What if your Insurance Company is mad at your broker?


By Carl Santa Maria

If you are responsible for the risk management function in your company a major responsibility includes the development of insurance programs, managing your broker, deciding on what to buy, how much to pay, handling of claims, and satisfying insurance requirements of customers.

By definition a broker is different than an agent. While both can have contracts with insurance companies a broker represents the insured and an agent represents the insurance company.

A broker’s job is to help identify threats to client businesses, evaluate the risks and design programs to deal with these issues in the most effective and cost efficient ways. Often the best ideas don’t involve insurance but the elimination of coverages that may not be necessary and, instead, target on mitigating, reducing, or eliminating the threat entirely.

When insurance is needed, it is important to consider a number of variables. Do the terms of the policy adequately provide protection? Are the limits purchased appropriate? Is the cost of the insurance competitive? Is the insurance company of sufficient financial strength to deliver on its responsibilities? Does the insurance company have a reputation for handling claims fairly and efficiently? These are just a few.

The insurance company seeks to write policies for risks that are well managed, for companies that are well run, and which offer a reasonable opportunity to earn a profit. When there is a fair exchange of value that is a good thing. Evaluating this existence of this equilibrium is very difficult.

A top broker works to create a program model, vet it thoroughly with his client, and search for a product that most closely conforms to the model. This approach changes the paradigm of the process from supplier (insurance company) control to buyer (client control) and will produce better outcomes consistently over time. The client decides what he will pay and at what cost and the supplier will either agree or offer alternatives.

Disturbances in the market can occur. This is particularly true if the broker is not aggressively monitoring the marketplace or merely renewing programs automatically, often at the last minute. The market can change quickly.

Recently, a company which had been insured by the same broker and carrier for a number of years was concerned about unexpected premium increases. The business was aware that its competitors had far lower costs. After the renewal was issued (at the 11th hour), the company reached out to another advisor for a program review. Not surprisingly the program costs could be reduced significantly, without reduction in quality, by moving the program to another insurance company. The savings was significant even after incurring a cancellation penalty. The holding insurance company was very upset that it lost the business and felt that the new broker had treated it unfairly. So the insurance company was mad at the broker for responding to an unsolicited inquiry, developing a better option, and replacing a program that was uncompetitive. It seems that the responsibility resides with the former broker and to some extent, the underwriter who priced the renewal.

Similarly, an insurer was undecided about continuing to insure a segment of a company’s operation. The insurer alerted its intent to cancel the coverage mid-term.  The broker appealed and delivered risk improvement information. Never the less the carrier insisted that the broker try to find another market for the exposure. Another carrier was agreeable to picking up coverage on the condition that the entire account be moved to them. The new carrier provided a very competitive package, including the problematic exposure. At the last minute the holding carrier relented on the cancellation, but the difference in coverage and cost resulted in the replacement of the account with a new carrier. The new carrier was only brought in at the insistence of the holding insurance company. The insurance carrier was mad at the broker for the change.

The overriding principle is responsibility to the client. If the broker hadn’t acted in the best interest of his client he would have been derelict in his duty. If the carriers had not forced the issues they would not have lost the business.

Business is best conducted as if the process and result could be shown on the 6 o’clock news. Would the insurance company or broker be most uncomfortable with those optics?

Maybe it’s okay for your insurance company to be mad at your broker!


Doing Business Abroad? Don’t Assume Your Insurance Travels With You

By Craig Santa Maria

It’s easier than ever to conduct business internationally, introducing your products and services to potentially lucrative new markets. With those opportunities come a lot of the same risks you face at home: quality control, supply chain reliability, contract disputes. But in foreign lands you might face different risks and other complicating factors such as political instability or unfamiliar cultural, legal, or economic systems.


Are You Protected?

You’ve secured all of the right types of insurance to protect you from the various liability risks you might face in your home country. But what if the same things occur while doing business on foreign soil? Do you know if you are covered?

Here are a couple examples of situations that could happen to you or your employees when far from home:

  • A firm’s head of sales was abducted in Venezuela while driving on a rural road between customer visits. The captors demanded from his employer a $500,000 ransom for his return. Local authorities couldn’t help, so the company had no choice but to pay. The employee was released unharmed, but the company was out the $500,000 because its domestic general liability policy did not cover events that occurred outside of the U.S.
  • An expatriate in Poland strikes and killed a local pedestrian and was jailed. After pleading guilty and admitting liability, the judge ordered him to pay the widow $2 million. The expatriate carried no international property and liability insurance, and had mistakenly assumed his employer was providing that protection. When he couldn’t pay the damage award and criminal penalties, the employer was named and attached in the lawsuit. In order to salvage a $30 million investment in Poland, the employer had to pay.

What You Need

In both of these cases, the employers should have obtained separate foreign liability and travel and accident insurance for their employees working or traveling in foreign countries. If you are or will be traveling internationally, you have two primary options, depending on how much you travel:

  • Trip-specific policies cover just those traveling during the specified period they are outside the U.S. Coverage and rates are determined based on criteria such as where they are traveling, for how long, types of employees traveling, and their specific activities.
  • Global general liability is a permanent policy that covers all employees anywhere throughout the term of the policy. This can be a more cost-effective option for companies that regularly travel and do business in foreign lands.

These policies are widely available and will cover common claims, as well as some less common, such as repatriation of an employee’s body in the event of death in a foreign land. Your insurer will also manage the entire process for you, such as hiring security experts in a hostage or threat situation or negotiating with local legal officials or claimants. This is an invaluable service when you are alone far from home.

Whether you are doing business in the U.S., overseas, or both, you should never assume you are covered. Spend the time to review your risks and insurance needs with an expert. A high quality broker will help you secure a comprehensive protection package, where ever you go and whatever your needs, and will be on your side when you need him/her most.




Craig Santa Maria is President and COO of Santa Maria & Company (SMC), a risk management consultancy and commercial insurance brokerage in the San Francisco Bay area with deep expertise helping companies protect what is most important to them: their assets, their employees, and their futures. Contact SMC at 925-956-7600 or online at www.smcrisk.com.



Experts in Risk Management and Providing Peace of Mind

ERISA Bond vs. Fiduciary Liability: You Need to Know the Difference

By Craig Santa Maria

If you provide a health or retirement plan for your employees, they expect it to be there when they need it. And if the people managing the plan act outside of the law, resulting in plan losses, they can be held personally liable to the plan members. If you are a trustee of your company’s benefits plan, do you know if you and your company are adequately protected?

It’s the Lawnest egg

In 1974, Congress enacted the Employee Retirement Income Security Act (ERISA) to protect plan participants and beneficiaries from fraud, theft or mismanagement by plan managers, or fiduciaries. Basically, ERISA established rules governing how voluntarily-created, private-sector retirement and health plans must be managed and it requires those companies to provide protection to participants in the form of an ERISA Fidelity Bond equal to 10% of the plan value.

For additional information about ERISA Fidelity Bonds, visit the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) website.

Know the difference

ERISA bonds protect plan participants, but many business owners wrongly believe ERISA bonds also protect fiduciaries, those who handle plan assets, from liability against losses arising from breaches of fiduciary responsibilities. That is not true, and it can leave you and your company exposed to costly judgments.

For example:

  • A group of employees sued retirement plan trustees, claiming a new outside plan administrator improperly delayed transferring fund balances, resulting in lost investment income. They were awarded more than $1 million and defense costs totaled $250,000.
  • A manufacturer failed to submit the required forms for an employee’s life insurance policy, but continued to deduct the premium from the employee’s paycheck. When the employee died, the life insurer denied the claim. The employee’s heirs sued the plan fiduciary and recovered $250,000.

Fortunately, in both of these cases the companies had protected their plan trustees with fiduciary liability insurance, which provided legal defense and covered the legal settlements.

3 Critical Considerations

Every employer should carefully answer these three questions to be sure you have the proper protections in place for your employees, your plan fiduciaries, and your company:

  1. Do you need an ERISA Fidelity Bond? If you offer most types of employee benefit plans, you most likely are required to purchase an ERISA Fidelity Bond. There are some exemptions; check the EBSA website for detailed ERISA information.
  1. Is your ERISA Fidelity Bond sufficient? The law requires that the bond cover at least 10% of the plan value in the previous year for each fiduciary, so if your company has multiple people who have fiduciary responsibilities, each must be bonded for at least 10%. The bond must be at least $1,000, but no more than $500,000, for each bonded plan official. Each person is responsible for his own bonding, so if the bond amount is insufficient, that person can be fined by the EBSA.
  1. Do you also need fiduciary liability insurance? Remember that the ERISA Fidelity Bond does not protect the fiduciary from liability resulting from breaches of fiduciary responsibility. Claims against the fiduciary put his personal assets at stake. Even if you have a Directors and Officers (D&O) liability policy, most do not cover fiduciary liability.

If these questions raise any doubt about whether you or your company are adequately protected from claims related to ERISA, speak with a high-quality, experienced broker to ensure your business and personal assets are covered.




Craig Santa Maria is President and COO of Santa Maria & Company (SMC), a risk management consultancy and commercial insurance brokerage in the San Francisco Bay area with deep expertise helping companies protect what is most important to them: their assets, their employees, and their futures. Contact SMC at 925-956-7600 or online at www.smcrisk.com.


Experts in Risk Management and Providing Peace of Mind

Worried About Being Sued by Your Employees? You Should Be!


By Carl Santa Maria, CPCU

We’ve all heard or seen it around the office. Whether it’s an off-color joke around the water cooler, improper advances by a supervisor, or hiring decisions excluding certain ages or genders, there are many local, state and federal laws that enforce the fair treatment of present, past and potential employees, and even 3rd party contractors.

As an employer, you bear the significant and growing risk of claims for various forms of discrimination, harassment, and wrongful termination. These claims are either made through private attorneys or government agencies, such as the federal Equal Employment Opportunity Commission (EEOC), for investigation and potential action. Whether taken to trial or settled out of court, companies can incur large costs from an employee lawsuit.

A minefield for employers

One of the higher profile cases today involves Texas Roadhouse, a chain of steakhouse restaurants, which was sued by the Equal Employment Opportunity Commission, for what the EEOC claims is systemic age discrimination. In this case, not a single complaint had been filed with the EEOC to prompt the charges. Texas Roadhouse is fighting the charge, spending millions on legal fees to date, with the trial still at least a year away.

In another case, a woman resigned her position after three years with a company and sued four managers/directors for sexual harassment and gender discrimination. A company investigation uncovered clear evidence of the misconduct and dismissed three of the four people involved. As a result, the defendants were personally liable for attorney fees and a settlement totaling nearly $300,000.

With loads of information available online and several high-profile cases in the news, employees today are much more aware of their rights. Even if you treat people fairly and within the law, others that you hire, contract or otherwise work with might not. And if they create an uncomfortable or hostile work environment for those working for you, it’s still your business that gets sued.

What can you do?

In recognition of the growing risk, more and more businesses are providing specific training to managers and employees in an attempt to create a more fair and inclusive culture. However, it is estimated that 60 percent of all companies will be sued over employment-related issues.

Companies should protect themselves with Employment Practices Liability Insurance (EPLI), which covers these specific types of claims. It is inexpensive, easy to obtain, and it can be purchased as a stand-alone policy or as part of a business and management liability package, which can include D&O, fiduciary, crime and cyber coverages. Nevertheless, it is estimated that in 2015 less than half of all employers carried EPLI coverage, meaning most companies are bearing this rapidly growing risk themselves.

You are vulnerable from your first contact with a potential employee through the exit interview, so it is wise to speak with a corporate insurance broker as soon as you decide to hire employees. A knowledgeable broker can help you understand your exposure and provide risk management advice and EPLI coverage as part of a comprehensive risk mitigation solution.

Carl Santa Maria is Chairman and CEO of Santa Maria & Company (SMC), a risk management consultancy and commercial insurance brokerage in the San Francisco Bay area with deep expertise helping companies protect what is most important to them: their assets, their employees, and their futures. Contact SMC at 925-956-7600 or online at www.smcrisk.com.


Experts in Risk Management and Providing Peace of Mind