Monday, June 25, 2012

Management Liability/EPL/D&O Market Update

ducksManaging effectively – without having your ducks in a row? 

From China Daily/Reuters via MSN: A farmer snarls traffic in China herding 5000 ducks to a pond 3/4 of a mile away. With one other helper and two long sticks, supposedly not one duck was lost.

We “quietly” write a fair amount of Management Liability coverage, including D&O and EPL, and recently a few of my customers have been asking what’s going on in the market. We represent a number of carriers, including Chartis, Travelers, Carolina Casualty and a couple of Lloyd’s facilities, in addition to USLI and Philadelphia.

I spoke to several companies to get their take, so the following is a composite of discussions with underwriters, claim staff and marketing reps. I’ll break this up into two posts to keep it short.

D&O Claims Are Up. There’s a slight increase, but not at the same level as Employment Practice Liability claims. More and more carriers are trying to sell management liability policies where D&O is included with EPL, Crime and Fiduciary coverage. That helps loss ratios and profitability where there are more premium dollars to pay EPL claims vs less frequent and/or less severe crime or D&O claims.

Community Associations – (Homeowner, Condo and Neighborhood Associations make us most of this class) Claim frequency has increased, but not to the extent where you’ll see any major adjustments from the insurance companies. The increase in frequency is in part driven by the economy. Lower real estate values can result in deficits in association funds, and resulting increases in assessments give way to disputes and legal action. Those same deficits also create opportunities for legal issues as repairs and maintenance and other related work may not be completed and resulting finger pointing invariably goes back to the board.

The Community Association product is still probably underpriced, but don’t expect to see more than a 5% or 10% increase in premiums unless the account has problems. More than likely underwriting eligibility and coverage rules have changed or will change to “make up” for carrier’s inability to get the rates they want.

Not For Profit – The situation here is almost exactly the same as for Community Associations in terms of rates, as there’s still a great deal of competition. Don’t expect much to change anytime soon.

Private Company – Claim frequency is increasing, and the common theme of claims being economically driven holds true here. Companies are in trouble financially and some are bankrupt. Extensive reviews of the books, trustees coming in to make their claims and other similar circumstances all contribute to the problem. There are also some claims resulting from M&A activity.

Rates are going up a little and that’s as much a result of EPL coverage claims as anything, since it's usually combined with the D&O. Also, coverage issues can be more complex these days so the cost to defend in those cases is almost always going to be higher.

Overall on D&O coverage noted above, there are very few new companies entering the market and if they do enter it’s usually in the form of management liability. Also, there’s not much new in the way of coverage expansion – the majority of additional coverage options have already been introduced to the market. And you can expect rates to be fairly similar to expiring unless there are issues with the risk.

EPL update will follow in the next post.

Monday, June 4, 2012

Coverage Update–New Option for Stand Alone Sexual Misconduct Liability

kcpq-tacoma-high-school-band-director-reigns-a-001Stadium High School, Tacoma WA, where the high school band director resigned after allegations of inappropriate sexual contact with a student. Photo from WGNTV.COM

The photo above is the one of the first I found simply because it’s a fairly recent event, but unfortunately I could have picked just about any state in the union for headlines about high school or college related sexual misconduct. And a similar sad story can be told concerning healthcare facilities, religious institutions and many, many others. The risk is real and profound, as recent headlines have all too often pointed out.

We’re now offering a new option for stand alone sexual misconduct coverage. This isn’t intended for a small risk, but really fills some possible coverage gaps for mid to large size entities, public and private. And it’s important to note this isn’t an afterthought with sub limits of $50,000 or $100,000. In this day and time a $50,000 limit just isn’t sufficient. Here’s a quick summary:

What Does the Policy Provide? Risk Management Advice and Broad Insurance Coverage for Liability and Costs of Defense Regarding Claims for Sexual Misconduct and Molestation and/or Negligent Hiring and Supervision.

Who’s Covered? Executive Directors, Trustees, Employees, Coaches, Counselors, Clergy and Volunteers.

What’s Included? Negligent Hiring, Employment, Investigation, Supervision, Training or Retention Of, Failure to Report Employees Who Commit Sexual Misconduct/Molestation.

Additional Benefits? Tailored Risk Management, Including Access to a Web Based Risk Management Tool. Employee and Volunteer Training Information. Early Loss Mitigation and Access to a Network of Expert Counsel.

Which Entities Are Targets? Religious Institutions, Educational Institutions, Leisure Services, Social Services and Healthcare Organizations.

Minimum Premium? $10,000 for $1 MILL Limit

Limits Available? Up to $5 MILL, Primary or Excess.

Call or email and ask for more information or an application.