Pandemics, Property, PIP, Professionals & Pollution

Recent news affecting the insurance claims industry include:

1) Bird Flu Pandemic Could Bring $400B Comp Claim, Affect 400 Million Workers, and Kill 900,000, Report Says
If a mutated version of the bird flu were to evolve into worldwide pandemic, as warned by many scientists and medical professionals, as many as 40 million workers could be affected in the United States and up to 900,000 could die. Such a grim forecast was given in a report to the NCCI in its annual meeting in Orlando, FL.

While many insurance experts believe that such a flu illness, or death, would not be covered by workers’ compensation, such an opinion fails to recognize the realities of our society and its expectations, the factual scenarios that would produce such claims (i.e. teachers, healthcare workers, etc.), and the impact of work comp legal doctrines on such scenarios. If all claims were covered, the potential loss could hit $400 billion, according to RMS models.

The report indicated that such a pandemic only occurs once every 250 years, and the chance of it occurring is, at this time, only estimated at about three or four percent.  Unfortunately, there have, to date, been approximately 288 identified cases of the H5N1 avian flu, and it has resulted in 170 deaths worldwide.  Once such a virus is isolated, experts predict that it would take four to five months to develop a vaccine.

2) Florida Insurance Reforms Risky and Underwriting Unsound, According to National Consulting Firm and Florida’s CFO
In a report issued this week, a national consulting firm, Milliman, Inc., reported that while Florida’s legislative property insurance reforms have provided the greatest benefit to coastal high risk areas, they could raise premiums and shift the eventual costs of loss to less risky areas.

This report, commissioned by Property Casualty Insurers Association of America, was unveiled this week in Tallahassee in briefings for the state’s chief financial officer, the attorney general, and members of the governor’s staff. Last week, Florida’s CFO, Alex Sink advised that Citizens, Florida’s insurer of last resort, was actually writing “actuarially unsound” policies.

The Milliman report suggests that the greatest benefit of the reforms has been directed at households in Florida’s highest risk coastal areas and provides immediate savings for homeowners, it shifts potentially devastating loss costs to future policyholders, motorists and business owners who would be assessed if such a catastrophe were to occur.

3) Florida PIP Fails in Legislative Session
Will Florida join the growing number of states who are abandoning the concept of “Personal Injury Protection (PIP)” insurance, otherwise known as “No-Fault”? It appears quite likely!

Despite the efforts of special interests groups such as hospitals, medical providers and the plaintiff’s bar, Florida’s Personal Injury Protection/No-Fault legislation failed to regain its foothold during the 2007 legislative session.  Unless something happens in the upcoming Special Session, Florida PIP will “sunset” (i.e. go away) on October 1st, returning Florida to a traditional “fault” state for automobile liability and recovery.

There are those who predict that PIP will survive, and there are those who predict it will not. These prognosticators are, as one would expect, tightly aligned with the special interest groups with whom they share similar interests, or those they represent

4) Insurance Pros Have Many Employers, Poll Finds
A recent insurance career survey has found that, among insurance industry veterans, more than 70 percent have experienced an involuntary change in employment. The survey, conducted by the Society of CPCU (Chartered Property and Casualty Underwriters) found that 72 percent of industry professionals who have been in the industry for more than 30 years have experienced an involuntary change in employment.

Overall, 94 percent of survey respondents said they have changed jobs at least once to improve their job situations, and 58 percent reported experiencing an involuntary change of employers in the course of their careers, according to the survey.

Respondents rated continuing education in technical insurance subjects as the most valuable tool available for advancing their careers and minimizing the impact of involuntary career changes.  Sixty-six (66%) percent rated continuing technical education as “very helpful.”

Remember when the mark of a good 29 percent of respondents now list five or more employers on their insurance resumes. Members with more experience in the industry have changed employers more often, with 40 percent reporting more than five different insurance employers over their careers.

CPCU said members with up to 20 years of property-casualty insurance experience are also mobile, with 29 percent reporting four different employers during their tenure in the industry.

Typically, the poll found that respondents spent between three and five years (34 percent) or between six and 10 years (30 percent) with an employer. However, more than one-half of Society members, 54 percent, who have spent 20 years or less in the business typically stay less than five years with any one employer, according to the poll.

Two-thirds of the respondents said that they consider their current employer to be “very supportive” of their efforts to develop professional and career skills, and an additional 23 percent rated their employer as “somewhat supportive.”

When asked their likely reaction if their employer significantly cut back on support for professional development, a majority of the group, 40 percent, said they would possibly change career plans while 12 percent said they would definitely change plans.

And...for the industry’s most recent Breaking News:

5) Louisiana Court Limits Pollution Exclusion
A Louisiana judge has just ruled that an insurer cannot use a general liability policy’s pollution exclusion language to deny coverage for claims against a policyholder that allege bodily injury from workplace exposure to hazardous substances.

In the case at hand, ConocoPhillips, is being sued by workers employed by one of its contractors at or near ConocoPhillips’ docks facility in Westlake, LA. ConocoPhillips is seeking coverage as an additional insured under the contractor’s GL policy.  The contractor’s employees have claimed injury due to negligent workplace exposure to a purportedly hazardous substance, ethylene dichloride (EDC) that exists as a useful and essential ingredient in the stream of commerce and production of vinyl chloride.

Judge Wilfred Carter of the 14th District Court, Calcasieu Parish, in Lake Charles, La., rejected such denial of coverage, even with the so-called "absolute" and "total" pollution exclusions, agreeing that the underlying claims did not arise from traditional environmental pollution.

ConocoPhillips is represented by attorney John Ellison the firm of Anderson Kill & Olick of New York.  Mr. Ellison indicates that across the country, states have pretty much been evenly divided on whether the pollution exclusion can be used in cases such as this.

Representing the insurance industry in this case are such carriers as National Union Fire of Pennsylvania and Louisiana, American International, Lexington, American Indemnity, Colonia Insurance, United National, Columbia Mutual, Continental Casualty, Continental Insurance, and Scottsdale Insurance.

While attorneys for the defendants indicate they will appeal to the Louisiana Court of Appeals, don’t hold your breath looking for a reversal.  Given that ethylene dichloride (EDC) in this instance is considered a useful and essential ingredient in the production of a valuable end product, and is not a traditional “environmental pollution or contamination” case, such a reversal could have grave consequences for insured business and industry.

Louisiana is not typically considered a “carrier-friendly” state, and having lived in Louisiana for 16 years and worked in claims for 9, I find such a reversal unlikely, and the expectation of same naïve.