Defense Base Act (DBA) coverage is usually relatively easy to identify as it is a contractual requirement for Employees working on U.S. defense bases and other similar contracts overseas. It becomes a little trickier when the insured is a subcontractor, as you may need to contact the principal to determine the DBA requirements in the prime contract.
 
When interacting with the Jones Act or other Admiralty remedies, it becomes much more complex. For example, when an insured works on a U.S. Navy vessel (considered a defense base in its own right). If the Employee does enough work on the vessel to meet the "substantial connection to a vessel in navigation" requirement for Admiralty jurisdiction, they have a right to collect those Admiralty (Jones Act) benefits.  
 
Taking this one step further, DBA excludes admiralty employees, so here is what happens:
·        DBA Carrier denies coverage
·        Employee sues and collects under admiralty

Here is the problem – it is so easy to assume that DBA supersedes all other coverages that most agents/brokers will not provide Maritime Employers Liability (MEL) coverage … leaving a massive gap and an E&O exposure for that agent/broker.

 
Even if the "substantial connection" test is not met, the Employee still has the right to sue under Admiralty law, and the DBA policy does not even provide defense cost coverage in this event!
 
I want to assure you that this is not some hypothetical situation. We have practical examples of claims where the DBA carriers have declined defense and indemnity under Admiralty law, and agents/brokers have had to respond under their E&O policy. Further, this does not need to be some vast Navy vessel, a carrier, or Destroyer, etc.; it could be as simple as an 18ft harbor patrol vessel!
 
It is rare to see this happen IF all the work is performed dockside. But, if your DBA employee ever does work on a military vessel in Navigation, you must offer MEL coverage, even if it is only to provide defense costs for the incidental exposure.
 
An "incidental" MEL can cost as little as $3,500 and typically provides $1mil of defense coverage with a small deductible.

  Ian Greenway

AI in underwriting poses significant risks that could have disastrous effects for both consumers and the insurance companies that underwrite them. AI can be prone to inaccuracies if the algorithms fail to properly interpret data points or mistakenly identify risks in consumers. This can potentially lead to incorrect and unfair pricing decisions, resulting in the rejection of legitimate claims or in some cases, the acceptance of fraudulent applications. Additionally, if implemented poorly, AI systems can worsen existing biases, since algorithms can maintain and even amplify existing biases without proper oversight. Finally, AI can lack transparency in its decision-making processes, making it difficult to challenge decisions and uncover systemic flaws in an insurer's underwriting process.

Surprise! That opening paragraph about the risks of AI underwriting was, ironically, written by AI. It was generated using a GPT-3 AI via an API. You can get similar results using the ChatGPT bot over at openai.com.  

It misses some key points though. To understand the problems inherent to AI, it helps to understand how it works. The basic vastly oversimplified explanation is that AI is a black box that you feed inputs and then you get an output. How it determines that output is based on Machine Learning. To oversimplify Machine Learning, you take sample input and then tell the machine what the output should have been. Do this often enough and the machine will learn how to do it.

Hopefully, this has already tipped you off to some of the simple pitfalls of AI. It is only as good as the things it’s trained with, as exampled by the AI bot Tay on Twitter, which had to be taken down hours after release due to the subject matter of its responses.

But some drawbacks are less obvious. AI makes different assumptions than humans do and sometimes they’re wrong. For example, one set of researchers was able to make the AI in a car read 35 as 85 simply by using a piece of black tape to extend the middle arm of the 3. 

Humans have an inherent bias. Sometimes an account gets declined because of how it’s presented and explained. Sometimes they are declined because of the timing in relation to a major news story. Humans are more likely to buy newspaper subscriptions if the day is sunny which there’s no logical reason behind. The machine trying to analyze these could end up making the wrong determination as to why a risk would be good or bad.    

So why do we care? Well, there already existing AI-based syndicates. Some are follow-only, meaning that a human has little to no interaction with it and the underwriting becomes solely a matter of how good the AI is. It’s not science fiction, the technology is here today and is likely already causing issues for insureds. 

Author: Mark Greenway, LIG Marine Managers

Sources:

The Guardian

MIT Technology Review

The British Psychological Society

In the world of Longshore, nothing ever seems to be as simple as it should be! So, why should class code suffixes be any different?

In the traditional sense, if you look in NCCI’s SCOPE manual, or Bureau States manuals, you will see that “true” Longshore class codes, i.e. 6872F, 6824F, 6006F, etc. will have an “F” suffix. It’s understood within the insurance industry that the “F” indicates “Federal” coverage. 

You will also see the “F” suffix attached to “true” Longshore class codes in the Advisory Loss Cost pages of NCCI’s Basic Manual. A footnote on these pages states “F Advisory loss cost provides for coverage under the United States Longshore and Harbor Workers Compensation Act and its extensions. Loss cost contains a provision for the USL&HW Assessment.”

Seems simple and straightforward enough, right?  Well, what about the “U” that shows up on the rating pages of some carriers’ quotes or policies? 

Some carriers will attach the “U” to a standard State Act class code, i.e. 3724U, 5403U, etc. to indicate that the Longshore factor has been applied to that class code. 

It is understood within the industry that the “U” represents “USL&H”. However, not all carriers will apply the “U” suffix. Many will still use the “F” suffix on their quote/policy rating pages to reflect the application of the Longshore factor. 

In either circumstance, the “F” or “U” suffix on your quote/policy indicates that coverage under the US Longshore and Harbor Workers Compensation Act has been applied.

Below is a list of the 15 countrywide true “F” classes along with the 7 State-specific true “F” classes:

6801F
Boatbuilding--wood--NOC & drivers
6824F          
Boatbuilding or repair & drivers
6826F            
Marina & drivers--coverage under U.S. Act
6843F            
Barge building--iron or steel--U.S. Act--& drivers
6845F            
Shipbuilding--naval & drivers
6872F            
Ship or repair conversion
6874F           
Painting--ship hulls
7309F            
Stevedoring NOC
7313F            
Coal dock operation & stevedoring
7317F            
Stevedoring--by hand or hand trucks exclusively
7327F            
Stevedoring--containerized freight & drivers
7350F            
Freight handling NOC--coverage under U.S. Act
8709F            
Steamship line or agency--port employees--talliers, checking clerks and employees engaged in mending or repackaging of damaged containers--coverage under U.S. Act
8726F            
Steamship line or agency--port employees--superintendents, captains, engineers, stewards or their assistants, pay clerks
9077F           
United States armed service risk

We hope this provides some clarity on a topic that can be confusing to many.

The world of longshore can be complex, but the experts at LIG are here to help!

 - Author: Tommy Bridges, VP of Business Development, LIG Marine Managers

Marine Insurance has a longstanding tendency to perpetuate confusing names for coverage. You’ve probably heard of Longshore, but are you familiar with USL&H and LHWCA? 

Let’s clear up some of these misunderstandings.

The full name of the act establishing benefits for waterfront workers is “33 U.S. Code Chapter 18 - LONGSHORE AND HARBOR WORKERS’ COMPENSATION ACT.”

If you compare the coverage names and the title of the Act, you’ll see that these three names originate directly from this piece of legislation. Two are partial abbreviations, and the third is a broad single-word simplification.

But which term is the standard for the industry and why are they all used to say essentially the same thing?

• The abbreviation “USL&H” is somewhat incomplete, as it ignores the WCA part.
• The abbreviation “LHWCA” is more complete, but not descriptive.

You’ll often see these abbreviations in written format, especially on ACORD or Carrier forms, as they are easier to include in a short-form question.

Meanwhile, “Longshore” is the broadest and most inclusive term and is much easier to say. Therefore, you may hear this term used more often when speaking about this coverage.

The good news is that everyone in this market segment understands all these terms interchangeably and will quote accordingly.

Now that’s the simple part … more complex is how and where Longshore applies. 

If you need to know more about that, have a look first at Longshore 101 for a basic understanding and then our other webinars for more details.

Keep an eye out for our upcoming blog post covering different types of Longshore rates and how they apply.