Property Casualty Today
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154 PROPERTY CASUALTY TODAY Issues in the P&C Industry, 10 Liability Insurance, 83 The Business of Insurance, 16 Workers Compensation, 89 The Structure of Ins Companies, 27 Boiler / Machinery, 94 Insurer Safety, 30 Burglary Insurance, 96 Policy Construction, 40 Sprinkler Insurance, 100 Fire Insurance, 44 Financial Responsibility, 101 Earthquake Insurance, 53 Automobile Insurance, 102 Homeowners Insurance, 56 Business & Insurance Law, 124 Farmowners Insurance, 61 Legal Issues of Marketing, 161 Mobliehome Insurance, 63 Agent Sale Conduct, 184 Special Multi-Peril Policies, 64 Managing Agent Conflicts, 209 Fair Plans, 69 Consumer Protection, 224 Ocean Marine Insurance, 70 Insurance That Fails, 231 Inland Marine Insurance, 72 Surety & Fidelity Bonds, 78 2 CONTENTS Issues Shaping the P&C Industry Mergers & acquisitions 10 Personal lines 10 Property / casualty issues 10 Commercial lines 11 Alternative markets 12 Surplus lines 12 Distribution channels 14 Reinsurance 15 Tort reform & lawsuits 16 The Business of Insurance Business of insurance 16 Business of insurance, making money16 Expense ratios 17 Insurance company's expense ratios 17 Insurance company's loss ratio 17 Loss ratio 17 Profitability of insurance companies 17 Business of insurance, investments 20 Nonadmitted assets 19 Operating cash flow 20 Quick liquidity 20 Reserves 21 Business of insurance, who insurers owe 22 Junk bond investments 25 Real estate investments527 Alien insurer 28 Foreign insurer 27 The Structure of Insurance Companies Insurance companies, organization 27 Insurance companies, structure 27 Insurance companies, classes written 28 Mutual insurer 28 Insurance companies, marketing systems 29 Insurer Safety Insurance company safety 30 Insurance company failures 31 Insurance regulatory changes 34 Risked based capital 34 Solvency & financial enforcement trust 36 Compact approach 37 Rating changes 39 Policy Construction Insurance policy construction 40 Insurable interest 40 3 Open policy 43 Valued policy 43 Endorsement & policy conflicts 44 Endorsements 44 Fire Insurance Fire insurance 44 Fire policy, interest insured 44 Exclusions, standard fir policy 47 Fire insurance, exclusions 47 Fire policy, exclusions 47 Fire insurance, conditions 47 Flat cancellation 49 Short rate cancellation 49 Fire insurance, endorsements 50 Fire insurance, rates & premiums 54 Fire rates, basis 53 Earthquake Insurance Earthquake insurance 53 Multi-peril policies 53 Multi-peril policies, covered perils 53 Homeowners Insurance Homeowners insurance 56 Multi-peril policies, exclusions 56 Farmowners Insurance Farmowners policies 61 Unscheduled farm personal property 61 Mobilehome Insurance Mobilehome policies 63 Mobilehome insurance, eligibility 63 Special Multi-Peril Policies Special multi-peril policies 64 Fair Plans Fair plans 69 Fair plans, purpose of 69 Ocean Marine Insurance Ocean marine insurance 70 Inland Marine Insurance Inland marine insurance 72 Inland marine insurance 72 Surety & Fidelity Bonds 4 Surety & fidelity bonds 78 Surety 78 Administrator's bond 80 Fiduciary bond80 Glass Insurance Glass insurance 82 Glass insurance, exclusions 82 Liability Insurance Liability insurance 83 Strict liability 84 Vicarious liability, examples 84 Completed operations insurance 87 Contractual liability 88 Liability gap coverage 88 Liability gap coverage policies 88 Workers’ Compensation Worker compensation insurance 89 Workers' compensation insurance 89 Boiler & Machinery Insurance Boiler & machinery insurance 94 Boiler & machinery insurance 94 Burglary Insurance Burglary insurance 96 Burglary insurance, exclusions 97 Sprinkler Insurance Sprinkler leakage insurance 100 Sprinkler leakage insurance 100 Financial Responsibility Laws Financial responsibility laws 101 Automobile Insurance Automobile assigned risk plans 102 Automobile insurance 104 Automobile insurance, required conditions 104 Automobile insurance, comprehensive 107 Automobile insurance, family 108 Automobile insurance, uninsured motorist 108 Automobile insurance, business 118 Business & Insurance Law Business & insurance law 124 Court system 124 Hedging 125 5 Risk & liability 125 Tort, civil action 126 Defamation 126 Liability, without fault 127 Contracts 128 Recision 128 Judgement, statute of limitation 129 Statute of limitation, judgement 129 Statute of limitations, oral contract 129 Bankruptcy 130 Personal injury law 131 Agency law 132 Ostensible authority 132 Employment law 135 Ownership law 136 Partnership & corporation law 139 Corporation 141 Corporations, officers & directors liability 142 Officers & directors liability 142 Real estate law 142 Landlord & tenant law 145 Lease, legality of 145 Written lease, legality of 145 Miscellaneous law 148 Deceptive advertising 149 Good Samaritans 149 Parents liability for children 149 Bad check law 150 Tree, ownership 150 Attractive nuisance law 150 Dog bite law 151 Insurance law 151 Insurance contracts, meaning of 153 Meaning of insurance contracts 153 6 Legal Issues of Marketing Insurance Legal marketing issues 161 Legal conduct for agents 162 Agency agreement, liability 164 Liability based on agent duities 163 Law of Agency 165 Marketing organization, cluster 166 Agent vs broker 168 Conflicts through contract disputes 170 Contract disputes 170 Agent promises 172 Policy ambiguity 173 Agent negligence & bad faith 174 Agent torts 173 Agent relationships, conflicts 175 Insurer claims against agents 177 Insurer failures, agent liability 180 Agent Sales Conduct Sales conduct 184 Sales conduct 184 Sales conduct, choosing companies 186 Asset-default test 191 Risked based capital 190 Sales conduct, choosing product 192 Process of risk management 192 Risk management 192 Risk management rules 192 Speculative risk 192 Sales conduct, life/health 192 Sales conduct, property/casualty 202 Loss control 203 Quotes & illustrations 208 Sales conduct, quotes/illustrations 208 Managing Agent Conflicts Managing agent conflicts 209 Agents, statutory duty 211 Statutory duties, agents 211 Redlining 214 Twisting, churning 214 Agent ethics 215 Grace vs Interstate Life 215 Agent disclosures 216 Errors & omissions insurance 219 Errors & omissions, exclusions 219 Ratification 219 Errors & omissions, limitations 219 Office protocol 221 Parol evidence vs hearsay 221 Consumer Protection Issues Consumer protection issues 224 7 Insurance advertising 224 Defamation 226 Unfair insurance practices 226 Deceptive business practices 227 Unfair competition 229 Insurance That Fails to Insure Insurance that fails to insure 231 Insurance, what goes wrong 231 Legal maneuvers, insurance litigation 232 Agent records 233 Agent records 233 Drafting history 233 Insurance litigation 235 Triggers of coverage 235 Continuous theory 236 Duty to defend 237 Lost policies 238 Venue 238 Concealment 240 Misrepresentations 240 Limitations on coverage 241 Settlement disputes 242 State Guaranty Funds, pay off 243 State Guaranty Funds, protection of 244 8 Agent Blunders & Conflicts A.G. Edward vs Drea 245 Alaniz vs Simpson 246 Bedford vs Connecticut 247 Bell vs O'Leary 247 Bitz vs Knox 248 Blumberg vs Paul Revere life 248 Brill vs Guardian Life 249 Cunningham vs PFL Life 250 Daniel vs Florida 250 Everly vs Gregary 252 Fitzpatrick vs Hayes 253 Free vs Republic 252 Goebel vs Suburban 254 Goebel vs Suburban 254 Heritage Mutual vs Stevens 256 Levine vs Allamerica 259 Life Investors vs Young 259 Mate vs Wolverine 260 Metropolitan Life vs Haney 260 Moss vs Appell 260 Perelman vs Fisher 262 Rieger vs Jacue 263 Smith vs Dodgeville 264 Southwest vs Binsfield 265 State Farm vs Gros 265 New Frontiers for Agent Conflicts Agent conflicts, new frontiers 271 American Disabilities Act 272 Experimental treatments 272 Language barriers 273 Contamination 274 EIL vs CGL policies 273 Sick building syndrome 274 Asbestos 274 Lead 274 Electronics Commerce & Insurance Sales Electronic commerce, insurance sales 277 Internet, insurance users 280 World wide web 280 Internet insurance sales 281 Insurance malls 282 Single source sale site 281 Vertical insurance mall 282 Internet insurance sales, legal aspects 283 Electronic payments, Internet 287 Consumer disadvantages, internet sales 292 Internet sales, consumer disadvantages 292 Internet insurance sales, regulators 293 Internet insurance sales, security 295 Encryption 296 Digital signatures 297 9 Beyond the Insurance Sale Beyond insurance 298 Expanding liability policy 299 Asset protection planning 300 Deep pocket pursuits 300 Free alienability of property 301 Asset protection, whole vs sum of parts 301 Governing law 301 Whole vs sum of the parts 301 Fraudulent conveyance 302 Creditor access 303 Homesteads 305 Multi-entity protection 307 Offshore creditor protection 307 Limited liability company 308 10 ISSUES SHAPING THE P&C INDUSTRY MARKET CONDITIONS There is a four letter word that most agents use to describe the recent and near-term P&C market . soft. The late 90’s have seen a significant decrease in general pricing (premiums) while underlying claims, in most cases, have gradually increased. Many say that the two conditions actually crossed and the result is finally beginning to show up on company balance sheets. Industry experts point to the A “soft” P&C market is nothing new. The last hard fact that the soft P&C market is market was 1985. nothing new. In fact, the last “hard” market was in 1985. The exception has only been in a few geographic marketplaces and certain types of P&C business. For example, homeowner lines tightened considerable after the Northridge, California earthquake where large direct writers decided