Stoller & Cole Discuss Jurisdictions & the Insurance Industry

89th General Meeting Speaker Presentation

"Jurisdictional Programs and the Insurance Industry: A Unique and Valuable Partnership"
Ken Stoller and Phillip Cole

The following presentation was delivered remotely through Zoom at the 89th General Meeting Monday General Session, May 10, 2021. It has been edited for content and phrasing.

INTRODUCTION: Ken Stoller is the Senior Director, Workers’ Compensation & Amicus Counsel with the American Property Casualty Insurance Association (APCIA). He has more than 20 years of experience in the insurance industry, in workers’ compensation, boiler and machinery, loss control, tort and liability, Medicare and Medicaid, and litigation affecting the industry. Prior to joining APCIA in 1998, he practiced workers’ compensation law in Florida and held a variety of positions in insurance, education, and small business.

Phillip Cole is the Staff Vice President, Manager Jurisdictional Services with Factory Mutual Insurance Company. He has more than 28 years as a National Board Commissioned Inspector and chairs the NBBI Committee on Qualifications and the APCIA Boiler and Machinery Legislative Committee. He is a member of the National Board Advisory Committee, representing Authorized Inspection Agencies.

MR. STOLLER: Thank you very much and good afternoon. My name is Ken Stoller with APCIA, and I would like to thank Executive Director Joel Amato and the National Board for inviting us here to discuss the unique and valuable partnership between jurisdictional boiler programs and the insurance industry. APCIA, which stands for the American Property Casualty Insurance Association, is a trade association of companies writing all lines of property and casualty insurance. This pretty much covers all types of insurance except life and health. For instance, our members write personal and commercial property, personal and commercial auto, workers' compensation, and of course boiler and machinery insurance, otherwise known as equipment breakdown coverage.

APCIA was formed by the 2019 merger of the American Insurance Association, or AIA, and the Property Casualty Insurance Association of America, or PCI. The AIA acronym was always a bit confusing in the boiler world because it also means authorized inspection agency, so I'm glad that our merger included the name change. APCIA's members write the vast majority of boiler and machinery insurance nationwide. Usually it will be 75% of market in any given state.

I have been with the organization since 1998, and I have managed the boiler and machinery portfolio for the past 15 years. I'm a legislative and regulatory attorney, which means I never have to set foot in a courtroom as part of my job. Instead I help our members deal with pending legislation, regulatory proposals, and the many day-to-day implementation issues that arise in not only boiler and machinery, but various other lines of insurance that I handle. For each of those lines, APCIA maintains a committee, subcommittee or working group which consists of representatives from all interested member companies. The most active members of APCIA's Boiler and Machinery Insurance Subcommittee in alphabetical order are AXA XL, CNA, FM Global, Hartford Steam Boiler, Travelers, and Zurich.

The chairman of our subcommittee is Phillip Cole, Manager of Jurisdictional Services with FM Global. Phillip is well known to many of you as the Board of Trustees Advisory Committee member representing authorized inspection agencies. I would like to turn over the microphone to Phillip to describe his day-to-day responsibilities with FM Global, his relationships with the National Board, individual chiefs and ASME, and how the forum provided by APCIA benefits not only our member insurance companies, but hopefully the jurisdictions as well.

MR. COLE: Thank you, Ken. I just wanted to mention to everyone, the insurers' personnel maintain their own relationships with the various jurisdictions that we serve, and we serve on numerous National Board, ASME committees as well as jurisdictional boiler boards and advisory boards. I currently chair the National Board Committee on Inspector Qualifications, for example, as Ken had mentioned. We also as a trade association, much like National Board, recommend to our membership to be actively involved with the various committees and task groups that are formulated to benefit public safety.

Insurer personnel act as both safety professionals and stewards of corporate interests. We often say that we wear two hats when we go on site – one to meet the jurisdictional mandated inspections, as well as risk mitigation for our prospective employers.

The APCIA provides a forum for insurers to work cooperatively on boiler safety regulatory issues. This promotes consistency of understanding and implementation when changes occur. Hearing the perspective of other members is a good supplement to reports from our local inspectors and conversations with the various chiefs. One of the members may raise an issue. I will share that information to the rest of the membership, and we'd also discuss and follow up as warranted to ensure that we don't have eleven different companies going to the chief and harassing them. We will come with one voice to get a better understanding.

It's also important for these issues to percolate up to my level within the organization since local inspectors by definition do not follow the developments in other states that might have a bearing on developments in the particular state that they are working in or commissioned in. Sharing these perspectives on experience in different jurisdictions, at times we can provide feedback to the various jurisdictions on how another jurisdiction has implemented a process to handle specific issues.

We are also able to provide feedback to the National Board jurisdictional liaison if he was asked to provide additional assistance by the jurisdiction.

MR. STOLLER: Great, thank you. I want to take a moment to discuss the unique nature of boiler and machinery insurance as compared to other lines of insurance. In those other lines, the relationship between insurers and regulators has evolved very differently. Insurers generally favor limited involvement by state agencies, such as departments of insurance or divisions of workers' compensation in their day-to-day operations.

For instance, when it comes to the policy forms insurers use or the rates they charge, they believe a mostly hands-off free-market approach is in the best interest of both insurers and policyholders. This is also true when it comes to inspections that insurers perform outside of the boiler context. When insurers conduct surveys of policyholder operations as part of a property or liability policy, it is primarily for their own underwriting purposes whether to right the business and how much premium to charge. Insurers control how they perform these surveys, and they do not report the results to state agencies.

Boiler safety inspections, on the other hand, are very different, and they reflect more of a true partnership between the state and insurance companies. While boiler safety is fundamentally a governmental oversight issue, and owners and users are ultimately responsible for the condition of their equipment, insurers are proud to play an important role in boiler safety.

APCIA supports well-staffed and well-funded jurisdictional boiler safety agencies. APCIA also supports efforts to enact laws and regulations that improve public safety, and we oppose those that would have a detrimental effect on safety. For instance, there have been times over the years when chiefs have privately expressed concerns with certain proposals but have been unable to publicly oppose them, and APCIA has gladly taken the lead in raising concerns in the interest of public safety.

Another benefit of interaction between APCIA and chiefs is improving our mutual understanding of the somewhat different but ultimately complimentary business models of the jurisdictions and insurance companies.

Insurers naturally have a very strong interest in reducing insured losses, but they also need to operate within the boundaries of their contractual relationship with policyholders to avoid opening themselves up to unintended legal liability.

Insurers can and do perform state-mandated boiler safety inspections and report the results to state agencies. However, insurers are not regulators, and they do not have the force of law behind what they do. For instance, an insurer cannot require a policyholder to pay a fine, correct a violation, or take an object out of service until the violation is corrected. This is why the jurisdiction's ultimate oversight of boiler safety is so important with the close cooperation of the insurance industry.

We greatly appreciate the understanding that National Board members have shown us over the years when discussing various issues, and we are usually able to find common ground. We also appreciate the chiefs' leadership during the pandemic, prioritizing the safety of all stakeholders in the inspection process and overseeing an orderly return to normal procedures. As part of that process, we look forward to resuming in-person meetings at APCIA's Boiler and Machinery Subcommittee. Like most organizations, we have been operating well in a virtual environment, but there is no substitute for the heightened level of interaction that comes with meeting face-to-face.

Along those lines, for the past several years, we have invited leadership from both the National Board and ASME to attend APCIA boiler meetings, not only to hear about what they are working on, but also so they can be privy to our discussions about the activity taking place in all jurisdictions.

That type of collaboration with the goal of improving mutual understanding is a perfect example of the unique and valuable partnership between the jurisdictions and the insurance industry, and we look forward to further strengthening that partnership going forward. On behalf of the entire APCIA membership, Phillip and I appreciate the opportunity to speak with you today, and we welcome any questions.

MR. STOLLER: Thank you very much.

MR. COLE: Thank you.