Umbrella Policies and Related Agent Expertise

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1. Expertise As to Umbrella Policies and Their Agents. 

Umbrella Policies. First, in terms of a definition, umbrella policies are insurance policies that cover amounts above those covered under one or more other primary policies, and which do not pay until the losses exceed a certain sum. Such policies are sometimes referred to as excess insurance.

A. Umbrella Policy Expertise as an Insurance Regulator. I have had extensive and substantive experience relating directly to umbrella insurance policies (inclusive of commercial auto policies, which by reference are included throughout this narrative whenever the term “personal auto” is used) including interpreting policy language and determining the insurer’s obligations under such policies. As a regulator for many years in five positions ((i) Assistant Attorney General assigned to the Department of Insurance (Iowa), (ii) First Deputy Commissioner of Insurance, (iii) Commissioner of Insurance, (iv) administrative law judge, and (v) Executive and Member of the National Association of Insurance Commissioners (NAIC)), along with my staff, I approved (or disapproved) of the language of umbrella insurance policies used by each of the 1,000 property casualty insurance companies doing business in the state. This regulatory action also included the approval of most all policy application forms and policy forms themselves in use today.

Service as an Expert Witness as to Umbrella Policies and Their Agents. Along these same lines, I testify frequently as an expert witness and have so qualified as an expert in several of the states as an expert witness as to umbrella policies and the agents that sell them.

B. Umbrella Insurance Policy Expertise: NAIC. While Commissioner, I also served as a member of the National Association of Insurance Commissioners (“NAIC”), (including membership on its Executive Committee), the nationwide organization of all state insurance commissioners. That organization has responsibilities for establishing model insurance administrative regulations and model statutes for consideration by all of the states. While with the NAIC, I served among others as:

  • Chair of the Midwest Zone. I was elected to this position by my fellow Insurance Commissioners from this zone (composed of the Midwest states) to provide leadership before the balance of the states.
  • Member of the Executive Committee. As a member of the Executive Committee, in effect the steering committee of the NAIC, I provided leadership organization wide. The Executive Committee had direct oversight over the Property Casualty Committee.
  • Member, Commercial Lines Committee: This Committee exercised national oversight over the functioning of commercial lines insurance, namely umbrella policies (which provide coverage over both personal and commercial underlying coverages).

C. Umbrella Insurance Policy Expertise: American Academy of Actuaries. Along these same lines, I served as general counsel and chief lobbyist to the American Academy of Actuaries, Washington D.C. The Academy is the national professional association for actuaries. These professionals establish premium levels for policies. In addition, because policy language dictates premium levels, actuaries are also active in determining policy language.

D. Umbrella Insurance Policy Expertise: CEO of A Major US Insurance Entity. After serving as a regulator, I served as President and Chief Executive Officer for the National Council on Compensation Insurance (“NCCI”), New York City, a nationwide industry owned organization with about 1,500 employees with annual revenues of about $150 million that did (and does) business in about 40 states. NCCI was domiciled in Florida and did business throughout most of the United States. This means while CEO, NCCI was subject to the full authority of the Florida Office of Insurance Regulation (“FL OIR”) and subject as well to the Florida Insurance Code as well as the jurisdiction of all Florida courts, state and federal. In addition to Florida, NCCI was subject as well to the authority of the various state departments of insurance (‘DOIs”) as well as the state and federal courts of each of these states. Among my responsibilities at NCCI was (together with my staff) to formulate all workers compensation insurance policy forms as used in our 40 states of operation. This work included drafting all policy language (tailored to the specific state’s insurance code) as well as drafting all endorsements and all other policy forms. In addition, my responsibilities included gaining state insurance department approval of all such policy forms as a condition precedent to their use as submitted by some 600 insurance companies. Finally, I note that among others, the life insurance benefit under workers compensation is an important coverage. I am very familiar with the meaning and relevance of specific state approval of policy forms, endorsements and applications and related documents and matters.

E. Umbrella Insurance Policy Expertise: Reinsurance Arbitrator. I am also one of about 400+ certified reinsurance arbitrators (by ARIAS-US) and have sat as an arbitrator on property casualty insurance issues in disputes about policy language between reinsurers and their insurers, including issues relating to umbrella coverages.

2. Expertise as to Duties of Umbrella Insurance Companies Including Claim Settlement Obligations. 

A. Expertise as to Duties of Property Casualty (Umbrella) Insurance Companies As Commissioner of Insurance. I have also had significant experience and responsibility in connection with determining and passing judgment on insurers’ responsibilities as to insurance agents and insurers claim settlement duties such as those involved here. In particular, in my three regulatory positions previously described, I had daily responsibility to assure and to hold accountable all of the state’s 1,000 property casualty insurers for their related obligations, inclusive of claim settlement obligations, including that relating to umbrella coverages. I did so through a series of action steps and tools. The action steps and tools included the following:

1. Unfair Claims Settlement Act. Like most every other state, Iowa enacted the model NAIC Unfair Claims Settlement Practices Act (“UCSA”) which set forth standards against which the Insurance Commissioner could pass judgment on a property and casualty insurer’s claims settlement practices. This is the same Unfair Claims Settlement Act (because it is based on the NAIC Model Act) as adopted and used by most every state in the United States. As Commissioner and as First Deputy and earlier as Assistant Attorney General assigned to the Department, I had daily responsibility to enforce this act and assure all insurance companies were in compliance with the act. That was the same act as adopted in most every other state in substantially similar form and enforced on regular basis by the DOIs.

2. NAIC Market Regulation Handbook. In addition to the standards set out in the UCSA, as Commissioner, I had as an available tool, the NAIC Market Regulation Handbook (“Examiners Handbook” or “Handbook”). This Handbook sets forth standards to assess insurance agent and insurer claim settlement behavior and is used by every department of insurance in the United States. The standards have been universally agreed to by all of the nation’s Commissioners of Insurance as adopted formally by them through the NAIC, including most every state. The claim settlement standards of the Handbook are universally recognized as appropriate standards against which to judge insurer claim behavior, including their applicability to umbrella claims.

3. Market Conduct Examination. On a regular basis, my agency conducted Market Conduct Examinations of property insurers utilizing the Examiners Handbook to determine whether in fact the target insurer was meeting all of their claim settlement obligations. This action entailed physically going into the insurers claim operations and studying claim files to determine any errant action or inappropriate claim settlement behavior. As further discussed below, errant insurers were warned, disciplined and prosecuted as required.

4. NAIC Financial Examiners Handbook. As Commissioner, I had available another tool, namely the NAIC Financial Examiners Handbook (“Financial Examiners Handbook”). Among other things, the Financial Examiners Handbook sets forth standards to assess umbrella insurer solvency on a triennial basis. Among other documents reviewed by examiners in reaching financial conclusions are agent contracts and policyholder matters. As with the Market Conduct Examiners Handbook, the Financial Examiners Handbook is used by every department of insurance in the United States. Similarly, these standards have been universally agreed to by all of the nation’s Commissioners of Insurance as adopted formally by them through the NAIC. The standards of the Financial Examiners Handbook are universally recognized as appropriate standards against which to judge umbrella insurer behavior.

5. Financial Examinations. On a regular basis, my Department conducted financial examinations of umbrella insurers utilizing the Financial Examiners Handbook to determine whether in fact the insurer was and was likely to remain solvent. As with market conduct exams, financial examinations entailed physically going into the insurers’ operations and studying, among others, files to (i) assure compliance with agent and policyholder duties and (ii) to assure that financial reporting as to agent and policyholder matters were properly carried out. As further discussed below, errant insurers were warned, disciplined and prosecuted as required.

6. Complaints From the Public. On a daily basis, my Department received incoming consumer complaints as to insurance company claim settlement practices. This division was staffed by Department lawyers who resolved the individual complaint but equally important, those lawyers also determined whether an insurer evidenced unacceptable claim settlement practices. That is to say, staff lawyers determined whether the incoming consumer complaints in fact constituted a red flag as to the insurance company’s potential behavior across the board.

7. Prosecution. To the extent insurer behavior required formal action (whether a result of complaints from the public or a result of Department investigation through a Market Conduct Examination), my Department prosecuted such insurers under the state’s civil Administrative Procedures Act. In connection with such prosecutions, I served in various capacities during my eight years as a regulator as (i) prosecutor (as Assistant Attorney General), (ii) as the decision maker as to whether to initiate prosecution in the first instance and (iii) as the Administrative Law Judge (“ALJ”) who presided over the prosecution and defense of the case and entered findings of fact and conclusions of law as to insurer claim settlement practices. I have served as an ALJ in scores of such cases where the insurer’s claim settlement practices in property claim settlement matters were the primary issue and entered final decisions in such matters.

B. Expertise As to Claim Adjustment Duties of Insurance Companies From the Perspective of an Industry Executive. In addition to my experience as a regulator, as reflected above, I have had specific industry experience (in other positions) as to insurer claim settlement practices. Some of those positions included the following: 

1. CEO of a Major US Insurance Organization, Regulated Throughout the US; Domiciled in Florida; President and Chief Executive Office of the National Council on Compensation Insurance (NCCI; Boca Raton, Florida), 1990 – 1998. I referenced above, under policy expertise, my experience at NCCI. In addition to exposure as to insurance policy forms, this same NCCI experience also provided significant background as to insurer claim settlement obligations.

NCCI: Claim Settlement. In addition, NCCI had a vested interest in member insurer claim practices in that the industry’s reputation for fair underwriting and claim settlement practices ultimately impacted regulatory attitudes toward NCCI’s premium approval process.

NCCI: Industry Standards of Practice. While President and CEO of NCCI, I visited and physically toured and reviewed in excess of 400 insurance companies and gained direct exposure to the procedures and processes and standard industry practices of the U.S. insurance community and its claim settlement practices. I have had extensive exposure to insurer practices and procedures.

2. General Counsel and Director of Government Relations to the American Academy of Actuaries (Washington D.C.), 1980 – 1983. I served as General Counsel and Director of Government Relations for the American Academy of Actuaries, including advising on admissions, discipline, federal antitrust and general corporate law. I represented the 10,000 member professional organization before Congress (e.g., Senate Committees on Banking, Commerce, Finance and Labor, and House committees on Education, Labor, Energy, and Ways and Means) and the various federal regulatory agencies.

The Academy is the professional organization of actuaries and includes qualified actuaries from all disciplines and all forms of insurers. Academy members included affiliation with virtually every commercial property insurance company in America. Such actuaries had duties relating to policy language and policy pricing. The Academy’s Board of Directors was likewise made up of leading insurance company executives from such property companies.

3. Attorney in Private Practice. As an attorney in private practice, I represented a number of agent and insurer interests and became familiar with applicable regulatory and industry claim settlement standards of practice. Those interests included the position of Iowa Counsel to the National Association of Independent Insurers. Those interests also included intimate involvement with commercial property insurance, as counsel to the:

  • Professional Insurance Agents of Iowa (property casualty insurance agents);
  • Iowa Association of Life Underwriters (life, health and annuity insurance agents); and
  • The National Association of Independent Insurers (“NAII”; I served as Iowa Counsel to this trade group), the trade association of smaller stock property casualty insurers.

Specific duties as counsel at both the Professional Insurance Agents of Iowa (who sold, among other coverages, commercial property insurance) and the Iowa Association of Life Underwriters (life, health and annuity insurance agents) included in-depth familiarity with commercial property insurers, their agents and their claim settlement practices. Specific duties at the NAII included daily counsel to member insurers as to their claim settlement duties.

C. Expertise As to Insurance Agents, Brokers and MGAs. 

1. Expertise as to Insurance Agents as a Regulator: Licensure. I have had extensive and substantive experience relating directly to the duty of care that comes to bear on insurance agents and agencies in their various relationships with umbrella insurance companies. As an Assistant Attorney General (see above), I have prosecuted property casualty insurance agents (who sell among others, umbrella coverage)for violations relating to their duty of care. As an insurance regulator (see above), along with my staff, I have screened hundreds of thousands of agents for character and background (separate and apart from subject matter testing). As to subject matter, I have formulated agent-licensing exams in the first instance. Upon passage of the exam, I have licensed hundreds of thousands of insurance agents.

2. Expertise as to Insurance Agents as a Regulator: Prosecution and CE. I have had full responsibility for continuing education for licensed property casualty insurance agents (approving CE courses in the first instance for acceptable content; overseeing the administration of such courses and granting and denying credit for such courses). I have initiated agent revocation actions and prosecuted those actions to completion.

3. Expertise as to Insurance Agents as a Regulator: ALJ. I have sat as the Administrative Law Judge in such actions and entered findings of facts and conclusions of law in scores of cases in which agents were prosecuted for violations relating to standards of care in connection with property casualty insurance matters and I have had direct responsibility for the appointment process by insurance companies (some 1,000 property casualty insurance companies) of all of their agents, including agents selling umbrella policies. I have supervised as well the ongoing relationship of all insurance companies in the state with all of their appointed agents, including agents selling umbrella coverage.

4. Expertise as to Insurance Agents: Legal Representation. As a lawyer, I have defended property casualty insurance agents and brokers, including those selling umbrella coverage against allegations (in administrative law forums) of violations of their duty of care.

5. Expertise as to Insurance Agents: Industry CEO. As President and Chief Executive Officer of a major Florida domiciled and licensed insurance entity (NCCI) doing business in some 40 states, I have had substantial working relationships with the U.S. insurance agent and agency community.

Contact Bill Hager at 561-306-5072 or via email to discuss your case.

William D. Hager - Insurance and Reinsurance Expert and Arbitrator

William D. Hager

Insurance and Reinsurance
Expert and Arbitrator

561-306-5072


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