Why James River Insurance Dumped Uber Account

Interesting article published today out of the Insurance Journal by Suzanne Barlyn about insuring Uber.  Not surprisingly, carriers continue to be perplexed with gig-economy exposures.

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A Bermuda-based insurer that recently severed ties with an Uber Technologies Inc. affiliate said on Thursday the risk of providing driver ride-hailing coverage had become too great and that it had mispriced policies during its initial years on the account.

James River Group Holdings Ltd said on Oct. 8 it would cut ties with a unit of Uber, its largest client, and cancel all related policies as of Dec. 31 this year.

Florida was an “outsized contributor” to the insurer’s Uber problems, especially in 2016, given a large number of uninsured and underinsured motorists, said James River Chief Financial Officer Sarah Doran in a call on Thursday with analysts to discuss its third-quarter financial results.

The insurer cut back on its exposure to Uber’s Florida market in 2017, Doran said.

James River boosted its cash reserves by a total of $57 million during the 2019 third quarter. Of that, $50 million was for 2016 and 2017 losses stemming from its Uber account, the insurer said.

James River late Wednesday said it withdrew $1.2 billion in funds held as collateral in a trust created by an Uber affiliate to cover current and future claims.

Insurance is one of the largest expenses for ride-share companies, an issue that many analysts cite as a risk for the ride-share industry’s profitability.

“In Uber, we wrote a new type of risk that originally seemed to be highly profitable,” J. Adam Abram, James River executive chairman and chief executive officer, said in the Thursday call.

But the nature of that risk changed as Uber rapidly expanded into new regions, added tens of thousands of drivers, and moved into other business lines, Abram said. Uber’s businesses now include food delivery and freight.

“Candidly, in some years, we mispriced the risk,” Abram said.

James River’s poor results for its Uber account in 2016 and 2017 spurred it to negotiate a “substantial pricing increase” for 2018 and charge similar rates for 2019, Abram said.

James River bought reinsurance for a third of the Uber account in 2019, but does not expect profits on the account for 2018 and 2019 to offset earlier losses, Abram said.

A new California law designed to limit the use of “gig” workers ultimately swayed James River to cancel the Uber account, despite coverage now being “well-priced,” Abram said.

The law, which goes into effect on Jan. 1, 2020, spells out when companies must treat “gig economy” contract workers, such as ride-hailing drivers, as employees. “We believe (it) will adversely alter the claims profile for ride-share companies,” Abram said.

James River expects to process about 18,500 Uber-related claims while winding down the account, Abram said.

PEOs, Hamburgers, and Joint Employment

Happy Monday!  Re-publishing this fantastic update from Mike Miller regarding joint employment.

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Who would have thought that PEOs would have anything in common with McDonald’s, Hamburger University, and joint employment? Well, earlier this month a three judge panel of the United States Court of Appeals for the 9th Circuit issued a decision interpreting California law regarding a joint employment issue that PEOs will be able to utilize with regard to the bourgeoning number of wage claim cases in California and elsewhere that have been filed against PEOs. In this California case, the Plaintiffs, among other allegations, alleged that they were denied proper overtime premiums, meal and rest breaks, and other benefits in violation of the California Labor Code. Most significantly, the Plaintiffs also alleged that McDonald’s and its franchisee are joint employers and that McDonald’s is, therefore, liable for the wage violations. The district court had held that McDonald’s is not a joint employer of the franchisee’s employees and was not liable for these wage claims and had dismissed these claims in a summary judgment action. On appeal, the 9th Circuit affirmed the lower court ruling.

Similar to how PEOs operate, the franchisee, and not McDonald’s, selects, interviews, hires, trains, supervises, disciplines and fires its employees. The franchisee also sets the employees’ wages and their work schedules and monitors their time entries. There was no evidence that McDonald’s performed any of these functions. Interestingly, evidence in the record, if viewed in a manner most favorable to the Plaintiffs (as must be done in a summary judgment proceeding), would have permitted a finding that McDonald’s could have prevented some of the alleged wage-and-hour violations but did not do so, and yet this did not impact the Court in its decision.

Under the franchise agreement, McDonald’s required the franchisee to use its Point of Sale (“POS”) and In-Store Processor (“ISP”) computer systems every day. Managers of the franchisee took various courses at McDonald’s Hamburger University and then trained other employees on topics such as meal and rest break policies. The franchisee also voluntarily used the McDonald’s computer systems for scheduling, time keeping, and determining regular and overtime pay through applications that came with the IPS software.

Under the applicable California Wage Order, an employer is defined as one “who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.” In construing this Wage Order, the California Supreme Court has set forth three alternative definitions as to what it means to “employ” someone. These three alternative definitions, any one of which can establish an entity as an employer, are as follows:

(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law relationship.

With regard to whether McDonald’s exercises “control over the wages, hours or working conditions” of the employees of the franchisee, the 9th Circuit pointed out that McDonald’s does not “retain ‘a general right of control’ over ‘day-to-day aspects’ of work at the franchises.” The Court held that McDonald’s involvement with the workers did not represent control over wages, hours, or working conditions.

With regard to the “suffer or permit to work” definition of employer, here too McDonald’s did not meet the test for being an employer. In one of the more significant aspects for how this case may impact PEOs, the Court stated:

The question under California law is whether McDonald’s is one of Plaintiffs’ employers, not whether McDonald’s caused Plaintiffs’ employer to violate wage-and-hour laws by giving the employer bad tools or bad advice.

I have written previously about the importance of not referring to the manner in which PEOs do business in California as being the “leasing of employees.” The 9th Circuit gave credence to this position when it referred to a staffing agency supplying employees to another entity and having such a manner of doing business fit under the “suffer or permit to work” standard for being an employer. Clauses found in PEO Service Agreements stemming from the early days of the industry such as the PEO shall have the power to “withhold employees’ services from the client,” not only is not an accurate representation of the realities of the PEO/client relationship in 2019, but also is a worrisome clause. As the 9th Circuit pointed out in this decision, the determination of whether an entity is an employer under the “suffer or permit to work” standard turns in part on whether an entity has “the power to prevent plaintiffs from working.” Consequently, in California, a PEO’s not retaining or assuming “a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees” is crucial in avoiding the determination of employer status under California law.

Lastly, with regard to the third part of the test, “to engage, thereby creating a common law relationship,” the Court concluded that according to California common law “[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” The Court stated that while perhaps arguably there was evidence that McDonald’s was aware that its franchisee was violating California’s wage-and-hour laws with respect to the franchisees employees, there was “no evidence” that McDonald’s had the requisite level of control over the Plaintiffs’ employment to establish a joint employer relationship.

While the Court went on to dispose of other peripheral issues, the Court’s discussion did not change the fact that McDonald’s did not have sufficient control to make it an employer. I have talked for many years about making sure your service agreements are 21st century service agreements and this case drives home the importance of updating service agreements.

Latest NAPEO White Paper Shows ROI Of Using a PEO is 27 Percent

See below from our friends at NAPEO.  Solid results!!

AUSTIN, TexasSept. 17, 2019 /PRNewswire/ — The average client of a professional employer organization (PEO) can expect a return on investment – based on cost savings alone – of 27.2 percent, according to a new study released today by the National Association of Professional Employer Organizations (NAPEO) at its annual conference in Austin.

Conducted by noted economists Laurie Bassi and Dan McMurrer of McBassi and Associates, the study is the seventh in a series. Previous research by Bassi and McMurrer examined the benefits of using a PEO, finding increased profitability and growth, higher employee satisfaction, and lower employee turnover for companies that use a PEO.

The new report focused solely on costs and calculated savings for PEO clients in five HR-related areas:

  • HR personnel costs
  • Health benefits
  • Workers’ compensation
  • Unemployment insurance (UI)
  • Other external expenditures in areas related directly to HR services (payroll, benefits, etc.)

The average cost savings from using a PEO is $1,775 per year per employee, according to the study, which also reinforced the findings of earlier research, again showing notably lower employee turnover, higher rates of both employee and revenue growth, and enhanced employee benefit offerings.

“We have known for some time now that using a PEO is good for a company in a variety of ways, and we now have a compelling and impressive number on the actual ROI of using a PEO,” said NAPEO President & CEO Pat Cleary. “When you put this new data on costs savings and ROI together with the data we already had on business growth, turnover, survival and employee satisfaction, it’s clear that there really is no better value proposition than PEOs in the HR space.”

PEOs provide HR, payroll, benefits, workers’ comp, and regulatory compliance assistance to small and mid-sized companies. By providing these services, PEOs help businesses improve productivity, increase profitability, and focus on their core mission. Through PEOs, the employees of small businesses gain access to employee benefits such as 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits typically provided by large companies. A copy of the full study is available here.

About NAPEO
The National Association of Professional Employer Organizations (NAPEO) is The Voice of the PEO IndustryTM. NAPEO has some 250 PEO members that provide payroll, benefits, and other HR services to between 175,000 businesses employing 3.7 million people. An additional 200 companies that provide services to PEOs are associate members of NAPEO. For more information, please visit www.napeo.org 

SOURCE National Association of Professional Employer Organizations (NAPEO)

Report: California Workers’ Comp Medical Payment Trends Fell in 2018

NAPEO is right around the corner!  While in Austin, there’s certain to be quite a bit of discussion around claims trends throughout the country.  That said, I found the some interesting news out of California from the Insurance Journal regarding the continued decline of medical payments, number of claims and paid medical transactions.

See you in Austin!

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Medical payments in California’s workers’ compensation system continued to decline in 2018 as the medical payments per claim decreased, according to a report from the Workers’ Compensation Insurance Rating Bureau of California.

The WCIRB released its California Workers’ Compensation Aggregate Medical Payment Trends report comparing medical payment information from 2016 to 2018.

The report also includes an analysis on utilization and cost of opioid prescriptions over time and by region.

Other findings in the report include:

  • The medical payments for pharmaceuticals and to pharmaceutical providers declined sharply.
  • Physical therapy services experienced the largest increase in the share of medical payments driven by increases in both service utilization and paid per service.
  • Physical medicine and rehabilitation procedures continued to grow the fastest within all physician services and use of anticonvulsants increased more significantly than any other therapeutic groups.
  • Opioid prescriptions and costs declined significantly, mostly driven by fewer claims involving opioid prescriptions. In addition, average doses of opioids prescribed dropped sharply as did the concurrent use of opioids and sedatives.
  • Fresno, Bakersfield and Tulare areas had the highest share of claims involving opioid prescriptions, while the Silicon Valley area and the Los Angeles Basin had the lowest share.

Another WCIRB report issued this week showed a new drug formulary put into effect by the California Division of Workers’ Compensation over a year ago may be working as intended.

AM Best Assigns Credit Rating to Clear Spring Property and Casualty

Congrats to Clear Spring and the recent AM Best rating!

Press Release – AUGUST 14, 2019

AM Best Assigns Credit Ratings to Clear Spring P&C Co.; Downgrades Ratings of Lackawanna Casualty Co. and Other Subsidiaries


CONTACTS:
Jeffrey Stary
Financial Analyst
+1 908 439 2200, ext. 5689
jeffrey.stary@ambest.com

Robert Raber
Associate Director
+1 908 439 2200, ext. 5696
robert.raber@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com


FOR IMMEDIATE RELEASE

OLDWICK – AUGUST 14, 2019
AM Best has assigned a Financial Strength Rating (FSR) of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” to Clear Spring Property and Casualty Company (Clear Spring). Concurrently, AM Best has removed from under review with negative implications and downgraded the FSR to A- (Excellent) from A (Excellent) and the Long-Term ICRs to “a-” from “a” of Lackawanna Casualty Company and its subsidiaries, Lackawanna American Insurance Company and Lackawanna National Insurance Company. The outlook assigned to these Credit Ratings (ratings) is stable. Clear Spring is domiciled in Dallas, TX, while the three Lackawanna companies are domiciled in Wilkes-Barre, PA. The companies are collectively referred to as Lackawanna Insurance Group (Lackawanna).

The ratings reflect Lackawanna’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The ratings assigned to Clear Spring reflect the company’s role as a member of the group. Factors supporting this relationship include common ultimate ownership and management. Explicit support is provided through Clear Spring’s participation in the inter-company pooling agreement.

The rating downgrades reflect a revision in AM Best’s assessment of the group’s operating performance to adequate from strong. This rating action is in response to less favorable comparisons with peer companies assessed as having strong operating performances over the most recent five-year period in metrics such as loss and loss adjustment expense ratio and operating ratio. This places the group more in line with companies in the composite assessed as having adequate operating performances. The assessment also takes into consideration the execution risk associated with the blending of the distinct lines of business and geographic delineation of the member companies, which may affect prospective operating performance.

Negative rating actions would occur with a decline in the group’s risk-adjusted capitalization, operating performance well outside expected ranges, or business profile modifications that fail to gain traction.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’sRecent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

New House Bill Would Allow Insurance For Cannabis Sector

A bipartisan bill that would ensure legal marijuana and related businesses have access to insurance coverage has been introduced in the U.S. House of Representatives, just days after the bill was introduced in the Senate.

Rep. Nydia Velázquez, D-N.Y., and Rep. Steve Stivers, R-Ohio, have introduced H.R. 4074, the Clarifying Law Around Insurance Marijuana, or CLAIM, Act, which would help businesses operating in the rapidly growing cannabis sector obtain insurance products, according to a statement issued by the office of Rep. Velázquez on Monday.

“Due to discrepancies in federal and state law, insurers are understandably reluctant to provide coverage to legitimate, cannabis-based businesses,” Rep. Velázquez said in the statement. “Without casualty, property and title insurance coverage, the growth of this industry will be impeded if not blocked entirely.”

The CLAIM Act establishes a federal “safe harbor” to prevent federal criminal prosecution of insurers that transact with consumers and would prevent civil liability for agents, brokers and insurers that do business with the cannabis sector.

In addition to the insurance provisions, the House bill would require a Government Accountability Office study of hurdles facing women and minority entrepreneurs interested in entering the cannabis sector.

“For far too long, minority communities bore the brunt of our country’s backward marijuana policies,” Rep. Velázquez said. “As we normalize these products and this becomes a business, we must ensure minorities, women and other disadvantaged groups are able to enter this market and profit from this burgeoning industry.”

The CLAIM Act has been referred to the House Financial Services Committee.

https://www.businessinsurance.com/article/20190729/NEWS06/912329852/House-introduces-bill-to-allow-insurance-for-cannabis-sector

 

Beacon Aviation To Provide Workers’ Compensation Program Via Appulate

Excited about the partnership between our friends at Beacon Aviation and Appulate!

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Beacon Aviation To Provide Workers’ Compensation Program Via Appulate

MGA To Connect Program To Appulate Agent Network

Sarasota, FL – July 22, 2019 Beacon Aviation Insurance Services, Inc. is excited to announce that it will offer its Workers Compensation program via Appulate.

“Making the submission process easy for agents is a high priority” said John Cunningham, President at Beacon Aviation Insurance Services. “With Appulate’s automation, we are able to use technology to enhance the user experience and make it easier for agents to do business with us,” commented Cunningham.

Appulate offers independent insurance agents technology so that they can bridge data directly from their management systems to make the submission process to key programs easier. By working with Appulate, Beacon will bring its Workers’ Compensation program, that focuses on risks in the aviation industry to the nearly 30,000 independent agencies using Appulate’s platform nationwide.

“Agents using Appulate want to be able to more easily submit to key program administrators,” said Jeff Harris, President at Appulate, Inc. “Beacon has a unique program that serves the Aviation industry and we are pleased to partner with them on their offering” stated Harris.

To access this program, an agent simply needs to have an Appulate account. This is offered free of charge and can be setup within 5 minutes. Once the agent has an account, they will be able to bridge ACORD and other data from their management system to complete the Beacon Aviation online application.

About Beacon Aviation Insurance Services

Established in 2003, Beacon Aviation Insurance Services, Inc. (an Amynta Group Company) is a Workers’ Compensation Program Manager specializing in workers’ compensation insurance coverage for the general aviation industry. Based in Sarasota, Florida, we work with a nationwide network of partner agents and brokers to offer coverage in all non-monopolistic states except Alaska. Beacon “holds the pen” for AmTrust Insurance Underwriters.

Our experience and expertise in providing workers’ compensation coverage and risk-management solutions extends to a full range of general aviation businesses: Fixed Base Operators (FBOs), Maintenance Repair and Overhaul operations (MROs), Municipal Airports, Airline Services, Aviation Manufacturers and Suppliers, Charter Operators, Flight Schools, and Corporate/Industrial Aid.

We pride ourselves on being responsive to each client’s individual needs. That personal touch, combined with our extensive industry expertise, is why so many agents, brokers and policyholders choose to work with Beacon.

Visit Beacon Aviation at www.beaconais.com

About Appulate, Inc.

The digital age is rapidly changing the way agents quote business with their carriers. Long gone is the fax machine – replaced by mobility and algorithms. Today, agents (and the insureds they represent) demand instant gratification. If business can’t be conducted quickly, customers go elsewhere.

Appulate powers the digital transformation of insurance by bringing together the insured, agent, wholesale broker, MGA and carrier on a single “point of sale” platform designed to expedite the rate, quote and even bind process for property and casualty risks.

Carriers and MGAs use Appulate to not only digitize their products and programs, but further expose them to the more than 30,000 agencies using Appulate today.

Appulate is where Agents, MGAs & Carriers do business digitally!

Visit Appulate at www.Appulate.com.

Check out our upcoming webinar:

 

Beacon Aviation Workers’ Compensation Powered by Appulate

 

Scooter Riders Advised to Avoid Insurance Pothole

More on the scooter fad from Insurance Journal…specifically, what’s not typically covered when a rider causes an accident.

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We’ve all seen reports about head injuries, traffic accidents and even deaths that electric scooter riders have suffered as the popular new mobility option has pushed onto the streets in more than 100 cities worldwide.

Despite the dangers, riders are exposing themselves to liability and are most likely not insured for the damages they may cause.

A rider’s personal health insurance — if he or she has it — could help defray the cost of their own medical bills in case of an accident.

But it’s another matter entirely when a scooter rider hits and injures a pedestrian, damages someone’s property or causes a car accident. The rider may be held responsible, and most insurance policies will not cover those expenses.

“Under the standard insurance policy, there’s most likely a pretty significant gap in coverage,” said Lucian McMahon, senior research specialist for the Insurance Information Institute. “Even if the odds are low, it doesn’t mean that something bad might not happen, and owing people money or compensation for injuries that you caused them can get very, very expensive, perhaps even ruinously so.”

The two largest scooter companies in the U.S. — Bird and Lime — generally place the responsibility for accidents on riders by listing in their rental agreements that riders relieve the companies of liability. Customers must agree to those terms to ride.

Bird says riders are fully insured for anything that might happen as a result of a faulty Bird scooter. Lime says its insurance policy offers at least $1 million in liability coverage for each covered claim, but there’s no way to know whether a claim is covered until an investigation is done, and each claim is unique.

Despite the scooter companies’ liability insurance, experts say responsibility for damages is likely to fall on the riders’ shoulders, because of the terms and conditions users agree to when they download the app.

“These are such new modes of transportation that the courts have not weighed in on any of this,” said Bryant Greening, attorney and co-founder of LegalRideshare, which represents clients injured in ride-hailing or shared scooter accidents. “Generally speaking, these waivers of liability hold up in court, but we’re going to have to see what happens as more and more of these injury cases are brought and are litigated.”

Electric scooter riders might think their auto insurance would kick in to cover an electric scooter accident, but automobile insurance generally doesn’t cover vehicles with less than four wheels. And homeowner’s or renter’s insurance may cover an accident that occurs on a traditional bicycle, but it does not cover motorized bike or scooter trips.

“Once you motorized that scooter or that bike, then the equation changes,” said Bob Passmore, assistant vice president at the American Property Casualty Insurance Association. “More likely than not, most people’s home liability or their renters’ liability probably aren’t going to provide coverage for that.”

So what can scooter riders do to protect themselves? Experts suggest calling an insurance agent to ask how to get coverage. If you have a homeowner’s or renter’s insurance policy, you may be able to add an `”umbrella policy,” which can cover more scenarios and include higher limits for coverage than typical homeowner’s or renter’s policies.

For example, State Farm offers a personal liability umbrella policy that the company said may cover an electric scooter driver’s liability for damages they cause, but all claims are investigated based on their own merits. Allstate offers an umbrella policy to customers that have a qualifying auto or property insurance policy. The umbrella policy doesn’t specifically state that it covers electric scooters in promotional materials, but there is a “recreational vehicles” category.

Nationwide’s policies do not provide liability coverage for losses arising out of the use of shared electric scooters. The company says it supports shared mobility options and believes the devices should be governed by common-sense regulation that emphasizes safety and protects all road users. “When that is in place, insurance covering the operation of a shared mobility device should be provided directly to the consumer by the device provider,” Nationwide said in a statement.

“Read your policy and talk to your insurance agent,” Passmore said. “There’s certainly some issues that need to be worked out.”

Voom, an Israeli company which offers on-demand insurance for drone operators in the U.S., plans to roll out per-ride insurance that covers electric scooters and is targeting riders and providers as potential customers.

“My partner being a scooter owner, and me being a scooter sharing rider, we kind of realized, who is insuring those things?” said Ori Blumenthal, co-founder and CTO of Voom. “If you go to all the scooter sharing companies and you look at the terms and conditions, you actually take responsibility and liability for everything that may happen.”

Riders in the U.S. took 38.5 million trips on shared scooters last year, according to the National Association of City Transportation Officials. Within a few days of Chicago’s recent electric scooters launch, LegalRideshare got calls from injured riders asking for help.

If a rider causes a car crash, he or she could be badly injured and still be held financially responsible for damages to the car, Greening said. If the rider injures a pedestrian, the rider could be responsible for the pedestrian’s medical bills, lost wages and pain and suffering. Many shared electric scooter riders are riding scooters for the first time, increasing the chance of injury, Greening said.

“They don’t think to themselves, `boy if something goes wrong here I might be on the hook for thousands and thousands of dollars,”’ Greening said.