have been a
Renter’s policy, commonly referred to
as an HO-4—Contents Broad Form.
The Renter’s policy not only provides
coverage for the contents of the named
insured and his/her family members, but
also includes personal liability insurance.
The lease agreement could also require
a stated liability insurance limit, such
as $500,000 or $1 million. One must
keep in mind, however, that the personal
liability insurance does not cover liability
for property damage to property rented
to, occupied or used by or in the care
of an insured, except when the property
damage is caused by fire, smoke or
explosion.
If the renter had such a coverage form,
therefore, its liability for damage to the
unit owner’s personal property would
have been covered. This also begs
the question of what would be covered
if the aforementioned exclusion did
not have an exception for fire, smoke
or exclusion. Since it was only the
unit or interior space that was within
the tenant’s care, custody or control,
presumably the Renter’s policy would
pay for all other damage.
A dwelling fire policy could also be used to
provide contents coverage for the renter
(lessee). Many insurance companies
will also allow personal liability coverage
to be added to the dwelling fire policy.
Limits generally will not exceed $500,000.
Should greater limits of liability be desired
or required, the personal umbrella policy
will provide coverage for these types of
residential exposures.
Some insurers will permit a unit owner to
maintain the HO-6 (Unit Owner’s Form),
even if the unit is held for rental and not
occupied by its owner. This is usually
accomplished by a specific endorsement
granting permission to rent/lease the unit.
This is the more preferable approach,
because it provides the additional
benefit of having Coverage A, Building
Alterations and Additions available to
provide coverage for building items not
covered by the Master Policy.
30 www.bigi.org

IIAI News
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