Despite the headlines, the Florida insurance market is not just about property. Lost amid all the press about homeowners' insurance is the fact that in Florida more than $1 billion in premium is placed in the Excess & Surplus (E&S) marketplace for mono-line general liability, excess liability, umbrella, and professional liability/E&O insurance.

In professional liability, general liability and umbrella business, the coverage classes are incredibly diverse and fluid. Changes often are prompted by trends showing adverse claims experience or judgments handed down by various jurisdictions. Because regulators require admitted carriers to obtain approval for changes in rates and Terms & Conditions, insurers often cannot react quickly to these emerging trends. E&S writers, not bound by those restrictions, can make the necessary policy and rate adjustments to make these risks more insurable.

In the general liability arena, the admitted marketplace has been quite aggressive over the past few years. By writing as much general liability business as it can, it is trying to make up for lower premium writings as it exits many property lines of business.

In addition, with the current economic conditions, many insureds are going out of business or reducing operations, which means even if the insurance company continues to write an insured, the exposures could be cut dramatically. However, even with this more aggressive stance in writing more general liability, agents often must turn to E&S providers to place business.

E&S has traditionally stepped in to write new exposures, unique risks and “one-of” type business. Because E&S is not required to file forms and rates, it can be responsive when a new exposure comes up. One recent example is the energy drink industry. Ten years ago, these beverages took up little space on grocers' shelves (Gatorade(R) aside). As they gained popularity, no one knew if they would have a positive or negative impact on people. E&S came out with a products liability policy that would provide the necessary coverage for this new exposure. Special events like parades, fairs, and golf tournaments including hole-in-one coverage are other areas that have historically gone to E&S.

Know Your Product

With all coverages, it is critical that the retail agent and the insured completely understand what they are buying. This may require even more due diligence in the constantly evolving lines of general and professional liability. Terms & Conditions vary dramatically from carrier to carrier, both in the admitted and non-admitted markets. To compensate for market conditions, carriers may put specific exclusions on their policies that can present a major problem for insureds.

For example, over the past 20 years there have been significant construction defect claims in residential homebuilding. For many years the admitted marketplace turned away from this class of business, and E&S stepped in. E&S carriers were able to modify terms and price correctly to make this an acceptable class of business.

However, in recent years, some admitted carriers have gotten back into the game on this class, offering policies with restrictive terms, such as excluding the work of subcontractors. General contractors generally do not do much of the work themselves, relying on subcontractors for those jobs. This begs the question — if subcontractor work is excluded, exactly what coverage is being provided?

Risks in a Changing World

A professional liability exposure exists any time a client provides services for a fee that pose a risk of causing a financial loss: An insurance agent who neglects to bind coverage for a client and a claim occurs; a lawyer who lets a statute lapse on a client's case; a web site designer who infringes on another's trademark, are all examples of services that result in a financial loss.

Much of the current growth in professional liability insurance is seen in the health-care and technology fields.

As baby boomers age and their need for health care increases, the potential of risk and the need for professional liability coverage at medical centers increases exponentially. Professionals in this field typically face bodily injury exposures, failure to diagnose, and sexual abuse/molestation exposures.

It is easy to visualize what can go wrong when a patient's MRI or X-ray is not viewed properly or when a doctor improperly touches a patient. But does the facility have adequate coverage when a patient's history of allergens is overlooked and a potentially harmful dye is injected into the body with the intent to illuminate problem areas in a MRI? While coverages have remained the same (bodily injury has always been a significant exposure), the risks are more prevalent now as the field continues to grow.

But just as serious as the exposures in the medical arena are the risks within the cyber world. New exposures and gaps in coverage are surfacing as we become a society evermore reliant on technology.
Cyber liability and the need for this unique coverage has been growing since the dot-com era. Companies are going paperless, more and more transactions are being conducted online, and the Internet is becoming the standard marketing platform for companies around the world.

Where will coverage come in to play when a company has its entire client database breached by a hacker? The traditional lines of insurance are not designed to cover this exposure, and many insureds will find themselves bare when these types of claims occur. The solution to this exposure comes from cyber and privacy coverage, or what is also known as data breach coverage. Many agents may be unaware that is coverage is readily available, very affordable, and a rapidly growing product.

Florida's Challenges

In Florida, certain lines of coverage can be heavily surcharged due to a risk's location. Health-care risks, law firms and insurance agents E&O policies all can experience a pricing increase when located within Miami-Dade and Broward counties. Some carriers will not write a risk at all if it is located in these areas.

These surcharges are generally a set percentage that is charged due to the applicant's specific location. Miami-Dade and Broward are viewed as high hazard due to the history of higher claim settlements and awards in these areas.

In the real estate field, Florida has seen some carriers pull back and others go full speed ahead. Several years ago, many admitted carriers decided they were going to stop writing vacant buildings, lessor's risk business, shopping centers, apartments, condominiums, and bars & taverns. In the E&S world, these things are considered vanilla risks and they can be written by any one of a number of quality carriers; capacity remains strong.

Miscellaneous E&O for real estate is extremely competitive throughout Florida due to the single-digit loss ratio this line typically generates. It is important that agents understand the various markets and products offered to obtain the best possible price and coverage available for their clients. Some of the markets that offer this line of coverage are Argo Pro, Markel, and Lloyd's of London. The combination of these markets has the ability to place coverage on risks ranging from a hazard consultant to applicants involved in alarm installation and monitoring services.

Having the ability to cross-sell products and properly protect all areas of exposure is key to growing a book of business in a soft market. A savvy agent will understand where the exposures exist and will convey the importance of specific coverages to his clients.

Cyber and privacy coverage can be cross-sold with almost any line of coverage. Businesses that maintain client information with personal and confidential data are at risk for a system breach. Large and small companies are targets for identity theft, hackers or viruses. Because some carriers offer coverage for fines, notification costs, business interruption, credit monitoring services and system repair in the event of a virus or hacker attack, agents can cross-sell this product to every client who comes through the door.

Being aware of the growing lines within the professional and general liability arenas and the opportunities they present will help agents better serve their clients, diversify their business, and grow their agencies in a soft market.

Michael Franzese, CPCU, CIC, CRM, ASLI, CPA is vice president/branch manager of Burns & Wilcox in Tampa. He may be contacted at 813-746-3698 or [email protected]. David Derigiotis is a professional lines underwriter at the Burns & Wilcox corporate headquarters in Farmington Hills, Mich. He may be contacted at 248-539-6041 or [email protected].