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The PCOC Insurance Program Celebrating 25 Years! An Aspired Achivement
Voice Magazine June 2014 By: Paul Lindsay, Program director Consider the challenges we faced. In the mid-1980s, errors and omissions insurance (designed to cover the most frequent type of claim impacting the industry) did not exist. Many policies did not cover pesticide applications (no pollution coverage) — the very essence of the pest control profession. Those carriers that stayed in the marketplace increased rates by 100 percent to 1,000 percent. Yes, 1,000 percent! This effectively put many operators out of business. Through the leadership of Harvey Logan (then executive vice-president of the PCOC) and Carl Doucette (then of Western Exterminators and chairman of the PCOC insurance committee), the PCOC took a stance. They would prove, via a broad and detailed feasibility study, that the risks inherent to pest control were not nearly as bad as the insurance industry thought. Further, the insurance claims and loss ratio decried by the carriers were not as bad as they alleged. Thus, an insurance program based on facts and controlled by the PCOC could offer better coverages and services at affordable rates. In 1987, the PCOC assessed a $50 per member fee to fund the study. A request-for-proposal (RFP) went out to six key brokers. This event would set into motion what became the best part of my insurance career. I was sitting in my office at Fred S. James in San Francisco when the RFP came in. Jim Peterson, Rick Cowan, and I reviewed the well-written request. We were impressed with the position and optimism of the document. I was named the lead, with Rick and our staff in support. When I told my wife about this challenging project that night, she gave a little chuckle and pulled out a bumper sticker that read, "Say No To Pesticides." With a shrug, she said, "I guess I better not put this on our station wagon!" We still laugh about what became a pivotal moment in my career. Pivotal because the sentiment expressed on the bumper sticker personified the misconceptions that plagued — and continue to plague — he pest control industry to this day. You see, right then and there I believed in the PCOC's theory and vowed to help them solve this industry-wide crippling problem. Led by Carl and Harvey, Rick and I gave our presentation to an insurance committee comprised of eight additional members: Lee Blevins, Charlie Clark, Ben Diedi, Lyle Evans, Bob Gordon, Allen Kanady Jr., Michael Katz, and Gene Reeve. In their sage wisdom (either that, or we fooled them!), they selected Fred S. James. Over the next 18 months, the James team collected and analyzed the five-year history of the premiums and losses for more than 400 PCOs. We held onsite meetings with key carrier claims adjusters to discuss their handling protocols. Harvey and I went in the field with several underwriters to see branches one, two, and three in action. Neighborly Pest Management, Delk Pest Control, Clark Pest Control, and Admiral Pest Control were delighted to help. Through this study we learned: 1.Insurance underwriters mixed structural pest control with agricultural, crop, and orchard applications when they considered the risks presented by structural pest control operators. 2.The insurance underwriting "bible," Best's Underwriting Guidelines, furthered this misconception by including animal control (domestic and wild), county Vector control, and long since banned chemicals, etc. in their analysis. 3.Structural pest control industry loss ratios were 45 to 55 percent, not the 100 to 200 percent that several carriers claimed or alluded to. 4.The carriers were largely not fighting chemical sensitivity claims, falling victim to the hyperbole and misconceptions caused by ignorance, bias, and some environmental groups. 5.The lead carrier at the time would hand out $5,000 per instance of alleged E&O claims rather than fight them, saying they were "too expensive to deny, too expensive to defend." On the humorous side (stemming from a sad loss), I also learned to not expose underwriters to the war stories of the field technicians. I will never forget one fume crew member jumping down from a one-story roof, strolling over to us and bemusedly relating how he had just accidentally fumed two cats! Of course the underwriter was a major cat lover and nearly fainted on the spot! I really earned my combat pay for this project when I gave quarterly study updates at the PCOC board meetings. Jim Clark Jr., Dan O'Connor, Bob Gordon and others really put Carl and me through our paces. "How do we know these numbers are true?" "How current and valid is this data?" "When are we going to see some positive results?" There was no sweet-talking those guys! Between the summer of 1988 and March of 1989, we met and presented to 22 insurance carriers. With Industrial Indemnity we found the One. Together, we re-wrote the Best Underwriting Guidelines, re-designed the pesticide and herbicide applicators endorsement, and launched true errors and omissions coverage. We developed structural pest control underwriting guidelines designed to ensure a long-term and stable insurance market. Finally, we created loss prevention protocols to improve business practices and keep loss ratios low. Thus, on April 1, 1989, I had the honor of writing the PCOC Insurance Program's first policy, Hydrex West Coast, owned by Dan O'Connor— a policy still in effect today. Between 1989 and 2014, we have written more than $150,000,000 in premiums and paid out approximately $75,000,000. The starting general liability rate per thousand dollars in 1989 was $80.00; today, it is $20 before risk credits! With the PCOC, we have fought and beat fraudulent claims, pushed back the plaintiff attorneys and thwarted the "toxic mold" threat. Through "lessons from losses," training and education, and risk control practices, we have helped to improve industry practices and improve the industry's public image. We have kept PCOs in business and made them financially whole. And, just in case we have made it look too easy, consider that the majority of association-backed insurance programs fail within the first 36 months. Only a tiny percentage last 25 years. How have we done this? Vision, a mandate and teamwork. A vision born from adversity and a mandate from gifted PCOC leadership that said the threat would be conquered. A leadership that drove and continues drive the best pest control insurance program offered. In closing, I get a lot of credit for the program's success, and I really appreciate the compliments. However, as you can see, I was but one of many that made it happen. From the insurance side, I have to thank the original team: Jim, Rick, Marc, Greg McDermont, and Bruce Horton (and others too numerous to mention.) The addition of Laura Coy and Michael Glauser in 2002 and leading the present-day team has been extremely gratifying to me. They are taking this program to a whole new level of professionalism. From the pest control side, I must mention the awesome support, advice, and leadership/friendship offered by: the Peacock board of directors (past and present), the PCOC Executive Committee (past and present,) and especially Lee Whitmore, Lee Blevins, Charlie Clark, Allen Kanady. Gene Reeve, Steve Delk, Hal Stein, Jim Shockey, Greg Augustine, Fred and Nancy Rose, Duff and Janet Thrasher, and too many others to mention here! Then, a special thank you to Harvey and Carl; what started out as a dream became reality — thank you for keeping me and the program on track! Well, I see another claim has hit my desk while writing this article that I have to get to, so I will end here by saying congratulations, and here's to another wonderful 25 years! |
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