Letters

A reader discusses insurance

NRCA's Executive Vice President William Good blaming 9-11 for the current state of the insurance market in "The insurance market: no easy answers," May issue, page 34, doesn't make sense. It may have been the proverbial straw that broke the camel's back, but the real cause was years of the insurance industry poorly underwriting and pricing its product in the search for more capital to invest in a market that had to burst. That is the reason the insurance industry was headed into a "hardening market cycle"—something that could have been avoided by the consistent application of prudent underwriting and pricing. Such a business practice would eliminate cycles in insurance costs and make predictable costs available to the construction industry as a whole, making our lives easier because we price our product for work that may not take place for months or even years.

Because I live and work in Arizona, where workers' compensation rates are among the lowest in the United States, I can't really comment on those costs except to say that a strong association commitment to worker safety seems to work especially well with the carrier and Occupational Safety and Health Administration.

In response to Good's comments about the stand taken by CNA Insurance Cos., Chicago, regarding torch work, I would like to see statistics that back up the statements it is making regarding fire losses. And not just for 2003. If this has been an ongoing problem, why hasn't CNA Insurance worked with the roofing industry (installers and manufacturers) to develop new or improved applications or equipment? I don't think using the results of one year makes any sense except as a "knee-jerk" reaction or to defend the stance CNA Insurance now is taking, which, to my way of thinking, is again a result of years of poor pricing and underwriting by the insurance industry. Tell me how limiting the percentage of work will improve loss results. Although it may improve the odds by reducing exposure, doesn't it also mean—even assuming the use of best practices—that an applicator who doesn't do this type of work on a consistent basis will not be as proficient as an applicator who does that work every day?

Good's right: Construction defects are becoming a concern. But I have yet to see a coalition of construction and insurance companies banding together to force states to write better, more equitable legislation. The legal community certainly has fought hard to prevent any legislation from passing. The comment Good makes that the cost for construction-defects claims now is about $70,000 even if a roof system is not defective only means to me the legal community has found a soft spot and will continue to scratch it as long as the insurance industry continues to pay. The attorneys don't want a fight, and that is what we and the insurance industry need to give them. Until that happens, the cost of construction-defects claims will continue to rise. The article does not make any mention of exclusions CNA Insurance ... is placing on current and/or future insureds. It would seem to me that if Good really wanted to make his article informative rather than make excuses for CNA Insurance and other insurers, [exclusions] would be a topic of vital importance to the industry and NRCA members.

Lastly, it is beyond comprehension how NRCA can continue to "work diligently" with an insurer that was there for the good times in our industry and then tucked tail and abandoned the industry, pointing at losses that always have been there or were not properly underwritten or priced. Remember, when you point a finger, three point back at you.

John Yoder
Star Roofing
Phoenix

Following is Good's reply to the letter:

"Yoder makes a number of excellent points. I certainly didn't mean to imply all the insurance industry's problems can be attributed to the attacks of Sept. 11, but if those events were the final straw, he would at least have to concede they represented a big straw worth about $50 billion.

"Further, fire losses clearly are not a one-year phenomenon. The industry has done quite a lot to get at the root causes of fire losses—but we have been doing that at a time when torch use has become more common. New steps we are taking, such as developing torch applicator training programs, surely will help in the long term.

"Clearly, plaintiffs' attorneys were the largest force behind the rash of construction-defects claims that have plagued the insurance industry for the past decade. But to suggest the insurance industry and construction industry have sat idly by is wrong. Collectively, those industries have spent millions of dollars attempting to fix a broken system, and if Yoder has suggestions on changing our legal system, I'd sure welcome them.

"Yoder is correct that new insurance policies contain new limits on completed operations and other exposures. These have been communicated to NRCA members separately and were beyond the scope of my article.

"Finally, I continue to believe the best way for us to find meaningful solutions for our members is to work closely with insurance providers rather than simply engage in more finger pointing."

A note to readers

In the January 2004 issue, page 25, the article "Observations for 2004," by Dick Baxter, president of CRS Inc., Monroe, N.C., included the following statements: "There have been sporadic reports of endothermal reactions in polyisocyanurate foam roof insulation resulting in open burning of the insulation material during shipment and storage. The reaction appears to be limited to thick foam boards (plus or minus 4 inches [102 mm]). Truckloads of thick polyisocyanurate foam have arrived at their destination with smoke pouring from trailers. Open flames break out when shipping containers are opened, allowing the influx of oxygen to the smoldering plastic foam. Some caution should be in order when opening shipping containers exhibiting any sign of smoke."

Although Professional Roofing cannot be responsible for assertions made by its authors, neither Professional Roofing nor NRCA is aware of any documented situations such as those Baxter describes.

William A. Good
NRCA Executive Vice President