IRMI Update—Issue #156
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
March 7, 2007
In This Issue
Colleague,
You are the CEO of a major insurer, and you have an opportunity to settle
a lawsuit that you think you would eventually win, but only after spending huge
sums on defense, vast amounts of management time, and depressing your stock
price in the interim. The problem is that the decision to settle is not necessarily
a good one for your industry because it sets a bad precedent. Perhaps it requires
you to discontinue paying contingency commissions that you feel are legal and
proper, to pay flood claims that your policies clearly exclude, or something
else along these lines. What would you do?
Aon's Pat Ryan was asked why he didn't fight Eliot Spitzer's lawsuit at the
IRMI Construction Risk Conference a couple of years ago. His articulate and
thoughtful response was a dose of reality for me. "I thought about it," he said,
and went on to discuss how a cost/benefit analysis revealed that the best decision
for his company was to settle the suit and move on. His rationale made a lot
of sense, and I concluded he made the right decision for Aon. You can't blame
him for that. But his decision and others like it have put pressure on other
agents, brokers, and insurers to change business practices that have long been
accepted and are quite legal. We'll see, but similar decisions may be made with
respect to Hurricane Katrina claims in Mississippi or Louisiana.
This conundrum makes me wonder about the responsibility of corporate executives
(whether with insurers or other types of businesses), when deciding how to handle
a high-visibility lawsuit, to consider not just the short-term good of their
company, but also what is best for their industry or even the broader public.
Financially, settlement will often be the best course, but should the fact that
the settlement will damage your industry's reputation and credibility, or otherwise
hurt the industry as a whole also be considered? When, if ever, should the greater
good be chosen over the company's best interest? What do you think? [See
reader responses.]
We are currently taking registrations for our two spring construction seminars
(covering construction defect risk management and wrap-ups). See the agendas,
speaker biographies, locations and dates
here.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
International Risk Management Institute, Inc.
Insist on the Forms/Endorsements Along with the Quotes—In
my 20-plus years of experience as a commercial lines brokerage employee, I find
that getting renewal/new business quotes from insurers on a timely basis is
an ongoing problem. Surplus lines/excess lines insurers are of particular concern.
These carriers often use special manuscript forms that often limit or restate
coverages that are part of the standard policy forms. When renewal or new business
quotes are received by the broker so close to the effective date, it limits
the time we have as brokers to review all the conditions and coverage being
provided by the quotes. It is very important that brokers make sure to obtain
copies of all forms that make up the quotes to make sure we understand the limitations
and exclusions and how they affect the insureds' ability to adequately protect
their business. No quotes should be presented to clients without the proper
disclosure of the limitations/exclusions of coverage with copies of applicable
forms. As part of your submission to any wholesale or excess/surplus lines market,
be sure to insist that copies of all forms/endorsements be presented along with
the quote. State that if this is not done, the quotation will not be considered
viable.
By: Jodi Brandi, Team Leader, Commercial Lines
USI Northeast
Briarcliff Manor, NY
Suggest a Risk Tip.
Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages.
Submit your tips. We'll
acknowledge your contribution as we did for Jodi.
We have recently updated a number of the reference manuals in the IRMI library
and published new issues of The Risk Report
and Captive Insurance Company Reports.
To make sure you don't miss any of this new information take 30 seconds to scan
the "What's New" summary page.
For
IRMI Online and Print subscribers
For
SilverPlume Sage subscribers
There are now over 800 risk management and insurance articles on IRMI.com.
Below you'll find summaries of some recent additions with links to the articles.
Anyone with responsibility for evaluating, managing, or insuring construction
risks will benefit from these new seminars—Construction Defect Risk Management
and Insurance, and Wrap-Ups: Avoiding the Pitfalls.
The seminars run back-to-back at each location, and will sell out quickly.
Register now to reserve your spot and save $100 by attending both seminars.
Learn more about the dates, locations, agendas, and the expert speakers
here.
Dr. Nathan Gould has written 12 articles for his catastrophe risk management
column since he began writing for IRMI.com in 2002. As chief of technology and
general manager of ABS Consulting in St. Louis, Dr. Gould is a practicing structural
engineer with experience in the design, construction, and rehabilitation of
major structures in all regions of the United States. He is a licensed professional
engineer in Missouri, California, and Washington D.C., and licensed structural
engineer in Illinois. For more information on Dr. Gould, see his
full biography. His latest
article is discussed above and can be found
here. See all his IRMI.com
articles.
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