Three former workers in a Northern California office of the Zurich American Insurance Co. who were fired after taking “off-the-record” paid time off were awarded more than $80 million in damages by a Sacramento jury Thursday, Sacramento attorney Lawrance Bohm announced. The case stemmed from a lawsuit originally filed in 2018 that went to trial after Zurich American declined settlement offers starting at $150,000 for each of the three plaintiffs who worked at the insurer’s Gold River offices, Bohm said in an interview. “I’m jubilant,” Bohm said. “It is shocking for an American-based insurance company that provides coverage to 90 percent of the Fortune 500 to have made a zero-dollar offer... This is vindication.” Zurich American spokeswoman Robyn Ziegler said in an email response to The Sacramento Bee that the company does not comment on litigation, “So I have no comment to offer you.” Wednesday’s verdict included damages for economic harm, reputational damages and $25 million in punitive damages for each of the employees — Melinda Brantley, Nicholas Lardie and Daniel Koos — who were part of Zurich American’s workers’ compensation division, Bohm spokesman Daniel Harary said in announcing the $80,252,412 verdict details. Bohm’s spokesman said the three plaintiffs were fired in December 2017 after they followed a supervisor’s policy of taking “off the record” time off as an incentive for hard work. The days off were called “Omen days,” referring to then-Assistant Vice President Chris Omen, court papers say. “Omen offered free paid time off (‘PTO’) based on performance,” court papers say. “Employees in Omen’s department referred to the free paid time off as ‘Omen Days.’ “Omen’s free paid time off was used to reward employees who were performing at a high level or reached certain goals. The free paid time off rewards did not require any requests or entries in the official PTO system. “If an employee used paid time off approved by Omen, the employee was instructed not to use any of Zurich’s official paid time off. On most occasions. Omen instructed the employee to ‘take a day off or delete the time off requests in the system and stated that ‘it’s on me,’ indicating that the employee earned the free paid time off. “The entire Rancho Cordova branch was aware of and benefited from this unofficial rewards program.” The three were fired days before Christmas 2017 after a brief investigation by the company, Bohm said. Zurich American argued in court filings that the employees were fired after “time theft” that resulted in the three being paid a total of more than $100,000 over two years. “Theft is not justified simply because your boss told you to do it,” the company argued. “Plaintiffs are three former managers at Zurich insurance company who were discovered to have under reported paid time off (PTO) at work. “They admitted to engaging in this activity and explained it away by saying that their supervisor told them to do so.” Bohm said Zurich American “maliciously defamed three very good people from our Sacramento community,” and that his clients did not want to be involved in a lawsuit. Bohm initially offered to settle the case for $150,000 for each plaintiff but was rebuffed, he said. In 2021, he tried again, offering to settle for $500,000 each but was turned down. Finally, before trial began in Sacramento Superior Court last month, he offered to settle for $2 million per plaintiff but was told no, he said. “Zurich has had years to prevent this and do right,” Bohm said, adding that company supervisors spent 71 minutes investigating the allegations against the employees before firing them. “For a company that prides itself on fairness, that’s frightening,” he said. “Thousands of us in California have claims being handled by Zurich. “If this is the way it treats its employees what does that mean about what we can expect from them when we need them?”    

Mergers and acquisitions among insurance brokers and agents declined 18% in the first quarter, falling to the lowest level of deals since the beginning of the COVID-19 lockdowns in 2020, according to a report released Friday by Optis Partners LLC. A drop-off in deals by two of the biggest acquirers over the past several years – Acrisure Inc. and PCF Insurance Services – accounted for much of the decline, the Chicago-based investment banking and financial consulting firm said in the report. “On a trailing 12-month basis, we’re back to levels that we last witnessed at the end of 2020,” said Steve Germundson, a partner at Optis. BroadStreet Partners Inc. announced the most deals in the quarter with 29, followed by Hub International Ltd. with 12, Inszone Insurance Services with 10, and Keystone Agency Partners LLC with eight. Private-equity-backed buyers and private firms with significant outside financial support accounted for 71% of deals announced in the quarter. Publicly traded brokers announced 12 deals in the quarter, with Arthur J. Gallagher & Co. accounting for seven of them. Despite the reduction in deals by several previously highly active buyers, demand for agencies remains high, and prices for top-performing companies is strong, said Timothy J. Cunningham, Optis’ managing partner. “We don’t expect this to change any time soon,” he said.    

Progressive Corp. intends to list several of its office buildings across the United States for sale as it consolidates office buildings amid a changing work environment, a company spokesman said. Among those that will be offloaded are its Campus 1 facility in Mayfield, Ohio and the Progressive Home campus in St. Petersburg, Florida, according to an email. Also slated for sale are the Colorado Springs campus in Colorado, the Riverview campus in Riverview, Florida, and Progressive Fleet & Specialty in Carmel, Indiana. "As we continue to grow and reimagine our workforce, Progressive offers flexible work options for many of our employees with most people choosing to work from their homes," a Progressive spokesman said in the email. "Our current office locations have always been a mixture of owned and leased spaces," it said. "As we continue to look for ways to operate as efficiently as possible while providing the best for our employees and customers, our Real Estate team has completed a comprehensive market analysis and will begin marketing efforts for the sale and/or lease of some buildings involved in previously announced consolidations." Progressive first announced last July it would consolidate several of its properties in Northeast Ohio and across the United States, with the company planning to hold the locations within its portfolio until the latest announcement. Progressive said It will continue to monitor and review office utilization in order to make the best decisions for employees and the company.

Progressive Corp. net income climbed more than five-fold to $2.33 billion in the first quarter as its combined ratio improved 12.9 points to 86.1.

A year earlier the company posted net income of $447.9 million. First quarter net premiums written increased 18% to $18.96 billion."

Most operating entities of Progressive Corp. currently have a Best’s Financial Strength Rating of A+ (Superior).

 

The U.S. Environmental Protection Agency on Friday designated a pair of widely used industrial chemicals as hazardous substances under the country's Superfund program, accelerating a crackdown on toxic compounds known as "forever chemicals." The rule will require companies to report leaks of two of the most commonly used per- and polyfluoroalkyl substances, or PFAS, and help pay to clean up existing contamination. The EPA last week announced its first drinking water standards to guard against PFAS pollution. PFAS are a family of thousands of chemicals used in consumer and commercial products like firefighting foams, nonstick pans and stain resistant fabrics. They have been linked to cancer and other health concerns, and are often called forever chemicals because they do not easily break down in the human body or the environment. The new rule targets contamination from two PFAS known as PFOA and PFOS. It does not ban the chemicals. The Superfund designations will ensure that those responsible "pay for the costs to clean up pollution threatening the health of communities," EPA Administrator Michael Regan said in a statement. The Comprehensive Environmental Response Compensation and Liability Act, known as the Superfund law, allows the EPA and state regulators to undertake or order remediation of hazardous sites and seek reimbursement from site owners, hazardous waste generators, waste transporters and others. The EPA said on Friday it would prioritize enforcement against significant contributors to the release of PFAS, such as federal facilities and manufacturers. The American Chemistry Council, a leading industry trade association, called the rule "severely flawed" on Friday and said the chemicals have not been produced in the United States in nearly a decade. The Superfund program "is an expensive, ineffective and unworkable means to achieve remediation for these chemicals," the group said in a statement. Environmental groups praised the EPA's move. "These designations will give PFAS-contaminated sites the attention they deserve," Earthjustice attorney Jonathan Kalmuss-Katz said in a statement. The new rule, one of the most aggressive moves yet by the Biden administration to regulate PFAS, also makes public funds available for remediation. The regulation could spur additional litigation over liability for PFAS cleanup efforts. Lawsuits filed by public water systems and others accusing major chemical companies of polluting U.S. drinking water with PFAS chemicals led to more than $11 billion in settlements last year.    

A Redfin survey has found that nearly three-quarters (70.3%) of Florida homeowners and over half (51%) of California homeowners have seen a rise in insurance costs or change in coverage in the past year. The survey was fielded to 2,995 homeowners and renters in the United States. According to Redfin’s survey, insurance is top of mind for homeowners in Florida and California, this is mainly due to the fact that those states are the epicentres of the insurance housing crisis. Many homeowners have seen their premiums skyrocket (71.7%), and some have lost coverage altogether because their insurer has dropped them. Roughly one in eight Florida respondents (12%) and one in nine California respondents (10.7%) said their insurance company stopped offering coverage for their home, compared with 8.3% of respondents overall. Intensifying natural disaster risk is the main reason why a number of insurers have been prompted to stop doing business in Florida and California. So far, seven of California’s biggest property insurers have opted to limit new policies in the state amid increasing wildfire risk. And in Florida, eleven insurers have liquidated amid growing flood and storm risk. Other homeowners are worried they will be dropped by their insurer in the future: Over one-quarter (27.7%) of respondents in Florida said they are or have been concerned their insurer may stop offering coverage for their home, compared with 13.5% of respondents in California and 8.9% of respondents as a whole. The average annual US home insurance rate is expected to rise 6% this year to $2,522 after surging 19.8% between 2021 and 2023, according to Insurify. In Florida, the average annual rate is $10,996 – higher than any other state. The survey also found that mounting insurance costs and natural disasters are prompting some people to relocate. In Florida, 11.9% of respondents who plan to move in the next year said that rising insurance costs as a reason for this – roughly twice the national share of 6.2%. In California, 13.1% of people who intend to relocate in the coming year cited concern for natural disasters or climate risks as a reason, compared with 8.8% of respondents nationwide. Nearly 30% are staying in their home with little or no coverage. Almost half (46%) of respondents who lost insurance coverage said they’ve found a new insurer to cover their home. A similar share (44.5%) said they pay a significantly higher premium for coverage than before. While some people are leaving disaster-prone areas, there are still more people moving in than out, a separate Redfin analysis found. Daryl Fairweathe, Redfin Chief Economist said: “Homeowners living in areas where insurance premiums are surging are at risk of seeing their properties gain less value than homeowners in areas with stable premiums – and in some cases, they may even lose money. “Homes with low disaster risk and low insurance costs will likely become increasingly popular, and thus more valuable, as the dangers of climate change intensify.” Additionally, the survey found that only one-third (34%) of homeowners know which natural disasters their insurance covers. With climate disasters on the rise, homeowners should revisit their existing insurance policies so they know exactly what and how much is covered, Fairweather said. In some cases, they may want to purchase an additional policy covering a specific disaster, like fire or flood.

Allstate Corp. said it incurred an estimated $343 million in pretax catastrophe losses from activity in March, raising the total for the first quarter to $731 million from $1.69 billion in the prior-year period. March catastrophe losses included six events. About 80% of the losses related to one hail system, Allstate said in a statement. Losses were partially offset by favorable reserve reestimates on prior events, lowering the monthly pretax loss to $328 million. In mid-March a string of destructive severe convective storms impacted a wide stretch on the middle of the country.

Allstate in 2023 reported estimated pretax catastrophe losses of $1.17 billion in March after waves of powerful and destructive storms rolled across widespread swaths of the country. That accounted for the majority of $1.69 billion in first-quarter 2023 pretax catastrophe losses.

Allstate also continues to raise rates. Allstate brand automobile insurance hikes increased premiums 2.4% in the quarter. Implemented rate increases and inflation in insured home replacement costs increased average brand homeowners gross written premium 11.9% from the prior year, the company said. Allstate plans to hold a first-quarter earnings conference call on May 2.

Marsh McLennan reported consolidated revenue of $6.5 billion in the first quarter of 2024, up 9% from $5.9 billion in the prior-year quarter. On an underlying basis, its revenue also increased 9%. The firm’s operating income also rose 12% from $1.7 billion to $1.9 billion, while its net income reached $1.4 billion. “We had a terrific start to the year, reflecting continued momentum across our business. For the quarter, we generated 9% underlying revenue growth, 14% adjusted EPS growth, and 80 basis points of margin expansion. With this strong start, we are well positioned for another good year in 2024,” said John Doyle, president and CEO. The firm’s risk and insurance services segment, which includes broking arms Marsh and Guy Carpenter, saw revenue grow 9% to $4.3 billion in Q1 2024, while its operating income was up 12%, reaching $1.6 billion. Marsh McLennan’s consulting services, Mercer and Oliver Wyman, reported $2.2 billion in revenue, reflecting a 9% increase in the first three months of the year. The company also highlighted Oliver Wyman’s acquisition of SeaTec Consulting, which was completed in February. In March, Marsh McLennan Agency closed on the previously announced agreement to acquire two leading middle-market agencies in Louisiana – Querbes & Nelson and Louisiana Companies. Within this month, Mercer also completed the acquisition of Vanguard's U.S. Outsourced Chief Investment Officer (OCIO) business. The firm’s operating income also rose 12% from $1.7 billion to $1.9 billion, while its net income reached $1.4 billion. “We had a terrific start to the year, reflecting continued momentum across our business. For the quarter, we generated 9% underlying revenue growth, 14% adjusted EPS growth, and 80 basis points of margin expansion. With this strong start, we are well positioned for another good year in 2024,” said John Doyle, president and CEO. The firm’s risk and insurance services segment, which includes broking arms Marsh and Guy Carpenter, saw revenue grow 9% to $4.3 billion in Q1 2024, while its operating income was up 12%, reaching $1.6 billion. Marsh McLennan’s consulting services, Mercer and Oliver Wyman, reported $2.2 billion in revenue, reflecting a 9% increase in the first three months of the year. The company also highlighted Oliver Wyman’s acquisition of SeaTec Consulting, which was completed in February. In March, Marsh McLennan Agency closed on the previously announced agreement to acquire two leading middle-market agencies in Louisiana – Querbes & Nelson and Louisiana Companies. Within this month, Mercer also completed the acquisition of Vanguard's U.S. Outsourced Chief Investment Officer (OCIO) business.  

 

Developers, suppliers, and users of artificial intelligence must comply with existing state consumer protection, anti-discrimination, and data privacy laws, the Massachusetts attorney general cautioned Tuesday. In an advisory, Attorney General Andrea Campbell pointed to what she described as the widespread increase in the use of AI and algorithmic decision-making systems by businesses, including technology focused on consumers. The advisory is meant in part to emphasize that existing state consumer protection, anti-discrimination, and data security laws still apply to emerging technologies, including AI systems — despite the complexity of those systems — just as they would in any other context. “There is no doubt that AI holds tremendous and exciting potential to benefit society and our commonwealth in many ways, including fostering innovation and boosting efficiencies and cost-savings in the marketplace,” Cambell said in a statement. “Yet, those benefits do not outweigh the real risk of harm that, for example, any bias and lack of transparency within AI systems, can cause our residents,” she added. Falsely advertising the usability of AI systems, supplying an AI system that is defective, and misrepresenting the reliability or safety of an AI system are just some of the actions that could be considered unfair and deceptive under the state’s consumer protection laws, Campbell said. Misrepresenting audio or video content of a person for the purpose of deceiving another to engage in a business transaction or supply personal information as if to a trusted business partner — as in the case of deepfakes, voice cloning, or chatbots used to engage in fraud — could also violate state law, she added. The goal, in part, is to help encourage companies to ensure that their AI products and services are free from bias before they enter the commerce stream — rather than face consequences afterward. Regulators also say that companies should be disclosing to consumers when they are interacting with algorithms. A lack of transparency could run afoul of consumer protection laws. Elizabeth Mahoney of the Massachusetts High Technology Council, which advocates for the state’s technology economy, said that because there might be some confusion about how state and federal rules apply to the use of AI, it’s critical to spell out state law clearly. “We think having ground rules is important and protecting consumers and protecting data is a key component of that,” she said. Campbell acknowledges in her advisory that AI holds the potential to help accomplish great benefits for society even as it has also been shown to pose serious risks to consumers, including bias and the lack of transparency. Developers and suppliers promise that their AI systems and technology are accurate, fair, and effective even as they also claim that AI is a “black box”, meaning that they do not know exactly how AI performs or generates results, she said in her advisory. The advisory also notes that the state’s anti-discrimination laws prohibit AI developers, suppliers, and users from using technology that discriminates against individuals based on a legally protected characteristic — such as technology that relies on discriminatory inputs or produces discriminatory results that would violate the state’s civil rights laws, Campbell said. AI developers, suppliers, and users also must take steps to safeguard personal data used by AI systems and comply with the state’s data breach notification requirements, she added.

The American Property Casualty Insurance Association is urging California lawmakers to slow down on legislation that would require insurers to factor state and private fire mitigation efforts into decisions on coverage and rates. The bill, S.B. 1060, would require insurers to account for fire mitigation efforts including hazardous fuel reduction, home hardening, defensible space and fire prevention activities, according to the measure's text. It would also authorize the Department of Insurance to examine models used for underwriting purposes to ensure compliance with a risk model requirement and issue orders to ensure compliance. Lawmakers in the state's Senate Insurance Committee are scheduled to take up the bill on April 24, according to the Legislature's website. It's sponsored by Sen. Josh Becker, a Democrat of Menlo Park. "The California Department of Insurance already requires insurers that use risk models to take into consideration specific mitigations and provide consumers discounts," said Mark Sektnan, APCIA's vice president for state government relations. "The department is also in the process of developing regulations to authorize new types of catastrophe models that factor in the risk of wildfires and mitigation efforts taken by individuals and communities.  We believe the department should be allowed time to adopt these regulations." Carriers support wildfire mitigation efforts like home and community hardening projects to protect both public safety and property, Sektnan said in an emailed statement. Insurers will be allowed to base projected wildfire, terrorism and flood losses on catastrophe models under proposed regulatory changes in California, a move Insurance Commissioner Ricardo Lara is calling another step in efforts to safeguard the integrity of the state’s insurance market. The market is “essentially at a crossroad” with residents finding fewer options on climate-related threats from wildfires to atmospheric rivers and floods, he said. Seven of the state’s 12 largest property/casualty insurance groups have instituted some kind of limit on underwriting, his department said, sharply increasing enrollment at the state’s insurer of last resort. The five largest homeowners multiperil writers in California in 2022, based on direct premiums written, were: State Farm Group, with a 20.58% market share; Farmers Insurance Group, 14.46%; CSAA Insurance Group, 6.66%; Liberty Mutual Insurance Cos., 6.43%; and Allstate Insurance Group, 6.36%; according to BestLink.    

Chinese government-linked hackers have burrowed into U.S. critical infrastructure and are waiting "for just the right moment to deal a devastating blow," FBI Director Christopher Wray said on Thursday. An ongoing Chinese hacking campaign known as Volt Typhoon has successfully gained access to numerous American companies in telecommunications, energy, water and other critical sectors, with 23 pipeline operators targeted, Wray said in a speech at Vanderbilt University. China is developing the "ability to physically wreak havoc on our critical infrastructure at a time of its choosing," Wray said at the 2024 Vanderbilt Summit on Modern Conflict and Emerging Threats. "Its plan is to land low blows against civilian infrastructure to try to induce panic." Wray said it was difficult to determine the intent of this cyber pre-positioning which was aligned with China's broader intent to deter the U.S. from defending Taiwan. China claims democratically governed Taiwan as its own territory and has never renounced the use of force to bring the island under its control. Taiwan strongly objects to China's sovereignty claims and says only the island's people can decide their future. Earlier this week, a Chinese Ministry of Foreign Affairs spokesperson said Volt Typhoon was in fact unrelated to China's government, but is part of a criminal ransomware group. In a statement, China's Embassy in Washington referred back to the MFA spokesperson's comment. "Some in the US have been using origin-tracing of cyberattacks as a tool to hit and frame China, claiming the US to be the victim while it's the other way round, and politicizing cybersecurity issues." Wray said China's hackers operated a series of botnets - constellations of compromised personal computers and servers around the globe - to conceal their malicious cyber activities. Private sector American technology and cybersecurity companies previously attributed Volt Typhoon to China, including reports by security researchers with Microsoft and Google.  

Marsh McLennan sees strong growth opportunities amid a year of economic and geopolitical uncertainty that is raising the price of risk, according to its chief executive officer. The geopolitical environment remains unsettled, with multiple major wars and rising tensions politically, said President and CEO John Q. Doyle in a conference call. As more than half the world goes to the polls in elections this year, he said the economic outlook is uncertain. Marsh McLennan's growth prospects are strong with economic growth in most of its major markets as inflation and interest rates remain elevated, the cost of risk and health care costs continue to rise and labor markets remain tight, he said. Property rates overall increased 3%, compared with a 6% rise in the fourth quarter, and casualty rates also rose 3%, in line with the fourth quarter, Doyle said.  Financial and professional liability rates fell 7% and cyber liability rates decreased 6% and workers' compensation rates fell in the mid-single digit range. Conditions were stable in the reinsurance market as client demand increased and capacity remained adequate, Doyle said. U.S. property catastrophe reinsurance rates in April renewals were flat with some decreases for loss-free accounts, he said. Rates rose in the 10% to 20% range for accounts hit by losses. For Florida catastrophe risk renewals at June 1, early signs show improved conditions for cedants. Increased reinsurance appetite for growth should be adequate to meet higher demand, Doyle said.

First-quarter net income attributable to the company rose to $1.40 billion from $1.24 billion a year ago. Revenue rose to $6.47 billion from $5.92 billion.

All of the group's segments reported revenue growth in the quarter, with Marsh, Mercer and Oliver Wyman's growth accelerating, Doyle said. He noted revenue rose 9% each in both risk and insurance services and consulting. Marsh McLennan continued to add to its assets through acquisitions in the first quarter, Doyle said.

The group used about $1 billion in cash in the first quarter, including $347 million for acquisitions, said Chief Financial Officer Mark McGivney in the call. The group expects to deploy about $4.5 billion in 2024 for dividends, M&A and share repurchases.

The amount to be used for share repurchases depends on how the M&A pipeline develops, McGivney said. Oliver Wyman closed on the acquisition of SeaTec Consulting, expanding it capabilities in the aviation, transportation and defense industries, he said. Marsh McLennan Agency acquired two agencies in Louisiana and Mercer completed its acquisition of Vanguard's OCIO business, which expanded its reach in endowments and foundations. The group's Marsh, Oliver Wyman and reinsurance broker Guy Carpenter affiliates developed the Unity facility, a public-private insurance solution enabling grain shipments from ports in Ukraine, Doyle noted. Marsh McLennan earlier said it is expanding the Unity war risk insurance facility in conjunction with the Ukrainian government and Lloyd’s to provide affordable war risk insurance for ships carrying all non-military cargo. Doyle said Unity expanded in the first quarter to allow all ships to carry non-military cargo with the help of Lloyd's and Ukrainian banks, supporting Ukraine's wartime economic resilience.

Led by Ascot and underwritten by insurers based at Lloyd’s and other London-based insurers, Unity provides up to $50 million in hull and protection and indemnity war risk insurance. It is available to clients of all Lloyd’s registered brokers, the broker said earlier.

Marsh McLennan's outlook for 2024 includes an expectation of mid-single digit revenue growth, margin expansion and strong earnings per share growth, Doyle said. Lloyd's and underwriting entities of Ascot parent Canada Pension Plan Investment Board have current Best's Financial Strength Ratings of A (Excellent).

Thousands more Californians will lose their home insurance this summer as two more insurers withdraw from the state.

In filings with the California Department of Insurance, Tokio Marine America Insurance Company and Trans Pacific Insurance Company said they would both withdraw from the homeowners and personal umbrella insurance markets in California. Both are subsidiaries of Tokio Marine Holdings Inc., a Japanese company.

The two companies together insured 12,556 homeowner policies in California with $11.3 million in premiums, according to their filings. Tokio Marine also insured 2,732 personal umbrella policies for liability worth $400,000.

Tokio Marine America and Trans Pacific join a roster of insurers big and small that have limited and stopped doing business in California, often citing the risk of wildfires in the state. Some, such as AllState and State Farm, have stopped writing new policies in the state though they continue to renew policies — though last month, State Farm also announced it would not renew 30,000 homeowner policies, a small fraction of its total business in California. Farmers Direct Insurance has chosen to leave the state.

In response, California Insurance Commissioner Ricardo Lara has proposed a slate of reforms known as the Sustainable Insurance Strategy, designed to attract insurers back to the state. They include ideas such as changing the process for requesting rate hikes to allowing insurers to use forward-looking risk models when raising their rates. All of the strategy’s reforms are set to take effect at the end of the year.

Tokio Marine did not immediately respond to a request for comment. Neither company disclosed in state filings the reasons behind the withdrawal or where their policies are located in the state.

The companies will begin sending non-renewal notices to customers starting July 1, according to state filings.