John D. Rockefeller Jr. had it right when he declared, “A friendship founded on business is better than a business founded on friendship.”

In one case of misplaced business trust, the PAR insured obtained a commercial property account based on the fact the producer and the business owner each had children attending the same school. The producer, who was not an insurance person, lacked adequate understanding of exposures and coverages, and the account was the only one he had ever written.

The original carrier’s policy limit for concrete and asphalt was $500,000. For a slightly better premium, the producer got the client to change to a replacement insurer offering only $25,000 in concrete and asphalt coverage.

The drastic limit reduction came into play when a fire damaged an outside concrete slab, concrete block fence, and outside asphalt pad at the account’s property. The reduced policy limits didn’t come close to reimbursing the damage, and the client pressed for restitution. The business owner ultimately received $575,000 -- $475,000 for the policy limit difference plus $100,000 in attorney fees -- but only after the principal at our insured leveraged his firm’s clout with the replacement carrier to get it to pay the amount above the agency’s PAR deductible. In addition, PAR had over $20,000 in legal expenses.

Multiple businesses, and surely a friendship, were taxed in this instance. Better to choose business partners based on other characteristics, such as possessing the knowledge needed. There’s always time to meet friends after work instead!