A catastrophic claim could put any business at risk — and in today’s environment of social inflation driven by nuclear court verdicts, it is an existential threat to every business that cannot be overlooked. To learn more about Excess Casualty Insurance, Crain’s Content Studio spoke with David Eudy, Associate Vice President, Director, Excess Casualty, Burns & Wilcox, Detroit/Farmington Hills, Michigan.
What are some of the greatest Excess Casualty risks companies face today?
D.E.: Commercial excess products are designed to enhance protection by providing additional limits over an insured’s existing primary Casualty line policies. In this era of unprecedented social inflation, primary limits no longer afford the protection a business needs to do business with confidence and peace of mind. One recent Large Loss Profile by Chubb estimated commercial auto claims have increased by more than $8 billion in the last decade. These massive legal windfalls have even attracted third-party investors, speculating on returns by investing in litigation. This litigation funding is estimated to have reached $17 billion in 2021. No industry is spared — that same report provided examples of verdicts in a single claim ranging from $110 million for a single slip-and-fall up to over $1 billion for a single auto accident in Florida. As shocking as this may sound, there is no meaningful tort reform anticipated.
These growing risks to business ventures truly represent an existential threat and are only projected to continue getting worse. A company doing business without an Excess Liability Insurance policy simply risks losing it all over a single auto accident or slip-and-fall. Now not only do companies have to train focus on keeping online reviews at five stars, but they must also vigilantly search for blind spots in how their business model mitigates the possibility of ever being taken to court.
What should business owners be aware of relative to these risks?
D.E.: They should review their business practices to ensure adequate risk control measures are in place. This includes creating and/or reviewing existing employee training manuals and hiring protocols relative to each position. I cannot stress enough the need for common-sense measures where any auto exposure is concerned. For employees that must operate a vehicle on public roads to perform their job, even for seemingly mundane service tasks, invest in programs that check and monitor driver MVRs for signs of risk. Perform ride-along checks with your employees and make sure safety meetings take place routinely, because courts tend to look favorably on these measures when determining the level of liability of the insured.
What should companies consider when seeking out Excess Casualty Insurance policies?
D.E.: Competing for the attention of an excess underwriter is probably the biggest obstacle to delivering solutions in this marketplace. Make sure you are working with a wholesaler that doesn’t just have “all the markets” so to speak, but rather has the strongest relationships with those markets.
Are there steps that businesses should take or services they should invest in that complement their insurance coverage from a prevention standpoint?
D.E.: Again, companies should review employee manuals, training programs, and hiring protocols. If it is a small company with a handful of employees and a modest human resources team, invest in third-party firms that are experts in setting up those manuals, programs, and protocols. These are necessary steps to take no matter the size of the company. Even businesses with these risk controls already in place must stay vigilant. Have this material reviewed annually, keeping the standards and practices codified in them up to date to reflect our current legal environment. This best practice goes hand in hand with protecting the business with an Excess Liability Insurance policy and, when done effectively, may spare the Excess Liability Insurance policy from having limits exhausted due to a single claim.
What advice would you give brokers to increase their success rates with these products?
D.E.: Right now, submission quality is the most critical element to success in the excess space. Brokers must make applications shine and make them easy for an underwriter to quickly review. They should place impact information, like anything unusual or challenging about the risk, right up front. While facing the agents and policyholders, brokers must realistically manage expectations. Excess rates continue to increase and displacement in the marketplace remains extremely high. Handling Excess policy renewals, even those without any changes to the exposure, has become increasingly complex. The good news is that making submissions complete and easy to read and managing expectations are all things squarely under the control of the broker.
What services/features of Excess Casualty Insurance are specific to Burns & Wilcox? What are the advantages of these?
D.E.: Burns & Wilcox has a unique specialty facility at our corporate headquarters, staffed by a team of experts in the commercial excess liability product holding exclusive, broad underwriting authority to quote, bind, issue and endorse policies written on Markel Insurance Company’s non-admitted paper. For over 25 years this facility’s strategic carrier relationships, anchored by its foundational partnership with Markel, annually delivers thousands of excess liability policies to more than 45 Burns & Wilcox branch offices nationwide. This facility, dedicated to servicing only Burns & Wilcox offices, essentially functions as an embedded excess carrier holding the pen for A XV rated paper. It also has the ability to change hats and broker submissions in need of additional limits or niche capabilities through select companion markets. The specialty facility model itself is probably the biggest point of leverage over competitors: it focuses expertise and resources solely on the commercial excess product to meet the handling speed and coverage flexibility needed to deliver on a wide array of solutions in this dynamic market space.
WHY YOUR CLIENTS MIGHT NEED IT: With spiking social inflation and legal windfalls, companies doing business without an Excess Casualty Insurance policy could be at risk from something like a single auto accident or slip-and-fall.
PROTECTS AGAINST: Catastrophic losses from claims that exceed the coverage limits of existing primary Casualty policies.
EXPERT OPINION: “Companies should review employee manuals, training programs, and hiring protocols. If it is a small company with a handful of employees and a modest human resources team, invest in third-party firms that are experts in setting up those manuals, programs, and protocols.”