Newsletter Sign-up

Managing Director
Executive Perils Inc.

The Fixer

Peter Taffae loves to fix things, and tinker with insurance policies. Call him the Steve Wozniak of risk coverage.

Peter Taffae has made a career out of crafting innovative fixes.

He devised a directors' and officers' (D&O) and an errors and omissions (E&O) liability products protection policy for food and drug manufacturers after the Tylenol tampering and poisoning incident, and developed a super continuity contingency plan for clients insured by American International Group Inc. during the financial crisis, and created Trilateral CoverageŽ for acquiring companies in merger deals to cover tails of the selling companies' D&O policies. Taffae said the goal always has been to find a solution that works for both his clients and the insurer.

"Everything we've ever done is really a solution to a problem; these innovative ideas come because we were in between a rock and a hard place," said Taffae, formerly an underwriter for The Chubb Corp. and now managing director of Executive Perils Inc. in Los Angeles.

"We want the insured to win, but we also want the underwriter to win, so we have to figure out something in the middle," Taffae said. "We want to make everybody happy."

After the 1982 Tylenol incident, Taffae, then a Chubb underwriter, realized that food and drug manufacturers much like Johnson & Johnson Services Inc. were lacking an insurance product that would indemnify for their expenses, if they had to recall damaged products, rebuild tarnished reputations and pay for claims.

Consequently, Taffae convinced Chubb's management to create a new D&O/E&O products protection policy for two clients in that sector--a large chocolate manufacturer and a national diet food manufacturer. Less then 90 days after the Tylenol incident was reported in the media, Chubb had its first insured on this newly written policy.

In the summer of 2008, Taffae realized that he needed to come up with a "worst case" contingency plan for Executive Perils' clients coming up for renewal on their D&O policies with AIG, XL Group, The Hartford Financial Services Group Inc., and other insurers with heavy exposure to the mortgage sector.

Taffae developed a super continuity plan, which would allow the insureds to remain with their incumbent carrier, but have a "back up" should their carrier earn an unacceptable credit rating.

Taffae negotiated a separate standalone D&O program and paid a small fee to keep the quote open for 365 days, versus the industry's traditional 30 days. The contingency program was only available if A.M. Best downgraded the current primary carrier and/or its subsidiaries to an A- or lower.

Then, this year a Taffae client, Southwest Airlines, made a deal to buy AirTran Airlines, and hence had to provide the seller's outgoing directors and officers a six-year tail that was at least favorable to their existing coverage.

Taffae found a second insurance carrier that underwrote a tail that was far more favorable than AirTran's existing policy. Then he created the first part of Trilateral CoverageŽ: an endorsement that was added to the second carrier's policy that stated that in no event would its policy be less favorable then the AirTran's existing policy by its first carrier. The endorsement also stated that the most favorable provision of the two carriers' will be utilized to determine coverage in case of a claim.

Taffae then went a step further and included Southwest's carrier to that language, thus reducing the risk that Southwest would be named a co-defendant in any future claims.

"Peter stepped outside the box and got the carrier to make a policy broad enough to cover both languages" of the existing policies, said Chris Thorn, Southwest's risk manager. "From a client perspective, the fact that an insurance company was willing to listen to Peter and actually explore this rather than just flat out denying it--that did it for me. Now I'm looking forward to doing more business with that carrier."

Dan Bailey, a partner at Bailey Cavalieri LLC in Columbus, Ohio, who represents insurers in claims and policy negotiations, said that Taffae has always done a very good job representing insured companies, but in an "even-handed way."

"Some brokers are hell-bent on getting everything they can for the client, but Peter sees the bigger picture, how it affects all parties of the transaction," Bailey said.

-- Katie Kuehner-Hebert

Senior Vice President
Marsh Risk Consulting

Dialing into the Touch Tone

Companies utilize software programs to assess employee worksite problems, but it's the personal touch of the ergonomics professionals that make this program innovative.

A global financial services company asked its key broker, Marsh Risk Consulting's Tom Hilgen, to help solve a problem: restructure its onsite ergonomics program to both lower its cost, and the escalation of workers' compensation claims for the company's leading recurring injury, muscular-skeletal repetitive-motion disorders.

Hilgen's solution: a telephonic program manned by Marsh's ergonomics professionals to briefly interview affected employees about their workstation, equipment and habits. The experts then utilize a software program developed by Hilgen and his team to determine the root problem and corresponding solution. Any required equipment changes are purchased centrally with contract pricing, from a list approved by Marsh's team.

While many companies utilize software programs to assess employee worksite problems, it's the personal touch of ergonomics professionals that make this program truly innovative, said Hilgen, a Marsh senior vice president.

"Associates have a comfort level with this person, they know that this person knows their company, knows the work station and the equipment they are using, and they know that our consultants have experience in resolving issues," he said. "You get a lot more information about the associates' situation using a live person than just a computer program."

The new system of early intervention has been extremely successful for the company. In the first half of 2011, the call intake system has processed more than 400 employee requests. In their initial complaints, employees reported an average discomfort of 6.7 on the scale of 1 through 10; after their evaluation and follow-up, these employees reported an average discomfort of just 1.5.

Out of those 400 employee requests, only one required an additional onsite visit, and none resulted in a workers' comp claim. To date, the financial services company's return on investment has been almost 10 to 1, and employees are reporting that they are happier, more productive and more energetic, the company's risk manager said.

Based on the success of the initial U.S. phase of the program, the company is discussing rolling out the system internationally, the risk manager said. The intent is to implement the program globally.

"Any of the individuals that we provide the service were potentially avoiding their discomfort from escalating to the point that they filed a workers' comp claim," the risk manager said. "For us, this is a proactive approach to get ahead of the muscular-skeletal repetitive-motion disorders before they became more serious in nature."

Hilgen and his team now operate the ergonomics program for four of the firm's clients as well as for its parent, Marsh and McLennan Cos.

So far in 2011, more than 99 percent of intake calls for all five clients were resolved telephonically and did not escalate into onsite visits or workers' comp claims.

Melissa Yee, assistant risk manager for Marsh & McLennan, said utilizing the program from April 2010 to April 2011 has resulted in a 50 percent reduction in the number of reported losses in repetitive injuries in workers' comp claims, compared with the same 12-month period the previous year.

"Employees have been very happy with the results that in most cases, it hasn't progressed to onsite evaluations," Yee said.

Moreover, the program has also helped reduce the costs of purchasing new equipment, she said.
Unsolicited feedback about the program from employees of the participating clients has been tremendo us, particularly about the personal interaction with Marsh's ergonomics experts, Hilgen said.
"To be such a consultant requires a lot of unique attributes--good at ergonomics, but also good at resolving issues, and being extremely patient with people who are in pain," he said. "They are also very good problem solvers and they have very good people skills. They are genuinely concerned about helping these people.''

-- Katie Kuehner-Hebert