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On Friday, June 29th, at 10AM, we're giving a 1-hour course in captive insurance. If you're a CPA, CFP or Texas insurance Agent, it's good for 1-hour of CE. You can sign up at this link.
If you'd like to add captive insurance to your professional offerings and would like to become an affiliate, please contact us at 832.330.4101. We own and operate the first Montana based series LLC named Aegis. We run it in conjunction with Aceterrus Insurance Resources One of the primary objections I hear from insurance agents about captives is that commercial policies are comprehensive. But, the devil is really in the details here -- or, more specifically, in the legal precedent interpreting the policies. For example, how comprehensive is a duty to defend? On the surface, the wording looks pretty iron clad. But there's a big split among the states as to what duties this actually encompasses: Does the duty to defend require an insurer to prosecute an insured’s counterclaims or fund the insured’s counterclaims? The First Circuit certified these questions to the Massachusetts Supreme Judicial Court. In Mount Vernon Fire Insurance Company v. Visionaid, Inc., issued on June 22, 2017, the Massachusetts Supreme Judicial Court answered them, concluding that the duty to defend – under either contract or the common law – encompasses no duty either to prosecute a counterclaim or to fund the prosecution of a counterclaim. ..... Some states view it as an unambiguous word, excluding representation for claims by the insured. Other jurisdictions view “defend” as ambiguous, requiring insurers to prosecute affirmative counterclaims in some instances, such as where the counterclaim would reduce liability on, or is factually intertwined with, the underlying claim. Massachusetts now firmly stands with those states following the literal and narrow reading of “defend.” This opinion also resolves any ambiguity about the scope of defense cost payments under Massachusetts law by clearly stating that the duty to defend and the duty to pay defense costs are co-extensive. If the company had a captive, they probably would have underwritten a legal liability policy, which would have indemnified them for this loss.
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If you'd like to add captive insurance to your professional offerings and would like to become an affiliate, please contact us at 832.330.4101. We own and operate the first Montana based series LLC named Aegis. We run it in conjunction with Aceterrus Insurance Resources For smaller companies, captives usually cover "stochastic" risks. These are infrequent events that are more expensive than the average claim. Employment lawsuits are a good example, as shown by several studies. U.S.-based small and medium sized businesses face an almost 12 percent chance that they it will be hit with an employment claim, with their chances much higher in certain states. A new study of employee charge trends by specialty insurer Hiscox found New Mexico, Washington, D.C., Nevada, Alabama and California as the top states for employee lawsuit risk in the U.S. Employers in these markets with at least 10 employees face a substantially higher risk of being sued by their employees when compared to the national average. According to the study, U.S.-based companies have at least an 11.7 percent chance of having an employment charge filed against them. Not only are these events more common then you'd like, they're also expensive. Hiscox claims data for small and mid-sized businesses (under 500 employees) indicate that one in five will face employment charges with an average cost to defend of $125,000, which includes expenses such as attorney’s fees and settlement costs. For those that did have insurance coverage, the average deductible cost was only $35,000, compared to the $90,000 balance paid out by their insurance company. The median judgment for cases that go to trial is approximately $200,000 for employment lawsuits adjudicated by the courts, while one-in-four cases resulted in a judgment of $500,000 or more, according to the study. These figures are confirmed for by other sources: A representative study of 446 closed claims reported by small- to medium-sized enterprises (SMEs) with fewer than 500 employees showed that 19% of employment charges resulted in defense and settlement costs averaging a total of $125,000. On average, those matters took 275 days to resolve. Due to the unpredictability of costs and fairly high claims history, this is a perfect coverage for a captive insurer. |
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