Commercial Property and Management Liability Insurance Case Study

Meanwhile, their management liability insurance—an equally necessary and important part of their insurance portfolio—consistently received less time and attention than it deserved.

When commercial insurance consultants MB Davis Group recognized this problem, they had a simple but effective solution. Remove the elephant.

Get to Know the Client

This client has a large portfolio of industrial buildings worth just south of $1 billion. They run an extremely sophisticated business involving significant revenue from myriad services. They also syndicate deals, meaning they take responsibility for other people’s money.

This greatly increases the complexity of their required commercial insurance portfolio, including their management liability exposures.

Juggling Insurance Liabilities and Priorities

Because this client’s business is complex and they take on additional liability that many companies don’t have, they find themselves simultaneously dealing with two issues: the elephant (their property insurance, which costs them millions of dollars every year) and this other extremely necessary arm of their insurance portfolio (management liability insurance).

What Is Management Liability Insurance?

Management liability insurance is a type of insurance that financially and legally protects a business and its managerial team from the risks inherent in managing that company.

It covers a wide range of liabilities:

• Directors and Officers (D&O) Liability
• Crime
• Cyber
• Employment Practices Liability (EPL)
• Professional Liability
• Fiduciary Liability

Because this company handles other people’s money, that opens up a range of liabilities that must be addressed in these tertiary policies. This protects the companies and leadership individuals in the event an investor believes their investment isn’t being used wisely, a cyber claim, other kinds of criminal activity, and many other instances.

What Happens Come Renewal Time?

The line items in these management liability insurance policies are hugely important but can often get limited attention during renewal negotiations.

For this client, their property insurance invariably dominated the entire multi-month renewal conversation. Because of the massive expense of their property insurance, this made sense. Of course you’re going to talk about the policy costing you multiple millions of dollars year in, year out.

But the urgency of discussing their property insurance didn’t negate the importance and necessity of their management liability insurance.

The management liability broker and legal counsel, who were there to talk about issues like syndicator liabilities, crime and cyber, and D&O liability, often left these meetings frustrated and uncertain the company’s management liability insurance was as strategically negotiated as possible.

Removing the Elephant from the Room: Putting Management Liability Insurance on Its Own Track

As MB Davis Group navigated this company’s insurance portfolio, this problem quickly became evident. To solve it, they simply removed the elephant from the room. Instead of negotiating the entire insurance portfolio package together, they put the two renewals on separate tracks and timelines.

They kept the same broker for deal cohesion, but they created two separate deal teams. One exclusively handled the property side, and the other specifically managed the liability piece.

“As a result of creating these two deal teams, we were able to put better attention on this account as a whole, and that led to some great results,” said Mitch Davis, founder of MB Davis Group. “We even ended up uncovering and rectifying some uninsured exposures.”

Faster, More Organized Processes Revealed Hidden Insurance Coverage Gap

With commercial insurance consulting firm MB Davis managing this client’s insurance portfolio, the client enjoys several benefits:

• Deals are done in a more timely and orderly fashion. “Before I got involved, negotiations were routinely done in the last week before renewal. Management liability insurance got two minutes of discussion during a meeting where everyone was competing for the floor,” said Mitch Davis, founder of MB Davis Group. “By simply separating the two insurance issues, the process goes faster and much more smoothly.”
• No one is rushed to make last-minute decisions. When it comes to insurance issues with multimillion-dollar ramifications, you don’t want to make hasty decisions. “I never want to be in a position where I have to call a client at the beach the day before their insurance window closes and tell them, ‘Listen. I need you to spend a million dollars,’” said Davis. “Recognizing we needed to change the management process has made everything more effective, and we’ve avoided those rushed, knee-jerk decisions.”
• Other insurance errors or issues could be identified and fixed. Because of the extra time and space this change gave to MB Davis Group, they were able to identify that the client had started a new construction management venture without the proper insurance. By improving the process for the rest of the insurance package, MB Davis Group was able to rectify a potentially massive liability before it became a costly problem.

The Greater Your Business Complexity, the More You Need a Commercial Insurance Consultant

For complex businesses with many streams of liability, it’s easy to get distracted by one piece of your commercial insurance portfolio—especially when that one piece is costing you millions in insurance premiums. But other insurance line items can have just as much of a financial impact.

You must make sure every piece of your commercial insurance plan is strategically and proactively accounted for. How? Partner with a commercial insurance consulting firm.

By taking a high-level view of your specific commercial insurance needs, they can ensure you:

• Have adequate coverage, without glaring holes or gaps
• Secure the most cost-effective premiums
• Enjoy the most favorable insurance terms
• Get these benefits today and down the line, even in a drastically changing commercial insurance landscape

Learn more today about how MB Davis Group can help.