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May 2009 Newsletter

LETTER FROM LANDERS

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So, I completed my first Boston Marathon. Along with about 25,000 of my closest friends, I ran 26.2 miles from Hopkinton to Boston in the 113th running of the nation’s oldest marathon. It was a real kick to be in the midst of so many people, all trying their best to do something really hard. Lots of pageantry and the crowds were wonderful. It was something to run through the Wellesley Scream Tunnel, which consists of a quarter mile of college women yelling, cheering and holding “free kisses” signs. And then, there was Commonwealth Avenue, filled with the crowds exiting Fenway Park after a Red Sox win. Somehow, I managed to run my fastest marathon yet and qualified to go back again next year. And I will.

I’ve neglected spring gardening and yard work, though. I’ve got tomato and pepper plants to get in this weekend. Fruit trees need fertilizer and mulch. Brush needs to be cleared on the dam. And, it’s a week past time to mow the lawn. I’ve got a checklist of chores and a weekend that just doesn’t have enough hours.

Although we’ve kept up a regular travel schedule visiting customers throughout Maryland and Virginia, this seems to be the season when visits with our companies start to pick up. I’ve just returned from Arizona, where Nautilus Insurance Company held their annual underwriting meeting. They’ve got new products that will be introduced over the coming months and we’re anxious to roll them out. Next month, Noah McMurray will be spending time at Essex Insurance Company for their underwriting meeting in Richmond. AAMGA’s convention in Florida is coming up in a couple of weeks, where I’ll be spending time with a whole bunch of markets, as well as learning from my colleagues around the country. Jackson Landers has been teaching classes to agents on “Personal Lines for the Affluent”, a subject that he’s been immersed in for the past decade. We’re all trying to continue to find ways to improve our ability and the ability of our producers to serve our customers.

ERRORS & OMISSIONS IN A TOUGH ECONOMY

photo by Thunderchild tm - Creative Commons

Are your customers asking, “Can I get by without E&O coverage this year?” The smart money (and history) says buy the E&O! Times are tough and businesses are struggling. Those that survive will be the ones that make smart decisions. Spending money on E&O insurance is not glamorous and it might seem an easy place to trim expenses, but in these times more than ever, protection against claims is a necessity, not a luxury. Claims against businesses that are service providers are more likely when the economy struggles, for a variety of reasons.

• My clients aren’t paying their bills.
A service provider’s clients may be experiencing cash flow problems and get behind on payments. When the service provider begins exerting pressure on its clients for payment, the chances increase dramatically that the client is going to start making noise about the service being “unsatisfactory” as a way to either delay payment, get the invoice reduced or to justify not paying the bill at all. They may even file suit against the service provider alleging negligence and claiming damages, in an effort to stave off further collection efforts. The odds of this happening increase when it is the service provider who lobs the first ball in the courts. When they take their clients to court to collect, they are often setting up a countersuit. While allegations of negligence may well be baseless, once a client digs in and takes that position it is often difficult and expensive to sort it all out.

• Where did Joe go? He was the only one that knew how to do that.
Another fact of business life in this economy is that business owners are laying off staff, and sometimes it’s the more senior, higher paid employees that are among the casualties. While good business owners and managers strive to maintain high service standards and oversight, the loss of those experienced employees increase the likelihood of a mistake. Customer relationships become strained when the customer has to work with new and unfamiliar staff. Similarly if the service provider’s client lays off senior employees who were key to the project and assigns less qualified staff, this can spell trouble for the success of the project and ultimately for the service provider. All of these things increase the likelihood of a claim.

• Let’s take that job… and that job… and that one over there, too. We need the money!
When business is harder to come by, business owners and managers responsible for “rain-making” may accept projects that are less attractive and might be refused in better times or the projects are riskier, involving difficult or hard-to-please clients. The jobs may not be clearly defined. They may be jobs that involve lots of work and not enough pay. That means taking on more and more projects so that staff and other resources normally allotted to each client are spread too thin. Service could begin to suffer. All of these things increase the likelihood that there will be friction and ultimately, a claim.

There are things that you can do for your client and that might include testing the market to be sure that you’re providing the right coverage at the right price. In doing so, though, you’ll want to be particularly careful to maintain full prior acts coverage if you change carriers. Your insureds may also want to consider whether they’re able to trade a higher deductible for premium savings. It’s important that you lay out all of the facts for your clients, so that a bad choice in a bad economy doesn’t send them from the frying pan into the fire.

A PINT’S STILL A PINT

Photo by Stephen Cummings - Creative Commons

One pint equals 16 fluid ounces. Scientists are pretty much in agreement on that. In the world of ice cream, though, there seems to be some shrinkage going on. We saw a recent press release from our friends, Ben & Jerry, in Vermont, that calls out another ice cream producer:

“One of our competitors (think funny sounding European name) recently announced they will be downsizing their pints from 16 to 14 ounces to cover increased ingredient and manufacturing costs and help improve their bottom line. At Ben & Jerry’s we think downsizing pints in downright wrong. We understand that in today’s hard economic times businesses are feeling the pinch. We also understand that many of you are feeling the same, and think now more than ever you deserve your full pint of ice cream.

We are even more committed today to lead with our values through the quality of our ingredients and how we source them to make the best ice cream possible. So, while our competitor may be experiencing a bit of shrinkage, rest assured that your Ben & Jerry’s will still be standing tall in the freezer. Enjoy!”

So we can, with full confidence, place our order for another big stack of Ben & Jerry’s coupons to send out to producers, along with policies. And, although you don’t have to eat the whole pint in one sitting, sometimes you just can’t help yourself.

HELLO! ANYBODY HOME?

photo by Marcus941 - Creative Commons

We’ve talked about vacant buildings before, but a number of recent phone calls from agents tells me that it’s time to revisit the subject. So let’s see if we can consider a policy provision that’s buried deep in the heart of ISO’s Building and Personal Property Coverage Form CP0010 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 $1,000,000 building saves a few hundred dollars in premium, but walks away from a total loss with $150,000 missing. Worth it? Try explaining that one to the judge when the E&O claim comes

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 try to put a square peg in a round hole. 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.

UMBRELLA FOR BIG SHOTS

photo by Eric Kilby - Creative Commons

Do your clients include any of the following high profile individuals?

• Professional Athletes
• Television Personalities
• Public Officials
• Well-known Musicians
CEOs of Fortune 100 Companies
• Actors

Standard carriers are often reluctant to provide personal umbrella liability coverage to individuals deemed to be “target” risks. Yet, these clients, often with considerable assets to protect, are the very ones that most need to high level of protection that an umbrella policy offers.

We’ve got a solution. U. S. Liability Insurance Company offers a personal umbrella liability product that’s specifically targeted towards celebrities. The policy provides true worldwide coverage and limits of up to $10,000,000 are available. Defense costs are paid outside of the policy limits.

We’ve got a specific application for this coverage and you can get it at landersunderwriting.com or by calling us. Or, if you’re a do-it-yourselfer, you can click on the “Get Quote” button on our website and get terms directly through the magic of the internet.

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