Louisiana Agent

Independent Insurance Agents & Brokers of Louisiana
March 2012
Louisiana Agent
LA Supreme Court Victory in Arabie v. Citgo
In Arabie v. Citgo Petroleum Corporation, the Louisiana Supreme Court recently overturned the district court and Third Circuit
Court of Appeal decisions to grant punitive damages (in addition to their compensatory damages) to 14 plaintiffs. These decisions
were rendered, even though the Louisiana Legislature specifically repealed punitive damage provisions in 1996. The plaintiffs had
asserted that, because CITGO’s corporate management had been headquartered in Tulsa—and then moved to Houston—and had
made corporate decisions from those states, Oklahoma and Texas laws which allowed for punitive damages should supersede
Louisiana law.
The Supreme Court ruled: “As we have previously discussed, the legislature has seen fit to authorize punitive damages only in
certain specific instances. The fact that punitive damages are only authorized in particular situations shows that the State has a
general policy against punitive damages.” The opinion went on to dispel the notion that punitive damages should be awarded
because of an out-of-state law under a conflict of law theory.
IIABL filed an amicus brief in the appeal to the Supreme Court providing an independent perspective on the case, pointing out the
negative economic impact the lower courts’ decision would have on Louisiana's economy. As IIABL argued in its amicus brief,
the Court held that "the punitive damages laws of Texas and Oklahoma are not authorized under Louisiana's conflict of laws
statutes and the ruling of the courts below to the contrary were in error."
IIABL's participation in this case made a meaningful difference. By providing the Court with a "friend of the Court perspective" on
the economic significance of the lower courts' rulings, IIABL helped the Court to see beyond the parties' dispute. If the lower
court's rulings had been affirmed, businesses based outside of Louisiana would have faced punitive damages, while businesses
solely within Louisiana would have been protected from punitive damages. The cost of doing business in Louisiana, and of
obtaining insurance for punitive damages/setting reserves for punitive damages, could have caused businesses with out of state
operations to leave or reduce operations in Louisiana. Absent this independent perspective, the Louisiana Supreme Court easily
could have taken the approach preferred by the dissenting minority opinion.
The Commissioner’s Corner
2012 LDI Legislative Proposals
LDI Legislative Bill Highlights
The 2012 Regular Session of the Louisiana Legislature convened
on March 12. The Department of Insurance (LDI) is proposing
36 bills this session including: five major health care bills, two
bills impacting Louisiana Citizens Property Insurance Corp.
(Citizens) and a reinsurance bill that would allow LDI to
implement the National Association of Insurance Commissioners
(NAIC) Model for Reinsurance.
Also included in the LDI legislative package are bills that: prevent public adjusters from
acting as appraisers on claims they are adjusting; remove the legislator exemption from
continuing education requirements for renewal of an insurance license; require all policy
forms to sunset every five years; bring Louisiana into compliance with the NAIC Holding
Company Model Act, needed for LDI to maintain its NAIC Model Accreditation; reauthorize
the operation of the LDI for another five years (LDI sunsets in 2012); revise the captive law
by adjusting the minimum capital and surplus requirement from $1 million to $500,000 and
delete the prohibition of a captive providing workers’ compensation and employee liability
insurance.
Inside this issue:
LA Supreme Court Victory in
Arabie v: Citgo
1
The Commissioner’s Corner
1-4
LA. Department of Insurance
6-10
Rate & Rule Filings
Ask Mike
Subject: Stated Amount vs.
Agreed Value in PAP and BAP
7-14
Education Conference & Trade 15-16
Show Photos
Trusted Choice Mobile App
18
Young Agents Crawfish Boil
Photos
19
1
Continued from page 1
PPACA Update
State governments and the medical and insurance industry are doing their best to move forward with plans to implement the various
components of the Patient Protection and Affordable Care Act (PPACA), also known as health care reform under President Obama,
despite six pending U.S. Supreme Court cases. The first case challenging PPACA will be heard this month with a decision expected by
late June 2012. This case is one filed by 26 states, including Louisiana, the National Federation of Independent Business and two
individual plaintiffs. With great interest we are awaiting the outcome of these six legal challenges to PPACA.
Bills Impacting Health Insurance
LDI is proposing several bills this session that will bring Louisiana into compliance with certain PPACA requirements. One of those bills
addresses the internal and external appeals process. The U.S. Department of Health and Human Services (HHS) requires health
insurance issuers offering group and individual coverage to have an internal appeals process incorporating the U.S. Department of
Labor claims and appeals procedures. Under PPACA, all health insurance issuers must comply with a state external review process that
ensures consumer protections pursuant to HHS regulations. These consumer protections are found in the NAIC Uniform Health
Carrier External Review Model Act or minimum consumer standards established by HHS that are similar to the NAIC model. These
requirements do not apply to grandfathered group and individual health insurance coverage.
LDI recently learned that our state is one of ten whose external review law does not contain the minimum consumer protections
established by HHS. The proposed bill will amend Louisiana’s current internal and external appeals process by adopting three NAIC
Models: the Utilization Review and Benefit Determination Model Act, the Health Carrier Grievance Procedure Model Act and the
Uniform Health Carrier External Review Model Act, to afford Louisiana citizens as many consumer protections as possible. Failure to
pass legislation will continue to result in Louisiana citizens having to go to the federal government for an external review.
We are also proposing legislation establishing the health care rate review and approval process that will bring Louisiana into
compliance with PPACA. PPACA requires the Secretary of HHS, in conjunction with states, to establish a process for the annual review
of unreasonable rate increases in health insurance premiums and to monitor premium increases, or the federal agency will do it for us.
LDI applied for and received a $1 million grant under PPACA’s Rate Review Program to develop and expand its current rate review
authority. LDI will propose legislation for the review and approval of health insurance premium rates for unreasonableness. The
proposed bill is within the spirit and intent of PPACA, which is to ensure that consumers receive value for their premium dollars and to
increase the transparency of rates in our health insurance market.
Continued on page 3
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Continued from page 2
LDI will also propose a measure to require health insurance issuers to submit their networks to the LDI for approval to determine
network adequacy. LDI has two pieces of legislation addressing balance billing for medical emergency services and non-emergency
services. Both measures will amend our state’s balance billing statute to ban a practice that generates surprise medical bills for patients
with health insurance after they have returned home from a hospital visit or stay for out-of-network services provided without the
patient’s knowledge by specialists not covered under the insured’s plan. This includes any billing for covered services above and
beyond the co-insurance, co-payment and deductible in an insured’s policy or plan.
Working toward solving this problem, the Louisiana Legislature passed Act 354 in the 2009 session, which provides disclosure
requirements for health plans, hospitals and physicians regarding network participation. To comply with the Act, LDI created the
Louisiana Consumer Health Care Provider Network Disclosure Web page, in which health insurance companies provide links to their
Web sites containing information about their networks of contracted hospitals, facilities and providers. Balance billing remains a very
serious problem in Louisiana and legislation addressing the issue has not passed in recent sessions. The balance billing problem can be
solved with the passage of LDI’s proposed legislation this session. I am hopeful that 2012 will be the year Louisiana makes a change in
favor of consumers in the matter of balance billing practices.
Bills Impacting Louisiana Citizens Property Insurance Corp.
Our package contains two bills proposed as a result of the recent class action lawsuit in which Citizens is involved. One of the bills
prohibits the recovery of penalties in class action suits against Citizens. Citizens is working with plaintiffs’ attorneys and the courts to
resolve a Louisiana Supreme Court decision that found the company should be held liable for $92.8 million in damages because it was
untimely in initiating claims, even though there was no evidence that the corporation had acted in bad faith. Class action lawsuits for
penalties were not allowed against private insurance companies that paid Katrina claims, nor are class action lawsuits allowed against
the Louisiana Insurance Guaranty Association for such penalties. This bill will prevent this type of action in the future in which
policyholders statewide could be left with the bill.
A second bill resulting from the recent class action lawsuit exempts Citizens from posting bonds. This will place Citizens in a group with
other state agencies, political subdivisions and public boards and commissions that are not required to furnish an appeal bond or any
other bond in judicial proceedings that arise from the course of their duties. Such was the case in the recent class action lawsuit
against Citizens in which they were required to post a bond in the amount of $92.8 million.
Continued on page 4
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Continued from page 3
NAIC Model for Reinsurance
We are proposing a reinsurance bill that will bring Louisiana into compliance with the recently updated NAIC Credit for Reinsurance
Model Law and Model Regulation. NAIC’s recent updates to the two credit for reinsurance models are the result of over ten years of
efforts by regulators, insurers and reinsurers to reform collateral requirements. The result is a compromise that protects the solvency of
domestic insurers and permits reinsurers, especially major international reinsurers, to deploy capital in an efficient manner.
Currently, an unauthorized—usually non-U.S. or alien—reinsurer must post 100 percent collateral for the business assumed from a
domestic insurer to receive credit for the reinsurance. Collateral in the form of irrevocable letters of credit or funds placed in trust in the
U.S. is a costly expense or a detention of deployable capital.
One component of the bill modifies the provisions relevant to credit for reinsurance and brings Louisiana into compliance with the
recently updated NAIC Credit for Reinsurance Model Law. The bill allows the Commissioner to reduce or eliminate required collateral
under certain circumstances. To determine the amount of the reduced collateral, if any, the Commissioner will consider: the financial
rating of the reinsurer; the domiciliary regulator’s solvency regulation requirements; the financial and operating standards of the
domiciliary jurisdiction; the form and substance of reporting requirements and public financial statements in the domiciliary jurisdiction;
the domiciliary regulator’s general willingness to cooperate with U.S. regulators; the credit for reinsurance requirements imposed on
U.S. reinsurers by the domiciliary jurisdiction of the assuming insurer; the history of performance by reinsurers in the domiciliary
jurisdiction; the evidence of substantial problems, if any, with enforcement of valid U.S. judgments in the domiciliary jurisdiction; and
other matters, if any, deemed relevant by the Commissioner.
A second component of the bill is based on the NAIC Credit for Reinsurance Model Regulation, which provides detailed guidance on
minimum levels of required collateral as a function of a reinsurer’s evaluation by rating agencies. The ultimate goal of this effort is to
reduce the reinsurance cost that is ultimately borne by the policyholder, especially those in areas prone to catastrophic events. Prior to
the recent NAIC revisions, Indiana, Florida and New Jersey adopted statutory changes, and New York adopted regulatory changes that
implemented similar credit for reinsurance rules.
You can track these and other bills in the LDI package as they move through the Legislature at www.legis.state.la.us. Calling your
legislators on these bills will go a long way toward seeing them pass in the Legislature this session. I believe the changes we are
seeking will greatly benefit insurance consumers in our state.
4
5
The Louisiana Department of Insurance
Rate and Rule filings
February 27-March 25, 2012
Company
Coverage Type
21st Century Centennial Insurance Co.
19 - Private Passenger
Automobile
19 - Commercial Automobile
19 - Commercial Automobile
Starnet Insurance Company
Berkley Regional Insurance Co.
Assurance Company of America
Northern Insurance Co. of New York
Maryland Casualty Company
Assurance Company of America
Northern Insurance Co. of New York
Maryland Casualty Company
National Liability & Fire Insurance Co.
Accident Fund General Insurance Co.
Accident Fund Insurance Co. of America
Accident Fund National Insurance Co.
Guideone Mutual Insurance Company
Ace American Insurance Company
Ace Fire Underwriters Insurance Co.
Ace Property & Casualty Insurance Co.
Bankers Standard Fire & Marine Co.
Bankers Standard Insurance Company
Indemnity Insurance Co. of N. America
Insurance Co. of. Of N. America
Pacific Employers Insurance Co.
Harco National Insurance Co.
% of Impact/
$ of Impact
5.50%/$574229
# of
Policyholders
6027
-12.40%/$-62709
78
6.50%/$123046 244
19 - Commercial Automobile
6.50%/$70218
162
New: 04/15/2012
Renewal: 07/15/2012
19 - Commercial Automobile
16 - Workers Compensation
8.750%/$263105
211
11.1%/$88752
134
New: 04/10/2012
Renewal: 05/10/2012
New: 05/01/2012
Renewal: 05/01/2012
16 - Workers Compensation
16-Workers Compensation
5.3%/$82842
775
4.3%/$3531874
594
3.300%/$28179
22
19 - Commercial Automobile
Effective Date
New: 04/23/2012
Renewal: 05/30/2012
New: 08/01/2012
Renewal: 08/01/2012
New: 04/15/2012
Renewal: 07/15/2012
New: 05/01/2012
Renewal: 05/01/2012
New: 06/01/2012
Renewal: 06/01/2012
New: 05/01/2012
Renewal: 05/01/2012
Continued on page 9
6
Ask Mike Edwards
IIABL Director of Education, Mike Edwards is available to answer
technical questions from IIABL members. To submit a technical
question, contact Mike Edwards, CPCU, AAI, at
[email protected] or call Mike at (678) 513-4390.
Subject:: Stated Amount vs. Agreed Value in PAP and BAP
Q. I have a question about a subject that doesn’t come up very often, and so I’m a little fuzzy on it. Can you give me a comparison
between stated amount and agreed value in auto policies – both personal and commercial? Also, a math example would help,
especially when I’m discussing this with insureds.
A. You’re not alone on this subject – but it comes up more frequently than you may think. And you’re right, it can seem a little fuzzy
sometimes. Actually, it’s “double-fuzzy,” because as you suggest, it’s really a two-part issue. First, it’s important to understand how the
two concepts differ. Second, being able to illustrate how each concept works in an actual situation is helpful, so the insured can make
an informed decision about which method is appropriate for any particular situation.
One point of confusion is that the terms “stated amount” and “agreed value” don’t really give a clear picture of what their basic
concept is. And to make things a little more weird, they each go by slightly different variations. For example, “stated amount” is
sometimes referred to as “stated value.” And “agreed value” is sometimes called “agreed amount.” The obvious difference is that one
is “stated,” and the other is “agreed.” Here ‘s how I keep them straight. From the insurer’s point of view, they look at a dollar figure
placed on some item of property such as an auto, and say, “Just because you stated is doesn’t mean we agreed with it.”
Let’s look at how these two concepts work in the PAP and the BAP.
Personal Auto Policy
Before we analyze how these two concepts differ, it’s important to review how the unendorsed PAP values an auto in a physical
damage claim. Excerpt from the ISO
PP 00 01 01 05:
Part D – COVERAGE FOR DAMAGE TO YOUR AUTO
LIMIT OF LIABILITY
A. Our limit of liability for loss will be the lesser of the:
1. Actual cash value of the stolen or damaged property; or
2. Amount necessary to repair or replace the property with other property of like kind and quality.
Continued on page 8
110th IIABL Annual Convention
June 17-20, 2012
Destin, Florida
7
Continued from page 7
B. An adjustment for depreciation and physical condition will be made in determining actual cash value in the event of a total
loss.
C. If a repair or replacement results in better than like kind or quality, we will not pay for the amount of the betterment.
Comment: PAP pays on an ACV basis.
In my experience, stated amount comes up almost exclusively when dealing with older cars. In the ISO Manual, Rule 19, two types of
autos are described as being eligible for the stated amount endorsement PP 03 08: antique autos and classic autos. This is how Rule 19
describes each.
Antique Autos: An antique auto is a motor vehicle of the private passenger type which is 25 or more years old and is main-
tained primarily for use in exhibitions, club activities, parades and other functions of public interest, and occasionally used for
other purposes.
Classic Autos: A classic auto is a motor vehicle of the private passenger type which is 10 or more years old and may be used
on a regular basis. Its value is significantly higher than the average value of other autos of the same make and model year.
Here’s an example. Jill has a 1992 Corvette convertible, fully loaded, with about 95,000 miles. She is the original owner, and has maintained the car in mint condition. Cost new was $45,145. She has never had the car appraised, but a few weeks ago, a friend offered her
$9,500 for it. She decides to insure it for that amount, and the producer (or underwriter) attaches the stated amount endorsement PP 03
08, which unfortunately carries the vague and unhelpful title “Coverage for Damage to Your Auto.”
If a physical damage claim occurs, here is how the stated amount endorsement works. Excerpt [emphasis added]:
PP 03 08 06 94
LIMIT OF LIABILITY
A. Our limit of liability for loss will be the lesser of the:
1. Amount shown in the Schedule or in the Declarations.
2. Actual cash value of the stolen or damaged property; or
3. Amount necessary to repair or replace the property with other property of like kind and quality.
B. An adjustment for depreciation and physical condition will be made in determining actual cash value in the event of a total
loss.
C. If a repair or replacement results in better than like kind or quality, we will not pay for the amount of the betterment.
Continued on page 11
8
Continued from page 6
The Louisiana Department of Insurance
Rate and Rule filings
February 27-March 25, 2012
Company
Coverage Type
Unitrin Auto and Home Insurance Company
Greenwich Insurance Company
XL Insurance America Inc.
XL Specialty Insurance Company
Great West Casualty Company
4 - Homeowners
Hanover Insurance Co.
The Massachusetts Bay Insurance Co.
Hanover American Insurance Co.
Hanover Insurance Co.
The Massachusetts Bay Insurance Co.
Hanover American Insurance Co.
Westport Insurance Company
Imperial Fire and Casualty Insurance
Company
American Nat’l General Insurance Co.
ANPAC Louisiana Insurance Company
Great Divide Insurance Company
ACIG Insurance Company
Foremost Insurance Company
Foremost Insurance Company
LA. Farm Bureau Casualty Insurance Co.
LA. Farm Bureau Mutual Insurance Co.
Southern Farm Bureau Casualty Insurance Co.
% of Impact/
$ of Impact
5.5%$8889150 # of
Policyholders
3676
19 - Commercial Automobile
-3.3%/$2360727
16
16-Workers Compensation
3.8%/$288471
10
New: 05/01/2012
Renewal: 05/01/2012
1 - Property
11.60%/$557642
684
New: 08/01/2012
Renewal: 08/01/2012
17 - Other Liability
-2.40%/$-110765
830
New: 08/01/2012
Renewal: 08/01/2012
17 - Other Liability
4.50%/$81250
174
-0.600%/$-28194
260
1.50%/$507018
28585
23.0%/Incomplete
Filing
11.53%/$11220
21
14
6.05%/$52962
2069
9.61%/$14374
791
13.83%/$482492
3520
New: 11/01/2012
Renewal: 11/01/2012
New: Incomplete
Renewal: Incomplete
New: 06/22/2012
Renewal: 06/22/2012
New: 05/01/2012
Renewal: 05/01/2012
New: 05/01/2012
Renewal: 05/01/2012
New: 07/01/2012
Renewal: 08/01/2012
New: 07/01/2012
Renewal: 08/01/2012
New: 06/15/2012
Renewal: 06/15/2012
9.90%/$1750683
10819
19 - Commercial Automobile
19 - Private Passenger
Automobile
16 - Workers Compensation
16 - Workers Compensation
19 - Private Passenger
Automobile
19 - Private Passenger
Automobile
17 - Other Liability
Effective Date
New: 07/05/2012
Renewal: 07/05/2012
New: 09/01/2012
Renewal: 09/01/2012
America First Insurance Company
4 - Homeowners
Hanover Insurance Co.
Hanover American Insurance Co.
The Massachusetts Bay Insurance Co.
Manufacturers Alliance Insurance Co.
PA. Manufacturers’ Assoc. Insurance Co.
PA. Manufacturers’ Indemnity Co.
Garrison Property and Casualty Insurance Company
United Services Automobile Association
Foremost Property & Casualty Insurance
Company
5 - Commercial Multiple Peril
-0.3/$-15881
513
16 - Workers Compensation
8.3/$126406
130
New: 05/01/2012
Renewal: 05/01/2012
1 - Property
9.70%/$460269
6648
New: 06/30/2012
Renewal: 06/30/2012
19 - Private Passenger
Automobile
9.60%/$12857
374
New: 07/01/2012
Renewal: 08/01/2012
19 - Private Passenger
Automobile
17 - Other Liability
3.0%/$1233108
17965
-1.80%/$-111024
2408
New: 07/14/2012
Renewal: 08/25/2012
New: 07/01/2012
Renewal: 07/01/2012
1.70%/$427198
7081
+4.100%/$931087
9960
13.3%/$1220892
5668
General Insurance Company of America
Republic Underwriters Insurance Co.
Southern Insurance Company
Republic Fire & Casualty Insurance Co.
Southern Underwriters Insurance Co.
Progressive Paloverde Insurance Co.
Allmerica Financial Benefit Insurance
Co.
Financial Indemnity Company
19 - Commercial Automobile
19 - Private Passenger
Automobile
19 - Private Passenger
Automobile
New: 08/15/2012
Renewal: 08/15/2012
New: 08/01/2012
Renewal: 08/01/2012
New: 05/03/2012
Renewal: 06/06/2012
New: 07/01/2012
Renewal: 06/08/2012
New: 03/31/2012
Renewal: 05/25/2012
Continued on page 10
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Continued from page 9
The Louisiana Department of Insurance
Rate and Rule filings
February 27-March 25, 2012
Company
Coverage Type
% of Impact/
$ of Impact
‐0.082%/$‐24714 # of
Policyholders
2318
Automobile Club Inter-Insurance Exchange
Lighthouse Property Insurance Corp.
19 - Private Passenger
Automobile
4 - Homeowners
Allmerica Financial Benefit Insurance
Co.
24.80%/$931814
3198
19 - Commercial Automobile
4.900%/$62829
858
New: 07/01/2012
Renewal: 07/01/2012
Hanover Insurance Company
Massachusetts Bay Insurance Company
Hanover American Insurance Company
Progressive Security Insurance Co.
19 - Commercial Automobile
4.50%/$176397
247
New: 07/01/2012
Renewal: 07/01/2012
19 - Private Passenger
Automobile
1.500%/$4840645
178870
New: 07/20/2012
Renewal: 08/24/2012
Progressive Paloverde Insurance Co.
19 - Private Passenger
Automobile
16 - Workers Compensation
16 - Workers Compensation
1.40%/$1321263
48573
11.4/$404278
148
3.0%/$29172
432
New: 07/20/2012
Renewal: 08/24/2012
New: 05/01/2012
Renewal: 05/01/2012
New: 05/15/2012
Renewal: 05/15/2012
Praetorian Insurance Company
QBE Insurance Corporation
Assurance Company of America
Northern Insurance Co. of New York
Maryland Casualty Company
Effective Date
New: 06/01/2012
Renewal: 06/01/2012
New: 06/01/2012
Renewal: 08/01/2012
Additional rate filling information can be found on the
Louisiana Department of Insurance website by clicking here.
If you have questions, you may contact the Office of Property and Casualty Insurance Rating and Policy Forms Division
at: (800) 259-5300 Toll free or (225) 342-5203 Louisiana
10
Continued from page 8
Here is how Edmund’s values a 1992 Corvette like Jill’s (I entered the data myself in conjunction with research for this article):
Trade-In: $2,476
Private Party: $3,684
Dealer Retail: $5,732
Even using the highest of the three figures as ACV, here is how they fit in to the stated amount endorsement language:
A. Our limit of liability for loss will be the lesser of the:
1. Amount shown in the Schedule or in the Declarations. [$9,500]
2. Actual cash value of the stolen or damaged property; or [$5,732]
3. Amount necessary to repair or replace the property with other property of like kind and quality. [Any amount up to
$5,732]
Maximum payable is $5,732, irrespective of what “stated amount” is shown on the endorsement’s Schedule. It is important to note that
the stated amount endorsement includes the following statement:
NOTICE
The amount shown in the Schedule or in the Declarations is not necessarily the amount you will receive at the time of loss or
damage for the described property.
In addition, ISO Manual Rule 19 includes this reminder:
Note.
Coverage is not provided on an "agreed value" basis.
Since the stated amount endorsement will never pay Jill more than she would receive under an ACV settlement with the unendorsed
PAP, the obvious question is, “What good is the endorsement?” My understanding is that it allows a perhaps reluctant insurer to write
the coverage on an older car. The issue for the insurer is that ACV is not specifically defined in the PAP, and there is no dollar-figure
representing ACV on the Declarations page for Physical Damage. And because certain models of older cars have a cash value or
market value higher than most ordinary, non-collectible cars of a similar age, determining ACV can sometimes be a sticky wicket. So the
stated amount endorsement is intended to set the insurer’s maximum exposure.
As a sidebar note on ACV, sometimes it’s a lot more than just a sticky wicket. At times, it is like Area 51: everybody knows it exists, but
there are lots of different ideas as to what exactly it is.
To illustrate, a colleague of mine recently related his personal experience with ACV on an older (and highly collectable) car. He bought
a 1970 Buick Electra 225 new for $4,000. It had the new 455 cubic-inch, 370-horsepower V8, with every available option. In 1997, his
daughter had a wreck with the car, and bent the frame (and he was bent out of shape!). The car had less than 100,000 miles and was
in pristine condition. And being an insurance nerd, he had lots of pictures and other information to document the car’s condition. The
Buick was insured on an unendorsed PAP. Similar 1970 Buicks were then selling for over $20,000. The adjuster depreciated that value
and settled the claim for $16,000.
The term “actual cash value” is not defined in the PAP. The myth about ACV is that it always means “replacement cost minus
depreciation.” Oceans of ink have been used in writings about all the variations on what ACV might be in a certain situation. While the
PAP does not define ACV, it does reference “depreciation.” Referring back to the beginning of this article, see the “Limit of Liability”
excerpt from the unendorsed PAP:
B. An adjustment for depreciation and physical condition will be made in determining actual cash value in the
event of a total loss
In the Buick claim, the adjuster did indeed apply $4,000 depreciation to the loss, paying the insured $16,000. Although the coverage
was written on an ACV basis, agreed value would probably have been much more advisable.
While ISO does not have an agreed amount endorsement, there are several specialty auto markets that provide this important coverage
for insureds who own classic or antique autos. In underwriting agreed value coverage, an appraisal is often required, just like for other
agreed value coverages on items such as fine arts, etc. When the insurer accepts the appraisal, the insurer has “agreed” to the value,
and in the event of a total loss, would have paid Jill $9,500 if she had insured the car for that amount. Actually, recall that Jill came up
with this figure based only on what a friend was willing to offer her for the Corvette. I checked the Internet, and found several 1992
Corvette convertibles for sale in the $16,000 - $17,000 range. (I wonder if her “friend” knew the car’s real value?!) An appraisal on her
Corvette will allow Jill to obtain the amount of coverage she needs to fully protect her investment, which could be almost double what
she thought it was worth.
Although agreed value is far preferable than stated amount for older cars, it does have a couple of important caveats. First, not only is
an appraisal usually needed, but the underwriting is very tight. Second, the terms and conditions of many (maybe most) agreed value
policies greatly restrict the use of the car.
Continued on page 12
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Continued from page 11
Common requirements, especially for cars over 25 years old (“antique cars”), often include that it be stored in an enclosed structure,
cannot be driven except under limited conditions and to specified events, and only for a set number of miles per year. But many
people are like Jill, who loves driving her ‘Vette on weekends, with the top down and the wind in her hair. She thinks of it more as a
second car than a specialty vehicle (like the “good china”), to be used only on limited occasions. Insureds need to fully understand the
terms and conditions of the insurer they are considering when purchasing agreed value coverage.
By the way, there is a lot of useful information on all this on the Internet, especially at web sites for car collectors. This would probably
give you a better understanding of the specialty of insuring classic and antique autos.
Business Auto Policy
As we did in the Personal Auto discussion above, we should examine how the unendorsed BAP values an auto in a physical damage
claim. Excerpt from the ISO
CA 00 01 03 10:
SECTION III – PHYSICAL DAMAGE COVERAGE
C. Limit Of Insurance
1. The most we will pay for "loss" in any one "ac­cident" is the lesser of:
a. The actual cash value of the damaged or stolen property as of the time of the "loss"; or
b. The cost of repairing or replacing the dam­aged or stolen property with other property of like kind and quality.
3. An adjustment for depreciation and physical condition will be made in determining actual cash value in the event of a total
"loss".
4. If a repair or replacement results in better than like kind or quality, we will not pay for the amount of the betterment.
Continued on page 13
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Continued from page 12
Comment: As in PAP, the BAP pays on an ACV basis.
Here’s how the BAP stated amount endorsement (CA 99 28) reads [emphasis added]:
CA 99 28 03 10 – Stated Amount Insurance
Limit Of Insurance­
1. The most we will pay for "loss" in any one "accident" is the least of the following amounts:
a. The actual cash value of the damaged or stolen property as of the time of the "loss";
b. The cost of repairing or replacing the dam­aged or stolen property with property of like kind and quality; or
c. The Limit of Insurance shown in the Sched­ule.
2. An adjustment for depreciation and physical condition will be made in determining actual cash value in the event of a total
"loss".
3. If a repair or replacement results in better than like kind or quality, we will not pay for the amount of the betterment.
As we saw with the PAP version, stated amount coverage in the BAP never pays more than ACV. It is definitely not “agreed value,” any
more than its PAP cousin is.
The use of stated amount in commercial auto isn’t necessarily limited to classic or antique autos, as is generally the case in PAP. Since the
term “auto” in BAP includes “a land motor vehicle, ‘trailer’ or semitrailer de­signed for travel on public roads,” covered autos can run the
gamut from private passenger vehicles to large truck-tractors, mobile cranes, and so forth.
I checked with a few of my insurance-nerd buds about some real-world examples of when stated amount is used in commercial auto
situations. Here are two that are representative of what I found out.
(1) Trucking account, with 100+ truck/tractors. Given that the truck/tractors are dispersed over a wide geographical area (not subject to
the same concurrent peril), and the relatively modest amount of physical damage a truck would sustain in an accident, some insureds will
accept a physical damage limit which is less than ACV, in order to obtain a premium savings which could be significant with a large fleet
of vehicles.
Example: 2010 model year truck/tractor – representative of the fleet
Cost new = $145,000
ACV = $110,000
Stated amount might be $70,000 (+/-)
Repair costs: (a) $50,000 (paid); (b) $75,000 (max payable $70,000)
Total loss: $70,000 (insured understands this risk, but will accept due to reduced premium)
Continued on page 14
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Continued from page 13
(2) Various accounts with large vehicles and attached equipment. Certain classes of business often add a considerable amount of aftermarket equipment. The standard rating for trucks is based on original cost new and age group (which reflects ACV). Since ACV is not
stated in dollar-amounts, in cases where $20,000 or so of equipment has been added the vehicle, some insurers have found that they
were experiencing bad physical damage loss-ratios, due to not having received adequate premium for the vehicle plus its after-market
equipment. In the PAP, there is are exclusions for certain customizing equipment added to pickups and vans, and an endorsement is
needed to cover the added value. However, there is no such exclusion in the BAP. Physical damage applies to “the covered auto or its
equipment.” (There are exclusions for certain electronic equipment.)
Example: 2010 model year vehicle – representative of the fleet
Cost new = $145,000
After-market equipment added: $20,000
ACV = $125,000 (insurer based rating on $110,000 ACV, but would owe $125,000 in total loss.)
Stated amount = $90,000 (+/-)
Repair costs: (a) $50,000 (paid); (b) $95,000 (max payable $90,000)
Total loss: $90,000 (insured understands this risk, but will accept due to reduced premium)
An alternative solution for risks such as this would be to insure the value of the basic vehicle (chassis) on the BAP, and cover the added
equipment under an inland marine form. If at all possible, both coverages should be written with the same insurer. Lastly, ISO does
not have an agreed value endorsement in BAP.
14
2012 IIABL
Education Conference and Trade Show Photos
Lyle Lejeune, Dean Stroud and Doug Raucy of Access Home
Insurance Company
Cliff Young , Insurance Solutions Group with Dan Burghardt,
Dan Burghardt Insurance Agency
Trade Show photos continued on page 16
15
Education Conference and Trade Show Photos Continued
Johnny Beckmann, Whitney Insurance Agency, Darrin King,
Progressive Insurance Company, Brad Bourg, Bourg Insurance,
Margaret Miller, ASI and Alan Case, Lowry-Dunham, Case &
Vivien Group
Susan Joly, Summit Consulting, Doug Chiles, Summit Consulting, Marc Eagan, Eagan Insurance and Scott Pellegrin, Summit
Consulting
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IIABL COMPANY PARTNERS
GOLD PARTNERS
LA WORKERS COMPENSATION CORP.
PROGRESSIVE INSURANCE COMPANY
SILVER PARTNERS
Burns & Wilcox, Ltd.
Louisiana Construction & Industry Fund
Louisiana Restaurant Association SIF
The Republic Group
Stonetrust Commercial Insurance Co.
BRONZE PARTNERS
AMERISAFE
ASI
BANKERS INSURANCE
CNA INSURANCE
DEEP SOUTH INSURANCE
EMC INSURANCE COMPANIES
FIRSTCOMP
RPS FIRST PREMIUM
GMAC INSURANCE
GULFSTREAM PROPERTY & CASUALTY INSURANCE
HOMEBUILDERS SIF
LEMIC INSURANCE COMPANY
LCTA WORKERS’ COMP
LUBA WORKERS’ COMP
SEABRIGHT INSURANCE COS.
SUMMIT CONSULTING
THANK YOU FOR YOUR SUPPORT!!
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Trusted Choice®: There’s an app for that!
Get mobile app for consumers in Android Market or Apple App Store
The Trusted Choice® mobile app is already available for free download by consumers in the Android marketplace and
Apple App Store. The app boosts your credibility with clients in this smartphone age and allows consumers to keep one or
more home inventories, document accidents at the scene sending reports immediately to their Trusted Choice® agent, and
get regular insurance tips and updates, all from their smartphone or mobile device.
Agents can get customizable version by registering for CAP
Agency customized versions of the app with your agency logo and color scheme are available for a
monthly fee alone or as an add-on to any package available through Project CAP.
For additional information go to www.projectcapmarketing.com.
18
2012 YOUNG AGENTS CRAWFISH BOIL
Phillip Dunlap, Summit Consulting and David Bunch,
Stonetrust
Crystal DePascual, RPS First Premium, John Exner, LUBA
Wokrers’ Comp, Kelley Quirk, Deep South Surplus and
Mike Dileo, Stonetrust
Trent Bondy, LUBA Workers’ Comp, Amy Kawas, Lewis
Mohr and Tiffany Murphy, Hughes Insurance
Tammy Culmone and Tracey Gremillion with
Doug Chiles, Summit Consulting and Chad Kropp,
Susan Joly, Summit Consulting, Kristin Joly and Michelle
Brenan, LC&I Workers’ Comp
Insurance Underwriters
Gresham & Associates
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20
IIABL Staff Listings
Jeff Albright
[email protected]
Chief Executive Officer (CEO)
Francine Berendson
[email protected]
Director of Events
IIABL New Member
February 29– March 28 2012
Mike Edwards, CPCU, AAI [email protected]
Director of Education
Kim Jackson
Boyd Holding, LLC
Baton Rouge
[email protected]
Education & Membership
Karen Kuylen
[email protected]
Director of Accounting & Finance
Rhonda Martinez, CIC
[email protected]
Director of Insurance Programs
Jamie Newchurch
[email protected]
Marketing & Insurance Services
Lisa Young
[email protected]
Communications & Member Relations
21
March 2012
IIABL 2011-2012 BOARD OF DIRECTORS & OFFICERS
Marc F. Eagan, CIC
President
Eagan Insurance Agency, Inc.
James Fontenot
Dwight Andrus Insurance Inc.
dba Fontenot Ins. Agency
Barry O. Blumberg, CIC
President-Elect
Blumberg & Associates, Inc.
Morris Funderburg
Reeves, Coon & Funderburg
Tommy Huval
Brown & Brown of Louisiana
R. Parke Ellis, CPCU
Secretary/Treasurer
Gillis, Ellis & Baker, Inc.
Richard D. Jenkins
Moore & Jenkins Insurance Agency, Inc.
H. Lee Schilling, Jr.
State National Director
Schilling & Reid Insurance Agency
Joseph A. O’Connor, III
Insurance Underwriters, Ltd.
Brad Bourg, CIC
Past-President
Bourg Insurance Agency
David T. Perry, CIC, ARM
Arthur J. Gallagher Risk Management Services
John L. Beckmann, III
Whitney Insurance Agency
Neil Record, CIC
Record Agency, Inc.
Mickey Bennett
Bennett Seymour Insurance, Inc.
James J. Brien, Jr.
Arthur J. Gallagher Risk Management Services
Byram H. Carpenter, III
Mooreman, Moore & Company
Brenda Case
Lowry-Dunham, Case & Vivien
David Dethloff, CIC
Dethloff & Associates
Philip McInnis
McInnis Insurance Agency, Inc.
Edwin S. Robinson, CPCU, CLU, ARM
Insurance Unlimited
Michael D. Scriber
Scriber Insurance Services
Donelson P. Stiel
David H. Stiel, Jr. Agency
Elizabeth Treppendahl
Wright & Percy Insurance, a Division of Bancorp
South Insurance Services, Inc.
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