NATO host committee switches insurance brokers - Chicago Tribune
The NATO host committee pulled an insurance brokerage contract from Aon Risk Solutions after the company found only one carrier willing to insure local police against lawsuits and at a price higher than summit organizers anticipated, the Tribune has learned.
The action reflected the difficulties in finding affordable insurance for large-scale events that could result in riots and mass arrests. Chicago hosts the NATO summit May 20-21.
Lori Healey, executive director of the NATO host committee, confirmed that the committee had switched brokers from Aon to USI Insurance Services due to "cost issues." She declined to comment on what types of coverage Aon had tried to solicit or the dollar amounts involved.
Briarcliff Manor, N.Y.-based USI already has a relationship with Chicago as the city's broker for what's called excess liability coverage — that's a secondary policy for larger claims. According to a source, city officials have decided to rely on their existing policy with USI and have the host committee pick up any additional costs associated with expanding that policy's terms.
Companies like Aon and USI are brokers, meaning they're hired to scour the marketplace for appropriate insurance at the best price. In this case, Aon was looking for carriers to insure event organizers against lawsuits and associated costs. Separate policies would be needed for the police force; public officials, such as the mayor; and general claims arising out of host committee-organized events. The latter category would include everything from slip-and-fall injuries at banquets to terrorism-related damages.
"The costs were very high — and high because this is a special, unique kind of event, with a lot of risks, and it was much higher than what the city was willing to bear," Aon spokesman David Prosperi said. "They made the rational decision to go back and use their existing policies. We understood it. We're not happy with it. But we understood it."
According to a source, the "police professional liability insurance" was the source of Aon's difficulty. This insurance covers legal settlements or court judgments against police officers and their departments, most often for unlawful arrests and civil rights violations. Aon marketed the police coverage to 70 carriers and only one responded with a bid, according to a source.
"Any time you have a big group at a public gathering with protesters, you'll have some angry police and some angry protesters, and when they meet, you're likely to have a lawsuit or two, or three or many," said insurance broker Andrew Marks, senior executive vice president at insurance brokerage Bollinger Inc. in New York. A prospective insurer, he added, would "be buying losses."
After the G-20 summit in 2009, the city of Pittsburgh faced five claims against its insurance coverage, which Aon brokered. The claims involved allegations of excessive force, false arrest, violations of free speech, and improper search and seizures, according to Pittsburgh Solicitor Daniel Regan. Some claims involved numerous plaintiffs and are still active.
According to Aon's contract with Pittsburgh, the company earned a fee of 15 percent of the premium on each of the policies it negotiated, with the total not to exceed $3 million. Regan said Aon ultimately was paid about $3 million.
The Tribune could not determine Friday what those premiums were or the amount of coverage Aon acquired for Pittsburgh or tried to acquire for NATO.
Another issue for Aon, insurers and the host committee could be the legal environment in Cook County, one expert said.
"I know for a fact that Cook County is viewed negatively from a litigiousness standpoint," said Robert Hartwig, president and economist at the Insurance Information Institute, a New York-based trade group. "It is relatively litigious and plaintiff-friendly and has a history of significant jury awards. ... Even if a city is found not to be liable, millions still are spent on the defense." Typically those costs are covered by insurance, he said.
And in February, city of Chicago lawyers reached a $6.2 million settlement with more than 800 plaintiffs in a class-action lawsuit stemming from mass arrests of protesters during a 2003 demonstration against the Iraq war. Legal fees from the nine-year lawsuit will increase the city's costs significantly.
It's not clear what trade-offs the host committee is making, if any, by using USI instead of Aon. But sources said using Aon would have had the advantage of keeping NATO-related affairs completely sequestered from city insurance expenditures, since Chicago had pledged not to use city money to host the event. How overall insurance-related costs would compare could not be determined.
Ralph Wilson, executive vice president with USI, referred questions to the city.
Word that Chicago had shifted NATO business from Aon to USI spread through the insurance industry. The news accompanied speculation that the switch was payback for Aon's decision earlier this year to move its headquarters from Chicago to London, which hurt Mayor Rahm Emanuel's campaign to polish Chicago's global image.
"This is not retribution for moving their headquarters," Healey said emphatically. "It's a ridiculous assertion, to think this had to do with retribution. That was never the case."
Tribune reporter David Heinzmann contributed.
12 May, 2012
-
Source: http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEd5fIOh_hGcdIKAwHNWdj_yuBZGA&url=http://www.chicagotribune.com/business/ct-biz-0513-nato-insure-20120512,0,6776606.story
--
Manage subscription | Powered by rssforward.com
