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Commercial Office Space Set for a Strong Comeback

The sustained increase in demand for office space across the nation since late 2022 suggests that the market has moved past its lowest point, according to insights from the real estate technology platform, VTS. Demand for office space began to rise in late 2022 and continued into early 2023. Since then, the office market has experienced a period of stability and growth, supported by favorable economic factors, indicating a market rebound. This conclusion is drawn from the VTS Office Demand Index (VODI), which tracks unique new tenant tour requests for office properties in key U.S. markets. The VODI serves as an early indicator of future office leasing activity. According to the index, demand for office space has grown consistently over the past 12 months, closing the second quarter with a 17% year-over-year increase and a 34% rise from the VODI’s lowest point in December 2022. A significant shift in office-based employment patterns further supports the belief that demand for office space has stabilized. After reaching its peak in August 2022, office-based employment declined by 3.9% in early 2024. However, this trend has since stabilized, and employment growth has remained steady. Additionally, a recent decrease in work-from-home rates has fueled the renewed demand for office space. “They say you can only recognize a market bottom after it has passed, and the office space market is no exception. Following what we now see as the bottom, the national demand has gradually increased, though it remains susceptible to economic challenges,” said Nick Romito, CEO of VTS. “However, the growth observed in VODI over the past 18 months, coupled with positive trends in the office-using workforce, suggests that the market has reset, and the worst is behind us.” It’s important to note that this national trend does not impact all local markets equally. Cities like Los Angeles and New York City have seen healthy growth in office space demand, while markets such as San Francisco and Washington, D.C., have experienced prolonged stagnation. In Los Angeles, office space demand surged in the second quarter, briefly surpassing pre-COVID levels, driven by an increase in the average size of office spaces sought by tenants. New York City followed a similar overall pattern, though with some softness in the second quarter. Conversely, San Francisco’s demand for office space remains unpredictable, largely due to its tech-focused workforce, which continues to favor remote work more than other industries. “Markets heavily dependent on the tech sector, like San Francisco and Seattle, are on a markedly different post-COVID recovery path compared to more diversified markets like Los Angeles and New York City. It may take some time before we see office demand in San Francisco and Seattle return to pre-COVID levels,” added Ryan Masiello, Chief Strategy Officer at VTS.

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Global IT Outage Puts Business Interruption Insurance in the Spotlight

In July, a global IT outage had a significant impact on business interruption insurance policies, overshadowing the effects on cyber insurance coverages. “This incident wasn’t a result of a malicious attack, which is why typical cyber insurance policies may not have been activated,” explained Peter McMurtrie, a partner in West Monroe’s insurance sector, in an interview with PropertyCasualty360.com. “Where coverage was applicable, factors like deductible amounts, waiting periods, and coverage limits played a critical role in determining the extent of exposure,” McMurtrie noted. “Standard policies for small businesses were less likely to offer coverage, while more complex policies for mid-sized companies and Fortune 500 corporations may have included broader triggers for non-malicious outages caused by third-party software issues.” The outage was triggered by a software update on July 19, 2024, by cybersecurity firm CrowdStrike, which affected organizations worldwide using Microsoft Windows. This interruption had far-reaching consequences, including disrupting hospital systems, media outlets, financial institutions, delaying thousands of flights, and halting daily business operations. McMurtrie emphasized that while the initial impact of the outage was similar for both large and small businesses, the ability to recover operations and whether insurance covered the loss of business income varied. “Larger companies are more likely to have advanced disaster recovery plans that ensure service redundancy following unexpected outages,” he added. “Their insurance programs also tend to cover a wider range of incidents.” According to Microsoft, the CrowdStrike update error affected over 8.5 million Windows devices globally. The incident highlighted the interconnected nature of our global ecosystem, including cloud providers, software platforms, security services, and their clients. “It’s a stark reminder of the importance of prioritizing safe deployment and disaster recovery across the tech industry,” the company said in a blog post. McMurtrie pointed out that the outage’s widespread impact was largely due to its effect on organizations that are critical to societal infrastructure—sectors like agriculture, airlines, banking, energy, government, healthcare, manufacturing, and retail. “Insurance companies base their risk appetite on their ability to understand and price risks appropriately. This becomes increasingly challenging with emerging threats,” he said. “However, I anticipate that insurers will respond by clarifying policy language, refining risk selection criteria, and possibly developing new products specifically designed for this evolving exposure.”

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Specific Technologies Driving Insurtech Investment in 2024

Understanding the Funding Decline The decrease in funding does not necessarily spell trouble for the insurance sector but instead highlights a strategic shift, the report suggests. “The insurance industry, like many sectors, is focusing on the most promising ventures with substantial insurance potential,” the report explains. “Insurers are directing their investments toward key areas and current trends such as embedded insurance, employee benefits, and cyber risk management. This strategic investment approach signals a forward-looking mindset within the industry.” Three Key Insurtech Trends for 2024 The report identifies three major trends shaping insurtech investments in 2024: Public Insurtech Companies: Financial and Growth Strategies The report also notes that public insurtech companies are prioritizing revenue growth as their main goal. These firms are restructuring their financial strategies to boost cash flow and capitalize on rising revenue streams. Their growth prospects are supported by expanding asset portfolios and strong market demand. “Public insurtech companies are focusing on revenue growth and optimizing their financial frameworks to increase cash flow,” the report states. “The growth potential for these companies is driven by increasing revenue opportunities, broadening asset bases, and a robust market for their services.” In summary, while global insurtech funding saw a decline in 2023, the industry’s focus on GenAI, digital process management, and connected insurance technologies is setting the stage for a dynamic and forward-looking 2024.

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Insurer Secures Unanimous Supreme Court Victory in New York Choice of Law Dispute

In the world of sports, a clean sweep, a shutout, or a perfect game is the ultimate achievement. In the legal arena, a unanimous decision from the U.S. Supreme Court is equally rare and significant. In a notable legal triumph, Great Lakes Insurance SE achieved a unanimous 9-0 victory in the Supreme Court on February 21, 2024. This victory follows a protracted legal battle that began in the District Court of Pennsylvania, advanced to the U.S. Court of Appeals for the Third Circuit, and culminated in the Supreme Court’s decisive ruling. Background of the Case: Great Lakes Insurance SE v. Raiders Retreat Realty Company The heart of the dispute was the insurance contract’s clause selecting New York law to govern any future legal conflicts. Although the financial implications of this case were relatively minor compared to the broader marine insurance industry, the insurer’s determination to uphold a crucial maritime legal principle has significant long-term implications for marine insurance. Faced with the insured’s counterclaims—including allegations of breach of fiduciary duty, insurance bad faith, and violations of Pennsylvania’s Unfair Trade Practices Law—the insurer was confronted with serious risks. Such claims could lead to the shifting of attorney’s fees, treble damages, and more, which might normally encourage insurers to settle rather than risk pursuing justice. However, Great Lakes Insurance, supported by The Goldman Maritime Law Group, opted to challenge the Third Circuit’s decision and seek clarity from the Supreme Court. Supreme Court Ruling: A Landmark Decision In a landmark ruling, Justice Brett Kavanaugh affirmed that choice of law provisions in maritime contracts should be upheld by default. This ruling is a major victory for establishing a consistent federal standard in maritime law and avoiding a patchwork of state laws that could complicate marine insurance disputes. The Supreme Court’s decision overturned the Third Circuit’s earlier judgment, which had questioned whether Pennsylvania’s public policy concerns might override the insurance contract’s choice of New York law. By upholding the New York choice of law clause, the Supreme Court eliminated the extra-contractual bad faith claims under Pennsylvania law, thereby ensuring that the dispute could be resolved based on the merits of the insurance claim itself. Significance of the Supreme Court’s Decision This ruling represents a significant advancement in maritime law, affirming that choice of law clauses in maritime contracts are generally enforceable. The decision establishes a clear, uniform legal framework for resolving maritime contract disputes, which will streamline the process and ensure fair adjudication of future insurance claims. Justice Clarence Thomas’s concurring opinion was particularly notable for its criticism of the 1955 Wilburn Boat v. Fireman’s Fund Insurance decision, which had previously influenced maritime insurance law. Thomas argued that Wilburn Boat was incorrectly decided and stressed that a uniform and enforceable set of rules is essential for the development of maritime law. Impact on the Marine Insurance Industry The Supreme Court’s decision sets a “bright-line” rule affirming that choice of law clauses are valid unless there is a strong argument against the selected jurisdiction. By endorsing New York’s insurance laws as a reasonable choice, the ruling supports a more consistent and predictable legal environment for marine insurers. This decision represents a major step forward in maritime law, helping insurers better assess risks, determine premiums, and ensure fair and efficient resolution of maritime insurance disputes.

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Small and Midsize Businesses Optimistic Despite Tough Economy

Most small and midsize businesses feel better about their own finances than the U.S. economy, according to a recent Nationwide survey of 800 businesses. Positive Outlook on Personal Finances More than three out of five small companies and 51% of mid-market companies rate the economy as either ‘poor’ or ‘fair’. However, 51% of small businesses and 73% of mid-market companies rate their own financial situation as ‘good’ or ‘excellent.’ Kristina Talkowski, Nationwide’s senior vice president and head of middle market commercial lines, explained, “Business owners are more optimistic the closer you get to their specific region, industry, or business. This optimism aligns with economic indicators showing a resilient economy but also reflects challenges with high interest rates, material, and labor costs.” Prepared for Challenges Despite facing economic challenges, business owners are taking proactive steps to strengthen their operations and resiliency. “Owners’ optimistic views of their own business conditions stem from their preparedness for future disruptions or expansions,” Talkowski added. Internal Challenges and Employee Benefits Both small and mid-market businesses face internal challenges, including benefits for workers, operational optimization, and managing expenses. “Health insurance and voluntary benefits like pet insurance are crucial for attracting and retaining talent,” said Talkowski. Business owners who increase wages must be aware of the impact on workers’ compensation premiums, which will rise as pay increases. Many are looking to optimize costs without sacrificing long-term protections for short-term savings. Reviewing and Adjusting Insurance Policies The survey revealed that 83% of small businesses and 77% of mid-market companies reviewed their commercial insurance policies in the past six months. Over one-third of mid-market owners either discarded a policy or lowered coverage limits during this period. AI Investments and Workforce Challenges Talkowski highlighted generative AI as an evolving need and challenge for businesses. “Employers need policies to govern the use of AI tools like ChatGPT to secure their business data and processes. While AI can increase efficiency, 43% of workers are concerned about its impact on job security.” The survey showed that mid-market companies are more likely to invest in AI, with 63% of them already doing so, compared to just 27% of small businesses. By understanding the challenges and opportunities within the current economic landscape, businesses can navigate uncertainties and continue to thrive. Skyscraper Insurance is here to support your business with tailored insurance solutions, ensuring your continued success and growth. #BusinessResilience #EconomicOutlook #EmployeeBenefits #AIIntegration #InsuranceReview #SkyscraperInsurance #WeShareYourVisionForABetterTomorrow

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D.C. Court Rules Insurers Must Cover $1.5 Million Water Damage Claim

In a significant ruling, the U.S. Court of Appeals for the District of Columbia Circuit has overturned a previous judgment, compelling two insurers to cover a $1.5 million water damage claim. Judge Gregory G. Katsas delivered the opinion, reversing a 2022 trial court decision and instructing summary judgment in favor of real estate developer 3534 East Cap Venture and McCullough Construction. The developers initially filed the claim after spending $1.5 million to remediate water damage at a residential and retail complex in D.C. However, Westchester Fire Insurance Co. and Endurance American Insurance Co. denied coverage, citing a policy exclusion accepted by District Judge Amit P. Mehta. The D.C. Circuit found that the builders’ risk insurance policies cover losses from water damage, even when caused by excluded perils like dampness and temperature changes, provided that direct physical loss by an insured peril follows. Judge Katsas, joined by Judges Cornelia T.L. Pillard and Judith W. Rogers, stated that this ensuing-loss clause mandates coverage for the damages in question. C. Thomas Brown of Silver & Brown, representing the developers, successfully argued the appeal. “This is a significant decision in an area with limited case law,” Brown remarked. “It’s reassuring that our clients will receive compensation for their policy.” Philip C. Silverberg of Mound Cotton Wollan & Greengrass, representing the insurers, has not commented on the ruling. Stay informed and protected with Skyscraper Insurance.We Share Your Vision for a Better Tomorrow. #InsuranceNews #WaterDamage #LegalUpdate #RiskManagement #SkyscraperInsurance #BuildersRiskInsurance #InsuranceClaims

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Making a Difference: June 14, 2024

Skyscraper Insurance is proud to spotlight the philanthropic efforts making waves in the insurance industry. Erie Insurance has donated $1 million to the United Way of Erie County, a social impact organization dedicated to breaking the cycle of generational poverty through education in Erie, Pennsylvania. This generous donation will help launch the Community Schools Model at Erie High School, enhancing academic growth, addressing basic needs, increasing engagement, boosting attendance, and improving school culture.The National Alliance for Insurance Education & Research has rebranded after 55 years, now known as the Risk & Insurance Education Alliance, or simply The Alliance. This name change reflects their evolution and expanded services as the leading professional-development resource in the insurance industry.Invest has awarded $20,000 in scholarships to three students pursuing insurance-related degrees. This nonprofit organization works in high school and college classrooms across the U.S. to educate, train, and attract the next generation of insurance professionals.At Skyscraper Insurance, we believe in supporting initiatives that inspire positive change and growth within our communities.We Share Your Vision For A Better Tomorrow.#Insurance #Philanthropy #Education #SkyscraperInsurance #MakingADifference #CommunityImpact #FutureLeaders #Scholarships

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States with the Highest Workers’ Comp Rates

In 2023, the workers’ compensation market demonstrated significant strength and stability, marking another year of impressive performance for private carriers. According to data from the National Council on Compensation Insurance (NCCI), this sector achieved remarkable results, continuing a decade-long trend of profitability. Key Metrics and Trends Combined Ratio and Premiums:Private workers’ compensation carriers recorded a combined ratio of 86 for the 2023 calendar year, maintaining the combined ratio below 90 for the seventh consecutive year. This consistent performance underscores the financial health and operational efficiency within the industry. Moreover, workers’ compensation premiums saw a modest increase, rising to $43 billion, which is a 1% uptick from 2022. This growth, albeit slight, reflects the sector’s resilience and capacity for steady expansion. Reserve Redundancy:The reserve redundancy in the workers’ compensation sector expanded to $18 billion, highlighting the industry’s robust financial foundation. This redundancy acts as a financial buffer, ensuring that carriers can cover future claims and obligations without significant financial strain. Market Dynamics:The voluntary market carriers showcased their strength as the residual market’s share of the workers’ compensation line continued its downward trajectory. The residual market’s share dropped from 6.1% in 2022 to 5% in 2023. For context, the residual market held a 12.5% share in 2003. This decline indicates a healthier voluntary market where more businesses can secure workers’ compensation insurance through regular market channels rather than relying on state-assigned risk pools. Claim Frequency and Severity In 2023, the frequency of lost-time claims decreased by 8%, which is twice the rate of the long-term average decline. This reduction in claim frequency is a positive indicator, suggesting improvements in workplace safety and risk management practices. Additionally, the severity of claims showed moderation last year, with NCCI reporting a 2% rise in medical-claim severity and a 5% rise in indemnity-claim severity. While these increases are notable, they are relatively modest, indicating controlled growth in claim costs. Opioid Utilization and Prescription Trends Opioid utilization in workers’ compensation claims experienced one of its most significant declines in recent years. According to the Enlyte Group, LLC, opioid utilization per claim dropped by 9.7%, and the cost per claim decreased by 7.2%. This decline reflects ongoing efforts to address and mitigate opioid dependence within the workers’ compensation system. However, the utilization of alternatives to opioids also saw decreases, albeit to a lesser extent. Non-steroidal anti-inflammatory drugs (NSAIDs) saw a 3% drop in utilization, while anticonvulsants declined by 7.4%. Over the past year, eight of the top ten therapeutic drug classes experienced an increase in prescription costs. Notably, two classes saw costs rise by more than 10%. Enlyte reported that utilization per claim fell in every drug class except for medications treating migraines. Migraine medications experienced a 17% increase in utilization and a 10.2% rise in cost, while respiratory medications had the largest cost increase at 14.7% per prescription. These trends highlight the evolving landscape of pharmaceutical management in workers’ compensation. Highest Workers’ Comp Costs by State The slideshow above reviews the states with the highest workers’ comp costs based on the Workers’ Compensation Index Rate, which is a biennial survey conducted by the Oregon Department of Consumer & Business Services’ Information Division. The index rate is calculated per $100 of payroll and serves as the basis for determining final premiums for workers’ compensation insurance. Key States with High Workers’ Comp Rates: These states face higher costs due to a combination of factors including higher average wages, cost of living, and regulatory requirements. Businesses operating in these states must account for these higher insurance costs in their overall risk management and financial planning strategies. Conclusion The workers’ compensation market continues to demonstrate resilience and profitability, with key metrics showing stable or positive trends. However, businesses must remain vigilant about evolving risks and regulatory changes that can impact their insurance costs. By staying informed and proactive, companies can better navigate the complexities of workers’ compensation insurance and ensure they are adequately protected. For businesses looking to optimize their workers’ compensation strategies, it is crucial to work with experienced insurance professionals who can provide tailored advice and solutions. At Skyscraper Insurance, we are committed to helping our clients understand and manage their workers’ compensation needs, ensuring they are prepared for whatever challenges lie ahead. Stay tuned for more insights and updates on the latest trends in workers’ compensation insurance. We Share Your Vision For A Better Tomorrow.

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What is a BOP and What Does it Cover?

What is a BOP and What Does it Cover? A Business Owner’s Policy (BOP) is a comprehensive insurance solution tailored for small and medium-sized businesses, bundling major property and liability risks into a single package. This streamlined approach simplifies insurance management and can reduce costs compared to purchasing separate policies, as noted by the Insurance Information Institute (Triple-I). Eligibility for a BOP BOP eligibility is influenced by the nature and size of the business. Typically, businesses that qualify for BOPs have 100 or fewer employees and generate revenues of up to approximately $5 million annually. Certain high-risk industries, such as restaurants, may not be eligible due to their specific operational risks. Coverage Provided by a Standard BOP A standard BOP usually includes the following types of coverage: Property Insurance: Covers buildings and contents owned by the business. Business Interruption Insurance: Compensates for lost income and covers operating expenses if the business is temporarily halted due to a covered event. Liability Protection: Protects the business against legal claims of bodily injury, property damage, and advertising injury. Limitations and Additional Coverage Needs While BOPs provide broad coverage, they do not cover everything. Notable exclusions include: Professional Liability Insurance: Protects against claims arising from professional services provided. Auto Insurance: Covers vehicles owned and operated by the business. Workers’ Compensation: Provides benefits to employees for work-related injuries or illnesses. Additionally, BOPs typically have lower coverage limits compared to standalone policies. Small businesses also face unique risks that might not be included in a standard BOP, such as: Cyberattacks: Coverage for data breaches and cyber incidents. Active Assailant Incidents: Protection against violent incidents on business premises. Employee Practices: Coverage for issues related to employment practices, such as wrongful termination or discrimination claims. Given these limitations, it’s crucial for business owners to assess their specific risks and consider augmenting their BOP with additional coverage to ensure comprehensive protection.

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Does New Jersey’s PIP Law Change Allow Injury Victims to Claim Future Medical Costs? 

Does New Jersey’s PIP Law Change Allow Injury Victims to Claim Future Medical Costs? The New Jersey Supreme Court is set to decide if a legislative amendment to the state’s personal injury protection (PIP) law enables accident victims to receive benefits for future medical expenses. This review comes after a trial judge allegedly used an older version of the PIP statute, ignoring the recent changes. Case in Focus: Brehme v. Irwin Linda Brehme was injured in a 2016 car accident in Paramus when Thomas Irwin’s vehicle hit her from behind. She was awarded $225,000 for pain and suffering and $50,000 for lost wages, but her future medical expenses, estimated at $236,000, were denied by the judge. Legal Dispute Gerald Clark, Brehme’s attorney, argues that the judge failed to apply the revised PIP law that allows for compensation of future medical expenses. The 2019 Supreme Court ruling in Haines v. Taft stated that medical bills exceeding PIP coverage could not be claimed at trial, inviting the Legislature to clarify the law. Legislative Amendment Following Haines, the Legislature amended the PIP statute (N.J.S.A. 39:6A-12) to allow the collection of medical bills beyond PIP benefits at trial. However, the trial judge in Brehme’s case did not apply this amendment. Appeal and Controversy Clark has appealed the decision, arguing that accepting the initial judgment does not waive the right to appeal for future medical expenses. The Appellate Division panel ruled against the appeal, citing procedural issues rather than addressing the statute’s application. Moving Forward Clark is optimistic about presenting the case before the New Jersey Supreme Court, seeking justice for Brehme and others in similar situations. Stay tuned as the court reviews this significant issue affecting personal injury claims in New Jersey.

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