I interrupt my presentation of NU's Top 10 Stories of 2006 to bringyou this important news bulletin! Independent agent Thomas J.Crowley contacted NU to warn us that Santa Claus is facing aninsurance crisis that could shut down his operation, which is rifewith hard-to-place risks–from commercial auto on his sled, toworkers comp for his elves, to property coverage for his isolatedNorth Pole workshop. Click below to read the full story, and feelfree to weigh in on how Santa could get out of this mess in timefor Christmas!

***
What If Santa's Insurance Was Cancelled?

BY THOMAS J. CROWLEY

Unconfirmed reports have been circulating that Santas insurancecoverage is in jeopardy of being seriously curtailed or evencancelled, putting delivery of toys for Christmas 2006 in seriousjeopardy.

An anonymous insurance industry source explained that Santasaccount presents major underwriting challenges, including thefollowing:

Santas North Pole home and workshop are in a very rural area,and fire protection is not adequate for the exposure. The home andshop combined are roughly 12,000 square feet (made entirely of ice)and does not contain a sprinkler system. The property is adjacentto a large body of water, increasing exposure to loss as a resultof windstorm. Icy conditions also lend themselves to slip-and-fallexposures.

Santa has a serious commercial auto problem. On his world-wideexcursion once a year, Santa has been known to drop unsecuredmaterial from the back of his vehicle, potentially causing damageto homes and other property. Santa also is getting on in years, andthere is some concern his driving skills havedeteriorated–especially in snowy conditions. Santa has also beenspotted riding without a seat belt, and due to lack of a credithistory, his score is ineligible.

Santas workers compensation program is also a serious concern.Many of Santas elves work in roles that require repetitive motion,creating a carpal tunnel exposure. Santa is also prone to OSHAcompliance problems as his workplace is a bit outdated, and hisemployees work around-the-clock every December.

Santas general liability may be his biggest problem. It seemsthe workload has gotten so great that Santa has begun usingsub-contractor manufacturers to help meet the demand for toysaround the world. He also reportedly lacks product liability,errors and omissions, and employment practices liabilitycoverage.

Santa lacks key man life insurance. So far he has beenunsuccessful in finding an affordable policy, as he is overweightand rather old.

Santa has been shopping his health insurance for years, but fewwill write such a small group, rates are soaring, and there are noin-network doctors at the North Pole.
Santa and his independent agent met last week to discuss options,with Christmas Eve looming. The agent explained he had sentsubmissions to all of his standard markets and severalwholesalers–noting that on the plus side, loss runs for the past100 years are all perfectly clean.

The agent told Santa he was sure he could obtain quotes for him,but the cost would go up quite a bit, coverage would be morerestrictive, and the carriers might not be as well known.

For the longer term, however, the agent had a number of riskmanagement suggestions for Santa to help make his account moremarketable.

Hire a fulltime risk manager, or at least allow his agent toconduct a loss control and safety survey of Santas home andworkshop.

Put together an employee manual and provide instructional DVDsto all supervisors and elves to avoid EPLI claims.

Expand his in-house manufacturing operation to eliminate the useof sub-contractors and control his liabilities.

Consider self-insuring some hard-to-place risks in a captive.Bermuda was dismissed as too warm, but Vermont would beacceptable.

Continue lobbying legislators to create a special federalreinsurance program just for Santas exposures. (Unfortunately,passage this year is unlikely, as Republicans believe the privatemarket should handle the problem without a government bailout,while Democrats see any such move as a violation of theConstitutions church-state separation.)

In the short-term, Santa is optimistic he will make his gift rundespite any insurance woes, with officials from major toymakers andgreeting card firms offering generous pledges of support if soaringpremiums threaten to sink his non-profit shop.

In addition, insurers are reportedly wary of cancelling Santascoverage for fear of receiving lumps of coal in their stockings–notto mention the bad publicity!

MERRY CHRISTMAS and a HAPPY NEW YEAR to us all!!!

Thomas J. Crowley is a partner at Maran Corporate RiskAssociates in Southampton, N.Y.