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Shining sliver: CAMICO'S 25th Anniversary: an Opportunity to reflect.

a group of CalCPA CPAs was busy forming a start-up insurance company 25 years ago that would serve as the first insurance program dedicated to CPAs. And the timing was perfect.

CalCPA had received notice from its professional liability carrier that, as of 'July 1986. the company would no longer provide insurance for CPAs in the state, leaving about 1,700 firms bout coverage--and exposed to damages from lawsuits.

Insurance companies had been engaged in a rate-cutting war and found themselves with insufficient funds to cover their new claims liabilities. Most companies responded to the crisis by discontinuing their coverage of CPAs, while others imposed huge premium increases to cover the cash shortfalls.

GalCPA's executive committee responded by approving the formation ot a new insurance company dedicated to protecting CPAs. The prime movers were Lou Barbich, 1985-86 GoICPA president; Jim Kurtz, thenCalCPA executive director; John Dodsworth, then-director of CalCPA business operations; and Ken Ashcraft, then-chair of the CalCPA Insurance Committee.

The four leaders began developing business plans, filing documents and writing contracts. They also recruited seven others to the new company's board of directors: Robert Game, Victor McCarty, Roland Mangiantini, Bill Scheuber, Arnold Bernstein, Zeke Sicotte and William Moore.

Then the Gal Accountants Mutual Insurance Company (CAMIGO) was incorporated March 4, 1986 -a prerequisite for a Certificate of Authority from the California Department of Insurance, which would decide whether CAMIGO could open for business.

'We Were There'

The 11 board members, who had not vet met formally as a group, fanned out across the state to explain to CPAs how the CAMIGO program represented the difference between GPAs staying in business or going out of it. "If there was a place we could get (our accountants together, we were there," said Bernstein. They were also convincing: About 1,400 firms signed on with the new venture, paying their annual premiums in advance, as well as certificates of contributions that helped finance company operations.

By June 1986, within weeks of the July 1 expiration of their professional liability coverage, the board had the $5 million in cash required by the Department, of Insurance. The Department, however, would only count the amount of processed policies, which came to $4 million leaving the new venture short by $1 million.

CalCPA loaned the difference before the Department of Insurance conducted its qualifying examination June 23. CAMICO received its Certificate of Authority to transact liability insurance June 24, and policies began to roll out with an effective date of July 1, 1986.

"In hindsight, I don't know how we did it," said Barbich. "It was risky. We put a company together in a matter of months. I don't think you could do that today"

Barbich transitioned from CalCPA president to chair of the CAMICO board and called the first CAMICO board meeting to order July 2. 1986. A year later CAMICO had 1,472 policyholder firms and repaid the CalCPA loan that had helped get it started.

The company soon started to and hire personnel to handle underwriting and claims functions. Ron Klein was hired as CAMlCO's first claims manager just three months after the (bunding of the company and is still with the company. One of his first job directives was "to solve professional liability issues for CPAs." and at the top of the list of tools for solving those issues was the engagement letter.

Bernstein had saved copies of engagement letters he had tised in his practice and collected from other CPAs. Such letters were then used for audit engagements, but Klein-Bernstein and other board members wanted to expand their use for non-audit work because of the legal protection the letters provided.

Bernstein and Klein read through the collection of letters, marking the paragraphs that contained usable guidance. They then grouped that information with paragraphs from Other letter's On the same subject. These creations served as early models for the engagement letters that CAMICO would use to help protect CPAs.

First Step in Reducing Losses

"In the past most engagement letters were hand-me-down letters or had boilerplate language." said Bernstein. "But each engagement has a different set of needs. Taking on engagement letters as a first step in reducing losses was a unique contribution CAMICO made to the profession."

Besides engagement letters. CAMlCO's loss prevention and risk management program provides professional advice via hotline consultations; informational alerts and newsletters; online and live presentations; and members-only website resources on legal and tax issues, client screening, documentation, record retention, data security fraud, fees, billing; collection, arbitration, mediation and several other practice management issues.


By 1988 CAMICO became the first insurance company serving the CPA profession to establish a stand-alone loss prevention department. That's also when the famous red Loss Prevention manual was first mailed to CAMICO policyholders that contained resources such as sample engagement letters. loss prevention articles and other tools.

As CAMICO grew over the years the company pioneered:

* The development of sample engagement and disengagement letters;

* Proactive assistance with incidents before they become claims; and

* Loss prevention classes and CPE for policyholders.

As CAMICO's programs became better known in California, its financial standing became sturdier. It ended 1991 with a surplus of $12.7 million. At that time the company's board ended the requirement--begun when CAMICO was just starting--that all new policyholders pay certificates of contribution when they became insured with the company

CAMICO began to pay interest to its policyholders on the certificates, which totaled nearly $10 million, with the goal of erasing the debt.

In the fell of 1992 the company convened its top people for a pivotal meeting in San Francisco to discuss CAMICO's future direction. The management team included, in addition to Dodsworth and Klein: Ric Rosario, vice president of risk management; Sandra Maker, vice president of marketing and communications; and GFO Ed Marley

Up to that point CAMICO's policy underwriting had stopped at the borders of California. But the management team felt that expansion to other states was desirable, and developed plans on how to make it happen. The board agreed on the expansion and reiterated the need to pay back the certificates of contribution.

Two years later the company took a big-step in doing just that, making a S3.3 million payment on the certificates.

First Policy Outside California

With its financial goals being realized, CAMICO issued its first policy outside California Dec. 1, 1995, to a CPA firm in Oregon. CAMICO then moved across the Western stales, as its board and staff worked closely with the other state CPA societies.

"Part of our program was to tell our story to other CPAs and the CPA societies," said Robert Carrie, CPA, a board member from 1986-2009. "Many of them were facing the same sort of problems we were, so they were receptive to us."

Eventually, the CPA societies of Washington, Nevada, Arizona, Colorado and 11 other states would sponsor the CAMICO program. In 1996 the company wrote only $42,000 in premiums in five western states. But by 2003, after a public relations and marketing campaign helped spread the word, those same states generated more than $4 million in annual premiums.

As the company then pushed into the Great Lakes region and beyond, it started paying dividends to its policyholders--$1.75 million in 1996 and 11.93 million the next year. While continuing to pay interest to those policyholders who still held certificates of contribution, CAMICO also kept chipping away at the principal: S3. I million in 1994, another $3.1 million in 1995, $1 million in 1996, SI million in 1997, and finally; in 1998, the final $I million that redeemed all the certificates. That payment fulfilled the company's promise to its policyholder's who had showed faith in CAMICO by investing in it during 1986 when the company existed only on paper.

To learn more about CAM ICO, visit
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Title Annotation:historicallandmark
Publication:California CPA
Date:Oct 1, 2011
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