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Meeting Institutional Coverage Requirements When Budgets Get Cut

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Meeting insitutional coverage requirements

The long tentacles of the financial meltdown have affected organizations in challenging ways, and it often takes persistence and teamwork to accomplish what had been a relatively simple process.

That was the case for Renee Gloudeman, Commercial Underwriter at Burns & Wilcox of Sacramento, who had placed general liability and professional liability for a 16-bed lock-down inpatient mental-health institution and its outpatient facility with the same carrier each year.

In mid-2009 the State of California, facing a severe fiscal shortfall, made drastic budget cuts. Particularly hard hit were institutions that care for those without insurance and rely on state reimbursement for a large portion of their revenue—like mental health facilities. Gloudeman’s client had to close its adjacent outpatient clinic.

With revenues down, the institution needed to reduce other expenses, including insurance costs, but the latter was not easy. Though the outpatient facility was closed and there was less exposure, the original carrier would not go much below its minimum premium of $100,000.

“The institution was well run and had a clean claims history” for its entire six-year lifespan, but it was difficult to place with another insurer, said Gloudeman. Carriers generally were willing to write an in-patient psychiatric center but not a lock-down facility—a non-prison placement where patients are sufficiently ill that they cannot leave on their own. With assistance from David Derigiotis and Kim Smith in the Burns & Wilcox Professional Lines Center of Excellence, she offered the account to at least a dozen different carriers before finding one willing to provide the necessary price relief and coverages.

Finally, they secured a quote for $65,000, “a dramatic difference that helped us win the account.” The institution had a quote through another broker, “but ours had better coverage and lower premium,” she said.

The carrier now writing the institution was willing to provide broader limits of $1 million per occurrence/$3 million aggregate instead of $1 million/$2 million. It is written on a claims-made basis with a retroactive date. “With the closing of the building next door, we had to make sure the tail is open. We were able to leave the closed facility on the policy to cover any tail claims that come in during the policy period,” she said.

“The institution is a stellar risk in a tough-to-write class, so most carriers were unwilling to write it,” said Gloudeman. “It had suffered a setback from its financially strapped state, but at least we were able to reward the good management by finding protection it could afford.”

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