excess/surplus/specialty lines interest group the specialist surplus lines marketplace from a to z:...

Chairman’s Messageby Carl R. Sadler, CPCU, ASLI

Carl R. Sadler, CPCU, ASLI, is president of Transportation Insurance Consultants, LLC, where he offers consulting, expert witness, and training services mostly involving truck and commercial auto insurance. During his forty-one-year insurance career, Sadler has been an underwriting officer at four separate property-casualty insurance groups. He also has extensive general agency and surplus lines experience involving truck and commercial auto insurance.

Sadler was a founder of the ESSL Interest Group and has served as chairman since 2011, a position he previously held from 1986 to 1989. He recently moved to Palmyra, Virginia, and is a member of both the CPCU Society Valley Forge and Central Virginia Chapters. He is also a member of the Trucking Industry Defense Association (TIDA).

Excess/Surplus/Specialty Lines Interest GroupThe Specialist

The Excess/Surplus/Specialty Lines (ESSL) Interest Group Committee met on Saturday, April 27 at the very successful CPCU Leadership Summit, held in Phoenix from April 24-27, 2013.

Leadership Summit Society TopicsMajor changes in the Society were discussed at the Leadership Summit. The two most important, from the perspective of interest groups, are the greater emphasis being placed on the role of interest groups and the encouragement for increased cooperation between interest groups and chapters. ESSL members have an opportunity to play an important role in the successful implementation of these changes.

Leadership Summit ESSL Interest Group TopicsIn the past year, there has been some turnover on the ESSL Interest Group Committee. We thank Royanna Carle, Brian Krout, and Jim MacDonald for their service, and we welcome

Jeanette McDonough, Lou Nunez, and Greg Rubel to the committee. Lou has taken responsibility for recruiting, and he reports that he has several new committee appointments in process.

My term as chair ends at the 2014 Annual Meeting. As part of our succession planning at the Leadership Summit, our committee selected Maureen Brown to succeed me as ESSL chair. She has therefore become vice chair.

We have had both successes and disappointments in the last year. The greatest disappointment has been our poor track record in developing timely newsletters. I have temporarily assumed responsibility for this function. This edition of The Specialist would not have been possible without the hard work of our Institutes liaison, Arthur Flitner. We thank Arthur for his contributions. We believe the solution to this problem is finding two ESSL members, either committee members or volunteers, who wish to become coeditors.

What’s in This Issue

Chairman’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The Surplus Lines Marketplace From A to Z: Now Available to CPCU Society Chapters. . . . . . . . 3

The ABCs of Windstorms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Technology Trends Affecting the Excess and Surplus Lines Market . . . . . . . . . . . . . . . . . . . . . . . 5

Auto or Mobile Equipment Decision Tree for the Pre-2004 CGL and Pre-2006 Commercial Auto Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Hello Auto Dealers, Goodbye Garage! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

A Higher Calling to Professional Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

www.cpcusociety.org | Visit us online.

Volume 25 | Number 1 | July 2013

continued on page 2

Chairman’s Messagecontinued from page 1

2 CPCU Society Excess/Surplus/Specialty Lines Interest Group | The Specialist | July 2013

We are also seeking ESSL members to help build bridges to Society chapters. We are repackaging “The Surplus Lines Marketplace from A to Z” seminar from the 2012 Washington, DC Annual Meeting; on June 27, this seminar will be presented in Malvern for the Valley Forge Chapter and is approved for two continuing education credits. This program could be presented at other chapters, which could strengthen the relationships between interest groups and chapters.

2013 New Orleans Annual Meeting Seminars (October 26-29, 2013)At the 2013 CPCU Annual Meeting, the ESSL Interest Group will present two seminars and cohost two other seminars with other interest groups. The two topics we are presenting are:

• “HelloAutoDealers,GoodbyeGarage!”This seminar will be presented by Tom Kussurelis, chief underwriting officer of CorePointe Insurance Company (an auto dealer specialist); Arthur Flitner; and myself. This topic is timely because, in

most states, ISO is introducing the Auto Dealers Coverage Form and withdrawing support for the Garage Coverage Form on October 1, 2013.

• “ProgramBusiness—CriticalSuccessFactors.” This seminar is being developed by Maureen Brown. Rajesh Narayan of the ESSL Committee is one of the panelists.

The two seminars we are cohosting with other interest groups are:

• “Fracking”

• “RenewableEnergy”

SummaryWe are making progress in rebuilding ESSL. Please help us by becoming an ESSL volunteer!

For more information, please contact Carl R. Sadler at (434) 207-3555 or [email protected].

WANTED

Two ESSL members who wish to become co-editors of our newsletter, The Specialist.

No travel required, and you don’t need to become a member of the ESSL Interest Group Committee or take on any other duties. Contact Carl Sadler: (434) 207-3555 or [email protected].

The Surplus Lines Marketplace From A to Z: Now Available to CPCU Society Chaptersby Fred Parcells, CPCU, ARM, ARe

3CPCU Society Excess/Surplus/Specialty Lines Interest Group | The Specialist | July 2013

Fred Parcells, CPCU, ARM, ARe, has over twenty years of experience in the commercial property and casualty business. He held underwriting-related positions in production multi-line underwriting, multi-program management, and product management with admitted and surplus lines insurers involving both field and home office roles. Before joining the CPCU Society’s Excess/Surplus/Specialty Lines Interest Group Committee, he chaired the Society’s Underwriting Interest Group Committee and also served as president of the Chicago Chapter.

Parcells earned a bachelor’s degree in finance from the University of Illinois and a master’s of business administration degree in marketing and finance from the Indiana University Kelley School of Business. In addition to earning the CPCU, ARM, and ARe designations, Parcells holds the Certified Financial Planner (CFP) designation and is listed in Who’s Who in Finance and Industry, Who’s Who in the Midwest, Who’s Who in America, and Who’s Who in the World.

If you were unable to get to the 2012 CPCU Society Annual Meeting in Washington, D.C., you might still be able to attend a subsequent presentation of “The Surplus Lines Marketplace From A to Z,” a seminar that was produced by the ESSL Interest Group.

The ESSL Interest Group is now making this seminar available to CPCU Society chapters that are interested in hosting it in their area using local speakers. ESSL will provide the slideshow, as well as leads for finding qualified speakers. As this article went to press, the Valley Forge CPCU Society Chapter was planning to host the seminar in Wayne, Pa., on Thursday, June 27, with two local surplus lines experts as speakers.

The seminar was created with the intent of providing an overview of the surplus lines market that would be highly informative to industry personnel who are unfamiliar with surplus lines, as well as serving as a refresher for surplus lines veterans. Key learning objectives include these:

• Identifyingthepurposeofthesurpluslinesmarket

• Knowinghowtoaccessthismarket

• Rememberingthetypesofaccounts/linesof business that are frequently placed in the surplus lines market

• Knowinghowthemechanicsofthismarket differ from the admitted market

• Knowinghowandwhythismarketisregulated and the differences from admitted market regulation

To support these objectives, the seminar describes the wholesale broker’s role in surplus lines transactions, how to choose a wholesale broker, the criteria for selecting a surplus lines insurer, and the types of information that surplus lines underwriters typically require. Regulatory changes as a result of the passage of the Nonadmitted and Reinsurance Reform Act (NRRA) are also discussed.

For more information, contact either Fred Parcells ([email protected]) or Carl Sadler ([email protected]).

Does your interest group participate on Social Media Sites? Here’s the link:http://www.linkedin.com/groups/CPCU-Society-Excess-Surplus-Specialty-4001375?home=&gid=4001375&trk=anet_ug_hm

Social Media Sites

CPCU Society Excess/Surplus/Specialty Lines Interest Group | The Specialist | July 20134

The ABCs of Windstormsby Maureen Brown, CPCU, RPLU+, ARM-P, ARe, AIC, ASLI

Maureen Brown has over thirty-five years of insurance experience, with expertise in underwriting and managing insurance programs. In her current position of senior product specialist in Munich Reinsurance America’s Specialty Market Division, she recommends expansions of Munich’s product offerings, serves as a specialty market liaison with the home office, and coordinates training for the underwriting staff. She also serves as a subject matter expert on many internal projects. Previously, Brown worked in Munich’s Product Development Department, where she led the development of casualty and management liability forms and endorsements geared to the not-for-profit classes of business. In addition, she is a course facilitator at Munich Re, having led CPCU 551, CPCU 552, and ARe 143 classes. Prior to joining Munich Re in 2004, Brown held various management positions in underwriting, operations, and claims.

Brown is vice chair of the CPCU Excess/Surplus Lines/Specialty Lines Interest Group. In addition to earning her CPCU designation, she holds the RPLU+, ARM-P, ARe, AIC, and ASLI designations.

With insured losses from the Moore, Oklahoma, tornado approaching $3.5 billion and the National Oceanic and Atmospheric Administration (NOAA) predicting a 70 percent likelihood of having thirteen to twenty named storms in the Atlantic Ocean in 2013, there is a heightened awareness of the losses that can be caused by windstorms. So, as the 2013 hurricane season begins, a review of some windstorm basics is timely for insurance professionals.

Windstorms include straight line wind, tornadoes, and tropical cyclones. Tropical cyclones are classified based on their sustained wind speed. A tropical depression has a maximum sustained wind speed of 38 miles per hour (mph) or less, while a major hurricane has a minimum sustained wind speed of 111 mph or greater.

Tropical cyclones that occur in the Atlantic Ocean, Gulf of Mexico, and Caribbean Sea are called hurricanes. These same storms are known as typhoons in the western North Pacific. In the southern Pacific and Indian oceans, these storms are known as cyclones. Regardless of the name, some of these storms have caused significant damage. They also have cycles, which may differ from the storms of the Atlantic Ocean, Gulf of Mexico, and Caribbean Sea.

Hurricanes traditionally have a defined cycle, with the official season running from June 1 to November 30. Each year, people wonder how many named storms will develop over the course of these six months and whether the storms will develop into tropical storms or hurricanes. They watch these storms develop, hoping landfall does not occur in heavily populatedareas—andtheybreatheasighofrelief (until the next one develops) or spring into action, depending on whether landfall occurs and what damage ensues.

Another type of windstorm is the tornado. Tornadoes also have a cycle. In the area of the United States known as Tornado Alley, tornadoes are most active during spring and

early summer. However, while hurricanes normally do not occur in the colder months in the U.S., tornadoes can occur in any month of the year. Although in the past it was uncommon to hear about tornadoes on the East Coast, that is no longer the case.

Windstorm is an insurable peril. If one purchases a policy that covers basic, broad, or special perils, windstorm is covered unless it is excluded by endorsement. It is a rated peril, just like fire; the basic factors used to rate windstorm include the construction and location of the building.

Several catastrophe modeling agencies analyze historical windstorm data to try to make predictions about future losses. The models that these agencies develop can also be used to predict an individual account’s loss potential from a specific type of modeled wind event. Several major universities have research departments that study wind events.

NOAA conducts research on wind events and maintains a database with statistics dating back to the 1950s for severe weather events such as hurricanes, tornadoes, and hailstorms. NOAA also has an early warning system in place for approaching windstorms. People in the Midwest received emails the weekend before the tornado struck the city of Moore, and a warning was issued sixteen minutes before the tornado developed, setting off alarms in the area. Without these warnings, the death toll could have been much higher.

NOAA is scheduled to begin furloughs for all of its employees beginning on July 5. Hopefully these furloughs will not have an impact on NOAA’s ability to track and warn of impending windstorm systems.

Although there will always be an element of randomness in windstorm losses, it is reassuring that humankind continues to increase its understanding of wind events and that the insurance mechanism is available to pay for the catastrophic losses that can result from these events.

continued on page 6


Technology Trends Affecting the Excess and Surplus Lines Marketby Rajesh Narayan, CPCU, CIOP, PMP

Rajesh Narayan, CPCU, CIOP, PMP, is general manager and head of P&C insurance at ValueMomentum Inc., a leading provider of rating, product configuration, and underwriting solutions and technology services. Narayan has more than ten years of property-casualty industry experience, leading large enterprise portal, rating, underwriting, business intelligence, and document automation initiatives. He is focused on aligning ValueMomentum’s software and service offerings to meet the needs of the various property-casualty segments by working closely with product, practice, marketing, and client services teams. Narayan has been active in many industry committees and organizations over the years, such as AAMGA, ACORD, and the CPCU Society.

Market analysts such as Gartner and Novarica work with global companies to understand which technology assets insurance carriers are using. Gartner publishes its Hype Cycle reports, and Novarica publishes reports for all major lines of property-casualty business. This article refers to these two analysts and their reports, as well as the efforts of ACORD and the E&S Joint Working Group (ESJWG), which is an alliance of carriers, agents, and vendors led by Mike Roy and Angelyn Truetel that works with ACORD, the American Association of Managing General Agents (AAMGA), the Independent Agents and Brokers of America’s Agents Council for Technology (ACT), and the National Association of Professional Surplus Lines Offices (NAPSLO).

Specialty Market’s Characteristics and Tech ConcernsAccording to Novarica’s report “Business and Technology Trends: Specialty Lines Insurers,”1 the specialty lines market has these characteristics:

• Ahighdegreeofspecializationonthepartof underwriters and brokers

• Asizeablesurpluslinesmarketinwhichcoverage is provided by nonadmitted insurers

• Highexposuretoinflation,claimsescalation, and unexpected changes in claims and claims costs, due to the long-tail liability nature of many lines

• Low-volume,high-contract-valuebusiness

While some distributors welcome a carrier that has a full rate/quote/issue solution, others prefer to use their own rating and issuing capability. They just need carriers’ rates and prefer to pass data back and forth. The challenge is to be able to work with a number of different distributors without creating a number of proprietary one-off interfaces.

The top technology concerns for specialty lines insurers include these:

• Eliminatingkeystrokesbyprovidingreal-time interface for brokers (including upload/download)

• Findingthebestwaysofmovingdatabackand forth

• Buildingquotingandapplicationsubmission capabilities for brokers to add convenience

• Usingstandardstominimizethenumberof proprietary interfaces

Key Trends for E&S CarriersA number of technology trends that appear in Gartner’s Hype Cycle research, particularly “Hype Cycle for P&C Insurance,”2 are capable of overcoming some of the challenges that insurance carriers face. Some of the key trends that excess and surplus lines (E&S) carriers should note are these:

Trends that offer the ability to automate business processes more effectively:

• Productconfigurator

• ACORDExtensibleMarkupLanguage(XML), standards that facilitate communication

• Businessrulesengines

Trends that offer the ability to increase collaboration and productivity:

• Casemanagementsolutions

• Underwritingworkstation

Trends that offer the ability to increase the efficiency of data management and business intelligence efforts:

• Insurancedatamodels

• Predictivemodelingsolutions

Technology Trends Affecting the Excess and Surplus Lines Marketcontinued from page 5


Trends that offer cost-effective solutions for dealing with core systems implementation:

• Cloudcomputing

• Service-orientedarchitecture(SOA)component models

Trends that offer the ability to leverage the interconnected world we live in:

• Property-casualtyinsurancebusinessprocess outsourcing (BPO)

• Electronicdocumentgenerationanddelivery

• Socialmedia

• Customercommunicationsmanagementsolutions

Role of the E&S Joint Working GroupACORD has been instrumental in setting standards for the industry at large. Recently, its focus has been on enabling E&S carriers to implement communication standards between carriers and general agents. This initiative will help address the current lack of standards to assist distribution channels in doing more business electronically.

The ESJWG’s mission is to improve efficiencies for retail agents, general agents, wholesale brokers, and carriers by promoting use of ACORD standards, best-practice workflows,andtheelectronicexchangeofdata among each of the business partners. Within the ESJWG are a number of subgroups focused on specific initiatives.

One such subgroup is the E&S Carrier Subgroup, led by Greg Ricker from Sombra Technologies and Scott Good from Scottsdale Insurance. The primary purpose of this working group is to help establish data exchange standards facilitating carrier, wholesaler, and retailer communications.

Another ESJWG subgroup is the Retail Agent/General Agent Subgroup. Its mission is to improve retail agent and general agent workflowsandrelationshipsbydiscussingcurrent “pain points” and prioritizing particular improvements. It has been conducting tests intended to achieve proof ofconceptofworkflowimprovements,demonstrating real-time automated workflowsamongthebusinesspartnersandsuggesting technologies the parties could use toimplementimprovedworkflows.

Carriers, general agents, wholesalers, retail agents, and vendors will all benefit from discussing how data standards can improve all operations within the E&S and program markets and how new technologies can be employed. General agents and vendors can get retail agents’ perspectives on how they can improve their interactions with retail agents and the technological tools they offer.

Retail agents will benefit from achieving more efficient quoting and binding, along with more efficient internal agency operations, which not only improve customer service but also eliminate unneeded expenses.

ConclusionI would appreciate hearing your ideas about the best way to add value through technology. Please send your suggestions to [email protected].

Endnotes1 Martina Conlon and Steven Kaye, “Business

and Technology Trends: Specialty Lines Insurers,” (New York: Novarica, April 2013), www.novarica.com/business-and-technology-trends-specialty-lines-insurers/.

2 Gartner, “Hype Cycle for P&C Insurance, 2012,” July 27, 2012, www.gartner.com/id=2097017.


Auto or Mobile Equipment Decision Tree for the Pre-2004 CGL and Pre-2006 Commercial Auto Formsby Arthur L. Flitner, CPCU, ARM, AIC, and Carl R. Sadler, CPCU, ASLI

In an earlier article1, we published a decision tree for classifying vehicles as autos or mobile equipment as those terms are defined in the 2004 and later editions of the Commercial General Liability (CGL) Coverage Form and the 2006 and later editions of the Business Auto Coverage Form, Truckers Coverage Form, and Motor Carrier Coverage Form of Insurance Services Office, Inc. (ISO).

After the article was published, some readers asked if we could make a similar decision tree for the previous editions of these forms. In response, this article provides a decision tree for classifying vehicles as autos or mobile equipment under the pre-2004/2006 editions of the ISO coverage forms shown in the exhibit. Because of differences in policy wording, the decision tree in this article does not apply to any coverage forms with earlier edition dates than those shown in the exhibit.

ISO Coverage Forms to Which the Pre-2004/2006 Decision Tree Applies

Commercial General Liability Coverage Form

Business Auto Coverage Form

CG 00 01 11 85 CA 00 01 01 87

CG 00 01 11 88 CA 00 01 12 90

CG 00 01 10 93 CA 00 01 06 92

CG 00 01 01 96 CA 00 01 12 93

CG 00 01 07 98 CA 00 01 07 97

CG 00 01 10 01 CA 00 01 10 01

Truckers Coverage Form

Motor Carrier Coverage Form

CA 00 12 01 87 N/A

CA 00 12 12 90 N/A

CA 00 12 06 92 N/A

CA 00 12 12 93 CA 00 20 12 93

CA 00 12 07 97 CA 00 20 07 97

CA 00 12 10 01 CA 00 20 10 01

The only difference (a very substantial one) between the auto definition in the pre-2004/2006 forms and the revised auto definition in the subsequent editions of the forms is that the revised auto definition includes any land vehicle that is subject to a motor vehicle insurance law in the jurisdiction where the vehicle is licensed or principally garaged. Similarly, the mobile equipment definition in the subsequent editions excludes such vehicles from being mobile equipment even if they would otherwise meet the mobile equipment definition.

Therefore, the only modification of the original Auto or Mobile Equipment Decision Tree that is needed to make it work for the pre-2004/2006 forms is to omit Decision 2 of the original Decision Tree. The result is the four-step decision tree that appears on the next page. Facing that page are instructions for using this decision tree.

To repeat a crucial point that was made in our previous article, both decision trees are designed only for classifying vehicles as autos or mobile equipment as defined in the applicable coverage forms. Such classification might be needed when deciding whether a vehicle will be automatically covered under a CGL policy as mobile equipment or whether the vehicle needs to be added to a commercial auto policy to be covered as an auto.

Such classification might also be one step of many in deciding whether a vehicular liability claim is covered under the insured’s CGL policy, commercial auto policy, or neither of these. The decision trees do not address any of the other coverage issues that need to be addressed, such as whether the Aircraft, Auto or Watercraft exclusion in the insured’s CGL policy applies to injury that has resulted from the use of an auto. For example, the exclusion contains exceptions that allow CGL coverage to apply to the insured’s use of autos in narrowly defined circumstances.

Similarly, a vehicle correctly classified as an auto may not qualify as a covered auto under the insured’s Business Auto Coverage Form. Or the operation of equipment attached to a vehicle that qualifies as a covered auto under the insured’s Business Auto Coverage Form may nonetheless be excluded under that form and covered under the insured’s CGL form. The decision trees do not address the policy provisions that make such coverage distinctions. The decision trees can only help you to classify vehicles as autos or mobile equipment.

ConclusionThe additional decision tree provided in this article can be used for classifying vehicles as autos or mobile equipment under the pre-2004 editions of the ISO Commercial General Liability Coverage Form and the pre-2006 editions of the ISO Business Auto Coverage Form, Truckers Coverage Form, and Motor Carrier Coverage Form. The purpose of the decision tree is limited to classification. Determining whether a particular vehicle is actually covered involves additional analysis that the decision tree does not provide.

Endnote1 “Auto or Mobile Equipment Decision Tree,”

published in The Specialist, vol. 24, no. 2, July 2012, pp. 3–7; and in Underwriting Trends, vol. 25, no. 1, March 2013, pp. 4–9.

About the AuthorsCarl R. Sadler, CPCU, ASLI, is president of Transportation Insurance Consultants, LLC. (Please see full bio on page 1.)

Arthur L. Flitner is senior director of Knowledge Resources at The Institutes. (Please see full bio on page 10.)

CPCU Society Excess/Surplus/Specialty Lines Interest Group | The Specialist | July 20138

Auto or Mobile Equipment Decision Tree

1Is it a land vehicle?

2Does it meet

paragraph f(1), (2), or (3) in the mobile

equipment definition?

START

3Does it meet

paragraph a, b, c, d, e, or f [other than f(1), (2), (3)] in the

mobile equip.def.?

4Is it a land

motor vehicle, trailer, or semitrailer designed for travel

on public roads?

MOBILEEQUIPMENT

NEITHER

NO

NO

YES

AUTO

AUTOYES

YES

NO

YES

NEITHER

Auto or Mobile Equipment Decision Tree

NO

For use with only the pre-2004 editions of

the Commercial General Liability

Coverage Form and the pre-2006 editions of the Business Auto

Coverage Form, Truckers Coverage

Form, and Motor Carrier Coverage

Form

Notes for Using the Pre-2004/2006 Decision Tree


Decision 1: If an object does not qualify as a land vehicle, it is neither an auto nor mobile equipment. For example, a watercraft or an aircraft is a vehicle but is not a land vehicle. A land vehicle does not have to be motorized or self-propelled. A trailer or semitrailer, for example, is a land vehicle even though it is not a land motor vehicle.

Decision 2: If a land vehicle is a self-propelled vehicle with any of the types of permanently attached equipment listed in paragraphs f.(1) through f.(3) of the mobile equipment definition, the vehicle is an auto.

However, self-propelled vehicles with the following types of permanently attached equipment are not “mobile equipment” but will be considered “autos”:

(1) Equipment designed primarily for:

(a) Snow removal;

(b) Road maintenance, but not construction or resurfacing; or

(c) Street cleaning;

(2) Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and

(3) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.1

Decision 3: If a land vehicle is any one of the types listed in paragraphs a. through f. of the mobile equipment definition, other than a self-propelled vehicle with permanently attached equipment of the types described in f. (1), (2), or (3), it is mobile equipment.

"Mobile equipment" means any of the following types of land vehicles, including any attached machinery or equipment:

a. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads;

b. Vehicles maintained for use solely on or next to premises you own or rent;

c. Vehicles that travel on crawler treads;

d. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently mounted:

(1) Power cranes, shovels, loaders, diggers or drills; or

(2) Road construction or resurfacing equipment such as graders, scrapers or rollers;

e. Vehicles not described in Paragraph a., b., c. or d. above that are not self-propelled and are maintained primarily to provide mobility to permanently attached equipment of the following types:

(1) Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment; or

(2) Cherry pickers and similar devices used to raise or lower workers;

f. Vehicles not described in Paragraph a., b., c. or d. above maintained primarily for purposes other than the transportation of persons or cargo.2

Decision 4: If a land motor vehicle, trailer, or semitrailer is designed for travel on public roads and does not meet the mobile equipment definition, it is an auto. If the outcome of Decision 4 is NO, the vehicle is neither an auto nor mobile equipment.

1 Includes copyrighted material of Insurance Services Office, Inc., with its permission. Copyright, ISO Properties, Inc., 2000. 2 Includes copyrighted material of Insurance Services Office, Inc., with its permission. Copyright, ISO Properties, Inc., 2000.


Hello Auto Dealers, Goodbye Garage!by Arthur L. Flitner, CPCU, ARM, AIC

Arthur L. Flitner is senior director of Knowledge Resources at The Institutes, where he participates in teams that develop materials about property-casualty insurance and risk management. He is an author or editor of content used in many of The Institutes’ programs, including CPCU, Associate in Surplus Lines Insurance, and Associate in Marine Insurance Management. Flitner serves as liaison to the ESSL Interest Group and is a member of the Derek Hughes/NAPSLO Educational Foundation’s board of directors, the Insurance Services Office, Inc. (ISO) Commercial Lines Industry Liaison Panel, the Inland Marine Underwriters Association’s Professional Development Steering Committee, and the American Marine Claims Award Steering Committee. He earned a master’s degree from Eastern Michigan University and a bachelor’s degree from Ohio University.

Insurance Services Office, Inc. (ISO) has filed its new Auto Dealers Coverage Form (ADCF) to replace the Garage Coverage Form (GCF). The effective date for the ADCF is October 1, 2013, in most states. At the same time, ISO is withdrawing the GCF.

About a decade ago, ISO modified eligibility rules for the GCF to include only auto and trailer dealers, omitting nondealer auto service businesses such as service stations, repair shops, and parking garages that had formerly been eligible.

Subsequently, ISO began to develop an auto dealer form that included the customary auto and general liability coverages of the GCF and added some coverages that are now commonly offered by insurers specializing in insuring auto dealers. These coverages, contained in a section of the ADCF titled “Acts, Errors or Omissions Liability Coverages,” insure an auto dealer against liability arising out of any of these:

• Failuretocomplywithlawsconcerningthedisclosure of credit or lease terms

• Failuretocomplywithlawsconcerningthedisclosure of accurate odometer mileage

• Theinsured’sacts,errors,oromissionsasan insurance agent or broker with regard to auto physical damage coverage, auto loan/lease gap coverage, and credit life or credit disability insurance

• Defectsintitlesinconnectionwiththesaleor lease of an auto

A new Customer Complaint Legal Defense Coverage endorsement can be added to the ADCF. It covers costs incurred to defend the insured auto dealer against customer complaints to which the endorsement applies, such as complaints based on a state’s lemon law.

The ESSL Interest Group will host a session titled “Hello Auto Dealers, Goodbye Garage!” on Tuesday, October 29, at the CPCU Annual Meeting in New Orleans. The session will describe the specialty market for insuring auto dealers, provide insider knowledge for those who want to become more involved in this market, examine the coverage and rating differences between the ADCF and GCF, and compare the ADCF with proprietary auto dealer forms. Session attendees will earn two hours of continuing education credit for qualifying states.

Speakers for this session will include Tom Kussurelis, CPCU, CLU, AAI, chief underwriting officer, Corepointe Insurance Company; Carl R. Sadler, CPCU, ASLI, president of Transportation Insurance Consultants, LLC, and chair of the ESSL Interest Group; and me. I hope to see you there!


A Higher Calling to Professional Commitmentby Louis E. Nunez, CPCU, ARM, AU, AAI, AAM, AIM

Louis E. Nunez, CPCU, ARM, AU, AAI, AAM, AIM, has twenty-two years of experience with the aviation industry, having served as an underwriter with CIGNA Aerospace (now ACE), a senior broker with Alexander & Alexander (now Aon), and Reliance National’s General Aviation division manager. He was recently the senior training specialist for AIG Business Training, servicing primarily the global casualty and specialty divisions. He also coordinated technical training for the AIG Professional Associates program, which recruited and trained college graduates for careers in insurance and risk management.

Nunez was president of the CPCU Society New York Chapter from 1991–92. He continues to serve on the chapter’s board. He earned his CPCU designation in 1983 and has served as the chapter’s new designee representative and chaired the Candidate Development, I-Day, and Education Committees. For the national CPCU Society, Nunez has served on and chaired the Candidate Development and Excess/Surplus/Specialty Section Committees, and he has served on the CPCU Society Board of Directors.

The dynamic nature of risk is such that our industry finds itself constantly responding to new and unforeseen challenges. The current environment calls for entrepreneurship, innovation,andflexibility.Itis,infact,thiscurrent environment that prompts us to

encourage you to consider an opportunity for national service with the Excess/Surplus/Specialty Lines Interest Group Committee.

ESSL has been among the most active CPCU Society interest groups within the CPCU Society. We have produced informative newsletters, and we developed and hosted successful seminars at the CPCU Annual Meeting.

We are also planning to package ESSL seminars that can be used at the chapter level and to expand our social network. Our goal is to increase networking among fellow CPCUs with an interest in surplus and specialty lines and to promote the CPCU designation to this industry segment.

ESSL had a great showing at the 2012 CPCU Annual Meeting, where it was awarded the Platinum Circle of Excellence Award. ESSL is also aiming to cosponsor and network with other associations such as the National Association of Professional Surplus Lines Offices, the American Association of Managing General Agents, the Professional Liability Underwriting Society, and the American Insurance Association.

As excited and ambitious as we are, we still need additional ESSL committee members. We’d like more geographic balance, a reasonable spread of ages and experience, various functional roles (underwriting, claims, administration, systems, and marketing), and participation by all segments of the business (brokers, wholesalers, insurers, and reinsurers).

Committee-member candidates must complete the Society’s Application for CPCU Society Service. All Interest group committee members, per Society guidelines, serve for a three-year term and are expected to attend both the CPCU Annual Meeting and the Leadership Summit each year. In addition, committee members agree to participate in monthly teleconference meetings and committee work.

Please consider the benefits of joining the Committee or of serving as an ESSL volunteer without the obligation of meeting attendance. You can be an outstanding representative of your company as part of our endeavor to promote CPCU and professionalism in our unique segment of the industry.

If you wish to discuss the opportunity, please contact me or our chairman, Carl Sadler, CPCU.

Carl Sadler [email protected] (434) 207-3555

Lou Nunez [email protected] (917) 915-4884

CPCU Society 720 Providence Road, Suite 100Malvern, PA 19355-3433

The Excess/Surplus/Specialty Lines Interest Group newsletter is published by the CPCU Society Excess/Surplus/Specialty Lines Interest Group.

Excess/Surplus/Specialty Lines Interest Grouphttp://essl.cpcusociety.org

ChairmanCarl R. Sadler, CPCU, ASLITransportation Insurance Consultants, LLCEmail: [email protected]

CPCU Society720 Providence Road, Suite 100Malvern, PA 19355-3433 (800) 932-CPCU (2728) www.cpcusociety.org

Statements of fact and opinion are the responsibility of the authors alone and do not imply an opinion on the part of officers, individual members, or staff of the CPCU Society.

© 2013 Society of Chartered Property and Casualty Underwriters

CPCU is a registered trademark of The Institutes.

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