Have all the headlines regarding stolen customer data and the possibility of class action suits made you wonder if your clients' (or company's) insurance programs were structured properly to respond? Are you confused about whether the special insurance policies for property and liability risks associated with the Internet, computer technology, media, and privacy are necessary? Are you concerned about the proper use of indemnity agreements and insurance requirements in technology-related contracts? If so, you should attend Tech-eRisk 2006.

This is an updated version of the highly acclaimed seminars we held in 2004 and 2005, and it will be held in three cities across the U.S. in March. Register before January 7 to get more than $100 off the regular price. Learn more about the agenda, dates, locations, and the dynamic program presenter here.

Best wishes from all of us at IRMI for happiness and good health during the holiday season.

All the best,

Jack

Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI

Risk Tip

Don't Let "and/or" Creep into Your Contracts—We've all seen it, and probably used it. The phrase "and/or" is everywhere. One place it should not be is in your contracts and insurance policies. My dictionary defines "and/or" as "'either' and or 'or,' according to what is meant." Not really a word, not really a phrase, it can be deemed ambiguous.

As risk managers and insurance professionals have seen in too many contexts, notably in environmental and toxic tort cases, courts can find even the most clear-seeming terms ambiguous. In any legal contract, including insurance policy endorsements, clarity is the goal. And in coverage disputes, insurers are bound by the rule of construction known as "contra proferentem," Latin for "against the offeror." If the policy language is ambiguous, it must be construed against the insurer, who drafted it. Why invite problems by using a term in your contract or manuscript endorsement that is ambiguous on its face?

Better to hone in on what you truly want to say in your contract or endorsement. For instance, an administrative rule at the heart of an Oregon Appellate Court case about workers comp benefits said that if a worker's injury prevented him or her from walking "and/or" standing for a total of more than 2 hours in an 8 hour period, he or she would get a certain award. The workers compensation insurer interpreted "and/or" as meaning "and," while the claimant, and the court, interpreted "and/or" as meaning "or." The claimant couldn't walk more than 2 hours, but he could stand for at least that long. He argued that the rule applied, since he couldn't do one or the other of the activities. The comp carrier argued that the claimant should only get an award if the injury prevented him from both walking and standing. The court found the claimant's interpretation more persuasive.

If you mean that for a condition to occur, either x or y must happen, use "or." If you mean that both x and y must happen, use "and." And if either x or y or both can happen, just say that. If you find the dreaded "and/or" in any of your contracts or endorsements, insist that your lawyer or contract drafter replace it with the right word or words.

By Betsy Palmieri, JD, FCLS
President, Jupiter Risk Management LLC
Weatogue, CT
E-mail:

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 Betsy.

What's New in Your IRMI Library

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.

New Expert Commentary

There are now 739 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

"Catastrophes" in Early Twentieth Century America—John Bogardus and Robert More look at what history can teach us about how our forebears responded to the threats and opportunities of the early twentieth century.
Understanding Coverage from Dawn's Early Light—The debate over the World Trade Center placement is indicative of the disconnect between underwriting intent, policy language, and claims handling. Peter Polstein examines the dilemma.
Covering Katrina—Doing "The Right Thing"—In his Risk Management Ethics column, Dr. George Head looks at insurance coverage for hurricane victims and the problem of the NFIP exclusion for "failure to inspect and maintain the insured property."
Environmental Insurance Helps Cities Create Sustainable Development Out of "Brownfields"—Michael O. Hill describes how two cities use environmental insurance to turn large polluted areas into environmental models that reduce greenhouse gases, improve wildlife habitat, and provide other improvements.
Handle Property Claims Properly—Jay Levin explains how a recent case addressing property insurance for damage to computer systems makes clear that even having the right coverage is not enough.
Taylor v. Progress Energy Affects FMLA Rights—Paul Siegel discusses a recent case which may affect an employer's ability to settle Family Medical Leave Act claims or negotiate broad releases in connection with separation agreements.
The Current State of Wrap-Ups—Looking to 2006, Rich Resnick predicts wrap-ups will remain a highly viable solution to those seeking to control coverage and cost in the most advantageous way possible.

3 Weeks Left for Tech-eRisk Seminar Early-Bird Discount

Register online before January 7 for one of IRMI's most highly rated seminars and get a 15% discount. Tech-eRisk 2006 will help you manage and properly insure the potentially catastrophic technology, media, and e-business risks faced by companies in any industry. If you are worried that your company may not be properly protected against these risks—or you think you're missing out on lucrative insurance sales opportunities because you don't understand these new coverages—you should attend this seminar. See a full description of what you’ll learn, plus the agenda, dates and locations.

Your View—Developing Trust in Agent-Broker/Client Relationships

In IRMI Update 125, Jack Gibson discussed how trust is the key to successful partnerships between agents/brokers and their clients. He asked readers for steps an agency/brokerage can take to gain their clients' trust.

For a broker/agent to gain trust with their client, there must be a willing partnership established. The broker must put forth substantial effort to understand the client's business and be willing to work collaboratively towards solutions without pushing/selling a product. Contractual language on disclosure in and of itself will not build trust. Working relationships will.

—Kevin Gehrmann, Risk Manager,
Wisconsin Department of Transportation, Madison, WI

The broker or agent issue of gaining and maintaining the trust of their clients rests in large part with their ability to be a risk management partner to their clients, not just insurance salespeople. The partnership that should develop and exist between brokers and their clients means that clients can rely on their brokers to offer straightforward and honest information about risk transfer and management solutions within and outside the insurance marketplace. If the broker is doing more to earn their place in that relationship, the trust will be there on both sides.

—Michelle Luster, Assistant Risk Manager,
Rudolph and Sletten, Redwood City, CA

Brokers earn my trust by being proactive and upfront about their plans and intentions to market our business and earn their fees. We have to have honest and open discussion about this that includes a detailed written outline of what lines require the most effort and how the premiums map to the proposed compensation. Beyond the written documentation, there should also be a warm and open relationship that allows for honest feedback (both ways) and a true desire to improve the aspects that might impair that necessary sense of trust. Sounds like a marriage, doesn't it? As a private company, we are not comfortable with frequent change in business partners who are so intimately familiar with the details of our business, so we try to choose carefully and monitor the relationship to make sure that it continues to meet our standards. I cannot imagine having ongoing brokerage relationships with an adversarial or suspicious undercurrent; that would be counter-productive to the goal we should both have to make the best insurance recommendations and decisions for the insured.

—Mari-Jo Hill, Director of Risk Management,
SAS Institute Inc., Cary, NC

Inasmuch as broker compensation is such a hot topic in the financial services industry, our agency has transcended the usual compensation disclosure methods by carefully enumerating our commission and/or fees on all of our original quotes or proposals. Many of the quotes provided by the insurers or MGAs outline commission and fees, which we also tender to the prospect. We have found that this procedure has shown our personal regard and loyalty to our customers, and also leaves little room for mistrust. Most professional customers understand that agents don't work for free, and respect us for the disclosure of any and all fees we receive for our work. This has not been an arduous process by any means, and I hope other agents follow suit, if they haven't already done so.

—Lucy Harris, CIC, CPCU, AU, RPLU, Producer,
SCF Insurance Services, Inc., La Mesa, CA

We quote most of our clients on a fee basis and enter into client service agreements that address the services provided for the agreed fee amount. This pricing model is beneficial to both the client and broker as the account revenue is not tied to the premium negotiated on the client's behalf and the services are both measurable from a results and activity standpoint.

—Robert Bookhammer, Senior Client Executive,
Palmer & Cay, a Wachovia company, Dallas, TX

The bottom line fortunately and unfortunately is what guides business in this industry. And because of this there is often potential for a used car salesman approach to any given broker-client relationship. This is a given. One can only hope that the broker cares enough about breadth and depth to get beyond the "getting over" tactics that satisfy the first couple of commissions but in the long run may very well loose the customer for good.

—Heather Wallace, Corporate Claims Administrator,
Gothic Landscape, Inc., Valencia, CA

Spitzer's activities have given all insurance buyers a reason to mistrust their sellers. It will take some time for this institutional suspicion to dissipate. Question: Do brokers feel that insurance buyers are forthright in their disclosure of their exposure bases and competitive pricing sets? Trust is built and maintained by both parties in the relationship. Both sides have to want it. The amount on my commission disclosure form makes for little more than spirited dinner conversation when the client knows the contract has been done right, with the client's best interest in mind and that should the winds blow, we've got each other's back. You get what you give. Unfortunately, Spitzer has trained a whole class of insurance buyers to think what we brokers are giving them is a good screwing, which makes for a harsher environment in which to establish the trusting relationships so essential to this business.

—Tom Bobrowski, Producer,
Rothschild Agency, Merrillville, IN

It is not yet accepted practice for insurance salespeople to reveal their commission and/or contingency income to clients. In the current environment, insurance agents/brokers are judged no differently than any other sales professionals ... when is the last time you asked the shoe store salesperson what their mark-up was for the shoes they just sold you? I don't believe that we should set standards for our industry on anything other than an "all for one and one for all" basis. So why don't you get the ball rolling and call for all insurance salespeople, large and small, to reveal their income to clients at the point of sale? This includes personal lines as well.

—Richard E. Schmidt, Proprietor, Richard E. Schmidt Insurance and Risk Management Consulting, Ithaca, NY

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IRMI Update—Issue #126

In This Issue