Laura S. Danoff Educational Enterprises (#30885) Wilson Elser Moskowitz Edelman & Dicker LLP...

• Laura S. Danoff Educational Enterprises (#30885)• Wilson Elser Moskowitz Edelman & Dicker LLP (#1760)

““The Art, Science and LawThe Art, Science and LawOf Underwriting”Of Underwriting”

Thanks to our Continuing Education Providers

Wednesday, September 6, 2007

Sierra Specialty Insurance ServicesThanks to our Hosts

Opening and WelcomeOpening and Welcome

Statement of compliance – anti trustStatement of compliance – anti trust CE/MCLE CreditCE/MCLE Credit PLUS Membership BenefitsPLUS Membership Benefits

Makes programs like this possibleMakes programs like this possible Discounts at PLUS national eventsDiscounts at PLUS national events

Resources through Resources through www.plusweb.org Local and International networkingLocal and International networking RPLU and other recognition n the industryRPLU and other recognition n the industry We have a good time!We have a good time!

WELCOME

Today’s Speakers

Diana GranilloUnited Valley Insurance Services

Nick TaubeMaxim Insurance Group

Louie CastoriaWilson Elser Moskowitz Edelman & Dicker LLP

and You

Our AgendaOur Agenda• Underwriting is an Underwriting is an Artistic Act – Diana Act – Diana

• Underwriting is a Underwriting is a Scientific Act – Nick Act – Nick

• Underwriting is a Underwriting is a Legal Act – Louie Act – Louie

<Ten-Minute Break><Ten-Minute Break>• Three Difficult Placement Situations, Three Difficult Placement Situations,

featuring audience reactions and panelists’ featuring audience reactions and panelists’ comments.comments.

Feel free to ask questions and contribute comments throughout.

Underwriting is an Underwriting is an Artistic ActAct

Underwriting is a Underwriting is a ScientificScientific Act Act

Underwriting is a Underwriting is a Legal Act Act

What results from Underwriting?

(Hint: it’s a Contract)

What do those words mean?

Do they mean what they say in the contract?

Do they mean what you or I intended?

Do they mean what a judge says they mean?

When do we look beyondthe policy itself?

• AmbiguityAmbiguity• Rescission/ReformationRescission/Reformation• Public policyPublic policy

Ambiguity

• General Rule: read the contract, all of it.

• If still unclear, look at the context

• If still unclear, look at the insured’s objectively reasonable expectations

Rescission/Reformation

Reformation: The parties’ mutual intent isn’t reflected in the policy.

Rescission: The applicant concealed or misrepresented facts that were objectively material to the risk, and which the insurer didn’t have reason to know.

Public Policy

“Time for a short break”

• Laura S. Danoff Educational Enterprises (#30885)• Wilson Elser Moskowitz Edelman & Dicker LLP (#1760)

““The Art, Science and LawThe Art, Science and LawOf Underwriting”Of Underwriting”

Thanks to our Continuing Education Providers

Wednesday, September 6, 2007

Sierra Specialty Insurance ServicesThanks to our Hosts

Difficult Placement #1

A mortgage banking firm, Owl Lending, has been through some tough times.

Owl is a small company, with less than $2 million in capital. They have had an operating loss for the last two fiscal years, and restated their financial statements once during that time frame.

Owl has only a small percent of subprime loans, and no prior E&O claims. To satisfy contract commitments, Owl must maintain both Mortgage Banker E&O and D&O coverage.

Would you underwrite this risk, and if so on what terms?

AGREE OR DISAGREE?

The current negative publicity about subprime mortgages make Owl an unacceptable

risk.

AGREE OR DISAGREE?

Owl is too small a company to find a market.

AGREE OR DISAGREE?

An insurer can’t cover Owl without stepping into its shoes

under its mortgage loans if Owl goes belly-up.

AGREE OR DISAGREE?

Owl sounds like one of those fly-by-night mortgage

companies

Difficult Placement #2

MediHazards, a medical malpractice insurer (rated B++) has a wholly-owned subsidiary, RiskiHazards Insurance Agency. RiskiHazards used to sell Business Package Policies to Doctors who were insured by MediHazards for their medical E&O risks.

However, MediHazards has now decided to sell the Business Package Policy book of business to an unrelated insurer, Massive Market, which will underwrite the program through its own MGA, MeGaAgency. RiskiHazards will still be the producer.

Up to now, RiskiHazards has not carried its own Insurance Agent & Broker E&O coverage, since all its placements have been with its parent company, but MeGaAgency requires all producers to carry E&O coverage.

If you’re the broker E&O underwriter, would you insure RiskiHazards?

AGREE OR DISAGREE?

I would not underwrite RiskiHazards at all because it

had no prior coverage.

AGREE OR DISAGREE?There’s a big difference

between an agency that only writes coverage issued by its parent company and one that

writes through a different carrier’s MGA.

AGREE OR DISAGREE?

Business Package Policies present greater risk when

issued to a lot of doctors than to other kinds of businesses.

AGREE OR DISAGREE?

I’d never insure anything called “RiskiHazards.”

Difficult Placement #3

The owner of “Auto U,” a driver’s education company, approaches you to buy a Miscellaneous E&O Policy. Auto U has never had that coverage before, though it has broad-form CGL coverage and insures the cars it uses in training and its instructors under a comprehensive Auto policy.

AGREE OR DISAGREE?

Auto U has no need to buy Miscellaneous E&O coverage,

because Driver’s Ed isn’t a “profession.”

AGREE OR DISAGREE?

Auto U shouldn’t buy the new coverage because it’s already

covered for all the risks inherent in its business.

AGREE OR DISAGREE?

I’d need to know more facts.

A month later a recent graduate of Auto U, Ariel Ditz, buys a new hybrid car and

insures it for the $15/$30K minimum limits.

On her first trip in the car, she comes to a stop light and her engine shuts off, which

hybrids do. Surprised by the lack of engine sounds, she thinks that she has stalled the car and that it can’t move.

OK, here are more facts:

She looks for the owner’s manual, and takes her foot off the brake pedal. The car rolls forward under battery power, colliding with a pedestrian in

the crosswalk.

Unfortunately, he is Mark Splatz, world-famous Olympic swimming gold-medalist. His

swimming career and lucrative endorsements are ruined.

Mr. Splatz sues Ms. Ditz for $10,000,000.

She cross-complains against Auto U for failing to teach her

that hybrid cars can move forward when their engines

turn off. Do these facts change your

answers?

Questions/Comments

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