Archive for June, 2010

Contractual Liability and/or Compliance?

June 18, 2010

Attention!  Accountants, Lawyers, Lenders, Business Executives, Managers and Owners!

Having spent 2+ years reviewing $1.5+B in Commercial Loans provides one with an insight into the insurance industry that even an insurance professional would never normally experience.

What do I mean?  Well, with nearly 20 years in Retail Commercial Banking in both Canada and the USA, I knew that banks do not fully (and never will) comprehend the Commercial Property/Casualty Insurance business.  Yes, I did have some insight into the wonderful world of insurance, having grown up at the dinner table with a father and older brother discussing the intricacies of their day’s activities – Lucky Me!

So that just made it easier to enter the field when I decided that I needed a change and I now have spent 20+ years in this sector of Financial Services.

Following 9/11, I wanted to become more attuned to Risk Management and obtained my Canadian Risk Manager designation (well, I was a Registered Insurance Broker and had previously obtained my American Institute of Banking Commercial Lending Diploma, so why not?) in order to better understand risk as opposed to insurance.

Well, I thought I had seen a lot until the past 2 years of working on Loan Reviews – and this was a real eye-opener!  Borrowers agree to terms in their Loans whereby they don’t ever ask their insurance providers about the terms/conditions regarding insurance and costs, prior to signing (yes, they may confer with their Lawyers but, unless their Lawyer works with qualified insurance people, they cannot adequately advise on the subject of insurance, either).  Lenders neglect to confer with Risk Consultants prior to formulating their own desired requirements and Lawyers do not fully understand what is available and what will never be available in the insurance industry.

An example, I saw, is a Lender who decided to offer facilities to a Client on a number of properties  with a $5Million Liability minimum requirement.  The Insurance Broker offered $5Million on a blanket basis for 37 properties in the Aggregate – something that would, in many cases, be grossly inadequate!  The Lender did not have the ability to amend their Agreement, except within a condition they preferred not to apply to the Borrower – something that I encouraged be done.  I also know of several insurance “professionals” who would never have sold only a $5Million Liability policy in the Aggregate without Umbrella/Excess coverage being applied but the firm insuring these risks did not do so.

What a problem, right?  Well, how about insurance providers who only wish to make a sale and never request copies of leases, contracts, franchise and loan agreements, etc. but also provide ridiculously low deductibles for extremely high property values and then complain that their clients will not pay the added insurance premiums!  I saw this time and time again.

Imagine being able to purchase insurance or consulting service from a professional who was able to reduce your insurance costs and provide better coverage – is this possible?  Many times, the answer is a simple YES!

If anyone – lawyer, accountant, lender, insurance sales professional or a company/business-owner – wishes to contact me for further discussion on this topic, please e-mail me at with the Subject Line – Contractual Liability and/or Compliance?

I look forward to hearing from anyone reading this blog here or on one of my online network sites.