Tag Archives: AIMU

Additional Insureds: How Policy Language Can Create Dramatic Consequences

By John Novaria, Managing Director, Amplify

Underwriters routinely receive requests to add additional insureds to policies. But failure to add insureds correctly can open up insurers to potentially huge losses.

Companies typically need to add additional insureds to allow them to fulfill their obligations with their contractual partners. The requests are commonly associated with coverage for the marine and energy business, but construction and other industries often need to add insureds as well. Those requests can involve commercial general liability, excess and umbrella and other liability policies.

Maritime legal expert Harold “Hal” K. Watson recently conducted an interactive educational webinar on the proper addition of insureds for the American Institute of Marine Underwriters (AIMU). Watson, a partner at Chaffe McCall LLP in Houston, is a former president of the Maritime Law Association of the U.S. and an internationally renowned authority in marine and energy insurance.

Using detailed examples from actual cases — including the Deepwater Horizon disaster — Watson illustrated how policy language surrounding additional insureds can cause claims to go wrong. He offered the audience of underwriters, brokers and claims adjusters practical suggestions for writing policy language in specific ways to prevent problems.

Watson explained how arguably ambiguous policy language became a significant factor in Deepwater Horizon, the offshore drilling rig that in April 2010 blew out, resulting in an explosion that killed 11 crew members and caused billions of dollars in pollution and environmental damage in the Gulf of Mexico. Transocean owned the drilling rig, but it was under contract to BP. Watson noted that the contract between the two companies required Transocean to name BP as an additional insured for some purposes. But there was uncertainty whether or not the insurance policy incorporated the limitations of the drilling contract.

The U.S. Court of Appeals for the Fifth Circuit initially held that the insurance policy did not incorporate the limitations in the contract, but then certified the case to the Texas Supreme Court since Texas law applied. The Texas Supreme Court finally ruled that the insurance policy did incorporate the limitations, but if the Fifth Circuit’s original ruling had stood, BP would have been entitled to all of Transocean’s insurance coverage limits.

Watson explained how wording can be used to avoid situations that essentially give away an insured’s coverage. He also discussed other areas involving risks and exposures including:

  • The distinction and nuances between indemnity clauses and insurance policies.
  • The need for caution when providing broad coverage for additional insureds.
  • How additional insureds come into play in umbrella and excess liability policies, including specialized maritime policies.
  • The effect of anti-indemnity statutes pertaining to oil and gas wells in Texas and Louisiana

AIMU has seen growing interest in its educational offerings as it pivots from live to virtual events. According to AIMU President John Miklus, there were nearly 100 attendees at the “Additional Insureds” webinar and a similar number at another recent webinar on yacht insurance fundamentals.

AIMU’s primary focus is on education of its members and the insurance community at large and continues to deliver its programs using innovative methods. Click here for more information on upcoming classes.

A Toast to Marine Insurance!

By John Novaria, Managing Director, Amplify

When you think of winemaking, you picture grapes on the vine and a hearty glass of red on your table. But you probably don’t think of all the steps involved in the production of wine and the fact that those grapes – and later, the finished product – travel long distances to reach our palates.

That’s where marine insurance comes in: to protect businesses along the supply chain from the unexpected.

The American Institute of Marine Underwriters (AIMU) drew a robust crowd to its recent webinar, “From Vine to Wine and the Fire In Between,” where participants learned of the risks associated with wine production and the coverages that are designed to mitigate losses. The two-hour session is part of AIMU’s extensive and popular educational series, and drew a crowd of underwriters, claims experts and brokers from the ranks of marine insurers and beyond.

“One of the biggest roles we perform is education, and it’s not limited to our members,” says John Miklus, President of AIMU. “Marine touches so many aspects of business that there’s a real thirst for knowledge in the broader insurance community and we try to quench that thirst.”

Pamela Schultz, Jonathan Thames and Erik Kowalewsky of Hinshaw & Culbertson opened by discussing the effects of the 2017 wildfires on the Napa and Sonoma wine growers and wineries, where 10 percent of the harvest was still on the vine when the fires started.

There are nearly 20 steps involved in wine production, including include growing, harvesting, fermenting, storage, barreling, aging, blending, bottling, labeling and distributing. Each presents opportunities for things to go wrong.

Thames explained that Stock Throughput is a form of marine coverage that insures goods in all their physical states along the supply chain with the exception of damage caused by the processes of turning the raw materials into the finished products. He said policies are generally very broadly worded and cover all risks.

Schultz pointed out how marine insurance comes into play during shipment. Stock Throughput policies are designed to cover supply chains and anything that moves inventory against loss due to:

  • Extreme weather and natural disasters can cause supply chain interruptions and even loss of product.
  • Transportation: Obviously, wine has to get from the vineyard to the table and that table may be anywhere in the world.
  • Trade problems/disruption: This affects imports and exports, especially delays due to current COVID-19 crisis.
  • Lack of Control: Products are sometimes shipped long distances, and it’s difficult to know everything about every link of the supply or travel chain.
  • Invaders: Yes, pests have been known to get into wine and cause damage and so can fumigation.
  • CTL: Constructive Total Loss becomes an issue if the wine is stolen. Most policies exclude consumption of wine, but Schultz said that hasn’t stopped some insureds from trying to claim it on that basis.

The 2017 California wildfires brought into focus the issue of smoke taint. The smoke that lingers for weeks after the fires are extinguished can taint the grapes, rendering a wine unpalatable, or worse, undrinkable.

Thames noted that smoke taint claims don’t arise until after fermentation, after the wine has been tasted, and the grower must prove damage with scientific evidence and serve notice of potential loss within 60 days. However, he said there are cost effective processes winemakers can put in place beforehand to mitigate the effect.

The presenters discussed the difference between crop insurance and whole farm revenue protection, both of which offer only limited protection to the grower. Crop insurance is not a 100 percent indemnity product; it only covers the grapes pre-harvest, so there will always be a gap. Limits are based on past yields so it’s difficult to expand limits in the first few years.

As a result of the 2017 fires in Oregon, one winemaker now requires its growers to carry crop insurance and pays half the premium.

Whole farm revenue protection insures against lost revenue, but doesn’t protect particular crops as it is not a property policy. To make a claim on this policy the insured must establish that farm revenue is down as a result of the winery rejecting the grapes.

Participants were invited to vote on their favorite wine, and the overwhelming choice was Red, at 70 percent. White garnered 17 percent of the vote and Rose 12 percent.

Upcoming AIMU courses include Yacht Insurance Fundamentals, which offers 6 CE credits, and Introduction to Static Risk Insurance: Warehouse Basics, offering 3 credits.

Aimu and Triple-I Amplify: An effective marketing and communications partnership

When John Miklus joined the American Institute of Marine Underwriters (AIMU) as president six years ago, he discovered the association had been in partnership with the Insurance Information Institute (Triple-I) for more than 20 years. But he wasn’t quite sure just what Triple-I did for their organizations.  He understood that Triple-I provided marketing and communications services – such as writing speeches and talking points on marine insurance issues for past presidents Walter Kramer and James Craig. But what Miklus soon came to realize and appreciate, was Triple-I’s profound understanding of the insurance business that no other marketing and communications firm provided, and the powerful partnership they had forged. 

In years past, AIMU had been hesitant, if not reluctant, to engage the media, according to Miklus.  “Working with the Triple-I changed all that. With adequate coaching and introductions to targeted media outlets, Triple-I facilitated a process that was comfortable and thoughtfully prepared. As a result, we got placement in high level media like the Wall Street Journal, and insurance trade press like Reactions magazine and AM Best-TV: taking us places we’d never been before and never thought we’d go.”  The partnership has not only heightened awareness of AIMU in the insurance industry, but with the public, making them more fully aware of the challenges facing the shipping industry and insuring marine risks.”

Triple-I Amplify is a PR consultancy built expressly for insurance organizations like AIMU, and Miklus says that partnership with Triple-I Amplify provides unique advantages his organization can’t get anywhere else. 

“It not only raises the visibility and credibility of AIMU, but also the importance and relevance of the marine insurance industry, in general,” he said.  “It’s never been more vital for a smaller niche product line to be connected to the rest of the insurance industry; our partnership with the Triple-I secures that connection.”

“This industry is much more complex than most people understand, but it’s our job to help translate subject matter into accessible information that’s easy to comprehend,” said Sean Kevelighan, president & CEO of Triple-I. “Working with our Amplify partners, we can quickly eliminate any learning curve and immediately provide marketing and communications services to meet their needs. We know this industry; we know how to communicate effectively; it’s what we do.”

The Triple-I Network

Triple-I serves approximately 70 percent of the U.S. property/casualty market (members) as well as industries that support the Triple-I mission such as trade associations, academia and think tanks (clients). We are the trusted source of unique, data-driven insights on insurance to inform and empower our clients. Another value Triple-I brings is access to distribution channels that tie clients to key industry stakeholders such as the carrier, broker and agency communities.

For 60 years, the Triple-I has been a trusted source of actionable, timely insight for consumers and professionals seeking insurance information.  We are the number one online source for insurance information. Our website, blog and social media channels offer a wealth of data-driven research, studies, whitepapers, videos, articles, infographics and other resources solely dedicated to explaining insurance and enhancing knowledge.

Amplify provides the following marketing and communication services to help elevate your brand:

If you’re interested in learning how Triple-I Amplify can help your non-profit or insurance trade association with marketing or communications services, please contact John Novaria, Managing Director, Amplify at johnn@iii.org.