Simmonds Business Insurance Index - Market Changing

For the first time in a long time, I am predicting a hardening in the insurance market.  That is reflected in the changes I am making in the Simmonds Business Insurance Index:

The Simmonds Business Insurance Index™ August, 2011

Renewal Premiums Flat To Slight Increase

Renewal Coverages Negotiate

Buyer's Outlook Long-Term: Prices Increasing

I think the insurance marketplace is starting to change.  Over the next 12 months we are going to see higher premiums and restrictions on coverage.



Over the past month I have seen underwriters decline accounts they would have drooled over six months ago.  My August and July renewals were/are more intense in the negotiations than in recent memory.



I'm getting more aggressive questions from insurers, and I'm starting to see a general attitude of, "We are not really interested in being competitive if it means we can't have the price we want."



At the same time, there are flashes of the soft market.  One recent renewal had one insurer 40% below last year.



As the marketplace toughens, it will be more important than ever to have a renewal plan and to negotiate coverage and premiums with insurers.



Agents and insurers have been looking for a hard market for some time - years now.  Their incomes will be going up.  Workloads too.  To the insurance buyers out there I say, "Make them earn it."

History lesson

Here's a really interesting article on the history of insurance.

Deductibility of CPP Disability Benefits

The plaintiff in Demers v. B.R. Davidson Mining & Development Ltd. [2011] ONSC 2046 received CPP benefits following a car accident in 1999. A dispute arose as to the deductibility of these benefits.

Prior to November 1, 1996 it was clear that CPP benefits were not deductible. The law in this respect became less clear with the enactment of Bill 59. This Bill dealt with car accidents occurring after November 1, 1996 and before October 1, 2003. As a result of its enactment, s.267.8(1) of the Act provided for the deduction of benefits for “loss of earning capacity”. What wasn’t clear was whether this included CPP benefits.

To complicate matters further, there were two conflicting court decisions. The court in Meloche v. McKenzie ,[2005] O.J. No. 3761 (S.C.J.) looked to the 2003 amendments which specify that CPP benefits are deductible and concluded that this amendment must be a clarification of the original legislation. The court in Sonnenberger v. Creamer, [2009] O.J. No. 754 (S.C.J.) made the opposite finding as it took the position that the amendment did not provide for retrospective application.

There is also a Court of Appeal decision, Kosanovic v. Wawanesa Mutual Insurance Co., [2004] O.R. (3d) 161 (C.A.) which held that CPP benefits were not deductible for this time period. This case was not considered by the court in Meloche and arguments were made by the defendants in Demers that this case should not be considered.

Shaw J. found Kosanovic relevant and binding but also focused on two principals of statutory interpretation to settle the issue: 1) the ordinary meaning of a legislative provision should prevail absent a good reason to reject it; and 2) there must be something in the wording of the provision or in the circumstances in which it is enacted to indicate that the provision is meant to be retroactive. He concluded that the legislation in effect in 1999, when the accident occurred, does not expressly provide for the deduction of CPP benefits and the amended legislation does not indicate retroactivity.

As a result of this case there appears to be two distinct periods of time: 1) accidents which occurred between October 23, 1989 and September 30, 2003 (CPP benefits not deductible); and 2) accidents which occurred after October 1, 2003 (CPP benefits deductible).

NonProfits-Where and Why Buy D&O

Letter from someone who found me on the internet...

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July 25, 2011

Dear Scott,

I just read your article here:

http://www2.guidestar.org/rxa/news/articles/2004/nonprofit-directors-and-officers-insurance-the-good-the-bad-and-the-ugly.aspx?articleId=839 and wonder if you might answer a few questions for me.

I am a director of a newly formed citizens' group, a non-profit corporation in the state of xx. We are not a 501c(3), although we may become one in the future. We expect to approve our Bylaws at the board meeting tomorrow, and we do have an indemnification clause...

We have been told that, although it is unlikely, there is a small risk that we will be sued, and that to be able to afford to defend ourselves in this unlikely event, we should get directors' and officers' insurance. You wrote in your article:

"Volunteer service is no defense for improper acts. Many states, however, provide immunity from prosecution if the actions arise out of voluntary service in a nonprofit. Remember that these laws are at the state level, and that they vary from state to state. State law cannot provide immunity from federal statues such as ERISA, the Americans with Disabilities Act, or Civil Rights laws."

We are in xx.  How do I find out if we really need this coverage or not? Can you point me to a description of the coverage that would be most applicable in our situation? Further, do you know of insurers who perhaps specialize in our type of needs?

Thanks for your prompt response,

SB

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My reply...

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SB,

Your indemnification clause is only as good as the assets that stand behind it.  Without insurance, you are asking your directors to risk their personal assets.

Any good local commercial insurance agent can help you.  Talk with your board members and supporters - find one who runs a successful business, and ask them to refer you to their insurance agent.

A local attorney can help you with the laws in your state.  Personally, I cannot imagine serving on a board of directors without D&O insurance.  The premiums are usually $1,000 or so for a small group.  Why should so many board members risk so much for so little?

Best of luck.

Regards,

Scott