DELAWARE SEEKS NEW WORKERS' COMP CLASSES

Delaware Insurance Commissioner Matt Denn has asked Delaware businesses to submit requests for classification changes for workers' compensation. According to Denn, some business owners have said they have been grouped with industries that have higher risks resulting in higher workers' compensation rates. He suggests that new classification groups might allow them to be rated more accurately.

His request comes as overall rates are going up. Denn recently approved increases of 8.1 percent in residual market rates and 7.1 percent in voluntary market loss costs to be effective Dec. 1, 2005.

WELDERS WIN MARYLAND POLLUTION RULING

Maryland's highest court has handed a victory to the welding industry by ruling that the scope of the pollution liability exclusion in a business insurance policy does not encompass welding rod liability. In Clendenin Brothers, Inc. v. United States Fire Insurance Co., the Maryland Court of Appeals ruled that a total pollution exclusion in U.S. Fire Insurance Company's commercial general liability policy does not relieve the insurer of its duties to defend and insure Clendenin Brothers Inc. against welding liability claims.

The law firm of Dickstein Shapiro Morin & Oshinsky LLP represented the policyholders and the Gases and Welding Distributors Association.

"The economic impact of this decision on the welding industry cannot be overstated," said Rick Doyle of GAWDA. "Many of our members are mired in disputes with insurers over coverage for welding claims. The Maryland court recognized that insurance companies have an obligation to pay the costs to defend and resolve these claims."

"This case is critical to any company facing insurer arguments that pollution exclusions in commercial general liability insurance policies preclude insurance coverage for non-traditional environmental liability," said Katherine J. Henry of Dickstein Shapiro.

VERMONT MUTUAL LATEST TO BE DRIVEN OFF CAPE COD

While the Massachusetts insurance regulator is warning about problems in the homeowners market, another insurer has decided it can't continue to write homeowners insurance on Cape Cod. Starting April 1, Vermont Mutual will stop renewing about 4,700 homeowners and 400 dwelling policies, Tom Tierney, president, confirmed.

Tierney's Montpelier-based company that writes throughout New England and New York had already stopped writing new homeowners policies on Cape Cod after Andover Insurance Companies dropped its more than 14,000 policies in the spring of 2004. Last December, Quincy Mutual and Hingham Mutual announced they were pulling back on writing Cape policies as well.

"This does not make us happy because of the relationships we have had for years with our agents," Tierney told Insurance Journal. He said the decision does not affect its writings in its other states or its commercial policies.

While several private carriers remain writing selectively, the exodus of Vermont Mutual and others leaves the residual market insurer, the Fair Plan, as the most likely recipient of the business being dropped. The Fair Plan has become the largest writer on the Cape with about 27 percent of the market.

Tierney says that the Fair Plan is part of the problem because its rates are too low and insurers are on the hook for whatever losses it may suffer down the road. The Fair Plan is currently in negotiations with the state to raise its rates. The insurer has proposed a 25 percent average hike on the Cape but Tierney says even that wouldn't be enough.

"Politicians use the term 'affordability' but that's not the issue," he said. As more and more people are moving to coastal areas to live, insurance costs must reflect the risk, he added.

Tierney suggested that the state should grant insurers an offset against Fair Plan assessments on any Cape policies they write to help cover higher catastrophe reinsurance costs on these risks. That offset, along with the Fair Plan buying its own reinsurance and insurers being allowed to charge the correct price, would help restore a private marketplace on Cape Cod, the Vermont executive suggested.

TREASURY CLARIFIES LIABILITY UNDER TERRORISM REINSURANCE

Insurers writing monoline farm policies and incidental professional liability coverage may face additional work to clarify coverage for their insureds under the federal terrorism reinsurance program.

Officials of the U.S. Treasury Dept., which administers the program, recently offered clarifications regarding the modification of the U.S. Terrorism Risk Insurance Program (TRIP) during a conference call with the National Association of Insurance Commissioners and the American Association of Insurance Services.

Farm: Farm insurance whose premium is reported under "farm multi-peril" on insurer annual statements is no longer covered under the revised federal program. However, Treasury officials said that if premium for a farm policy is reported under a line still covered by TRIP, such as "fire" and "general liability," that policy would still be covered under the program.

Incidental professional liability: Treasury officials said that TRIP provides no coverage for any type of professional liability, including incidental professional liability built into or endorsed onto a policy for a line covered under TRIP. This clarification may allow insurers to exclude coverage for professional liability exposures from endorsements that provide TRIP coverage.

Auto coverage under commercial umbrellas: While the revised TRIP no longer covers commercial auto as a line, Treasury officials confirmed that commercial umbrella coverage that extends to auto exposures would still fall under the program if the premium is reported as general or excess liability.

D&O EXCESS LIMITS UP BUT PREMIUMS DOWN

Directors and officers liability insurance capacity leveled off at about $1.5 billion in 2005, about where it was in 2004, while coverage restrictions continued to ease, according to D&O Liability 2005 Survey conducted by the Tillinghast business of Towers Perrin.

The same survey reports that D&O liability insurance premiums dropped another 9 percent in 2005 after dropping 10 percent in 2004. The authors predict that by the end of 2006, premium decreases will flatten, and the amount of D&O coverage insurers write will start to decline.

Similar to 2004, competition remains fierce in excess layers for large public companies, where premiums dropped 10 percent in the excess layer and 8 percent in the primary layer. The increase in average total policy limits was 9 percent, while the increase in average primary limits and average excess limits was 2 percent and 11 percent, respectively, between 2004 and 2005.

"Not surprisingly, the largest increase in limits was in the excess layer," observes Michael Turk, senior consultant. "However, premium decreases of a similar magnitude were reported in both the primary and excess layers. Given the increase in excess limits and increasing claim severity, it seems counterintuitive that there is a decrease in the excess layer premium."

The survey found that the average policy limit for U.S. for-profit 2005 companies was $14.3 million compared to $13.6 million in 2004, and that 63 percent of U.S. participants reported no change in their deductibles or retentions.