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The Profession

David Hornaday

David Hornaday knows risk managers have to be more fluent and competent in the financial world. Just procuring insurance isn’t enough anymore.
By: | August 3, 2016 • 4 min read

082016_Profession
R&I: What was your first job?

Working as a signalman for Consolidated Rail Corp. I did that for about a year and a half before I got my first risk management job as a claims agent for ConRail. That was a self-insured company, so they administered their own claims.

R&I: How did you come to work in risk management? 

ConRail got acquired by two different railroads and was split up, so I had the opportunity to either go with one of the railroads or look outside for another position, and I wanted to do more than just work with claims. I wanted to be exposed to the corporate risk management side of things. So I found a job as a risk manager for Suburban Propane in Whippany, N.J.

R&I: What is the risk management community doing right?

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We’re working closely with brokers and underwriters and communicating internally to bring the insurance expertise to companies that need it.

R&I: What could the risk management community be doing a better job of?

Risk managers should be aware of non-traditional risks and focusing on ERM, versus just the traditional insurance procurement function. That’s where the future of our profession is going.

R&I:: What was the best location and year for the RIMS conference and why?

This is a little self-serving, but I thought Vancouver in 2011 was great because I had never been there but always wanted to go.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Risk managers have to be more fluent and competent in the financial world. Just procuring insurance isn’t enough anymore. You have to have a basic level of financial knowledge to communicate with not only internal treasury and CFOs, but also with underwriters and insurers.

R&I: What emerging commercial risk most concerns you?

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Social engineering. The onslaught of fraudsters is relentless. Companies have to be vigilant. But the coverage surrounding that sort of risk is also emerging, so risk managers will have to pay close attention to that and keep up with that evolving coverage.

R&I: What insurance carrier do you have the highest opinion of?

We had a major loss recently and there was a handful of insurers who paid on that claim which I thought were exceedingly professional: ACE (now Chubb), Ironshore and XL (now XL Catlin).

R&I: How much business do you do direct versus going through a broker?

We use a broker for everything.

R&I: Is the contingent commission controversy overblown?

It probably was a little bit overblown, but I think it’s good that things are more transparent now.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

I’m probably a little more pessimistic than optimistic. I just don’t see signs of strength out there. There are still companies with tons of cash outside the U.S. which can’t really bring it back in a way that makes sense. U.S. oil production is way down since the price of oil is so low.  Of course, the lower gas prices help the average consumer and lowers overhead costs for businesses, so it’s a little bit of a mixed bag.

R&I: Who is your mentor and why?

My mentor in this business is Joe Racansky. He was the director of risk management and my boss at CyTec Industries, and I learned as much from him as anybody in my career.

R&I: What have you accomplished that you are proudest of?

Successfully resolving claims stemming from the Lac-Megantic train derailment in 2013.

R&I: How many e-mails do you get in a day?

I’d say about 100.

R&I: How many do you answer?

All the important ones.

R&I:: What’s the best restaurant you’ve ever eaten at?

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Prime 112 in South Beach, Miami. It was the freshest tuna I’ve ever had, and it was with the team from Aon, so it was great food and great company.

R&I: What is your favorite drink?

Gin and tonic.

R&I: What is your favorite book or movie?

My favorite movie is “Bull Durham.” It’s a baseball movie.

R&I: Who’s your favorite baseball team?

The Cincinnati Reds.

R&I: What is the most unusual/interesting place you have ever visited?

Key West, Fla., is pretty interesting. My wife and I have been there a few times and you always see something different.

R&I: If the world has a modern hero, who is it and why?

I was moved by the Chris Kyle story. I thought his life and story were inspiring.

R&I: What do your friends and family think you do?

I think they think I just buy insurance, when it’s really more comprehensive than that. They don’t know about meeting with underwriters and contract review and working on M&A deals.




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Workers' Comp

Do You Have Employees or Gig Workers?

The number of gig economy workers is growing in the U.S. But their classification as contractors leaves many without workers’ comp, unemployment protection or other benefits.
By: and | July 30, 2018 • 5 min read

A growing number of Americans earn their living in the gig economy without employer-provided benefits and protections such as workers’ compensation.

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With the proliferation of on-demand services powered by digital platforms, questions surrounding who does and does not actually work in the gig economy continue to vex stakeholders. Courts and legislators are being asked to decide what constitutes an employee and what constitutes an independent contractor, or gig worker.

The issues are how the worker is paid and who controls the work process, said Bobby Bollinger, a North Carolina attorney specializing in workers’ compensation law with a client roster in the trucking industry.

The common law test, he said, the same one the IRS uses, considers “whose tools and whose materials are used. Whether the employer is telling the worker how to do the job on a minute-to-minute basis. Whether the worker is paid by the hour or by the job. Whether he’s free to work for someone else.”

Legal challenges have occurred, starting with lawsuits against transportation network companies (TNCs) like Uber and Lyft. Several court cases in recent years have come down on the side of allowing such companies to continue classifying drivers as independent contractors.

Those decisions are significant for TNCs, because the gig model relies on the lower labor cost of independent contractors. Classification as an employee adds at least 30 percent to labor costs.

The issues lie with how a worker is paid and who controls the work process. — Bobby Bollinger, a North Carolina attorney

However, a March 2018 California Supreme Court ruling in a case involving delivery drivers for Dynamex went the other way. The Dynamex decision places heavy emphasis on whether the worker is performing a core function of the business.

Under the Dynamex court’s standard, an electrician called to fix a wiring problem at an Uber office would be considered a general contractor. But a driver providing rides to customers would be part of the company’s central mission and therefore an employee.

Despite the California ruling, a Philadelphia court a month later declined to follow suit, ruling that Uber’s limousine drivers are independent contractors, not employees. So a definitive answer remains elusive.

A Legislative Movement

Misclassification of workers as independent contractors introduces risks to both employers and workers, said Matt Zender, vice president, workers’ compensation product manager, AmTrust.

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered.”

Misclassifying workers opens a “Pandora’s box” for employers, said Richard R. Meneghello, partner, Fisher Phillips.

Issues include tax liabilities, claims for minimum wage and overtime violations, workers’ comp benefits, civil labor law rights and wrongful termination suits.

The motive for companies seeking the contractor definition is clear: They don’t have to pay for benefits, said Meneghello. “But from a legal perspective, it’s not so easy to turn the workforce into contractors.”

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered in the eyes of the state.” — Matt Zender, vice president, workers’ compensation product manager, AmTrust

It’s about to get easier, however. In 2016, Handy — which is being sued in five states for misclassification of workers — drafted a N.Y. bill to establish a program where gig-economy companies would pay 2.5 percent of workers’ income into individual health savings accounts, yet would classify them as independent contractors.

Unions and worker advocacy groups argue the program would rob workers of rights and protections. So Handy moved on to eight other states where it would be more likely to win.

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So far, the Handy bills have passed one house of the legislature in Georgia and Colorado; passed both houses in Iowa and Tennessee; and been signed into law in Kentucky, Utah and Indiana. A similar bill was also introduced in Alabama.

The bills’ language says all workers who find jobs through a website or mobile app are independent contractors, as long as the company running the digital platform does not control schedules, prohibit them from working elsewhere and meets other criteria. Two bills exclude transportation network companies such as Uber.

These laws could have far-reaching consequences. Traditional service companies will struggle to compete with start-ups paying minimal labor costs.

Opponents warn that the Handy bills are so broad that a service company need only launch an app for customers to contract services, and they’d be free to re-classify their employees as independent contractors — leaving workers without social security, health insurance or the protections of unemployment insurance or workers’ comp.

That could destabilize social safety nets as well as shrink available workers’ comp premiums.

A New Classification

Independent contractors need to buy their own insurance, including workers’ compensation. But many don’t, said Hart Brown, executive vice president, COO, Firestorm. They may not realize that in the case of an accident, their personal car and health insurance won’t engage, Brown said.

Matt Zender, vice president, workers’ compensation product manager, AmTrust

Workers’ compensation for gig workers can be hard to find. Some state-sponsored funds provide self-employed contractors’ coverage.  Policies can be expensive though in some high-risk occupations, such as roofing, said Bollinger.

The gig system, where a worker does several different jobs for several different companies, breaks down without portable benefits, said Brown. Portable benefits would follow workers from one workplace engagement to another.

What a portable benefits program would look like is unclear, he said, but some combination of employers, independent contractors and intermediaries (such as a digital platform business or staffing agency) would contribute to the program based on a percentage of each transaction.

There is movement toward portable benefits legislation. The Aspen Institute proposed portable benefits where companies contribute to workers’ benefits based on how much an employee works for them. Uber and SEI together proposed a portable benefits bill to the Washington State Legislature.

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Senator Mark Warner (D. VA) introduced the Portable Benefits for Independent Workers Pilot Program Act for the study of portable benefits, and Congresswoman Suzan DelBene (D. WA) introduced a House companion bill.

Meneghello is skeptical of portable benefits as a long-term solution. “They’re a good first step,” he said, “but they paper over the problem. We need a new category of workers.”

A portable benefits model would open opportunities for the growing Insurtech market. Brad Smith, CEO, Intuit, estimates the gig economy to be about 34 percent of the workforce in 2018, growing to 43 percent by 2020.

The insurance industry reinvented itself from a risk transfer mechanism to a risk management mechanism, Brown said, and now it’s reinventing itself again as risk educator to a new hybrid market. &

Susannah Levine writes about health care, education and technology. She can be reached at risklette[email protected] Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]