Standing up for Insureds
In 2009, commercial property insurers collectively decided that they were no longer obligated to notify certificate holders or other designated insured third parties that policies naming them as insureds had been cancelled or not renewed.
That did not sit well with David Hershey, risk manager at Sprague Operating Resources in Portsmouth, N.H., who needed to know the insurance status of hundreds of vendors, partners and suppliers coming onto the premises of the company’s busy oil and gas terminals and other facilities that are open around the clock.
First, Hershey and his team reminded Sprague’s vendors, suppliers and customers of their contractual obligations to have their insurer notify Sprague of any cancellation of a policy on which it was a named insured or certificate holder, or else they wouldn’t be allowed to enter Sprague’s facilities.
But simply putting the onus on those business partners and customers was not enough. Hershey created another full-time position, a risk management compliance coordinator, to help vendors and suppliers obtain policy endorsements from their carriers, restoring the insurers’ obligation to provide notice of cancellation within 30 days.
Doing so also required extensive work with insurance agents, brokers and underwriters.
Since then, Sprague has received roughly 80 sample endorsements from various insurance companies reinstating the insurer’s notice obligation.
“This allows us to either maintain or raise our self-insured retentions in the absence of knowing whether or not individual firms that come on our property have current compliant insurance,” Hershey said.
“We would have to have lower deductibles or self-insure retentions in order to compensate for that deficiency.”
Hershey said that many insurance agents try to negotiate the notice of cancellation provision out of contracts, but “that’s easier said than done.” He reviews roughly 35 contacts a week, and the vast majority contain such notices.
“Commerce is not in business to justify the insurance industry, insurers, agents and brokers,” Hershey said.
“They are there to facilitate commerce, not to manage it to suit their own perceived business risks.”
Hershey’s “insistence” on the notice of cancellation certainly brought more focus and attention to this issue, and now brokers and carriers know that they must insure their clients’ policies are properly endorsed “to meet a very necessary and important requirement of our contracts,” said Jaime Michaud, who was hired as Sprague’s risk management compliance coordinator.
Moreover, Hershey has been helpful in pointing out common exclusions to some insurers’ existing notice of cancellation endorsements, such as notice of cancellation for non-payment, she said.
“Making sure that the notice of cancellation requirement is enforced has afforded a higher percentage of security for our company should a loss occur,” Michaud said.
Ronnie Mordan, director of marketing at Anderson Kill P.C. in New York City, said that Hershey “employs a practical approach to problem-solving.”
“His experience in risk and insurance is particularly evident in his ‘plain English’ approach to presenting on the sometimes complex topics of environmental insurance, policy language, and risk management,” Mordan said.
David is also being recognized as a 2014 Responsibility Leader.
Making a Difference
David Hershey is a prolific speaker and writer on risk management topics. The list of industry awards he has won and industry leadership positions he occupies runs longer than most restaurant menus.
He has also volunteered his creativity and passion about risk management by serving on the External Affairs Committee and Standards & Practices Committee of the national RIMS organization.He serves as a board member, president, vice president, and committee member — both now and in the past — for the New Hampshire chapter of the CPCU, the Massachusetts and Delaware Valley chapters of RIMS, the Philadelphia Area Risk Managers Association, the Governor’s Council on Insurance Fraud, and the Association of Certified Fraud Examiners.
Sharing his knowledge with others, Hershey taught classes for the Insurance Society of Philadelphia and the Independent Insurance Agents & Brokers of New Hampshire.
In challenging insurance carriers to restore their obligation to inform named insureds when a policy is cancelled — and establishing a process to make sure his company was protected — Hershey made a difference to countless others in the risk management community, not just himself or his company.
“Notification is one of the core concepts of risk management,” he rightly noted.
Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, perseverance and/or passion.
Responsibility Leaders overcome obstacles by doing the right thing over the easy thing to find practical solutions that benefit their co-workers and community.