By Bill Russell, CEO, BRIA Insurance & Risk Consultants,
and Kevin Semtner, partner, Walthall-Sachse & Pipes Inc.

As society continues to flood a volatile economy with more lawyers and tort lawsuits, we have seen a spike in businesses buying coverage for employment practices liability (EPL), directors & officers (D&O) and errors & omissions (E&O) from our agencies. As members of Combined Agents of America (CAA), we hear the same stories from the other 42 independent agencies that make up our group across Texas, Kansas and Oklahoma. The buzz among our members is that sales of EPL, D&O, and E&O insurance are expanding at a brisk pace, and for compelling reasons.

CAA member BRIA Insurance & Risk Consultants, based in Austin, Texas, has grown its D&O and EPLI book of business by more than 40 percent in the last 2 years. During the same period, Duncan Fraser & Bridges Insurance, Pampa, Texas, another member agency, has seen its E&O sales grow by more than 160 percent.

Given the sluggish economy, our lawsuit-happy culture and the potential crushing damages, our members offer EPL to every business owner who has employees, or will be interviewing for employees, to address this exposure. Not only does it sell, but in many cases, it's required. For example, BRIA recently reviewed a janitorial business bid specs with a manufacturer where EPLI was a requirement to bid.

Although executive liability coverage traditionally protected larger companies, today's exposures make the need for protection necessary for even the smallest business. At Walthall-Sachse and Pipes Insurance, San Antonio, one of the agency's smaller business owner clients--a progressive veterinarian with multiple entities--now buys EPL on every practice he owns or sets up. These entities vary in size from three employees to 25. This is not something we saw 10 years ago, but today a growing breed of aggressive small business owners choose to hedge against this potential risk with extensive EPL coverage.

When work is slow and businesses lay people off, a growing number of former employees tend to file wrongful termination claims or other allegations of wrongdoing to overcome their financial losses. The $5,000 or $10,000 EPL limit provided in some business owners' policies no longer cuts it--that amount will not even get you up to the plate in the sexual harassment ball park.

To manage these escalating risks and protect our customers from the exuberant costs of potential lawsuits, agents must provide a more complete package of coverage--a package that arms businesses with D&O alongside the EPL coverage. Although producers have offered D&O protection to the public and non-profit sectors for years, today the private sector is brimming with growth opportunity.

One CAA member agency, Mims & Smith Insurance, Midland, Texas, has grown its executive policy packages--which include D&O, E&O, EPL and crime polices--by 160 percent between 2008 and 2009. When a business starts failing in the private sector, that's when its lenders, investors and suppliers tend to file a lawsuit against the leadership for a failure of duty, or alleged wrongdoing in making decisions that cripple the organization. Good news: our increase in D&O sales indicates directors, officers and employers have lost their appetite for these kinds of risks and want the safety net of insurance coverage.

Lower costs of EPLI and D&O further drives this uptick in sales. A steady decrease in cost, coupled with insurers packaging these coverages together, makes an attractive product. =With the growing frequency and severity of these types of claims, it is as important to provide these package coverages as it is to provide general liability and workers' compensation.

Related: Read "Hijacking D&O coverage"

Along with this new surge, we are experiencing growth in E&O coverage outside of the industries that traditionally buy this coverage because of customers increased awareness of their exposure, along with contractual compliance. In reviewing contracts for consulting firms, there is often a requirement for E&O insurance--unlike five years ago, when E&O was required only for the traditional professions like doctors, dentists, lawyers and architect and engineers.

If you are not having conversations with your clients and prospects about EPI, D&O and E&O, you're missing the boat. Not only will this protect your customer, but this type of policy growth may help your agency offset the soft market losses of revenue.

Founded in 1997, Combined Agents of America, LLC (CAA) is based in Austin, Texas, and is comprised of 44 independent insurance agencies located throughout Texas, Oklahoma and Kansas. By funneling the agencies' combined premiums, CAA brings larger volume commitments to insurance companies while empowering members to realize greater benefits from insurance companies, vendor discounts and other incentives. For more information, visit www.combinedagents.com.

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