Category Archives: D&0

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2Q Sees 2.5% Average P&C Rate Increase

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Property and Casualty rates in the United States were up 2.5% on average in the second quarter of 2018, with continued tough conditions for trucking and auto, MarketScout reports.

“Insurers seem to have a longer memory these days. It’s hard to find a commercial insurer who hasn’t suffered from a book of auto/trucking risks in the past 10 years,” Richard Kerr, MarketScout chief executive officer said in a statement. He noted that  previous bad experiences and challenges have meant that fewer insurers are willing to write auto or trucking risks. “The demand is exceeding the supply so rates continue to trend upward,” he said.

Compared to the first quarter of 2018, property, auto, directors & officers and employment practices liability rates saw increases. Business Interruption and general liability rates moderated. Workers compensation rates dropped from minus 2% to minus 3%. All other coverage classifications held steady.
Transportation risks saw a notable rate increase, up 6% in the second quarter of 2018 compared to up 4% in the first quarter. Habitation, service, contracting and manufacturing risks saw a slight rate increase from the first quarter of 2018 to the second. All other industry groups remained unchanged, MarketScout said.
Small accounts saw a slight rate increase while all other accounts were unchanged from the first to the second quarter of 2018, according to MarketScout.

Confronting D&O Insurers’ Efforts To Carve Back Subpoena Coverage

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Whether a government subpoena constitutes a “claim” is a frequently contested issue between D&O insurers and their policyholders. D&O policies—at least with respect to coverage for private companies and individual insureds at any company—typically define “claim” through multiple subparagraphs: first, a broad and generalized subparagraph that usually references a “written demand for monetary or non-monetary relief,” followed by several narrowly framed subparagraphs that address more specific situations, such as “a civil or criminal proceeding commenced by the service of a complaint or similar pleading.” Most courts have held that generalized language, such as any “written demand for . . . non-monetary relief,” must be read expansively to encompass government subpoenas.

Insurers trying to avoid covering costs incurred by policyholders in connection with government subpoenas sometimes respond to these decisions by arguing that the generalized subparagraph should not be read broadly if one or more subsequent specific subparagraphs reference government subpoenas (or government investigations). For instance, an insurer may argue that a subparagraph expressly providing coverage for government subpoenas issued to individuals implicitly narrows the meaning of “written demand for . . . non-monetary relief” to foreclose coverage for government subpoenas issued to corporate entities. Similarly, an insurer might contend that a subparagraph explicitly providing coverage for subpoenas issued by the Securities and Exchange Commission implicitly narrows the meaning the meaning of “written demand for. . . non-monetary relief” to preclude coverage for subpoenas issued by other government agencies. Policyholders should be prepared to reject such arguments, as they ignore both well-established law regarding the interpretation of insurance policies (which prohibits insurers from limiting coverage by implication) and the typical structure of D&O policies (which contemplates that the subparagraphs defining “claim” will complement, not limit, each other).

First, it is well settled that provisions in an insurance policy setting forth the scope of coverage must be understood in their most expansive and inclusive sense for the policyholder’s benefit, while language that would limit coverage must be narrowly and strictly construed against the insurer (especially where that language would negate coverage provided elsewhere in the policy). Additionally, courts and commentators agree that any limitations on coverage must be stated in clear and unmistakable terms and cannot be extended by implication. Further, to the extent that there are any ambiguities in a policy’s terms, those ambiguities must be resolved in favor of coverage. Given these rules of construction, insurers have no basis to argue that a specific subparagraph in the definition of “claim” implicitly removes coverage that would otherwise be available under the generalized subparagraph.

Second, the multiple subparagraphs defining “claim” are intended to supplement, not restrict, each other. Insurance policies are often drafted with what courts have referred to as a “belts and suspenders” approach, and the definition of “claim” in D&O policies is one such example, where the generalized subparagraph is the belt ensuring coverage for a broad range of losses, whether or not they are enumerated in the specific subparagraphs, and the specific subparagraphs are the suspenders providing additional certainty on issues of particular importance to a policyholder. This additive approach to defining “claim” is also mandated by the use of the connector “or” between subparagraphs, a word that courts have consistently held requires that each of the connected provisions be given separate meanings that do not modify each other. This reading is also consistent with the many court decisions holding that a “written demand for . . . non-monetary relief” includes government subpoenas, as those courts reached their rulings despite the presence of multiple specific subparagraphs in those policies’ definitions of “claim.”

For these reasons, policyholders faced with an insurer attempting to deny or restrict coverage for government subpoenas by implication should be prepared to respond forcefully and push for coverage under the broad and generalized subparagraph that promises coverage for any “written demand for monetary or non-monetary relief.”

Business and Employee Safety During Crisis Explored at RIMS 2018

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SAN ANTONIO – Emergency preparedness and action plans amid violent crises were explored during educational sessions at RIMS 2018 here. On Monday and Tuesday, experts discussed ways businesses can prepare for active shooter events and kidnapping crises. Experts agreed that in such events, lives, operations, reputation and finances are all at stake.

Some highlights from the sessions:

Kidnapped! A Crisis Simulation Exercise
Bill Laurence, head of crisis management at S-RM offered a kidnap simulation for a well-attended session on Monday. Laurence provided a scenario, asking the audience to assume a collective role as decision-makers of a fictitious, billion-dollar coffee company that has an executive abducted in Mexico. The group’s assignment was to create a crisis management team and decide who the communicator would be, how they would respond to threats and what information to relay to their insurance provider, among other critical actions.

“The first 24 hours are always the most critical during a kidnapping or ransom scenario,” Laurence said.

The simulation included real-life audio and video examples of terrifying ransom-demanding calls. The team learned that the kidnapper has typically planned the abduction in advance and always has control of the situation – beginning with communication. “For that reason alone, you cannot speed up the process,” Laurence said.

And although things may seem dire, he explained ways to glean information – and feel somewhat positive – even after a brief phone call. “We all react differently to pressure,” he said. “But avoid speculation and always prepare for the next call.”

Read more about kidnapping in a Q&A with the session’s co-host, Denise Balan, senior vice president and head of U.S. kidnap & ransom at XL Catlin, on page 9 in Tuesday’s Show Daily.

Active Threat and Workplace Violence on Campus: Preparedness, Response and Recovery
Craig McAllister, Cornell University’s director of risk management and insurance, opened a session on Tuesday with a discussion of duty of care and the obligation to the campus or work environment.

He pointed out that, in early January, the National Fire Protection Association (NFPA) processed its NFPA 3000 Standard as a provisional one to streamline the program elements necessary for organizing, managing, and sustaining an active shooter and/or hostile event response program. The standard gained even more input following the Marjory Stoneman Douglas High School in Parkland, Florida, on Feb. 14 in an effort to reduce or eliminate the risks, effect, and impact on an organization or community affected by these events

Paul Mills, global kidnap prevention manager at AIG, followed with a segment addressing best practices for violent incident preparation and response. He discussed response and resilience training for employees who need enhanced preparedness with the rise of violence against soft targets.

He noted that advances in technology often are putting people in harm’s way by default. “People are distracted to the point where they are unaware of the threats they face. It’s also delaying and inhibiting their response times,” he said. “Without even realizing it, they often portray victim-like behavior.”

Kendell Moore, senior vice president at the Abernathy MacGregor Group, delved into the key crisis management sources of an organization’s response support, both internally and externally. She used a mass shooting that occurred inside a local business in the western United States (that is also part of a major American chain) as an example of an entity that needed to enact its crisis communication plan immediately after the attack.

Moore offered some crisis communication principles:

  • Media is a conduit, not an audience. “The media needs to catch up to the actions of the business.”
  • Speak directly to the impacted. “It is most important to communicate with victims, loved ones, the community and those who are directly affected.”
  • Take action, not credit. “No statement, no matter how eloquent, can substitute for doing the right thing.”
  • Communicate what matters when it matters. ““What is said first must stand the test of time. So announce nothing and predict nothing that isn’t solid and certain.”
  • Build relationships in the community. ““Work alongside local law enforcement, government officials and those who know the community best.”
  • Listen to people’s needs and requests. “Ask what people need, rather than telling them what you think they need.”

P&C Rates Continue Upward Trend

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The U.S. property and casualty industry continues to show rate increases, with a first quarter composite rate of plus 2%, according to MarketScout. The increase is in all lines except workers compensation, which had a rate decrease of 2%. The trend follows a 2% increase in the fourth quarter of 2017.

By coverage classification, business interruption, inland marine and professional lines all raised rates 1% higher than in the last quarter of 2017. Only EPLI rates moderated.
By account size, rates for medium accounts ($25,001 to $250,000 premium) increased from plus 2% in the final quarter of 2017 to plus 3% in the first quarter of 2018.
By industry group, service contractors, public entities, and energy accounts were assessed larger rate increases in the first quarter of 2018 than in last quarter of 2017. Transportation accounts had a quarter-over-quarter price decrease from plus 5 to plus 4%.
Richard Kerr, chief executive officer of MarketScout noted, “Automobile and transportation exposures continued to experience the greatest rate increases due to increasing expenses and adverse claim development. Insurers are struggling with this segment of our industry. Part of the problem is actual underwriting results, part is expense ratios, and in our view, a larger part is the uncertainty of the long-term prospects for the auto insurance industry.”

He noted that the questionable future of auto insurance could be impacting insurers’ willingness to invest in new safety concepts, pricing models and distribution alternatives. “Autonomous vehicles are going to change the auto insurance industry forever. Many tech firms are working hard to deploy new insurance alternatives, which reflect the lower claims frequency and severity anticipated by driverless or driver assisted trucking exposures. Traditional auto insurer opportunities will shrink unless they adapt their business model to get in the middle of the autonomous vehicle parade,” Kerr said.