Risk Purchasing Groups

[Rob]

I'm looking at a program for a certain higher risk entertainment exposure and one of the policies is written through a Risk Purchasing Group. I've gotten a specimen of the master policy and the "named insured" is an assocation. It shows the limts as $1M/$5M with a provision that states if a "named insured member" has lower limits, then those limits apply. However, It does state that the "named insured" includes each "named insured member" and that each "named insured member's" limit is separate. What are some pitfalls of policies written with a Risk Purchasing Group?

[Rob]

Alot of looks but no responses so....Alternatively, do you place business with Risk Retention Groups and why or why not?

[Bob Lake]

Make sure that your E & O doesn't prclude your selling RRG's.

[Bob Lake]

Sorry...it's PRECLUDE

[Rob]

Bob, it's not excluded in my E&O but that brings up a good point. It seems many E&O policies do exclude RPG's which is one of the reasons I'm wondering why the risk in writing them is greater than a normal carrier even when considering the paper is A rated and policyholders receive their own limits.

[Bob Lake]

You also need to review your application for the E & O because some applications state: "We rely on your answers to be accurate and issue the policy based on your responses...blah, blah, blah

[Rob]

You also need to review your application for the E & O because some applications state: "We rely on your answers to be accurate and issue the policy based on your responses...blah, blah, blah

Not an issue either because the application didn't ask about placing business with RPG's at all.

[Rob]

So based on the number of views vs. responses, I'm going to guess that there are some unknowns about RPGs. I read this particular policy and it looks like a normal policy, each insured has their own limits, it's admitted. So can someone talk me into or out of writing an RPG if it is covered by my E&O. Also there must be an issue with them if they are excluded under some E&O policies. Anyone?

[LadyBroker]

as i understand an RPG, its an association of folks all banded together to buy insurance, and the claims are paid from the premiums generated by the group, but if the group runs out of money to pay their claims, I believe the insureds are out of luck, and would have no coverage.

[Rob]

as i understand an RPG, its an association of folks all banded together to buy insurance, and the claims are paid from the premiums generated by the group, but if the group runs out of money to pay their claims, I believe the insureds are out of luck, and would have no coverage.

Sure, however, you would think that would have to be stipulated in the policy contract, no? I've reviewed the policy and I don't see anything at all like this. It is written on A rated, admitted paper and the policy contract states they have a limit of X and that it is their own limit. If what you are saying is correct, how is one to make an informed decision if they don't know how much in premiums is generated by the group?

The reason I'm asking this is because it does cause an ethical dilemma for me. I've gotten some quotes from this RPG that seem under priced and lower than another competitor. So I need to show the insured both quotes, explain the differences, and let them decide. However, other than it being an RPG, I don't see any faults with the policy or the wording. Yet, I'm still not comfortable offering an RPG until I have an answer to my question but at the same time feel obligated to show the insured when their pricing comes in lower.

[Rock54]

There are RPG's and RPG's. Just some items to check with this RPG:
- Is a reinsurance cut through endorsement available?
- Is the insuring agreement "pay on behalf of" or "to indemnify"?
- Is there a "consent to settle" clause?
- Does the cost of legal defense reduce the limit of insurance?

It is good that you have a quote to offer the prospect from a carrier in the regular commercial marketplace.

Good luck!