My Dog Ate My Homework – That’s the excuse people used to use!

You know that old excuse—“my dog ate my homework”. 

 

Well, try this one—someone stole the catalytic converter from my car. I first heard this excuse when my sister, who is a psychologist, called during her work day and told me her patent had just cancelled their appointment. She said it was the second time that month that her patients used the excuse that their catalytic converter had been stolen and they had to get their car to the shop. I decided to look into this phenomenon to see if it was a trend or my sister had just lost her popularity. I was surprised to find out the facts.

Covered Not Covered: Stealing Catalytic Converters from Cars

It appears this crime is not a new one but has become more popular with the rising cost of platinum. The New York Times reported as far back as 3/29/2008 in an article titled: “Thieves Leave Cars, but Take Catalytic Converters” just how prevalent this type of theft was becoming. In the article they wrote: “The catalytic converter is made with trace amounts of platinum, palladium and rhodium, which speed chemical reactions and help clean emissions at very high temperatures. Selling stolen converters to scrap yards or recyclers, a thief can net a couple of hundred dollars apiece. Exactly how much depends on the size of the car and its converter. But even a little bit is worth a lot. Converter thefts are the quickie crime du jour, not only in Chicago, where workers in auto body shops and other experts say it is increasingly a nuisance, but anywhere cars are, which is to say basically everywhere.

“These are definitely occurring more than they have in recent memory, and why that is, is definitely tied to the price of precious metals within converters,” said Frank Scafidi, spokesman for the National Insurance Crime Bureau. Replacement converters usually start around $450. When you start getting into the larger S.U.V.’s, it’s $1,000-plus, said Don Tommasone, owner of Village Automotive, a car care center just outside the city. The larger the catalytic, the more platinum. That’s the ones they’re stealing. It’s also easier to crawl underneath them. They don’t need to jack up the vehicle, they just saw it right off.” http://www.nytimes.com/2008/03/29/us/29converters.html

This is not just a crime that affects the individual owner of a vehicle but is also prevalent at used car lots, especially those that have poor security. The thieves can make a big hit by stealing the converters from all the cars for one big score. In a youtube video, the story is told of a car lot in Camp Washington where all 47 vehicles on the lot had the converters stolen for an estimated loss of $20,000. The owner of the lot estimates it takes less than three minutes to steal the converter and done by simply cutting off the unit. www.youtube.com/watch?v=e_P1F8ifQjg. Other articles report of these theft occurring at auto repair shops and new car lots.

Now for the Covered Not Covered question, starting first with the individual’s Personal Auto Policy. Clearly the theft of the Catalytic Converter is covered under the Comprehensive or Other Than Collision Coverage on a Personal Auto Policy. It is, of course, subject to the deductible. What we know is that in today’s economy our personal lines clients are trying to save money on their insurance and it is not uncommon for them to be carrying higher deductibles in the $500 and $1000 range or more. Which means the loss would fall below their deductible.
As for the 47 vehicles stolen off the used car lot, we would look to the Dealers Open Lot Coverage. Most of these forms will have a deductible per vehicle, for example $1,000 or $2,500. Some policies will be written with deductible based on “car limit”, for example a 5 car maximum limit deductible. Policies can be issued with a maximum deductible during a 12 month period, for example $150,000. This entirely depends on the policy being issued. In the example of the 47 vehicles and a loss of $20,000 would work out to be only an average of $425.00/vehicle which might fall below their deductible. An auto repair shop would have the same issue on their Garage Keepers Physical Damage coverage with the deductible per auto or loss with an annual aggregate deductible.

The only silver lining in this story is that I have been reassured that my sister has not lost her touch and her patients were telling the truth. The bad news is that this loss is happening everywhere and could happen to you.

Written by: 
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center

 

Freezer Damaged Brain Samples Used to Study Autism

I first read this article late at night on my IPAD. Even at that late hour my mind immediately went to the enormity of this loss; the question of coverage and, most baffling, the dilemma in trying to assess a valuation of a loss of this type.

The Boston Globe first reported this loss in an article June 11, 2012 and the incident was reported to have happened in late May. The article reported: “A freezer malfunctioned at a Harvard-affiliated hospital that oversees the world’s largest collection of autistic brain samples, damaging a third of the scientifically precious specimens and casting doubt on whether they can be used in research. The Harvard Brain Tissue Resource Center is the largest and oldest federally funded “brain bank’’ in the United States. It provides thousands of postmorte

m brain tissue samples annually to researchers across the nation. The freezer failed sometime late last month at the center, which is housed at McLean Hospital in the Boston suburb of Belmont. The frozen tissue samples are normally maintained at about minus 80 degrees Celsius, but the temperature had reached about 7 degrees — the temperature of a common refrigerator — when the failure was discovered. The hospital launched an investigation to determine why the freezer malfunctioned and why two alarm systems failed to go off as the temperature rose.” http://articles.boston.com/2012-06-11/news/32177667_1_study-autism-autism-research-brain-bank

Now to the question as to whether this loss is covered by insurance. There still is not clarity as to how this loss occurred so we will consider various scenarios. The first possibility is that there was a “malfunction” of the refrigeration unit. This type of loss could be covered under an Equipment Breakdown Policy which would cover the repair of the refrigeration unit that was damaged assuming it fell within the definition of “accident” and the refrigerator was “covered property”. The big question, of course, is the damage to the contents in the refrigerator that being the brains being used for research. The EB policy does pay for resultant damage to the property from the accident. The big question mark is how to put a value on the “spoiled” brains AND the business income resulting from the loss of the brains in the research process. From what I have read up to this point, this loss does not appear to have been a breakdown but rather a loss of temperature which was temporary. If there was no breakdown then the Equipment Breakdown Policy would not respond.

We would now have to look at the Commercial Property Form under a Spoilage Endorsement such as the ISO Spoilage Coverage form CP 04 40. The endorsement is very broad based and has two insuring agreements: Breakdown or Contamination and Power Outage. The first covered Cause of Loss requires a “Breakdown” which does not appear to have happened in this situation. The Contamination is “by the refrigerant” also did not happen in this case. The “Power Outage” Covered Cause of Loss is where there could be coverage for this claim. The coverage states: “Power Outage, meaning change in temperature or humidity resulting from complete or partial interruption of electrical power, either on or of the described premises, due to conditions beyond your control.”

This is very broad coverage and does have some specific exclusions that could come into play in this loss. Specifically there is speculation that this was not an accident but was an intentional act. In the Boston Globe article written on June 11, 2012 they reported: “Benes said the situation is so unusual – the perfect storm of alarm and thermostat failure and the concentration of samples – that she cannot rule out foul play. She said she has not spoken to law enforcement officials, pending the completion of the internal investigation.” The article went on to say that they believe that the loss was not human error but just one of those glitches that sometimes happen.http://www.disabilityscoop.com/2012/06/11/autism-research-set-back/15821/ 

If the refrigeration was disconnected or deactivated there are specific exclusions in the Spoilage Form that would eliminate coverage. The form provides that there is no coverage for loss or damage caused by:
a. The disconnection of any refrigerating, cooling or humidity control system from the source of power
b. The deactivation of electrical power caused by the manipulation of any switch or other device used to control the flow of electrical power or current.
If the refrigeration system was “vandalized” we could then look to the vandalism coverage in the Commercial Property Form mindful that the form is written on a Replacement Cost basis and, in this case, that valuation would be difficult to prove.

Time will tell what caused the claim and we will then determine if there is any coverage that could apply. But, the real question is how this claim could ever be evaluated. If we are looking at the brains, themselves—the Spoilage Form values loss at “selling price”. How could we possibly determine a sales value of brains donated for research.
We then would have to look if there was any Loss of Income coverage that would apply AND, if there was, how a value could be determined on the claim. These brains were utilized in ongoing research over a long period of time—research that was backed by federal funding for the most part. Even under the best of circumstances it is difficult to assess a business income loss for a “research and development” operation. Even under an R & D form the “potential” loss of income, maybe in the form of grants or future income based on potential drugs that would be developed would be almost impossible to assess as a direct result of this occurrence.
It is hard to end this article on such a grim note. This is a major loss in autism research and one that cannot be measured as to its potential impact. I believe it falls through the cracks on most insurance forms. The failure of the backup alarm systems to alert the research facility of the temperature loss is, as they reported, a glitch—an expensive, devastating and most probably uninsured “glitch”.

Written by: 
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center

 

What do Encryption and E & O have in common?

They both start with “E” and Failure to Encrypt could mean E & O or WORSE!

Community Webinar Announcement: July 17th at 10am PST
The Five Key Issues You Must Understand about Encryption
CLICK HERE TO REGISTER FOR THIS EVENT – Complimentary
Conducted by: Seacoast Telecom/Link2Exchange/ ZixCorp

It is never ending–and darn right discouraging that there is something else we have to worry about transactionally in our insurance offices that could cause us serious problems. Failure to follow the protocols of encryption could not only lead us to being sued by our customers but can be a violation of privacy laws in effect. According to a Ponemon Institute study, insecure channels account for the majority of data leaks. These mistakes are not only unprofessional, they are often illegal. HIPAA, HITECH, GLBA, and SOX, state that data security laws and guidance from FFIEC agencies are no longer optional.

Some of the questions you must ask as you audit your own company’s encryption protocols are:
1. Does the agency management system you utilize have the required encryption?
2. Are your confidential emails truly protected by your Agency Management System?
3. Do any of your employees email outside of the Agency Management System?
4. Do any of your employees use their IPADS or phones to text information that could be considered confidential?

It is not only what you SEND—it could be what you RECEIVE.
Recipients receiving unencrypted emails, including your customers, patients, third-party organizations, business associates, strategic partners, and regulators may all be at risk.

Our presenters are leaders in the field of email services and encryption. Seacoast Telecom/Link2Exchange is a cloud service broker who has partnered with the leader in encryption technology, ZixCorp. To ensure privacy and compliancy, ZixCorp encrypted email solutions proactively scan for sensitive information based on defined corporate policies. If confidential material is found, it can either be blocked or sent encrypted. Each solution integrates with any corporate or Web based email system.

Don’t jeopardize your customer loyalty and company reputation and face the financial cost of defending yourself in a lawsuit or be found in violation of laws in effect. Attend this seminar so you can assess your operation and implement necessary changes right away.

Written by: 
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center

 

Don’t Let the Bed Bugs Bite — What does that have to do with Insurance?

The phrase: “Sleep Tight—Don’t Let the Bed Bugs Bite”, has an interesting history as to when it was first said and what it means.

The first citation of the phrase is said to be found in a diary in 1866. One theory of the “sleep tight” statement that appears in most explanations,  is that it had to do with beds that were supported by ropes which needed to be pulled tight to provide a spring for the mattress.

http://www.straightdope.com/columns/read/1570/whats-the-origin-of-the-expression-sleep-tight

As to the history of “bed bugs”, it is theorized that they were first introduced in America with the early colonists who brought the bugs over on the sailing ships.  It was such a problem in the early days that passengers were forbidden to bring any bedding on board the ships. The problem of bed bugs in the United States was almost totally eradicated in the 1950’s because of the wide usage of DDT.  DDT could be sprayed or dusted on and around the bed and the bed bugs were controlled for at least a year or more. Bed bugs can also be found in other places where humans spend time such as couches, chairs, airplanes and so on.

Today, bed bugs are making a comeback…big time. In the mid to late 90’s, bed bugs began appearing more frequently in hotels and motels, even premium ones, and in apartments, single-family homes, nursing homes, and hospitals. Lately, bed bugs have become national news, with media exposés on bed bug attacks in five star hotels.  There are several reasons for the resurgence of bedbugs including: increased worldwide travel; underground economy; increase in secondhand merchandise; changes in bed bug habits (they are a crafty bug); and the banning of DDT. 

Bed Bugs in the news can be big news. From an insurance perspective there are several different situations we have to deal with to determine if there is any insurance response to the potential loss.  Using a hospitality risk as an example, (hotel/motel) here are some of the situations that might occur:

1. Situation: A guest at a hotel is actually bitten by bed bugs at a hotel and makes a claim against the hotel for bodily injury and reimbursement for their costs of staying at the facility.

Insurance Response:  The Commercial General Liability Policy would most probably respond to the claim for Bodily Injury.

1.  Situation:  A guest sees bedbugs and is not harmed, reports it to the manager.

Insurance Issues and Response:

1.  Guest wants repayment for their hotel stay
     i.      The requirement to re-pay the guest could be considered a loss of income BUT the reason for the return of the hotel fees is because of a “siting of a bedbug”.  In addition, the room and probably the adjacent rooms cannot be rented because they have to be treated for potential infestation. This time there is no liability claim, no bodily injury.  We could look to the Business Income form but would then have to look at the cause of loss form that is attached to the Business Income Form which, whether Named Perils (the exception) or Special Form, will not pay for loss due to insects. There is also, typically, a 72 hour waiting period for coverage to apply so the loss would have to exceed 72 hours prior to its consideration for payment.  This varies from form to form.                                                ii.      A case in point: an Alaskan hotel Manager, Sheri Makela,  had an incident with bed bugs saying” it took over 3 months to get rid of the bed bugs, during that time the room had to be sealed totally in plastic and only accessed by the exterminator several times every month for additional spraying. A lost income claim was not filed in this case because you can only claim lost income for nights when the hotel is totally full and the incident happened during shoulder season so the hotel was not full every night. The bed bugs were discovered by housekeeping which most hotels are now routinely training how to check and spot bed bugs.”

The hotel has to hire a pest control company
The requirement to now hire a pest control company to investigate whether there were bedbugs and, if there are bed bugs, to fumigate them is a significant cost.  This would not be covered on a Commercial Property Form.

 

1. The angry guest now reports an incident on the Bed Bug Registry
2. YES –there is a registry of bed bug “incidents” that can be searched by state.  The site is: www.bedbugsepidemic.com/tag/hotel.   The site is updated daily and is searchable by location or hotel name.  All incident reports are also retrievable on the site.  One of the key concerns here is that these are “incidents” which typically are just postings without any substantiation.  The people reporting on the internet are not claiming necessarily that they were bitten by bed bugs; but, that they saw “a” bedbug. The result of this posting is that the hotel/motel could lose income and their reputation (brand name).  Now where is the coverage for the hotel? There is no coverage on the Business Income Form because that form requires that there must be “direct damage to property at the premises described” and covered under the cause of loss.  There really is now coverage available, to my knowledge, for loss of reputation because individuals are posting this on the bed bug registry anymore then there would be if an individual gave a restaurant a low score on a site that rates restaurants.  But, what we do know is that these postings can affect a business’s income.
   1. The angry guest now posts a blog about their alleged siting of the bedbug.
      1. Whether the allegations are true or false, the “claims” of bedbugs can cause serious business incomes losses and loss of reputation. The internet is a new and viral outlet for the disgruntled client to make their claims public. The “accused” in these cases do not take this lightly.
      2.  There is an interesting case in point reported on June 21, 2011 in an article titled: “Be Careful When Making Bed Bug Claims—You Might Get Sued!”  The article was about the Carelton Hotel located in Oak Park, Illinois.  A couple had complained to the manager that there were bed bugs in their room.  The manager refused to acknowledge that there was any problem.  The couple upon leaving promptly wrote a review on line when they returned home.  The hotel hired a pest control company that was unable to find any proof of bedbugs in any of the rooms at the hotel.  (Cost to hire the pest control company not covered on standard forms) As a result of the negative comments, the Carleton Hotel  sued the couple for the cost of hiring a pest company to inspect the entire facility and  $30,000 for loss of revenue claiming that the “malicious post dissuaded many people from staying in the hotel.  (Again, no coverage for the hotel suing the prior guest). The loss of business and loss of reputation is not covered on the Business Income Form.  http://bedbugs.net/be-careful-when-making-bed-bug-claims/

Coverage for the Angry Couple posting a “libelous” article and being sued.

1. Well, the answer was in the title—libel.  If the guest had a policy, such as a Homeowners Policy, and they had Personal Injury Liability Insurance, that form could respond to the lawsuit filed against them by the hotel.
2. Angry Couple claims they brought bed bugs back to their home and hired an exterminator.                                                  i.    This is an expensive proposition.  This cost could be in the range of $5,000 per home.  The Homeowners Policy would not pay for these expenses.

Who would ever have thought that Bed Bugs could bring up so many issues facing the hospitality risk AND other industries such as furniture manufacturers; furniture rental companies, etc.? For the most part these claims fall through the cracks of traditional insurance but that does not mean this is not a significant issue to consider from both a risk control and transfer of risk to an insurance company.  There are now specialty companies that offer coverage specifically for Bed Bugs.  One of the premier companies that offer Bed Bug Insurance is written through PLIS Inc.http://www.plisinc.com/bed_bug_infestation_recovery.htm .  The policy is described on their website and is primarily a first party coverage for Loss of Lodging Revenue; Rehabilitation Expenses; Extortion Payments; Decontamination Expenses; and Crisis Management.  There is a limited Third Party Remediation expense for Customer Decontamination Expenses and Onsite Customer First Aid.  As with any specialty coverage it is important to review the coverage form for definitions (such as the definition of bed bug);  coverages, and limitations.

So next time you tuck your child into bed you might think twice before saying “Sleep Tight, Don’t Let the Bed Bugs Bite”.

 

Insuring Wineries and What You Need To Know

There are NO two wineries that are exactly alike which makes insuring wineries so difficult.  The process involves understanding the winery operation; identifying the exposures; reviewing the risk management protocols the winery has in place; reviewing contracts the insured was assumed as to the contractual transfers and insurance requirements; and choosing the right insurance program to meet their needs.

The Insurance University is presenting a Winery Class specifically geared to identifying exposures and understanding specialty winery coverages.   This class is sponsored by AmWINS that has designed a Winery Insurance Program that is very comprehensive and unique in its insurance solutions.  The class will be presented by both Gary Delucchi, Vice President of AmWINS Insurance Brokerage of California and Laurie Infantino, President of the Insurance Community/University.

Understanding the winery operation is a lot more than just a GREAT glass of wine; but, ultimately it is all about that glass of wine! Join us to learn more.

The live online webinar class is this Thursday at 12 pm ET. For more information and to register, click here.

 

Avoid the Pitfalls of Insurance Proposals & Submissions

It is sad but true that most of the mistakes that an insurance agency makes are in the very beginning of the sales process.  Key to writing the correct insurance coverages and offering sufficient limits is to understand the customer’s specific needs whether it is the personal lines client or business customer.  The process of constructing an insurance program is to ask the right questions of our prospect/customer; determine the exposures; and proposing the appropriate insurance solutions with an insurance carrier that has the coverages and pricing that work for that specific client.

Most errors or omissions are a result of the processing of identifying risk and obtaining the correct coverage.  There must be accuracy from the risk identification/documentation; TO the proposal; TO the application for coverage: TO the binder: TO the Certificates of Insurance; TO the actual policy(ies) issued.

Join the Insurance Community Center/University for their class on Proposals and Submissions.  Learn what you MUST do and how to avoid the pitfalls.  The Instructor for the class is Casey Roberts, CIC, AFIS, ACSR and President of Laurus Insurance Consulting.

The LIVE online webinar class is this Wednesday at 12pm ET.  Register Here.