Insurance Policies- Frederick Fisher

[00:00:00] Hey guys, Corey Poirier here. Welcome to bLUTalks and I hope you enjoy this video.

[00:00:05] We already had lunch because now there's no excuse because the fastest way to clear a room is to say somebody's here to talk about insurance.

[00:00:35] Like all of a sudden everybody's gone. Okay? Now, before I get into some of the things that you all are going to be interested to hear, I'd like to know a little bit about who's in the room. How many people here own a company where you provide, even if it's just a sole proprietorship, where you're providing a service to somebody else for which you charge a fee? How many? Okay, we got a bunch. Okay. And how many of you think that you have general liability insurance for that and that will cover you while you're providing those services?

[00:01:04] Does anybody think that? Oh. Well, let me tell you, if you're afraid to raise your hand, your general liability insurance is for accidents that take place during the policy term involving bodily injury and property damage. And then there's personal injury coverage, which is misleading, but that's for libel and slander and what have you. It does not cover professional services. It's excluded.

[00:01:31] There is, however, professional liability policy. So I don't have time to ask everybody what it is you're doing, but if you're not a lawyer or an accountant or an architect or a real estate broker or an insurance broker and any other profession that has its own dedicated type of insurance policy to cover professional liability, then you fall into what's called the miscellaneous category, as dangerous and incomplete policy as exists. A lot of it can be bought online.

[00:02:02] How many people buy their insurance online? Anybody? Okay. I hope it's not what, well, I can't, I won't mention the name of the company. The problem with buying online is that you don't get to see the policy until you've clicked bind and give it your credit card. Then, you know, it'll email you a policy or you can download it right then and there. But rarely do you get a chance to look at the policy first. So you may or may not be covered. And chances are you're not. Miscellaneous E&O policies are loaded with exclusions.

[00:02:31] And then depending on what you're doing, there may be an endorsement that even has more. And some of those exclusions, and we'll get into it later, may be what are called absolute exclusions, which means that they don't cover any claim arising directly or indirectly from fill in the blank. And then it either stops right there or it goes on to say committed by an insured. Or it may even have a card back that says this exclusion doesn't apply when you're providing a service to a client.

[00:03:00] Well, the last two I have no problem with. It's the one that just says we don't cover any claim arising directly or indirectly from fill in the blank, period. That means any claim involving what they just said is excluded, committed by anyone, not you, your client, your client's client. If the claim arises from that activity, you're not covered. That's what I call it, and this is a soon-to-be trademark. We've got preliminary approval on it. That's a gotcha that's going to get you.

[00:03:31] Seriously. How many people here use an insurance broker? I mean a real insurance broker. Okay. How many people deal with a direct rider like homeowners or combo insurance, whatever, like State Farm or Farmers and companies like that? Anybody use them? Okay. Farmers' agents are allowed to go out into the marketplace, but they have to give first right of refusal to farmers.

[00:03:57] So if farmers doesn't like the account, then you can go elsewhere and go to a wholesaler or an intermediary, assuming that they have the proper license. Now, some farmers' agents only sell farmers' products, and as a result, they may not buy what's called a $10,000 broker bond, which is pretty cheap. It's like $80 for two years. So if they don't have that bond and they can't place business with farmers, they can't write it. State Farm agents are captive.

[00:04:27] All state agents are captive. They can only write with Allstate or State Farm or one of their related subsidiaries. So you're not getting good service because they're not getting competing quotes. How many people look for the cheapest price? Okay. Anybody else want to know that? Because we're all pro—that's right. We're all programmed. Oh, my goodness. I just saved $400, you know, moving my coverage to this guy or this carrier, and I just saved $600 on my homeowner's insurance.

[00:04:56] Okay. You all think policies are all the same, don't you? They're not. They're not. Departments of Insurance sets minimum standards what homeowners insurance has to provide. They set minimum standards on what has to be involved with auto insurance and general liability. After that, the insurance companies are free to do whatever they want to do so long as they've, number one, if they're an admitted insurance company, they have filed their policy forms, endorsements, rates, et cetera,

[00:05:26] with the department of insurance and gotten it approved, which means they can go beyond the minimum. As long as they provide the minimum, they're fine. But then they can also add a whole bunch of other exclusions. Anybody familiar with what's called the ISO, Insurance Service Office? You ever seen that language at the bottom of the page? Copyright ISO forms? The ISO drafts model policies. And then insurance companies join the ISO organization, pay a fee, which is enormous.

[00:05:54] And they're allowed to use ISO forms because they're written, they're reviewed, they're filed. The ISO files the forms with departments of insurance. So if travelers or somebody like that wants to use ISO forms, it's very easy for them to do so. Now, they don't have to follow the rates that the ISO recommends. They can do whatever they want with their rates as long as they file it with the department of insurance and get approval. Okay, fine. What I love is it says copyright ISO and other language, meaning ours.

[00:06:25] And you're supposed to know what that is? Like where in the policy is that ISO and where on this page is it not? Good luck with that. I don't know. And you might be able to do it with artificial intelligence today. But before that, good luck trying to find why is this not ISO language? And is it going to be broader or is it going to be more restrictive? These are dangers. And that's why I say these are gotchas that will get you.

[00:06:53] I've seen such a change in the insurance industry since I first started 50 years ago. I can't even begin. I don't have enough time to tell you about all the things that I've seen. And it's getting crazier. There are absolutely attorneys that have published articles, and I love calling them out on it, writing articles about it would behoove insurance companies to hire knowledgeable coverage counsels to help them draft policy language so as to avoid paying claims and claim expenses. I'm serious. That's a direct quote.

[00:07:23] And I'll tell you the case that that came from. There are big companies, huge. Pharmacy is one of them. Billions of dollars in the pharmaceutical industry. They sell stuff all over the world. And you can imagine what's called towers of excess coverage that they buy into the stratosphere, hundreds of millions of dollars to cover product liability claims and what have you. And they're probably self-insured for the first $5 or even $10 million, like a deductible.

[00:07:49] You know, you think your $2,500 deductible is high, try $1 to $10 million. So if they want to settle a case, they can't do it without getting permission from their insurance companies. They can negotiate it, but they can't commit until all the insurance companies are going to have to be the ones to write checks, give them advanced permission. So they got that. They did it. They entered into a $207 million settlement.

[00:08:17] And all the insurance companies that were going to be exposed had already given pre-approval, good deal, go ahead, great to close the file, let's move forward. Except the insurance company at what's called the sixth layer of excess was at the $160 million layer. There's already $160 million on the table. Now it's your turn. And that company, by the way, was not some fly by net company. It was Hartford, Twin City Fire.

[00:08:43] And they said, wait a minute, did all the other insurance companies admit liability? No. And the insured to say, wait a minute, here's their money. Obviously, they're admitting liability. And the court said, no. They have to be, they have to say, we're admitting liability, here's our money. They didn't do that. So Hartford was out of the case. They didn't have to pay their money. And everybody above Hartford was gone, too, for the same reason.

[00:09:12] We don't pay until everybody else has below us. So that meant there's a $47 million gap in pharmacy had to cover it. That's real money to me. That's real money to me. And then that's when I, there was a ton of articles that came out on the case that I got. And I receive all these fees. And that's when I saw this one article that it would behoove insurance companies to, you know, hire good coverage counsel so they could avoid this.

[00:09:42] So really how insurance companies operate in many respects. They get a claim. They're supposed to investigate it, which means they're going to incur investigation expense, whether it's outside adjusters or what have you. They're going to incur fees for all sorts of things and hopefully pay claims. And then as we all know, there are some insurance companies always want to play hardball. Like, no, this wasn't hail damage. This really was flood damage. And so they were denying coverage. And so you have this fight going on. Well, you can avoid all that. Very simple.

[00:10:11] Hire a lawyer to make policy more restrictive. And now you don't have to do any of that. And so there are insurance companies that are now following that model. And they're getting away with it because the courts are now following this. It's in the Constitution, the right of contract. And they're now fanatic about enforcing contracts where the language is clear and unambiguous. To who? An attorney? Probably not.

[00:10:41] I mean, they're going to read it. They're going to understand. Oh, yeah, that's clear. To you, that's another story. Okay? And it gets wilder from there. And so as a result of this absolute fanatic belief in that if it's clear and unambiguous language, we're going to enforce it. Okay. How about the traveler's cyber liability policy? Very good coverage. But they don't cover what's called social media fraud. And I don't know why. Or they claim they don't. I don't know why they call it that anyway.

[00:11:08] That's where somebody calls up and says, oh, I'm the president. You've got to wire me a million dollars right away. And so they call that social media fraud. It doesn't make any sense to me, but that's what it is. So that's what happened. In one state, travelers won. They said, we don't cover that. And they said, you're right. In another state, they said, oh, yeah, you do. And you're supposed to know that too? You're supposed to know more? They're a lawyer.

[00:11:33] And actually, most law firms, they don't have 50 state offices, many of them. So how are they going to do a 50-state review? And there was another law firm that published an article saying, when should you have reviewed your policy? Obviously, before you sign on the dotted line. And then he lists out 17 policies that businesses normally buy today, which is true. After it. When I first started in the industry, there was maybe five.

[00:12:00] But back then, you didn't have to worry about the internet and tech. And you didn't have to worry about employment practices and all this other stuff. So now there's maybe 15 to 16 policies that a business today has to buy. And they're going to have their attorney have maybe a week or two to review before renewal. And they're going to review 17 policies and do a 50-state review. That's impossible. Unless you're willing to spend an enormous amount of money in addition to the premium you're already spending. It's nuts.

[00:12:31] So how can the consumer fight back? Very simple. How many people here use a full-service agency versus a captive agent? Anybody? You know, full-service meaning they do all sorts of stuff and they represent all sorts of insurance companies. Not just all state or farmers. Anybody use a real broker? Okay, good. And so I take it the rest of you may or may not. But here's how you can really put, excuse the expression, gun to their head. Number one, everything's in writing.

[00:13:01] Number two, tell them what your expectations and needs are. And it can't be general. I want the best coverage. Irrelevant. It doesn't have any meaning at all. I want to be covered for everything. Well, number one, that's impossible. Not going to happen. Courts have already ruled on these things anyway and say it's too general to have any merit. So now you're going to have to be more specific. And that means that you're going to have to sit down with your agent and actually take the time and say,

[00:13:27] I need you to tell me what I need to know about this policy and what it's covering. For instance, how many people would know that on your homeowner policy, you're limited to $5,000 in sewer backup coverage? You know that. You were here last time, right? No? Okay. You learned the hard way? Yeah. $5,000. So this is where you get your farmer's agent problem. If farmers won't do more than $5,000 in coverage, tell them you want $15,000 or $20,000.

[00:13:55] Now he's got to go out into the marketplace because farmers will decline it. They want $15,000 in sewer backup. We don't do that. Fine. They're going to go elsewhere. And often, I would go to Lloyd's. Lloyd's still has policies that date back to the 1990s. If you're qualified, you can go to Lloyd's. I would do that in a heartbeat. And the same with flood insurance, et cetera. They have some really good policies, and they still use boots on the ground investigators to investigate claims that were they're supposed to and legally obligated to do that.

[00:14:24] I've seen insurance companies sit back and say, you have to do that. You send me the bills or estimates of this, and we'll evaluate them. But that's not what the law requires. The law requires insurance companies investigate claims. It's statutory. It's in the Fair Claim Practice Act. These are some of the ways you can fight back. But you've got to tell your agent, sit down with me. What do I need to know about my homeowners or condo coverage? Big one. God forbid you should have a horrible fire and everything's destroyed.

[00:14:54] So now you've got to have extra additional, what's called additional living expense, A-L-E. Okay. Is it limited to a year? Is it limited to two years? What's the limit? Now, granted, you can't go into a $10,000 a month apartment where it's lavish and this and that, and when you have an ordinary home type of thing, but everyone has to be a little bit reasonable here. But there are time limits and limits.

[00:15:24] There's also what's called additional, or you could have what's called actual loss sustained, which means they'll pay for a reasonable, like place to go for an unlimited amount of time. As long as you're not, you know, dill-dallying, you've got to still make a good faith effort. Contractors going and what have you. And then the Department of Insurance may step in if you have something going on where there's 10,000 homes all destroyed in two nights, like we had last year.

[00:15:56] But besides those kind of problems, it's okay. You can negotiate these things, but you've got to take the time to sit with your broker and sit down with him and have him go over all the little nuances so you can make informed decisions. And there's another reason why I saved this for last. California started this off in 1987. It still amazes me. Your insurance broker, your insurance agent has no duty to advise you in California. None. They're an order taker.

[00:16:26] It's called the order taker standard of care. California's one of 37 states that follow the order taker standard of care. They have no duty to advise you. They cannot misrepresent coverage. If they hold themselves out as an expert and they've got to say that, then they can be held to a higher standard of care. Or if they misrepresent coverage, or you can pay them an extra fee in addition to the commission they're going to get to do what's called a risk management review. Then they're, again, held to a higher standard of care.

[00:16:54] So offer them 50 bucks to sit down with you. Then you've automatically triggered it. Most agents won't know that. And there's another reason they won't know that. California, January 1st of this year, joined 34 other states, which has eliminated pre-licensing education before you can even take the exam. They don't have to study anything about insurance. They do have to take, they still have to take code and ethics. That they still have to do. But they don't have to study homeowners insurance.

[00:17:24] They don't have to study condo insurance. They don't have to study automobile insurance. They don't have to study anything about general liability. Now, all they got to do is go out and buy the book, how to pass the exam, memorize as much as they can, take the exam, pass it. And now they're right. They get a license and they can sell anything all the way up to director and officer liability coverage for privately held corporations or publicly traded. Seriously. How are you like that? Aren't you glad you stuck around? But that's the reality. 30,

[00:17:54] I haven't taken the time to take a comparison between the 37 states that followed the order taker standard of care versus the 35 states that said, you don't have to know anything to take license exam. I haven't done that yet. That's something I probably should do and compare them, but I'm sure they're pretty close. What's odd about this, New Jersey, statutorily holds insurance producers to a fiduciary standard, highest standard of care. Believe it or not,

[00:18:23] the conservative state of Florida did it by case law. They hold insurance producers to a high standard of care, not California. Think about that. Thank you.

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