Category Archives: Insurance Article of the Week

You never know what you will find as our article of the week. It might be noteworthy, newsworthy or just plain ridiculous insurance remarks.

Intellectual Property is important to any effective Enterprise Risk Management Plan

It is crucial to any effective Enterprise Risk Management (ERM) plan that the right manager has a

Intellectual Property and YOU

comprehensive understanding of every significant exposure of the company, so these exposures are properly managed.

Insurance products covering companies’ obvious or perceived “popular risks” do not completely solve
companies’ potential risk issues. A proper ERM plan should ensure that a company is not taking on unnecessary, additional risk. Some companies choose to effectively manage risk; while others tend to expose themselves based upon a misconception of that risk, thus jeopardizing the company. One potentially costly exposure in particular is intellectual property (IP) infringement. If a company is sued for IP infringement, or is compelled to enforce their rights, such actions endanger its profitability and sustainability if it does not to have the funds to successfully litigate. As part of constructing an ERM plan, it is important to understand what the company’s IP portfolio looks like and address any concerns or potential exposures. IP is often a company’s most valuable asset, yet it is often seriously neglected during risk management reviews. Companies who knowingly or unknowingly self-insure their IP portfolios are potentially risking the future viability of the company. Patent lawsuits in particular average $2.8 million in litigation expenses alone, when the amount in controversy is $1 million – $25 million. Virtually every company has IP risk. Any company that is making, using, selling or offering for sale goods or services in commerce has IP risk. Likewise, many companies have established rights in patents, trademarks, copyrights or hold trade secrets, making IP risk management a critical part of constructing an effective ERM plan.
By following ERM’s five step process, IP risk can be identified, and a plan can be put into place that makes the most sense for the exposure. Identify the risk:

Companies must proactively identify any potential IP risk. It does no good to ignore or discount the costs and consequences surrounding IP litigation.

Determine the projected impact of the risk:
Bottom line – determine if the company can, in fact, afford to self-insure an IP lawsuit if it is sued for infringement or forced to pursue an infringer.

Proper risk evaluation:
Intellectual Property risk can be a significant threat to a company’s survival. The lack of properly evaluating and
mitigating IP risk through specific IP insurance products could lead to the company losing its IP rights, incurring
burdensome royalty payments under licensing agreements, being forced to settle or going out of business.

Steps to mitigating IP risk:
Get an IP plan together by determining which IP insurance policies are right for the company. If the company has patents, trademarks or copyrights, they should consider an IP Enforcement insurance policy. All companies have the potential to be sued for IP infringement. A company is vulnerable if it is simply making, using or selling a product and/or service, especially if it holds sought-after technology on products and/or processes. These risks can be managed through the IP Defense insurance policy. As part of IP risk mitigation, companies must plan for the unexpected event of the loss of an insured IP lawsuit. If that lawsuit is lost, companies must already know if there are additional funds available to make it whole again through a Multi-Peril Insurance policy.

Take the time to monitor the plan:
Take the time to ensure the plan is constantly meeting the needs of the company. Be cognizant of the fact that as the company evolves, so too will the plan potentially need to be altered to fit the company’s current situation.
It is crucial to any effective ERM plan to have a comprehensive understanding of every exposure to the company, as well as the certainty that these exposures are properly managed through appropriate risk management products. Properly evaluating risk by including IP in the company’s ERM plan ensures the resources will be available to fund the high cost and consequences of IP litigation.



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Understanding Coverages and the Insurance Sales Process

I recently attended a seminar where the speaker before me was speaking on Sales and Increasing Your Bottom Line.

He went through several charts of what was important to the client and important for the selling broker/agent to understand to make the sale and create the long-term relationship. The presenter put up the chart that contained several “bubbles” of what might be important. When he pointed to the “bubble” with “knowledge of the insurance products” he asked the audience how important this was to their potential or current client. A boisterous “not important” rang out from the first two rows. The presenter then put an X through the bubble and moved on.

In all my years of sales, which dates back to the early 1970’s that bubble was the one that had a big red check mark on it . Back in the “olden” days when I started there were not nearly as many schools and methods to really learn insurance. I was blessed with a mentor that not only was a true student of insurance but also a CPA so he brought the technical and financial piece into a cohesive sale. This is not to discount the importance of all of the “sales” training that we all need to know how to get our foot in the door, close the door to the sale and maintain it year after year. But without knowledge of the product and the ability to communicate that to the customer we become just sales people and not business partners with our insureds.

We know that any sale begins with getting “your foot in the door” and that is difficult enough but only affords you the opportunity to present your qualifications and convince the prospect that you are the best person/firm to handle their account. This is a very difficult first step but each of you in the insurance industry want the opportunity of working with the more sophisticated and higher paying premium account.

Many of you in the community know Marjorie Segale. She is a partner (co-creator) of the Insurance Community Center/University LLC and the President of Segale Consulting. Part of her consulting practice is to work with larger insurance buyers in choosing the appropriate broker to handle their account. She may work with them directly or with their risk manager. She goes through an extensive vetting process in matching up the right agent/broker with the account. Marjorie has given the community permission to include her “Criterion for Selecting Your Insurance Agent/Broker.

P. S. from Marjorie
I built my agency on the basis of insurance technical skill. There will always be price shoppers. There is no law that says you have to be just a price seller. Those buyers will still line up to sue you if a loss is not covered because no one is ever grateful for that cheap policy that doesn’t cover their claim.

Click Here to View the Criterion Checklist

Written by:
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center
With Checklist by:
Director of Education, Insurance Community Center & President, Segale Consulting Services, LLC


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Combating the GEICO Effect

The billions of dollars spent by GEICO, Progressive, Esurance, et. al., have solidified the perception of many (if not most) consumers that price is the major factor when purchasing auto insurance. Independent agencies, even with insurer support, are ill equipped to compete in a “price only” environment.

Even if the money were available to match the advertising budgets of the direct sellers, the complexities of Internet marketing (e.g., search engine optimization) demand much more knowledge and marketing ability than the vast majority of agencies are in a position to provide. This strategy has been highly effective as direct writers continue to control the majority of the personal lines market.

According to A.M. Best figures, in 2008, direct writers accounted for 69.6% of net personal lines premiums written. The reverse is true in commercial lines with agency writers accounting for 69.1% of commercial P-C net premiums written.

Probably the most dramatic effect of this expanding method (selling on price, use of the Internet, social media, etc.,) is the number of competitors that have emerged.

Googling “Auto Insurance Quotes” brings up literally millions of entries. In the first 10 pages alone there are more than 70 businesses offering auto insurance quotes.

Very few, if any, of those price sellers include independent insurance agents as the producing force. So how can the independent agency compete?

Before any specific action can be taken, independent agents must gain a better understanding of the rapidly emerging insurance buyer.

Gen Y
Gen Y or the Millennial Generation (those born around 1980 and thereafter) is having a profound influence on the way insurance is marketed. These Millennials see the insurance industry as “old.” They are looking for Web-based support (for sales and service), online chat, and automated phone response. In short, they want the insurance industry to interact with them the way they interact with their peers.

Very few (again, other than the GEICOs of the world) saw the tremendous growth coming in Internet sales and the ease with which consumers could “shop” multiple providers of insurance. The Internet now allows people to do what independent agencies have always done—go to multiple companies to look for the best match of price and coverage.

The good news is that the independent agent is armed with knowledge and understanding, whereas when consumers compare prices on different Internet sites, it often leads to confusion and difficulty in comparing apples to apples.

However, one fact of insurance marketing life has become evident in this decade: Every prospect, every customer of every agency regularly hears that he or she can buy insurance from someone else and pay less in the process.

If independent agents are going to stay competitive in the coming years (and once they gain a better understanding of the insurance buyer), they must develop a new awareness of the three keys to profitability: communications, marketing and technology—and then take appropriate action.

The first step in understanding communications is to see and accept how the media are changing the way people interact with each other. Text messages, e-mails, virtual meetings and social networks often are the preferred method of communication for many of your customers. If you are not using them, one of your competitors will.

Handheld communications tools have gone mainstream. Growing numbers of our colleagues are leveraging so-called smart devices such as the iPhone, Palm® or BlackBerry® (to name just a few) to conduct both personal and commercial business.

A dynamic Web presence is critical. Agencies that want to avert the GEICO effect understand that words alone on Web sites (often called “brochure sites”) aren’t going to attract the emerging insurance buyer.

In the years ahead, audio, video, chat, online quote capability, integration with management systems (and who knows what else?) will be available to bring another dimension to agency Web sites.

Pundits predict that video will account for 80% of Internet data traffic in the next four years. This is a bit easier to understand when we begin to realize that 20 hours of video are added to YouTube every single minute; that there are now 3,500 years of video playing time on YouTube alone.

There are two “givens” when considering the facts of marketing life today:
1. Independent agents do not have the assets to compete with the direct writer advertising, whether on the Internet or elsewhere.
2. Because of the complexities of the new media, there is simply no way the average agency can stay abreast of changes in marketing methods or techniques.

On a national level, branding any product is a huge investment. On a local level, the investment is much less but the task is much more formidable now because of the national media advertising explosion.

Agency management system vendors (Vertafore and Applied Systems control over 90% of the market) suggest that only about 20% of their agency clientele use the full capabilities of their systems.

In working with both vendors, I see a concerted movement on their part to make marketing and communications more vital, with plans to expand that feature of their services in the very near future.

Some of those activities include understanding marketing tracking systems, eliminating the need for double entry, and improved capability to incorporate such features as virtual meeting conferencing, search engine optimization, instant messaging, “smart forms” for quoting, and the ability to use social networking.

Taking action
Simply understanding the changes in communications, marketing and technology is not enough. Rather than “preach to the choir,” let me list some revealing questions that agency principals might ask themselves, then suggest specific solutions:

• Do we believe that online communications are the wave of the future?
• Are we happy with our Web site?
• Are we constantly communicating with our customers?

Specific solutions:
• Investigate and begin to utilize more forms of electronic communications.
• Bring agency Web sites alive with interaction, service functions, live chat, videos, and voice-overs.
Make the Web site fun, exciting, entertaining and worth a return visit, while constantly reiterating the theme that insurance is not a commodity purchase.
• Maximize the potential of e-mail, social media, electronic newsletters and other online tools.
Continue to emphasize the use of the Web site as the major agency communications medium to clients, to staff members, to prospects.

• Do we have an in-depth understanding of our client base?
• Does our current business plan incorporate a well-designed marketing system that will constantly let us reach our business revenue and retention goals for existing customers?
• Does our active marketing system allow us to do an analysis of an expanding prospect list—to utilize demographics, etc.?

Specific solutions:
• Attain an in-depth understanding of the agency client base, utilizing every tool available, particularly your agency management system.
• If you don’t have a well thought out, written marketing plan, it’s time.
• Set up systems for constant contact with present clients. There are a variety of ways to do this. The less expensive and most effective way is to build an e-mail address list of all clients, friends, even prospects, and get the agency name in front of them at least six times (more preferred) a year. Also, offering an annual review to every client is going to be vital in the future (if not now).

• Do we know what our agency management system provider is creating to help us use their system for more communications and marketing activities?
• Do we have a robust, interactive Web site, that entertains, educates and serves as a functional sales and service tool?

Specific solutions:
• Determine how agency management system providers are creating applications to help agencies use their systems for more communications and marketing activities.
• Use that technology to create a new robust, interactive Web site that entertains, educates and serves as a functional sales and service tool. Use that technology to integrate all sales and services functions.

It’s all about the challenge

Every agency stakeholder needs to answer these vital questions:
• How can we compete in this new technology-driven multi-dimensional world?
• How can we bring together the best elements of marketing, communication and technology onto a single turnkey platform, making the Internet and other electronic marketing media the hub of our communications?
• How can we make it simple enough in application, essentially so self-contained that activities happen automatically without need for agency staff to have an extensive knowledge of technology?

Probably the best news of all is that the competitive tools available to independent agencies are more abundant than ever. Better yet, the major advantage of the independent agent still exists—the personal relationship.

Once agents face the need to understand and take action on the three essential activities (communications, marketing and technology), I believe the independent agency system will take back market share in personal lines and continue to dominate in the sale of commercial lines.

Trying to compete with the big spenders in driving prospects to the Internet is not going to work, for the reasons mentioned above.

Branding on a national basis is cost-prohibitive. Branding the agency in its local marketplace can work.

On a local level, the investment is much less but the task is much more formidable now because of the national media advertising explosion. Agents will be much more comfortable—and productive—because they understand their own local media as well as other public relations and advertising possibilities.

Trying to compete on price is a losing proposition in the long term.

Agencies spend an average of 1.5% to 1.8% of income on marketing. That money will be better spent on expanding local communications, marketing systems, and integrating technology than in any other way.

I see it as the only way to minimize The GEICO Effect.

The author
George Nordhaus has spent his entire career as an information provider to the insurance industry. He founded IMMS (Insurance Marketing and Management Services) in 1971, authored books on sales and marketing, and produced a weekly newsletter. In 2008 he left IMMS and became co-founder of AgenciesOnline, an all-inclusive marketing system for independent agencies.

This article appeared in RoughNotes magazine


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10 Ways to Attract and Retain Great Employees – Parts 1 & 2

The “human factor” has always been paramount for the insurance industry. In today’s business environment, clearly the long-term winners will be companies that provide a flexible and challenging work environment, along with employee recognition and rewards. Organizations have to be willing to share their successes. If employees are asked to share the risks, then they have to share the rewards.

Employment Exhibition


In our work as consultants we often discuss what owners and employees think are the key motivating factors. Most business owners initially think money is the key issue. However, many employees state that they are looking for challenges, recognition, and empowerment.
Despite the current softness in the economy and the rise in the unemployment rate, the shortage of skilled insurance workers is still restraining growth for many agencies. Given this environment, what can a firm do to retain and attract the best and brightest employees, while challenging them to achieve the business’ goals?
First, recognize that money, by itself, will not do it. High performing employees are searching for something more than just a high salary. The typical employee compensation plan should include a total package of rewards, recognition and environment. Some of the elements are “satisfiers” that allow a firm to attract and retain employees such as benefits, flex-time and training. Other elements of compensation are “motivators” such as bonuses, incentives, challenge, and opportunity. A well designed plan will have long term and short term compensation components.
The key to attracting and retaining the best people to the firm is the use of a “total compensation” approach. It is also a critical component in improving employee performance. A firm that takes the time to carefully customize a “total compensation” package will transform individual employees into high performing, and committed employees.
There are three basic ingredients to the total compensation package that every agency must have:
1.         Challenging Work
The old system of directing and monitoring every task that an employee performs is out. Employees with multiple skills and authority are in. For example, a major retailer has a one-paragraph employee handbook that states: “Rule #1: Use your judgment in all situations. There will be no additional rules.” To truly perform at this level requires enormous trust in the employees. However, if a business is able to perform at this level it will reach incredible heights.
Provide additional opportunities for learning and skill development to spice work up. Encourage the staff to take classes to get licensed and for courses to earn the necessary CEUs. But, an expansion of training could provide more flexibility through a higher skilled workforce. Send the employees to Dale Carnegie, Microsoft software training, business skills seminars, team building sessions or a sales class (such as Dynamics of Sales sponsored by CIC).
2.         Work Environment
Today’s workforce is looking for flexibility on the job and balance in their life. Management needs to evaluate ways to realistically provide this sought after flexibility in work. For example, tradition has it that the employees work in an office with established work hours. Could the firm allow for variations, such as 4-day workweeks, working at home two days a week or job sharing? Flexible work hours are becoming a common tool to attract and retain good employees.
3.         Recognition and Rewards
Non-cash recognition awards are a very effective way to reinforce the agency’s values. They can be a low-cost, high-impact element of the total compensation package. For example, employees who provide outstanding or innovative customer service receive special awards. One way is for employees to be nominated by customers or their peers.
Management needs to think about the types of awards that make sense for employees. Here are some examples:
¯Provide a day off with pay
¯Provide tickets to sports, music or cultural events
¯Take out an advertisement in the local newspaper thanking your employees for their contributions
¯Provide a donation in an employee’s name to the charity of his or her choice
¯Pay for tutoring for the winner’s child
¯Have the winner’s car detailed during work
¯Pay for the winner’s house to be cleaned
¯Pay for an evening out for the winner and their spouse – dinner and babysitting
Once the basic ingredients are established, the firm can then look into advanced tools to attract and retain employees. The following are some of the approaches that owners should also consider:
4.         Profit Sharing
Although money is not always king, it still has a lot of clout. Firms that establish a bonus plan based on the business profitability will have employees that strive to increase sales and cut expenses. Profit sharing can be based on the profitability of the overall business or by profit centers such as commercial lines versus personal lines versus life and health. The pool of bonus money can then be distributed to the staff based on management’s discretion.
A variation of profit sharing is to reduce the employees’ base compensation while providing quarterly bonuses based on a department’s performance. A plan that tracks employee performance will then allow them to see a direct correlation between their effort and their compensation.
Even in this economy, great employees are hard to find. You need to work hard and smart in order to find those star performers. Below are six more ideas for your agency to find and keep those high performers.
One of the key steps to take is to do your homework before you even begin the process of hiring a new employee. First, you need to identify what you are looking for. This includes the responsibilities for the position, skills required and your basic expectations for the type of person you want to hire.
We are very excited to offer to you our new employee hiring service through our partner, Insurance Hiring Systems. This is a great resource to help you do your homework before you hire and then have access to many tools that make sure you hire the right person.
10 Ways to Attract and Retain
Great Employees – Part 2
5 and 6            Phantom Stock and Stock Appreciation Rights
Stock appreciation rights (SARs) and phantom stock are both specialized deferred compensation techniques designed to provide an employee with the economic benefits of stock ownership without the employee actually owning any company stock. When an owner cannot or will not change the existing ownership structure, SARs and phantom stock are often used, to provide an employee with some sort of incentive compensation based on the actual business performance.
A SAR is simply a grant to an employee which gives that person a right, at some specific time in the future, to receive a cash award equal to the appreciation in value of a certain number of shares of company stock. In concept, SARs are similar to stock options, but different in several points. Stock options require the employee to purchase the company’s stock at the grant price. However, SARs do not require a cash outlay from the employee. The employee only receives the appreciation in value of the stock.
Phantom stock on the other hand can be viewed as units of value, which directly correspond to an equivalent number of shares of company stock. These phantom stock units are then granted to an employee for a specific period of time. When the maturity period is reached, the employee is then compensated directly in cash, based on the value of the phantom stock. Unlike SARs, the amount of compensation with phantom stock usually includes the underlying value of the stock as well as any appreciation above the grant price. Another difference is that SARs are typically paid out when the employee chooses to exercise the SAR, while phantom stock typically has a fixed award date.
7.         Deferred Compensation
Deferred compensation is a method for producers to build long term value for their efforts directly related to their books of business. We recommend using deferred compensation instead of ownership in the producer’s book of business. The plan is often phased in over time until the producer is fully vested in the plan.
The agency benefits by having a system that encourages the producers to build their books as well as remain with the firm. It must be noted that a deferred compensation plan (as well as SARs and phantom stock) creates a contingent liability for the firm, which does negatively affect agency value. However, deferred comp is also “consideration,” which helps uphold the covenant not-to-compete in a producer contract. This is another good reason to include deferred compensation as part of a producer agreement.
8.         Split Dollar Life Policies
A split-dollar plan is a way to provide life insurance for an employee or their spouse at a reduced cost to that individual. The premium for the insurance is shared by the employee and his or her employer (thus the name “split dollar”).
It is an effective way to retain key employees while the business is reimbursed for every dollar it advances. From the employer’s perspective, split-dollar is an inexpensive method of buying life insurance for any personal or business needs of select employees. It enhances employee loyalty by providing substantial insurance benefits. Some split dollar policies can provide funds, which may be used for additional employee benefits in the future (deferred compensation, salary continuation, stock redemption, or retirement income).
From the employee’s perspective, split-dollar can help replace needed family income that would be lost at the employee’s death or help pay any estate taxes. If the employee owns the policy and collaterally assigns the policy to the employer, the employer can borrow against the cash value to the extent allowed by the collateral assignment form.
9.         ESOPs
Employee Stock Ownership Plans (ESOPs) are a way for business owners to sell shares in the company or to provide an additional benefit to all qualified company employees. These plans were initially created as a win-win for business owners and employees. ESOP contributions are tax deductible as are dividends if they are paid to employees directly, on their behalf to the ESOP or applied to the loan payments of a leveraged plan. Because the ESOP is funded with pretax dollars, the company’s tax savings may increase even further.
The selling shareholder can also defer the capital gains on stock sold to an ESOP as long as the ESOP owns 30% or more of the company’s stock and the seller rolls over the sale proceeds into qualified replacement property (stocks or bonds of domestic companies). Employees pay no tax on the contributions until they are entitled to receive the stock when they leave the company or retire. At this point, the company generally buys back the stock through a buyback provision in the ESOP.
ESOPs are expensive to set up and maintain. Businesses need to be a certain size before it makes financial sense. We recommend that agency owners do their homework before seriously considering this option.
10.       Stock Equity
Stock ownership usually conjures up visions of importance and respect. Producers and employees feel that having the word “Owner” on their business card will improve sales and stature. Often the employees only understand the benefits of stock ownership and the drawbacks are ignored or not understood.
Agency owners are often unclear themselves whether or not they should offer stock to an employee. They usually first think about it either when a current employee is about to walk out the door and may not come back. Owners might often feel that they are forced to offer stock in order to entice a new producer to join the firm or to retain the currently employee, such as a producer with a book of business.
We recommend that owners think long and hard before offering stock to an employee. The decision whether or not to make an employee an owner needs to be based on a review of many factors. The right decision can propel the agency forward for many years to come. The wrong decision can mire the firm in unimportant muck.
A Final Thought
A good principle to follow is that if you want outstanding results, you need to be prepared to pay outstanding rewards. Implementation of a “total compensation” plan will motivate employees to improve not only their own performance but the performance of the firm as well.
Written by: Bill Shoeffler, CIC


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Current State of Insurance Marketplace 2012

With worsening results of profitability in the P & C sector in the US insurance marketplace for the past several years the industry has been in what can be described as a state of suspended animation.

As of January this year, the majority of industry leaders believe that the market is now in the beginning stages of a hard market.  A survey conducted by the Insurance Information Institute ( at the 16th annual Property/Casualty Insurance Joint Industry Forum revealed the opinions of some 260 insurance executives regarding the following:

  • 63 percent of respondents believe there will be an improvement in personal auto and 67 percent expect an improvement in homeowners
  • 72 percent of respondents expect an improvement in commercial lines
  • 55 percent do not expect an improvement in workers compensation.
  • 67% believe that premium growth will be higher;
  • 78% expect an improvement in profitability in 2012

The majority of reinsurance treaties renewed January, 1st and in certain areas, such as catastrophic loss, those reinsurance rates increased significantly.  As often happens, those additional business expenses are slowly trickling down to the insurance buyer in some areas of the insurance market.  The market appears to be reacting as it often does with some fragmentation and volatility; some mid-market and large accounts are seeing property rate increases while the smaller accounts have seen only slight increases in pricing.  Poor returns on investments and continuing large catastrophic losses have also had their impact on the current market.

What is striking is that within three months, insurance executives opinions have changed from 87% believing that the market is soft or at the bottom of the cycle, to 78% today believing that we are at the point of price increases.

So the soft market cycle that we have been in since 2006 seems to shifting and entering a new phase.  Could it really be the return of a “hard market”?  As is often the case, you will know it when you see it, but all indications are present.

What does this mean to you and your client?  Well, more revenue for you, but your clients deserve a heads up, particularly if they are in the manufacturing, wholesale, retail or construction business as future contracts need to be written to include the higher cost of insurance.  The previous hard market came at a time when the overall economic outlook was not as grim, so this may be a very hard pill to swallow for some of your clients.


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How IP Insurance Can Propel Technology Tomorrow

Start-up companies emerging from university research centers hold patents on revolutionary

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technologies, but they often lack the funds to enforce them.

Without an investor willing to assume the monetary burden of a long and costly legal proceeding, the startup, despite having a strong, enforceable patent portfolio, has no recourse against an infringer in the marketplace. Thus, startups can only hope to outperform infringers. The reality faced by technology startups, particularly those emerging from university research centers, is that patent protection is absolutely necessary to secure venture funding, but amounts to little more than a paper tiger without the financial ability to enforce them.

The Basic Problem
University technology transfer managers understand this basic problem, but they face challenges unique to the professional intellectual property (IP) world. Often, they are unable to offer any viable solutions to the startup regarding how best to commercially exploit the ideas developed within the schools. They are also faced with meeting the expectations of a strong commitment to the public good by transferring new technology outside of the university and into the public sphere. All must be done within the technology transfer office’s budgetary constraints.
This basic challenge is most pronounced when forming and executing a university patent licensing strategy. Universities struggle to satisfy two opposing and compelling forces. On one hand, as public institutions, universities have a public duty to move knowledge and technology out of its cloistered halls and into the public square sphere to disseminate learning as widely as possible. The public purpose of the university compels licensing agents to be generous in their contract terms and forgiving of infringement. Licensing agents tend to shy away from the aggressive, commercial tactics often used in the diligent IP management of others. Many university technology transfer offices are genuinely reluctant to pursue known patent infringers out of earnest deference to the public mission of the university.
 On the other hand, IP licensing is increasingly seen as an attractive revenue stream, potentially funding expanded operations of the university technology transfer office. More importantly, a consistent outflow of technology startups originating within the university creates an incredibly important regional economic engine. Some observers even view university licensing revenue and the number of new startups as a proxy indicator of a healthy return-on-investment for publically funded research. Within the academic community, a successful technology transfer program strengthens the prestige of the university.
What This Means
The confluence of self interest, public interest, and small budgets puts technology transfer offices and university startups in a difficult position. The peculiar hodge podge of IP incentives, restrictions, and limitations often creates a misalignment of expectations between university IP owners and startups.
To a small university startup with limited funds, the inability to bear the legal costs of a vigorous IP enforcement effort is an operational liability and an unmanaged risk. Because of the unique circumstances of the university technology transfer environment, licensees have little hope of mitigating these risks by routine contractual means alone. Unfortunately, potential investors do not overlook the ease with which large, well-funded firms can out-compete a small startup with “eerily similar” technology. The simple fact remains that neither university technology transfer offices nor university startups are likely to have the ability to pursue infringers in federal court.
The Solution
IP insurance gives the university technology transfer offices, their startups and their investors the ability to effectively leverage their IP rights against potential infringers. IP enforcement insurance is a unique plaintiff’s policy which reimburses the litigation expenses to enforce IP rights against alleged infringers. The policy remedies an investor’s concerns because it provides a source of funds for legal expenses and the litigation management expertise required to effectively utilize those funds.
Without an enforcement policy in place, startups and investors have limited options if they wish to pursue an infringer. The options may be to seek additional funds from investors, finance the lawsuit, or find an attorney to take the case on contingency. These generally are not viable options for startups because:
1.Investors are often reluctant to part with cash for reasons which do not directly contribute to their return.
2.Finding a lending institution willing to loan unsecured funds at terms which are acceptable to the startup may be difficult.
3.Only a small fraction of competent IP litigators are willing to take a case on contingency terms. Usually they want to know the outcome of the case will be a “sure thing” and that the damages to be collected are very high.
An enforcement policy changes the economic environment and assumptions of the infringer. IP litigation is an expensive and risky endeavor. Well-financed infringers rely on the fact that they have the ability to outlast a startup in court. They know that the small company may risk bankruptcy just enforcing their IP rights. Having an IP enforcement policy in place levels the litigation playing field and enhances the likelihood of success for these startup entities.
University technology startups operate with an entirely different set of concerns, limitations, and incentives than their larger corporate counterparts. These differences are neither subtle nor inconsequential. They create a licensing environment that, while attractive for its sheer volume of innovative technology, lacks the basic risk mitigation tools traditionally found in commercial licensing practice, specifically, indemnification of liability and pursuit of infringers. Here exists a superb opportunity for an IP insurance product to fill the risk management void left by the unique circumstances of university technology startups.


The undeniable fact is that in the coming years, university licensing will continue to expand and become a more important source of commercialized technology. The speed with which universities can turn laboratory ideas into commercialized goods and services will advance the prestige of the university and strengthen the economic growth of the region it serves. Effectively managing IP risk through IP insurance supports the growth and viability of vulnerable startups while helping meet both the public and self-interest goals of the universities.
Simply stated, IP insurance levels the playing field and enhances the likelihood
of success for these startup entities. IP insurance will continue to be a vital component for the future of university technology licensing.

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New Commercial Property Forms for 2012

The ISO has submitted significant changes for the Commercial Property Forms that have an effective date of 10/2012.

The changes include:  new edition dates of existing form numbers; forms that are being withdrawn and new forms that are being introduced. The information, upon which this article relies, is the ISO Circular dated January 3, 2012.  This multistate revision will be applicable to the following jurisdictions:

Alabama Kentucky Ohio
Alaska Maine Oklahoma
Arizona Maryland Oregon
Arkansas Massachusetts Pennsylvania
California Michigan Rhode Island
Colorado Minnesota South Carolina
Connecticut Missouri South Dakota
Delaware Montana Tennessee
District of Columbia Nebraska Texas
Florida Nevada Utah
Georgia New Hampshire Vermont
Guam New Jersey Virgin Islands
Illinois New Mexico Virginia
Indiana New York West Virginia
Iowa North Carolina Wisconsin
Kansas North Dakota Wyoming

Many of the ISO changes have already been adopted in insurance company forms while other changes represent clarification of the “intent” of the form.  We will include a listing of the forms that will be part of the 10/2012 edition date.  Specifically we will highlight those changes that have any significant impact and new endorsements to the form series.  This chart is a summary of the form changes and each form must be reviewed in its entirety to understand the impact of the changes. As you review the impact of the form changes you will note that there are many instances where there is no change in coverage.  What this means, typically, is that the language of the form has been modified by adding or removing a word or substituting a word that is clearer.  There is no change in the intent of the form.  Some changes result in acoverage increase typically in a sub-limit that is provided.  Some changes result in coverage being reduced for example removing am extension or sub-limit that appeared in a prior edition date.  Some changes will show coverage is broadened which typically means that form language has been added to make the coverage more comprehensive. There are some new endorsements that are being introduced that we will discuss in more detail as they are new to the form series.


Exclusion of Loss Due to By Products of Production or Processing Operations (Rental Properties) CP 10 34

This endorsement is as a result of the landlord/tenant business risks relating to the rental of the property.  While the landlord may enter into a lease that holds the tenant responsible for damages arising from a variety of causes, the insurance contract is not intended to compensate a landlord for the expected consequences of usage of the rental premises as intended. One example provided by the ISO in explanation would be when a premise is leased for use as a restaurant and there is damage from the residue of the cooking operation.  This is deemed a business risk innate to the occupancy not loss compensated by insurance.  This question becomes much more interesting and complex when the property is rented for illegal purposes such as the rental of premises that is used as a methamphetamine laboratory in which the damage from methamphetamine “cooking” operations can be likened to the residue from cooing operations in a restaurant.  Needless to say there are many issues at the heart of this discussion that goes beyond the coverage issue such as:  did the landlord know about the operation; should the landlord have known about the operation and so on.

A case in point that the ISO used in their circular was the Graff v. Allstate Insurance Company, 113 Wash, App.799; 54P.3d 1266 (Wash, Ct. App.2001).  In the case the insured filed a claim for cleanup expenses after a tenant’s methamphetamine laboratory damaged his rental house and the insurer denied the claim citing the policy’s contamination exclusion.  The insured sued and the trial court held in favor of the insured finding that his insurance policy covered the cleanup expenses.  The appellate court affirmed the lower court’s decision and stated that the operation of a methamphetamine laboratory is vandalism and therefore covered under the policy. Thus both the contamination and vandalism issues came into play.  The Insurance company,  (plaintiff),  contended that coverage is not intended to extend to the inevitable effect of a production operation which is emphasized in the language of the Special Form.  As a result of this case and similar claims, the ISO has introduced this endorsement to be attached to all polices issued to owners and tenants of rental property.

Equipment Breakdown Cause of Loss CP 10 46

Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment CP 1047

The ISO is introducing a new Cause of Loss form for Equipment Breakdown that is compatible with the Special Cause of Loss Form. Currently in the Special Cause of Loss Form there are three major categories of exclusions that relate to equipment breakdown:  artificially generated electrical current; mechanical breakdown; explosion of steam boilers…  By use of this new endorsement those exclusions are eliminated.  There are limitations specific to Equipment Breakdown coverage that is then added in the form language.   Ammonia Contamination and Hazardous Substance amounts of insurance can be scheduled on the form. Because of the introduction of the new Equipment Breakdown Form, the ISO has also introduced the Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment to allow the insurance companies to either suspend or reinstate coverage for certain pieces of equipment.

Increase in Rebuilding Expenses Following Disaster CP 04 09

This endorsement is introduced as a response to nationwide disasters and catastrophic events that have tested the limits of the policy as relates costs of labor; cost of materials due to demand and limited resources (demand surge). The ISO circular references Hurricanes Katrina and Rita wherein estimates per square footage of housing reconstruction quadrupled in the first six months after the events.

The new endorsement provides an option for insuring additional expenses when the costs of labor and/or building materials increase as a result of a disaster AND the total cost of repair or replacement exceeds the applicable limit of insurance.  Some significant sections of the endorsement include:

  1. Buildings to be insured are indicated on the endorsement
  2. Coverage will only apply as a result of an event that is declared a disaster as well as damage resulting from an event which occurs in close proximity to the disaster
  3. Coverage is on an annual aggregate basis
  4. The maximum amount of additional coverage is determined by applying a specified percentage to the limit of insurance for specific insurance.

Dependent Properties in the Supply Chain (Business Interruption)

Dependent Property Coverage is written by scheduling the business locations that the insured is “dependent upon” and have chosen to insure.  The new endorsement allows for secondary dependencies. An example provided by the ISO of a secondary dependency is a situation in which the insured’s supplier (a dependent property identified in the schedule of the current endorsement) is unable to deliver products/services due to interruption in the business of an entity (for example, a manufacturer) upon which the supplier depends but was NOT a supplier that the insured directly depended upon or was identified in the endorsement.

The new option for covering secondary dependencies is focused on contributing and recipient locations as defined in the form.  Business Income losses arising out of physical loss or damage at the secondary location is subject to the same Limit of Insurance that applies to the scheduled dependent location and does not increase the coverage.  The coverage territory is reiterated on the form to avoid any confusion that the coverage goes beyond the stated territory of the policy for example for locations outside of the United States.

Form Change Impact
Building and Personal Property Form
CP 00 10
Debris Removal: The additional limit provided is increased from $10,000 to $25,000. When no Covered Property sustains direct physical loss there is coverage in the amount of $5,000 provided for removal of debris of others’ property. Coverage is increased and expanded in definition
Building and Personal Property Form
CP 00 10
Fire Department Service Charge: The policy clarifies that the $1000.00 limit provided applies to each premises insured. No change in coverage
Building and Personal Property Form
CP 00 10 (various)
Business Personal Property in Described Structures: The coverage provided for Business Personal Property is clarified to cover both in the building or structures covered in the policy. No change in coverage
Building and Personal Property Form
CP 00 10 (various)
Coverage Radius: The language is clarified as relates “where” coverage must occur for coverage to apply. The form extends coverage to 100 feet from the building or 100 feet from the described premises, whichever distance is greater. The revision broadens coverage with respect to a tenant in a multiple-occupancy building in such situation where the premises are described in terms of the actual area (quarters) occupied by the tenant. Note: many company forms already include this clarification.
Building and Personal Property Form
CP 00 10 (various)
Property in Storage Units: A new coverage extension is introduced on the Commercial Property Form for Business Personal Property Temporarily in Portable Storage Units. The coverage is for 90 days with a sub-limit of $10,000. The property must be located within 100 feet of the described premises. A higher limit can be indicated on the Declarations Page. This can be considered an extension of coverage, however, if an insurer previously treated property in storage as property in the open then then coverage is decreased to the sub-limit.
Building and Personal Property Form
CP 00 10
Newly Acquired Business Personal Property: Currently the Commercial Property forms provide $100,000 additional coverage at each building covering newly acquired business personal property. This provision has been removed. There is no change for newly acquired business personal property located at newly acquired locations. If the insured has “newly acquired” property at their location, the coverage should be increased accordingly to reflect that limit. Coverage is reduced
Building and Personal Property Form
CP 00 10 & Cause of Loss Forms
Vegetated Roofs: This is one of the new “green” extensions in Commercial Property. Currently the property form excludes trees, shrubs, plants and lawns and then sub-limits the coverage. The property form is revised to include lawns, trees shrubs and plants which are part of a vegetated roof and thereby treating such property as an insured part of the building so that an existing vegetated roof can be replaced with like kind in the event of a loss. There are some exclusions that are revised to relate directly to a vegetated roof. Coverage is broadened.
Building and Personal Property Form
CP 00 10 & Business Income Form (various)
Electronic Data in Building Equipment: Currently ISO Commercial Property forms limit coverage for electronic data to $2,500 on an annual aggregate basis. The form is revised to remove the $2,500 limitation with respect to loss or damage to electronic data which is integrated in and operates or controls the building’s elevator, lightning, heating, and ventilation, air conditioning or security systems. Coverage is broadened
Building and Personal Property Form
CP 00 10;Business Income FormCP 00 30/00 32; Cause of Loss Forms(various)
Ordinance or Law Exclusion: The form is revised to include the word “compliance”. The new form states the “enforcement of or compliance with any ordinance or law. This is a clarification of language No change in coverage
Building and Personal Property Form
CP 00 10;Business Income FormCP 00 30/00 32; Cause of Loss Forms(various)
Options for Increasing Specified Limits: The coverage forms currently include the ability to increase coverage via an entry on the Declarations Page for certain categories of coverage. This change allows for increased coverage via Declarations for the additional coverages of Electronic Data; Newly Acquired Locations; Interruption of Computer Operations and Limitations for Theft. These changes are new coverage options
Business Income Form 
CP 00 30 and CP 00 32
Extended Business Income, Extended Period of Indemnity: The Business Income forms provide automatic coverage for 30 days’ following the end of the period of restoration for residual loss of income. The form revises the 30 days to 60 days. Coverage is increased. Note: Many insurance company forms automatically include more than 30 days.
Cause of LossCP10 10, CP10 20,
CP 10 30
Earth Movement Exclusion: The term “earthquake” now incorporates tremors and aftershocks. Language is added to the Earth Movement exclusion to reinforce that earth movement is excluded regardless of whether it is caused by an act of nature or is otherwise caused. No change in coverage
Cause of LossCP10 10, CP10 20,
CP 10 30
Water Exclusion: The Water Exclusion CP 1032 and is now incorporated in the base policy forms No change in coverage
Cause of Loss
CP 10 30
Entrusted Property: The revision is included to distinguish between those who have a role in the insured’s business such as partners/employees and others to whom property may be entrusted such as bailees or tenants. Specifically there is an exclusion for loss or damage caused by…dishonest or criminal acts by…anyone to whom the insured entrusts the property. Coverage is broadened
Cause of Loss
CP 10 30
Wear and Tear Exclusion—Special Form: The coverage is expanded to include coverage for water damage in the “specified causes of loss” to include accidental discharge or leakage of water or waterborne material as the direct result of the breaking apart or cracking of certain off-premises systems due to wear and tear. Coverage is broadened
Cause of Loss
CP 10 30
Covered Cause of Loss: The term “risk of” is deleted. This change has been done specifically to clarify the collapse exclusion but has a broader impact. This is modified for clarity purposes No change in coverage
Form Change Impact
Business Income Report/Work Sheet:
CP 15 15
The worksheet has been modified to 60 days rather than 30 days for the Extended Period of Indemnity as modified in the Business Income Form No change in coverage
Debris Removal and Outdoor Trees, Shrubs and Plants
CP 04 15 and CP 14 30
Debris Removal:
The $10,000 additional limit for debris removal is increased to $25,000. Note: Many company forms automatically include this limit automatically.
Outdoor Trees, Shrubs and Plants:
This specifies that debris removal is included in the limit provided for this coverage
Coverage is broadened
Radio or Television Antennas—Business Income or Extra Expense
CP 15 50
The endorsement removes a “reference” to the Cause of Loss Earthquake. If the Earthquake Form were attached to the policy it’s terms and conditions are therein specified No change in coverage
Utility Services—Overhead Transmission Lines
CP 04 17 (Direct) and CP 15 45 (Time Element)
The endorsement clarifies that the term “transmission lines” also includes “distribution lines” which is the vernacular in the power industry for a system that provides electricity to residential and commercial users by reducing voltage through the use of substations, transformers and other devices. The forms now reinforce the intent to cover both transmission and distribution systems which serve in the transmission of power or communication service. No change in coverage
Ordinance or Law
CP 04 05; CP 04 38; CP 15 01; CP 15 02; CP 15 08; CP 15 09; CP15 25; CP 15 31; CP 15 34
Ordinance or Law: The endorsement form is revised in the same manner as the exclusion in the Coverage Forms to include the word “compliance”. The new form states the “enforcement of or compliance with any ordinance or law. This is a clarification of language No change in coverage
Condominium Commercial Unit-Owners Changes—Standard Property Policy
CP 17 98
The endorsement modifies three sections of the Condominium Unit Owners Policy: Coverage Radius; Business Personal Property in Described Structures; and Newly Acquired Property.
1. Coverage Radius is modified to state 100 feet from the building or described premises whichever is greater
2. Clarifying that coverage applies both in a building or structure
No change in coverage
Building Glass Tenants Policy Endorsement
CP 14 70
This endorsement was first introduced in 2007 to facilitate writing coverage for building glass under a tenant’s policy that did not cover the building. This endorsement simply allows for the deductible for this coverage to be added on the endorsement rather than on the Declarations Page No change in coverage
Theft Exclusion Endorsement
CP 10 33
The Theft Exclusion Endorsement currently does not contain a schedule. The new edition date will display a schedule of locations so that there is clarity as to which location the exclusion applies No change in coverage
Flood Coverage Endorsement and Schedule
CP 10 65; CP DS 65
Currently the Flood Endorsement states there is no coverage for loss from any Flood that begins before or within 72 hours after the inception date of the endorsement. The prior form did not make any distinction concerning renewal policies. The revised form provides that the 72 hour waiting period will not apply when the prior policy included flood coverage and the policy periods are consecutive without a break in coverage. Coverage is broadened
Payroll Limitation or Exclusion Option
CP 15 10
The payroll endorsement is being modified to provide a means of limiting or excluding the payroll expense of “any category of employees or individual employees” The term “ordinary payroll expense” and its definition are removed from the endorsement. The title, also, will no longer refer to the word “ordinary” and the word “ordinary” will no longer appear in other sections such as the “coinsurance section”. The revised endorsement serves the same purpose as the prior one but can be used to address any category of employee on the insured’s payroll. No change in intent—clarification of definition
Condominium Commercial Unit-Owners Optional Coverage: Loss Assessment
CP 04 18
Currently the endorsement places a $1,000 limitation on an assessment as a result of a deductible on the condominium association policy. This endorsement provides a means for selecting a higher limit. Coverage is broadened
Utility Services—Wastewater Removal (Time Element) 
CP 15 45
The Utility Service Time Element endorsement is being revised to add a new category of utility service: wastewater removal property. By definition, wastewater removal property is a utility system for removing wastewater and sewage from the described premises other than a system designed primarily for draining storm water. The utility property includes sewer mains, pumping stations and similar equipment for moving the effluent to a holding, treatment or disposal facility; and includes such facilities. Coverage is broadened
Earthquake Sprinkler Leakage Deductible
CP 10 40; CP 10 45
In 1999, the EQSL Endorsement CP 10 39 was withdrawn from the series and EQSL could be purchased by activating the EQSL ONLY option on the EQ endorsements CP 10 40 and CP 10 45. The revision in this form adds language providing that the EQ deductible provisions outlined in the EQ endorsement (that is, the percentage deductible) do not apply to the EQSL—Only coverage. Instead the Fire deductible applies. Coverage is clarified and broadened
Builders Risk—Theft of Building Materials, Fixtures, Machinery, Equipment
CP 11 21
This change relates back to the issue of “entrusted property” discussed above. Entrusted Property: The revision is included to distinguish between those who have a role in the insured’s business such as partners/employees and others to whom property may be entrusted such as bailees or tenants. Specifically there is an exclusion for loss or damage caused by…dishonest or criminal acts by…anyone to whom the insured entrusts the property. There is no change in “intended coverage”
Green Upgrades Endorsement Revision
CP 04 02
The schedule on the form is revised to identify which property is subject to upgrade when not all personal property is not to be covered for Green Upgrades. No change in coverage
Form Change Impact
Exclusion of Loss Due to By-Products of Production or Processing Operations (Rental Properties) 
CP 10 34
New form introduced to be attached to policies issued to owners and tenants of rental premises.Discussion of the change is included above. There is no change in “intended coverage”
Specified Property Away from Premises
CP 04 04
New form introduced to provide coverage for business personal property temporarily away from the described premises in the course of daily business activities, while in the care, custody or control of the insured or an employee of the insured. Coverage is broadened
Higher Limits
CP 04 08
Currently the insurance form has many options to increase coverage via the Declarations Page. This endorsement is an alternative to activating the coverages on the Declarations Page by using this multi-purpose endorsement No change in coverage but new coverage option
Equipment Breakdown
CP 10 46
This is a new optional endorsement which is compatible with the Special Form Cause of Loss CP 00 13.
Discussion of the change is included above
New Coverage Option
Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment CP 10 47 Because of the introduction of the new Equipment Breakdown Form, the ISO has also introduced the Suspension or Reinstatement of Coverage for Loss Caused by Breakdown of Certain Equipment to allow the insurance companies to either suspend or reinstate coverage for certain pieces of equipment.
Discussion of the change is included above
New Coverage Option
Deductible By Location
CP 03 29
Currently there is a Multiple Deductible Form CP 03 20 adopted in most states which is designed to allow for the selection of different deductible by location and peril. This schedule of endorsement shows separate locations and the deductible for each location. This is a new optional way to show deductibles but does not affect existing deductible options.
Limitations on Coverage for Roof Surfacing
CP 10 36
This endorsement provides options for insuring roof surfacing on an ACV basis and for excluding cosmetic damage to roof surfacing. The cosmetic exclusion option applies only to the perils of wind and hail, and could be written without regard to the underlying valuation clause. New Coverage Option. This would be chosen by an insurer when they deem it necessary typically on an older building
Increase in Rebuilding Expenses Following Disaster CP 04 09 This is a new endorsement to add additional expenses following a disaster.
Discussion of the change is included above
New Coverage Option
Dependent Properties in the Supply Chain (Business Interruption)
Endorsement to CP 15 01; CP 15 02; CP 15 08; CP 15 09; CP 15 34.
Dependent Property Coverage is written by scheduling the business locations that the insured is “dependent upon” and have chosen to insure. The new endorsement allows for secondary dependencies.
Discussion of the change is included above
New Coverage Option
Discharge From Sewer, Drain or Sump
CP 10 38
This is a new endorsement to cover discharge from a sewer, drain or sump and pertains to physical damage and/or time element loss as indicated in the schedule. The amounts stated in the schedule are sub-limits and therefore do not increase the underlying limits of the insurance provided. An annual aggregate limitation can be selected via the schedule on the endorsement. New Coverage Option
Theft of Building Materials and Supplies (Other Than Builders Risk)
CP 10 44
Currently there is a limitation under the Special Cause of Loss form for theft coverage for building materials and supplies that are not part of the building or structure to that which is held for sale by the insured. The new endorsement provides coverage for the theft of building materials and supplies that are located on or within 100 feet of the premises when such property is intended to become a permanent part of the building or structure. New Coverage Option
Protective Safeguards (Fire)
CP 04 11
The new endorsement replaces the interline form IL 04 15. This endorsement, therefore, only pertains to Commercial Property insurance and contains the same provisions as the current endorsement. No Change in Coverage
Food Contamination (Business Interruption and Extra Expense)
CP 15 05
This new option covers extra expenses and business income loses arising out of food contamination and pertains to the Business Income And Extra Expense Coverage Form. Coverage is limited to loss of income/extra expense due to the closure of the business. Covered expenses include: cost of cleaning equipment; cost of replacing food; medical testing and vaccination and advertising expense. New Coverage Option

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Planning for 2012 – Let’s Talk About You!

Everyone, including me, has been writing articles about how to plan for 2012.

English: Fireworks over Copenhagen the night b...

We have told you how to select your carriers, products and markets. How to improve sales by choosing your best target markets and how to study your numbers. All these are important. What we have not done is focus on the single most important factor in the Success Equation – You.

I have given several talks recently where I point out that most agents believe the single most important factor in why clients buy is price competition. When you survey the clients themselves you find that to your insurance buyer the single most important factor in their buying decision is their relationship with the agent. Quite a stark difference. If you go another step deeper into what is the single most important factor in why client choose the agent they do, the answer is the agents KNOWLEDGE. Knowledge of the clients industry; knowledge of the client’s business needs and knowledge of insurance, in that order.

A Profession is defined as an occupation requiring the mastery of a complex body of knowledge and specialized skills through a combination of formal education and practical experience, with its primary orientation to the community interest rather than to individual self-interest, and having a code of ethics. We in the insurance industry must commit to our profession.

I then talk about the difference between Education and Qualification.

All of us who are licensed are qualified under the law but we may not be educated to properly handle our clients’ needs.  To help you understand the difference let’s talk about your prospective client. Would it be smart to go into your client’s office and state “I have an insurance license and here is your price.” At a very base level every agents that goes into your clients office has this same qualification, it is the expected minimum level to even talk to clients, therefore there is no differentiation in the knowledge you bring to the table. What I am asking you to do in 2012 is to look at your capabilities and make a plan for improvement, a plan to differentiate yourself.

Think about it this way we all plan to gain our CE credits to continue being qualified, what are you going to do, in addition, to become more educated. It’s time to talk about Professional Development in 2012.

I guess this leads directly to the question, what should I study? Here are the broad strokes.

1. What do your clients want you to do?
2. What do your clients need you to do?
3. What can I learn to understand business?
4. What can I learn to improve myself?

Once you struggle to answer these questions, you need to outline a timetable and process for completion.

1. Join –
2. Plan – Plan out your year educational classes and get them on your schedule, Now.
3. Read – get in the habit of reading every day. Read about your industry and Profession. Magazines, websites, journal articles etc. Set aside 30 minutes every day to read.
4. Listen – If you don’t like to read, you may well be a person who learns best by listening. Find websites that have information available through webinars or podcasts. This is a great way to get broad business knowledge. Often times you will listen to a webinar that will present information that one or more of your clients can benefit from send it to them via email.
5. Partner – Often you will not know how to do something, don’t be afraid to join forces with someone that might be an expert, split commissions, and learn from the best. That commission split could be the cheapest education you ever receive.
6. Join Groups – You can learn an enormous amount of information about an industry by joining Special Interest Groups on LinkedIn or an industry specific site. Many industries have onsite meetings, go, join in and listen to the discussions. You will begin to gain an understanding of your clients real needs, much more broadly than just insurance. Remember clients want you to have knowledge of their industry.
7. Combine – Use more than one of these approaches.

“We spend January 1 walking through our lives, room by room, drawing

up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives… not looking for flaws, but for potential.” By Ellen Goodman

I wish you all a prosperous New Year and believe if you create a Professional Development Plan you will get there.
Please join us on the Community for our free webinars you can register right on the Community


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She was drunk at her Junior High Dance. Who gave her the liquor?

This weekend I had a friend, Amanda, visit for a couple of days.  Within hours of arriving she got a call from her daughter’s school saying she (her 15 year old daughter) had to be picked up immediately because she and her friends had been drinking. The drama unfolded with her being picked up, suspended for at least a day and hopefully being an indentured servant at her home for an unlimited time frame.  But the question Amanda kept asking in heated tone was “where did you get the liquor”.  Finally, after escalating threats, the daughter admitted to getting the liquor from her friend’s parent’s home with whom she was spending the night.  Lucky in this case there were not any injuries—no one getting behind a wheel intoxicated—but, it could have happened and what then.

English: several liquor bottles Deutsch: einig...

As we look at the holiday season and the parties we give and attend (and those our children are attending) we have to revisit our treatment of this issue from our last holiday newsletter which discussed “Social Host Liquor Liability”.

Most of us are aware of business’s legal requirements to stop serving alcohol to people that are visibly intoxicated. This is especially true for those insureds in the business of serving alcohol. What we are not as aware of is the liability we assume by serving liquor in a social setting referred to as “social host” liability.

We cannot have this discussion without broaching the topic of parents who actually provide alcohol to minors in their homes—who become “social hosts” to under aged people. It may be that they do not serve the liquor to the minors but make it available or they allow alcohol to be brought in their home by their children’s friends. Some parents use a thought process that goes something like this: I would rather my child drink at home than attend a party and either drive home drunk or ride with someone who has been drinking. And here is the flaw in that thought process while you think you are providing a safe haven to your child, your friend’s parents may not share your same philosophy and, in fact, you have contributed to the delinquency of a minor. If that child gets hurt or hurts others and you contributed to that harm by providing alcohol, you will be named in the ensuing lawsuit and you may find yourself being held liable.

This brings us to the discussion of “social host” liquor liability. We become a social host whenever we are hosting an event that serves liquor be it a dinner party for another couple or putting on a wedding in our backyard. Examples of “social host” liability could be cases where our guest gets intoxicated and hurts themselves or causes injury to others; or the situation where our guest leaves our party and is involved in an accident as a drunk driver. Or, it could be a guest that leaves your party and is stopped and ticketed for drunk driving. I know you might be thinking “my friend…my brother in law would never sue me”. Surprise!

They will.

State laws differ as relates “social host” liability and not all states recognize social host liability. However there are some guidelines as to when a host serving liquor can be held liable:

-The host did, in fact, provide or serve liquor to the individual in question
-The individual was intoxicated and caused either bodily injury or property damage to a third party
-The host was aware or “should have been aware” that their guest was intoxicated
And now to the question of insurance when you are sued as a result of someone becoming intoxicated in your home and incurring or causing damage be it bodily injury or property damage.  The Homeowners Policy?  The Umbrella Policy? The answer is a “probably” yes but as always you have to check the policy.  While the Homeowner’s Policy may not have a specific liquor exclusion, most policies will have an “expected or intended injury exclusion” that the claims adjuster may or may not want to pursue. Whenever we talk about limits on a policy, these are specifically the type of situations that can take that $300,000 limit trying to respond to a $1,000,000 judgment.

The ISO 2000 edition says the following:

E.1. Expected or Intended Injury “Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”:
a. Is of a different kind, quality or degree than initially expected or      intended; or
b. Is sustained by a different person, entity, real or personal property, than initially expected or intended.
Could this exclusion be broad enough to remove coverage for the parents? Perhaps it could. Could you then look to the Personal Umbrella? Better read the form. Some forms have a liquor exclusion that applies when serving liquor to a minor.

Let’s talk for a moment about a business that occasionally or incidentally serves liquor. The Christmas season is the perfect time for this discussion. We go to our hairdressers and they offer us a glass of wine, or eggnog with a little bourbon. The office that decides rather than taking everyone to an expensive restaurant will have pizza and beer brought into the office for the big celebration. Is there coverage on the Commercial General Liability Policy for the liability of the business in these situations? Are these businesses in the “business of serving liquor”? The CGL provides automatic coverage as the exclusion only applies if the named insured is the business of manufacturing, selling, serving or furnishing alcoholic beverages. The result of this language is that a business typically has coverage for these “social” situations involving liquor.


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A Bit of Holiday Cheer

The holidays are supposed to be all about family fun and, of course, eating and drinking too much.

That’s how it all began at our family Thanksgiving dinner at my sister’s

English: Thanksgiving cheer distributed for me...

It all began with the turkey that was undercooked and put back in the oven.  The aluminum foil caught on fire and smoke filled the room.  The insurance person I am screamed out “covered, subject to your deductible”.house but it ended up as five separate insurance claims in a span of five hours.  A claim an hour—not bad!

Next, the turkey was taken out of the oven and put on the kitchen counter right as the light socket in the soffit above started pouring out water on the now overcooked turkey.  Apparently one of the guests had used an upstairs bathroom that overflowed causing the water that went on the floor to leak through the ceiling.  Again, I screamed out “covered, subject to your deductible”.

We sat down to dinner without further incident and then after dinner went to the living room to play our traditional game of Taboo.  As we all stood up after the game one of the guests spilled her glass of red one on my sister’s white carpeting.  Again , I screamed out “covered, subject to your deductible” however find out who did that because it’s covered on their liability policy.

Next, as I was passing by the entrance hall table where a flower arrangement with two candles my son brought as a gift was placed, the candles had burnt down and the arrangement was catching on fire.  This one we caught in time and immediately put it in the sink.  Beware the arrangements you get with candles in them.

I decided to leave the premises to the safety of our hotel.  I called my sister to thank her for the evening and she said it was not over yet.  After we left, the pipe broke under the sink broke and the kitchen floor was flooded. I again reminded her covered, subject to her deductible”.

The next day at her house she became the proud owner of a new toilet upstairs and shiny new pipes under her sink. The soot on the walls had been cleaned up and they actually were able to get most of the red wine out of the carpeting.  A good ending, I guess but we have decided to do Christmas Eve at our house.  I hope your holidays are less eventful!

Laurie Infantino, AFIS, CISC, CIC, ACSR, CISR, CRIS
President of Insurance Community Center


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