Wednesday, February 24, 2010

Tague Alliance - Hired & Non-Owned Auto Claims

The info presented below was provided by Philadelphia Insurance and is a great case study of the loss exposure that companies create when allowing employees to use personal vehicles or hired vehicles during the course of their employment. Tague Alliance encourages our independent insurance agent members to research their client's needs to help uncover loss exposure that may exist for a client. Read the case study below:

Source Philadelphia Insurance Company


Type of loss:

Bodily injury cases in excess of $1,000,000

Line of Coverage(s) involved in loss:

Hired and Non-Owned Automobile Liability (HNO) coverage

Description and narrative of the loss:

Four losses involving personal vehicles operated on company business:

• Organization incurred a $1.3M auto liability loss resulting from over-loading a 15-passenger van with luggage. An employee of the organization was driving the top-heavy van when it rolled, fatally injuring one passenger and severely injuring the other twelve.

• An employee of a social service agency was operating his personal vehicle, struck a middle-aged pedestrian moving in a crosswalk. Liability loss exposed the organization to a lawsuit and damages of $1.1M.

• Rental vehicle, operated by a policyholder employee, struck a motorcyclist while attempting to execute a left-hand turn. Motorcyclist died and the organization was sued; damages were in excess of $1M.

• Another motorcyclist was struck by an employee driving to a non-profit business meeting. The driver executed an improper U-turn killing the cyclist. Lawsuit resulted in a loss excess of $1M.

What controls were missing that would have prevented or lessened the loss?

Organizations often miss or under risk manage exposures related to the use of personal or “non-owned” vehicles for organization or company business. Whether you have an associate or volunteer “running an errand” to pick up office supplies or staffer transporting a consumer or others in their personal vehicle, the organization is ultimately responsible for the consequences of their driving. Be certain that individuals assigned to the task are screened, trained and have adequate insurance coverage. Errands and rental situations are a part of today’s business world. Let’s look at some of the basic elements of sound loss control aimed at mitigating non-owned auto loss.

Written Procedures
• Screening procedures were limited during new hire and subsequent to; motor vehicle records (MVR) checks were not conducted annually; MVR indications revealed driving infractions on one driver.

• Company Policy was missing in all of the above cases by not outlining the use of personal vehicles and what was expected of the employee regarding personal car insurance “liability limits”. This lack of planning resulted in the organization’s coverage to pick up “as excess” where personal auto policy limits were exhausted.

• There was more than one instance where personal vehicle coverage’s were basic having well less than the desired limits but while still meeting minimum statutory requirements.

• Pre-trip inspections were not completed in one case. Tires on the van that rolled over were under-inflated. There was no pre-trip vehicle inspection that day. A homemade roof rack loaded down with 1,800 pounds of luggage and gear quite possibly lead to greater instability due to the much higher center of gravity of the van and the roof mounted load.


• There was some instruction but mostly geared towards on the road procedures, what to do in case of an accident, distraction policies, etc. Training typically was geared towards drivers of company vehicles.

• Weak documented efforts in defensive driver training or demonstration of such trained techniques during a road evaluation.

What recommendations apply?

DRIVER SCREENING & QUALIFICATION - Screen all drivers. Screen those that drive organization vehicles as well as those employees who may on occasion or regularly operate personally owned vehicles. Obtain (MVR) data at least annually and compare to best practice guidelines per the criteria in the Technical Bulletin provided on the main page.

PERSONAL INSURANCE - Develop and establish a policy requiring employees and volunteers to maintain adequateliability limits on their personal auto policies. The preferred limits should be at least $300,000 unless the person is transporting clients, in which case the limit should be $1,000,000.

DRIVER TRAINING - Provide all drivers with a course in defensive driver training to review fundamental techniques of collision avoidance by recognizing road hazards, understanding defensive measures and having the skill and time to act. Philadelphia Insurance Companies has a FREE web-based interactive Defensive Driver Training Course available through

ROAD EVALUATION - Develop and maintain a road evaluation process. This process involves drivers taking the defensive driver course and demonstration of those learned skills in an “on the road environment”.

VEHICLE INSPECTION - Develop policies of regular and documented vehicle inspection. Inspect vehicles before and after every trip. Follow through on vehicle condition reports and repair or replace defects as needed.

Other tips:

• Restrict and limit personal auto use where possible! Strive to provide and make use of agency vehicles for medical appointments, deliveries or pickups or anytime consumer transport is required.

• Review all employees and volunteers using their personal vehicles for agency business. Treat them just like any staff member using an agency vehicle would be screened. Verify backgrounds, including driving records for the past five years, even if the worker lived in a state different from where employed.

• Develop policies where all drivers follow agency’s standard policies and procedures when using personal vehicles; (i.e., driver eligibility, use of seatbelts, etc).

• Employees and volunteers using a personal vehicle should provide proof of insurance, confirmation that there are no exclusion regarding vehicle use, proof of inspection and the agency should determine appropriateness of personal vehicle (i.e.,condition, type, etc).

• Implement periodic checks on employees’ and volunteers’ personal insurance and require copies of their declaration showing limit of liability carried.

Monday, February 22, 2010

Under Insured Properties - Tague Alliance

In the article below...the Insurance Journal discusses the CA DOI's desire to mandate some form of ongoing training for insurance agents in the area of replacement cost calculations for properties. This is probably a good idea as long as the CA DOI does not hold the insurance agent liable for the validity of the reconstruction estimate provided by a third party vendor.

Under insured properties cause nightmare scenarios for property owners and the insurance companies. Finding the proper replacement cost for a property is one of the most important and fundamental things that an insurance agents works on with their clients. Therefore, it makes sense that some form of ongoing training in this area be put in place for insurance agents. We do not need any type of burdensome regulation, but rather a streamlined and efficient training mechanism that keeps pace with the changing construction environment.

California Regulator Considering Regs to Alleviate Underinsurance

The California Department of Insurance is considering proposing new regulations governing standards and training for estimating replacement value on homeowners’ insurance. Among the ideas that was floated at a recent CDI workshop on the matter was to require continuing education for agents and brokers on replacement cost minimum standards, according to Steve Young, senior vice president and general counsel for Insurance Brokers and Agents of the West.

The idea for new regulations or legislation governing replacement value on homeowners insurance stems from the concern that homeowners are under-insured, explained Darrel Ng, CDI spokesman. He said the problem arises frequently after wildfires in California, when hundreds or thousands of homes in the same geographic area are destroyed, which causes construction costs to increase.

“The genesis of the issue was seen in the 2007 San Diego Fires and fires in Santa Barbara that demand surge is an issue that’s not addressed by the current model used by insurance companies,” he said. “We hold insurance recovery forums after every major wildfire, and that’s the No. 1 complaint we get most consistently, and one as a Department we’re not empowered to fix because state law currently says the homeowner is in charge of determining how much insurance to get for his or her home.”

Ng said the Department held the workshop to gather information on how to fix the policy issue.

IBA West’s Young said in his testimony that he appreciated the DOI’s and Commissioner’s “collective desire to address the pernicious issue of underinsurance in homeowner’s insurance, and for convening (the) pre-notice public discussion in order to fully evaluate not only (the DOI’s) contemplated solutions, but also alternatives.” And he noted that his association's membership shares the "desire to ensure that California homeowners better understand how the replacement cost of their insured property and contents is cacluated, and to make fully informed decisions regarding replacement cost when they select policy coverage limits."

Young noted it was “essential to understand the complex and varied reasons for the existence of the ‘problem’ of underinsurance,” such as economic incentives; the impossibility of obtaining an objective calculation because of too many variations in construction, contents, etc.; and lack of information. It is important to keep those factors in mind as the DOI contemplates imposing new duties upon insurers, producer or consumers, Young said. IBA West is concerned with any proposal that would, as a matter of law, make agents and brokers personally liable for replacement cost estimates produced by third-party vendors that insurers require broker-agents to use.

Ng said it would not be appropriate to comment on potential solutions discussed at the workshop, as the Department is still evaluating all of the information.

Friday, February 19, 2010

Paperless Insurance Agency

In the world of the independent insurance agency being efficient is one major key to being profitable. One of the easiest ways to improve agency work flow and efficiency is to be utilize paperless filing.

Tague Alliance offers our members access to management systems that allow client documents to be scanned or files attached directly to the client within the management system. If you are an independent insurance agent who is not currently paperless you should seriously consider making the switch from paper files.

The switch is not extremely expensive as you only need a decent scanner (scans at least 30ppm with sheet feeder) and a management system that allows you to attach files directly to the client. Look into the Fijitsu and the Evolution client management system.

There are many reasons beside efficiency to be paperless. With an online based management system with client documents attached you reduce potential E&O issues with date and time stamping, tracking of who is doing what on client files, no worries of fire destroying paper files, and your data is backed redundantly without you having to manage a server.

Remember, as an agency owner you need to look for every way possible to drive efficiency in your organization with the goal of continually improving your bottom line profit. Tague Alliance offers our members help with these types of issues. Call or email us if you are interested in these types of insurance agent resources.

Tague Alliance is a SIAA master agency with 52 member agencies.