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Schinnerer: Addressing the Management Liability Exposures of Private Companies

Featuring Steve Cohen, Management Liability Practice Leader, Victor O. Schinnerer & Company, Inc.


Posted on 05 Nov 14 by Neilson

This week in our In-Depth column we spoke with Steve Cohen, Management Liability Practice Leader for Victor O. Schinnerer & Company, Inc., one of the largest and most experienced underwriting managers of specialty insurance programs in the world. Steve’s career in the insurance industry spans 22 years, all within the management liability space. He worked for three insurers over a 12-year period and a major broker for nine years before joining Schinnerer last year where he manages a staff of eight. There are five programs within the Management Liability Practice: Private Company, Non-Profits, Miscellaneous Professional Liability, Kidnap, Ransom & Extortion (KRE), and Healthcare. We spoke to Steve about their Private Company program.

We began our conversation taking a look at private companies and if and how they are addressing their management liability issues. “There aren’t enough private companies purchasing management liability coverages,” explains Steve. “Statistically speaking, there are between 13 and 14 million private companies in the U.S., with various surveys by industry organizations suggesting that roughly only 30% buy some type of management liability coverage. This leaves you with several million privately held companies uninsured in this area, which informs why Schinnerer believed there was a need for a market designed for privately held companies. In fact, since the launch of Schinnerer’s Private Company program in July, we have received hundreds of submissions from a variety of risks.”

Steve explains that, for many, the lack of management liability insurance by private companies comes down to a financial issue and how much coverage they can afford. “Take EPL, for example, although it’s been available on the market for 20 years or so, small companies view it as a luxury. They buy General Liability, Property, Workers Comp, and Auto and then evaluate what other coverages they can afford to purchase. It becomes a cost-benefit analysis, weighing the cost of having a lawsuit against not having the proper coverage. For example, can they afford paying out of pocket a lawsuit that costs $50,000 versus buying a policy for $5,000?”

In discussing EPL, one of the growing management liability concerns for private companies, as with other types of companies, is how to manage wage and hour situations. “The smaller the company the more likely they are to have general counsel or an HR manager who wears many hats, and who is only astute in finite issues,” explains Steve. “They may not be managing something as specific as wage and hour properly. They may not be looking at their staff and independent contractors to assess whether they are coded and paid properly. Furthermore, they may not know how to address potential issues and what coverage, if any, is available to them.

“Equally important, wage and hour coverage must be specifically requested, and generally speaking, it’s up to the carrier to decide whether it will be provided and for how much. It’s not part of the EPL policy and is typically available only as a sublimit that covers defense costs, not loss of wage and hour claims. Again, the private company has to assess whether they need to buy this coverage and can afford it.”

Schinnerer’s Product for Private Companies

Schinnerer’s Management Liability program for private companies includes a broad appetite across a wide range of industry segments for businesses with assets of up to $1 billion. In fact, the only classes that the program doesn’t currently entertain are financial and educational institutions, and architects & engineers.

“We write small companies, including start-ups and ESOPs, to very large corporations, with very few ineligible classes,” says Steve. “Our product is written with A.M. Best “A”-rated Catlin, known for its great reputation in the management liability space.”

The program is based on a modular policy with one set of general terms and conditions, offering D&O Liability, EPL, Fiduciary Liability, Crime, and Kidnap, Ransom & Extortion (KRE). “You can buy all five products or some combination of the five,” explains Steve. “With the liability coverages, an insured can purchase separate dedicated limits for each business line or a blended limit. We offer different options with the limits carved out in various ways.”

There is a maximum limit of $10 million on a single-limit basis or separate dedicated limits that add up to $10 million. Wage and hour is available, depending on the insured, as a sublimit under the EPL coverage. The program is available nationally.

Text Box: “As an MGU, we had a great deal of input of how the policy would work. We provide a Coverage Checklist on our website so that brokers can see what we consider the most important features and critical coverage enhancements of our policy. They can evaluate whether other carriers are providing the same coverages we offer…”

In discussing what makes the program unique, Steve explains that the policy form was built from the ground up. “As an MGU, we had a great deal of input of how the policy would work. We provide a Coverage Checklist on our website so that brokers can see what we consider the most important features and critical coverage enhancements of our policy. They can evaluate whether other carriers are providing the same coverages we offer.

“For instance, we provide a lower threshold for M&As, and offer broad severability wording. We also include favorable wording regarding the conduct exclusion, which is unavoidable on a D&O policy.

“Additionally, our claims reporting provisions are crafted so that a client doesn’t feel as though the meter is going to run out quickly when it comes to reporting a claim. Moreover, our definition of claim is broad, one of the key levers that gets the policy to respond when an incident o ccurs. It’s important to marry a broad claim definition with a favorable reporting provision. If you have a broad claim definition, but a prescriptive reporting provision, the insured may be reporting an incident late without realizing it and end up not being covered. Enhancing the claims reporting provision makes it more difficult for carriers to deny a claim because of a late notice.”

Schinnerer works with 8,000 to 9,000 brokers throughout the United States. “We have an excellent reputation for providing great service and quick turnaround, and offering a broad appetite, including with our brand new programs. The experience brokers have with us is why they continue to turn to Schinnerer. We excel at program business, and as an organization we’re always looking at how we can do things better. We welcome and encourage feedback from our broker partners.”

For more information about Schinnerer’s Management Liability Practice for private companies, please contact Steve at 301.961.9851 or via email at Steven.E.Cohen@schinnerer.com.


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