Spotlight: CIWA Looking for Resurgence in Changing Market, Lawsuit

The California Insurance Wholesalers Association is in prime position to benefit from trends and events that its board members expect to be unfolding in the next year or two – including an improved surplus lines outlook and a lawsuit that may help spur interest in getting involved.

Additionally CIWA’s board hopes its rebuilding efforts will benefit from a state legislature that following the recent elections some believe will be less likely to be receptive to business interests.

CIWA group’s leaders say the time is right to make a membership push.

Around the turn of the millennium membership in the association began to dwindle. Board members say it’s hard to pin down a reason, but there were generally a lack of high profile issues to rally around and help peak people’s interest in getting involved. And for an association that has as one of its primary goals to lobby government on behalf of the industry, such apathy may have been bad medicine.

Then the economy began to head south, and businesses cut spending, including reducing expenditures on things like membership dues and paying for employees to attend meetings and conferences.

“In the last four or five years it’s been pretty quiet,” said CIWA’s Board President Tim Chaix, of R.E. Chaix & Associates.

Chaix blames that quiet period for generating a general sense of apathy, and he believes that cost the association a chunk of its members and it hurt efforts to build membership.

The association now has about half the members that it had maintained throughout the 1980s, 1990s and early 2000s – when laws like Proposition 103, which restructured much of the state’s insurance industry, came into being, and when battles between insurance commissioners and the industry were more commonplace.

“It’s not like it was when laws like Proposition 103 had just been passed, and when (John) Garamendi was the insurance commission, and he had it out for eliminating the surplus lines association in California,” Chaix said.

The quiet period may be at an end. Democrats won two-thirds majorities in both the Assembly and Senate in November’s election for the first time in more than 100 years, and they have a Democratic governor with whom to work. The supermajorities will allow them to raise taxes if they choose and to put constitutional amendments before voters without difficulty. Some believe this doesn’t bode well for those seeking to lobby the legislature on behalf of business interests.

Ultimately, when people in the industry see decisions being made that will affect them and their customers, the importance of involvement in a group like CIWA may become more apparent, Chaix hypothesizes.

Then there’s a recent court case for which CIWA and others in surplus lines are gearing up for a battle that could greatly impact the industry – a battle that Chaix believes will also energize people in the industry.

The battle Chaix thinks people in the industry will be hearing a great deal about is Hull & Co. v. Superior Court, an ongoing case involving duty of care to a third party and an appeal to the California Supreme Court of a ruling that imposes a tort duty on wholesale insurance brokers not only to their retail broker customers but also to the insured, an entity with whom the wholesale broker has no contact.

Other groups involved in the appeal include the Surplus Line Association of California, the National Association of Professional Surplus Lines Offices, the American Association of Managing General Agents and the Council of Insurance Agents & Brokers.

In November an attorney for the groups filed an amicus brief with the Supreme Court petitioning the court to review the matter, stating “wholesale insurance brokers now face potentially unlimited liability for doing business in California—not from the retail brokers they serve, but from third parties with whom they have no contact.”

The wholesale broker, Hull & Co., is being sued by a third party claimant for professional negligence. The plaintiff was shot at a bar, and initially sued the bar and its security guard company, claiming they should have prevented the shooting.

After settling claims the plaintiff brought a suit against the security guard company’s insurer, claiming that the insurer had committed bad faith by denying coverage based on an assault and battery exclusion. The trial court ruled the exclusion was enforceable and granted summary judgment for the insurer.

The plaintiff then sued the wholesale broker claiming to arguing that the wholesale broker owed a duty of care to the security guard company to ensure the insurance policy covered the suit against the guard company. It was claimed the wholesale broker breached its duty of care to the security guard company and the plaintiff. The trial court held that there was a triable issue of fact as to duty of care.

Chaix expects that legal battle, as well as any fall out that occurs with the trials and tribulations of implementing the Affordable Healthcare Act in California, to be a clarion call for members of the wholesaling industry to get involved and take some part in fighting those battles.

He also believes that if the market continues to turn away from being soft, and if the economy continues to improve, his own battle to beef up CIWA to its former status will be easily won. The California Surplus Lines Association is projecting $4.5 billion in premium written this year, with even more of an increase next year, Chaix noted.

“With Hull & Company, and the health insurance issue, the way that the marketplace is turning, the economy is getting a little bit better, the wholesale environment is certainly going to ramp up in the next year, more people are going to want to get involved,” he said. “We’re trying to rejuvenate to get the membership, and we’re hoping to get the support going from there.”

A membership push is already underway to beef up CIWA’s upcoming conference, “2013 California Wholesaler Industry Days,” in San Diego from Jan. 9-11, and interest expressed in attending has been on the rise from last year, according to conference organizers.

View CIWA’s video promoting the upcoming conference on InsuranceJournal.tv.

“In January we used to have about 200 to 250 people attend 10 years ago,” Chaix said, adding that last year between 80 and 90 attendees came to the event.

“What I would like to see is at least 125 to 150 people there,” he said of this year’s event.

Beside a marketing push to get the word out on CIWA, Chaix and other board members are offering more educational opportunities during such events, because that’s what they believe prospective members want more of nowadays – along with the networking and other functions that one is exposed to at such conferences.

The January conference includes a panel for employment practices liability, for example, which has two attorneys and two insurance company representatives, and another panel will be focused on technology that will cover both the risks faced by wholesalers and the advances in technology that are changing the industry.

CIWA By the Numbers

About
Address: 950 Glenn Drive, Suite 150
Folsom, Calif. 95630
Website: www.ciwa.net
Phone: (916) 932-1197

Events
California Wholesaler Industry Days
Jan. 9-11, 2013
Hilton Torrey Pines, La Jolla, Calif.

2013 CIWA Summer Forum & Annual Meeting
June 20-21, 2013
Silverado Resort & Spa, Napa, Calif.

Board of Directors
President – Tim Chaix, R.E. Chaix & Associates
Vice President – Paul Laufer, Compass Insurance Group of Agencies
Treasurer – Guy Knapp, ProWest Insurance Services Inc.
Secretary – Bryan Clark, H. W. Gorst Co.
Past President – John Mundelius, Union General Insurance Services Inc.
Directors – Katie Freeman, Katie Freeman Insurance Services,
Hank Haldeman – The Sullivan Group
Patrick Hanley – Socius Insurance Co.
Tony Joseph – Lloyd’s America Inc.
Emil Moskowitz – Cal Inspection Bureau Inc.
Warren Stanley – Wholesale Connection Insurance Services

Topics Lawsuits California Agencies Excess Surplus Insurance Wholesale