texas connection march 2015 corrected

In This Issue

2015 Convention Registration Opens

When Getting Customer Signatures

Isn’t Enough

Don’t Toss Those Old Liability Policies

How to Cover a Drone

the

TEXAS CONNECTION TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL MARCH 2015

Platinum Sponsor

Presidents Corner …………………………

When Getting Client Signatures….……… Page 7

How to Cover a Drone ………………….... Page 11

Don’t Toss Those Old Liability Policies .… Page 14

TDI Enforcement Actions …….……..……. Page 16

Our Partners ……..……………....……… Page 20

By The Numbers …...…….………...……… Page 22 Word Scramble ……...…….…………..…… Page 24 Classifieds ………………………..………… Page 26

The Last Word ……………………………… Page 27

THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL Page 5

It seems incredible, but on a regular basis we hear about some idiot who leaves the baby in the car and runs into the store… for just a minute. That turns out to be half an hour or more and the idiot comes back to the car and finds the child unconscious… or worse. It’s re-ported that 38 kids died last year from heatstroke after being left in the car.

Well, an ingenious Texas inventor has come up with a device to help eliminate that kind of situation. You may want to pass on to your customers, friends, and even strangers on the street.

There is now a device attaches to the car window and a motion sensor will sense any movement in the car and call your cell phone, reminding you that you have stayed longer in the store than you in-tended. This, of course, will work with dogs also. You can read more about this by going to:

http://www.dallasnews.com/news/community-news/plano/headlines/20150305-plano-woman-designs-prototype-to-stop-kids-from-dying-in-overheated-cars.ece

It’s worth a shot… but we all know you can’t legislate morality… and idiots will continue to make bad decisions… in spite of modern technology.

Tony Harper

On the Cover

Drive I-45 through Hunts-

ville, Texas and you cannot

miss this regal statue of

Sam Houston, first elected

president of the Republic of

Texas. The statue, erected

in 1994, stands 67 feet tall

and ‘presides’ over the area

day and night. General

Sam once made Huntsville

his home.

Tony

On the Cover






THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

Producers and customer service representatives are advised from early their careers of the importance of securing a customer’s signature on an . The basic premise is that if accurately completed and signed by the appli-cant, an application possesses tremendous power in the event of some type of errors-and-omissions litigation. The signed application played a significant role in the outcome of that litigation in a substantial number of E&O cases.

For agencies serious about reducing their E&O exposure, proper handling of applications is a great place to start. Un-fortunately, there have been numerous E&O cases where the signed application lacked the power it should have had. For an application to really help the agency if E&O litigation arises, the customer must fully know the contents of the entire application. If the agency sends the customer the application to sign, the entire application must be sent. Sending only the signature page could cause a problem as it might enable the customer to disavow knowledge of the contents of the entire application.

The goal is to ensure that applications work for your agency, not against it. Here are some key items to follow:

Complete, Current and Correct This is known as the “3 c’s requirement.” Are applications from your agency completed fully or are some questions left blank? If questions are left blank, why? The answers to these blank items could significantly impact the account’s desirability or pricing. How confident is your agency on the accuracy of the answers to the questions? In the haste to get applications submitted, producers/account executives may answer the questions believing they are answering honestly and correctly. This has the potential to cause some problems as carriers rely heavily on the application and presume the information to be truthful.

What is your agency’s approach when the carrier underwriter calls with additional questions? As a producer or CSR, do you presume to know the answer or do you contact the prospect to check? It’s best to contact the prospect/customer to ensure the information presented to the carrier is correct.

After a Loss What happens if, after a loss, the carrier discovers the information was incorrect? This is when your nightmare could start. The carrier may take the position that it would not have written the account had it known the correct infor-mation. Unfortunately, this scenario occurs much too often. At this point, the carrier will typically have two options: rescind the policy or honor the claim, but then take action against the agency. (continued on page 9)

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There have been many E&O claims where the carrier successfully sued the agent due to misrepresentation of the nature of the risk. This issue by itself heavily reinforces the benefits of having the insured sign the application to affirm the accuracy of the information.

The Best Approach Complete the application face-to-face with the prospect/customer, asking him or her the questions exactly as they appear and accurately noting the re-sponse on the application. After completing the appli-cation, the producer/CSR will usually request that the client sign the application. An additional requirement is recommended. Namely, don’t just ask the client to sign the application. Require the prospect/customer to review the entire application to ensure you have accurately stated the exposure, and then have the client sign it. This is one of the most important proce-dures for an agency to insist on. In virtually every state, the customer is held responsi-ble for the contents of the application once he or she has signed it. If the client misled you in the comple-tion of the application, his or her signature on the document could play a significant role if a problem develops. As stated previously, this means more than just sending the client the signature page to sign. If getting the signature is not feasible for some rea-son, explore the possibility of providing the customer with the application electronically, asking him or her to review and approve the information for correct-ness. Be certain your file is well documented with the insured’s approval.

Don’t Sign the Insured’s Name While the agency may believe the customer has au-thorized you to do so, don’t sign for the insured! After a loss, the customer may disavow giving you this au-thorization. Handwriting experts have found their way into E&O claims, so extreme caution should be exercised in this area.

Use All-new Information As a producer or CSR, have you ever completed “this year’s application” using the information from “last year’s application?” Avoid doing this. It is extremely dangerous and fraught with potential problems. Risks

change, so it is always best that the application is completed through current discussion with the cus-tomer.

Ensure Accuracy

Review and reinforce with your staff the issue of

providing your carriers with complete, accurate ap-

plications signed by the customer. This is also a great

time for management to clearly state the expecta-

tion that applications will not be submitted to the

carrier unless they are complete and accurate. This

requirement normally falls, especially with commer-

cial accounts, on the producers. Customer Service

Representatives should be authorized to return an

application to the producer if the application is in-

complete or if the CSR is concerned about accuracy.

Work in Your Favor

Applications you submit to your carriers are ex-

tremely important and must be handled accordingly.

Your agency’s goal should be that the information in

the applications is complete, current and correct

(the “3 c’s”) and the application is reviewed and

signed by the customer. While getting the insured’s

signature may be an additional step that takes time,

the power of this signed application cannot be em-

phasized enough. Anything less could spell trouble if

a loss develops and the carrier believes it was mis-

led. Turn the power of the application to work in

your favor by mandating and enforcing these re-

quirements.


by Curtis M. Pearsall, CPCU, AIAF, CPIA

President – Pearsall Associates, Inc. and

Special Consultant to the Utica

National E&O Program


Drones, or unmanned aircraft, have moved beyond

the world of espionage into the world of commerce.

Real estate brokers are using them to videotape prop-

erties from the air; farmers use them to monitor their

crops; insurance claims adjusters use them to view

damaged property; the Forest Service is using them to

monitor fires; and movie companies are using them in

film production. Some businesses, such as Amazon,

are even experimenting with using drones for package

delivery.

How would you insure a drone? We discussed this

topic with risk management expert and RiskEpedia

author Dick Rupp. He told us, “My instincts tell me

that this is an aviation risk, which most standard com-

mercial insurance policies exclude. I contacted several

broker friends and, from some of the couched re-

sponses received, I suspect that there are already

some reported claims involving drones that have ei-

ther been denied or are being handled under a reser-

vation of rights basis because of coverage questions.”

These questions concern the regulation and legality

of flying drones for commercial purposes in the Unit-

ed States. Civil and public users can only fly drones if

they have FAA approval. The FAA approval process

includes certification of the aircraft and requires the

use of a licensed pilot and approval of the purpose

and location where the drone is to be operated. Hob-

byists can only fly drones below 400 feet, away from

airports and air traffic. In 2007, the FAA clarified the

hobbyist rule to specifically exclude individuals or

companies flying drones for business purposes.

The FAA’s jurisdiction and rules have recently come

into question. After the FAA fined an individual

$10,000 for using a drone for commercial photog-

raphy purposes, the National Transportation Safety

Board dismissed the fine. The NTSB judge said that

“the FAA has no authority over small unmanned air-

craft.” The FAA has appealed the judge’s ruling that

the agency does not have the authority to regulate

commercial drones. It is scheduled to issue a proposal

on the operation of drones weighing less than 55

pounds later this year. Until the regulatory situation

becomes clearer, businesses operating drones could

run into insurance policy exclusions that bar coverage

for “illegal” activities.

(continued on page 13 )

The Federal Aviation Agency (FAA) expects that some 30,000 drones will be in use for

business purposes in the U.S. by 2020. Some businesses are already using them. Do they

have the proper insurance coverage?

Texas PIA Offers Members Satisfying E&O Solutions

“Fifteen minutes could save you 15%.... Everyone knows that… but did you know that not all E&O policies are the same? E&O is like other types of insurance… you buy it hoping you’ll never need it… but if you do… E&O can be the differ-ence in whether you stay in business or not. How about it? Do you know what your policy covers…. And more importantly, what it doesn’t? Texas PIA offers members, quality E&O markets and coverage. And members say they have saved as much as 40% when they switch to exclusive PIA pro-grams. Call today and get an analysis of your coverage and a competitive quote from multiple markets. Call Texas Insurance Professional Ser-

vices:

Ray Reyes or Bob Dixon (214) 618-2365 (832) 375-0787 [email protected] [email protected]


Businesses should also be aware of the limitations

of basic business coverages when it comes to oper-

ating a drone. The commercial general liability in-

surance policy excludes bodily injury or property

damage resulting from the ownership, mainte-

nance or use of aircraft. Commercial property and

inland marine insurance policies also have various

forms of aircraft exclusions. Some of these policies

extend to cover physical damage to the aircraft

while on the insured’s premises or on the ground,

but specifically exclude coverage while it is in the

air.

Businesses operating larger commercial drones,

which can range in cost from $250,000 to several

million dollars, can buy special inland marine/

aviation policies for the property exposure. Unless

you have a specific aviation liability policy, howev-

er, you would lack coverage for liability exposures.

Commercial drones have been used in Europe and

other countries for several years. Regulations and

specific insurance coverages have been developed

overseas to spell out liability resulting from dam-

age by drones. Overseas insurers have developed

specific insurance language for their use. At least

one specialty firm in the U.S. is providing drone in-

surance using aviation insurance forms. This insur-

ance covers drones only for “approved coverage

uses” (law enforcement, agriculture, land manage-

ment, videography, etc.) spelled out in the policy

declarations. The forms do not contain FAA Regula-

tions violation exclusions, and claims have been

paid under these policy forms. However, risk man-

agers see potential red flags, since aviation cover-

age forms do not provide coverage for personal

injury or invasion of privacy, which could result

from inadvertent videography of individuals on

their private property.

Most liability policies today are written on a “claims-made” basis, meaning they cover claims reported during the

policy term, as long as they result from incidents occurring after the policy’s retroactive date. When you first buy a

claims-made policy, your retroactive date will likely be the same as the policy’s inception date. Ideally, when you

renew or replace that policy, the insurer will use the same retroactive date. This gives you continuous coverage

back to the retroactive date of your original policy.

Older liability policies are often written on an “occurrence” basis, which means they cover claims that arise from

incidents that occur during the policy period, even if the claim is filed years later. These older policies often come

into play in cases involving “long-tail” liability claims, such as environmental, product liability and other claims that

can take years to develop.

When you make a claim that might be covered by an old insurance policy, it’s your responsibility to prove the poli-

cy existed. Having the actual document in hand can prevent coverage disputes with your insurer. For this reason,

risk management experts strongly recommend keeping all insurance policies, even expired ones, in a safe place,

and maintaining a list of policy information (including insurer name, address, type of policy, policy number and

inception/expiration dates) in a separate location.

Even if you can’t locate an old policy, you might be able to document its existence. Your broker might have a copy

(although brokerage firms have no legal obligation to keep copies of clients’ expired policies); your accounting de-

partment might have records of premium payments; your risk manager might have notes or correspondence re-

lating to the policy or other claims paid under it.

If your organization has long-tail liability exposures, including pollution liability or products liability exposures, you

have special risk management needs. Please contact us for an analysis of your exposures and coverage needs.


Imagine the worst-case scenario: a customer sues you for injuries allegedly caused by one

of your products. Then make it worse: you can’t find the policy that might cover that claim.

Contact Us

Need more in formation on the

benefits of membership?

Have a question about member

services? Give us a call:

Texas PIA & Young Insurance Professionals

3632 Frankford Rd 200B

Dallas, Texas 75287

(972) 862.3333 [email protected]

www.piatx.org

- The Insurance Sage

THE TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL Pa ge 16

: https://wwwapps.tdi.state.tx.us/inter/asproot/fraud/indictments/clips.asp

TEXAS DEPARTMENT OF INSURANCE ACTIONS

DECEMBER, 2014

ASI Lloyds of St. Petersburg, FL

Order Number: 3691

Date of Order: 12/2/2014

Action Taken: Fined $40,000

Violation: Improperly used a form for writing resi-

dential property insurance that was not filed and ap-

proved by commissioner.

Foster, Mary Hernandez of Houston

Order Number: 3719


Action Taken: General lines life, accident and health

license suspended until September 1, 2015

Violation: Failed to comply with continuing educa-

tion requirements

National Unity Insurance Company of San Antonio

Order Number: 3707



Violation: Failed to comply with Texas Insurance

Code and administrative codes in instances identified

in market conduct examination

Sosa, Lou Ann of Rosenberg

Order Number: 3706


Action Taken: Fined $1,000; must pay restitution of

$416

Violation: Withheld money belonging to insurer

Texas Mutual Insurance Company of Austin

Order Number: 3746



Violation: Failed to timely comply with a commis-

sioners order to produce information; Failed to notify

the division of refusal to pay a medical bill; Failed to

timely pay impairment benefits based on a designated

doctors opinion

Texas Professional Insurance Agents Selects EFG Companies As Its Ancillary Products Partner

-Partnership designed to increase insurance agent profit by at least 30 percent-

DALLAS, TX (March 10, 2015) Texas Professional Insurance Agents and EFG Companies, the innovator behind the award-winning Hyundai Assurance program, announced today that Texas PIA has selected EFG as its consumer protection products partner to drive greater revenue for its agent members.

With increased pricing pressure from carriers and expanding competition, insurance agents across the U.S. are struggling to grow their business. To address this need, Texas PIA chose to partner with EFG’s Simplicity Division and provide its members with three differentiating products:

Simplicity Home Protection which protects customers from the unanticipated costs of home ownership by covering household systems and appliances;

Simplicity Vehicle Protection is a vehicle service contract which covers many of the most expensive components on a vehicle; and,

Simplicity Repair Protection negotiates vehicle repair costs on behalf of the agent’s customer.

As part of the partnership, EFG’s Simplicity Protection division will provide the technology, training, marketing and sales support to ensure successful implementation. PIA members will also have the secu-rity and the ability to profit from the knowledge that the products they are offering are backed by EFG’s nationally award-winning claims administration.

“There is significant opportunity for independent agents to surpass their 2015 business goals,” said Mark Rappaport, President, Simplicity Division of EFG Companies. “The post-recession consumer is much more savvy with regard to protecting two of their largest investments, their home and vehicle. We haven’t met an agent yet who didn’t jump at the opportunity to grow their business by more than 20 percent.”

About EFG Companies

EFG Companies combines almost 40 years of experience serving as an industry innovator of consumer and vehicle protection programs with the company’s commitment to raising the industry bar in provid-ing superior client engagement. With their field and administrative teams AFIP and ASE certified, EFG’s professionals provide world-class product development and administration, go-to-market strategies, training and auditing support across a multitude of channels. www.efgcompanies.com


http://www.efgcompanies.com

WE APPRECIATE OUR PARTNERS


Aggressive Insurance

21st Century Managing General Agency

Affirmative Insurance

Alpha Insurance

American Southwest Insurance Managers

Ashley General Agency

Berwick Insurance Group

Celestite Group

Columbia Lloyds Insurance Company

Integra Premium Finance

Direct General

Dovetail Insurance

Empower Insurance Group

FloodSmart

Frank Crum

Great American Insurance

Hallmark Personal Lines

Hagerty Classic Insurance

Imperial Fire and Casualty

Imperial PFS

Insurance by Design

iMGA

Louis A. Williams & Associates, Inc.

Lane and Associates

Mendota / American Bankers Insurance

Mercury Insurance

Midlands Management

National Lloyds

Nations Safe Drivers

Personable Insurance General Agency

Premium Funding Associates, Inc.

Progressive

Ramsgate Managing Insurance

Safeway Insurance

Select Insurance Markets Inc.

Superior Access

Southeast Surplus

United Auto Insurance Group

Varsity Insurance Group

Western General Insurance Company


Time to check on those New Year’s Resolutions! How’s that going for you? Let’s look at the numbers.

As the authors of Book of Odds, a collection of statistics

about everyday life, we love the New Year. The slate is

wiped clean and we get to look at what resolutions peo-

ple make and how long the keep them. According to a

study by the University of Scranton, the top 10 this

year’s New Year's resolutions are:

1. Lose Weight

2. Getting Organized

3. Spend Less, Save More

4. Enjoy Life to the Fullest

5. Staying Fit and Healthy

6. Learn Something Exciting

7. Quit Smoking

8. Help Others in Achieving Their Dreams

9. Fall in Love

10. Spend More Time with Family

1. Lose Weight

Since 1 in 2.8 (35.6%) of adults in the US is obese

and 1 in 2.6 (38.5%) of adults believe he/she is over-

weight, it's not surprising that losing weight is the

top resolution for 2014. Barbie and Ken haven't

gained a pound since 1959, but alas most of us have.

2. Getting Organized

The average office employee spends 1.5 hours a day

(6 weeks per year) looking for things. Americans

spend 9 million hours looking for things. The top

five items men look for in their homes were clean

socks, remote control, wedding album, car keys and

their driver's license. For women, the top five items

were a favorite pair of shoes, child's toy, wallet, lip-

stick and the remote control.

3. Save More

During 2013, the personal savings rate or savings

as a percent of disposable personal income, was

about 4.5%. Thus the odds a dollar of personal

income was saved in 2013 was 1 in 22.2. Current

levels of saving are an improvement over the

2007 rate of 2.6% (1 in 38.7) but still a far cry

from the 1971 height of 13.3% (1 in 7.5). What

are the odds an adult has no savings at all? 1 in

3.2 or 31% of American adults.

4. Enjoy Life to the Fullest

We work way too hard. The odds an American

doesn't plan on taking all his or her vacation are

1 in 4, and half of those who vacation work or

think about it during their time off. Play is as im-

portant to us as it is to cats. The odds an hour of

a man's day will be spent at leisure or play are 1

in 4.1. The odds an hour of a woman's day will

be spent at leisure or play are 1 in 4.8

5. Staying Fit and Healthy

Staying fit and healthy is an aspiration but less

than half of us are willing to do much to achieve

it, especially as they get older. In the US, 1 in 1.7

adults 18-24 get the recommended amount of

exercise a week and the odds drop as people get

older, to 1 in 1.9 of those 25 to 34, 1 in 2 for

those 35 to 64 and 1 in 2.5 for those 65 and old-

er. If only paying for a gym membership did the

trick by itself!

6. Learn something exciting

The Department of Labor estimates that the aver-

age worker will switch careers 3 to 5 times dur-

ing their working life. Continuing education can

help a person pick a career that matches their

abilities and interests. Not everyone attends con-

tinuing education classes for professional rea-

sons. In fact, hundreds of thousands of people

Continued on page 23


enroll in personal enrichment classes every year to learn

new things and meet new people.

The odds an employed person is engaged in:

• Career- or job-related courses: 1 in 2.6

• Apprenticeship programs: 1 in 71.4

• Personal interest courses: 1 in 4.6

• Informal learning activities personal interest: 1 in 1.4

7. Quit Smoking

In 2011, 19% of people 18 and over (1 in 5.3) smoke. In

2013, most people who smoked wanted to quit smoking

all together (1 in 1.4 or 70%) but 1 in 2.5 (40%) will try

to quit this year. However, a small minority, 1 in 14 or

7%, will succeed in quitting on their first attempt.

8. Help Others in Achieving Their Dreams

Americans are remarkably generous with their time.

Over 64 million people volunteered in the last year,

which is more than the population of the U.K. That's

a lot of dream help! The odds a man volunteered in

2012 were 1 in 4.3, and the odds a woman volun-

teered in 2013 were 1 in 3.4.

9. Fall in love The odds an adult believes in love at first sight are 1

in 1.9, over half of us! The odds an adult believes

there is any number of people with whom she or he

could fall in love are 1 in 4.2.

10. Spend more time with family

About 23% (1 in 4.4) of adults spend time helping

household members, while about 20% (1 in 5)

spend time helping their children. The average time

spent per week on each of these activities is two

hours. One of our favorite family activities is read-

ing to kids at bedtime. The odds? A wonderful 1 in

The Bottom Line

Of the 317 million adults in the US only 1 in 2.2 make a New Year's resolution. Of these 1 in 8 or 17.8 million will

keep it for a year. Don't lose hope though. It turns out people who make a New Year's resolution are 10 times more

likely to change their lives than those who don't.


Arrange each of the following anagrams to form a single insurance related word. Keep in mind

that the anagram is not a clue. It has nothing to do with insurance related word. Send us your

answers to be entered in a drawing to win a fabulous prize! Feel free to call us if you’re stuck.

972.965.2025 Email to: [email protected] or fax to 972. 307.7888

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COMMERCIAL LINES CSR

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Send Resume to: [email protected]

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A software marketer was at the pearly gates, and

St. Peter, checking the life record, said: “Well this

rarely happens, but you are right on the line…

So, you get to choose… Heaven… or Hell…

First, he took the software marketer down to hell… there was a

wild party going on… loud music, dancing, drinking, etc.

Then, he gave the tour of heaven… it was beautiful. True serenity,

peace and tranquility everywhere…

Back at the pearly gates, he asked: “Well, which will it be?

The software marketer thought for a moment… and then said:

“Well, there’s certainly nothing not to like about heaven… it’s truly

wonderful… But, you know, I’ve been a software marketer for all

my career… I’ve led a pretty fast life… and I’m afraid I would miss it.

So, I choose Hell.

Immediately, the software marketer was transported to a room

where all manner of unpleasant torture was taking place… walking

on hot coals... roasting over a flame... lashings and floggings…

Yelling back up to St. Peter, he said: “Wait… Where’s the dancing...

and the drinking... and the loud music?

“Oh,” said St. Peter, “That was just a demo.”

the Last word

texas connection march 2015 corrected

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