Employee layoffs, doing more with less, feeling the pinch offederal cutbacks: More than ever before, public entities need toprotect themselves against liability arising from the currentuncertain economic climate. AA&B spoke with PaulFuller, president of wholesale specialty program operations,Glatfelter Insurance Group, about market conditions andthe ways in which agents and brokers can act as knowledgeableadvisors to their public entity customers.

AA&B: How would youcharacterize market conditions for public entity coverage from lastyear at this time?

Fuller: Frenetic and a bit schizophrenic. Lastyear there was more focus on market share and market penetrationwith less emphasis on underwriting results. Now, redundancies inreserves are gone, and carriers are realizing they're underwritingat a loss. Plus, investment income has disappeared and there areother pressures by rating agencies on reserves and surplus, socarriers are now forced to be very conservative in what they'reunderwriting. Right now, the marketplace is waiting for that firstcarrier to take the lead and announce they will have substantiverate increases, but that hasn't happened yet. Well-financedinsurers with good reputations that have made a commitment to thepublic entity sector will be able to present their case for higherterms, and they will be in a better position than new entrants tothe field. Some of the more aggressive carriers will take anaccounting of losses and reevaluate their commitment to this niche,and the newer entries will likely take an exit strategy.

AA&B: Please describe Glatfelter'sinvolvement with public entity.

Fuller: We have a 40-year tradition with publicentities, and are the largest public entity program manager incountry, with more than $350 million in program premium in thesector. What distinguishes us is that we're not all things to allpeople; we specialize in emergency services organizations, specialdistricts, select municipalities and school districts. Our spacinghistorically has been on smaller public entities, focusing onmunicipalities under 25,000 in population or special districts withcustomer service territories of under 25,000.

Our recent acquisition of Professional Underwriters hasincreased that spacing, so now we can offer brokers a viable,sustainable market for larger public entities, with populationbands exceeding 25,000. We're focusing on offering competitivepricing, but our real value is that we also offer full risk controland other value added services. Our biggest value is our ownershipof mistakes. We are experts in what we do: our programs are an inchwide and a mile deep.

AA&B: What types of coverages are typicallyrequired for public entities?

Fuller: Property and liability, includinggeneral liability, professional liability, management liability(wrongful acts, EPL and EB liability), boiler and machinery andequipment, and auto coverages.

Public entity exposures are basically in two categories:operational exposures, including first and third party, andmanagement liability exposures. The latter is especially importantbecause if a nonprofit board is volunteering, their personal assetsare at risk.

AA&B: What sorts of challenges are specificto this coverage in the way of servicing, claims handling,prospecting, etc.?

Fuller: For insureds, the biggest challenge nowis economic uncertainty. They're under pressure to reduce costs andsometimes have no choice except to look at insurance as acommodity. Brokers must be able to talk to their customers aboutthis. From our end, if coverage is a budget issue, we can offervariations on coverage and terms that won't adversely impact theportfolio, such as alterations to deductibles.

AA&B: Are you involved in organizationssuch as PRIMA or other trade associations representing the publicentity industries? How does this help in marketing andretentions?

Fuller: Yes, and since we've historically beeninvolved in small to medium public entities, we've also spent a lotof time with regional and state associations, specifically thosegeared to our niche markets: state rural water associations, stateschool board associations, regional and countywide municipalassociations. On the national level, we've done webcasts withgroups like the American Waterworks Assn.

AA&B: Are there any court cases,legislation or economic trends affecting this coverage?

Fuller: Although public entities areinstitutions that have many of the same exposures as anyone else,they also have a form of liability caps, immunity defenses or earlyreporting requirements that specifically protect them againstlawsuits. Public entities frequently see a lot of employment claimsbecause as a public organization, federal civil rights laws aremore directly germane to them.

We monitor state immunities, which are always being challenged.We're seeing a trend of class action litigation. There is aheightened level of responsibility for public entities to meet aneven higher standard. Court cases vary by state, but immunities arebeing challenged by increasingly sophisticated litigation. We tracktrends through our relationships with premier law firms whospecialize in specific public entity niches such as inversecondemnations, employment practices and religious land use.

AA&B: What are the challenges involved inworking with requests for proposals (RFPs)?

Fuller: The biggest challenge is separationbetween the customer and the broker, usually through a consultant,which makes the job more challenging. Consultants are very savvyand they understand what the customer needs; however, they have atendency to focus on premium savings. The best approach is arequest for proposal where the broker is selected to represent themarketplace and the insured. I'm not an advocate of RFP where yousend out to multiple brokers. That's not the approach werecommend.

AA&B: What do agents need to know to besuccessful at marketing public entity coverage?

Fuller: Specialization starts with a commitmentand the knowledge that success comes not as a sprint but as amarathon. You need a high level of technical skill, the ability tounderstand both insurance and the mechanism of a public entity. Itrequires a time investment in state associations, too. Myrecommendation is, don't be a public entity specialist: Instead, bea specialist within a subset of public entity coverage, such aswater districts or schools, that will separate you and createvalue. Inevitably you will understand the true exposures and canarticulate what you're seeing through your portfolio andnetwork.