Are You Prepared for Water Damage Inside your Home or Commercial Property? Risk Data and Questions

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Published on October 19th, 2023 by Kyle Langan

What is the sentiment surrounding non-weather-related water damage from incidents like sudden and accidental leaks?

In a sample study, 61% of consumers never heard of an automatic water shutoff device, “despite how effective they can be at reducing water damage” (Hanover, 2023).

“One of the most common residential claims is from water” (Epps, 2004).  Risk is present because of high frequency. The source of water must be determined during the claim adjustment because not all causes are covered (Epps, 2004).

“A common source of damage is water from a plumbing, heating, air-conditioning system, or household appliance” (Epps, 2004). Perils may include burst water heaters, burst pipes, or broken water lines to a washing machine. “If there is policy coverage, it usually covers the damages caused by the water but does not pay to repair the damaged or broken water line or appliance. If a broken or leaking water line is inside a wall or ceiling or under a slab foundation, there may be coverage to access the water line but again no coverage to repair the water line itself” (Epps, 2004).

  • When is the last time your property’s plumbing system got upgraded?
  • Do you have a water sensor?
  • Are you familiar with an automatic water shutoff device?

Some convincing data points to take action and prepare (sourced from one of our partner carriers):

  • Plumbing leak = 7x more likely than a fire in a home
  • Water damage = 6x more common than burglaries (Hanover, 2023).

Please reach out to our risk manager, Kyle Langan (kylel@conreyins.com) to help proactively educate on the risks of non-weather-related water damage and find devices to install in homes or commercial properties to help cover contingencies.

References

2023 Home Water Damage Prevention Report. 2023 Home Water Damage Prevention Report | The Hanover Insurance Group. (n.d.). https://www.hanover.com/2023-home-water-damage-prevention-report?utm_source=release&utm_medium=PR&utm_campaign=Water%2BMitigation

Epps, G. (2004, July 1). Residential water claims. IRMI. https://www.irmi.com/articles/expert-commentary/residential-water-claims

Celebrating National Recovery Month 2023

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National Recovery Month 2023

National Recovery Month (Recovery Month) is a national observance held every September to educate Americans that substance use treatment and mental health services can enable those with a mental and/or substance use disorder to live a healthy and rewarding life.

Since 1989, Recovery Month has been held to promote and support new treatment and recovery practices, the nation’s vibrant and proud recovery community, and the dedication of service providers and communities who make recovery in all its forms possible.

Recovery Month has adopted the theme of “Every Person. Every Family. Every Community.” as its permanent tagline, indicating that every person can overcome the trials and tribulations associated with the ups and downs of life.

As an affiliate member of National Association of Addiction Treatment Providers (NAATP), we want to echo the belief that mental health and Substance Use Disorder (SUD) treatment IS health care. In the United States last year, more than 106,000 persons died from drug-involved overdoses. This is an important cause to celebrate because SUD affects families all over the world.

When is the Right Time to Mitigate Cyber Risk?

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Published September 8th, 2023 by Kyle Langan

Organizations should consider hedging cyber tail risk with insurance. Traditional General Liability insurance contracts do not protect entities from cyber events. Conversely, an effective way to manage this risk is purchasing a specific contract with an agreed payout for covered causes of loss. At the close of 2023 Q2, data shows a correctional decline in the cost to mitigate cyber risk with insurance (Tokio Marine). Meanwhile, “ransomware appears to have returned to levels observed in 2020 and 2021 and concerns about cyberwar and systemic cyber events are at an all-time high” (Tokio Marine). This divergence indicates the balance of 2023 provides a timely opportunity for cyber risk mitigation. Widespread events can and will happen, while more sophisticated attacks develop (Tokio Marine). This is why many risk managers describe cyber events as the most dynamic or fastest emerging domain of risk.

Quarterly Cyber Rate Change

(Source: Marsh Global Insurance Market Index, Council of Insurance Agents and Brokers)

References

2023 Cyber Report. Tokio Marine HCC. https://tmhcc.com/cyber

Council of Insurance Agents and Brokers P/C Market Survey Q1 2021 to Q1 2023. The Council of Insurance Agents & Brokers. (2023, August 11). https://www.ciab.com/market-intel/pc-market-index-survey/

Global Insurance Market index 2023: Global Insurance Market index. Marsh. https://www.marsh.com/us/services/international-placement-services/insights/global_insurance_market_index.html

Total Cost of Risk for a Treatment Provider

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Article published by Kyle Langan August 25th, 2023

Executive Summary:

For financial health and longevity, it is vital to understand the costs of risk and their impact on surplus or profitability. This article provides analysis on cash flow for a treatment provider. It may point out factors that typically go unmeasured at times of stress.

Learn How to Measure:

Risks are inherent in an entity’s operations, and risk brings cost.

Total Cost of Risk is money spent managing risks and incurring losses. It is the sum of all aspects of operations that relate to risk. [1] Costs usually include buying insurance. Policy types and claims history determine these costs. Other costs include retentions, uninsured losses, administrative work, risk control, and indirect costs. [2]

Losses set back cash flow, but with the right protection, most direct losses are covered by insurance. Indirect costs are unbudgeted expenses of events caused by business interruption or disruption. An indirect loss cost factor, specific to industry group and risk category, can help with the calculation. [3] With these indirect costs calculated, strategic opportunities arise to minimize Total Cost of Risk.

Example:

A litigated medical malpractice loss will incur significant costs, thereby increasing Total Cost of Risk for a treatment provider. This results from the losses in the settlement/judgement and attorney fees (direct costs). Separate, there are business disruptions, time for data gathering, strategy formation, and human capital expenditures (all indirect costs).

Scenario: Addiction Treatment Provider Faces Medical Malpractice Allegation

$50,000 = Cost of insurance purchased by Treatment Provider (Premiums, Taxes, Fees)

$250,000 = Medical Malpractice Loss

Insurance company provides a $250,000 payout and protection for the covered cause of loss as defined in the treatment provider’s human services professional liability policy.

$10,000 = Self-insured retention

Insurance company collects $10,000 from the treatment provider after the loss concludes, as it was the entity’s agreed portion of the loss, per the insurance contract.

Indirect Costs

An indirect loss cost factor measures wasted time, energy, and resources spent on a claim process and recovery from the loss. [4] Indirect losses erode cash flow.

A factor of 0.50 equals indirect losses totaling an additional $125,000

250,000 * (0.50) = 125,000

In conclusion, the Treatment Provider faces $125,000 of indirect costs, $240,000 in losses covered by insurance, and a $10,000 deductible.

$125,000 is the portion that may go unaccounted for on financial statements, unless it is quantified by the treatment provider’s risk manager or CFO.

Total Cost of Risk:

Indirect Costs = $125,000

Insurance Premium = $50,000

Self-insured retention = $10,000

Total Cost of Risk for the Treatment Provider this year = $185,000

This also illustrates the importance of insurance. Without the protection, Total Cost of Risk is $240,000 higher, totaling $425,000, plus interest expense, if the company used debt to finance the loss.

 

References

[1]

Cost of risk. Cost of Risk | Insurance Glossary Definition | IRMI.com. (n.d.). Retrieved February 28, 2022, from https://www.irmi.com/term/insurance-definitions/cost-of-risk

[2] — [4]

Data-driven client outcomes for the insurance industry. TCORCalc. (2019, July 28). Retrieved February 28, 2022, from https://tcorcalc.com/

Cyber Risk Financing: Boom or Bust?

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How would the cyber insurance market react to a catastrophic loss? If rare events play a disproportionately large role in determining the properties of the cyber market, one of these events could send capital providers “running for the hills” (Ayers, 2023). In its report, “Cyber Risk: On the Edge of Insurability,” Conning specifically mentions the potential of this as the next black swan event.

“Conning envisions several possible paths for the cyber industry, including one where pricing gains in recent years and improved claims experience successfully attract more capital from both traditional sources and new players; and another where a catastrophic loss occurs,” shaking out capital providers and “reversing recent progress” (Ayers, 2023).

 

References

Ayers, E. (2023, July 18). A “surprising” cyber cat could stymie future market growth: Conning. Zywave | Advisen Cyber Front Page News. https://www.advisen.com/tools/fpnproc/fpns/articles_new_35/P/519407870.html?rid=519407870&list_id=35

Taleb, N. N. (2020). Statistical consequences of fat tails: Real world preasymptotics, epistemology, and applications: Papers and commentary. STEM Academic Press.

Lessons from Deepwater Horizon Oil Spill: Embedding a Culture of Risk Management

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Published June 20th, 2023 by Kyle Langan

Running a business involves speculative risk. A successful strategy brings an expectation of positive returns, while carrying a small but significant risk of catastrophic losses.

On April 20, 2010, “the inherent risks of decades of inadequate regulation, insufficient investment, and incomplete planning were realized in tragic fashion.” [1] This shows how errors develop into catastrophic loss. “The Deepwater Horizon rig sank on April 22, two days after the well blowout and explosion that tragically killed 11 workers in the Macondo Prospect.” [2] Roughly 4.9 million barrels spilled into the Gulf of Mexico, “based on flow-rate estimate, which ranged from 62,200 barrels per day on April 22 to 52,700 barrels per day on July 14, just before the capping stack stopped the flow.” [3]

The loss stemmed from roots of leadership’s culture of urgency and frugality. “Decision-making processes “did not adequately ensure that personnel fully considered the risks created by time- and money-saving decisions.” [4]

Source: (National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, 2011).

As seen in the chart above, an overriding sense of urgency to bring new wells on line without delay or marginal cost contributed to a risk-taking culture among the Macondo well-site workers and their managers. More time-consuming but safer alternatives were presently available in all the root causes of loss. Instead, “snap decision-making without supporting evidence, abandonment of procedural safeguards, ignoring of obvious safety-check warnings, and other dangerous behaviors took precedent.” [5]

Solution: A Culture of Risk Management

The findings of the Commission “highlight the importance of organizational culture and a consistent commitment to safety by industry, from the highest management levels on down.” Improved regulatory oversight aims to solve a culture of revenue maximization and complacency. The GPO recommends a “pervasive top-down safety culture.” [6] “The critical element is an unwavering commitment to safety at the top of an organization: the CEO and board of directors must create the culture and establish the conditions under which everyone in a company shares responsibility for maintaining a relentless focus on preventing accidents.” [7] For example, a company “rewards employees and contractors who take action when there is a safety concern even though such action costs the company time and money.” [8]

If a company “rigorously adheres to the best practices of a functioning safety culture”, it can prevent catastrophic losses. [9]

References

[1]-[5];[7-9]

National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. “Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling.” U.S. Government Publishing Office’s (GPO). (2011, January). https://www.govinfo.gov/content/pkg/GPO-OILCOMMISSION/pdf/GPO-OILCOMMISSION.pdf

[6]

The Institutes Knowledge Group. The Institutes. (n.d.). https://web.theinstitutes.org/

Insurance Strategy – AccuWeather forecasts (edited continuously)

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Published on: Apr 21, 2023 at 20:48 PST

Kyle Langan

Seasonal expectations

Example: AccuWeather’s 2023 US Wildfire Forecast. Forecasts break up years into seasons naturally and use their experience to account for things like “increased exposure in a few hot spots” and make predictions with a practical touch, not just following models. [1] In a forecast, readers can prepare for frozen water pipes that may arrive with a storm like in March 1993, or the Santa Ana winds, which caused fiery devastation at the start of 2025.

Southern California

Santa Ana Season: October – February

During dry times, “lightning from the North American monsoon can be a natural ignition source for fires, while the Santa Ana winds can fan the flames of ongoing blazes and cause them to evolve rapidly into massive wildfires.” [2]

In 2023, California saw one of the deepest snowpacks in state history, but AccuWeather warned that it would not prevent fires from starting. [3]  One of the concerns following that season was the total amount of combustible material. [4] Precipitation led to intense growth during that spring and first part of the summer, resulting in more fuel. [5] The winter storms also blew down branches, limbs and trees, so California experienced elevated fuel, which remains a concern in areas near brush.

Fuel load: total amount of combustible material. [6]

Snag: A tree stump. Snags are an important fuel for wildfires because they are drier than living trees and therefore more easily ignited. [7]

Backdraft: an explosion that occurs when oxygen is rapidly introduced into a superheated, but oxygen-poor, confined space. For example, if a fire occurs in a well-sealed room, it will burn until it uses up the oxygen in the room. This burning can intensely heat the atmosphere in the room, and its contents. As the fire starves for oxygen, it leaves fuels incompletely burned and superheated. If oxygen is rapidly introduced into this environment, such as by opening the door, the superheated pyrolysis products can explode in rapid combustion. [8]

Pacific Northwest, Rocky Mountains

The interior Northwest and the northern Rockies face risk of wildfires, especially following dry winters. [9] Washington, Oregon, Idaho, Montana, Northern California and northern Nevada confront exposure, seasonally, starting in June or the first half of July, while the region’s “peak of wildfire activity is late July into early September.” [10] Property stakeholders in these areas need to consider potential wildfire conditions like percentage deductibles in their insurance purchasing strategy.

Florida

Drier than average conditions can lead to brush fires in the spring.

Alaska

Alaska led the country in wildfire activity, with nearly twice the amount of land in Delaware burned in 2022 — 3 million acres. [11]

Predicting vs. modeling

Example: March 1993

Weather models could not accurately identify how deeply 1993’s storm system would intensify. Predicting allows an analyst to change their mind while modeling “freezes the opinion to an inextricable apparatus of estimators.” [12] NWS models nor personnel recognized the risk. However, NWS personnel did have enough confidence enough to allow States of Emergency in the Northeast before snow impacted the region. Most of the deaths were due to heart attacks from shoveling snow. Snow can impact the Midwest Great Lakes, interior Northeast too, which may arise from colder air downstream (brings snow and ice events).

Risks:

  • Weight of snow can collapse factory roofs
  • Snowdrifts on the windward side of buildings caused a few decks with substandard anchors to fall from homes.
  • 1993: Power outages, on the average, lasted for one to two weeks all over the east.

References

Backdraft. interfire.org. (n.d.).

Fuel load. interfire.org. (n.d.).

Lada, B. (2023, April 12). AccuWeather’s 2023 US wildfire forecast. Retrieved from https://www.accuweather.com/en/weather-forecasts/accuweathers-2023-us-wildfire-forecast/1510132

Snag. interfire.org. (n.d.).

Taleb, N. N. (1995). Dynamic hedging: Managing vanilla and exotic options. John Wiley & Sons.

US Department of Commerce, N. (2020, October 7). March 12th-15th, 1993: Superstorm. National Weather Service. https://www.weather.gov/jan/superstorm_march_1993#:~:text=The%20storm%20system%20caused%20blizzard,to%20over%2010%20million%20customers.

Wildfire Awareness

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Tri Phan, CPCU, ARM

Drought conditions

As weather becomes warmer, and wildland plants begin to dry out, it results in higher fuel loads. Therefore, wildfires risk West Coast. Property owners should take precautions to minimize property exposure.

How Wildfires Spread and Destroy Property

There are three ways that wildfires and spread and cause damage to property.

  1. Direct flames: Actual flame coming into direct contact with a building/combustible material.
  2. Airborne embers: Flaming airborne embers can travel more than a mile from the active wildfire. 60% wildland interface home ignitions are from flaming embers landing on flammable roofs/objects. (Smith 2009)
  3. Radiant heat: A wildfire can raise the temperature of nearby combustible materials to the point of ignition


This house was ignited by flaming airborne embers landing on vulnerable spots; meanwhile, the adjacent forest is not burning. Photo courtesy USFS-LTBMU.

Recommended Actions:

  1. Create a wildfire evacuation plan and train employees/inhabitants/family members how to use fire extinguishers
  2. Review and distribute a disaster communication plan
  3. Create and maintain a supply list
  4. Plan how property owners can restore critical operations during unplanned disruption in services
  5. Protect property by creating cleared zones that provide less fuel sources for the fire to spread
  6. Clean off the roof and gutters to minimize the risk of ignition
  7. Back up data to the internet cloud or an offsite drive
  8. Review Insurance coverage: Policy limits, time elements coverage should all be reviewed for adequacy
  9. If you need help with any of these recommended steps, email kylel@conreyins.com

First Published May 12, 2023

References

Myslivy, Jennifer. “BLM AND MAVERIK PARTNER TO PREVENT WILDFIRES.”  <https://www.blm.gov/blog/2022-07-14/blm-and-maverik-partner-prevent-wildfires>

Smith, Ed, Sistare, Sonya. (2009). “Be Ember Aware!”. University of Nevada, Reno. <https://naes.agnt.unr.edu/PMS/Pubs/1510_2005_89.pdf

Snowpack Levels Up Over 250%: Severe Flood Risk?

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Edited March 15th, 2023 by Kyle Langan

In December 2021, Conrey published an article about Sierra storm systems and the benefit to California’s then struggling mountain snowpack. Without these storms, a resulting decrease in the extent of alpine tundra ecosystems could have threatened wildlife.

At the start of February 2022, we revisited this prediction when the Sierra snowpack ballooned to more than double its usual size for that time of year.

Another month and a half later, and the Sierras are now seeing a “historic run of atmospheric rivers and punishing arctic blasts that have filled reservoirs, flooded cities and eased drought conditions across California” (Rodgers, 2023). With two weeks still left in March, the South Sierra Snow Water Content currently sits at 260% of average for April 1st, according to California Department of Water Resources (California Snow Water Content, 2023). In Southern Nevada, the Spring Mountains saw numbers as high as 410% over today’s median:

Check updated California / Nevada snowpack levels HERE.

Source: California Snow Water Content, March 15, 2023, percent of April 1 average (California Data Exchange Center)

As seen in the chart above, the snow water content previously hit its record size during the winter of 1982-83, as tracked by the green trend lines; 2022-23’s current blue trend lines show relief for California’s multiyear drought (California Snow Water Content, 2023). As of March 11th, “52 feet of snow had fallen at the UC Berkeley Central Sierra Snow Lab atop Donner Summit, tying the 1981-1982 season for the fourth-highest total since the lab was created in 1946, said Andrew Schwartz, lab manager and lead scientist. Schwartz expects this season to end up second only to the 1951-1952 winter season when nearly 68 feet of snow fell” (Rodgers, 2023).

Rain-on-Snow Events: Property Exposure

The flood risk is difficult to forecast, but property owners should prepare for atmospheric rivers. “Atmospheric rivers form when a long channel of wind transports water vapor from the tropics, and they produce heavy rain or snow when they make landfall” (Rodgers, 2023). Rain on top of snowpack could bring “rain-on-snow events, when runoff from rain combines with snowmelt to overwhelm watersheds” (Lee, 2023). For example, Kern River normally “runs at 600 cubic feet per second. During a ‘great’ summer river flow, it is around 7,000 cubic feet per second. In the climax of the storm on Friday, March 10th, the river was running at 45,000 cubic feet per second” (Garcia, 2023). Later this spring, uncertainty rises. The risk depends on whether the snowpack melts gradually or rapidly. A series of warm storms later in the spring will elevate property risk due to flooding (Lee, 2023). Property owners do not want a spring heatwave, which leads to more rain-on-snow and potential flooding or mudslides.

References

California Snow Water Content, March 14, 2023, percent of April 1 average. (n.d.). Retrieved March 14, 2023, from https://cdec.water.ca.gov/reportapp/javareports?name=PLOT_SWC

Flores, J., & Lee, J. (2023, March 11). Map: These are the areas facing serious flood risks in California storm. San Francisco Chronicle. Retrieved March 14, 2023, from https://www.sfchronicle.com/weather/article/map-shows-flood-risk-17830177.php

Garcia, L. (2023, March 13). Kern River once again flowing through Bakersfield after Weekend Rain. KGET 17. Retrieved March 14, 2023, from https://www.kget.com/news/local-news/kern-river-once-again-flowing-through-bakersfield-after-weekend-rain/

Lee, J. (2023, March 13). ‘whole hell of a lot of water up there’: This map shows the sierra snowpack’s record levels. San Francisco Chronicle. Retrieved March 14, 2023, from https://www.sfchronicle.com/weather/article/california-snowpack-record-17836514.php

Natural Resources Conservation Service. California/Nevada SNOTEL Snowpack Update Report. (n.d.). Retrieved March 14, 2023, from https://wcc.sc.egov.usda.gov/reports/UpdateReport.html?report=California%2FNevada&format=SNOTEL%2BSnowpack%2BUpdate%2BReport

Radde, K. (2023, March 13). A waterlogged California is bracing for yet another Atmospheric River. NPR. Retrieved March 14, 2023, from https://www.npr.org/2023/03/12/1162936998/a-waterlogged-california-is-bracing-for-yet-another-atmospheric-river#:~:text=Atmospheric%20rivers%20form%20when%20a,snow%20when%20they%20make%20landfall.

Rodgers, J. (2023, March 12). 52 feet and counting: Lake Tahoe grapples with ‘ginormous’ snowpack. Stars and Stripes. Retrieved March 14, 2023, from https://www.stripes.com/theaters/us/2023-03-12/california-storms-lake-tahoe-snowpack-9470968.html

Philadelphia Eagle’s Overlooked Symptom Leads to $43.5M Loss for Medical Provider

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Published on February 14th, 2022, by Kyle Langan

Jury’s award:

A jury in Philadelphia awarded former NFL player Chris Maragos $43.5 million after he sued the medical team in charge of treating a knee injury from his time playing as a Philadelphia Eagle. [1] “Maragos accused orthopedic surgeon James Bradley and Rothman Orthopaedics of neglecting to address a torn meniscus” he suffered in October 2017; this led to the “premature end of his NFL career” and caused “ongoing pain and physical limitations.” [2] Maragos endured a torn posterior cruciate ligament (PCL), which was surgically repaired by Bradley. [3] However, attorneys said the “medical team ignored damage to the meniscus, even after a May 2018 MRI exam showed the injury worsening.” [4]

Proven Negligence:

Members of the Maragos legal team said they “proved at trial that Rothman Orthopaedics created two separate medical charts for Maragos, one of which failed to include key notes about his injury and recovery.” [5] The jury assigned two thirds of the $43.5 million to Bradley, per reports, which made the remaining third the responsibility of Rothman Orthopaedics. [6]

The Medical Team’s Defense:

During the trial, “lawyers for the defendants argued Maragos suffered his meniscus injury in a weight-room incident several months after his surgery.” [7] Additionally, they highlighted age at the time of his surgery, 31, and eight years of experience in the NFL, suggesting that his career did not have much time left. [8] “Doctors who oversaw his rehabilitation knew of the meniscus issue, lawyers said, but deemed it ‘stable’ and unlikely to respond well to a surgical procedure.” [9]

Risk Management and Insurance Implications:

Medical Malpractice Insurance will defend and indemnify insureds with “coverage for the acts, errors, and omissions of physicians and surgeons, encompassing physicians’ professional liability insurance, hospital professional liability (HPL) insurance, and allied healthcare (e.g., nurses) professional liability insurance.” [10] If your company seeks in-depth knowledge of this protection and limit adequacy, contact me at kylel@conreyins.com

References

[1] — [9]

Bieler, D. (2023, February 14). Jury awards ex-eagles player $43.5 million for medical malpractice. The Washington Post. Retrieved February 14, 2023, from https://www.washingtonpost.com/sports/2023/02/13/chris-maragos-verdict-injury-eagles/

[10]

Medical Malpractice Insurance. Medical Malpractice Insurance | Insurance Glossary Definition | IRMI.com. (n.d.). Retrieved February 14, 2023, from https://www.irmi.com/term/insurance-definitions/medical-malpractice-insurance