2008 Officers and Directors
PIA of Ohio's officers and members of the board of directors this year are as follows:

President: Terry Kelso, CPCU, CPIA - Associated Insurance Agencies, Inc., Westerville
President-Elect: Doug Fox, CIC - Diversified Insurance Service, LLC, Toledo
Secretary: John E. Burtch - American Agency Inc., Columbus
Treasurer: Mike Grushon, CIC, CRM - Thomas and Grushon Agency, Bellbrook
Past President: David C. Kotary, CPIA - Benchmark Insurance Agency, Westerville 

PIA would like to welcome this year's newest member of the board, Tom Baker of Baker & Associates Insurance Agency in Hilliard.

To view a complete directory of the board, click here.

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A Belated Gift from The National Flood Insurance Program
Jerry T. Hargrove, JD, CIC, CPIA, SCLA, FCLA, LICS, PICS
Insurance Litigation Counselors

Almost five years ago Insurance Litigation Counselors (ILC) was involved in the defense of an agent who had sold a tenant a NFIP flood policy, including coverage for improvement and betterments to the leased premises. The lease made the tenant responsible for loss by flood but did not require flood insurance. The agent, finding that his client was responsible in spite of no requirement to insure the peril, offered the client flood coverage through the NFIP WYO program. The client instructed the agent to secure coverage for personal property and the improvements and betterments for which he was responsible. The value of the improvements were far in excess of the 10% extended from the purchased personal property limit. Thus, the agent sold a specific limit for the improvements to the building and the WYO company issued the policy.

A few months after the policy was issued a flood damaged the building and personal property and the client made a claim through the WYO company. Upon investigation the WYO company denied the coverage for the building damage except for offering 10% of the personal property limit. This was less than 3% of the loss to the building. The WYO company advised the insured, that according to the NFIP, the claim could not be paid because the named insured did not have an insurable interest in the building.

The insured's attorney advised the insured client to sue the agent for selling him a policy under which he could not collect. The insured was reluctant because he felt the agent was trying to protect him. The attorney prevailed.

As ILC got involved NFIP advised that Federal Law did not allow the tenant to purchase building coverage. A policy had to be in the name of the owner. Upon advising the WYO/NFIP that no such clause existed in the law, ILC was told that response was a mistake, the prohibition was in the manual. Long story short, it was not. To make matters worse, an email to several WYO companies and Ask the Expert at NFIP delivered differing advice on whether you could or could not write the policy in a tenant's name. In fact, NFIP personnel indicated that they followed the typical interpretation of insurable interest - exposure to economic loss as a result of a loss. Regardless, the NFIP would not move off its position and litigation ensued. Fortunately, the agent prevailed but at a cost in dollars, time and disruptive trauma.

ILC asked the National PIA liaison with NFIP, Ms. Rita Hollada, to see what could be done to stop this from being a problem for agents and insureds in the future. She was told that it would be considered and addressed in a coming manual update. The NFIP has finally gotten around to clearing up the issue in the October 1, 2007 manual update. The manual now reads as follows:

"A tenant may purchase higher limits of coverage for improvements and betterments under the building coverage if the lease agreement with building owner:

· Requires that the tenant purchase insurance coverage for the tenant's improvements and betterments that are made or acquired; and [Notice this is an "and" not an "or." It requires not that the tenant merely be responsible for the damage, but that the lease require flood insurance.]

· States that the tenant is responsible for the repair of the building and/or improvements and betterments that become damaged.

Duplicate coverage is not permitted under the NFIP, so only one policy can be issued for building coverage, and the amount of building coverage cannot exceed the maximum allowable under the Act. The policy may be issued either in the name of the building owner or in the names of the building owner and the tenant." [emphasis added]

Note that the exact wording does not allow the policy to be just in the name of the tenant. Thus, NFIP is not willing to give up the issue on the basis of an insurable interest due to the possibility of economic loss.

ILC's opinion is that a building owner would better serve its interest by buying the policy in the name reflected on the property deed. If the tenant is then required to pay some or all the premium that can be addressed in the lease. The owner will then have control over the settlement process with NFIP/WYO. Of course, the tenant must make sure the lease addresses how loss proceeds are allocated on its behalf for repair/replacement for improvements and betterments made by the tenant or running with the lease.

It took almost five years for the wheel to turn on this issue. At least now agents have guidance on how to handle this situation.

Practice Safe Insurance!

The information presented herein is for informational purposes only. Opinions expressed are those of the author, editors, and others, and are not presented as legal advice or recommendations. Readers should seek professional advice before taking action or making decisions based on the issues herein addressed. This article may be copied and distributed in printed form as long as all text is copied without modification, the article is not distributed for profit and contains the Insurance Litigation Counselors and Professional Insurance Agents of Georgia copyright notice.

Copyright, 2007, (c) Insurance Litigation Counselors and Professional Insurance Agents of Georgia

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Department of Insurance Begins New Requirement for Identification Numbers on CE Forms
On Jan. 1, the Ohio Department of Insurance (ODI) began requiring that an agent's National Producer Number (NPN) be included on all forms related to CE credit. The NPN number will be used instead of Social Security Numbers, because the department feels this will better protect agents' identities. The use of NPN for all continuing education-related documents is mandatory. Any 2008 PIA classes you sign up for require that you put your NPN number on the registration form.

Finding your NPN
The insurance department has sent letters to all licensed agents (who have accurate addresses on file with the department). Those letters contain agents' NPN numbers. Agents may also obtain their NPN at the following links:

Ohio Department of Insurance Web site

National Insurance Producer Registry Web site

Questions about the Change?
Insurance agents who have questions concerning the department's new policy can contact ODI's Licensing Division at (614) 644-2665 or visit www.ohioinsurance.gov.

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Featured Benefits

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Upcoming CIC Institutes      




Columbus
Graduate Seminar*
February 6-8

Registration Fee: $390 per person for regular institutes (add $20 if you need OH CE)
CE Credit: 20 hours for each institute (exam not required for CE credit)
Level: Advanced-level course
*James K. Ruble Graduate Seminars are for CIC designation holders only.

To register online, click on the class date above.
To download a registration form, click here.

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Upcoming Pre-Licensing Classes


Columbus
Feb. 21-23 and Feb. 28-March 1

Registration Fee: $249 per PIA member/$274 per non-member
CE Credit: There is no CE credit for agent licensing classes
Level: Introductory-level course

To register online, click on the class date above.
To download a registration form, click here.

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