Bridging the Property and Casualty Gap

Presented by:Amie CherryHUB International Personal Insurance

2009

Topics

• Does advising on Property and Casualty (P&C) issues increase Professional Liability?

• What are some of the recognizable signs that your client needs a P&C review?

• Employee Practices Liability Insurance• Texas Homeowner’s insurance policies are not

created equal• Umbrella policies…how much is enough?

Reasons to Bridge

• Nurtured and growing assets can evaporate overnight

• “See your insurance agent” is a thin veneer• Be more productive• Client satisfaction, retention and referrals• Peace of mind

Does advising on Property and Casualty (P&C) issues increase Professional Liability?

• Principle 3: Competence – “Competence also includes the wisdom to recognize the limitations of that knowledge and when consultation or client referral is appropriate.”

CFP Board Standards

• Principle 7: Diligence – “A CFP Board designee shall act diligently in providing professional services.”

• Rule 302 – “…when the CFP Board designee is not professionally competent, the CFP Board designee shall seek the counsel of qualified individuals and/or refer clients to such parties.”

7/1/08 CFP Board Standards

• Requires a heightened duty of care to client

• CFP’s providing financial planning services duty of care will be raised from the current duty to “act in the interest of the client” to the “duty of care of a fiduciary”

Does advising on Property and Casualty (P&C) issues increase Professional Liability?

• A CFP is generally not an accountant, lawyer or P&C insurance professional. Help in uncovering insurance issues, help client come up with questions and thoughts for the insurance advisor.

• Rely on the idea of doing a better service to your clients and therefore minimizing the risk of being sued by providing the service rather than ignoring the need.

Does advising on Property and Casualty (P&C) issues increase Professional Liability?

• Review insurance professional’s client recommendations before released to client. Ask your own questions and for a copy of a quote not used.

• Document insurance conversations with your client such as who/when you referred them and when insurance plan was delivered.

What are some of the recognizable signs that your client needs a P&C review?

• Most people hire a financial advisor in response to a major life event, according to Susan Bradley of FPA. Those major life events are becoming more and more frequent as some 76 million baby boomers get divorced, sell their businesses, make career changes, become widowed or enter retirement.

Trigger Circumstances

• Property in catastrophe prone areas– Florida, Texas Coast, California, NE Coastal

• Liquidity event

- Significant purchases

- Limits of liability not adequate

- Client gets more media exposure

Trigger Circumstances

• Board Membership – Private, public and nonprofit- Shareholders of a public company can sue the

company and the board for mismanagement- Sarbanes Oxley raised the level of responsibility and

liability of directors and officers- Nonprofit board purchases inadequate liability limits

or has none- Company files for bankruptcy

Trigger Circumstances

• High Public Profile– More visibility to predators– More attractive identity theft candidate– Lawsuits alleging libel, slander or defamation of

character• Significant Personal Net Worth

– Lawsuit target– Loss of future earnings if client loses lawsuit and

liability coverage is inadequate– Significant expenses related to defending lawsuit

Trigger Circumstances

• Significant International Travel– Client or spouse can be injured and requires medical

evacuation– Client can be kidnapped and held for ransom– Not all insurance policies are valid outside of US and Canada

• Multiple Residences– Tenant liability issues– Overseas property may be excluded from policy– Valuation of personal property may be over or understated– Farm and ranch policy needed

Trigger Circumstances

• Property in trust or with alternate ownership

– Trust may not be properly named in insurance policies

– Insurer may not recognize the trust on the policy complicating a claim

– Client’s trust may have additional exposures not addressed in insurance policies

Trigger Circumstances

• Collector, Classic or Recreational Vehicles - Difficulty in insuring vehicle for true replacement value - Proper vehicle damage repair - Client “only drives it once in awhile” and doesn’t carry sufficient coverage

• Watercraft or Aviation Exposures - Master aircraft policy owners share limits and coverage - Yacht furnishings usually include fine arts - Worker’s comp issues with crews - Navigational area needs reviewing

Trigger Circumstances

• Large Collection of Art, Antiques, Jewelry, Collectibles

– Appraisals can be outdated

– Inventory is not kept up or doesn’t exist

– Client is purchasing overseas or over internet and point of purchase insurance

– Improper care and custody issues

• The US Department of Labor estimates that homeowners employed 896,000 housekeepers alone in 2003

• EPLI is expensive to defend against with the average settlement verdict of $450,000

Employee Practices Liability Insurance (EPLI)

Employee Practices Liability Insurance (EPLI)

• Wrongful dismissal• Breach of any oral or written employment contract• Employment related misrepresentation, defamation of

character or wrongful infliction of emotional distress• Violation of employment related discrimination including

workplace harassment• Wrongful discipline• Wrongful deprivation of a career opportunity• Invasion of privacy

Texas Homeowner’s Insurance Policies are not Created Equal

• Almost everyone has one

• Basic Forms

– HOA - Named perils only. TX specific.

– HOB – Dwelling open perils, personal property named perils. TX specific

– HOC – Dwelling and personal property open perils. TX specific

– HO3 – Similar to HOB

– HO5 – Similar to HOC

• Named peril – Named in contract and no others

• Open peril – Covers everything unless excluded

Texas Homeowner’s Insurance Policies are not Created Equal

• Insurance to Value – How it’s determined. Inflation guard

• Endorsements

– Adds coverage

– Falling objects

– Sudden and accidental discharge of water

– Backup of sewer and drain

– Below foundation repairs

• Liability

– Primary to Umbrella policy

– Must be sufficient to transition into Umbrella coverage

• Etc.

– HOB-T, HCON-B, HO4, HO6, TDP-3

Umbrella Policies…How Much is Enough?

• What’s someone worth?

– Life insurance needs calculators are one way to value an individual’s life but stops short of emotional loss to the survivors.

– What are the costs to survivors?

• Cheap Protection

– Economic impact associated with litigation can dwarf economic damage caused by a home fire but the chances of sustaining a loss in this matter is small, as is the premium

– Insurance companies are obligated to defend you and negotiate a settlement if necessary. This cost is not born by the insured but the insurance company. Some companies provide money for a client’s personal attorney to be on the defense team.

Umbrella Policies…How Much is Enough?

• What Can Happen?– Insured’s teenage child causes an accident resulting in ongoing

back and leg injuries for the victim. Victim collects $1,500,000– A couples dependent child created a webpage that included

remarks about a number of individuals including one of his school instructors. Parents were sued for defamation, invasion of privacy and negligent supervision. Jury awarded $500,000.

– 37 year old suffered a fall while walking in front of an insured’s home. Knee surgery, severe chronic pain. Plaintiff’s demand was $2,500,000

Umbrella Policies…How Much is Enough?

• Optional Coverages

– Uninsured/underinsured motorist coverages covers accidents involving the 1 in 5 Texas drivers that uninsured or underinsured. Settlement amount payable to you and can include pain and suffering. 1 in 7 Nationally.

– EPLI is usually endorsed onto umbrella policy.

– D&O is usually endorsed onto umbrella policy.

Umbrella Policies…How Much is Enough?

• How much?– If 95% of all settlements fall under $1,000,000

do you want your client to be part of the 5%? The client should be presented with choices of coverage at different levels of coverages. Generally speaking, $5,000,000 will cover 2 victims. Up to $100,000,000 is easily available and more can be obtained.

Contact Information for Amie Alexander

HUB International Personal Insurance

2711 North Haskell Avenue

Dallas, Texas 75204

• 214.855.5607 – Direct

• 214.855.5656 – Fax

• 469.432.1655 – Mobile

• Amie.cherry@

hubinternational.com – Email

http://www.hubinternational.com/main_content.aspx?id=196

– Corporate Website