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Specialty Lines Market Employment practices liability By Larry G. France The employment practices liability insurance (EPLI) market is changing. Rates are decreasing, other additions are being “included at no charge” and some markets have decided to leave. The clients who could possibly handle a loss because of the financial stability; existing HR staff; and procedures in place to address EPLI issues carry the coverage. Smaller companies with no HR staff or, at best, a “part-time one”; few written procedures; and where $50,000 or $75,000 in defense costs alone could possibly put them out of business, go bare of coverage. While price has been one of the key factors in keeping smaller companies from purchasing EPLI, this may be foolhardy. The Fram oil filter slogan of years ago—“Pay me now or pay me later”—may apply equally well to EPLI coverage. And you usually get what you pay for. Benefits such as hot line access to attorneys, procedure handbooks for HR—and don’t forget good claims handling—can provide invaluable value-added services for clients. According to Tonya Hollederer, RPLU, assistant vice president/senior broker with Russell Bond & Co., the EPLI market continues to soften. “Markets for both nonprofit and for-profit risks continue to fight for business. It is not uncommon to see reductions in the range of 25%,” says Hollederer. “Although underwriters try to hold their premiums on risks that have had claims activity, if there is competition, they continue to reduce premiums, reduce retentions, and improve coverage.” Hollederer states that even classes of business that have limited markets available are seeing more options open for them, as “the number of markets entering these classes continues to grow.” Naturally, underwriters weigh carefully “the litigious nature of different geographic areas,” Hollederer points out. “The markets available for larger risks (those with employee count in excess of 750) continue to underwrite carefully while some markets will quote a smaller risk (under 50 employees) with a 10-question application and no supporting data. Truly a sign of a soft market!” says Hollederer. “Our view on choosing a market certainly recognizes that price and form are important in determining placement of coverage with a particular carrier,” says Richard Nowell, president of Stateside Underwriting. “We also advocate placing equal importance on the company’s claim reputation. Talking about the claims reputation of a market and approaches to claims handling is often difficult to discuss with a client because it is not easy to determine the value of a good claims approach. When a claim gets handled poorly, the cost can exceed any savings in price.” Nowell says that the recent softness in the market has caused EPLI pricing to come under pressure. “Some carriers are ‘tossing in’ coverages such as third party, defense cost outside the limit, D&O, fiduciary liability, and others with little or no additional premium. I do have a concern that some EPLI writers will not be able to maintain underwriting profitability since the product has so much claim frequency and severity as well,” states Nowell. “Overall, I believe underwriters are faced with the challenge of maintaining underwriting profitability in a softening EPLI market that is already operating on a thin margin,” says Nowell. “At the same time, the broker’s challenge is to utilize the experiences gained over the last few years in seeing how certain carriers handle EPLI claims and using that information in their marketing approach and market selection. “There have already been markets that have dropped out of the EPLI arena,” Nowell observes. “The financial strength of the market is very important, but equally important is a commitment to the EPLI class. You don’t want to be with a market that drops the class when the claims come and with EPLI, there is a frequency of claims and severity of losses. For example, our history tells us that in a three-year period, a small firm of 100 or fewer employees has a 30% chance of having an EPLI claim.” With the chances for a claim being that high, agents need to make certain that their clients are at least aware of the need for EPLI coverage in order to avoid a potential E&O claim. If a client rejects such coverage, it is advisable to get that in writing. It’s also important, as Jennifer Dumont, RPLU, CIC, professional lines manager at Jimcor Agencies, points out, to place clients with a market that provides the services the client needs. “Stand-alone EPLI carriers are offering a multitude of services including employment posters, sample handbooks, FAQs, and access to a hot line serviced by an employment attorney,” Dumont says. “Most carriers even offer this with unlimited access. This alone is worth a few thousand dollars a year! If the premium is too cheap and there is no hot line, you are getting what you paid for.” She goes on to point out that many small and mid-sized companies “cannot afford to keep an HR executive to manage day-to-today employment decisions. This is where an all encompassing EPLI policy proves invaluable.” Dumont says that another important consideration is the policy form being used. She suggests that you look for a broad form policy rather than a named perils policy. “There are too many new ‘employment issues/claims’ that come about that have not yet been tried—appearance discrimination for example. Named perils can’t keep up with the new definitions of a wrongful act being added to the employment arena. “Workplace issues that will determine future risk control measures include the aging workforce. Baby boomers will remain in the workplace longer due to living longer and the need to maintain an income. This will create more age discrimination, ADA and pension-related claims,” she concludes. “The EPLI market is essentially stable with a number of players and adequate capacity in most classes,” according to Ed Neuberger, professional liability manager for James River Insurance Co., but “there are difficulties in some areas such as law firms, staffing agencies, unions, and municipalities, and other governmental bodies.” James River’s niche is smaller firms with fewer than 250 employees and businesses that are viewed as higher risks by many firms: for example, fast food restaurants, auto dealers, and certain medical-related enterprises such as group homes and facilities providing 24-hour care or supervision. “Typically, EPLI is purchased in conjunction with D&O coverage,” says Neuberger. “The pitfall with this approach is that, depending on the policy construction, EPLI claims can erode aggregate limits on the D&O. Agents need to make sure that the buyer understands this possibility and considers buying a stand-alone policy.” For additional information and market updates, consult The Insurance Marketplace Web site (www.insurancemarketplace.com). The next three editions of the Specialty Lines feature will address Umbrella/Excess liability in July, Long Haul Trucking in August, and Pay for Play in September. The following have responded to our survey and indicated they are a market for certain target classes of EPLI coverage. Agency Marketing Services, Inc. Aggressive Insurance Brokers, Inc. Allsouth Professional Liability, Inc. An E&S broker that operates in AL, FL, GA, MS, NC, SC, TN and TX with limits of $25 million (minimum deductible: $1,000; minimum premium: $2,500). Will consider most classes (no size limitations). Can offer both public/private and nonprofit D&O. All carriers are A rated. AMIS/Alliance Marketing & Insurance Services A surplus lines/E&S broker that operates nationwide with limits of $25 million. Target classes are food processors (dairy), distributors (plumbing goods, heating & air conditioning), special trade contractors (carpenters, plumbers, electricians, printers), wholesalers (food, electronic supplies), and manufacturers (OEMs, metals, precision metals and plastics). Can offer D&O, fiduciary, and miscellaneous E&O coverage. The Hartford is the A+ rated carrier. Arlington/Roe & Co., Inc. A wholesale broker that operates in all states with limits of up to $10 million. Will consider most classes, including restaurants, auto dealerships and trucking risks. Will not consider adult entertainment. Can offer not-for-profit D&O, for-profit D&O, medical provider EPL, fiduciary, crime, K&R, and miscellaneous professional E&O. The most-used A rated carriers are USLI, Evanston/Markel American, Darwin, Chubb, Great American, Carolina Casualty, Houston Casualty, AIG, Westchester Fire, St. Paul Travelers, Lloyd’s, and Arch. Automotive Risk Management & Insurance Services, Inc. An E&S broker that operates in all states with limits of $5 million. Target class is auto/truck dealerships. Can offer third-party liability. All carriers are rated A- or better. AVRECO Brokerage An E&S broker that operates in all states with limits of up to $25 million. Target classes are health care entities, not-for-profit, and private/public entities. Can offer D&O. Lloyd’s (A), AIG (A+), Zurich (A), Great American (A), Executive Risk (A++), Evanston (A), and ACE (A+) are the seven top carriers. Bohrer-Croxdale & McAdoo, Inc. An E&S broker that operates in AR, IL, KS, MO, OK and TN with limits of $100,000 - $5 million. Will consider all sizes of risks. Can offer prior acts, duty to defend punitive damages, and third-party. All admitted and nonadmitted carriers are A rated. Boston Insurance Brokerage, Inc. A wholesaler/E&S broker that operates in all states and in overseas jurisdictions with limits of $25 million-plus. Target classes are public/private, not-for-profit, and financial institutions. Can offer D&O, E&O, financial institution, crime, and special contingencies such as K&R. All carriers are rated A or better. Carnegie Insurance Services Corp. An E&S broker that operates in all states with limits of up to $5 million. Target classes are accounting firms, advertising firms, ambulance services, fitness centers, convenience stores, food banks, humane societies, libraries. Will not consider adult entertainment, aviation, doctors, hospitals, medical trade associations, insurance companies, Internet companies, colleges/universities, fraternities/sororities. Can offer corporate D&O, nonprofit D&O, for-profit D&O, and stand-alone EPL coverage. USLI/Mt. Vernon Fire is the A++ rated carrier. Evolution Insurance Brokers (EIB International) An E&S broker that operates in all states with all limits. Will consider any class. Can offer monoline liquor, assault & battery, and after 3 a.m. closing time. Prime Insurance Syndicate is a B rated company. Gary Markel Surplus Lines Brokerage, Inc. An E&S broker that operates in FL only with limits of $250,000 - $5 million. Target classes are nonprofits, for-profits, attorneys, insurance agents, and restaurants. Can offer D&O. USLI (A++), Carolina Casualty (A), Markel American (A), AIG (A+), and Great American (A) are the carriers. Gateway Underwriters Agency A general agency that operates in IA, IL, KS, MO and NE with limits of $5 million. Target markets are manufacturers, sales, offices, and restaurant franchises. Can offer stand-alone or with D&O. USLI (A++), Lloyd’s, and U.S. Specialty are the carriers. Great American Insurance Group, Executive Liability Division An insurer that operates on an admitted basis in 39 states (but available in all states except CA) with limits of $100,000 - $10 million. Target classes are manufacturers and service companies (coverage for employers with up to 1,000 employees but target is fewer than 150 employees). Will not consider government entities, staffing firms, law firms, or schools. Can offer third-party liability on most risks. All carriers are A rated. H.R. Keller & Co., Inc. An E&S broker using both admitted markets and nonadmitted markets, operating in CT, MA, ME, NC, NH, NJ, NY, OH, RI, PA and VT with limits of $5 million. Target classes are law firms, architects/engineers, retail stores, hospitality, accounting firms, insurance agents, restaurants, advertising firms, supermarkets and franchises. Can offer D&O, fiduciary liability, and employee dishonesty bonds. All carriers are rated A or better. Harry W. Gorst An MGA/ surplus lines broker that operates in CA only with limits of $100,000 up to $5 million. Will consider all classes including entertainment, retail, education, professional office and health care. Can offer fidelity, fiduciary, D&O and E&O. Markel (A), Colony (A), Illinois Union (A+), Scottsdale (A+), National Casualty (A+), AIG/National Union (A+), and Lloyd’s (A) are the carriers. Insurance Center Special Risks Ltd. An E&S broker that operates in CT, MA, NH, NY, RI and VT with limits of $100,000, $250,000, $500,000, $1 million - $5 million maximum. Target class is small, private companies with 250 employees or fewer. Will not write governmental agencies, bars, nightclubs, or adult entertainment. Can offer D&O. Essex and Great American are the A rated carriers. Insurance Innovators Group An MGA/E&S broker that operates in CT, DE, MA, MD, ME, NH, NJ, NY, PA, RI and VT with limits of $5 million. Will consider all classes. Can offer for-profit and nonprofit D&O. All carriers are A rated or better. IT Risk Managers, Inc. An E&S broker that operates in all states with limits of up to $10 million. Target class is technology companies. Can offer all coverages including GL, property, EDP, and professional liability. All carriers are A rated or better. Jacobs & Associates An E&S broker that operates in OH only with limits of $10 million. Target classes are hotels, restaurants and contractors. Can offer D&O and fiduciary. Carriers are USLI, Aspen Specialty, and Houston Casualty. James River Insurance Company An insurer (E&S) that operates in all states except NH and OH with primary limits of $4 million and excess of $3 million. Target classes are firms with up to 250 employees: fast food, 24-hour care or supervision (medical related). Will not consider staffing agencies, law firms or unions. Can offer third-party liability. James River is an A- rated carrier. Jimcor Agencies An E&S broker that operates in CT, MA, MI, NJ, PA and NY (other states considered) with primary limits of $10 million; up to $100 million excess available. Will consider all classes. Can write lawyers, PEOs, auto dealers, distressed firms (those with claims), manufacturing, retailing, wholesale and distribution. Can offer D&O (for public, private and nonprofit), EPL stand-alone or with D&O, and enhancement coverages. All admitted and nonadmitted carriers are rated A- or better. Karsanidi Group, LLC An E&S broker that operates in all states with limits of up to $5 million. Will consider all classes except law firms. Can include third-party coverage. ACE, Great American, and St. Paul Travelers are the carriers. McLeckie Insurance Group An MGA/E&S broker/program underwriter that operates in all states with limits of $1 million. Target class is retail and professional risks. Can offer D&O and E&O. Various admitted and nonadmitted carriers are used to place coverage. Metcom Excess An MGA/E&S broker that operates in NJ, NY and PA with limits of $1 million. Will consider all classes. All carriers are A rated. Midlands Management Corp. An MGA that operates in AR, CO, KS, LA, MO, MS, NE, NJ, OK, NM, TN and TX. Target classes are fewer than 1,000 employees, agriculture, manufacturing, services, restaurant, retail and wholesale. Will not write the airline industry, attorneys/law firms, auto dealerships, government organizations or hospital/medical. All carriers are A rated. Monitor Liability Managers, Inc. An underwriting management company that operates in all states with limits up to $10 million (varies by product). Will consider any size account and most types of companies and firms, except for financial institutions and insurance companies. Can offer D&O (including nonprofit), EPL, lawyers professional liability and management liability. Carriers are Carolina Casualty (A) and Admiral (A+). NAS Insurance Services, Inc. An MGU/Lloyd’s correspondent operating nationwide with limits of up to $2 million. Will consider most classes except entertainment, religious, and governmental entities. Can offer D&O, miscellaneous E&O and tenant discrimination. Lloyd’s is the A rated carrier. NIF Group, Inc./NIF Pro An MGA/E&S broker that operates on an admitted basis in all states (primarily the eastern United States) and on a nonadmitted basis in 30 states. Will consider all classes. Coverages can be combined with D&O written on a stand-alone basis. All carriers are rated A or better. Prime Insurance Syndicate Inc./I.E.B.S. An MGA (IEBS)/insurer (Prime) that operates nationwide with all limits. Will consider all classes. Can offer monoline liquor coverage and assault and battery. Prime is a B rated company. Professional Indemnity Agency An MGA that operates in all states with limits of up to $2 million (deductible of $2,500 - $100,000). Standard EPLI Program highlights: Target class is employers with 750 or fewer employees. Will not write casinos, card clubs, child care centers, educational institutions, health care, labor unions, media/entertainment related, nightclubs, non-profits, property managers/real estate, public agencies (e.g., federal, state, or local governmental agency), religious organizations, social service agencies, or temporary staffing agencies/PEOs. Affinity/Franchise Group EPLI Program highlights: Operates in all states with limits of up to $1 million/$3 million or $2 million/$2 million (deductible of $2,500 - $50,000). Target market: An affinity group with a recognized association sponsor (e.g., Society of California Certified Public Accountants, IBA West) or a franchise group with a recognized franchiser (e.g., McDonald’s, General Motors, Marriott International) that has at least 25 potential policyholders who will generate at least $25,000 in annual premium. No classes are prohibited but probably will not entertain any class listed as prohibited in company’s standard EPLI program. Houston Casualty Company is nonadmitted; HCC Specialty Insurance is nonadmitted in TX; and U.S. Specialty is admitted. All are rated A+. Professional Liability Insurance Services, Inc. A national program administrator operating in all states with limits of up to $5 million/$10 million. Will consider all classes. Can offer third-party, aggregate administrative proceedings; deductible reduction options and aggregate deductibles available. Carriers are certain A rated underwriters at Lloyd’s. R.E. Chaix & Associates An E&S broker that operates in CA only with limits of $250,000 - $5 million on limited classes. Target class is all California employers. Can offer third-party; sub-limits offered for Fair Labor Standards Act, prior acts, loss prevention services, defense outside the limits. etc. Markel American, Admiral, Illinois Union, HoustonCasualty, Colony, Philadelphia, Axis Surplus, Continental Casualty, and Lloyd’s are the carriers. R.J. Bostick & Associates An E&S broker operating in most states with various limits. Can offer D&O, EPLI, and fiduciary. Carriers include Markel, AIG, Evanston, Chubb, and USLI. Rockwood Programs, Inc. An MGA that operates in all 50 states and Puerto Rico with limits of $250,000 - $5 million. Will consider all classes. Can offer D&O, crime, and fiduciary liability. AVEMCO (A+), Shand Morahan (A+), NAS (A), Carolina Casualty (A), and Chubb (A++) are the carriers. Roush Insurance Services, Inc. An MGA that operates in IL, IN and OH only with limits of $1 million (excess available to desired limit). Will consider all classes. Can offer E&O, D&O, employee dishonesty bonds, property, liability, and equipment breakdown. Carriers are Scottsdale (A+) and Shand Morahan. Russell Bond & Co., Inc. An MGA/E&S wholesaler operating in CT, MA, NJ, NY, PA and VT with limits of $100,000 - $25 million. Will consider all classes. Coverage is written monoline or in conjunction with D&O, school board legal and public officials. All carriers are rated A- or better. S.H. Smith & Co. An E&S broker operating in all states with limits of $1 million. Will consider all classes. Can offer D&O, E&O, and fiduciary. All carriers are A rated. Stateside Underwriting Agency, Inc. An MGA that operates in all states with limits of $250,000 - $3 million. All classes are written, including D&O. All carriers are A rated. Scarborough An MGA that operates in all 50 states with limits of $10 million. Target classes are community banks and financial institutions. Can offer D&O. CNA is the A rated carrier. Swett & Crawford An MGA/E&S broker that operates in all states with limits as needed. Can offer D&O, GL, fiduciary liability, and trustee liability. All carriers are rated A- or better. Tennant Risk Services Insurance Agency, LLC An E&S broker that operates in all states with various limits. Will consider all classes and sizes of accounts. Can offer tenant discrimination and third-party, among other coverages. All carriers are rated A- or better. United Brokers Inc. An MGA that operates in AL, AR, GA, IA, IL, IN, KS, KY, LA, MA, MD, MI, MN, MO, MS, NC, NJ, NV, OH, OK, SC, TN, VA, WV and WI with limits of $5 million. Will consider most classes. Will not write firms with more than 200 employees. Can offer E&O, D&O, professional, punitive damages, third-party and harassment. Carriers are USLI (A++) and Shand Morahan (A). Victor O. Schinnerer & Co., Inc. An underwriting manager that operates in all states except AR, MN and WY with limits of $5 million. Target class is design professional firms. Will not consider contractors. Can offer D&O, entity and fiduciary. CNA is the carrier. Western Security Surplus Insurance Brokers, Inc. An E&S broker that operates in CA and TX only with limits that start at $5 million. Target classes are law firms, medical, and manufacturing. Will not consider restaurants that serve alcohol. Can offer third-party. Admiral, Evanston/Markel, Illinois Union, Lexington, Houston Casualty, Colony, and Gotham are the carriers. World Wide Facilities, Inc. An MGA that operates in all states with limits of $5 million. Target classes are temporary staffing firms, PEOs, and ASOs. Can offer staffing services liability, GL and E&O. AIG is the A+ rated carrier. Yates & Associates Insurance Services, Inc. An MGA that operates in CA only with various limits. Will consider all classes. Can offer GL. Various admitted and nonadmitted A rated carriers are used to place coverage. * |
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