If you are, it's the one place owners aren't protected from a significant amount of risk. And they've already taken a lot of risk to get here, so it's critical to ensure they're protected.
The solution to this problem is D&O coverage. It's truly that simple, yet it's rarely discussed as an essential piece of the insurance pie.
Greg Seligman, Management Liability Underwriter, talks about the neglect he sees in providing D&O coverage and how offering it can become an easier conversation.
Joey Giangola: Mr. Greg Seligman, how you doing today sir?
Greg Seligman: I'm good. How about you?
Joey Giangola: Greg, I'm doing all right. I'm doing all right. I want to know this before we get too carried away with things today. Is there a relatively useless item, maybe a common item that is maybe deemed to be useless that you really don't use that often, like something that people always need around them or kind of just a small, innocuous item? Is there something that you have just abstained from taking part in?
Greg Seligman: That's a good question. Paperclip. How about a paperclip?
Joey Giangola: I like that. That's a great one. Any particular reason that the paperclip annoys you or bothers you or doesn't find your favor?
Greg Seligman: They fall to the floor. They make a mess. They get all crumply so you can't use it anymore and it becomes a waste. Stapler in my mind is much more effective.
Joey Giangola: That's a perfect answer. I definitely like that. For me, I got to go with the thing at ChapStick. Everyone's like, I need ChapStick, I just got to have it. And I don't think I've ever bought one in my entire adult life. I just go with whatever I got going. I think it creates a dependency, maybe an unnecessary dependency that I don't quite understand. But apparently it's a thing and it's a thing that people are very passionate about. Well Greg I mean the reason I bring that up is I want to talk about maybe a particular coverage that people may find will say useless or something that they don't feel that they necessarily need as maybe as much as they should. And around the executive liability, the management liability space. I guess I even want to maybe start by defining the two because those words are sometimes used interchangeably and they're technically not. So is there something around that lines of thinking or around that coverage that agents maybe don't fully see?
Greg Seligman: It's a good question. Very good question. I think for me side A D&O for small business is overlooked and I think that's an important coverage that needs to be addressed. The reason is is that this company and small business they're not allowed, they cannot for some reason identify the individual insures in case of a loss but they don't have the money. There's bylaws that say they can't do it. Individual insures may literally have their own personal assets taken away from them on the line. Lose their house potentially worst case scenarios, college funds for their children. And when you have some side. A coverage it's intent is to protect the individual insures.
So if there is a claim which the company cannot help them out with, side A kicks in and its first dollar and that will protect them and defend them and indemnify. So they don't necessarily have to lose the college fund for their children or future funds for the retirement. That's an important coverage, especially for small businesses that don't have a whole lot of capital to work with in the first place. In my mind, it is for persons like me the most important coverage because at the end of the day it saves a person individually. That makes a difference.
Joey Giangola: What do you think the awareness level is for like you said, how far down that can kind of go to impact somebody's day to day life because oftentimes they sort of isolate the business activity outside of like you said, their personal assets and things. Are agents having conversations on that level to where you think most business owners are aware of that risk?
Greg Seligman: I'm not sure. My impression is that most agents really understand EPL coverage. It's easy to identify, easy to say you've got employees, employees will make a claim, union protection from that. That's easy enough coverage to explain and understand. Using side A D&O coverage I think it's more difficult to understand and then explain because D&O coverage can be pretty complicated when you've got the company side C, when you've got the side B as well, more company identification. And then the side A is overlooked. I don't blame people for overlooking it because there's so many components of insurance, the GL policy, products liability. But when it comes down to it to protect the individual for the work that they do, I think that's essential. So I think conversation's the best that should happen and not necessarily do happen.
Joey Giangola: I think EPL is definitely something that has over the last I'll say 5 to 10 years become way more common of a conversation. Would you agree in terms of where would D&O sit I guess maybe in that sort of maturation process in terms of sort of penetrating that level of conversation and familiarity?
Greg Seligman: I think public company D&O which we don't cover here is very important and most people are familiar with that in that world. But for D&O coverage for smaller businesses I think it's overlooked because people say, I don't need the owner covered. My shareholders and my family they're not going to sue me so why do I need it? I think it's just a bit overlooked for the people who really need it.
Joey Giangola: Well you say your family's not going to sue you but that's probably not always the case at least from what I understand. That there's probably some instances where things get really nasty. And do you think people underestimate actually how things can get sideways quickly when it comes to business?
Greg Seligman: When it comes to money, absolutely. I've seen so many family fights and people broken up over it. And it's the most emotional time when you actually need the most help for people to guide you to make proper decisions. And that's what we can do as well.
Joey Giangola: So what is that conversation talking about the coverage that an agent maybe would maybe walk in the door if they're not talking about... Maybe let's establish a threshold. Better question, let's establish a threshold for a company where maybe the side A and just the D&O conversation hasn't maybe existed in any sort of regularity. Would you sort of draw a line somewhere in the business landscape to say, if you're here, if you're dealing with this type of business and under, this is maybe a slightly different angle that you'd want to take the D&O conversation and how you can approach them to make it more relatable.
Greg Seligman: I think one of the components of the question is how else to approach D&O is think of it as not just necessarily shareholder suits, although you certainly do find especially family squabbles which can turn into that. But also maybe even regulatory situations which our policy does cover, but that does play a role. Any regulatory body small or large can say, hey, we found this wrong with you. And then they're going to make a claim, an investigation. And at this point it's wise to have coverage, especially defense to make sure that this doesn't become a larger problem. Even by lawsuits against competitors, competitors is out there and they want what's in their best interest not your best interest.
We certainly have seen claims just from a competitor making allegations against our insureds that may or may not be unfounded or founded but certainly a good defense is very helpful in coming to a smart resolution. It's also just in times of these financial times any financial difficulty covenants that are made to financial institutions and with the best possible intentions they can't be met because if a natural situation is very unpredictable that becomes an issue too. And so again, with defense, with the assistance of counsel that could really reduce the amount of stress of individual insureds and it also helps save the company in the long run.
Joey Giangola: Is there a particular area of businesses on the smaller side of things that maybe this is a better or maybe easier conversation to have where they might see the need maybe a little more clear, there's less convincing or handholding through the process to where you can sort of present the coverage and sort of get it going quickly?
Greg Seligman: I think in any business that we see there are always these issues. Whether it's going to instruction, whether it's manufacturing, technology could have a role, e-commerce could have a role when you've got interstate coverage as well, interstate actions between states, businesses like that. Yeah it's very important because you don't even predict, cannot predict what other states that you do business in may be thinking, especially e-commerce in that situation. If you are a manufacturing or a wholesale distribution and you sell your goods all around the country or even internationally, it's good to have assistance when the unpredictable does happen.
Joey Giangola: And what type when it comes to actual coverage? I mean is there certain limits, what should I guess an agent be looking for in a business and how should they be looking to protect them? I mean what type of I guess overall limits do you think they should be approaching in terms of making sure the business is adequately covered?
Greg Seligman: Most of the policy for small business are 1 million. So we'll see 500,000 we'll see 1 million. I'm not sure the cost difference between 500,000 and a million is that great overall when especially you're looking at a defense. And defense costs can get out of control with discovery if things don't get settled initially. So you could have runaway expenses simply due to who the people are suing you and what their intentions are. And if they don't want to settle then little higher limits could be helpful in that situation. So yeah, most would go between 500,000 and a million of limits. More than that, probably not necessary but certainly always available. Again, it depends on the nature of the business and what they really want to spend as well.
Joey Giangola: Yeah, there's always that sort of like you said X factor of you don't know where the claim's going to come from and the intention behind it. When a building burns down you kind of know what's going to happen there in some cases. How hard is that to sort of again, present those uncertainties to the end insured of saying, listen it really just depends on who you get upset, the scenario in which it goes wrong. Is there any tricks to sort of bringing them around to that conversation?
Greg Seligman: Yeah, that's a good question. I believe it's going over certain scenarios. I like to think that defense itself is a very powerful tool because that's protection that somebody is suing you, somebody who may even have deeper pockets. Or a competitor who just wants to put you out of business or just make money out of lawsuits which we have seen frivolous lawsuits. Again, the fear of the unknown is powerful and having a defense really helps people sleep at night. Things you cannot predict is what insurance can be for.
Joey Giangola: Now I kind of want to focus in a little bit on I will say the overall profitability in terms of the time somebody has invested in getting one of these policies submitted and issued versus what they're going to get on the backend? What are some guidelines to making sure that they're targeting profitable business and doing business that is relatively easy to handle?
Greg Seligman: I think from businesses I've seen, I generally don't have to ask a lot of questions. Manufacturing, again it's simple to understand. You manufacture goods, you've got maybe a decent balance sheet, number of employees. That's fairly simple. Same thing maybe even with the construction. You can quickly understand the risk, quickly understand number of employees. As well for EPL coverage, quickly understand the financial stability of the company. And that does not take a whole lot of time. With our platform for example you can input the information and really within 5, 10 minutes you're done with it. It could give you a quote that's bindable and really just ask a simple couple questions. For example, what's the revenue? What are the assets? Have there been any claims? And that's pretty much the questions that we'll be asking and there's a couple more but in a nutshell within 5, 10 minutes you're done. And it's a very efficient process.
Joey Giangola: So I guess those questions alone at certain thresholds they start to create problems. So at what point does revenue become a problem? At what point does assets become a problem? And then obviously claims in any scenario are generally a problem. But what threshold, again, when you start going down these questions does an agent have to sort of be worried about saying, okay, they're doing 2 million in revenue, boy that might put them into a different category now?
Greg Seligman: Generally it depends on the nature of the business but really up to 50 million doesn't present any situations. When you get into about 50 to 75, 100 then it really requires just a bit more of a look. But if you're going for 5, 10, 20 million in revenue, that's pretty straightforward.
Joey Giangola:And then as far as like again just the size of the company, the assets, is there anything there that can cause a problem?
Greg Seligman: The larger assets certainly if you're looking it can be 100 million, 250 million in assets that would raise a question especially let's say if the revenue does not commensurate with those assets. For example if I have 2 million in revenue and 250 million in assets, that will raise questions. So it's common sense underwriting as well.
Joey Giangola: And as far as claims goes, I would imagine is it one strike, two strike, what's the scenario? What's the limit on that? What's the conversation? If there's any claims it's we're going to have to take a look sort of thing?
Greg Seligman: Yeah and generally if there's a $5,000 claim and it's the only claim they've had in five years, it shouldn't be a big deal. If there's multiple claims usually where there's smoke there's fire. And the questions that I really will ask are what have you done to alleviate this claim? To make safeguards? And most of the time the companies after one larger claim. So we did something wrong, we've made changes, now we're a pretty good company, we recognize that. Mistakes happen but we've spent the time to correct it. That's fine. It's when there's multiple claims and nothing is done to change it that becomes an issue.
Joey Giangola: What's the timeline on that sort of rehabilitation process? If a agent did have a client that was maybe had just sort of come across that versus this was two, three years ago. Is there any sort of parameters for when these things need to have happened?
Greg Seligman: Normally most companies will say three years, they'll look at three years. If the claim happened a year ago and they could articulate what they've done and the changes that were made, I'm fine with that. If something happened five weeks ago the bad actions are still brewing. So we have to be careful about that. But six months, a year's time, if we can see the changes have been made genuinely then I'm okay with that.
Joey Giangola: Now, if you had to sort of wrap all this up together and sort of pinpoint the biggest sort of takeaway for an agent to again, walk into a business and have a more intelligent, a more effective conversation around these coverages, what's the thing that stands out to you the most?
Greg Seligman: I think for me again for the coverages we're talking about, I don't want to diminish EPL because that's the central critical coverage for almost every business. Employer lawsuits are happening and will happen more. Yeah I think as you started out with the side A D&O coverage is really important because in a nutshell, protecting the personal assets, the people who took the risk to start the company up. And that's important because when all said and done, one allegation could make or break a business. And our insurance is designed to cover those people. Look, I hate to use the cliche main street, but it really is about people who are taking the risk, who are putting the shingle out and working hard to start up and create a business. And we can protect that.
Joey Giangola: All right Greg, I got three more questions for you sir. And the first one is what's one thing you hope you never forget?
Greg Seligman: Empathy, to relate to others, their success and their failures and my success and my failure. Never forget that.
Joey Giangola: Now on the other side of that, what's one thing you still have yet to learn?
Greg Seligman: I'm never going to stop learning. So that's a really good question. I wish I knew what I don't know but need to know down the road. I wish I had that hindsight and foresight.
Joey Giangola: All right Greg, last question to you sir. If I were to hand you a magic wand of sorts to reshape, change, alter, speed up really any part of insurance, what is that thing? Where is it going? And what is it doing?
Greg Seligman: That's a really good question. And I think for me it would be for businesses to recognize that insurance does not have to be a painful process. That they could easily obtain it. And that it really does offer protection when they need it. Not when it's too late which is the problem but when they need it right now. So they don't have to have those regrets, it's not needed.
Joey Giangola: Greg this has been fantastic sir. I'm going to leave it right there.
Greg Seligman: Thank you Joey. Appreciate it.