By now you should have received your new Commercial Property Portfolio from ISO containing the new changes to the Commercial Property Forms.  A number of new changes in the program means you will need to update your property coverage knowledge by attending one of the commercial property courses offered this year.  CIC and CISR will reflect the new changes, so make plans to attend one of these courses.  Changes to the forms include some long needed revisions.  The following apply to the Coverage Forms:

Supplementary payments - Loss of Earnings 
The Legal Liability Form and Mortgageholders E&O forms have been revised from $100 to $250.

Additional coverage - Increased Cost of Construction
The Building and Personal Property Form and Condo Association Coverage Form are revised to add Increased cost of Construction to the Additional Coverage Section. The ICC is a limited coverage for the increased cost of complying with building codes following covered damage to a building(s) that is insured on a Replacement Cost basis.  The maximum payable under ICC for an insured building is the lesser of $10,000 or 5% of the Limit of Insurance.  Broader coverage is provided under optional Endorsement  CP 04 05.

Replacement Cost Optional Coverage
An option is added to extend Replacement Cost Coverage to the personal property of others. In addition, Replacement Cost Coverage is revised to more explicitly convey that the insured is not required to rebuild on the original premises, but the replacement cost is limited to the cost that would have been incurred in rebuilding at the original location.
Replacement Cost Coverage is also revised to clarify that tenants’ improvements and betterments, certain property owned indivisibly by all condominium unit owners and certain property within a condominium unit are covered at Replacement Cost.

Newly Acquired Or Constructed Property Coverage Extension
The Newly Acquired Or Constructed Property Coverage Extension is revised to 
Equate the start of the 30-day coverage period (and the inception date for calculation of premium) with the start of construction of covered property;
Add coverage for business personal property at a newly constructed or acquired building at the insured location;
Specify that the business personal property itself may be insured property or newly acquired property;
Add coverage for newly acquired business personal property at the described building insured under the policy.
Qualify that the extension does not apply to personal property temporarily in the insured’s possession either in the course of installing or performing work on such property or in the course of manufacturing or wholesaling activities.

Debris Removal Limit Of Insurance
Debris Removal is revised to restate and thereby clarify the provisions governing the amount of coverage, and to incorporate a related provision which was located in the Limits of Insurance clause.

Limited Liability Companies
Coverage Extensions addressing Personal Effects, Property of Others, Additional Insureds and Newly Acquired Locations are revised to recognize limited liability companies.

Loss Payment Condition
The Loss Payment Condition is revised to clarify that determination of value is subject to the applicable provisions set forth in the Valuation Condition.

Non-Owned Trailers
Presently, coverage is not provided for trailers unless the policy is endorsed to eliminate a Property Not Covered Provision relating to certain vehicles (a wider class which includes trailers).  A Coverage Extension is introduced in the Building and Personal Property and Condominium Coverage Forms, and in the Standard Property Policy, to provide limited coverage on non-owned detached trailers.

Vacancy Provision
The Vacancy Provision is revised to:
Clarify that rented space must be used to conduct customary operations, if a condition of vacancy is to be avoided.
Restate the percentage threshold for vacancy under an owner’s policy, with no change in the actual threshold. Currently, vacancy is established when 70% or more of the square footage of the building is not rented or not used to conduct customary operations.  The revised text relates the percentage to space that is being rented/used (at least 31% of the premises square feet).
Add references to a general lessee, lessee, sub-lessee and building owner, in various parts of the provision which relates to an owner’s policy.

Builders Risk
Under CP 00 20, the Builder’s Risk Form, the $5,000 coverage for property in transit (which applied to policies written with the Special Cause of Loss Form) is eliminated.  The Special Form itself will provide $5,000 of coverage.

Property Off-Premises
The property Off-Premises Coverage Extension is broadened to include stock, property at a storage location leased mid-term, and property at a fair, trade show or exhibition.

Deductible Clause
The language of the Deductible clause is revised to elaborate on the interaction between the deductible and the Coinsurance Condition, and to clarify how the deductible will be applied when an occurrence involves items of property that are subject to separate Limits of Insurance.

Collapse Coverage
Coverage for Collapse is provided under Additional Coverages in the Causes Of Loss Broad and Special Forms. Over a period of years, court decisions have been divided on an interpretation of collapse.  To clarify this issue, a definition of collapse is introduced.  The definition explicitly sets forth that collapse coverage requires an abrupt falling down or caving in of the building or part of the building.  The collapse definition affects losses caused by hidden decay, hidden insect or vermin damage, or use of defective material/methods in construction, remodeling, or renovation.  Other perils named in the Collapse coverage grant are perils for which coverage is also addressed outside that grant, i.e. perils for which coverage is provided irrespective of whether there is a collapse.  Thus, the definition does NOT affect losses caused by: fire, lightning; explosion; wind/hail; smoke; aircraft/vehicles; riot/civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; breakage of building glass; falling object; weight of people or personal property (Special Form); or weight of rain that collects on a roof (Special Form).
The Collapse grant is also revised to clarify that in a policy covering a lessee’s contents, coverage applies to such contents in the event of building collapse, whether or not the policy also covers the building.

Inspections And Surveys Condition
This condition, found in CP 00 99, is revised to clarify that the condition does not apply to inspections, surveys, reports or recommendations made relative to certification of boilers, pressure vessels or elevators under state or municipal statutes, ordinances or regulations.

Time Element - Tenants’ Premises
For insureds who occupy part of a building, the meaning of premises is expanded in the Business Income Coverage Forms and the Extra Expense Coverage Form, to include any area within the building or on the site at which the tenant’s premises are located, if that area services the tenant’s premises.

Time Element - Suspension Of Operations
A definition of the term suspension is introduced.  The term encompasses “the slowdown or cessation” of business activities.

Business Income - Sales Value Of Production
The Business Income Coverage grant is revised to state explicitly that net income includes the net sales value of production.

Provisions Relating To Extra Expense Under The Business Income (And Extra Expense) Coverage Form
Alterations And New Buildings, Newly Acquired Locations and the Maximum Period Of Indemnity Optional Coverage are made applicable to extra expense coverage;
The Coinsurance Condition is revised to specify that it does not apply to extra expense coverage.

Editorial Changes To Various Commercial Property Forms
The text of the Extended Period of Indemnity option in the Business Income Coverage forms is revised to make reference to Subparagraphs (1)(b) and (2)(b) of the Extended Business Income grant since the Extended Period of  Indemnity option is intended to apply to both rental value[(2)(b)] and other-than-rental [(1)(b)].
The phrase “the total of all” is deleted from the Newly Acquired Property Coverage Extension in the Legal Liability Coverage Form to clarify the intent that there is building coverage up to $250,000 at each building covered under the Extension, and coverage up to $100,000 for personal property at each building.

Glass Coverage
The Glass Coverage Form CP 00 15 is eliminated. Glass Property will be covered using the coverage forms which apply to the building and personal property (CP 00 10, CP 00 17, CP 00 18, etc.) And a Causes Of Loss Form.  Glass property would be recognized under the Limits of Insurance applicable to the building and personal property.
The Causes of Loss Forms are revised to accommodate glass coverage.  Under the Basic and Broad Cause of Loss, the vandalism peril no longer contains an exception for glass property.  Under the Broad Form, the Additional Coverage - Breakage of Glass (applicable to vandalism and un-named perils) is eliminated.
Special Causes Of Loss Coverage (CP 10 30) is expanded to include glass breakage caused by a peril that is not otherwise excluded under this form.  This was accomplished by removing the $500 limitation on glass damage caused by vandalism or an un-named peril.  Coverage under CP 10 30 also includes chemicals applied to glass, via an exception to the pollution exclusion.  And, an Additional Coverage Extension addresses temporary plates and removal of obstructions.
Earthquake and flood coverages are not provided unless the policy is endorsed to cover these perils.

The following changes apply to the Causes of Loss Forms:

Glass Coverage
The effect on the Causes of Loss Forms is explained in the preceding section of this notice.

Earth Movement Exclusion
The Earth Movement Exclusion is revised to separate the various types of earth movement into different paragraphs, and to provide some detail on the terms earth sinking, rising and shifting, including explicit reference to soil conditions, the action of water, and settling.

Water Damage Named Peril (Description Of Systems)
The Water Damage named peril in Broad Form CP 10 20 is revised to clarify that this peril is intended to respond only to losses which involve the breaking apart or cracking of an on-premises system or on-premises appliance.

Water Damage Named Peril (Roof Drains)
The Water Damage named peril in Broad Form CP 10 20 is revised to specify that this peril does not include discharge or leakage from roof drains, gutter, downspouts or similar fixtures or equipment.  Thus, such equipment is not considered to be a covered system under the terms of this peril. 

Special Form Limitation on Electronic Media
Under Special Form CP 10 30, the language of the limitation on valuable papers and records is revised to distinguish the records from the media on which the records exist.  The revised language contains an explicit exemption for prepackaged software programs, for which coverage is not limited to the named perils identified as “specified causes of loss”.

Exclusions

Language is added to Section B. in the Causes Of Loss Forms, to make it explicit that exclusions apply whether the loss event is localized or affects a widespread area.

Weight of Ice, Snow And Sleet
The preclusion of coverage for loss or damage to gutters and downspouts caused by the weight of ice, snow or sleet is eliminated from the Broad and Special Forms (CP 10 20, CP 10 30).

Property In Transit
Coverage for personal property in transit, in or on a motor vehicle owned, leased or operated by the insured, is increased to $5,000.

Neglect Exclusion
To complement and reinforce the Duties In The Event Of Loss Or Damage condition in the coverage forms, ISO is are introducing a Neglect exclusion in the Causes Of Loss Forms.  This exclusion is based on lines 21 and 22 of the Standard Fire Policy.

Time Element Period of Indemnity - Cancellation Of Contract
Under Special Exclusions in the Causes Of Loss Forms, we have revised the exception to the exclusion dealing with suspension, lapse or cancellation of a license, lease or contract, to extend coverage beyond the “period of restoration”.  Thus, if a covered suspension of operations directly causes suspension, lapse or cancellation of a license, lease or contract, a business income loss is covered during the “period of restoration” of physical damage, during the Extended Business Income period, and under the Extended Period Of Indemnity Optional Coverage if such option applies.

Dishonest/Criminal Acts Exclusion
This exclusion is revised to recognize members, officers and managers.

In our next installment of Education News, we will discuss the changes to the Commercial Property Endorsements. Stay tuned!

Our Second Annual Commercial Lines Insurance For Producers School will be held in July 2001.  Last year’s school sold out well before the school began as space is limited.  We must limit space to the first 20 producers to make sure each one receives the attention they need to succeed. For producers to be considered for admission to this school, they should have less than two years experience in the insurance industry and have completed the pre-licensing school.  Commercial Lines Insurance For Producers trains your new producers for life on the street. The school combines sales, commercial property coverages and commercial casualty coverages over a two week intensive schedule to produce a knowledgeable and ready to work producer.  Instructors for the school include some of the best in their field from all over the United States.  You will find a descriptive brochure included in this mailing for your use in reserving a place for your new producer. 
 

In our last newsletter we detailed some of the changes made to the Commercial Property Forms and Cause of Loss Forms.  In this issue we would like to concentrate on the changes made to the various endorsements used to change, modify, or restrict coverage.

CP 01 53 - Collapse Changes (Withdrawn)

This endorsement was used with the 06 95 edition of Coverage Forms CP 00 20 and CP 00 70 for the purpose of correcting paragraph references pertaining to collapse coverage.  Endorsement CP 01 53 is not needed with the 10 00 edition of the coverage forms and is therefore withdrawn.

CP 04 01 - Brands And Labels

Under the terms of CP 04 01, the insured may stamp “salvage” on merchandise that is being taken by the insurer, or remove the brands or labels, subject to certain conditions. Endorsements CP 04 01 is revised to include coverage for costs incurred by the insured in performing the aforementioned activity.
 

CP 04 05 - Ordinance Or Law Coverage

CP 04 38 - Functional Building Valuation Endorsements

The endorsements are revised to add explicit provisions for determining loss payment for an ordinance or law loss where underlying physical damage is caused by excluded and covered perils.

CP 04 15 - Debris Removal Additional Insurance

This endorsement is editorially revised to reflect revised format of the underlying coverage.

CP 04 60 - Vacancy Changes

This new, optional endorsement enables modification of the threshold which determines vacancy.  In accordance with a complementary manual rule the rental/use criterion of 31% many be reduced to as low as 10%.

CP 10 37 - Radioactive Contamination

The word “or” in Paragraphs A.1. and B.1. of the endorsement is replace by the word “including”, thereby appropriately connecting the subparagraph on “resultant” damage to the description which precedes it.  The revised language tracks that of pre-simplified Forms CF 10 16 and 

CF 10 17.  Endorsement CP 10 37 was and is intended to provide the same level of coverage that was provided under the pre-simplified program.  In addition, reference to the Earthquake Causes Of Loss Form is removed from CP 10 37, since new Earthquake forms are structured as endorsements.

CP 10 52 - Broken or Cracked Glass Exclusion Endorsement 

This endorsement is revised to refer to and conform to the Commercial Property Coverage Part instead of the withdrawn Glass Coverage Form.  The purpose of CP 10 52, i.e., to identify and exclude glass that is known to be cracked or broken, is unchanged.

CP 1065 And CP DS 65  - Flood Coverage Endorsement And Schedule

ISO is introducing CP 10 65, Flood Coverage Endorsement, as an option.  Following is an outline of noteworthy features:

The endorsement is designed to provide wrap-around coverage in the event that the property is also covered by an NFIP (National Flood Insurance Program) policy.  As an example: The NFIP policy covers at ACV.  The coverage under CP 10 65 follows the valuation condition in the underlying policy-ACV, replacement cost or functional replacement cost, whichever applies to a particular policy or property.

The endorsement contains an OPTION for “no coinsurance”, enabling writing flood coverage at full (i.e., fire) limits or sub-limits (i.e., at a limit lower than the limit which applies to fire).

Coverage is subject to an Annual Aggregate.

Flood that begins before or within 72 hours after the inception date of CP 10 65 is not covered.

A Flood Deductible is to be entered in the Declaration or Schedule.

The cost to restore or remediate land is not covered.

This endorsement is intended as excess coverage over coverage provided under an NFIP policy, UNLESS the option for Underlying Insurance Waiver applies.

If there is flood coverage under a policy other than an NFIP policy, Endorsement CP 10 65 will pay a proportionate share based on Limits.

Flood Coverage Schedule CP DS 65 is introduced for use with Endorsement CP 10 65.

CP 11 20 - Builders Risk - Collapse During Construction

This endorsement is editorially revised to reflect revised format of the underlying coverage.

CP 12 11 - Burglary And Robbery Protective Safeguards

The endorsement is revised to eliminate information pertaining to an obsolete Underwriters Laboratories, Inc. classification system and replace it with a description of generic categories of protective safeguards.  The endorsement no longer refers to Underwriters Laboratories certification since there are many organizations that evaluate alarm systems.  Various changes in terminology are made for clarification.

CP 13 60 - Report of Values

The instructions contained in CP 13 60 are revised to refer to “this report” instead of “this endorsement”.  The term endorsement usually signifies a document which modifies policy provisions.  CP 13 60 is used only to report values and does not alter the policy.

CP 14 30 - Outdoor Trees, Shrubs, And Plants

CP 14 40 - Outside Signs

CP 14 50 - Radio Or Television Antennas

These endorsements are revised to emphasize that applicable policy provisions affect coverage provided under the endorsements.  Particularly relevant exclusions from the underlying forms are incorporated into the endorsements.

CP 15 08 - Business Income From Dependent Properties - Broad Form

CP 15 09 - Business Income From Dependent Properties - Limited Form

CP 15 25 - Business Income - Educational Institutions
CP 15 31 - Ordinance Or Law - Increased Period of Restoration

CP 15 34 - Extra Expense From Dependent Properties

To recognize that the term suspension is now a defined term, these endorsements are bing revised to add quotation marks to word suspension (in the phrase suspension of operations).

CP 15 24 - Mining Properties - Business Income

A Schedule and accompanying footnote are added to the endorsement.  The Schedule enables selection of the appropriate coverage option: No Underground Coverage, Limited Underground Coverage or Broad Underground Coverage.

CP 15 25 - Business Income - Educational Institutions

The Schedule in CP 15 25 is expanded to accommodate entry of a description of each school term in an annual period.  In effect, a customized definition is created for each risk.

An Extension Of Recovery Period Option is added to CO 15 25, triggered via the Schedule.  This option covers loss of business income sustained during “X” month following physical restoration of the property.  The selected number of months would be entered in the Schedule.  This option is an alternative to the more limited Extended Business Income found under CP 15 25.

CP 15 32 - Civil Authority Increased Coverage Period (Time Element)
This new endorsement provides the option of replacing the three-week coverage period with an longer period, i.e., the number of days entered into the Schedule of the endorsement.  A complementary manual rule provides for coverage periods of 60, 90, and 180 days.

CP 17 98 - Condominium Commercial Unit Owners Changes - Standard Property Policy

The Newly Acquired Property Coverage Extension in Endorsement CP 17 98 is being revised to:

Specify that coverage will be provided up to $100,000 at each building (eliminating the 10% cap);

Specify that the business personal property at the newly acquired location may be insured property that has been relocated to that location, or newly acquired business personal property;

Add coverage for newly acquired business personal property at the described premises; and 

Qualify that the Extension does not apply to personal property of others that is temporarily in the insured’s possession in the course of installing or performing work on such property or in the course of manufacturing or wholesaling activities.

CP 19 15 - Glass Coverage Schedule

The Schedule is withdrawn since it was unique to the withdrawn Glass Coverage Form.  It will no longer be necessary to provide a detailed description of glass panels, lettering and ornamentation.

CP DS 00 - Commercial Property Coverage Part Declarations

CP DS 01 - Commercial Property Coverage Part Supplemental Declarations
CP DS 02 - Commercial Property Coverage Part Renewal Endorsement

CP DS 03 - Standard Property Policy Renewal Endorsement

CP DS 04 - Reported, Acquired, Incidental Locations Schedule

CP DS 05 - Legal Liability Coverage Schedule

CP DS 06 - Earthquake - Volcanic Eruption Coverage Schedule

CP DS 07 - Leasehold Interest Coverage Schedule

These forms reflect a new naming convention which uses the prefix “DS” to identify declarations and schedules.

Form CP DS 00 is newly available in the forms portfolio.  It was submitted to regulators for information, not on behalf of insurers, and serves as a sample.  In any jurisdiction, where a filing requirement applies to Declarations, each company is responsible for complying with such requirement.

Forms CP DS 01 through CP DS 07 replace the following: CP 12 05 11 85, CP 12 40 11 85, CP 12 99 07 88, CP 19 40 11 85, CP 19 45 08 99, CP 19 60 11 85.

Forms CP DS 00, CP DS 01, CP DS 02, and CP DS 03 reflect a base deductible of $500 (current deductible in most states) and/or extension of the Maximum Period of Indemnity Option to Extra Expense Coverage.
 

Winter months seem to bring out a number of maintenance problems for homeowners.  One of our readers writes:

“One of our HO_3 insureds was under his house and found water damage to the sub floor including the beams supporting the floor.  This is near the front of the house and what the insured suspects is that water has gotten on his porch and has seeped up under the house and done this damage.  Would this be covered?”

Based on the description of the loss, I believe that this loss would not be afforded coverage under the homeowners form. 

Water damage to a residence is only covered under certain circumstances.  First, and foremost, water damage itself is not a named peril in the HO_2 and exclusions in the HO_3 narrow the scope of coverage.  Water damage to a home is covered if produced as a result of a covered peril which initially produces the direct damage, i.e. a tree falls onto the roof of a home and the rain enters the damaged roof, causing water damage.  Keep in mind that once a loss occurs however, steps must be taken to prevent further damage or the long term damage may be excluded due to the neglect of the insured to make repairs.  The homeowners policy does provide water damage coverage under a peril "Accidental Discharge or Overflow of Water or Steam".  This peril refers to damage as a result of the accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance.  Coverage to tear out sections of the home where the damaged pipe or aforementioned systems may be located is also covered by this peril.  There are some other restrictions which will not come into play with this loss scenario.  An exclusion within this peril is "(4) caused by mold, fungus, or wet rot unless hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure." 

The HO_3 exclusion; "(5) Mold, fungus, or wet rot has an exception for loss caused by mold, fungus, or wet rot that is hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure if such loss results from the accidental discharge or overflow of water or steam from within: (a) A plumbing, heating, air conditioning or automatic fire protective sprinkler system or a household appliance on the "residence premises"; or (b) A storm drain or water, steam or sever pipes off the "residence premises".  The exclusion clarifies that for purposes of this exception a plumbing system does not include a sump, sump pump or related equipment or a roof drain, gutter, down spout or similar fixtures or equipment.  Remember that coverage under this peril must be caused by the accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance. 

The 1991 edition of the homeowners policy eliminated a coverage limitation that applied to the HO_2 and HO_3.  This limitation excluded coverage for loss to a building caused by constant or repeated seepage or leakage over a period of weeks, months, or years.  This was aimed at the gradual deterioration that occurs with long exposure to water from an undetected leak, such as corroded water pipes or rotted flooring under a bathtub or shower stall.  However, the 1991 form still contains the exclusion of coverage for loss caused by mold or wet rot without making an exception for this type of damage when caused by repeated seepage or leakage.

These observations are based on standardized ISO forms. Please consult your carrier’s forms for their afforded coverages.
 
 

I have said it many times, “The larger the loss, the shorter the client’s memory.”  It’s always time to think about errors and omissions prevention but you may be doing all you can to sell the proper coverages and still find yourself in trouble.  Case in point: Agent called his client to offer coverage for Employment Practices Liability.  The client was agreeable to a quote but declined the coverage when the quote was presented due to the cost of the policy.  Some time later that year, the client found himself in trouble and a suit was filed by an employee against the employer. The employer swore under oath that the agent never mentioned that coverage to him.  The agent had no recorded notes regarding the offer of coverage, nor did he have any correspondence to the employer regarding his refusal of the quote for coverage.  The claim resulted in payment of a $1,000,000 judgement.  What could the agent have done?  Document the file!  Make short detailed notes when you discuss coverage with an insured.  Be sure to include the date and time coverage was proposed. You don’t have to write a book, just a brief detailed note of your suggestions and the action taken by the insured.  Follow up with a letter to the insured to make sure both of you understand what will be done.  Agency principals, agents, CSRs and anyone else in the office handling calls should make notes regarding client conversations.  You must be able to show, in a random audit of your files, that notes are kept on all files.  This can also be accomplished in an electronic file by making notes in the appropriate areas of your software program. 

Marathon week! Just gets us excited thinking about it.  Five days, five courses offered.  This year’s marathon week is scheduled for March 5-9 and offers something different this year, personal auto.  You asked us to change it and we changed it!  You can now complete your entire CISR designation in a little over a week.  We offer Agency Operations in Birmingham on February 28th, Personal Auto on March 5th, Commercial Casualty on March 6th, Personal Residential Property on March 7th, and Commercial Property on March 8th.  We didn’t forget our CISR designation holders either.  On March 9th, we have scheduled our 2001 Advanced Lecture Series.  This year’s topics are Excess & Surplus Lines, Worker’s Compensation, Commercial Umbrellas and Bonds.  Even if you don’t try to take all these courses at one time, it is your invitation to take these courses in advance of their regularly offered date.  You can also take this opportunity to take a course you may not have passed the first time.  These courses fill quickly! Call us today!
 

What’s in a word?  Plenty when that one word makes or breaks a court decision concerning coverage.  Take for example, the Extended Non-Owned Automobile Endorsement, commonly used to extend liability coverage from a personal auto policy to a non-owned automobile which may be furnished or available for your regular use.  This is accomplished by removing the “furnished or available” exclusion. 
In a recent seminar, the class was discussing the endorsement and an example was used about a college student living in a dorm room who has regular access to a roommate's car.  It was mentioned that this endorsement was needed to avoid the "furnished or available" exclusion on the parents' policy.  I agree with this and often use this same example in my class.

Next a question was asked:  "How would you handle the situation for an unmarried couple who are living together and often use each others' cars. They both have their own PAP policies."  A student answered that the "Extended Non_Owned Coverage" endorsement could be added to their policies. However, the instructor said that the endorsement would not work because in part III. the endorsement states that "this endorsement does not afford coverage under Part A or Part B of the policy for any accident involving a vehicle owned ...by a member of the same household."  His contention was that since they are living in the same household, this exclusion applies.
I have also subscribed to this opinion that two people living together constituted a “household.”  They are not recognized as married by the law or the IRS.  A number of insurance carrier’s adjusters also shared this same opinion.  It may now be time to change that interpretation.  Black’s Law Dictionary, 6th edition, defines household as “A family living together. Schurler v. Industrial Commission, 86 Utah 284, 43 P.2d 696, 699.  Those who dwell under the same roof and compose a family.
The term “household” is generally synonymous with “family” for insurance purposes, and includes those who dwell together as a family under the same roof.  Van Overbeke v. State Farm Mutual Automobile Insurance Company, 303 Minnesota 387, 227 N.W.2d 807,810.  Generally, the term “household” as used in automobile policies is synonymous with “home” and “family.”  Bartholet v. Berkness, 291 Minnesota 123, 189 N.W. 2d 410, 412. 

Family _ most commonly refers to a group of persons consisting of parents and children; father, mother and their children; immediate kindred, constituting a fundamental social unit in civilized society.

Kindred _ relation or relationship by blood or consanguinity. relative by blood; by birth.
In view of this, I no longer believe that the couple has created a "household" and do believe that the exclusion does not apply.  The PAP certainly wouldn't recognize them as "family members."  Nor would they qualify as "resident relatives" on the homeowners policy. 

I believe that the intent of the exclusion is to avoid providing excess coverage on my policy if I am driving an auto owned by a family member living in my household.  As a resident relative I would qualify as a "family member" on their policy and would have primary coverage there.  On my policy there is an exclusion for vehicles owned by a family member that are not covered autos on my policy but this exclusion does not apply to my (the named insured) use of that vehicle.  So I already have excess coverage on my policy and the endorsement would be redundant.
Does this mean that all future claims meeting these criteria will be covered?  Probably not, unless you can convince the company that a “household” has not been established.  This, my friends, is just a little more information for your use in doing that.  Until next time............

Summer is just around the corner which means those new producer recruits should be going back to school! The Commercial Lines Producer School! Where else can you send your new producers and over a two week period teach them sales skills, Commercial Property and  Casualty Coverages?  This is the school for your new producers.  Qualification for this school is contingent on your producer having two years or less experience in the insurance business and have completed the pre-licensing school.  We bring in the finest instructors from all over the country to teach them the things they need to know, how to sell, and what they’re selling.  This year’s alumni will hear Chris Amrhein, Keith Wilts, and Ted Kinney deliver the best in insurance and sales instruction.  Last year’s group of commercial producer’s left well equipped to find success in the marketplace.  The dates for our 2001 school are July 9-13th and 16-19th.  The first two days are spent in Sales training, the next three days are devoted to commercial property coverages and the last four days are spent in heavy casualty insurance.  You can’t get this much detail in this amount of time, for this amount of money anywhere! Take a good look at the brochure included for this school, but hurry.  The class is limited to the first 20 applicants.  We must keep the class size to 20 to ensure that each participant receives the attention to detail that we are known for. 

The first of three new Life & Health Pre-licensing schools will be presented in Montgomery, April 14-18, 2001. This marks a return to these schools after a ten year absence.  Our membership expressed an interest in reviving these schools and we are happy to make these available.  Each class, as required by law, is five days in length and will incorporate the same attention to detail that our property & casualty pre-licensing schools now do.  We have scheduled two additional schools this year, Birmingham in May from the 14th- 18th and Mobile in July from the 9th - 13th. Make your reservations soon as these classes are sure to fill quickly.  For more information, see the enclosed Life & Health School brochure.

We still have a few spaces left in the April Employment Practices Liability school!  This class is taught by Patrick Deem, a nationally recognized authority on EPL and employment related issues.  The classes are scheduled for Mobile on April 17th, Montgomery on April 18th, and Birmingham on April 19th. Make plans to attend this class as it will be several years before it will be available again.  We’ll see you there!
 

July will be here before you know it which means those new producer recruits should be going back to school! The Commercial Lines Producer School! Where else can you send your new producers and over a two week period teach them sales skills, Commercial Property and  Casualty Coverages?  Sure, there are other schools but where can you send your new producer to learn the technical and the sales aspect of this business?  This is the school for your new producers.  Qualification for this school is contingent on your producer having two years or less experience in the insurance business and have completed the pre-licensing school. We bring in the finest instructors from all over the country to teach them the things they need to know, how to sell, and what they’re selling.  This year’s alumni will hear Chris Amrhein, Keith Wilts, and Ted Kinney deliver the best in insurance and sales instruction.  Last year’s group of commercial producer’s left well equipped to find success in the marketplace.  The dates for our 2001 school are July 9-13th and 16-19th.  The first two days are spent in Sales training, the next three days are devoted to commercial property coverages and the last four days are spent in heavy casualty insurance.  You can’t get this much detail in this amount of time, for this amount of money anywhere! Take a good look at the brochure included for this school, but hurry.  The class is limited to the first 20 applicants.  We must keep the class size to 20 to ensure that each participant receives the attention to detail that we are known for. 

The Alabama Insurance Department has approved the new HO2000 program effective May 1st. The new policy will incorporate over 50 changes and many new endorsements.  We will have much more on this new contract later in our Alabama Independent Magazine.  AIIA will also present a new seminar detailing the changes and new endorsements in Mobile on August 28th, Montgomery on August 29th, Birmingham on August 30th, and Huntsville on August 31st. We expect these classes to sell out and it will be a couple of years before the seminar is offered again. Don’t miss this one.  Early registration is highly recommended.

The next life and health license Pre-licensing school will be presented in Birmingham, May 14th-18th, 2001. This marks a return to these schools after a ten year absence.  Our membership expressed an interest in reviving these schools and we are happy to make these available.  Each class, as required by law, is five days in length and will incorporate the same attention to detail that our property & casualty pre-licensing schools now do.  We have only one other scheduled school this year, Mobile,  July 9th - 13th. Make your reservations soon as these classes are sure to fill quickly.  For more information, see the enclosed Life & Health School brochure.

It’s never too early or too late to get the flood insurance training you need.  This year we have, in cooperation with the Gulf Agency, added four new flood insurance seminars featuring representatives of the National Flood Insurance Program .   Summer and Fall rains produce some of the worst flooding in Alabama and you need to be prepared to write this coverage. We have scheduled these seminars in Mobile on June 12th, Montgomery on June 13th, Birmingham on June 14th, and Huntsville on June 15th. The course is approved for 4 hours continuing education credit and the best news is that it’s free!!  That’s right, free to the first 50 Agent members who sign up.  We’re sorry but this is a production seminar geared towards our agency members only.  So don’t delay, sign up today.

Check out our education Calendar on the internet!  If you are looking for a particular class, CE credit available, locations, time, or cost, it’s all on the net.  You can access our information at www.aiia.org, click on the link to the education pages and see it for yourself!  You can even register for class there in the comfort of your own home if you wish.  Just one of the ways we try to make it easier for you to get the education you need.  And while you are there, check out the link to the Alabama Insurance Department’s web site.  They have a number of great links including forms you can download on your computer. Check it out!!!
 

While this question was once part of a cigarette advertising campaign (for those of you old enough to remember when such advertising was legal), a similar question might hold true if applied to agency automation. Are you more automated than ever, but feel you're not getting the benefits from technology that you should, given the time and expense invested in that technology? Do you view agency management systems (and, increasingly, the internet) as a necessary evil? Do you consider automation so ingrained in your agency procedures that IT controls what you do and how you do it rather than vice versa? Do you want to "kick the habit" but feel you need a Nicorette-like tool to do it?
Unfortunately for many agencies, "automation" has become an end in and of itself rather than a means to an end.  Agency owners and principals now find their staffers spending more time learning new technologies and less time devoted to the agency’s core mission – to sell and service insurance.  Equally unfortunate is the fact that these new technologies require a lot of time and training to master. A practical solution does not involve reducing the amount of time and money spent on technology but leveraging that investment so the results impact the agency's bottom line by reducing expenses or increasing revenues. And some agencies have done just that. They have embraced technology but only as far as it is able to contribute to the agency's core mission and bottom line.
According to a recent study commissioned by IIAA, 61% of agencies surveyed felt they were getting a good return on investment (ROI) in terms of their use of technology. Only 9% felt they were not and 30% weren't sure. However, this question was asked at the beginning of the survey, and by the time respondents completed the survey, many had changed their minds after learning how they could be using technology more effectively. In fact, based on the answers to other questions in the survey, it was clear that, despite the perception, most agencies were not using automation, the Internet, and other technologies in a manner that produces a measurable ROI. Almost three-quarters of agency producers were not using laptops in the field to gather or transmit data, and the vast majority of agencies were not using T-filing or E-filing despite the fact that such practices have demonstrated a significant reduction in cost.
Some agencies, though, clearly understand the potential for technology and have implemented programs that enable them to achieve agency sales and service performance levels far above industry norms. For example, ABD Insurance of Belmont, California is using their CyberSure website to provide secure client transactions in a 24/7 service environment. They also partnered with Fireman's Fund to automate an association program, incorporating SEMCI standards and secure Internet transactions to greatly improve processing efficiency. Producers can complete applications on their laptops and transmit the information to the agency server, which then filters the application into the rating engine for a quote. The resulting information automatically populates their policy information database, enabling them to produce worksheets, endorsements, and certificates. Upon renewal, the process can be reversed and a renewal quote and proposal generated.
Another case in point is Gateway Insurance of Ft. Lauderdale, Florida. This agency is using existing technology to greatly enhance their sales and marketing efforts. Through T-filing, document scanning and archiving, Gateway has achieved a 95% paperless office that has enabled them to move to a "rotational servicing" system for customer inquiries and to use the electronic files for printing and faxing, thus increasing productivity and improving customer service. They have also implemented SEMCI with six of their major carriers resulting in a significant reduction in processing time and a measurable improvement in upload/download time and information accuracy. They also use email extensively to permit fast, efficient resolution of customer and carrier communications.
Another success story is Clements & Company of Washington, DC.  Clements markets several programs internationally and uses both in-house automation and the Internet in such a way that leaves their CSR's free to be knowledge workers and engage in value-added transactions with clients around the world. According to Clements, due to the improved use of technology including Internet sales, T-filing, and electronic files, revenues per employee have increased dramatically by 18-20%. The agency is constantly benchmarking their performance against industry standards, including IIAA's Best Practices results, so they can continually fine-tune their automation procedures.
While it might be assumed these technological innovations are only available to large agencies, a number of small agencies have implemented programs to reduce expenses and enhance revenues as well. For example, Basic West Insurance of San Francisco, California is a very small agency that has embraced the Internet to vastly expand their markets. After little over a year, they are producing in excess of $100,000 in annual revenue exclusively from their web site. As agency owner Gary Savelli learned, the Internet has provided a leveling effect that enables this agency to compete with much larger agencies across a much broader geographical area.
So, what can you do to take advantage of your technology investments? A good starting point is IIAA's publication, Making Money the New-Fashioned Way. This Best Practices guide lays the foundation for understanding how technology affects your agency and how you can turn technology from a black hole of agency expense into a fountain of agency profitability. The guide also includes more detailed information on many of the agencies cited above. To obtain an order form for the guide, dial (800) 296-0578 and select fax-on-demand option 2122. For more information, contact IIAA's Education Department at (800) 221-7917.
In addition, IIAA's Virtual University includes a Technology section in the Research Library that includes a number of articles on using technology to enhance performance. To access this information, go to the IIAA web site at www.independentagent.com and select the Member or Industry tab, then click on "IIAA's Virtual University" from the menu and click on the Research Library button. You can also have technology articles and tips delivered right to your desktop by subscribing to the Virtual University's free email newsletter…just visit the "What's New" area of the Virtual University or send a blank email to:

iiaavu-subscribe@listbot.com.

Special Thanks to Bill Wilson, CPCU, ARM, AIM, AAM, IIAA Technology Guru and IIAA Virtual University creator for submitting this article.
 

Do your producer contracts reflect the difference between independent contractor and employee producers? Are you certain that your non-compete and non-piracy agreements will stand up in court? Can you be sure that you are developing compensation packages that are fair to you and to your producers? If any of these issues concern you, then the Best Practices Guide to Producer Contracts is a must have for your agency. This concise guide leads you through the steps of how to compensate and contract new producers. The Guide to Producer Contracts will save principals thousands of dollars in lost time, effort, cash, and potential legal fees, yet is priced at only $29.95, shipping and handling included. This concise guide designed by IIAA contains sample contracts making it a must have for principals, agents, and their attorneys and advisors.  Don't hire another producer without one! For the full story on hiring, training, and compensating producers, check out the Best Practices guide, Top Producers: Discover, Train, Reward, which includes the Guide to Producer Contracts free!  To obtain an order form for these Best Practices guides, dial (800) 296-0578 and select fax-on-demand option 2105.  For more information, contact IIAA’s Education Department at (800) 221-7917 or lmularski@iiaa.org.

Mark your calendars for the final life insurance licensing school this year to be held July 9-13 at the Ramada Plaza in Mobile.  This marks the completion of AIIA’s return to the Life Insurance License schools.  We hope to finish the series with high attendance and invite you to consider this class if you have any thoughts of being licensed to sell life insurance.  See the enclosed brochure for more information.

AIIA was recognized at IIAA’s annual education convocation May 29-June 1, 2001 as the winner of the L. P. McCord Award for the best education program among the 250-460 member group.  Several criteria were judged including “Single Best Seminar”.  AIIA’s submission was the “Commercial Lines Insurance 
For Producers” seminar, our two week, intensive commercial lines school for new agency producers. The school is modeled after the old company schools which were used to train their agent appointees.  It includes two days of sales training, three days of property insurance training and four days of casualty insurance training.  The school was first held in 2000 with 19 attendees and will be held again July 9-13 and July 16-19, 2001 at the AIIA training center in Birmingham.  We have room for several more attendees and need your support to continue this valuable training course.  Attendees should have less than two years experience in the commercial insurance field and should have completed the 40 hour pre-qualification course. Course participants will be taught by some of the top insurance professionals in the country.  See the enclosed brochure for more information. 

It’s the first major change in the Homeowners program since 1991 and ISO has received the approval of the Alabama Insurance Department to use it here in Alabama.  The new homeowner form incorporates over 40 changes and introduces 20 new endorsements.  Changes in the form include new definitions, increased limits on special limits of personal property and many other changes.  ISO has brought the old HO-5 back to the portfolio which eliminates the HO-15 endorsement’s use. For the complete run-down on the changes in the new program, be sure to attend the August seminars.  The new seminars are scheduled for August 28th in Mobile, August 29th in Montgomery, August 30th in Birmingham and August 31st in Huntsville.  You will not want to miss this one.

Making Yourself At Home On The Internet & Building a Website That Works has been approved for 6 hours of continuing education credit by the Alabama Department of Insurance.  The course will be held in Birmingham on August 13th, Montgomery on August 14th, and Mobile on August 15th.  A special presentation of the course will also be presented at the Young Agents Conference in Destin on August 17th.
 

In case you haven’t already heard, we  have been receiving a large number of calls from our members regarding client driver’s license suspension by the Department of Motor Vehicles for non-compliance in completing their Mandatory Liability Insurance Questionnaires.  HB134, the Mandatory Automobile Liability Law calls for random samples made of 10% of the drivers within the State of Alabama to test compliance for mandatory liability.  The questionnaire calls for the National Association of Insurance Commissioners (NAIC) identification number, which according to a new Department of Revenue Regulation #810-5-8-.15 is now required on all liability insurance policy identification cards.  The NAIC number is necessary as insureds tend to list the agency and/or agent as their carrier.  This in turn delays verification and results in suspension.  The NAIC number will identify the carrier and the verification notice will be sent to the carrier at that time.  Please make sure your automobile insurance carriers are made aware of this new requirement.

Have you been receiving renewals with larger than average rate increases just days before the renewal?  Our office has received a number of calls regarding “a state law requiring timely notification of rate increases”.  We didn’t find a state law but did find a regulation issued by the Alabama Department of Insurance dated August 30th, 1985 which states: “It has also come to our attention that some insurers or agents have failed to provide timely notice of premium increases or non-renewal of property and liability coverages and that, as a result, policyholders have not been afforded an adequate opportunity to shop for alternative coverage.  The Department considers any failure to provide such information in a timely manner to be an unfair trade practice.........It is suggested that 30 days’ notice prior to the anniversary or expiration date of coverage is a desirable target date.  Insurers should implement necessary administrative procedures to assure that required rating information is received and analyzed in sufficient time to provide appropriate notice of insureds.

The Certified Insurance Counselor and Certified Insurance Service Representative conferment ceremonies will be held in Birmingham at THE CLUB atop Red Mountain at noon on August 22nd, 2001.  This is a luncheon honoring our education super achievers.  All Conferees will have received an announcement by this time notifying them of this event. If you have staff members receiving this honor, come and support them.  We will also be naming the 2000 Alabama Customer Service Representative of the Year! For more information, contact Lauren Mashburn at 205-326-4129.

“Making Yourself At Home On The Internet & Building a Website That Works” and “The 2000 ISO Homeowners Changes” have both been approved for 6 hours of continuing education credit by the Alabama Department of Insurance.  Both of these courses are excellent and if you aren’t careful, you’ll learn something here!  The internet course will be held in Birmingham on August 13th, Montgomery on August 14th, and Mobile on August 15th.  A special presentation of the course will also be presented at the Young Agents Conference in Destin on August 17th.  The 2000 ISO Homeowners Changes is not to be missed.  This seminar is scheduled for August 28th in Mobile, August 29th in Montgomery, August 30th in Birmingham, and Huntsville on August 31st.  The time for each of these courses is 8:00 a.m. to 3:00 p.m.  You won’t believe the changes made in this contract!  This is the first major change in the homeowners program since 1991.  There are over 40 changes to the forms and over 20 new endorsements.  They’re even bringing the old HO-5 back!! So don’t wait until your license renews.  These are the last two contract seminars we have planned for this year. 

CIC Courses are now approved for 24 hours of continuing education credit effective in September 2001 with the Life and Health Institute!!
 

The cable snaps and the elevator drops 29 stories!!!  Have you ever given much thought to a business that has an elevator?  Like many agents, you probably think that it’s covered by the property form.  You may be surprised to find, as one agent recently found, that not all property forms cover an elevator collision.  First, let’s take a look at the Commercial Building and Personal Property Form and the Cause of Loss Forms.

Should you write the coverage on a Basic or Broad Cause of Loss form, you will find that elevator collision is not named and is therefor, not a covered peril.  There is no wear and tear exclusion in the Basic and Broad Cause of Loss Forms as perils not specifically named in these forms are excluded. This is not the case with the Special Cause of Loss Form.

The Commercial Property Special Form Causes of Loss CP 10 30 contains an exception for elevator collision.  The group 2 exclusions has an exclusion for wear and tear which eliminates most inevitable types of losses.  In the 1990 version of the form, however; the ISO form gives an exception for elevators.

d.(1) Wear and tear;

     (6) Mechanical breakdown, including rupture or bursting caused by centrifugal force. But if mechanical breakdown results in elevator collision, we will pay for the loss or damage caused by that elevator collision.

In the 1990 edition of the form, the mechanical breakdown exclusion was revised to make an exception for resulting damage caused by elevator collision. Previous editions of this form did not provide this coverage (although the pre-1985 ISO all risks building forms did). As a result of this change, the special causes of loss form provides coverage for damage to the elevator, as well as to any other covered property, in the event of an elevator collision, even if a mechanical breakdown was the cause of the elevator collision.

Unfortunately, the BP 00 02; Businessowners Special Form, does not contain this exception.  The form does include "elevator maintenance contracts" in the "insured contract" definition, but this is for liability coverage assumed in the contract in lieu of physical damage.

The question also may extend to coverage afforded under the Boiler and Machinery (or Mechanical Breakdown) Coverage.  The form provides coverage for defined Objects in the Objects Definition Form and we find:

Object does not mean any:

11. Conveyor, crane, elevator, escalator or hoist, but not excluding any electrical machine or  electrical apparatus mounted on or used with this equipment;

This type of equipment is susceptible to frequent cable snap (wear and tear) problems. Note, however, that any motors or machines that run this equipment are covered.  Take into consideration however, that the majority of elevators installed in smaller buildings, those six stories or less, use hydraulic lifts and don’t use the electrical devices excepted by the object definition.  Electric engines are used in high rise buildings to turn the flywheel that raises and lowers the cable. 

You don’t hear about elevators plummeting to the basement from several stories taking their innocent riders to their deaths all that often.  It does happen, but rarely.  There are more airline passenger deaths per year than deaths attributed to elevator collision. Why is that?

The answer is the elevator maintenance contract.  Elevators must meet very strict standards set by the communities where they are located. Municipalities and townships across America require annual inspections of the equipment.  The maintenance contract is written to allow for frequent (at least annual) inspections and to replace any worn or damaged parts.  Most contracts include the following:
“This service shall consist of periodic examinations of the equipment, lubrication, cleaning supplies, replacement parts and repairs or adjustments to keep the equipment in proper working order. We will maintain the complete elevator system and if operating conditions should so dictate, we will repair or replace, at our expense, the following system components as applicable to the particular system covered: pump-unit including; pump, valves, silencer, tank and belts; drive motor and motor-generator; floor selector; dispatching controls; motive controller coils, contacts, printed circuit boards, relays, timers, traveling cables and related components for entire electrical control system; hoistway guide rails; car and counterweight guide shoes or rollers; hydraulic fluid; main piston and pump packing or seals; brake and linings; all hoist, governor, compensation and selector cables or tapes. Also included will be the periodic cleaning of the hoistway, pit and machine room areas and the painting of all exposed elevator machinery and the relamping of signal fixtures during regular examinations.”
This maintenance is key to the excellent safety record of the elevator industry.  The contract doesn’t include everything and the following items are excluded from the agreement:
The following equipment is not covered by the scope of this Agreement: Repairing, refinishing or replacing the cab enclosure, including suspended ceiling frame and panels, light fixtures and lamps, handrails, cab flooring & sills, cab doors; Hoistway and machine room enclosures; Hoistway entrance frames and doors; Security systems & switches; Emergency lighting components & batteries; Communication systems; Damage caused by power failures or fluctuations of 10% +/- to the equipment design voltage; environmental requirements; mainline disconnect switches and fuses, circuit breakers & main power feeders.

Given proper maintenance, the elevator should last several decades and there are a number of elevators that are over 100 years old still in operation.  If a building you insure has an elevator, consider the insurance coverage you have in place on the building and always ask for a copy of the elevator maintenance agreement.
 

The 2000-2001 Annual Conferment Ceremony honoring our CIC and CISR designees was held on August 22nd at THE CLUB in Birmingham.  A record crowd gathered to be honored at this year’s ceremony.  The 2000-2001 class honored 35 new CIC designees and 80 new CISR designees.  At the conclusion of the conferment, our 2000 Alabama CSR of the Year was named, Sandra Phillips, CIC, CISR, CPIW, with Thames, Batre’, Mattei, Beville, & Ison in Mobile.  Sandy was awarded a beautiful framed certificate of achievement.  In addition, she was awarded a gold and garnet pin which signified her achievement as one of the top five finalists in the National CSR of the Year competition by the National Alliance.  The certificate and pin were presented to Sandy by Victor D. McCarley, CIC, Director of Education and Technical Affairs for AIIA, and Dr. William T. Hold, CIC, CPCU, CLU, President of the National Alliance in Austin, Texas. 

The 2000-2001 designees honored were:  Lisa Ayers, CIC, McGriff, Seibels, & Williams, Birmingham, AL; Charles Bradshaw, CIC, Harmon Cone, Montgomery, AL; J. Paul Carter, CIC Hermann, Carter, Van Antwerp, Mobile, AL; Patsy Coan, CIC, The University Agency, Auburn, AL; Ernest Cordell, CIC, Southeast Inc., Gadsden, AL; James Dykes, CIC, HRH, Mobile, AL; Lambert Lee Garrison, CIC, Duckworth Morris Acordia, Tuscaloosa, AL; Truejoy Grimwood, CIC, Grimwood Insurance, Huntsville, AL; Troy Harris, CIC, Harris Insurance, Birmingham, AL; Carrie Herrin, CIC, Fountain, Parker, & Harberger, Huntsville, AL; Donald Hohne, CIC, Liberty Mutual, Birmingham, AL; Jennifer Howard, CIC, Chubb Insurance, Birmingham, AL; Harry William Mattei, CIC, TBMBI, Mobile, AL; Melanie McGee, CIC, McGriff, Seibels, & Williams, Birmingham, AL; Dona Mezick, CIC, 
McGriff, Seibels, & Williams, Birmingham, AL; Kathleen Nicastro, CIC, Sevier, Fowlkes, & Jackson, Florence, AL; Lindsey Joe Nichols, CIC, Byars & Associates, Jasper, AL;  Winston Nobles, CIC, Cousins Insurance Agency, Wetumpka, AL; Sandra Phillips, CIC, TBMBI, Mobile, AL; David Poundstone,, CIC, ALFA, Montgomery, AL; Bronwyn Pritchett, CIC, Aronov, Montgomery, AL; Grantland Rice, CIC, Cobbs, Allen & Hall, Birmingham, AL; Ellen Roberts, CIC, Greenhalgh Insurance, Birmingham, AL; Karen Rodda, CIC McGriff, Seibels, & Williams, Birmingham, AL; David J. Ross, CIC HRH, Birmingham, AL; Robert Schiefer, CIC, R. A. Brown, Birmingham, AL; Richard C. Skipper, CIC, Skipper Insurance, Jackson, AL; Patricia Sommer, CIC, American Resources, Mobile, AL; Elaine Sullivan, CIC, The Starke Agency, Montgomery, AL; Linda Trigg, CIC, Mutual Assurance, Birmingham, AL; Craig Vinson, CIC, The Starke Agency, Montgomery, AL; Patrick Scott Walker, CIC, Insurance Resources, Heflin, AL; Forrest Warren, CIC, Whittaker Warren, Enterprise, AL; Sanders Woodroof, CIC, Richardson & Deemer, Athens, AL; Michael Zucco, CIC, Alabama Self Insured WCF, Birmingham, AL; Mary J. Agan, CISR, HRH Risk Service, Birmingham, AL; Jodie O. Anderson, CISR, Liberty Mutual, Birmingham, AL; Sheila S. Arnold, CISR, McGriff, Seibels, & Williams, Birmingham, AL; Sandra M. Baker, CISR, Marengo Insurance Agency, Demopolis, AL; Patti E. Bates, CISR, R. A. Brown, Birmingham, AL; Jennifer D. Bauer, CISR, McGriff, Seibels, & Williams, Birmingham, AL; Sandy D. Bice, CISR, O. M. Hughes Ins Agency, Birmingham, AL; Roseann D. Brasher, CISR, TBMBI, Mobile, AL; Diane M. Brayman, CISR, Molten, Allen & Williams, Birmingham, AL; Sheila H. Brewer, CISR, Molten, Allen & Williams, Birmingham, AL; Barbara P. Broadfoot, CISR, Insurance of North Alabama, Decatur, AL; Lisa D. Brown, CISR, Dorman & Reynolds, Anniston, AL; Elise C. Buschmann, CISR, International Assurance, Mobile, AL;  Tina D. Calloway, CISR, Knight-Free Insurance, Cullman, AL; Sharon Clines, CISR, Weaver Insurance Group, Gadsden, AL; Angelia P. Coach, CISR, Aronov, Montgomery, AL; Kelly Cole, CISR, Cooney, Rikard & Curtin, Birmingham, AL; Tracy L. Cooke, CISR, J. R. Prewitt & Associates, Birmingham, AL; Janelle K. Covey, CISR, Palomar Insurance Corporation, Montgomery, AL; Stella J. Davis, CISR, Collins Insurance Agency, Birmingham, AL; Tracey M. Davis, CISR, Palomar Insurance Corporation, Montgomery, AL; Allison Demarest, CISR, Trans Con Assurance, Vestavia, AL; Cathy N. Dowd, CISR, Sevier, Fowlkes, & Jackson, Birmingham, AL; Brenda J. Downing, CISR, Calhoun County Insurance Ctr., Jacksonville, AL; Chasity Shane Eiland, CISR, Harmon-Cone Company, Montgomery, AL; Vicky Ferrie, CISR, TBMBI, Mobile, AL; Catherine A. Fisher, CISR, Hilb, Rogal & Hamilton, Birmingham, AL; Leigh Foster, CISR Ken Holt Insurance Agency, Bessemer, AL; Andra H. Garrard, CISR, Cobbs, Allen & Hall, Gadsden, AL; Debbie K. Godfrey, CISR, Willis of Birmingham, Birmingham, AL; Stephanie K. Goins, CISR, Fitts Agency, Tuscaloosa, AL; Nancy Golden McDonald, CISR, Colonial Insurance Agency, Montgomery, AL; Tammy Graves, CISR, Escambia Insurance Agency, Brewton, AL; Deborah H. Griffith, CISR, Marengo Insurance Agency, Demopolis, AL; Heather A. Grimme, CISR, Duckworth-Morris Acordia, Tuscaloosa, AL; Tina M. Hargrove, CISR, Pritchett-Moore, Inc., Tuscaloosa, AL; Susie Lawry Hartmann, CISR, Southern United Fire, Mobile, AL; Helen E. Hudgens, CISR, Willis of Birmingham, Birmingham, AL; Cynthia D. Johnson, CISR, Bullock County Ins. & Realty, Union Springs, AL; Patricia E. Koster, CISR, Duckworth-Morris Acordia, Tuscaloosa, AL; Keron F. Kyzar, CISR, Kyzar & Kyzar Insurance, Inc., Andalusia, AL; Danelle D. Lamartiniere, CISR, Palomar Insurance Corporation, Birmingham, AL; Tallie M. Langley, CISR, Alabama Retail, Montgomery, AL; Madora L. Leamon, CISR, McGriff, Seibels, & Williams, Birmingham, AL; Cynthia H. Lee, CISR, Glatfelter Insurance Group, Lineville, AL; Nancy Jeanne Levin, CISR, J. Smith Lanier, Opelika, AL; Jaclynn S. Long, CISR, Insurance Place, Birmingham, AL; Jennifer L. Lyons, CISR, Fitts Agency, Tuscaloosa, AL; Amy L. Marinucci, CISR, Fountain, Parker & Harberger, Huntsville, AL; Elizabeth M. Mask, CISR, Wright & Sprayberry, Sylacauga, AL; Shirley Dianne Matherly, CISR, The Insurance Store, Alabaster, AL; Vicki S. McWaters, CISR, Sealy Insurance, Tuscaloosa, AL; Becky Mims, CISR, Alabama Insurance Exchange, Birmingham, AL; Debra M. Minor, CISR, J. R. Prewitt & Associates, Birmingham, AL; Donna Mock, CISR, Willis of Birmingham, Birmingham, AL; Debra R. Noojin, CISR, Weaver Insurance Group, Gadsden, AL; Susan S. Parker, CISR, Talladega Insurance Agency, Talladega, AL; Gayla D. Porter, CISR, Gale, Smith & Company, Florence, AL; Tracie L. Rainwater, CISR, Wright & Sprayberry, Sylacauga, AL; Sheila A. Rashleigh, CISR, Weaver Insurance Group, Gadsden, AL; Ann W. Rivers, CISR, State Farm Insurance, Homewood, AL; Patricia M. Rogala, CISR, J. R. Prewitt & Associates, Birmingham, AL;  Jennifer Marie Roy, CISR, Aronov Insurance, Montgomery, AL; Juanita T. Sanford, CISR, Cooney, Rickard & Curtin, Birmingham, AL; Aimee Lucille Sapp, CISR, Hilb, Rogal & Hamilton, Birmingham, AL; Rhonda C. Short, CISR, Glatfelter Insurance Group, Lineville, AL; Josephine B. Simonetti, CISR, Sevier, Fowlkes & Jackson, Birmingham, AL; Kaci D. Sims, CISR, First Insurance, Alexander City, AL; Estelle Smith, CIC, CISR, Alabama Public Auto, Birmingham, AL; Jason L. Staggs, CISR, Associated Insurors, Inc., Florence, AL; DeDee R. Stone, CISR, McGriff, Seibels & Williams, Birmingham, AL; Maria Dewan Taylor, CISR, Pritchett-Moore, Inc., Tuscaloosa, AL; April G. Tillery, CISR, Colonial Insurance Agency, Montgomery, AL; LaChrisha L. Vozar, CISR, Millsaps & Associates, Mobile, AL; Angie S. Waggoner, CISR, Norman Insurance Service, Greenville, AL; Hugh H. Walker, CISR, NAI, Florence, AL; Patricia D. Weems, CISR, Molton, Allen & Williams, Birmingham, AL; Linda Wilson, CISR, Insurance Ctr of the Southeast, Dothan, AL; Brandi S. Wright, CISR, McGriff, Seibels, & Williams, Birmingham, AL; and Wendy R. Zinn, CISR, Pinnacle Casualty Assurance, Montgomery, AL.
 

November 2001

Privacy Notices May Not Have Been Sent Out By Independent Agents!

We are pleased to advise you that we now have the ruling from the Alabama Department of Insurance regarding our request to review the "agent exemption" within the Gramm-Leach-Bliley Privacy Act and include Independent Agents within that exemption. Commissioner David Parsons and Reyn Norman of the Legal Division have been working with us for several months to make that happen and we have been notified that the exemption will apply to Alabama Independent Insurance Agents as long as their carriers provide the necessary notice to your clients. This means that you will not have to send out notices to your Alabama insureds provided your companies send the notices to your clients.

Keep in mind that if you write insurance in states other than Alabama, you may still be required to send privacy notices out to those clients. The law also requires all Insurance Agents to have a privacy notice and to publicly post it in their office and on their websites.

The following are questions that we asked the Insurance Department with regard to compliance and their answers. 

Does the regulation apply to agents?

Yes, the regulation does apply to agents. However, an agent does not have to comply with the notice and opt out requirements of the regulation if:

a) the agent is an employee, agent or other representative of another licensee (a "principal" or "company") that complies with, and provides the notices required by the regulation; and

b) the agent does not disclose protected information to any person other than the principal or its affiliates.

To clarify, if an agent wishes to disclose a consumer's protected information to an entity other than the insurance company or insurance companies that the agent is representing, the agent must give the consumer a copy of the agent's privacy notice and an opportunity to prohibit the disclosure of that information to non-affiliated third parties ("opt out").

I am an independent agent and therefore represent a variety of insurance companies. What are my responsibilities under the privacy regulation?

Just like other agents, you are subject to the regulation, but you are not required to comply with the notice and opt out of requirements of the regulation if:

a) the company (or companies) for which you are acting as an agent with the respect to a particular consumer complies with the regulation; and

b) you do not disclose protected information to any person other than that company (or companies) or the affiliates of that company (or companies).

I am an independent agent and need to share consumer information with many insurers in order to get the best prices for my clients. Is this permissible under the privacy regulation?

Yes, an agent may share protected information with multiple companies in an effort to compare prices. In such situations, the individual will be a consumer of each of the companies and will be entitled to privacy and opt out notices from any of the companies that wishes to share the individual's protected financial information with non-affiliated third parties. The individual's consent will be required prior to disclosure of protected health information. Note that these individuals may become your consumers - or customers - if you disclose their protected information (for other than normal business purposes outlined in the exeptions in the rule). (See Question 1)

Every company is different. Of the companies I represent, how am I supposed to know which ones sent out notices?

Like all aspects of the agent-principal relationship, effective compliance with privacy regulations will require on-going communication and coordination between the parties. See the next question for additional clarification.

What if one of my clients didn't receive a notice from a company? Who is responsible?

Specific compliance issues will be decided on a case-by-case basis, of course. However, if an agent is acting in good faith and legitimately relies on a company to comply with the regulation, the agent would have a good arguement that he or she should not be held responsible.

Our agency receives phone-in requests for information on the insurance products offered by the companies we represent. Do we have to tell these callers the privacy policy of each of the companies when they call in?

Not necessarily. If these individuals are simply requesting information and not purchasing a product, that are likely to be considered consumers - either your consumers or consumers of the companies for which you are acting as agent. If you collect protected personal information about these individuals and you are going to share that information with non-affiliated third party, you will be required to provide them privacy and opt out notices prior to disclosure of any protected personal information. 

On the other hand, if you are not going to disclose any non-public personal information to non-affiliated third parties, you have no obligations to provide privacy and opt out notices to the individual. 

Finally, if you are going to disclose information only pursuant to a joint marketing or servicing agreement, a privacy notice is all that is required; the consumer is not entitled to opt out. 

If an individual actually purchases a product from you over the telephone, that individual is considered a customer. Normally, customers are entitled to privacy and opt out notices at the time the customer relationship is established. With a telephone transaction, however, delivery of notices can be delayed with the customer's consent. The same obligations would apply to the companies for which you are acting as agent.

I am an independent agent and I perform servicing and processing functions for several insurers. Does the regulation permit the exchange of information necessary for me to continue to perform these functions?

Yes. An insurer can share non-public personal information with agents acting as service providers for a variety of purposes regardless of whether a consumer permits disclosure of his or her information.

For more information, please call the Alabama Department of Insurance, Legal Division, at 334-241-4116, or visit them on the web at www.aldoi.org.

Yes, the holidays are just around the corner and you know what that means! That’s right! Time for the new AIIA Education Calendar. You will find your very own copy enclosed for all your insurance education needs.  And what an edition this year’s calendar turned out to be!  We have scheduled more informative classes including two new ISO update courses dealing with the new CGL contract and the new Commercial Property policy. Here’s the scoop! 
Alabama Independent Insurance Agent’s Education Department strives to bring its members and education participants the most up-to-date and topical subjects currently on the “hot topics” list.  2002 promises to be a banner year for new information and includes six new specialty seminars.  In February we have scheduled “CGL Issues and Answers, The New 2000 Form Changes”, which is one of two major policy update seminars for 2002.  This course will be taught by Chris Amrhein, AAI, former National Association Education Director and now insurance consultant guru from Alexandria, Virginia. 
In April we have a treat for our Personal Lines Agents and Customer Service Representatives with “Are These Personal Lines Losses Covered?” taught by Rick Goolsby, CIC from Cincinnati, Ohio.  Rick does a great job with this course. 
In May we offer our second major policy change course, “Commercial Property Q&A, The New 2000 Form Changes” which covers the new commercial property policy changes.  This course is taught by Terry Tadlock, CIC, CPCU, from Tallahassee, Florida, one the country’s foremost property experts. 
In July we again present our new “Commercial Lines Producer School” which combines technical and sales skills into a single 9 day course.  This course will be taught by a national faculty of coverage and sales experts. 
In August we have “Are These Commercial Lines Losses Covered? which will be taught by Ted Kinney, CIC, CPCU, CPIA. This is a new Q&A course with practical knowledge examples. 
Finally, “Dynamics of Service”  will be taught for the first time in Alabama.  This course is the premier customer service seminar. This new customer service course is now approved for 8 hours of continuing education credit so you won’t want to miss the premier! We’ll see you there!!

We have two new locations for our education programs in Montgomery and Huntsville. We will return to the Embassy Suites at 300 Tallapoosa in Montgomery for all courses except “Are These Commercial Lines Losses Covered” in August. That course will be at Southern Guaranty Insurance Company.  Our new location in Huntsville is the Space Center Marriott, 5 Tranquility Base!!  Consult Course Brochures for changes!
 

Estimates are still coming in as to the total amount of insurance losses ranging from $30-$120 billion depending on who you ask. The actual amount may not be known for some time.  One thing that we do know for certain is that the industry is preparing to cut their losses in the future by excluding terrorism as an insured peril.  In less than 60 days after the attack on New York and Washington D.C., new exclusionary endorsements have been drawn up and filed for approval.  ISO has filed the latest of those that your editor has seen although many E&S market carriers as well as AAIS have also brought new exclusions to the table. The endorsements have been filed for property as well as liability risks with a proposed effective date of January 1, 2002.  The ISO endorsements initially issued were total exclusion endorsements but after efforts made on your behalf by various state and national organizations, including this one, amended their original filings.  The terrorism exclusion in the amended property endorsements is designed to apply only when a terrorist “incident” involves nuclear or pathogenic or poisonous biochemicals (regardless of damage), or a terrorist “incident” results in TOTAL property damage (all affected properties, insured and uninsured, both direct damage and indirect business interruption losses) exceeding $25 million dollars. This means your insured could suffer a loss well under the threshold and because neighboring businesses suffered losses which exceed the cap, not receive anything.

The liability exclusion in the amended liability endorsements is similar to the property endorsement and also includes a bodily injury threshold requiring serious physical injury or death of at least 50 people. The exclusion is triggered by meeting either the property damage or bodily injury threshold. 

For a comprehensive analysis of both forms, please take a look at the Virtual University Research Article at www.vu.iiaa.net .

Yes, they have changed it again! In February we have scheduled “CGL Issues and Answers, The New 2000 Form Changes”, which is one of two major policy update seminars for 2002.  This course will be taught by Chris Amrhein, AAI, former National Association Education Director and now insurance consultant guru from Alexandria, Virginia.  Those contract changes seminars are a must for any insurance agent to keep you up-to-date on the latest coverages.  Some of the many changes in the new form are related to the electronic web based activity most of your insureds are dabbling into these days. You won’t want to miss this seminar when it comes to your area of the state.  We have scheduled four seminars in Alabama starting in Mobile on February 12th at the Ramada Plaza.  We will continue up the state to Montgomery on February 13th when we return to our former seminar location, The Embassy Suites Hotel.  The show moves to Birmingham on February 14th at the AIIA Office and makes it’s final stop in Huntsville at our new seminar location, The Space Center Marriott.

Just in case you missed this announcement in our December Edition of the Education News, we have two new locations for our education programs in Montgomery and Huntsville. 

We will return to the Embassy Suites at 300 Tallapoosa in Montgomery for all courses except “Are These Commercial Lines Losses Covered” in August. The Air Force has booked all hotel space on the date we plan to be there in August so that course will be at Southern Guaranty Insurance Company. 

Our new location in Huntsville is the Space Center Marriott, 5 Tranquility Base!!  Consult Course Brochures for any future changes!

One of the best kept secrets we’ve got is now out of the bag! We’ve had a number of changes made to our website for the benefit of our members!

Log on today to www.aiia.org to see what we have done to make your life easier.

You can access information on all of our member benefits and check out the 2002 Education Calendar on line.  We now have direct links to those CIC and CISR courses you want. We have our Education News on line too!  There’s even an archive of past issues when you want to go back and check on some of the  facts we publish! Register for courses using our secure registration transmittal form.  You can even order self study video courses on line!!

Remember, always check the web site for the latest information available.
 

It’s time to consider nominating that special customer service representative for some well deserved attention! Nominations are now being accepted for the 2002 Outstanding CSR of the Year.  This award is the highest honor for insurance representatives who have distinguished themselves through contributions to their industry and profession.  This award is open to everyone regardless of affiliation or professional designation.  Candidates must be an insurance customer service representative, or have primary responsibility for customer service duties, and write an essay of not more than two pages double spaced (approximately 1000 words) on “The Role of a CSR During a Hard Market”. All entries become the property of the Society of CISR, inclusive of permission to reprint).  Candidates must also submit letter(s) of recommendation from a professional reference.  Enclosed in this mailer is a nomination form for your use to nominate the CSR of the Year! The State winner will receive special recognition at our annual conferment ceremony including a very nice framed certificate of achievement.  National finalists will received a framed certificate of achievement and a gold and garnet pin.  The national winner will receive a gold and diamond pin, $1,000 cash award, and a scholarship to a National Alliance Program for their employer.  Alabama has been fortunate to win three national awards and one finalist.  You could be the next national award winner! Get your nominations in no later than May 1, 2002 for consideration. Good luck!

Just in case you missed this announcement in our December Edition of the Education News, we have two new locations for our education programs in Montgomery and Huntsville. 

We will return to the Embassy Suites at 300 Tallapoosa in Montgomery for all courses except “Are These Commercial Lines Losses Covered” in August. The Air Force has booked all hotel space on the date we plan to be there in August so that course will be at Southern Guaranty Insurance Company. 

Our new location in Huntsville is the Space Center Marriott, 5 Tranquility Base!!  Consult Course Brochures for any future changes!

Look for a new uninsured motorist form effective February 1, 2002.  The new form “PP 04 31 01 02 will affect private passenger auto policies.  The form has been revised in response to the Supreme Court of Alabama case of Omni Insurance Company v. Foreman, So. 2d__ (Ala. 2001).  The Uninsured Motorist Coverage has been revised by deleting the “exhaustion clause” and matching offer subrogation provision contained in the Insuring Agreement.  The new form also introduces a provision in the Limit of Liability section to state that the insurer will reduce the underinsured motorists coverage benefits payable, by any amount available to that insured, but not recovered under the liability bonds or policies applicable to the underinsured motor vehicle. However, such a reduction in damages will not reduce the limit of liability for this coverage.  The new form also deletes Exclusion C.. (“punitive damages exclusion”) in its entirety.
 
 

For all those needing a CISR course or two to complete their designation, now is the opportunity you’ve been waiting for!  It’s time for “Marathon Week” March 4th - 8th, 2002 at the association office. You can take one or all of the CISR courses during this special offering. We start with Agency Operations on February 28th, and continue with the remainder of the annual schedule with Insuring Personal Automobile Exposures on March 4th, Insuring Commercial Casualty Exposures on March 5th, Insuring Personal Residential Property on March 6th, Insuring Commercial Property Exposures on March 7th and we finish out the series for those of you who already have the CISR designation, the Advanced Lecture Series. This year’s ALS topics are Commercial Casualty Questions and Answers, Crime Insurance and Insuring Home-based businesses.  Each course is approved for 8 hours of continuing education regardless of whether you sit for the examination or not. We’ll even let you attend these courses if you don’t want to get the CISR designation, however, as long as you’re here, you might as well make the best of it and take the exam.  Make plans now to attend this once-a-year event. Space is limited.

Catchy title huh? This is our all-new and improved Difficult Questions and Answers course to be taught April 8th in Mobile, April 9th in Montgomery and April 10th in Birmingham.  As an agent or someone who deals with the personal lines client, you know to expect the unexpected.  Everyday situations can produce coverage problem areas. Why not get the upper hand on those problems before they pop up?
Personal lines errors and omissions losses make up approximately one third of the claims.  You deal with some serious financial aspects of your client’s insurance portfolio. Why not take a day to bring yourself up to date with some of the old and new questions and answers.
Insurance policies change all the time.  New personal lines policies have developed some new answers to some old questions.
The new Auto policy has some major changes as does the new 2000 homeowners program. And let’s not forget the Umbrella policy!
Get the Edge!  Don't let your competitors get ahead of you.  Education is necessary for you to compete in today's highly competitive environment. The course is approved for 6 hours of continuing education credit. See the enclosed course brochure and sign up for this seminar today.