This is the placing you first podcast. I'm Dan Wentz and this podcast features news and insights from CRCs fast knowledge base of 2000 plus associates who write an excess of $8 billion in premium annually and we're giving you insider access to what's happening in our company and the types of insurance we place on this edition of the podcast.
Last time we saw this kind of utilizes a strategy and mass was about 20 years ago when the telecom bubble burst back in 2000 and that the ensuing renewables for the DNO carriers, there was coverage that was unavailable or they were greatly restricted, super expensive. You know, kind of a little bit of what we're seeing today and why this has come up yet .
Again, the idea and the strategy is to preserve the good coverage that you had in the past via a more restricted policy going forward and it's an option. I wouldn't say it's great because there's a couple of problems. This is the placing you first
bug cast . The Kogan 19 pandemic has really challenged our agents to find some great solutions for their insureds during a particularly tough time for insurance. One of the solutions that they're looking at right now or maybe considering is an extended reporting period. So we definitely wanted to get into that subject today. We've got
two of our specialists on the conference call here with us, Mike Robeson . He's a senior broker in the CRC, Dallas office and exec pro national practice leader and a pro at these webcasts. I mean this is the 30th one you've been on, man. Thanks for joining us yet again. Appreciate that. And also Linda Caruthers who is a new face on the podcast, she is the vice president director in CRCs Minneapolis office and an active member of the exec pro practice group.
We are excited to have you both here today. So welcome to the podcast guys. How are you doing? You surviving, living the dream, living the dream, 25% open, right? Aren't most States sort of opening right now? Not really. So it's still dealing with Covidien 19 so let's get into this extended reporting periods. Why would agents and insureds be considering them right now? What are they used for? What situations kind of give us the background on that.
Um, extended reporting periods are used when are are there , they're on a professional liability policy and you would elect to use them. Your renewal coverage is being offered at less than expire in terms or maybe you're being non-renewed it's the availability to report a claim after the policy expires. But it had to have occurred after the retro date of the policy and then before the, before expiration of the policy.
But in this, in this time , uh, of culvert 19, it's really used because you're getting more, we're getting much more restrictive coverage. So the idea would be to lengthen the amount of time that you have with your good coverage to report potential claims of, you know , one, two or three years out that you're not going to get going forward. And then the idea would be to get a retro going forward
and the caution be much more cost effective. So if I understand this correctly, it's kind of like buying time, right? For you to find a policy that's going to fit you in the future or something that's going to be as advantageous as possible, right? Yes. Well we would hope. Yeah . We, you know, we hope 12 months from now this is all over and we can get coverage that's better than you can get right now.
Yeah. Hopefully as we get this car out there saying, I mean the president keeps saying we're going to get past this thing and the economy's going to go great. Moving forward. We'll see. Mike, why should a insureds and Asians, I mean right now it sounds like a great option, right? If you can't get the coverage you're looking for moving forward, why should insurance agents be cautious when looking at an ERP? What are some of the downsides to it?
Yeah, it's an option. A great option. It's an option, right? The best option is getting it renewed with the proper coverages that you want . Right. Um, you know, and kind of Linda explained some of the , you know, how the process works.
What we've been seeing the last time we saw this kind of utilizes a strategy in mass was about 20 years ago when the telecom bubble burst back in 2000 and and the, the, the ensuing renewables for the DNO carriers, there was coverage that was unavailable or they were greatly restricted, super expensive, you know, kind of a little bit of what we're seeing today and why this has come up again.
So again, the idea and the strategy is to preserve the good coverage that you had in the past via uh , a more restricted policy going forward. And it's an option. I wouldn't say it's great because there's a couple of problems. One is the expense. Anytime you buy an extended reporting period, typically , uh , we try to negotiate it is, is an automatic one, two and three year price where you can buy the extended reporting period for one, two, or three years.
Those premiums are typically a hundred, 150, maybe 200% on one, two and three years of the expiring annual premium . So again, if you've got an insurance that's paying $20,000 to buy a one year extended reporting period, that's $20,000 it's all learned up front so you can't find the exit and then you have to buy the new policy going forward. So it's an expensive option. However, the benefit of it is is you preserve that coverage.
So for example, on an EPL policy, if your renewal wants to put on a covert 19 layoff exclusion and you had to lay off, you know , 500 employees a month or two ago being a claims made policy, if the claim was turned in after you renewed it with that exclusion on there, it's not covered. So the expense can preserve the good coverage, but it's very, very expensive.
Makes sense. So you have to weigh in and see if that is the right option for you. Really, there's a lot to it. What about insurers denying claims? Could that happen on an ERP? Are there any ways around it? They could deny a claim? Yeah. For some reason you should have known that something was going to become a claim because when you ruin , when you move coverage going forward to a retro inception policy, that's the much restrictive policy.
You're prob you're going to have to complete an application that says, do you know of anything that could become a claim? Have you had any layoffs in the past 12 months? Are you expecting any layoffs in the coming 12 months? So as soon as you say, well, yeah, we're probably going to lay off 20% more people or what have you, if this doesn't turn around that Macquarie is going to deny any of those claims that you all, that you told them that you probably think we'll become a claim.
That's a distinct possibility.
She's exactly right. And , and another , um, another issue that you can run into is, remember if you buy an extended reporting period is for a finite time and a finite limit. You have one limit for all the claims for all the past and there's no renewal of that policy. So let's say you buy it for one year and you know, we go from May 1st of two 2020 to May 1st of 2021 the market has not changed. Everything's kind of the same and we come up to the expiration of that extended reporting period.
And let's say nobody's made a claim yet. Well when that policy expires, now you've just lost all your retro coverage. The for what you bought that extended reporting period for . So let's say a claim is put in two months after the extended reporting period expires and the market hasn't changed enough to where we can fix that upon renewal. You just, you don't have any coverage for your prior acts . So it's a strategy that can be employed. Um, it's expensive.
It can be dangerous because if you only put it in for one or two, one or one year, you can put it in for two or three and, and improve your chances. But again, the cost goes up at two and three. What's the best way for a retail agent to proceed? If they're interested in this and they think that it might be an option for them,
contact your CRC broker so we can help them. Help the retailer negotiate , uh , the length of a tail . Well, first of all, do you , do you want one? Is it in the best interest of your insured? Negotiate the price of the tail and the length of the tail. Just because a policy is issued stating one, two, and three years at a hundred percent, one 25 and one 50. Uh , in most cases you can negotiate up to, you know , more than three years and you can negotiate the price on some as well.
So you , you really need a CRC broker to help you work your way through that. And the specific wording on the extended reporting period, is it indeed available? They all are not available.
The professional liability policies, they , they're all written, they all follow the same spirit of , um, of a concept, but they're written differently. So when Linda touches on, you know, the wording is different. You mean that person that understands the language to be able to help you negotiate through that. Secondarily, I would say, you know, with your, with your , uh , CRC broker, we can also access a large marketplace to make sure that we do that.
We vet the marketplace and make sure that, that it's not replaceable. You know, there may be an area where you've got a particular company that's taking a hard stance on manufacturers for example, or a particular class, but maybe another market is not. So you might be able to transition that and avoid the expense and the risk of the ERP. So I think it's twofold . Number one, with your CRC broker, they can, they can vet the marketplace, right?
They can look to see if there's any other opportunities. And number two, if it does move to that, they can advise and walk you through the language, the risks, the particular forms and talk about the costs . So, yeah, no, I think Linda's right on with that.
Do you guys want to touch real quick on the fact that this whole discussion is being prompted by the fact that it's a hard market cycle right now and how CRC is approaching that and how you guys can help out specifically during this time coronavirus and all of this.
One thing that I'd like to touch on is, you know, we, we tend to focus on EPL because that's where the downsizing exclusions are layoff exclusions, but it really hits a lot of other areas. I've got contractors professional, there's a couple of carriers that are putting on full coronavirus exclusions and I don't really understand how that would , how that would work, you know, what does that actually do? It's just something new that we have to check into.
And there's, it seems like a DNL policy, private company, DNO , the main basis of rating is the financial or the management liability. How do you manage that business to profitability? Well, if your business is not doing that well right now, when you're , if you have an renewal coming up, you're probably gonna get a creditor or bankruptcy exclusion.
Well, we can navigate the marketplace and get you with the carrier that hopefully doesn't have a creditor or bankruptcy exclusion because some, some carriers that we work with and we work with most all private company, DNO carriers, we conduct those markets to see who would be the best fit for you, your, your insured that maybe would not have that bankruptcy creditor exclusion going forward. Well said. Linda.
Thank you guys very much. I appreciate you both joining us today on the podcast. Is there anything we missed out before we wrap this thing up? Anything we need to mention that would be helpful?
Yeah. One thing I would like to mention, you know, another strategy people are talking about and, and it's a little, it's a little riskier than the extended reporting period is the forms directors and officers, employment practices, liability errors and omissions. It's, it's an insensitive reporting or notice. Uh , a lot of times it's a notice of awareness provision .
So if you become aware of a situation that could reasonably give rise to a claim, you can turn it into that claims made carrier and that locks it in to that policy period. So it doesn't have to be a full blown claim. But for example, if we laid off an employee and on the way out they said, you laid me off because you don't like pregnant women and I'm a pregnant woman and now you'll hear from my attorney, well that'll give reason to believe that a claims come in , right?
So you can turn that into your carrier. So one of the strategies people are talking about and people have employed at various times over our careers is notice the policy, right? It's, you can law called laundry listing or notice provided to the carrier before it expires to try to preserve that good coverage.
And that's a pretty dangerous strategy because if you know, for example, you lay some money off and you, and you think, well she might make a claim because she thinks I fired her because she's a woman. So you turned that in and then she comes back and sues you because she's handicapped, not having anything to do with gender. It has to do with handicap. Well you didn't quite, you didn't quite fit the notice of claim so the carrier could deny that and then you've already turned it in.
So your new carrier is going to say, wait a second, but this is a claim, you know from your prior carrier not covered. So there's, there's dangers and gaps in there. So just wanted to make people aware of that that if somebody talks about notice of awareness provisions, that could be risky as well.
Yeah, you really do need a wholesale specialist to help you sort through all this. That's what we do at CRC, that's for sure. That is Mike Robinson. He is a senior broker, CRCs Dallas office and of course Linda, who has been very informative today. Linda Carruthers , vice president, director in CRCs Minneapolis office. You can find them both on our website, CRC group.com we've got them listed by specially practice is well as all of our other brokers as well.
You can get so much more information there about you know , our brokers and what they specialize in. It's important to find somebody that knows the types of business and the types of insurance you're trying to play. So yeah, CRC group.com check it out. Thank you guys very much. We appreciate you helping us clarify ERP today. Mike and Linda.
Yeah , thanks and thanks for having me placing you first podcast. As the situation with the Corona virus develops impacting normal daily life, insureds across the country are in a state of uncertainty. CRC group is committed to doing whatever we can to help you and your clients@crcgroup.com we have a webpage specifically devoted to Covin 19 Corona virus. It has all of our tools, Intel podcasts and industry leading white papers on the virus.
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