IRMI Update—Issue #39
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
April 23, 2002
In This Issue
Colleague,
I was disappointed when the U.S. insurance industry, through ISO, developed
and filed a terrorism exclusion for attachment to homeowners policies. On the
other hand, I was proud of the National Association of Insurance Commissioners
when it issued a statement concluding that such exclusions were not needed,
implying that state regulators need not approve them. We agree with the NAIC
that these exclusions are unnecessary for personal lines insurance, and we think
that the attempt to develop and use them further tarnishes the industry's image.
Where is the truly catastrophic exposure? Existing exclusions in homeowners
policies rule out coverage for nuclear weapons or radioactive contamination.
That leaves contamination from a chemical or biological attack, which though
it might be extensive, doesn't seem likely to be catastrophic to insurers of
homes.
Most regulators appear to have decided not to allow the exclusion's use in
their states. However, the exclusions may now be used in a handful of states.
I hope the insurers in those states have decided not to employ them. The hard
commercial lines market is going to cause more than enough animosity toward
the industry. A knee-jerk reaction to exclude terrorism in personal lines policies
will only make it worse.
Do you agree with me on this? Or do you think I've missed something in coming
to this conclusion? [See reader comments.]
All the best,
Jack
Jack P. Gibson
President
IRMI
Make Sure Subrogation Recoveries are Applied Properly. Your company (or client) has just had a property loss—a motorist has negligently
driven into your building and caused $15,000 in damage. The damage is covered
by the commercial property policy, albeit subject to a $10,000 deductible.
The insurer pays $5,000, and pursues recovery against the motorist via subrogation
for the full amount of the loss. Unfortunately, the motorist has purchased only
$10,000 of auto property damage liability insurance. Is the insurer entitled
to keep the entire $10,000 recovery? Is it entitled to only part of the recovery
or none of the recovery?
Most jurisdictions hold that the insured must be fully compensated for any
uninsured loss before the insurer may share in the proceeds of the recovery.
Therefore, assuming the company is located in one of these "insured-whole" first
jurisdictions, the company has a right to the full $10,000 recovery in addition
to the $5,000 already paid by the insurer.
Ask your legal counsel if this doctrine applies in your state and make sure
that any subrogation recoveries obtained by your insurers are applied properly.
By: Craig F. Stanovich, CPCU, CIC, AU
Stanovich Risk Managers, LLC
Holden, MA
cstanovich@stanovichrisk.com
Suggest a Risk Tip. Future issues of IRMI Update will include more risk tips from our readers. Send
us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. We'll
give you credit for your contribution.
There are now 282 articles on IRMI.com, and many more are in production.
Below you'll find summaries of some recent additions with links to the articles.
-
Captive Structures—There
are many different structures for a captive insurance company. Michael Mead
discusses the most common structures and their potential uses.
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Roles and Responsibilities:
A Delicate Balance—In this article, Rolf Neuschaefer explores
the roles and responsibilities of the principal or client, the surety, and
the agent/broker in procuring corporate surety bonds.
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Bouncing Back from
Disaster: The Plan's the Thing—In this article, Baron Garcia
explains how having a well-organized plan is the surest way for those in
the insurance industry to pull through a disaster relatively unscathed.
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Public Policy & D&O
Insurance—In his Drafting and Interpreting Insurance Policies
column, Ken Wollner looks at a new California court case examining D&O conduct
exclusions.
As The Workers Compensation
World Turns—The acts of September 11 have led to new underwriting
exposures and concerns. The impact on workers compensation rating, risk retention,
coverage, and the market is addressed.
Mark W. Bridgers To Keynote
IRMI Construction Risk Conference. Mark Bridgers will deliver one
of two keynote addresses at the IRMI Construction Risk Conference in San Diego.
A consultant with FMI Corporation, he works with owners or purchasers of construction
contracting services in the areas or organizational analysis, accounting and
financial issues, and strategy development. Previously Mark designed and implemented
reinsurance programs for sureties. He'll be sharing the podium with Mark Reagan
of Willis at the plenary session on November 12. The theme of the 22nd IRMI
Conference will be "Succeeding in a Difficult Market." Plan to join us on November
11–14. For more information about the Conference, visit this Web site.
Celebrate 200,000
CE Courses With $5 Off! Please join us in congratulating our CE partner,
WebCE, on delivering its 200,000th CE course! The Training and Education section
of IRMI.com is powered by WebCE, a nationwide e-learning company. With WebCE's
help, we offer more than 50 courses and most are available in all 48 states
that allow distance learning. We are happy to join WebCE's celebration by giving
you a $5 off Party Favor for your next purchase. You can redeem this voucher
online or by phone. Simply enter voucher number 11785 when you check out online
or give it to the customer service representative if you choose to phone (offer
expires on September 30, 2002). To order by phone, call 1-800-488-9308. To order
online, go to this Web page.
Workers Comp Self-Insurance
Help—With premiums increasing rapidly, many companies want to evaluate
the feasibility of self-insuring their workers compensation programs. The prospect
of performing this type of analysis can be daunting, however. IRMI's Risk Financing reference manual provides
the information and tools to compare self-insurance to the other funding options.
It even summarizes each state's requirements to qualify for workers compensation
self-insurance. When you are ready to redesign your risk financing program,
be sure you have the leading blueprint on hand, "Risk Financing." For more information
or to view the table of contents, visit our Web Site.
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