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Anne Freedman

Anne Freedman is managing editor of Risk & Insurance. She can be reached at

World Cup

Insurable Values

Money apparently can't buy success at this year's World Cup.
By: | June 23, 2014 • 1 min read
World Cup Values

Germany, Spain, England and Brazil have the four most expensive teams in terms of insurable value, according to research by Lloyd’s.

In fact, the average insurable value of one player for England is more than the entire Costa Rican team — a very ironic factoid since twice-defeated and eliminated England faced off on June 24 against Costa Rica, which has already scored two major upsets (against Italy and Uruguay). The England vs. Costa Rica match ended i n a 0-0 tie.


Of course, expensive insurable value didn’t work out too well for last year’s champions, Spain, either, which is heading home in defeat, although it managed to win 3-0 against Australia in its final game.

According to Lloyd’s research in conjunction with the Centre for Economics and Business Research (CEBR), the total collective value of all teams is estimated at $10.5 billion.

CEBR used players’ wages and endorsement incomes, as well as other indicators to construct an economic model that estimates players’ incomes until retirement. Those projections formed the basis for assessing insurable values by player age, playing position and nationality.

Here is each team’s insurable value:

Anne Freedman is managing editor of Risk & Insurance. She can be reached at
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The Law

Legal Spotlight: June 2014

A look at the latest decisions affecting the industry,
By: | June 2, 2014 • 5 min read
You Be the Judge

Hockey Players Seek Damages

From 1970 through 2009, 22 former National Hockey League players skated and checked their way through the fast and sometimes bloody sport, only years later to find themselves suffering from the effects of concussions and head trauma.

As with football players, the NHL players claim the head trauma caused depression, memory loss, dementia, and degenerative brain disease, among other injuries, and they argue the NHL fostered a culture of violence that put them at risk.


With two class-action lawsuits pending against the NHL, seeking more than $5 million in damages, TIG Insurance Co. is seeking a judicial determination as to whether it must defend or indemnify the league and/or its board of governors (NHL BG).

TIG also filed suit against a dozen other insurers that also issued primary, umbrella and excess liability policies to the NHL at various times, seeking a ruling on whether those insurers must defend or indemnify the NHL or NHL BG.

TIG issued a primary insurance policy to the NHL for the period covering Nov. 30, 1989 through Jan. 1, 1991; an excess liability insurance in excess of $1 million from Nov. 30, 1989 through Jan. 1, 1991; and another excess liability policy for more than $121 million from Jan. 1, 1997 through Jan. 1, 2001.

Ottawa Senators v Boston BruinsIn addition to denying it insured the board of governors, TIG argued its policies “do not provide coverage for intentional wrongdoing or bodily injury expected or intended by the NHL and/or NHL BG.” It also argued it did not provide coverage “for injuries in events not ‘sponsored’ by the NHL;” that the careers of the players/plaintiffs “began following the expiration” of TIG’s policies; and that it did not receive proper notice.

Experts expect the dispute to center on whether the violence and fighting during games was encouraged by the league. If that is the case, the policy exclusions that bar intended or expected injuries may let the insurers off the hook. The timeframe of when the injuries occurred may also impact when — or if —coverage was triggered.

Summary: TIG Insurance Co. wants to know if it must defend or indemnify the NHL or its board of governors against class-action allegations filed by former players who suffered head trauma.

Takeaway: If the violence was encouraged by the league, the policy’s intentional wrongdoing exclusion may apply.

Multiple Claims Linked Together

Nearly 650 investors who participated in privately funded mortgage loans arranged by Berman Mortgage Corp. (BMC) joined a 2009 class-action lawsuit filed against BMC’s principal officers after the company was placed in receivership by the State of Florida.

The complaint sought damages in excess of $168 million, alleging that BMC failed to adequately engage in due diligence or appropriate accounting standards for 41 projects.

Axis Surplus Insurance Co. sought — and won — a summary dismissal of the case in the Circuit Court for Miami-Dade County, arguing that the claim was filed outside of the coverage period for the claims-made professional liability policy.

The circuit court ruled the claim did not fall within a “Reported Wrongful Acts” provision, which allowed for coverage even if the claim was made following the policy period as long as the insured had previously given the insurer notice of a potential liability.


The U.S. 3rd District Court of Appeal for the State of Florida disagreed, and reversed that decision.

The appeals court ruled a different provision of the policy should apply — the “Multiple Claims” provision — and linked the class-action lawsuit to a prior lawsuit filed in 2007 by Robert Revitz, a private investor who sued BMC alleging the company failed to perform proper due diligence and used negligent accounting practices.

The lower court had ruled the two claims were not related and coverage was not triggered because Revitz “did not provide ‘a description of the potential damages’ that included the class action claim,” as required by the Reported Wrongful Acts provision. The class-action lawsuit sought substantially higher damages than Revitz.

The appeals court, however, said the Multiple Claims provision should govern the case because the claims are “related by common facts, circumstances, transactions, events and/or decisions” and thus, should be treated as one wrongful act.

“The fact that individual class members may have been involved in separate mortgage transactions does not negate the fact that each claim is based on BMC’s negligence in this regard,” the court ruled. It returned the case to the lower court for further proceedings on certification of the class as well as the allegations in the class-action lawsuit.

Summary: Axis may have to pay out up to $168 million should a court rule that its professional liability policy covers damages pursuant to the actions of a defunct mortgage broker.

Takeaway: The failure to provide the total amount of potential damages in an initial report to the insurer may not deter coverage if multiple claims have common facts and circumstances.

Court Rules on Excess Coverage

Viking Pump Inc. and Warren Pumps LLC, both of which used to be owned by Houdaille Industries, manufactured industrial pumps that contained asbestos, and have faced thousands of asbestos claims.

062014_legal_spotlight_machineryIn 1985, Viking and Warren were divested by Houdaille — which had purchased $17.5 million in primary and $42 million in umbrella commercial comprehensive general liability insurance in addition to 35 excess policies through 20 different carriers.

Viking initially filed suit against Liberty, the primary and umbrella carrier, fearing Warren was draining its shared insurance coverage. That case was settled and dismissed, but then the excess insurers joined the litigation.

The case evolved into the question of when insureds are entitled to seek coverage under excess policies. The answer, according to a Delaware court, is that policyholders do not have to exhaust horizontal excess coverage when losses occur over many policy periods.


Although the decision occurred in Delaware Superior Court, the judge ruled that New York law should govern the question and the Delaware ruling was just a prediction of what a New York judge might rule, based on New York law. It was not a final decision, but it did offer some guidance into an issue that is rarely addressed by the courts.

Summary: Policyholders in long-tail cases must exhaust all primary and umbrella policies before first-layer excess policies are triggered; however, not all first-layer excess policies need to be horizontally exhausted before triggering second-layer excess policies.

Takeaway: The ruling will provide guidance to policyholders as well as provide assistance should an excess insurer be insolvent.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at
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Global Claims

A Global Footprint

Handling international claims effectively means being devoted to having local knowledge.
By: | June 2, 2014 • 8 min read

Varied customs and business practices. Different currencies, languages and regulatory practices. Not to mention trying to coordinate activities in a multitude of different time zones while meeting internal expectations at both the local and corporate level.

There are a host of challenges faced by risk managers when they suffer an international loss. But if they wait until the loss occurs to meet those challenges, it will probably already be too late to effectively respond.

Putting together a team pre-loss to handle claims — including forensic accountants, technical experts and counsel — and forging relationships on the ground with the locally admitted insurance company, adjusters and regulators are key to a smooth process.


Especially in some emerging economies, local business units have little experience with insurance. And in countries where the government has a stake in the insurance industry — such as China, Brazil, Russia and India — adjusting claims can be even more challenging.

All too often, risk managers don’t even anticipate having to adjust claims overseas, said John Dempsey, managing director and global practice leader, Aon Global Risk Consulting.

“For that reason, they more than likely do not have a system in place to effectively deal with it,” he said.

Not so for Jose Heftye, senior director-global risk management at Flextronics in San Jose, Calif., who has three main objectives when it comes to handling international claims: quantify the loss, maximize the coverage and minimize the recovery time.

Jose Heftye, senior director-global risk management at Flextronics

Jose Heftye, senior director-global risk management at Flextronics

It sounds straightforward, but often, it is anything but.

Resolving international claims often means dealing with multiple insurance carriers on a single claim; making sure the company is in compliance with the increasing number of countries that require local policies; and understanding what resources are available from employees, consultants, brokers, adjusters and carriers.

“To get to a successful outcome, you have multiple factors that will influence that outcome,” said Heftye, who joined Flextronics, an electronics design and manufacturing company, last year after working mostly in the food and beverage industry.

“If you don’t do pre-loss work to prepare in case of a claim, then you are in the fire trying to put together a team that will help to quantify the loss and identify the key items in your insurance policy to trigger coverage,” he said.

“I think the biggest mistake I have done is to send raw data to the insurance company without telling a story. If you take raw data and just send it to them and let them put together a story on your behalf, then it’s very difficult to turn that ship. … I am the one who should be articulating what happened and using the numbers to back it up.”

It’s also necessary to keep perspective, he said. Too many risk managers “always try to push the number,” instead of seeking a reasonable, speedy conclusion to the claim in a way that maintains good relations with the primary carrier.

“The main thing for the risk manager to do,” Dempsey said, “is to set objectives and then put in place the people who can carry out those objectives.

“The very first thing is to understand where we are going with the claim and what do we want to achieve at the end of this process. You would be surprised at how many objectives there may be. Some are financial. Some are organizational. Some don’t want to deal with it at all.”

Because of time differences and the complexities, some risk managers let overseas claims languish.

“If a $5 million claim is settled within six months, that transaction is a lot more valuable to the organization than a $5 million claim that takes two years to settle.” — John Dempsey, Aon Global Risk Consulting.

“If it takes too long to settle or the claim is not adequately resolved, the value of insurance is not as great as it could be as when the process is managed more effectively,” Dempsey said. “If a $5 million claim is settled within six months, that transaction is a lot more valuable to the organization than a $5 million claim that takes two years to settle.”

Loss Determinations

Quantifying the loss itself can be a struggle.

After the Thailand flooding in 2011, a packaging company client of one of Heftye’s prior employers could not get raw materials from its supplier because that company had been affected by the flooding. Without raw materials, the client halted production, and with production halted, the client stopped buying from Heftye’s company.


“Without having any locations in Thailand, I was losing income. These are the types of things you don’t think about,” he said. “How do you convince an insurance company that you are losing money because the supplier of your client is not operating?”

Of course, Heftye did just that. But it involved traveling to Thailand, dealing with the local fronting insurance carrier — which was overwhelmed by all of the losses in the country and did not have any resources to adjust the claim — as well as bringing in his own team, including a forensic accountant, engineer and counsel; and working with brokers and multiple insurers on the claim: All of them based in different time zones.

“This was a situation where I was adjusting my own claim,” he said. “It took us almost a year. It takes a long, long time to capture all of the information and put it together and understand the different variables.”

For all of the time zones involved, however, it’s best to view international claims in the same lens as domestic ones, said Gerry Alonso, senior vice president and manager of claims at FM Global.

“The process should deliver fair, prompt and equitable service. If you look at the risk manager, the CFO, they are buying a program of insurance and their experience should be no different than if the loss happens in Bangkok, Buenos Aires or Baton Rouge,” he said.

“I believe it is critical to have boots on the ground that know the jurisdiction and local customs.” – Gerry Alonso, senior vice president and manager of claims at FM Global.

Echoing Heftye, Alonso pointed to the importance of establishing relationships with the adjusters, carriers and regulators at the site of the claim prior to a claim occurring.

“I believe it is critical to have boots on the ground that know the jurisdiction and local customs,” he said, such as understanding the etiquette of presenting a business card in Japan or knowing that Sundays are revered in Spain and that work rarely occurs.

“At the same time,” Alonso said, “you are an organization that has promised the client consistent treatment irrespective of what country in the world that loss occurred, and you have to meld both of that together.”

FM Global’s claims team numbers about 300 people, who, in total, speak 21 different languages, he said. In 2010-2011, the carrier paid losses on 34 natural catastrophes, 11 of which were outside of North America. Of the 2,500 claims outside of North America, “we had zero that ended up in litigation,” Alonso said.

In Chile, for example, FM Global was able to settle 99 percent of losses due to the earthquake there in less than a year, and many were in excess of $10 million, he said.

Behavioral issues present another challenge.

“The cultural mores and norms [in some countries] may not be as assertive as they could be in debating issues that could arise in the claim,” Aon’s Dempsey said. “Oftentimes, they simply follow the advice of the insurance carrier, which may or may not be correct. Sometimes, the settlements are fine but you often take your chances in these things.”

Consistent Processes

Putting the right people in place is a crucial task for carriers as well.

“You have got to ensure you hire the right talent,” said Colm Singleton, head of international claims at Allied World.

Colm Singleton, head of international claims at Allied World.

Colm Singleton, head of international claims at Allied World.

“There’s a risk that carriers overlook the importance of local claims knowledge. You have got to meet the people you are going to hire, whether that means flying over to the region or having them come to you.”

To prevent regional differences popping up in the claims process, insurers should use peer audits and key performance indicators to ensure consistency, he said.

In the EU, for example, companies are dealing with a significant increase in cross-border litigation and regulatory exposures that mirror class-action lawsuits in the United States.

The claims team is able to partner with others in the network to draw on their experience, he said.

Technology is also crucial to support an effective claims process, including electronic claims filing and a system that easily configures to new lines and products, he said.


That improves customer service, enables a faster response time and enhances results.

“I am a big believer that a negative claims experience is a top reason a client will not renew with their insurer,” he said.

At ESIS Inc., the TPA spent two years planning and developing a global claims platform designed to give clients the same service internationally as domestically, said David Patterson, president of ESIS, a wholly owned subsidiary of the ACE Group.

The platform, which went live last fall, is structured around 12 hubs that service the globe and report into ESIS. Before the restructuring, ESIS had a global network of organizations their London-based team would call on.

Now, it has ESIS-branded operations with staff around the world who are knowledgeable of local customs and regulations but have also been trained on ESIS’ processes and protocols.

“To try to get a good handle on [global differences] and be able to manage it consistently while still being respectful and in compliance with local customs is always a challenge,” Patterson said.

Knowledge of customs and technical expertise is mandatory, FM Global’s Alonso said. But his company’s training program also places a heavy emphasis on soft skills.

“At the end of the day, you could be the sharpest adjuster, the most competent, but if you are unable to articulate and empathize with the client, it’s really all for naught,” he said.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at
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