Document RJ3aJDQvVV66jv77eyQ0jp8K8

" Pi i ? , * ,< , **" f,wy '"' ^ io''!*j i f J'1^ ^ s * m Johns-Manville Internal Correspondence l<' J. J. Tracy 3-21 // ' ^ ?'<"" W. R. Cur liner 3-21 ,//'/ D;ilo: 7/17/7B Copmr.: chrono Subjoct: The Insurance Department: and Management Development E. M DcCoursey's 6/30 lotter on "Management Development" prompted me to evaluate two different but related topics, my own career development, and the present and future needs of the Insurance Department. booking at the latter first, I believe that the Insurance Department is facing an extremely heavy workload which, for the mo "t, is due to the many changes that have occurred over the past throe years. The specific causes of this additional workload, which continues to increase, a r e t: 11 o fallowing: 1. for 2b years prior to July 1976, J-M simply renewed its primary casualty program with Travelers, Starting with 7/76 J-M has h.ut two major changes in this program with the Inst change resulting in the establishment of a captive insurance company program. These changes plus the operation of the captive have squirt*,.! ad* lit tonal work am! sophistication to monitor and control change:.: i.n policies, reporting requirements, and accounting. 2. for 10 years prior to 7/76, J-M simply renewed its umbrella policy wi th onuonfc ial. ly the same companies as the year bo Core. Starting with 7/76, J-M has had three major changes with the last requiring a one-month extension before coverage could ho placed. These changes not only caused a tremendous amount of: work at renewal, but ftmy also created coverage problems, that; wo arc still trying to work out with the Legal Department. 3. J-M is having to face and deal with very difficult insurance coverage questions which most other companies do not have. Many of those questions relate to asbestos disease claims, one of which is the date of accident question for product 1 liability claims, Workers' Compensation claims and employers' liability claims. Other open issues relate to our pipe products for which many coverage questions remain unsolved. These questions have become more difficult to deal with because J-M is no longer insuring with the same carriers year after year- Ii PLAINTIFFS ig EcAXHnIiBoiITi |i Wftft 3^ PLAINTIFFS || EXHIBIT |i ,l$05a.00 CRMC-000383 1 itsi pi fi-, i &?v4 Hg^rl /'XC.'.Ct a i IS |;R| 1 S;i $1 I -2- J. J. Tracy W. R. Curtncr 7/1.7/70 The Insurance Department and Management Development 4. JM. is also faced with an increasing volume of difficult claims, especially in the employers' liability area. We have gone from possibly one claim in this area in 1976 to over 60 in 1978. Certainly we have seen the same kind of dramatic volume increase in the asbestos-related product liability area and to some extent in the auto liability area as well. 5. Since Insurance became a separate department with its own budget, which it didn't have in 1975, there has been a significant increase in budget and personnel duties which did not previously exist. 6. Previous to 7/76 there 'was very little need to keep in-house records. J-Mlind the same .insurance carriers year after year, and they used the same insurance broker, M&M, year after year. Now that we have made numerous change.';, J-M j.s attempt ing to develop records and record- keeping procedures that were previously left up to the brokers and insurance companion to maintain. in other word;;, wc find ourselves trying to catch tip to fulfill the needs of today by changing pro- ecduron that Wore based on the nearly static situation of three or four years ago : at f ho 0:afno t ? TO,0, ' great ep number Of e! /} a nd covr r< continue to deal with a 7 . 'I'lie phi 1 O'lpjihy Of Ui t n nmnutcr 1)01 rtni'-nf. has changed from one o! keeping pee,;r> ! e 1 n t hv her k a bOU insurance coverages and premiums f (l Oi V n f Keep 1 l iff On Cip \ O fut 1 y i t< { ; mod. This not:, only requires ad, 1 i ! Pinal wot k, sue h an upd a? Hip M insurance Program Manual, Annual Audi! tt 'port , atui Wo ry ss iteport, it also requires re s p< a id i in; to add 1 t. i on a 1 ? pea ?, i on a (by phone s, letter) due to the g rente t inf ere ;;t and lU'K'j er a f. and i tig f Insurance matters. 1 i finally, the c i n n ur an CO has ! sen 751 from 1975 to 1977 going from 3.6 B! i 1 . t o i'i . \ m i 1. (e ltiding Canadian W/C) . Moreover, this iiirt'iMso does fi Ot'. c Sj i i\ tnc 1 ud th-' 51.5 mil. paid for product liability. Ce r *. a i a} y rh taco her indicate the importance of controlling th CCC CO s n s a r c f fo c t i :ly as possibl Al 3 of these change c have bee n do alt. w i a s c x is ted in 197'.>. The- only cha aetc W.-i honciicounit.., along wit. h a an a i 1 pa r t. o t th, vi i i c h the lnsnran.ee Pc oar t.tnon t l.h cn had on o person at. this t. imo , but o a: > o r\l i all pc r: ;on because the depart: i rig oyo c w. employee Benefits, and so s ore of he; r v;< the now replacement. nt La 1 ly the same headcount: that in 1976, we lost one nployoo none f i. t Insurances for : respons i hi 1 i f.y. We added a added only 1/2 to 1/4 of a sot: working full time on remained the responsibility of S&VStfSL CRMC-000384 J. J. Tracy W. R. Curtner 7/17/78 The Insurance Department: and Management Development Bccau.se of the extremely heavy workload, due to the. causes stated above, many tasks that need to be done arc not getting done. Specifically, these tasks are the following: 1. We need to establish a procedure by which all potential and actual insurable product liability claims are reported to the Insurance Department so that we can properly report them to the carriers in a timely manner. In the recent past we have depended on the Legal Department for this information, and this procedure hasn't worked. For example, there are approximately $1 million of small shingle claims which have not been reported to the insurance companies and which are potentially insurable. This is only one example; there are others. My problem is that I do not have enough time to spend on developing a system of identifying insurable claims. I could do it, however, if I had a person whom I could direct and who could commit a significant amount of time in working with the Quality Assurance managers to develop reporting procedures. It .(?i w-'rOi noting that Dick Von Wald has indicated to me that, he1 lu hirin'! another lawyer as a Manager of Product f.lability. My >onceth is fit,it. if the tnstitahee Department dons not have the resources to tackle thin problem,, which is an insurance problem, it. will soon fall within the t-egat Department* n respond ibi. 1 i ty. 7. We need to improve our analysis of d-M's insured Workers' Compensat.ion el aims* which amount to C-1 mi 11 Ion per year . We should be analysing the claim information received from insurance carriers to determine: a. Ase the reserves being correctly calculated by Crawford. 1). fio the e 1 aimr> paid by Crawford all belong to JM, c. Do the claims indicate a pattern of Losses that could he corrected? ,*s you know, the Legal Department is forming a nix-person group to handle the self-insured Workers* Comp. An expressed in item `(l, my concern is that,if Insurance does not have the resources to adequately perform these task-;, they will soon become the rosponsibll ity of the I,e an .1 Do pa r t roe n!;. 3. Al thouuh we have improved l he account ing for insurance premium:'., we still depend on the Accounting Department i it providing ._od J ng and allocation assistance. Also, we still do not allocate all our policies on the basis of current, lose; exper ienee (when possible) . With more resources, we could do at ! tdio coding and allocations of premiums by current loss experience within the* Insurance Department. CRMC-000385 .* _ j :. y: ' -o V ,* .M&j- 4. I think the Insurance Departmont, as part of Finance, should maintain onouqh information on the asbestos liability suits to aLlow us to make our own evaluation and projections. We would, of course, con tinue to consult with Legal. Wc do not have the resources to maintain this information.. 5. More time should be spent .studying new types of pol icies which, can be placed in Rocky Mountain as well as considering new reinsurance arrangements to be used in conjunction with new policies. The possi bilities for savings in this area cannot be accurately quantified, hut it .is worth noting that ARM calculated that it can reduce our property insurance costs by over $400,000 a year by placing our policies into Pocky Mountain and reinsuring into their pool, Hopewell. 6. Wc should be analyzing the policies of J-M's joint ventures and con trolled minority companies,which have separate insurance programs such as Advocate, RFPC, Kings!'/ Falls, and Elkhorn. It is important to avoid both gaps and duplications in coverage, especially in the case of liability exposures which can amount to many millions of dollars. 7 . Hot: onoiK t i mo 1 r hit in risk identification. J-M does not have /inyon^ wii.tthhi.nMl iittsr; corganization who spends, a significant amount of t 1. me n !. 1 <anjit: i ng to ago i df'tdo11 Iodise which may be control led and/or insured. Related fo !. hi n ij 1 he f ;1Cl: that more analyses of insurance policy exclusions need to 1 K * tn.irje In avoid imtxartnnf gaps, in coverage. t do not believe t h.-t. Wo < Mil dejje nrt on .insurance broker'-, to do this task , especially tow tlui t Wf * p 1 .ir liffereut {-siloies with different brokers. S i AS irldi Oll.ol. f.ir Mu r, 1 1 fO i i is an ranks are imporiant and should bo comp Jet ed wi. thin n tela! i v< ! y short > i m=-; however, the Insurance Department v.'i t 1) i t s cur M-rh. : t4 court: <" cannot, acoompt i?*h these tanks In the near .future, As you mi ghi. suitM o e, my duties is to add one person to the Insurance tiH'p.'U'i'ItVM} hut \ ! bei j these tasks, warrant the expend 1 inrun Involved in ;u:<j!i 1 v ini;i a u n . More spec i !: s ca 1 1 v , 1 would like to add a person at a le vol hi or beta too * of the importance and complexity of the tasks for whi ch t'vie add i t iona 1 V' *rson would tv responsible. This new person would w oi-k ' in [ h<:/ t i r s i: fo ir items 1 is ted above; a !., this add 11 ion would a 11ow ra.o mo ro t.iino t o wo rk on the last, three item.:; 1 is ted, in addition to train.in q n;u:\ <Hr< o * i ng t ho now norson's activities. IBtill iiiiiiiif --K Anot hev bi'iv;' r i i -O i; ii'.ore a o i f. voui ( ; (-. } \ O i'-' t i mn for Insurance Department-.' s resources is that devo I op-men r.. More specif Leal Ly, 1 am coin-;' rntod W\ mt w 1 ttout: dd 11 lO; il person there won't bo enough resources within i.he jnsur.meo Department t- allow time to train a new Insurance Manager (when and if there is an opportunity for me to broaden my experience within ,5-M) v*i t bout letfise a number of insurance r rspons ihi 1 if ieu; si ide and/or be non looted. This slide in performance of existing tasks would be ious in light of the number of areas that, are already being neql.ee te.d. I MBWI fSjgBgggffl P* Sr.,, CRMC-000386