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The Rough Notes Company Inc.



July 28
09:07 2020


An auto owner was insured under a personal automobile and a personal umbrella policy from the same insurer. The auto policy’s limit was exhausted, responding to the claim where a person, given permission by the vehicle owner to use the car, struck several persons on the side of a roadway. The injured parties sought coverage under the umbrella and the insurer filed for a declaratory judgment. The carrier argued, successfully at the lower court, that it had no obligation to respond to the loss. The injured parties looked for the opinion of a higher court.

Here is how the higher court determined whether the living situation between the auto owner and the permitted driver made the latter a dependent under the umbrella policy.

Lawrence Archembeault was insured under a personal automobile and a personal umbrella policy from Allstate Insurance Co. (Allstate) when he was sued for a serious auto accident. In 2011, a member of his household was operating Archembeault’s car when that driver struck and injured an officer Rigby and two others who were dealing with a disabled vehicle located on the shoulder of a roadway. The injured persons sued Archembeault for coverage, seeking damages under the umbrella policy after coverage under the auto policy was exhausted. Allstate filed for a declaratory judgment that its umbrella policy did not need to respond to the claims. Archembeault, the vehicle operator, and the injured parties filed an appeal after the lower court ruled in favor of the insurer.

Upon appeal, Allstate argued that its umbrella policy did not cover the vehicle operator because the driver did not qualify as an insured person. For three years before the auto accident, the vehicle driver lived in Archembeault’s home. However, during that time, he left the household for other living arrangements several times. For 14 months prior to the accident, the driver was employed and paid monthly rent to Archembeault. The periods when he didn’t pay rent, he performed various household duties such as lawn and grounds maintenance. The driver, besides rent, also started paying for a variety of personal expenses such as telephone, food and clothing which, until he got his job, were paid by Archembeault.

The lower court examined the umbrella policy language that defined insureds to include any dependent person who is a resident of the policy holder’s household and under that person’s care. It examined the circumstances of the living arrangement. Afterwards, it ruled that the driver was not a dependent person. The defending parties argued that the policy language was ambiguous as “in the care of” and “dependent person” were not defined. Therefore, coverage should apply to the vehicle driver as a dependent person.

The higher court focused on two cases it found were relevant to this situation. It determined that the policy language could be interpreted in different ways, yet still have meaning that can be relied upon to determine whether a party is an insured. The court considered a number of factors, particularly the level of financial assistance provided to the vehicle driver and the amount of control that Archembeault exercised over the adult living in his household.

In its opinion, while the driver, at various times, did benefit from some financial support, it was not at a degree that demonstrated substantial dependence. The court noted that Archembeault never exercised control with regard to the vehicle driver’s comings and goings nor was he ever involved in disciplinary actions. Further, the vehicle driver, at the time of the accident, was fully employed and his living arrangement allowed him to terminate and resume as he pleased. In consideration of those factors, the lower court ruling that the vehicle driver did not qualify as a dependent person under the umbrella policy was affirmed.

Teresa Rigby (Plaintiff–Appellant) v. Allstate Indemnity Co. (Defendant–Appellee) – No. 225 MD App 98 Court of Special Appeals of Maryland – September 20, 2015. Affirmed – 123 A 3d. 592 WL

Prudent To Secure Higher Levels of Protection

While the above loss situation did not result in the driver securing coverage, it does not change the fact that personal automobile risks can be substantial. Therefore, it can be critical to make use of the significant, additional layer of protection available from umbrella policies. While the term, “umbrella” is not as popular as it once was, it is still accurate as it provides excess coverage that supplements what is provided by primary policies that cover residences, vehicles, and other personal liability policies such as dwelling liability, boatowners, motorcycles and personal recreation liability.

Even when primary policies are written for higher liability limits, they may still be inadequate when an accident involves injury to several persons or destruction to highly valuable property. Therefore, a policy that steps in when initial coverage is exhausted is critical.

Here is an excerpt of wording on underlying coverage requirements found in the AAIS Personal Umbrella Section found in PF&M.

(November 2017)

Agents and brokers have to keep current with the underwriting requirements of companies with which they arrange personal umbrella protection. A key responsibility is to be vigilant regarding underlying insurance requirements.

The above precaution allows an insurance professional to handle renewals and new policies without unnecessary delays and problems. One practical, time-saving step is to make certain that underlying insurance is renewed at current required limits so that such policies need not be endorsed with higher limits at the time of renewal or when new umbrella insurance is ordered.

The minimum required limits may vary by insurance carrier and are established for all sources of primary coverage such as the following:

  • Automobile
  • Comprehensive Personal Liability
  • Watercraft Liability
  • Non-Owned Automobile Liability
  • Owned Recreational Vehicle Liability
  • Professional Liability insurance
  • Other vehicle or craft liability policies

Depending upon the state or company preference, the limits may be expressed as split limits or as combined single limits. It is rare for required limits to be below $100,000 and much higher limits, such as $250,000/$500,000 split or $300,000 combined for auto liability, are likely.

It is a condition of coverage that underlying insurance for the limits specified in the declarations be maintained during the term of the umbrella insurance. Accounts need to be monitored carefully to avoid errors or miscommunication about intended protection.

Special problems may be avoided by monitoring an account. Maintaining contact with a client may prevent gaps or overlapped coverage. Inquiries made to a client could uncover the existence of previously unknown exposures such as newly acquired vehicles or craft, in-home business activity, or additional property or driver exposures.

Example: A-Beta Agency handles the personal account for the Mannerly Family. They have sold the Mannerlys a full array of personal lines policies including an umbrella. In order to keep tabs on their client, they regularly send questionnaires prior to policy renewals. An gent is reviewing the latest questionnaire and discovers that the family has begun hosting a foreign exchange student who is also allowed to drive the family’s cars. He also notices that Mrs. Mannerly has started a mail-order craft business. The agent contacts the Mannerlys for a visit to discuss how these new exposures are properly met by their underlying and umbrella coverage.

Higher Exposures Creates Need For Identification

While umbrella policies were, for many years, only seen as a niche product for those with high, personal net worth, that is no longer the case. Unfortunately, the greater need for higher levels of liability coverage is due to an increase in the number of lawsuits and the propensity to seek higher levels of recovery. Further, there are more activities that may result in more serious harm to others. Consider injuries to others involving mishaps with hunting, hosting events involving alcohol, accidents at parties involving ziplines, or trampolines and pool parties.

A course of action that is always useful is to take steps to identify situations where a need for additional coverage is more likely.

Below is an excerpt of a list of exposures that could indicate a need for additional protection from the Personal Risk Survey found in Advantage Plus.

Because aspects of your life change from year to year, you and your agent should use this form for discussion to assure that you are properly covered.

Do you have collectibles: antiques, fine art, stamps, coins, etc.?

Yes No

Do you have costly sporting equipment or firearms?

Yes No

Do you have valuable jewelry or furs?

Yes No

Do you have valuable photography equipment?

Yes No

Do you have a business in your home?

Yes No

Do clients or customers come to your home?

Yes No

Do you own professional tools or equipment?

Yes No

Do you keep samples or items for sale in your home?

Yes No

Do you baby-sit or have child day care in your home?

Yes No

Do you own rental or income property?

Yes No

Do you own investment property?

Yes No

Do you own recreational vehicles: boat, jet-ski, camper, cycle, etc.?

Yes No

Have you remodeled your home? Have plans to do so?

Yes No

Do you have an above ground or in ground swimming pool?

Yes No

Do you have detached structures: gazebos, storage barn?

Yes No

Do you have a satellite dish?

Yes No

Do you have pets?

Yes No

Do you have roomers or boarders?

Yes No

Do you have domestic help, babysitters, landscapers, and house cleaners

Yes No

Do you travel frequently(domestic or foreign)?

Yes No

Do you have a wood burning stove?

Yes No

Do you have a fireplace?

Yes No

Focus On Interests, Create Opportunities

Be open about what is at the core of handling exposures faced by individuals, their activities, and interests. Above we mentioned the use of a tool to assist with exposure identification. But paying attention to others after asking “What do you like to do when you’re not working?” Don’t let your focus waiver when information is shared. You often receive a great deal of information about what is important to a person. That information may lead to your exploring situations that may reveal unaddressed exposures. Hobbies, collections, and serious leisure interests are often accompanied by liability exposures that represent coverage gaps.

Here is an article on creating a niche market, which includes umbrella sales, from the archives of Rough Notes Magazine in Advantage Plus.


By Donna Gray

Chances are there’s something you love even more than insurance. Whether you’re a biker, art collector, or baseball fan, you can develop a specialty niche around a passion you pursue in your personal life. And when you merge your personal interests with your professional goals, the resulting sales and infectious energy it generates at your agency can be tremendous.

Whatever hobby, leisure activity, or industry you want to leverage into new business, you may want to consider five tips based on the successful efforts of Klinger Insurance Group in Germantown, Maryland, who offer specialized insurance for the sports memorabilia market.

Open your mind to possibilities. Almost every physical object requires some form of insurance, assuming its owner wants to protect its value. And many activities require personal safeguards against injury or financial loss. That means the categories of specialized insurance a producer can offer are virtually limitless. How about dog show handlers, collectible automobiles, skydiving, bungee jumping, or mountaineering? What about protection for the growing number of home-based baking businesses or for home school groups? Insurance is available for rowing, historic firearms, musicians and instruments, beekeeping—the possibilities are endless.

Think about your lifetime passions—perhaps a hobby you walked away from after starting a family or moving to a new area. This could be your opportunity to reignite and reconnect with a favorite pastime while getting paid to do so.

In the case of Bob Klinger, CPIA, LUTCF, president and chief executive officer of Klinger Insurance Group, his fascination with sports memorabilia started when he purchased his first pack of baseball cards for 25 cents when he was seven years old. By age nine he was selling those same cards at flea markets for a profit. Ever the entrepreneur, he began to promote sports card shows at local fire halls; by then, some of the original penny cards he had purchased were trading for up to $170 each.

Propelled by success, Klinger opened and operated three Triple Crown Sports Cards stores by age 18. After selling that business, he got involved in an organization that hosted national sports shows at convention centers and worked to promote and authenticate signed sports memorabilia.

Even after his insurance career began, Klinger maintained a passion for sports memorabilia. But it took a light bulb moment to realize how the two could intersect.

Engage in conversations. Klinger, who is president-elect of the American Insurance Marketing and Sales (AIMS) Society and a member of the Rough Notes Agent Editorial Advisory Board, notes that his specialization in sports memorabilia insurance began with casual conversations and interactions with the professional athletes, sports agents, and fellow collectors he met at sports shows. One athlete shared a story of a recent robbery during which his own family memorabilia were stolen. Show vendors had tables filled with valuable pieces that prompted considerable interest. Collector after collector described the details of their own items.

All the collectors, Klinger observes, were eager to highlight their unique memorabilia, and they knew which items were most valuable. It soon became clear to him, however, that the majority had never considered the need for specialized insurance or thought about the potential financial consequences if items were damaged, lost, or stolen. After all, most collectors purchase items individually over time and often fail to realize the significant value their collection represents.

The power of a personal connection based on a shared passion is that any follow-up discussion of insurance feels less like a sales pitch and more like an offer to serve as a resource. “I was genuinely interested in their items, so our conversations were sincere,” explains Klinger. “Once we had established that connection to items, we both loved, it became a natural next step for me to ask them if they had their collections insured.”

Follow your own passion, and you’ll find that instead of dreading the idea of prospecting, you’ll begin to relish the pursuit because it’s connected to something you already enjoy. In Klinger’s case, he finds considerable excitement in insuring professional athletes and sports memorabilia collectors. “It allows me to relive a boyhood dream,” he says. “And it’s a great feeling to find a client with a mutual hobby where you can share memories and bond over a common interest. The process of collecting, selling, meeting athletes, and building business relationships with them is incredible.”

Go online. Attending events, conventions, or trade shows related to your area of interest can be a great way to find prospects, but don’t forget about the power of online relationships.

Find the Twitter feeds, Facebook pages, and websites that relate to your passion. Just like the conversations Klinger started over memorabilia tables, engage in online discussions, share resources, and mention your insurance specialization when appropriate. Position yourself as someone who is equally interested in the topic, and your conversations can evolve seamlessly to include insurance.

Remember that people worldwide share your interest. A dedicated Web page and online promotion may help you reach a previously untapped market.

Know your stuff. “You can’t be an impostor,” says Klinger. “The people you want as clients will quickly label you as just a salesperson if you don’t know about the category you want to insure. You don’t have to know everything, but you’d better know more than the average participant.” Use correct terms, know the trends, and understand the risks. Of course, if it’s a hobby or passion you already have, this shouldn’t be tough to accomplish.

Parlay the resulting new business into more new business. The same new clients you secure because of your specialty have broader insurance needs, so don’t forget to cross sell after you’ve wowed them with your niche market service and know-how.

In Klinger’s case, the professional athletes, sports agents, and super collectors he’s met are typically high-net-worth individuals, so he’s acquired considerable business that way. His agency—the Rough Notes July 2015 Agency of the Month—currently insures three professional boxers, two WWE wrestlers, seven NHL players, one MLB player, five retired MLB players, six NFL players, 13 retired NFL players, two retired NFL coaches, one professional pool player, two retired soccer players, and six NBA players, all of whom were introduced to the agency through their shared sports memorabilia connection. Klinger offers these individuals insurance for all aspects of their lives, including auto and homeowners, umbrella, life and disability, business, and more.

Not only does Klinger’s extensive sports memorabilia collection bring him personal joy and serve as a great bonding activity with his son Ryan, but he also has found it to be a powerful in-office promotional tool and icebreaker. Many of his items are displayed throughout the agency office, and this frequently prompts casual office tours and conversations with visitors.

What’s your passion? Wouldn’t it be great to enjoy it on a professional level as well? Spending more time focused on something you love while also generating more sales seems like a win-win that’s tough to ignore.

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