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July 2008 Newsletter

LETTER FROM LANDERS

Harry's Signature

July. Tomatoes are ripening on the vine. I’ve got Brandywine, Cherokee Purple, Mortgage-Lifters and some of those little grape tomatoes that just keep on coming. I eat most of those while I’m in the garden – they don’t even make it to the kitchen. The fruit trees seem to be working out okay. We fought off the early cases of cedar rust and I’ve sprayed with a kaolin solution (essentially, clay) that’s supposed to peremptorily ward off those darn Japanese beetles that are ready to invade.

I’ve returned from vacation on the Outer Banks, tanned, rested and ready. It was one of those lazy vacations, where the agenda was: Read. Nap. Eat. Nap. Go into water to cool down. Read. Nap. Repeat. I did make it a point to get up before dawn, when it was still relatively cool, for a run on the beach. I’ve started training for a fall marathon. This is the year that I’m trying achieve a time that will qualify me for entry in the Boston Marathon. We’ll see how that goes.

I’ve been thinking about what it is that distinguishes those producers with whom we have the best business relationships from those who don’t quite fit into that category. A lot of it really seems to come down to chemistry. We work well with people that we like. Who doesn’t? We enjoy the challenge of getting a phone call, presenting an insurance problem and inviting our collaborative help in coming up with a solution. There are some folks who enjoy thinking on their feet, talking things through and asking pertinent questions. They find satisfaction in coming up with a plan and executing that plan. We like to think of ourselves as being intellectually curious and just seem to get along well with those who share our curiosity.

The latest version of landersunderwriting.com is now available for your listening and dancing pleasure. Downloadable applications are still available, but we’ve sorted them into categories, so you won’t have to spend quite so much time searching for the one that you need. This newsletter is available on the site, along with archived copies of past editions. We’ve even got photos, so you can see exactly who you’re dealing with.

There’s nothing like ice cream on a hot summer day. And we’ve got plenty of Ben & Jerry’s coupons that we just love sending out along with insurance policies. Come and get ‘em.

AND NOW YOU KNOW… THE REST OF THE STORY

MShades - Creative Commons

You all know about Franz Kafka, right? The Bohemian novelist who wrote the unforgettably creepy The Metamorphosis, in which a man turns into a cockroach. “When Gregor Samsa woke one morning from restless dreams, he found himself transformed in his bed into a monstrous insect.” That Franz Kafka.

It turns out that writing didn’t pay all of the bills for Kafka. He had a career in the insurance business, first working at the Assicurazioni Generali, a huge Italian insurance company. The working hours at Generali interfered with Kafka’s writing, so he left and found employment with the Worker’s Accident Insurance Institute for the Kingdom of Bohemia. They, apparently, offered more congenial conditions.

It was at the Worker’s Accident Insurance Institute that Kafka came up with the idea of mandating the use of safety helmets for industrial workers. Worker’s in Bohemia’s steel mills were being killed at an alarming rate and Kafka’s innovation led to a dramatic reduction in on-the-job injuries. He received a medal for this work in 1912. Two decades later, when construction began on the Golden Gate Bridge in 1933, that job became the first construction site to mandate that all employees wear hard hats.

Who knows? Perhaps it was while pondering the nature of Gregor Samsa’s protective exoskeleton that Kafka had a brainstorm. Could be. Who says there’s no room for creative types in the insurance industry?

A MIGHTY WIND

GIuser.com - Creative Commons

The 2008 Atlantic hurricane season is here. In an average year, we get ten tropical storms and six hurricanes. Forecasters are predicting a somewhat busy season this year, with fifteen tropical storms, of which eight will become hurricanes. This prediction gets even further refined as four of those eight hurricanes will become “major” storms, with sustained winds of over 110 miles per hour.

This might be a good time to remind producers that Landers Underwriting does have capacity for coastal commercial property. It’s not unlimited capacity and that doesn’t mean that we’ll take all comers, but we do welcome your submissions. ACORD applications will get us started, and we’ll ask that you provide specific details as to distances from the coast, elevations and any specific windstorm protection, such as storm shutters. Sometimes the answer to getting coverage placed can be as simple as including a somewhat higher deductible as respects windstorm claims.

Although we’ve heard talk of coastal property owners complaining about lack of availability of insurance, our experience is that that’s just not the case. While there may be some affordability issues, there’s still plenty of appetite for property business in Maryland and Virginia. And, even as respects the question of affordability, it sure ain’t Florida.

Oh, and I’d be grateful if those hurricanes would just stay away from the Outer Banks during my vacation, thank you very much.

GET YOUR RED HOT COLLECTOR CARS

JanZio - Creative Commons

Collector cars take in a lot of territory. There’s the 1954 Mercedes W196, introduced at the 1954 French Grand Prix at Reims and driven by legendary drivers Juan Manual Fangio and Stirling Moss, valued at $24,000,000. And, then, there’s the 1965 Ford Mustang, a fun cultural artifact, valued at around $25,000. Chubb Group of Insurance Companies is writing coverage on the whole gamut of collector vehicles on a form that is the best available in the market.

While the coverage is not intended for vehicles used on an everyday basis, there are no mileage restrictions. Unlike with other carriers, the policy does not limit coverage for hobby use of your vehicle in collector activities, exhibits and parades. If your client wants to put the top down and take his sweetheart for a Sunday drive in the country, he’s perfectly welcome to do so.

As you’d expect, there are important coverage features provided by Chubb. Automatic coverage for newly acquired collector cars for 30 days. Coverage for vehicles while they’re at a repair shop. Agreed value. Customer choice of body shop for repairs. Coverage for unscheduled trailers up to $3,000. Towing to the insured’s shop of choice (which could be a long way for a specialized mechanic). Safety and security inspections for storage facilities with large collections. Referrals to top renovations specialists when needed. Not to mention Chubb’s unsurpassed reputation for claims-handling excellence.

It’s not real complicated to place coverage. In addition to an ACORD application, we’ll want to see a photo of the vehicle and there’s a supplemental application (available at landersunderwriting.com) to be completed. When the value of a single vehicle is $500,000 or greater or an entire collection of vehicles is valued at $1,000,000 or more, a completed high value supplemental worksheet (again, available on our website) is required. Let’s write some of these risks.

THE PORCH LIGHT’S ON, BUT NOBODY’S HOME

IntangibleArts - Creative Commons

The current troubles in the real estate market mean that there are more vacant buildings. That means it’s time for a review of procedures for dealing with insuring vacant property.

Let’s start by talking about a policy provision that’s buried deep in the heart of ISO’s Building and Personal Property Coverage Form CP0010. Can I do it without sounding like an insurance policy wonk and/or putting everybody to sleep? Probably not, but let’s try because it’s important.

We’re going to take a careful look at the Vacancy clause. Frequently, when an occupied building becomes vacant, insureds and their brokers will want to hold onto a standard carrier’s policy for as long as the carrier will let them get away with it. While it may seem advantageous to preserve the lower rate, as compared to what a surplus lines carrier would charge for a knowingly vacant building, there are pitfalls.

If the building has been vacant for more than 60 days, coverage for vandalism disappears. So, when somebody breaks in and spray paints graffiti all over your client’s walls – claim denied.

Or how about this? Even if the loss is covered – say the building burns down – the amount paid is reduced by 15%. So, the owner of a $100,000 building saves a couple of hundred dollars in premium, but walks away from a total loss with $15,000 missing. Worth it?

We’ve seen some folks try to get away with calling a building occupied because they’ve got a desk or a few wooden pallets sitting in the middle of an otherwise empty building. That doesn’t cut it. The ISO form says that “a building is vacant when it does not contain enough business personal property to conduct customary operations”. A pile of junk does not equal customary operations.

Don’t put your relationships with your standard carriers and your clients in jeopardy by hanging onto a policy that’s outlived its usefulness. Landers Underwriting understands how to underwrite vacant property. Try us.

PAPERWORK REDUCTION NOTICE

Roland Tanglao - Creative Commons

For real. As of July 1, 2008, it’s easier to write business with a surplus lines insurer in the Commonwealth of Virginia. You know that form that you have to complete, giving the names of admitted companies unwilling to write a risk, along with names of underwriters, location of offices and dates of declinations? The form that we always had to bug you to get back before we could bind coverage? Gone.

The Virginia legislature determined that there was no purpose to requiring this information, as long as consumers are properly advised that the insurer is not licensed nor regulated by the Commonwealth and that there is no protection under the Virginia Property and Casualty Insurance Guaranty Association Act. We provide this information, along with our quotes, by means of Virginia Form SLB-9, and expect producers to furnish it to the client. Additionally, we attach the form to the front of the policy, when it’s issued.

The reality is that market forces have always dictated that coverage would be placed in the admitted market, rather than through surplus lines carriers, if possible. Agents know the appetites of their markets and it just didn’t make sense to force them to make submissions to carriers on risks that were clearly unacceptable to those markets. The law now reflects that reality.

Now, if only Maryland would follow suit.

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