The shareholders complaints are similar. They all assert that BP directors and officers should have taken safety concerns and warning signs more seriously. They seek recovery against the BP defendants for “breach of fiduciary duty and corporate waste.” (Herman, Herman, & Grimm, 2010)

The BP scenario is a prime example of the critical need for D&O coverage. Without D&O insurance, very few people are likely even to serve on a board in this day and age. As adept as an individual may be there is still a risk.

“No entity is exempt,” says Scott Meyer, executive vice president, ACE Professional Risk, “Increasing numbers of lawsuits have been filed against private companies and charitable organizations as well. Any person who is considering a position as a director or officer of a company or charity needs to be certain D&O coverage is in place. Otherwise, they could be facing a situation where their personal assets are at stake.” (Pillsbury, 2010)

Part of the problem is that the breadth of fiduciary duty of officers and directors has grown. It used to be just the duty of loyalty and duty of care; now there is a duty of oversight. Any shareholder of a corporation has the right to bring suit against a D&O if they think the company has not acted in the best interest of the corporation. The insurance is not so much for liability but to cover the cost of litigation. Even though most corporate charters provide for indemnification for officers and directors, they often don’t have the funds for massive litigation and may not cover if the directors or officers are found wanting.

A carrier takes a claim, defends it and pays the cost of the defense. Defense can be costly– thousands and thousands of dollars, even millions, so costly that the insurance is what often keeps a company afloat.

There are three types of D&O coverage:

• Side A: Directly insures directors and officers for defense costs, settlements and judgments, not indemnified by the corporation.
• Side B: Reimburses the company indemnification payments made to its directors and officers
• Side C: Covers the company for its own liability, such as securities law claims

All coverages are included in a typical D&O insurance policy and directors and officers share this policy. “If the company’s indemnification obligations, or its separate liability, deplete the limits of insurance under the Side B and Side C coverages, the limits for individual directors and officers may be eroded, in some cases to nothing.” (Meyer, Zacharia, & Lavigne, 2010)

Because of the litigiousness of this country it has become a necessity to have insurance. Well-meaning officers and directors face a growing multiplicity of obligations and regulations that it becomes near to impossible to avoid crossing a line—even unintentionally—or, in any event, to prevent lawsuits with limited merit requiring a costly defense .

Learn more about D&O insurance by taking CEU’s online Directors and Officers Liability course.

Editors, F. (2010, August). The Deepwater Spill: Coverage Analysis . Claims .
Herman, H., Herman, T., & Grimm, M. (2010, August). Director And Officer Insurance And The Gulf Oil Spill. Retrieved August 26, 2010, from http://www.clausen.com: http://www.clausen.com/index.cfm/fa/firm_pub.article/article/1abaff03-46ad-4092-a974-7ce99b7bab0a/Director_And_Officer_Insurance_And_The_Gulf_Oil_Spill.cfm
Meyer, S., Zacharia, C. A., & Lavigne, K. (2010). Financial Crisis: Bankruptcy Implications for D&O Insurance. the ACE Group.
Pillsbury, D. (2010, August). The ABCs of D&O. Rough Notes .

It is 10 o’clock at night on a Wyoming highway. A van with no headlights careens into the path of oncoming traffic killing an elderly couple on their way home from vacation. The van driver, whose blood-alcohol level is twice the legal limit, is also killed along with his two passengers.

The family of the couple killed in the accident files a lawsuit against the bar owners, whose establishments served the motorist. However, the judge dismisses the lawsuit based on a 2003 Wyoming Supreme Court ruling, which states that bar owners in Wyoming aren’t responsible for their patrons’ actions.

This is not the norm. Court decisions coupled with new state laws are holding sellers of alcoholic beverages gradually more responsible for damages and injuries resulting from a patron’s inebriated conduct.

A recent article in Rough Notes discusses the proliferation of Liquor Liability laws and the importance of insurance coverage. Despite the national sentiment towards drunk driving, there are establishments willing to risk everything because they believe they can’t afford liquor liability protection.

Attorney Scott Gemberling’s law practice focuses on liquor liability defense. He says, unlike other liability cases, liquor liability is unique because most alcohol-related cases are judged on an emotional basis.

“There are varying degrees of outcomes when one is working a medical malpractice case or a professional liability case, but all dram shop cases are tragic,” he says. “The word ‘alcohol’ exacerbates a jury verdict four or five times. The jury gets angry. It’s not like somebody broke an arm or a leg. With alcohol-related cases, usually there are multiple deaths involved.” (Zinkewicz, 2010)

Gemberling goes on to say that many lawyers are reluctant to take on alcohol-related cases because the likelihood of winning is slim to none and, in some states, where liquor liability insurance is not required, there is no “money motivation.”

The economy also has a significant impact on the liquor liability market. “When revenues are down some people decide to go without insurance,” says Chris Reisdorf of wholesaler, TAPCO Underwriters. (Zinkewicz, 2010) Generally, liquor liability comes within a package. Many companies are not willing to write stand-alone coverage. Some establishments aren’t even aware of the existence or necessity of liquor liability coverage and may not find out about it until faced with the consequences of an alcohol-related injury or death.

Learn more about Liquor Liability Coverage by taking CEU’s online Liquor Liability course.

Mirhadi, D. (2008, March 11). Small town remembers helpful couple . Retrieved July 16, 2010, from trib.com: http://trib.com/news/state-and-regional/article_fdb790f1-3c77-5838-9eb9-bd6d787a7fa5.html

Neary, B. (2010, July 13). Lawyer pledges appeal of Wyo. liquor liability law. Retrieved July 14, 2010, from businessweek.com: http://www.businessweek.com/ap/financialnews/D9GU87C80.htm

Zinkewicz, P. (2010, July). Liquor Liability. Rough Notes , 26, 28.

• “Resident licensing original and renewal applications, non-resident original and renewal applications, address change requests and the attachment warehouse will be available to producers and other licensed entities on-line, all day, every day.
• Temporary licenses will be processed online.
• Approved license transactions will be loaded to SBS and viewable by the licensee online within minutes.
• Licensees and licensing administrators will have fingertip access to electronically available information, including license printing, review of continuing education (CE) transcripts, and review of any portion of the licensee summary. Licensees can also receive automatic email notifications from the Department, thus avoiding U.S. postal mailing expenses.
• The public will have free online access to information describing the status of a producer’s license.
• Licensees will no longer have to use a Social Security number as a license identification number for CE courses, online log-ins, and course lists. Instead, they will use their National Producer Number.
• CE course review features will be available online so that producers are able to search for course availability.”

During SBS implementation, electronic and paper license applications and renewals will be temporarily unavailable. “Electronic functionality will be unavailable beginning July 16, 2010, and will resume normal operations on July 26, 2010.”

The SBS transition will improve Illinois licensee services and create uniformity amongst the 20 other states that already use SBS for insurance regulation.

For more information, visit http://www.statebasedsystems.com/.

View our Illinois course catalog.

Source: Illinois Department of Insurance

CEU.com utilizes a paperless proctoring process that allows proctors to enter their demographic information online. We provide the fastest way to complete your CE!

 View our South Carolina course catalog.

A recent article in the Insurance Journal discusses how the insurance industry isn’t quite ready for the social media revolution. Although, many companies have caught onto this powerful, cost effective, and dynamic new way of advertising and marketing, insurance providers are slow to adopt the trend.

“Having a web presence is non-negotiable,” according to Michael Larocco, president and CEO of Fireman’s Fund Insurance Companies, who was a speaker at a recent insurance education forum in California.  “Agents who adapt to the (social media) lifestyle and the needs of buyers and provide the added value of professional advice with personal relationships will not only survive, they will thrive.” (Thom, 2010)

It’s not enough just to provide information anymore; it is now all about community and connecting. There are a wide range of social media tools insurance professionals can use to become interactive:

• Facebook
  With a user population comparable to that of Indonesia, Facebook is has fast become the core component of any marketing strategy. And it’s not a tool just for teeny boppers. 55 to 65 year-old females are the fastest growing segment of users. 
• Linkedin
  Linkedin is a tool for business professionals, where members can create a personal profile, much like a resume. Linkedin offers online forums and groups for sharing information, such as new products and services.
• Twitter
  Agents can send messages, “tweets,” to “followers” providing real-time feedback, information, or announcements.
• YouTube
  Even videos have their place in the social media world; after all, the Geico caveman practically has cult-status on YouTube.

It’s up to the individual or agency to decide what tool works best for them. For some, it may be delivering information to a customer through Skype, for others it may be using Twitter as a sales tool or Facebook to educate consumers on various insurance topics. What’s important to keep in mind is that the value gained from social networking can change the way we communicate, advertise, market, manage and ultimately sell.

Start engaging in social media by connecting with CEU.com on Facebook and Twitter!

Reference: 
Thom, P.-A. (2010, May 17). Agents Aren’t Quite Ready for the Social Media Revolution. Insurance Journal , p. 12.
Morgan, R. (2010). Websites & Social Web. Retrieved June 14, 2010, from Independent Insurance Agents & Brokers of America: http://www.iiaba.net

Pat Alexander, a Texas-based consultant/social media coach, recently presented at an agency management seminar hosted by the Independent Insurance Agents of Texas. She said there is a good bit of resistance to Facebook, Twitter, LinkedIn, blogging, and the like, because many agents see them as fad, or they fear the risk of errors and omissions in those media. Around 81 percent of insurance agencies have websites, but only about 23 percent have a social media presence like Facebook or Twitter, Alexander said. Nearly half of agencies use some form of e-mail marketing, but only 6 percent use blogs, which can be an effective tool for communicating an agency’s particular expertise or passion.

She advises, while agents should be aware of the possibility for errors, that fear should not discourage them from trying social media. She says agents should consider all the phone calls and e-mails that go out of the typical insurance agency every day. Can the agency control every conversation or every word and comma that appears in all those calls and e-mail messages? If you have the right social media tools and policies for your agency, you can actually control the results, Alexander said.

She also reminds agents that cell phones, e-mail, electronic files, direct bill and online rating were all considered to be “fads” when they first came on the scene. Staying current in all your skills, including current technology, remains important to staying in business and thriving.

Deni Townsend, vice president of Billy Greaves Insurance Agency in San Antonio, Texas, said she believes all agencies should have a website at the very least, and one that reflects who they are and what they do.

“When I look up a business, that’s the first thing I do,” Townsend said. “When I have a new client I go to their website immediately. I want to see what’s on there. It does make a big difference. I want to see where they are located. All of those things are important.”

To read Jones’ complete article, click here.

Source: www.insurancejournal.com

In February, J.D. Power and Associates released the results of its 2010 Insurance Agency Satisfaction Study: Personal Lines. These results indicated that insurers whose agents are highly satisfied tend to receive a considerably greater share of business from those agents.

The study found that, on average, there is more than a 150-point gap in agency satisfaction between insurers who receive 5 percent or less of an agency’s business and those who receive more than 60 percent of an agency’s business (661 vs. 821, on a 1,000-point scale). In addition, 77 percent of highly satisfied agents (satisfaction higher than 950 points) say they intend to increase business with an insurer, while only 24 percent of less-satisfied agents (satisfaction of 600 points or less) say the same.

“Individual policyholders are more likely to be loyal to their independent agent than the insurer that writes their policy,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “This strong bond between policyholders and insurance agents makes it essential for insurers to satisfy their appointed agents in order to grow their business.”

While the contact an insurer has with an agency is the main driver of agency satisfaction, the level of satisfaction varies depending on the role the individual holds in the agency. Agent principals are less satisfied with insurers than are agents or producers, particularly in the area of key business contact (778 vs. 808, respectively). Similarly, agent principals are less satisfied than their licensed customer service representatives with the technology interfaces offered by the insurers they work with (735 vs. 764, respectively).

“Frequent contact with the agents and staff is one of the best practices employed by insurance companies with high satisfaction levels,” said Bowler. “Insurers that make it a priority to build relationships with their agents see direct results to their bottom line. However, with the difficult economic times, insurance companies are challenged to use their limited resources to maximize agency satisfaction. By understanding the different roles and responsibilities of personnel within an agency, insurers can better target their efforts to meet agent expectations and increase satisfaction.”

The 2010 Insurance Agency Satisfaction Study is based on responses from 2,316 insurance agents who evaluated more than 10 well known insurance companies across the industry. The study was fielded between November and December 2009.

Source: J.D. Power & Associates press release

“Ethics” is a broad-ranging term, and ethical decision-making is important in virtually every aspect of life. As insurance professionals, you need to be concerned about the impact of ethics on both your clients and your own agencies. It’s up to you to advise your clients about the risks posed by executive misconduct, fraud, and other serious ethical issue. CEU.com offers a number of continuing education courses (for credit) that will help you do that job effectively.

These courses include:

• Adjuster Conduct and Law
• Anti-Money Laundering Legislation
• Basic Ethics for the Insurance Professional
• Ethics and the Insurance Industry
• Ethics and the Senior Market
• Fraud in the Life and Health Insurance Industry
• Fraud in the Property and Casualty Insurance Industry

The information you will learn in these CE courses will help you provide your clients with up-to-date, knowledgeable guidance as they attempt to minimize risk in their organizations. They will also help you run your insurance business in compliance with all ethics laws and regulations. Be sure to include one (or more) ethics course when you sign up for continuing education.

Click Here to view the above mentioned ethics courses approved in your state.

In the survey conducted by Insurance Journal, 11 of the 26 states they polled use fingerprinting in their license applications processes. Each of these “fingerprinting” states reported that it had helped them identify applicants who had served time in prison or had other substantial run-ins with the law. Convicted forgers, child abusers, and even rapists (all of whom, of course, had lied on their applications) were discovered among the potential licensees.

The controversy over fingerprinting is another example of significant differences in insurance regulation and governance from state to state. Some in the industry see this as a reason for the federal government to take a role, however limited, in making sure regulations across the country are more uniform.

Is fingerprinting of potential insurance agents an invasion of privacy, or is it necessary to weed out people with serious criminal histories? Should the federal government step in? Let us know what you think!

Several state insurance departments, including Oklahoma, Idaho, Nevada, and California, have reported similar scam attempts during recent months, and insurance industry officials warn that it is likely to spread.

If you receive a call asking you to provide your social security number or credit card information, you are advised to contact both local law enforcement officials and your state’s department of insurance.

Remember, a state-sanctioned, bona fide insurance industry regulator would never solicit your personal information or any sort of payment by phone. Even if you are concerned that you might actually have committed some sort of breach, do not give your information to anyone who calls you! Contact your department of insurance and talk to a legitimate representative to clear up your concerns.