While You Are Sleeping?

You have read a lot and taken steps to limit your children's access to certain areas of the Internet, but have you given a minute of thought or checked with your Independent Insurance Agent about exposure to personal injury claims? You should have, especially if you have adolescent children.

Up until 10 or 15 years ago, chances were remote that a household would be sued for libel, slander, invasion of privacy, or some other offense. Unless they were picked up in a publication, damaging comments tended to remain within small circles of people and faded away soon after they were uttered.

In the Internet age, however, the potential for personal injury claims has increased substantially. Thanks to the global reach of e-mail, blogs, and shared sites such as MySpace and YouTube, damaging comments can be instantly transmitted to millions of people throughout the world and live on, so to speak, in electronic files that may never be fully expunged.

The growth in personal electronic communications is staggering. According to an August 2006 report by General Reinsurance Corporation, an estimated 57% of American teens had posted material on the Internet; and more than 53 million American adults had created online content. Those figures do not include the text and photos shared in supposedly private e-mails.

As a result of this communications revolution, households and personal lines insurers are seeing personal injury suits filed by individuals who have been ridiculed in electronic communications or had embarrassing information or photos of themselves posted online. Businesses are also taking legal action against “gripe sites” and individuals who post disparaging comments about their products and services online.

“The concern [today] is that the trickle of claim activity may become a torrent, as Internet usage continues its sharp growth among younger, and perhaps less worldly, insureds.” one report begins.

The American Association of Insurance Services (AAIS) has responded to the transformation in personal injury exposure by introducing new policy language for personal injury coverage.
AAIS is a national advisory organization that develops policy forms and rating information used by more than 600 property/casualty companies throughout the United States. Several states have already approved a comprehensive revision of the AAIS Homeowners forms, due to take effect in some states on July 1, 2007.

Among other things, the revision introduces several changes in wording in the optional endorsement for providing personal injury coverage.

First, the definition of “personal injury” is modified to explicitly include injury that arises from electronic publication of material that slanders or libels a person or organization, disparages the products or services of a person or organization, or violates another’s right to privacy.

With coverage for electronic publication established, the revised AAIS endorsement then clarifies the extent of coverage for electronic
publication by implementing a new exclusion that includes a key exception. This new provision generally excludes coverage for personal injury arising from “chat rooms,” "bulletin boards,” “gripe sites,” and other electronic forums that an insured hosts or controls. However, it contains an exception that preserves coverage for personal injury arising from content posted or provided by an insured.

Thus, in a general sense, the exclusion and exception are crafted to preserve coverage for an insured’s own comments, but not for his or her potential liabilities as a publisher of the comments and ideas of others.

In today’s world, one’s liability for personal injury does not necessarily end after a libelous, slanderous, or compromising comment is transmitted for the first time. A key characteristic of modern electronic communications is that the person initiating a communication usually loses control of it once it is released into cyberspace. No one can completely prevent others from forwarding malicious e-mails, or from copying malicious Web content and passing it along, even if the original is “taken down.”

This characteristic of electronic communications is raising legal questions that are now being weighed in the courts. When does publication happen? Is existing content on a blog re-published anew—and, thus, potentially a new offense—every time the blog is updated with additional new content? What is the extent of liability for the originator of injurious content when others link to it, or when it finds its way into search engines?

The one thing you can do is make sure your Homeowners Insurance has the broadest coverage possible for this activity, that you have an Umbrella policy that gives you comfort so you can go back to sleep.

Canadian Excise Tax on Insurance

The Canadian federal excise tax imposes a 10 percent premium tax on entities resident in Canada, including international corporations, that place insurance against risk in Canada with insurers not authorized by federal or provincial insurance authorities. The tax is also applicable when coverage is placed by a non-resident broker or agent — even if the insurer is authorized in Canada.

The tax furthermore applies to master controlled programs where a non-Canadian parent company purchases insurance for a Canadian subsidiary. The involvement of a
Canadian broker or the Canadian branch of a global broker or underwriter may or may not
change the situation. For the Canadian government, the primary source of coverage takes
precedence.

The local buyer must be able to prove that the Canadian agent/broker was not merely processing the document(s). On admitted master controlled programs, the primary non-resident broker is typically considered the original point of contact and therefore the Canadian government considers the tax applicable.

Canadian tax authorities recently changed the way the federal excise tax on insurance premiums is collected. The tax authorities will no longer forward tax notices to insurance buyers but instead the insurance buyer must file an excise tax return (form B243E) and remit the federal excise tax by April 30 of each year. Previously, the tax authorities invoiced insurance buyers by forwarding to them a Notice of Excise Tax. These notices were derived from the excise tax returns submitted by brokers or insurers.


If the Canadian federal government discovers unpaid premium taxes, they will likely charge the 10 percent tax, plus interest, for current and prior years. They may also disallow the insurance premium (current and prior years) as a legitimate business expense for other tax purposes. Sorting out such problems can be time-consuming and costly.
In addition to the federal excise tax, there are provincial taxes on unlicensed coverage. The tax rates range from two percent to 50 percent. The latter is imposed by the province of Alberta.
Ontario, Quebec and Newfoundland have an additional provincial sales tax on insurance premiums. Ontario charges eight percent on all lines except Auto, for which there is no tax in respect of any premium payment due after March 31, 2004. Quebec levies nine percent for all lines except Auto (for which the rate is five percent). Newfoundland charges 15 percent on all lines. Some lines are exempt in some provinces — automobile, surety, agriculture and reinsurance contracts to name a few.


Some classes of insurance are exempt entirely under the Federal Excise Tax Act. These include Personal Accident, Life, Sickness and Marine. The point -- If you are insured or insuring in Canada check with your accountant.

Risk Managers Urged To Prepare For Pandemic

It's not a question of if a pandemic will happen, but a question of where and when, said Michael Osterholm, director for the Center for Infectious Disease Research and Policy.

Osterholm was the keynote speaker April 30 at the Risk and Insurance Management Society's annual conference in New Orleans. He urged risk managers to take the lead in planning how to respond to a pandemic for their companies, their communities and their families.

The risk of a flu pandemic spreading across the globe is greater today than it was in 1918, when a deadly flu killed about a half a million people in the United States alone. Osterholm said with improved transportation, diseases can be spread through airplane travelers very quickly.
Also, while some argue that improved medical technology would help prevent a flu pandemic from taking so many lives, Osterholm said there's a shortage of beds in hospitals and medical staffs.

For instance, there are only 105,000 ventilators in U.S. hospitals, which tend to keep a two-day supply of oxygen on hand, Osterholm said. "We'd run out of oxygen before we ran out of ventilators," Osterholm said.

In addition to the medical system being overwhelmed, Osterholm said communities would have to find a way to manage the number of corpses. "We'd run out of caskets overnight," Osterholm said. "Most communities don't have plans."

And a pandemic would also have tremendous economic ramifications. In the recent SARS outbreak, 80% of flights in to and out of Hong Kong were cancelled for 10 weeks.

(By Meg Green, senior associate editor, Best's Review: Meg.Green@ambest.com) Copyright 2007 A.M. Best Company, Inc.

Read The Fine Print - Part II

Previously, we have cautioned about contractual indemnity language and how if you are not careful you can become exposed as a result of contractual risk transfer. Well contractual risk avoidance is present even where you might not expect it, such as insurance policies. Exclusions to coverages are a traditional way of insurance companies saying you are covered on one hand and taking it away with the other. If you and your Independent Agent aren't careful what you do every day may be the one thing excluded from your insurance. Here are just a few examples -- Lobbyist Policies containing an exclusion for Lobbying activities; Union Insurance excluding Organizing activities; Law Office E&O coverage excluding attorneys acting as Fiduciaries; the list of exclusions to coverage is growing faster than Kudzu in a swamp.

When that policy arrives in the mail don't just stick it in a drawer. More importantly, make sure that your Independent Agent has a good understanding of what you do so he/she can review the exclusions when they come in as well. Finally, just because the original policy doesn't obtain an exclusion do not assume at renewal that the new policy is identical to the old policy.

TV commercials make you think that purchasing insurance is just like buying a book on Amazon. Nothing can be further than the truth. If you are not careful and well advised you may "save 15%," but get nothing for the 85% you pay.

Terrorism Insurance

If the terrorism insurance program were allowed to expire, coverage would become largely unavailable and unaffordable, and the gears of commercial real estate would grind to a halt, according to the National Association of Realtors(R) and the Coalition to Insure Against Terrorism.

"The potential unavailability of terrorism risk insurance at the end of this year impacts our financing agreements and potentially hurts the commercial real estate market," said Joseph Ditchman, former president of the Ohio Association of Realtors(R) and a partner at Colliers Ostendorf-Morris, one of Cleveland's largest commercial real estate firms.

Speaking on behalf of NAR and CIAT in testimony before the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Ditchman urged Congress to extend the coverage that was originally enacted after September 11, 2001, and extended in September 2005. "This hearing recognizes that the essential facts have not changed from when Congress enacted the Terrorism Risk Insurance Act in 2002. Terrorism continues to be an unpredictable threat."

NAR agrees with a set of joint principles that the new legislation should contain that were developed by CIAT, along with the American Insurance Association. "We agree that the new legislation should be long term, eliminate the distinction between foreign and domestic acts of terrorism, and ensure coverage against losses from nuclear, biological, chemical or radiological events (NBCR)," said Ditchman.

NAR believes including those principles in legislation will strengthen the terrorism risk program. "The principles strengthen the economic security provided to the commercial real estate market by reducing the uncertainty of terrorism coverage availability, and covering most conceivable forms of terrorist activity," according to Ditchman.

In earlier reports, the Government Accountability Office and the President's Working Group on Capital Markets determined that no meaningful amount of insurance against NBCR events is available in the property market today, notwithstanding that TRIA backstops such insurance. NBCR events have been described as virtually uninsurable and there does not appear to be any mechanism to price such coverage. "To make sure businesses have access to this important coverage, we urge Congress to ensure that NBCR perils be added to the 'make available' requirements under TRIA," Ditchman said.

NAR testified that it believes that the "proper" long-term solution should focus on what private markets have been unwilling or unable to do. "The ideal solutions must enable businesses to purchase insurance for the most catastrophic conventional terrorism risks, provide adequate insurance capacity in all major commercial real estate markets, particularly in high-risk urban areas, and provide meaningful insurance against the so-called NBCR risks," said Ditchman.
NAR believes that this comprehensive approach can be an ideal program that will over time seek to reduce the federal role in the conventional terrorism markets and will maximize long-term private capacity by facilitating entry of new private capital.

Long Term Care Costs are Skyrocketing

Yearly Long Term Care Costs Increase 15% Since 2004 to Nearly $75,000 in 2007 According to Annual Study by Genworth Financial

Additional Polling Shows 75% of Americans Have No Long Term Care Plans
RICHMOND, Va., April 3 /PRNewswire-FirstCall/ -- Genworth Financial's (NYSE: GNW) 2007 Cost of Care Survey found the average national cost of care for nursing homes, assisted living facilities and in the home has steadily increased over the past four years and has reached new highs that exceed most household incomes in the U.S.(1) The rising costs of long term care may, therefore, present difficulties for many Americans should they need to pay for long term care out of their own pockets.

A separate national poll conducted by Public Opinion Strategies for Genworth Financial with input from the Alzheimer's Association found that 75 percent of Americans have made no long term care plans and 59 percent expressed concern about being able to pay for long term care. Almost half of the respondents (44 percent) incorrectly believe that Medicare or their private health insurance will pay for their long-term care needs. In actuality, health insurance and the federal Medicare program do not generally cover long-term care.

Genworth's annual benchmark study surveyed more than 11,000 nursing homes, assisted living facilities and home care providers in all 50 states and the District of Columbia. It was conducted by CareScout between January and February 2007 to gain a comprehensive view of long-term care expenses. The 2007 Cost of Care Survey, which offers national, state, and local cost information is available at http://www.genworth.com.

According to the 2007 Cost of Care Survey, the average national cost in 2007 of a single year in a private nursing home room is $74,806. To put this into context, one year in a private nursing home room costs nearly double the average full 4-year college degree in the U.S., including tuition, room and board (College Board's national average for public colleges is $51,184 for four years, making a single year in a nursing home 46 percent more expensive).

Seventeen U.S. Insurance Companies became Financially Impaired in 2006

Seventeen U.S. insurance companies became financially impaired in 2006, despite a respite for property/casualty insurers from two consecutive turbulent hurricane seasons and more diversified asset portfolios among life/health insurers, according to two new A.M. Best Co. special reports, "2007 Annual U.S. Life/Health Impairments" and "2007 Annual U.S. Property/Casualty Impairments."

The property/casualty report found 15 insurers in those lines of business became impaired last year, a rate of 1-in-233 companies. While any impairment can be a hardship to policyholders and employees, 2006's impairment rate is half the historical rate of the past 38 years. So far in 2007, A.M. Best has identified one public impairment: Vanguard Fire & Casualty Co. Florida regulators placed that company in rehabilitation in January. Vanguard Fire & Casualty was never rated by A.M. Best.

Of the two life/health companies identified as impaired in 2006, one is a known confidential supervision. The other impairment is Security General Life Insurance Co., which was issued a cease-and-desist order by the Oklahoma Insurance Department last September. It was placed in rehabilitation in November. The company was not rated by A.M. Best at the time of impairment. 2006's impairment rate of 1-in-769 life/health companies continues a seven-year trend of below-average impairment rates.

A.M. Best designates an insurer financially impaired as of the first official regulatory action taken by an insurance department. That marks the point when an insurer's ability to conduct normal insurance operations is adversely affected, capital and surplus have been deemed inadequate to meet legal requirements, or the company's general financial condition has triggered regulatory concern.

State actions include supervision, rehabilitation, liquidation, receivership, conservatorship, cease-and-desist orders, suspension, license revocation and certain administrative orders. The financially impaired companies identified in these studies might not technically have been declared insolvent. The definition of financially impaired is broader than that of a Bests Rating of E (under regulatory supervision), which is assigned only when an insurer is no longer allowed to conduct normal ongoing insurance operations.

In addition to the regulatory actions that are announced publicly, there also are actions that insurance regulators undertake on a confidential basis. When A.M. Best becomes aware of an active confidential regulatory action, the impairment is counted in the aggregate analysis but is not reported on a company-specific basis to protect confidentiality.

Property/Casualty Impairments

The performance of property/casualty insurers was bolstered by a dearth of hurricanes and near-record underwriting profits, which were parlayed into a combined ratio that stands at its lowest level since 1953. "It speaks favorably to the capital strength of the property/casualty industry," said John Williams, senior business analyst at A.M. Best. "What we found with most of these companies, both in property/casualty and in life/health, the impaired companies and those that became impaired either had vulnerable A.M. Best ratings, or were not rated at all by A.M. Best."

The majority of last year's impaired property/casualty companies were affiliated with either Poe Financial Group or Vesta Insurance Group.

Poe Financial Group was formed in 1996 by Tampa Mayor Bill Poe, who later established Southern Family Insurance Co. The company acquired Atlantic Preferred Insurance Co. and Florida Preferred Insurance Co. in 2003. By July 2004, Poe Group had become the largest privately held property insurance organization in the Florida market and the third-largest property insurance organization in Florida overall. The hurricanes and storms of 2004 and 2005 prompted policyholders to submit more than 120,000 claims, which cost more than $2.1 billion. Vesta's family of companies were domiciled in Texas, Florida and Hawaii. Most were placed into rehabilitation in June, 2006 after being hit hard by hurricane claims and were unable to pay claims.
The sector's outlook for the remainder of this year is bright. David Small, an equity analyst at Bear Stearns, said both publicly traded and mutual insurance companies are in a strong position going forward in terms of capital and funding. "One could argue that aggregate amounts (of capital) measured by standard surplus is at record levels. That is one of the reasons we see rates softening," Small said. "You could argue that some of the publicly traded companies have excess capital on their balance sheets."
Small said one major hurricane this season should not adversely affect property/casualty companies. "When you look back at 2005, the industry still grew a surplus and that was after Katrina, Rita and Wilma. The companies generated so much investment income the way they're set up that one good storm isn't going to knock them out," Small said.

Life/Health Impairments
One life/health company, Oklahoma-based Security General Life Insurance Co., was placed in rehabilitation in September 2006. Another company was taken under a confidential supervision impairment. While the 2006 life/health impairment rate represents a new 31-year low, additional confidential supervision impairment could rise.

"We have a circumstance with confidential supervision," said Williams. "The states take action to try to prevent problems for companies that they see in financial trouble. We picked up three additional impairments for 2005 and there's a fair shot that you'll see a fair jump in the 2006 numbers as we go forward-- enough that they won't be the lowest numbers on record."
The recent improved annual impairment rates for life/health insurers reflects an improving operating environment since 2001, industry efforts to diversity its asset portfolios and consolidation of some of the more thinly capitalized insurers with stronger companies.

(By Tom De Martini, associate editor, BestWeek: Thomas.DeMartini@ambest.com) Copyright 2007 A.M. Best Company, Inc.

Insurance Industry Mergers On the Rise.

Insurance industry mergers and acquisitions transactions in the US increased in 2006 to the highest level since 2001 and may foreshadow an acceleration of activity into 2007-2008, according to a new study by Conning Research and Consulting.

"Insurance industry mergers and acquisitions transactions in 2006 increased due to a significant increase in the distribution sector. This is the highest level of transactions since 2001, yet the total value of these transactions was USD8bn lower than 2005 levels," said Clint Harris, senior analyst at Conning Research & Consulting. "The property-casualty sector led public offerings, including secondary offerings, with eight of the nine IPOs and nine of the fourteen secondary offerings."

The Conning Research study, "Mergers & Acquisitions and Public Equity Offerings -- 2007 Edition" continues Conning's annual review of insurance industry M&A and its effects on the industry.

"While transaction level increases in the insurance industry have kept pace with the broader marketplace over the past five years, the annual value of transactions has been very volatile," said Stephan Christiansen, director of research at Conning Research & Consulting. "Despite this, we forecast an increase in acquisition transaction values in the next 12-18 months, due to the continuing increase in surplus in the industry, along with private equity's increasing involvement in insurance. The ability of these firms to access large amounts of capital, and their ability to secure relatively inexpensive debt layers, means that they can be part of transactions exceeding USD10bn. Therefore, we expect more transactions valued between USD1bn and 5bn, with perhaps a few USD10bn or higher. Of course long-term drivers of scalability of data and process and global trends in business continue."

This article is supplied by Insurance Newslink (www.insurancenewslink.com).

Copyright 2007 Shillito Market Intelligence

Data Loss Seen as Most Serious Global Risk

More than one-third of a group of senior executives and risk professionals surveyed earlier this year view loss of data as among the most serious threats facing their organizations.

In fact, loss of data was the most commonly cited threat in a new global risk report put out by the London-based Economist Intelligence Unit for ACE European Group, IBM Corp. and KPMG L.L.P. Thirty-six percent of the 181 participants ranked it among the types of threats "seen to be most important in your organization’s consideration of operational risk management planning."

Human error followed closely, being cited by 35% of the participants, and systems failure ranked third at 31%. Natural disasters, terrorism and pandemics showed up much lower on the list, behind such exposures as supply chain disruption and attacks on information technology systems.

"The survey shows that risk managers clearly understand the value of data and, increasingly are focusing on its associated losses," Gareth Tungett, senior underwriter specializing in IT and cyber risk at ACE, said in a statement released Friday discussing the survey’s results.

The survey—"Business Resilience: Ensuring Continuity in a Volatile Environment"—is available at www.aceeuropeangroup.com.

Survey: Most Workers Underestimate Chances, Impact of Disability

While growing number of American workers are forecasted to experience a disability during their career, more than 80 percent of workers said they believe their chances of becoming disabled are far lower than actual statistics report, according to a new survey. The 2007 Disability Awareness Survey, released today by the Council for Disability Awareness (CDA), said the majority of workers are not concerned about the possibility of becoming disabled – an accident or illness that will keep them out of work at least three months.

Data from the survey underscores the need to better inform America's workforce about the likelihood of experiencing a disability, as well as the potential financial consequences that may accompany a disability. The CDA is embarking on an outreach effort to increase public dialogue about disability awareness.

"Preparing for an unexpected disability has never been more important for America's workforce – especially as more American workers are suffering from income-limiting disabilities that can leave them and their families vulnerable to severe financial hardship," explained Robert Taylor, executive director of CDA. "It's important that workers recognize the growing threat that disability can pose to their financial security."

Since 2000, the number of disabled workers in America has increased by 35 percent according to recent Social Security Administration data. At the same time, the financial health of many American workers has declined. Workers are not only spending their earnings, but also are dipping deeper into their savings and going into debt to make ends meet. The overall 2006 U.S. savings rate was negative 1 percent – the worst since the Great Depression. These statistics are distressing, considering two-thirds of respondents with a 401k or IRA plan are unaware of what would happen to their retirement savings should they become disabled and unable to earn an income.

Given this unsteady financial situation, it's alarming that nearly 60 percent of workers surveyed said they haven't discussed how they would manage an income-limiting disability. In fact, almost half of these workers haven't thought at all about the need to plan for the financial impact of a disability.

On the other hand, more than 80 percent of workers who have planned financially for a disability are confident about their ability to cover living expenses if a disability strikes.

The CDA survey also showed that:
* The majority of workers (56 percent) didn't realize that their chances of becoming disabled had risen over the past five years.
* Nine out of 10 (90 percent) workers underestimated their own chances of becoming disabled.
* More than one-third (35 percent) of workers with 401k or IRA plans said they haven't thought about or don't know what would happen to their contributions if they were unable to earn an income for a period of time.

As responsibility for long-term financial security continues to shift to the American worker, the need to incorporate disability planning into each person's financial security plan has become more critical," Taylor said. "Fortunately, with good planning, American workers can dramatically improve their chances of financial stability should a disability strike."

Source: Council for Disability Awareness, www.disabilitycanhappen.org.

The McLaughlin Company Speakers Bureau

Over the years, we have seen an increase in the need for professional speakers in the Insurance and Risk Management area. Ted Pappas, Webb Hubbell, Brenda Mantz and Cheri Brewer represent over 100 years of experience in these areas. To make it more convenient for your organization to utilize their abilities, The McLaughlin Company responded by creating a speakers bureau specifically focused on those areas. Each speaker has become fluent in the issues and trends surrounding the insurance and risk management industries. Our speaker's bureau coordinator, Julie Johnson will strategically work with you to define your exact needs in a speaker. Contact her at speakersbureau@mclaughlin-online.com

Our Insurance and Risk Management speakers address many areas including:
Specific insurance and/or risk management topics
Continuing education and training Industry trends
Market transformations
Dynamic sales and management techniques
Insurance Programs and Risks specifically designed for Labor Unions
Fiduciary Insurance and Risk Avoidance
Risk Management for Pension Real Estate Investments
The Hidden Costs of Workers Compensation Insurance
The Pension Protection Act of 2006

To learn more about our speakers go to www.mclaughlin-online.com

Backdating -- What's in your D&O Wallet?

Stock option backdating and financial restatements will bring on a surge of shareholder class actions and drive the cost of D&O coverage upward in 2007. Numerous suits were filed at the end of 2006 and the SEC is investigating over 100 other backdating charges. Although insurers continue to say that they look at each company on a case-by-case approach pressure continues to grow to raise D&O rates for all companies.

Identity Theft Update

An announcement from Aetna detailing the theft of sensitive personal infor­mation of l30,000 plan members from a field office of a company that provides medical claim audit services highlighted a year of data loss and theft throughout the insurance industry in 2006.
More than 10 such announcements from insurers were reported last year as Companies dealt with the fallout of cus­tomer privacy missteps including the loss of names, addresses, birthdates, drivers license numbers and social security numbers of its insured. Some instances included loss of sensitive medical information.

Aetna’s December announcement of late October event was the second for the company in 2006.

In May 2006, the company also reported the loss of information of 38,000 of its members resulting from a theft of an employee’s laptop.

Other insurers reporting data breeches last year included Aflac, Allstate, American Family Insurance, American Insurance Group (AIG), Blue Cross - Blue Shield, Kaiser Permanente, Progressive Casualty Insurance, Sentry Insurance Virginia Bureau of Insurance and Wellpoint.

The announcements of each of these data loss incidents typically included the disclaimer that any personal information would be difficult to access by thieves, with many adding that the sensitive data was simply part of a burglary of property that could be sold for cash and that identi­ty theft was not an intended goal. But with identity theft three times greater than the aggregate of all U.S. property crimes (burglary, larceny and motor vehicle theft), the cause for concern is high.

Big I opposes Spitzer decision

ALEXANDRIA, Va., Nov. 30, 2006-The Independent Insurance Agents & Brokers of America (the Big "I") disagrees with, and is disappointed by, New York Attorney General Eliot Spitzer's decision that four leading companies can no longer offer incentive compensation to agents and brokers selling their products.

Spitzer today announced that he has notified ACE, AIG, St. Paul Travelers and Zurich that, under agreements reached with his office earlier this year, they may no longer offer this form of legal compensation because they have crossed the 65-percent "tipping point" in those agreements as to homeowners', personal auto, boiler and machinery and financial guaranty insurance. Those agreements bar carriers from paying incentive compensation to their sales forces when more than 65 percent of that line of insurance is sold by companies that do not pay incentive compensation.

"The independent agent and broker community is greatly distressed by this development," says Big "I" CEO Robert A. Rusbuldt. "These carriers are now unable to use what otherwise is a perfectly legal way to compensate their sales forces, just as is done in virtually all industries across America. It is ironic that the illegal activities uncovered by Mr. Spitzer occurred in commercial lines, not personal lines, and yet, it is largely in personal lines that the fallout is being felt today. The solution imposed on carriers and agents of banning incentive compensation is totally misplaced and directed at business that was never a problem to begin with."

The Big "I" continues to defend incentive compensation as a legal, legitimate form of compensation that is employed in all sales-based industries. Any compensation system can be abused, but the problem lies with those few who abuse it, not the system itself.

"There is no doubt that a few bad actors in the commercial lines area abused the system, and we have always agreed that those who break the law should be punished to the fullest extent possible," Rusbuldt says. "But it is absolutely wrong and indefensible to penalize the innocent majority for the misdeeds of a handful of people. This decision will impact thousands of agencies across the country as they face reductions in compensation that will hamper their ability to create jobs in their communities, train staff, invest in their agencies, and provide consumers access to insurance. On behalf of the hundreds of thousands of agents and brokers across America who had no part in the dishonest activity of a few, we will continue to fight to preserve the right of companies to pay legal incentive compensation." www.independentagent.com

ICE -- In Case Of An Emergency

In a recent article from the Toronto Star, "the ICE idea", is catching on and it is a very simple, yet important method of contact for you or a loved one in case of an emergency. As cell phones are carried by the majority of the population, all you need to do is program the number of a contact person or persons and store the name as "ICE".


The idea was thought up by a paramedic who found that when they went to the scenes of accidents, there were always mobile phones with patients, but they didn't know which numbers to call. He therefore thought that it would be a good idea if there was a nationally recognized name to file "next of kin" under.

Following a disaster in London The East Anglican Ambulance Service has launched a national "In case of Emergency (ICE)" campaign. The idea is that you store the word "ICE " in your mobile phone address book, and with it enter the number of the person you would want to be contacted "In Case of Emergency ". In an emergency situation, Emergency Services personnel and hospital staff would then be able to quickly contact your next of kin, by simply dialing the number programmed under "ICE".

It really could save your life, or put a loved one's mind at rest. For more than one contact name simply enter ICE1, ICE2, ICE3 etc.

DISB approves new Annual Workers Compensation Rates

NCCI received approval for its filing of workers comp loss cost and rates effective November 1, 2006 for new and renewal policies. This filing proposes an overall pure premium level decrease of 7.9% for the voluntary market and an overall rate level decrease of 5.8% for the residual market. The following gives a breakdown of the overall indication for the voluntary market: Change in experience and trend: 8.5%; Change in Benefits (increase in Maximum benefits): +0.2%; Change in Loss Adjustment Expense: 0.4%; Overall indication: -7.9%. Circulars are posted at NCCI’s website (www.ncci.com).

The ABCs of indemnity agreements and additional insured endorsements

Understanding your business’s risk exposures is the cornerstone to managing them. Whether your business relies on outside vendors to provide goods and services, or you’re a provider of goods and services to your clients, you should be aware of how to take contractual precautions to protect your business against potential losses or damages. An indemnity agreement secured by an additional insured endorsement is a risk-transfer tool that can help insulate your business from potential risks.

Indemnity and additional insured endorsements

It is a common practice to enter into contractual agreements with those involved in a project to formalize the terms and responsibilities for all parties. These contracts often include an indemnity agreement, also known as a hold harmless agreement, as a means to transfer the risk of future losses or damages from one party to another.
There are basically three kinds of indemnity or hold harmless clauses typically contained in contracts.
1.Limited - obligates the indemnitor (the party paying compensation) to hold harmless the indemnitee (the party receiving compensation) only for the indemnitor’s own negligence
2.Intermediate - obligates the indemnitor to hold harmless the indemnitee for all liability except that which arises out of the indemnitee’s sole negligence.
3.Broad form - obligates the indemnitor to hold harmless for all liabilities, including the indemnitee’s negligence.
Carefully review the indemnity agreement prior to finalizing the contract to determine the extent of your company’s liability. Once the scope is understood, you may want to negotiate the terms to limit your exposure. The application and enforcement of an indemnification agreement does, however, depend upon the statutory and common law of the jurisdiction in which enforcement is sought.

To support the terms of the indemnity agreement, the contract will often include insurance requirements. These spell out the insurance required by the various parties entering into the contract. It is common for one party to include another as an additional insured under its Commercial General Liability (CGL) policy. For example, owners or general contractors of construction projects commonly require those who are actively involved in the project operations, such as subcontractors, to sign a contract and name them as an additional insured on their CGL policy to limit their liability for damages caused by the subcontractor.

Additional insured status

When reviewing the insurance requirements section of a contract, pay particular attention to the additional insured requirements. There are numerous additional insured endorsements. The specific additional insured endorsement, required in the contract, must be reviewed in order to determine the scope of coverage. Contact The McLaughlin Company] to obtain sample endorsement wording.

The Insurance Services Office (ISO) released new additional insured endorsements in 2004. The intent of the endorsements is to provide liability coverage for additional insureds (typically the general contractor or project owner) with respect to damages caused by the named insured (subcontractor). The endorsements do not provide coverage for the additional insured’s sole negligence, but they can provide coverage for the additional insured’s contributory negligence. Make sure that the actual additional insured endorsement satisfies contract requirements.

What’s in a name?

Don’t be confused—additional insured coverage is different than “additional named insured” coverage. An additional named insured usually is an affiliate of the primary insured. You will not be able to add or be added as an additional named insured. If this is part of the contract, it should be removed.

Understanding your coverage

Understanding the terms of the contract, the extent of liability assumed in the indemnity agreement, and the insurance requirements—including the coverage provided or afforded by the additional insured endorsement—are critical to minimizing future liabilities and exposure to losses.
Keep in mind, the liability assumed in the indemnification agreement of the contract can be broader than the coverage provided under the additional insured endorsement. A comparison of the two should be done to determine what is covered by insurance and what is not.
Many businesses choose to transfer or accept risk through contracts, purchase orders and lease agreements. However, not all contracts or endorsements are created equal. Contact The McLaughlin Company to learn more about contractual risk transfer and how it can be a part of your overall risk management program.

New California Sexual Harassment Training Guidelines Released

New California Sexual Harassment Training Guidelines Released



Last year California passed legislation that requires employers with 50 or more employees to train their managers and supervisors on sexual harassment. Because some felt that the law was too broad and general, the California Fair Employment and Housing Commission has drafted more detailed guidelines to help California employers. “Commission provides definitive guidelines for sexual harassment training,” San Diego Daily Transcript as reported in www.yahoo.news (Aug. 15, 2006).

The guidelines, which may go into effect as soon as three months, include these points:

The trainer must possess a certain level of expertise – either a law degree or practical experience in prevention training and knowledge of California law;
Online training must be interactive so that a trainee can pose a question and receive an answer within two days;
All live training must be interactive presumably permitting questions and answers;
Employers must keep a training record for each individual supervisor; and
Employers must distribute their harassment policies and incorporate these policies into the training.

Commentary

The proposed guidelines eliminate from consideration any training where a trainee sits and watches a video without a trainer or person present to answer questions. It also eliminates any training where an employer simply reads from a training manual without any form of interaction.

Employers that utilize online training should make certain that the training allows trainees to ask questions and that the training records participation for each individual trainee. California employers should also make certain that employees acknowledge reading and understanding their sexual harassment policy just prior to taking any training and that they are provided the name of a person to ask questions about their policy.

Live training requires that employers do their homework to make certain that the trainer is qualified and that the materials can pass muster if questioned.

Offline Media versus Online Media Coverage

Most of the combined tech/media/eBusiness forms in the market limit their media liability coverage to “online” media. That is, they limit the coverage to liability arising out of the content on a Web site or used to run a Web site or other of the company’s operations (e.g., software) and content sent via the Internet (like e-mails). But more and more insurers are willing to add endorsements to their forms to extend such coverage to offline media—e.g., traditional forms of advertising, publishing, broadcasting, etc.

So, one of the questions that insureds and brokers alike should ask themselves when reviewing a quote for a combined tech/media/eBusiness policy is whether they want coverage for offline media activities. If so, they also need to understand what issues to look for when negotiating the various endorsements that insurers use for offering offline media coverage; as one might imagine, not all endorsements are created equal. Some of those issues are discussed below.

Interplay with CGL “Personal and Advertising Injury” Coverage

One of the issues that might drive an insured’s decision regarding the need to pursue offline media coverage is how the insured’s general liability program is structured. By “general liability” we mean commercial general liability, foreign general liability, and umbrella liability. These policies provide coverage for “bodily injury,” “property damage,” “personal injury,” and “advertising injury” (with newer forms combining the latter two coverages into “personal and advertising injury” coverage).

Several general liability insurers will put endorsements on their programs that bar all “personal injury” and “advertising injury” coverage from the program, because they don’t want any part of that risk, and know that the insured is buying separate coverage for “media liability” in some fashion or another. If an insured’s general liability program contains such an exclusion, then the insured should seriously consider seeking coverage for offline media in the insured’s combined tech/media/eBusiness insurance program. Also, care must be taken when doing this, because the tech/media/eBusiness policy, even when endorsed to
address offline media, might not cover all risks typically covered by the “personal injury” coverage of a general liability program. Accordingly, an insured might need to approach its general liability insurers and ask them to amend their “personal injury/advertising injury” exclusions so as to minimize gaps in coverage.

Watch What You Write

In a recent survey, 24% of the employers responding reported receiving subpoenas for emails that were stored in their company records. At times the content of existing emails led to legal troubles, and other times the destruction of emails led to other adverse legal consequences. Eric J. Sinrod, “Why employers are cracking down on email,” www.news.com (July 26, 2006).

According to the survey conducted by the American Management Association and the ePolicy Institute, emails written at work have led to litigation for 15% of the companies surveyed.

Commentary and Checklist:

Employees write and respond to hundreds if not thousands of emails each year. For an employer to monitor every email is impossible. This means that managers and supervisors need to monitor themselves when writing emails and monitor their subordinates.

Here are some rules when writing emails:

Write every email with the understanding that people other than the recipient may read what you have written.

Don’t write anything that you wouldn’t state verbally to the recipient in a business conversation.

Don’t write emails when you are angry or upset. If angry or upset, take some time to cool down first and write a few drafts before sending.

Avoid using abbreviations and slang. These informalities can lead to a wrong interpretation from readers.

Skip attempts at humor especially when writing about a serious subject. Humor has little value in a courtroom.

Be clear and concise in your language.

Avoid sending long emails. If a matter requires a lengthy explanation, make your explanation in a formal memorandum attached to an email.

If you discover that subordinates are writing improper emails, especially emails that harass or threaten other employees, move quickly to stop the problem.

Counsel your employees on why they should take the time to follow these rules.

Using Materials From The Internet

Overview of Copyright Law

Copyright law protects original works of authorship ranging from literary works to sound recordings. Rights accrue the moment that the content is “fixed” in a tangible medium of expression. This means that works written on paper, programmed onto a webpage or recorded on a digital tape have been fixed in a medium and are protected by copyright laws. To receive full federal rights and remedies, the work must be registered with the Copyright Office. The rights of registration include statutory damages and attorney’s fees.

Much of what is posted on the Internet is protected by federal copyright law, despite the fact that it is available free of charge and/or does not contain a © copyright symbol or notice. A good rule of thumb is to always attribute your sources and obtain permission from the copyright owner before posting an article or provide a link from your Web site to the article.

Frequently Asked Questions

1. What material is subject to copyright laws? The safest assumption is that all materials available on the Internet are subject to copyright laws. This includes photographs, charts and other graphics.

2. When is Permission required? Re-posting or republishing an article in its entirety always requires permission from the copyright holder, unless the original posting specifically indicates to the contrary. Permission may not be required when using small excerpts from a copyrighted source under the Fair Use Exception. See question number seven (7) below. Linking to an article, rather than re-posting may also avoid the permission issue.

3. How do I obtain Permission? You may contact the publisher or the author of the materials to obtain permission directly. Another option that may be more efficient for those regularly obtaining copyright owners’ permissions is to go through a licensing agency such the Copyright Clearance Center. Their website is located at www.copyright.com.

4. Why is there a hyperlink entitled “Terms of Use” on a webpage? Many websites will post a Terms of Use type of document as a link on the bottom of their home page. Reading this document will allow you to determine whether the site owners intended to grant you a license to copy or re-post or otherwise republish the material on their website. It may also indicate how to contact them to obtain permission to utilize their materials.

5. What is the difference between Linking and Deep Linking? This is a method by which you may direct your users to content on another site by providing a hypertext link, or hyperlink. This method of linking directs users to the website’s home page, not the specific page containing the article which you would like to share. The user must navigate the site to find the article in question. Deep linking is the use of a link that brings users directly to a specific page containing the desired article.

6. May I modify content? You may not edit or create another work based upon a copyrighted work without prior permission from the copyright holder. Since only an expression of an idea or fact is copyrightable, and not the idea or fact itself, you may use the information and credit the source.

7. What is fair use? The Fair Use doctrine is an exception to copyright law which permits one to copy segments of an otherwise protected work in certain circumstances. Four factors are used to evaluate whether a particular use is fair: (1) the purpose of the use; (2) the type of work being excerpted; (3) the amount being used as compared to the copyrighted work as a whole; and (4) the impact of the use upon the market for and value of the original work. See 17 U.S.C. 107.

Some examples of possible fair uses are as follows: using a paragraph from a copyrighted two page piece to report news of a piece of legislation; copying two sentences of an editorial for a critique; using a three-page chapter from a 350 page book to inform an audience about a topic. Fair use is a narrow exception and an attorney should be consulted prior to relying on it.

For more information, please visit the Federal Copyright Office’s website located at: www.copyright.gov.

Disaster Planning: Ready for Implementation

Tropical Storm Chris was a reminder that a disaster can strike anytime, in any area. Perhaps you’ve already taken the time to sit down with employees to go over the steps they should take if a storm or other disaster occurs. The last thing to cover is how to implement the plan.



The following checklist is based on recommendations contained in ACT’s reports and is designed to assist agencies in updating their current disaster plans:



When a Foreseeable Disaster is Imminent

FedEx a tape of the latest database to the company system’s data center.

Consider e-mail and automatic call outs to customers with emergency contact information.

Staff should complete processing of all work that is outstanding, especially for Matters relating to a disaster.
Make sure all needed lists are updated in paper form as well as exported to a laptop and portable storage device. Tight security is imperative.

Make sure all employees know their assignments and have made clear how they can be reached in emergency.

If possible, load your company system application onto a laptop along with your latest data file for instant access. Take all security precautions to protect your data.

If you utilize an online data backup service, upload to them if possible.

Wrap and label all employee work to be done to protect it.

Take reasonable steps to protect all equipment.
Redirect your phone numbers before the disaster.

Disconnect all electrical equipment from the wall.
If destruction of file server is imminent, consider taking the server with you if you know how to disconnect it and handle it safely.

Shut off water and gas lines.

Have needed provisions on hand, including enough cash for a few weeks.

Needed Provisions
Fans, extension cords, batteries, flashlights, battery-powered lamps and radios and low heat, low-energy lighting available to use with your generator.

Sufficient bottled water to handle employees’ and customers’ needs for two weeks.

Canned or dry food goods that do not require refrigeration or cooking, as well as beverages and snacks for employees and customers.

Can openers, paper/plastic utensils, plates and cups, trash bags, bleach, paper towels and cleaning supplies, and hand wipes.

First aid supplies and blankets.

Matches, barbeque grill, fuel for grill.

Customers’ and Employees’ Special Needs in Disaster Aftermath

Be aware there will be significant emotional and psychological effects after major events.

Provide drinks and food.
Staff should caucus each day to adjust response as necessary.


Supplier Issues

Understand in advance each of your supplier's CAT plans, the local presence they will have and how they will permit you to contact them efficiently.

Seek draft authority or methods to provide customers with emergency funds immediately.

U.S. SUPREME COURT EXPANDS TITLE VII’S ANTI-RETALIATION PROVISION

Burlington N. & S. F. R. Co. v. White, 2006 WL 1698953 (U.S. June 22, 2006)




Facts of Burlington N. & S. F. R. Co. v. White




Marvin Brown (“Brown”), a manager for Burlington Northern & Santa Fe Railway Company (“Burlington”), hired Sheila White (“White”) in June 1997 to work as a “track laborer.” White was the only woman working in the Maintenance of Way department. White’s primary responsibility was operating a forklift; however, she also performed some of the track laborer tasks.



In September of 1997, White reported to Burlington officials that Bill Joiner (“Joiner”), her immediate supervisor, had repeatedly told her that women should not be working in the Maintenance of Way department and also made insulting and inappropriate remarks to her in front of other colleagues. After Burlington conducted an internal investigation, Joiner was suspended for 10 days and required to attend a sexual-harassment training. Brown then reassigned White to standard track laborer tasks and completely removed her from forklift duty.

White filed a complaint with the Equal Employment Opportunity Commission (“EEOC”) claiming her reassignment amounted to gender-discrimination and retaliation for her complaint against Joiner. In December, White filed another complaint with the EEOC claiming that Brown had placed her under surveillance, constantly monitoring her daily activities.

A few days after filing the December complaint, White and her supervisor, Percy Sharkey (“Sharkey”) had a disagreement. Sharkey claimed to Brown that White had been insubordinate. Brown suspended White without pay causing White to prompt internal grievance procedures, which eventually led Burlington to conclude White had not been insubordinate. White was reinstated, with 37 days backpay for the time she was suspended. She then filed another EEOC charge for retaliation, based on the suspension.

A jury found in White’s favor awarding her $43,500 in damages for her claims of unlawful retaliation. Burlington appealed arguing White did not suffer any harm from these acts of retaliation since she received backpay. The Sixth Circuit heard the matter en banc and affirmed the District Court’s judgment for White. The U.S. Supreme Court granted certiorari to resolve a deviation in the Circuit Courts as to whether Title VII’s anti-retaliation provision forbids only those employer actions and resulting harms that are related to employment in the workplace.

The Ruling
The Supreme Court held that the anti-retaliation provision of Title VII extends beyond workplace related or employment related retaliatory acts and harm. This conclusion was based on several factors. First the court found the language in the anti-retaliation provision of Title VII does not include limiting words such as “hire,” “discharge,” “compensation, terms, conditions, or privileges” as the other provisions in the Act include.

Second the Court found that an employer can retaliate against an employee with actions not directly related to employment and can cause harm outside the workplace: such as in Rochon v. Gonzales, 438 F.3d, at 1213, where the FBI refused to investigate death threats from a federal prisoner made against the agent and his family. Last, the Court agreed with the EEOC manuals stating that a broad interpretation of the anti-retaliation provision is intended to provide exceptionally broad protection to employees who protest discriminatory employment practices.

The Court limited the scope of the Title VII provision, saying it does not protect an individual from all retaliation, but only retaliation that produces injury or harm. They also adopted a rule saying a plaintiff must show that a reasonable employee would have found the challenged action materially adverse.

Ultimately the court affirmed, finding in favor of White and saying that suspension without pay could act as a deterrent to filing a complaint, which is against the primary objective of the Title VII

Analysis
Title VII has always prohibited employers from retaliating against an employee for making a legitimate claim of discrimination. The Burlington decision makes it crystal clear that the protections are even more broad than many employers believed including that employers should not suspend reporters of wrongdoing without pay, even when their claim is being investigated, and that employers should make certain that the pay and job functions of such employees remain the same or nearly the same.

The Burlington decision may place some employers between a “rock and a hard place.” In Burlington the Court had the privilege of Burlington’s internal investigation where it was determined that the harassment did occur, and the actions of the Burlington supervisors gave every appearance of being retaliatory. Unfortunately, not all complaints of retaliation are so “cut and dried.”

A concern is what to do when an investigation is non-conclusive, finding no evidence to prove or disprove the accusation. In the past, a “best practice” was to separate the accuser and the accused to avoid a claim of retaliation.

After Burlington, many employers must now choose to keep accuser and accused together, increasing the likelihood of more issues arising, especially if the accused manages the accuser, or transfer one of the parties to a different, but like position. Simply transferring an employee to a different position no longer appears to be an option.

Checklist

To prevent a Burlington dilemma, employers should keep in mind the following suggestions:

Develop policies and procedures protecting employees who file discrimination complaints from materially adverse actions both inside and outside of the workplace.

Train all supervisors on what can amount to adverse actions against an employee.

Follow all the policies and procedures thoroughly and investigate claims of discrimination fairly without taking any adverse action against the employee making the complaint.

Continue to pay the accuser and the accused during an investigation of a claim.
Make certain that human resources and your legal counsel approve any transfer of an employee who has made a claim of wrongdoing.

If transferring one of the parties becomes necessary, make certain that the transferred employee receives the same pay and benefits and has similar job duties and expectations as required in his or her previous position.

Continually check with all parties of an accusation to make certain that retaliation is not occurring after the matter is resolved.

Phishers Hooking Employers for $2 Billion Each Year

The Federal Trade Commission (FTC) estimates that thieves posing as legitimate businesses send 75-150 million fake emails daily, a practice is known as “phishing.” These scam artists are looking for financial and personal information that will allow them to steal the identity and money of their victims. Candace Heckman, “Phishing finds victims even among savvy computer users,” seattlepi.nwsource.com (May 1, 2006).

Claiming to represent a legitimate business such as a bank or the IRS, the phisher sends out emails asking the reader to follow a hyperlink to update or verify his or her personal information. If the person receiving the email clicks on the link but never submits any information, the phisher may still be able to capture important data from the victim’s computer.

The FTC claimed that in 2005, consumers lost $929 million to these cons, and businesses suffered losses of $2 billion.

Phishers are not only after the financial information of individuals; the FTC numbers reveal that they are successful in obtaining financial information from businesses as well…$2 billion in losses for 2005 alone.

Any person in charge of an organization’s financial accounts and any person in charge of employee social security numbers are possible targets.

Beware of any email requesting updated financial information. These requests will often appear to come from sites with which you do business, including your financial institutions, and will create the “look and feel” of your institution’s website by incorporating their colors, logos. and disclosure information.

The best method to stop phishing from impacting you is to never respond to emails requesting financial information about you, your organization, or your employees.

When you receive emails asking for such information, do not open the email or any attachment; instead, forward it unopened to a representative of the institution it is reputed to be from and ask if the email is legitimate.

US Hurricanes may wipe out 20-40 Insurers

By Ed Leefeldt - NEW YORK, June 1 (Reuters) - The U.S. hurricane season kicked off Thursday with another gloomy prediction: major storms could cause $100 billion worth of property loss, and wipe out 20 to 40 insurers.

With a booming coastal population and high-priced real estate, "this is not far down the road," said John Williams, an author of the report at A.M. Best Co., a leading rating agency for insurers.

For 3 to 7 percent of insurers exposed to the catastrophe, that could spell disaster, Williams said. Likely to fail are thinly capitalized property casualty carriers that are low-rated at Best, along with some firms not rated at all.

"This will take a bigger bite out of the industry than the 1906 San Francisco earthquake," Williams said.

Insurance costs from last year's major catastrophes, or "megacats" -- Hurricanes Katrina, Rita and Wilma -- have already reached $58 billion, with some claims still in court. In addition, federal aid to rebuild areas such as New Orleans, which was flooded by Katrina, will top $100 billion, Best said.

With population expansion in vulnerable areas and soaring real estate values, catastrophe losses are likely to double every 10 years, according to hurricane modelers. In Florida, which has seen five major hurricanes in the past two years, four insurers have already failed, according to Best.

When insurers are no longer around to answer the phone, the burden falls to the state, which sets up a claims fund and forces solvent insurers to pay the costs. But settlements are slow, particularly after a catastrophe like Katrina has damaged the infrastructure, Williams said.

Insurers are also running from areas where storm damage is likely to be the worst. American International Group Inc. (AIG.N:), the world's largest insurer, is declining to write new property policies in areas of the Gulf Coast, while Allstate Corp. (ALL.N:), the U.S.'s second-largest home insurer, is limiting exposure in areas as far north as New York.

While no one knows where hurricanes will hit this year or in the future, they are almost certain to arrive, fueled by warmer than usual water temperatures and new wind patterns in the Atlantic, forecasters said.

Professor Mark Saunders, head of the British-based Tropical Storm Risk Venture, which plots storms, is expecting two major storms to hit U.S. coastal areas during the hurricane season, which runs for six months through November.

These megacats won't be confined to the Gulf Coast, which has seen the worst of the recent storms. "The specter of a hurricane hitting a major Northeast population center is hardly the stuff of Hollywood fantasy," warned Wendy Baker, president of Lloyd's America, a unit of the insurance syndicate, in a speech on Thursday.

Six of the 10 costliest storms in U.S. history have occurred within the 14 months of the 2004-2005 hurricane season. While 2006 isn't expected to suffer the megacats of 2005, it will be part of a pattern that has seen the most devastating pattern of hurricanes since 1900, said Saunders.

On Wednesday William Gray and his Colorado State University forecasting team repeated their prediction that the 2006 season would produce nine hurricanes, five of which would be major storms with winds over 110 miles her hour.

The National Oceanic and Atmospheric Administration expects eight to 10 hurricanes, with four to six of them major. Saunders' group is the lowest, looking for about eight hurricanes, more than three of them severe. © Reuters 2006. All Rights Reserved.

Workplace bullies may be next on Insurer's Watchlist

From the playground to the classroom to the office -- bullies can be found in all walks of life, but new anti-harassment legislation in some states could put an end to bullying in the workplace that can be costly for employers.

"We define bullying as strictly repeated health harming mistreatment," Dr. Gary Namie of the Workplace Bullying and Trauma Institute, an advocacy group that supports anti-bullying legislation, told Ortega-Wells of the Insurance Journal. Namie and his organization have supported anti-bullying legislation, or the "Healthy Workplace Bill," since the first bill was introduced in California in 2003. He says bullying in the workplace "undermines legitimate business interests."

While bullying is not currently a protected category under harassment law, Johan Lubbe, a partner at Jackson Lewis LLP law firm, says bullying is likely the next "evolutionary" step in harassment law. He advises businesses to understand what workplace bullying conduct is and to develop preventative strategies that prohibit such conduct in the work environment.

Coverage for bullying claims may already exist under some employment practices liability policies, according to Gregg Draddy, assistant vice president of employment practices liability at The Hartford. Draddy says "there are issues around bullying/harassment that are covered, whether it's under other workplace harassment, infliction of emotional distress, or other areas that are covered under wrongful acts under EPLI policies."

Robert Cap, associate product manager for EPLI and nonprofit D&O, at Shand Morahan, a part of the Markel Corp. Group, argues that the problem in coverage for workplace bullying "is that if the allegation was simply one of workplace bullying, it's hard to do that negligently -- it's really an intentional act."

That's precisely why anti-bullying legislation is needed, says WBTI's Namie.

Source: The Insurance Journal

Bloggers -- Are you at risk?

The most popular new form of expression may soon become the most dangerous. Weblogs, or “blogs,” as they are called, combine the immediacy of a diary with the gloss of an online magazine, creating a potent brew of reportage, opinion, and gossip. With blog-hosting services like Blogspot available for free, nearly anyone can become a journalist. And therein lies the problem.
According to USA Today, blogs and “bloggers” are “rewriting rules of journalism.” With little editorial oversight, and no pretense at objectivity, bloggers have aggressively pursued certain stories that were initially ignored by the mainstream media. As noted by USA Today, bloggers hounded Senate Majority Leader Trent Lott who remarked, at the birthday party of Senator Strom Thurmond, “that the nation might have been better off had Thurmond won his segregationist campaign for president in 1948,” which led Lott to resign his leadership post. Elsewhere, bloggers disclosed that CBS had relied on forged documents in its exposé of President Bush’s National Guard service, leading to the resignation of an award-winning CBS producer and widespread criticism of Dan Rather.

To paraphrase P.T. Barnum, a blog is born every second. There are millions of blogs, devoted to thousands of topics, from cross-country running to gourmet cooking to energy conservation. According to Technocratic, a search engine that indexes blogs, there are over 35 million blogs, 75,000 new blogs are created every day, and blog traffic continues to double every six months. Most blogs require no knowledge of the complicated protocols of web design — just a keyboard and a dream. Once posted, a blog is instantly accessible to anyone on the Internet. Some of the best-known blogs receive a million or more individual page “hits” each month.

But media experts worry about the dangers blogs pose. “The biggest risk is that there isn’t the normal vetting process,” says Kelly Sager, a Los Angeles media lawyer and partner in the law firm Davis, Wright & Tremaine. A reporter who blogs on his own time may nonetheless expose his employer to unanticipated liabilities. For example, an injured plaintiff might claim that the employer is liable for any damaging statements made by the reporter on his blog. The blog might provide evidence of “actual malice” — a critical element of many libel cases — because the reporter is likely to be less guarded about his statements. The disclosure of information on a blog that is not published elsewhere might waive the privilege journalists normally have not to disclose information they learn in the course of their reporting. In short, according to attorney Sager, blogging puts the reporter in the position of “making decisions about content that the publisher might not make.”

And the issue is not limited to publishing companies. Many non-media companies allow or even encourage employees to maintain blogs. Although few cases have been brought against blogs and bloggers to date, Sager says there has been a great deal of discussion and concern among media lawyers. While companies have begun to embrace blogs, recognizing that it provides another forum for news and information — and appeals especially to a younger demographic — they have been slower in recognizing the associated risks. Many employers may be surprised to learn that their employees’ activities — even if done on their own time — could subject them to liability. Others may not realize that claims arising from blogging may not be covered under traditional insurance policies. One thing however is certain: as blogs proliferate, claims against them will inevitably follow.

DOL Expands, Simplifies Voluntary Fiduciary Correction Plan

The Department of Labor (DOL) recently finalized and expanded revisions to the Voluntary Fiduciary Correction Program (VFCP). The VFCP is designed to encourage voluntary corrections of fiduciary violations of ERISA by describing how to apply for relief, listing the specific transactions covered, and providing acceptable methods for correcting violations.
To take advantage of the VFCP, an applicant cannot be under investigation by DOL or any federal agency in connection with a plan transaction. If an applicant is not under investigation, the applicant may apply for relief under the VFCP by identifying fiduciary violations and determining whether the violations fall within the transactions covered by the program.
Next, an applicant must follow the program’s procedures for correcting the violations. Generally, a VFCP applicant corrects a violation by: (1) conducting valuations of plan assets; (2) restoring the plan, its participants and its beneficiaries to the condition they would have been in if the breach had not occurred; (3) paying the expenses associated with correcting transactions; and (4) making supplemental distributions when appropriate to former employees, beneficiaries, or alternate payees. Finally, an applicant must file an application with the appropriate Employee Benefits Security Administration (EBSA) regional office.
An applicant that satisfies the criteria and complies with the procedures set forth in the VFCP receives a “no-action” letter from EBSA and is not subject to certain civil and monetary penalties. The VFCP also includes a prohibited transaction exemption (PTE) that provides relief from excise taxes imposed under the Internal Revenue Code for certain transactions covered by the VFCP.
In 2005, DOL proposed revisions to the VFCP that include, among other things, the adoption of a model application form, a reduction in the documentation required from an applicant, and simplification of the calculations needed to determine lost earnings or profits to be restored to a plan. The final 2006 revision adopts many of the 2005 proposed revisions and makes some notable changes. Among the changes are an expansion of the program to provide relief under ERISA Section 502(i) and (1) (which generally apply to welfare plans and nonqualified pension plans), the addition of a new covered transaction for expenses improperly paid by a plan because they were either “settlor” expenses or because a plan’s terms require the sponsor to pay the expenses out of its own funds, and a more narrow definition of when a plan is considered “under investigation.” In addition, DOL expanded the PTE that is part of the VFCP to include two additional covered transactions.
The 2006 revisions to the VFCP are effective May 19, 2006. Notice of the 2006 revisions to the VFCP Update can be found in the April 19, 2006 Federal Register

Interesting facts

Interesting facts:

43% of all people age 40 will have a long-term disability event prior to 65.

64% of disabilities occur off the job and are not covered by workers compensation

48% of all mortgage foreclosures are the result of disability.

About 1 in 7 people can expect to be disabled for 5 years or more.

Due to medical advances, things that used to kill you now disable you.

Insurance Company CEOs, Concerned About Capacity and Pricing, Stress Underwriting Discipline

Republished from the Insurance Journal, written by Amy Friedman


Although property casualty insurance capacity still exists in some areas in the U.S.'s east coast, the rate at which it is vanishing, especially in coastal areas, as well as the steep prices being offered for available capacity, have industry executives concerned about pricing discipline.

"Someone's going to have to blink soon," said Ted Kelly, chairman, president, and CEO of Liberty Mutual Group Inc.

Property catastrophe capacity was high on the list of concerns for panelists from the property casualty industry at Standard & Poor's Ratings Services' recent annual insurance conference, "Insurance 2006: Rethinking Risk."

Whether insurers price risk properly is a worry. Even though premiums have doubled in the past three to four years, "pricing in primary markets isn't supporting the cost of reinsurance," Kelly said.

Kelly said that reinsurance capacity might still be 20 percent short of demand in the southeastern U.S., and "[p]roblems getting insurance in the Gulf region haven't been settled yet."

Companies "should look at their enterprise risk management, and what kinds of controls management has on currency and hedging," said Martin Sullivan, president and CEO of American International Group Inc., who would also like to see construction codes improved in the Southeast.

Property casualty industry pricing, looking forward, is a huge question mark, and an additional worry for these CEOs. If 2006's hurricane season is benign, pricing discipline will remain, especially in the catastrophe area, Sullivan said.

Kelly, however, was not so sure. "A pricing bloodbath" could ensue if the hurricane season is moderate, he said. "Watch October renewals--they will be the first sign of a lack of discipline," he warned.

The role capital markets now play in maintaining financial strength also had panelists, as well as the moderator, Standard & Poor's credit analyst Thomas Upton, concerned. Although capital to replace what was lost to the catastrophes of 2005 and 2004 was readily available, it might not be if severe catastrophes hit in 2006.

"I was surprised at the ease of which companies recapitalized after Katrina," said Dinos Iordanou, president and CEO of Arch Capital Group Ltd.

Would companies be better off if they had to replenish capital organically rather than going to the capital markets? Opinions were not uniform. Kelly was emphatic about the industry's need for a free flow of capital, but Sullivan said the industry would be tested if the season were active. Iordanou cited that even if a major hurricane does come, $600 billion-$650 billion of surplus still exists in the global marketplace.

Bottom line, underwriting discipline continues to be important.

"Given the legal environment, what we are writing today will be the issue five to seven years down the road," Sullivan said. Surprisingly, the industry has made an underwriting profit only once in the past 25 years--in 2004. "Clearly, there's room for improvement," Sullivan added.

Survey: Millions of Renters Lack Insurance Coverage

Almost 25 million U.S. families renting their homes are going bare on insurance coverage, leaving themselves vulnerable to serious property and liability losses. Many renters without coverage own valuable, high-tech equipment and face higher risk related to pets, a new national survey conducted by Trusted Choice® finds. Among those respondents who said they don't have renters' insurance, 26 percent feel that the coverage is too expensive and another 17 percent said they didn't know they needed it. Moreover, another 8 percent have never heard of renters' insurance. Coverage for renters is widely available in most parts of the country, with the average annual premium about $20 per month for about $20,000 of property coverage and $500,000 of liability coverage.

Increased Use of Blogs Creates Many New Exposures

For television fans who can't get enough of their favorite shows and characters, the Internet offers an instant fix of backstage gossip and plot extensions: Web logs, or "blogs" as they are called, combine the immediacy of a diary with the gloss of a fan magazine. Producers of many popular television shows have created blogs written by characters in the shows, or by writers and producers about the shows. In doing so they have expanded their audience but created potential new liabilities.
TV blogs give producers a new way to reach out to fans on the Internet. According to an article in the April 5, 2006 issue of USA Today, TV shows are beefing up their blogs to help market their programs in a more community-friendly way, offering eager and younger tech-savvy fans a bonus for being loyal and, in the end, boosting ratings for the shows. Dr. Nigel Townsend's blog on the series Crossing Jordan, for example, has created a story line that will be incorporated into the show later this year, according to USA Today. On other shows, like The Office, characters blog about real-life behind-the-scenes events, dishing on everything from the catering for the show to the clothing worn by fellow actors.
But media law experts worry about the dangers TV blogs pose. "It reminds me of the problems caused by extra material included on DVDs," says Lou Petrich, a partner in the Los Angeles entertainment firm Leopold, Petrich & Smith. Petrich notes that the additional commentary by directors and screenwriters included on DVDs has raised libel, privacy, and copyright claims, and extended the statute of limitations for claims that might otherwise be time-barred. Like DVDs, TV blogs can create or strengthen a copyright claim based on an allegation that material posted on the blog originated elsewhere. Blogs about backstage goings-on could raise privacy and libel issues, as well as potential misappropriation claims if actors are featured in ways beyond the scope of their contracts.
In addition, according to Petrich, because supplemental material is often added as an after-thought, without the usual rounds of legal review and executive supervision, it can include material that is more problematic than what otherwise might appear on a finished show.
Although no cases have been brought to date against producers based on material posted on a TV blog, the risks are significant as the experience with DVDs demonstrate. Any new medium of exploitation creates the potential for new claims. Because of their freewheeling nature, blogs seem particularly ripe for legal exposure. One thing is certain: as blogs proliferate, claims against them will inevitably follow.
Media/Professional Insurance Company is very aware of this development and has a solution. Like all of our media liability insurance policies, the Film and Program Producer Policy can be structured to cover the liabilities associated with this growing exposure. By adding language such as "all websites or blogs authorized by the Insured relating to the production," to the definition of Scheduled Productions on the Declarations Page, coverage will extend to claims arising out of these additional activities. Clients planning to use blogs or other similar devices should advise their Independent Insurance Agent.

California Law Mandates Sexual Harassment Training

California employment law now mandates that all employers with 50 or more employees provide two hours of sexual harassment training for supervisory employees. Newly enhanced sexual harassment training modules present managers and supervisors with scenarios and basic employment law principles including application of California state law. These modules are available through certain Independent Insurance Agents such as the McLaughlin Company. Over 40% of claims made under a Union Liability Policy are related to employment related practices. Don’t be caught uninsured. Contact info@mclaughlin-online.com

26 Million Veteran's Personal Information Stolen

Last June, we wrote our clients identifying a substantial risk to their organization. This risk is generally not covered by a Commercial Liability Policy, but is covered by the policy The McLaughlin Company developed -- the Union Liability Policy to protect Unions and individuals engaged in Union activities. Typically those exposures arise from the Landrum Griffin and Taft-Hartley Acts, which permit union members to sue union leaders for alleged misconduct.

Last June, we explained there was a new risk making the headlines that made it imperative that a labor organization consider Union Liability Coverage.
This risk was exposure to Unions and Union Officers due to Identify theft of the Union’s database of personal information on its members. The McLaughlin Company foresaw claims and lawsuits arising out of this exposure.

Today's headlines bring this issue to the forefront. No matter how many steps an organization takes to protect its member's information the simple act of bringing a disc or a laptop home can lead to a disaster.

If you don't have this protection contact us at info@mclaughlin-online.com

Expect a Wild Ride

Oil prices are going through the roof, but in Bermuda and London a wilder ride is expected as the 2006 season treaty renewal season begins for reinsurance. Some companies are pulling back while others are ratcheting up business in America.

Bermuda companies lost over $2.8 billion in catastrophe losses last year. So what happens, over $18.4 billion in new capital from investors has entered the reinsurance market hoping to capitalize on rising reinsurance rates.

What does it all mean to you the insurance buyer. No one knows for sure, but this sage predicts reduced premiums for fiduciary and human failure risks, and increased premiums on the casualty side especially in coastal states.

We will see.

Trustees “First Do None Harm.”

Despite repeated warnings from the DOL, SEC and other regulators, professional fund consultants persist in trying to provide multiple and conflicting services including procurement of regulated products (i.e. securities, mutual funds, insurance, etc.) as part of a “total package of services” or as an “accommodation.”

If this pitch persuades your fund to hire one of these consultants, then at a minimum a "prudent trustee" must:

1. Find out if the consultant is receiving a commission (both an up front commission and/or eligible for a contingent commission) from any vendor. Is such an arrangement inconsistent with your contract with the consultant?

2. Receive a copy of the individual consultant's license to sell any regulated product for the relevant jurisdiction. Do not accept the statement, “that we run it through our ________ office.” Ask, “is your company licensed to sell this product in our state.” Obtain a copy of the license.

3. Review the consultant's professional negligence policy to make sure it covers the sale of regulated products such as securities, mutual funds, insurance, etc., not just professional errors and omissions. Check with your Fund’s fiduciary carrier whether the proposed arrangement creates additional risk. Even if the arrangement is covered, it may be and is perhaps costing the Fund more in the way of additional premium.

4. Most importantly, obtain from the consultant a hold harmless agreement that protects your Fund should a claim be made against the Fund or any trustee as a result of a potential conflict of interest. Ask for language like the following:

“Consultant agrees to hold Fund, its trustees, its employees and its agents harmless from any and all claims, lawsuits, causes of action, etc that might arise, regardless of its origin, that asserts, claims, alleges or accuses the Fund, its trustees, its employees, its agents, and or its consultants for acting improperly or imprudently by reason of the Fund allowing Consultant to procure for the Fund regulated products while performing other services for the Fund.”

The safest approach for a prudent Trustee is, of course, to avoid potential conflicts of interest; but if you can’t resist the lure, protect your Fund and yourself. Be prepared to answer the following question, “What steps did I, as a prudent trustee, take to make sure that the Funds assets were not exposed by this arrangement.” If the answer is simply, the “consultant said it was not a problem,” you are likely to have failed the “prudent trustee” rule.

New Grace Period for Filing LM-10s

> >
>
>
> The Labor Department's Office of Labor-Management Standards
>announced March 7 that many employers will have extra time to file LM-10
>forms disclosing payments and gifts made to unions and their officers and
>employees.
> OLMS said employers whose fiscal year ends Dec. 31 will have until May 15 to file fiscal 2005 LM-10s. Normally, LM-10s must be filed 90 days after the
>end of an employer's fiscal year; thus, organizations whose fiscal year
>ends Dec. 31 normally would have to file LM-10s by March 31.
>
> A separate March 7 advisory OLMS included an updated list of
>frequently asked questions regarding the LM-10, including who must file it
>and what must be disclosed.
>
> Under the Labor-Management Reporting and Disclosure Act, employers
>must report any payments and loans made to unions and union officials, as
>well as payments to employees designed to persuade them regarding their
>bargaining and representation rights, and payments to labor relations
>consultants.
>
> In announcing the grace period, OLMS said it received many inquiries
>following its last update of the frequently asked questions in November
>2005. The new guidance is
>designed to address some of the questions raised, but the Labor Department
>acknowledged that employers utilizing the new guidance would have only a
>short period of time to incorporate the answers prior to the normal March
>31 deadline. Thus, while the department does not have the authority to
>extend statutory deadlines, OLMS said it would use its discretion and not
>take any enforcement measures against employers with fiscal years ending
>Dec. 31 as long as they file by May 15.
>
> The November guidance from OLMS also said that as an incentive to
>get employers to file LM-10s for the first time, organizations filing their
>fiscal 2005 forms on time would not have to file delinquent forms for such
>years. Under the new extension, employers with fiscal years ending Dec. 31
>can file their LM-10s for the first time by May 15 and not have to file
>back LM-10s, the department said.
>
>
> Clarification of Who Is 'Employer.'
>
> The new list of frequently asked questions includes new guidance on
>when businesses are considered employers for LM-10 purposes. For example,
>it clarifies that any person acting directly or indirectly as an agent of
>an employer is covered. Thus, an individual hired by a financial services
>firm to generate new business and who provides a union official with season
>tickets to sporting events would have to file an LM-10, even if that
>individual does not employ anyone.
> In addition, the guidance now states that outside attorneys retained
>by unions "will in most, if not all, cases" have to file LM-10s. A law firm
>providing representation to an employer for collective bargaining purposes
>also would have to disclose the value of lunches provided to union
>officials during bargaining, subject to the $250 annual de minimis
>limitation. However, sole proprietors generally are not employers for LM-10
>purposes, according to the guidance.
>
> The guidance also specifies that certain payments from employers to
>unions and union officials are not reportable if the union reimburses the
>employer for those payments. Thus, a law firm that provides a meal during a
>meeting to prepare for collective bargaining would not have to report the
>value of that meal if the food costs are billed to the union, the
>department said. If one employer reimburses another for a reportable
>payment, the entity responsible for the final cost must file the LM-10, it
>added.
>
> The department added language to the guidance making it clear that
>employers must disclose otherwise reportable payments to union employees
>who earn $10,000 or less per year, even though such employees do not have
>to be mentioned by name on LM-2 financial disclosure reports for unions.
>The guidance also clarified that employers do not have to report payments
>to individuals who are officers or employees of unions composed entirely of
>state, county, or municipal employees and thus not covered by the LMRDA.
>
> OLMS also introduced new exemptions for reporting payments and gifts
>to union officials associated with widely attended gatherings, which the
>department defined as events that many people attend, including a
>substantial number with no union connection. Employers that sponsor such an
>event and spend $20 or less per attendee do not have to report such gifts,
>nor do they have to track such payments. In addition, an employer can
>sponsor up to two widely held events per year and spend up to $125 per
>participant without reporting or tracking such expenses.
>
> The $125 exemption also applies to union officials. They can attend
>up to two events not costing more than $125 each without reporting the
>benefit on LM-30s, which are the corresponding forms filed by union
>officers and employees. In addition, such payments would not count toward
>the de minimis threshold for LM-30 purposes; thus, if a union official
>attended two employer-sponsored events that cost $120 each and also
>received a reportable payment of $50, he or she would still not have to
>file an LM-30 because of de minimis rules.
>
> However, OLMS cautioned that if an employer does not know at the
>beginning of its fiscal year that it will hold no more than two such
>events, it should keep records of its expenses and attendee lists.
>
> OLMS added language to its LM-10 guidance specifying how such forms
>are different from LM-30s. For example, employers filing LM-10s must
>disclose payments to unions officers, agents, shop stewards, and other
>representatives, while union officers and employees must file LM-30s if
>they--or a spouse or minor child--receive a reportable payment. In
>addition, employers filing LM-10s must disclose any payment to any union
>employee. Meanwhile, a union employee who is a member of the clerical staff
>would not have to report the receipt of such a payment on an LM-30.
>
> As for past-due forms, the guidance said that in order to comply
>with the department's grace period offer, employers were required to file
>an LM-10 for fiscal 2005. Now, however, employers can take advantage of the
>grace period even if they did not make any reportable payments for fiscal
>2005. Rather than filing a blank form, employers should maintain records
>demonstrating that they identified no reportable interest after making a
>good-faith effort to track such payments, according to OLMS.
>
> The new guidance is available on the Web at
>http://www.dol.gov/esa/regs/compliance/olms/lm10_advisory.htm.
>
>
>
> >
>
>
>_____________________________________________________________________
>>

Lobbyists and Associations Need Fiduciary Insurance

A new rash of lawsuits are on the horizon.

Clients and members of associations are, in light of recent scrutiny of lobbyists activities, becoming more concerned about how their funds are being spent in DC, whether directly or through their lobbyists. Lobbyists who handle or direct client's funds may be determined to be fiduciaries for their clients. The SEC, the Courts, and other regulatory bodies are rapidly expanding the definition of a fiduciary.

For lawyers this is usually not a problem, most Professional E&O policies cover fiduciary exposures, although if I were a lawyer-lobbyist I would want to make sure there is not an exclusion in my firm's policy for fiduciary responsibilities. However there are many lobbyists who are not lawyers or lawyers who do not carry professional E&O who have this exposure. They direct the client where to spend money or do it themselves.

The same goes for associations who use their member's funds to promote certain causes in many ways. There is an exposure to a claim that funds were not used in a "prudent" manner. The association's assets or lobbyist assets can very quickly be used up defending such a claim. The McLaughlin Company is developing with its carriers a low-priced exclusive product targeting lobbyists, but we also think that the exposure to associations is possibly even greater. Although the exposure is even greater, most evidence indicates that less than 10% of associations carry fiduciary coverage. A "prudent" association Board of Directors should consult with its Independent agent about fiduciary coverage.

As always we would both really appreciate your thoughts and insights.

Professional Advisors = Fiduciaries -- Are you insured?

Scandals that have rocked the financial services industry and have raised awareness among investors of the potential for conflicts of interest, misrepresentations and other alleged wrongdoings by investment advisers, actuaries, brokers and money managers. As a result, professionals increasingly are subject to lawsuits alleging various forms of misfeasance, including breach of fiduciary duty, misrepresentation or omission of material facts, conflict of interest and fraud. Lawsuits of this kind also entail the possibility of personal liability.

Financial planners, investment advisers, actuaries, securities dealers, registered representatives and others in the financial field often act in a fiduciary role.
Recently, the SEC has moved toward treating all brokers as fiduciaries, as well.
Those advisers who deal with pension, employee benefit and other benefit plans are subject to additional fiduciary duties under the Employee Retirement Income Security Act of 1974. In our litigious times, even the most circumspect professionals may find themselves sued for breach of fiduciary duty or other misfeasance. Insurance is therefore of paramount importance as a defense against fiduciaries’ liability exposure.

Due diligence on the insurance front entails more than simply the purchase of the right kinds of policies. Policyholders must be aware of common provisions routinely inserted by insurance providers that raise the likelihood of coverage denials in time of need. Over the past few years, there has been a significant restriction in the insurance marketplace for investment advisers and asset managers. Many companies pulled out altogether, and those that remained increased their pricing and retentions significantly while at the same time carving out important areas of coverage. Recently, however, the underwriting conditions have improved. Companies that withdrew from the market have stepped back in, and new entrants have begun to surface. With this opening up of the marketplace has come a reduction of the pricing scale, somewhat lower retentions and a willingness to consider broadening the scope of certain coverage.

Although underwriters remain stringent regarding the amount of limits to which they are willing to commit, the addition of these new markets allows for the layering of much higher limits than has recently been available. There are significant differences among the various insurers’ policy forms.

Although the market has improved carriers continue to try and reduce their exposure by addining exclusionary language. The following is a sampling of some actions taken by insurance companies of which to be aware:

* Limiting regulatory-investigation coverage.

* Widening the exclusions for personal profit and wrongful acts.

* Narrowing the severability language of their policies, which protects innocent officers from the
wrongful conduct of other officers.
* Issuing specific additional exclusions, such as market timing and late trading.

Since the policy forms, exclusions and available endorsements are changing frequently, it is advisable that someone well versed in financial insurance, like The McLaughlin Company, review your current policies.