January 16, 2017 Insurance Advocate

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Serving: New York, New Jersey, Connecticut, Eastern Pennsylvania and Washington D.C.

DFS Sets Out

CYBERSECURITY REGULATIONS Vol. 128 No. 1 | January 16, 2017

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Contents

14 DFS SETS OUT CYBERSECURITY REGULATIONS

[FEATURES] 4

Foreword: Orrino to Get a Top PIANY Award Steve Acunto, Publisher

6

On the Level: Take the Challenge Jamie Deapo

8

24

Social Notebook: Five Reasons Every Agency Should Be On Instagram Chris Paradiso Guest Opinion: You’re Old, You’re Sick, Get Over It Marilyn M. Singleton

January 16 | Volume 128 Number 1

28

On My Radar: Set-Up of Injured Plaintiff Fails; Clear and Unambiguous Exclusion Must Be Applied Barry Zalma

29

In the Associations: NYIA Elects 2017 Officers and Board of Directors

30

Looking Back: August, 1991

32

Courtside: Intercompany Arbitration: Though Award Exceeds Policy Limits, Court Will Not Vacate Lawrence Rogak

33

Classifieds

34

In the News: John Roberts to ShelterPoint’s Board of Directors

[A D F E ATUR E S ] 12

IIABNY: Education

21

MSO: Home Inventories— Helping Claims

New York and New Jersey’s Leading Insurance Magazine Since 1889.

FOR ADVERTISING OR SUBSCRIPTION INFORMATION Call 914-966-3180 or email g@cinn.com info@insurance-advocate.com www.insurance-advocate.com INSURANCE ADVOCATE / January 16, 2017 3

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[ FOREWORD ]

STEVE ACUNTO

Orrino to Get a Top PIANY Award uCongratulations are in order. PIANY will present Gino A. Orrino, CPIA, with its Industry Professional of the Year award at the annual Metropolitan Regional Awareness Program. Orrino is principal of Orrino Capital Services LLC in Corona, N.Y. MetroRAP will be held at The Roosevelt Hotel on Thursday, Jan. 26.

According to the PIANY standard, “the award recognizes an individual from an insurance company, general agency, managing general agency or other insurance industry profession, who has demonstrated qualities that foster a strong working relationship with agents and brokers, and who has exemplified a commitment to professionalism and service.” Active in PIANY, Orrino serves as vice chair of the association’s Government Affairs Committee. He also is a member of PIANY’s Member, Benefits and Services Committee and the PIANY Political Action Committee. He is an active past president of the Young Insurance Professionals, an organization dedicated to the professional and personal growth of newcomers to the insurance industry and an affiliate of PIANY. He served as National Chair of the Careers in Insurance Task Force for PIA National in Alexandria, Va. More recently, Orrino took part in the cybersecurity roundtable discussions with the New York Department of Financial Services, which helped in part to assist the NYDFS with releasing a fair cybersecurity regulation to consumers and agents. Other highlights of the daylong event include an expansive trade show and the keynote/awards luncheon. A Welcome Reception will be hosted by the NY-YIPs Wednesday evening, Jan. 25 from 6:30-8:30 pm., to kick off the event at Connolly’s Time Square, 121 West 45th St., New York, NY. Register for the NY-YIP reception at NYYIP.org.… … You cannot help but feel good about this industry now and then.

Forty-six students were just selected as recipients of The Griffith Insurance Education Foundation’s 2016 scholarship offerings. This past year’s scholarship funds totaled $130,000, which helped these students to continue advancing their education in preparation for future careers in risk 4 January 16, 2017 / INSURANCE ADVOCATE

management and insurance. These scholarships are awarded biannually to students who are in good academic standing, and they support The Griffith Foundation’s efforts to inspire students to continue pursuing risk management and insurance careers. Each year, The Griffith Foundation administers scholarships on behalf of organizations such as Westfield Insurance and Westfield Agents Association (WAA), which awarded $42,000 to seven students this fall. Westfield also introduced the James R. Clay Scholarship, an annual scholarship of $5,000 that continues former Westfield CEO Jim Clay’s legacy of supporting insurance education for the next generation of industry professionals.

Scholarship funds were awarded to students from the following institutions: • Bowling Green State University • Butler University • Eastern Kentucky University • Ferris State University • Florida State University • Georgia State University • Howard University • Illinois State University • John Carroll University • Kent State University • Missouri State University • Ohio State University • Olivet College • Rutgers University • Saint Joseph’s University • Temple University • The University of Georgia • The University of Texas at Dallas • University of Cincinnati • University of Iowa • University of Wisconsin at Oshkosh The Griffith Insurance Education Foundation, an affiliate of The Institutes, is a 501(c)(3) not-for-profit, nonadvocacy, educational organization that provides risk management and insurance education for students and public policymakers. The Institutes are the leader in delivering proven knowledge solutions that drive powerful business results for the risk management and property-casualty insurance industry.

For more information, visit GriffithFounda tion.org.[IA]

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VOLUME 128 NUMBER 1 JANUARY 16, 2017

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Kelly Donahue-Piro Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Director of Operations and Creative Services Gina Marie Balog 914-966-3180, x113 g@cinn.com EDITORIAL ASSISTANT COPYEDITOR & PROOFREADER Maria Vano mariavano9@gmail.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x111 circulation@cinn.com PUBLISHED BY CINN Media, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 613-1595 www.cinn.com | info@cinn.com President and CEO Steve Acunto

CINN MEDIA, INC.

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in July, August, September and December by CINN ESR, Inc., 22 Bedford Road, Greenwich, CT 06831. Periodical postage paid at Greenwich, CT and additional mailing offices.

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[ O N T H E L E VE L ]

JAMIE DEAPO

Take the Challenge uI’m astounded by the lack of response by independent agents to the significant increase in competition for their clients. Not responding is a mistake. The competition is growing daily and it is no longer isolated to personal auto insurance or even just personal lines. This new competition is after small-to-medium commercial accounts as well as personal insurance. Only the larger, more sophisticated commercial clients are currently beyond their grasp.

You need to take these competitors seriously. They are well funded, heavily invested in technology, provide ease of doing business and use psychological marketing techniques to blame the inflated cost of insurance on useless agents and profit-hungry traditional carriers.

Consumers don’t need an agent. Their services are overrated and they are hard to reach. They only add cost to the transaction in the form of commissions and they work traditional banker’s hours. Once they write your coverage you never hear from them again other than a renewal policy and bill. This is what they say.

The competition is available 24/7.

They’ve replaced hard to reach agents with a bot. An automated, artificial intelligence program available anytime to answer your questions and provide advice. Those that don’t offer a bot have automated coverage information sources available. Some even have a live chat feature. Once they’ve answered your questions you can buy lowcost coverage through an automated system when it’s convenient for you.

Lemonade even goes on to laud their philanthropic nature through a unique peer to peer arrangement that supposedly will donate to charity all profits over expenses.

What consumer wouldn’t be impressed with that?

How long will the competition be allowed to go unchallenged? Maybe independent agents can’t match the competition’s speed and relative ease in transacting business but we all know that won’t mean a damn if consumers aren’t properly protected or able to have an ally when it comes to a claim. We need to educate consumers 6 January 16, 2017 / INSURANCE ADVOCATE

What I don’t understand is why I am not seeing most independent agents flooding consumers with warning messages about proper coverage and claims advocacy. to look beyond the hype at what they are really buying. The competition is marketing slick packaging and delivery at the expense of professional knowledge and proper protection.

What I don’t understand is why I am not seeing most independent agents flooding consumers with warning messages about proper coverage and claims advocacy. Have agents just gotten lazy or forgot how to promote the legitimate and important benefits they provide? Have you given up? Are you biding your time until you can sell your agency and leave the problems to someone else?

Marketing against these competitors isn’t rocket science. It only takes a real commitment to reach out and bring the issues to the attention of the buying public.

Storytelling is a great way to educate. It forces the reader to visualize the issue and makes it easy for them to see themselves as the victim. Short, simple and sincere stories that highlight the real dangers of buying protection without the advice of an agent will get their attention.

Most individuals, families and businesses want to be properly protected. They worked hard for the things they have and they don’t want to lose them. Make a commitment to get the truth out about buying insurance. When consumers start to see more and more warnings to be cautious and aware it will get them to ask questions.

Knowledge is power and an educated consumer will ask questions and hopefully will see through the competition.

I hope you’ll make a commitment this year to marketing to consumers the pitfalls

Jamie Deapo is AVP of Membership & Member Programs for IIABNY and is an approved CE instructor in New York.

Prior to being with IIABNY, he was an independent agent in the Syracuse area for 15 years. Jamie started his career in 1972 working for insurance carriers, and he has held various underwriting and marketing positions with several national as well as regional companies. He is a past president of the Independent Insurance Agents of Central New York and served on the board of directors of IIABNY.

Marketing against these competitors isn’t rocket science. of doing business without a professional agent. We need everyone in the independent agency system to carry that message. We need to create caution and concern in the buying public’s mind about doing business direct. I hate to think of what might happen if we don’t mount a campaign like this.

Count me in. I’m willing to do whatever I can to assist any agency willing to mount a campaign like this. I’m sure I can find some others willing to help as well.

It’s all up to you now! [IA]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com

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[ T H E SO C I A L N OT E B O OK ]

C H R I S PA R A D I S O

Five Reasons Every Agency Should Be On Instagram uYes, you read that title properly.

Every independent insurance agency should be making the most of Instagram as a part of their digital marketing plan.

I’ll give you three reasons right off the bat that should help convince you: it allows you to connect with your customers and clients, visually promote your agency’s brand, and it’s free ROI. If you don’t believe me, that means you must not have tried it out for your agency yet, because ours is enjoying the positive benefits behind Instagram on a daily basis, and I would never go back on including this in my digital marketing plan.

For those of us who are a bit new to Instagram or haven’t heard about it before, allow me to explain what this social network is all about. First and foremost, it is a free social network for all users to enjoy.

Within this network, 100% of the content is visually-based, so it’s either pictures or videos for the most part. You can include a brief description, hashtags, location, and a few other minor details with each of your posts, but each will still be visually based.

The most common age group on this social network is millennials, which makes it a great platform for you to connect with and understand their generation, but you can still find users of all ages on this network as well.

The most common age group on this social network is millennials, which makes it a great platform for you to connect with and understand their generation, but you can still find users of all ages on this network as well. Instagram only works on mobile devices, so if you’d like to get started with this social network, you’re going to need a smart phone or tablet!

Christopher Paradiso, CPIA , is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center.

In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies to not only survive, but compete in today’s complex online marketing world.

Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

CONTINUED ON PAGE 10

8 January 16, 2017 / INSURANCE ADVOCATE

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[ T H E S O C I A L N OT E B O OK ] CONTINUED FROM PAGE 8

As I mentioned, Instagram is only capable of sharing photos or pictures as well as videos up to fifteen seconds in length. It also allows you to “follow” other users, and in turn, create a newsfeed based on the posts of only users you follow. It’s a very simple platform for the most part, which is one of the reasons it became so popular so fast. As of April 2016, it has up to 400 million monthly active users (that’s more than Twitter!), has over 75 million users on a daily basis, and at least 20% of all internet users have an Instagram account. Those are statistics that you shouldn’t be ignoring. Let’s talk about some more reasons why every insurance agency, or small business for that matter, should be making the most of this powerful social network.

Expanded Reach Instagram is a great network to expand your overall reach, or extend your audience. It allows you to form one-on-one connections with your audience by letting users follow one another, but there are also ways to reach people outside of your established network as well. The first thing you can start thinking about with expanding your reach is to incorporate hashtags into your Instagram post. For those who aren’t familiar, hashtags are using the pound or “hash” symbol in front of keywords or phrases to attract users with similar interests. Whenever you make a post, it’s important to include these hashtags, because they make your posts discoverable. Other users can search for hashtags on Instagram, so even if they aren’t directly connected to you, your post will still show up if they search for a hashtag that you used.

For example, we have our Flag Day Barbecue coming up for our agency where we hand out free American flags to our customers. When we take pictures or videos during our event on our mobile phones, we can upload those pictures and videos to our company’s Instagram later on. When we do so, we will use hashtags such as #FlagsfromParadisoIns, #Patriotism, and #Cookout. Tags that are universal, such as #Patriotism and #Cookout, will come up in user searches pretty frequently, while #FlagsfromParadisoIns is an example of a hashtag we created to prompt our users to shout us out in social media.

Similarly speaking, Instagram also has trends like any other social network, or 10 January 16, 2017 / INSURANCE ADVOCATE

When content is trending, meaning it’s showing up in the news or in the top stories on Twitter, for example, or you’re hearing about it constantly on other social media networks, that might be a good time to post about that content yourself to your company’s Instagram.

trending content that you can use to your advantage as well. When content is trending, meaning it’s showing up in the news or in the top stories on Twitter, for example, or you’re hearing about it constantly on other social media networks, that might be a good time to post about that content yourself to your company’s Instagram. As long as the trending content aligns with your agency’s general overall tone on Instagram or won’t make your audience perceive you any differently, then it could be good to post trending content to get more engagement or visibility.

Lastly, Instagram also makes use of paid-for advertising, or what we like to call “paying to play.” By investing some of your marketing budget into your company’s Instagram, your posts will reach users outside of your network who have interests similar to your posts based on the demographics you so choose to target. Instagram was bought by Facebook though, so any advertising management you’d like to do on Instagram is done right through Facebook’s ad manager by syncing your accounts. If you’d like to get started with advertising on Instagram, I would suggest having your marketing team take a look at what options Facebook advertising has available.

Building Trust Building trust is a huge part of what social media is all about. Some people believe that when they open new social media accounts, they are going to see their new leads triple, or develop all sorts of new business, but I will tell you that that’s not quite the case. While social media will sometimes bring you fresh leads, it’s more

of an existing clientele nurturing system.

Social media will indirectly bring you a very strong ROI; when you think about it, it is used to nurture your client relationships, and if there is a strong enough bond, those customers and clients will be apt to talk about your agency and generate more word of mouth referrals for your agency— and that’s the goal at the end of the day.

Not to mention, once you establish trust with your audience, your renewal rate is sure to skyrocket, because they’ll want to stick around.

You can establish trust in many ways on social media, and that includes Instagram. Like I mentioned earlier, it is a great way to help with visually establishing or maintaining your agency’s brand. Your marketing team should have the ability to create branded visuals following your agency’s visual branding guidelines, and if you don’t already have some in place, I would consider speaking to a branding professional. Your audience will learn to recognize your agency’s brand, and will understand subconsciously which posts are yours versus your competitors. In order to properly establish trust though, you have to have a healthy balance of photoshopped branded visuals with organic photos of your agency, staff, or events. Showing that you are a real person or being personable in your approach is a great way to encourage your audience to interact with you online.

All in all, I hope you see the strengths behind this powerful social network. This visually inclined network has the ability to expand your agency’s audience while developing trust along the way, and is a great tool in assisting your renewals and word of mouth referrals. Let’s get social, people! [IA]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com

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It may seem like an impossible task to get noticed agains t the mega-insurer s and the insurance hater s of the world. And truth be told, on your own, it is a challenge. But when we join forces, incredible things can happen.

At IIABNY, we set out to break down the stigmas and barrier s to highlight t h e u n t o l d s t o r i e s o f i n d e p e n d e n t a g e n t s — h o w t h ey s p e n d t i m e g e t t i n g t o know their client s, suppor ting their local businesses, and giving back to their ommunities. We traveled the s tate talking to our member agent s and their us tomers to get their real stories, not just the bios on their website. And what we discovered was magical. he Result We’ve created a grassroot s campaign that shares — in a new, authentic way —the unique bond bet ween an agent and someone who needs rotec tion...Two connec ted s to t r ie s . ver y agent has a stor y and we want to share yours. Go to TCStories.com/share

ust one more way we are stronger together than on our own.

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DFS Sets Out Cybersecurity Regulations

“This updated proposal allows an appropriate period of time for regulated entities to review the rule before it becomes final and make certain that their systems can effectively and efficiently meet the risks associated with cyber threats.”

14 January 16, 2017 / INSURANCE ADVOCATE

uThe New York State Department of Financial Services (DFS) has updated its proposed first-in-thenation cybersecurity regulation to protect New York State from the growing threat of cyber-attacks. The proposed regulation, presented by Superintendent Maria T. Vullo will be effective as of March 1, 2017, and will require banks, insurance companies, and other financial services institutions regulated by DFS to establish and maintain a cybersecurity program designed to protect consumers and ensure the safety and soundness of New York State’s financial services industry.

“New Yorkers must be confident that the banks, insurance companies and the other financial institutions that they rely on are securely handling and establishing necessary protocols that ensure the security and privacy of their sensitive personal information,” said Superintendent Vullo. “This updated proposal allows an appropriate period of time for regulated entities to review the rule before it becomes final and make certain that their systems can effectively and efficiently meet the risks associated with cyber threats.”

DFS carefully considered all comments submitted regarding the proposed regulation during the 45-day comment period, which ended on November 14, 2016, and has incorporated those suggestions that DFS deemed appropriate in an updated draft that will be subject to an additional final 30-day comment period. DFS will focus its final review on any new comments that were not previously raised in the original comment process.

The regulation is presented on the following pages.

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NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES PROPOSED 23 NYCRR 500 CYBERSECURITY REQUIREMENTS FOR FINANCIAL SERVICES COMPANIES I, Maria T. Vullo, Superintendent of Financial Services, pursuant to the authority granted by sections 102, 201, 202, 301, 302 and 408 of the Financial Services Law, do hereby promulgate Part 500 of Title 23 of the Official Compilation of Codes, Rules and Regulations of the State of New York, to take effect upon publication in the State Register, to read as follows: Section 500.00 Introduction.

The New York State Department of Financial Services(“DFS”) has been closely monitoring the ever-growing threat posed to information and financial systems by nation-states, terrorist organizations and independent criminal actors. Recently, cybercriminals have sought to exploit technological vulnerabilities to gain access to sensitive electronic data. Cybercriminals can cause significant financial losses for DFS regulated entities as well as for New York consumers whose private information may be revealed and/or stolen for illicit purposes. The financial services industry is a significant target of cybersecurity threats. DFS appreciates that many firms have proactively increased their cybersecurity programs with great success.

Given the seriousness of the issue and the risk to all regulated entities, certain regulatory minimum standards are warranted, while not being overly prescriptive so that cybersecurity programs can match the relevant risks and keep pace with technological advances. Accordingly, this regulation is designed to promote the protection of customer information as well as the information technology systems of regulated entities. This regulation requires each company to assess its specific risk profile and design a program that addresses its risks in a robust fashion. Senior management must take this issue seriously and be responsible for the organization’s cybersecurity program and file an annual certification confirming compliance with these regulations. A regulated entity’s cybersecurity program must ensure the safety and soundness of the institution and protect its customers.

and policies of a Person, whether through the ownership of stock of such Person or otherwise. (b) Authorized User means any employee, contractor, agent or other Person that participates in the business operations of a Covered Entity and is authorized to access and use any Information Systems and data of the Covered Entity. (c) Covered Entity means any Person operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law. (d) Cybersecurity Event means any act or attempt, successful or unsuccessful, to gain unauthorized access to, disrupt or misuse an Information System or information stored on such Information System. (e) Information System means a discrete set of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination or disposition of electronic information, as well as any specialized system such as industrial/process controls systems, telephone switching and private branch exchange systems, and environmental control systems. (f) Multi-Factor Authentication means authentication through verification of at least two of the following types of authentication factors: (1) Knowledge factors, such as a password; or

It is critical for all regulated institutions that have not yet done so to move swiftly and urgently to adopt a cybersecurity program and for all regulated entities to be subject to minimum standards with respect to their programs. The number of cyber events has been steadily increasing and estimates of potential risk to our financial services industry are stark. Adoption of the program outlined in these regulations is a priority for New York State.

(2) Possession factors, such as a token or text message on a mobile phone; or (3) Inherence factors, such as a biometric characteristic. (g) Nonpublic Information shall mean all electronic information that is not Publicly Available Information and is:

Section 500.01 Definitions.

For purposes of this Part only, the following definitions shall apply: (a) Affiliate means any Person that controls, is controlled by or is under common control with another Person. For purposes of this subsection, control means the possession, direct or indirect, of the power to direct or cause the direction of the management

(1) Business related information of a Covered Entity, the tampering with which, or unauthorized disclosure, access or use of which, would cause a material adverse impact to the business, operations or security of the Covered Entity; (2) Any information concerning an individual which because of name, number, personal mark, or other identifier can be used to identify such individual, in combination with any one INSURANCE ADVOCATE / January 16, 2017 15

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or more of the following data elements:(i) social security number,(ii) driver’s license number or non-driver identification card number,(iii) account number, credit or debit card number,(iv) any security code, access code or password that would permit access to an individual’s financial account; or(v) biometric records.

(n) Third Party Service Provider(s) means a Person that(i) is not an Affiliate of the Covered Entity,(ii) provides services to the Covered Entity, and(iii) maintains, processes or otherwise is permitted access to Nonpublic Information through its provision of services to the Covered Entity.

Section 500.02 Cybersecurity Program.

(3) Any information or data, except age or gender, in any form or medium created by or derived from a health care provider or an individual and that relates to(i) the past, present or future physical, mental or behavioral health or condition of any individual or a member of the individual's family,(ii) the provision of health care to any individual, or(iii) payment for the provision of health care to any individual. (h) Person means any individual or any non-governmental entity, including but not limited to any non-governmental partnership, corporation, branch, agency or association. (i) Penetration Testing means a test methodology in which assessors attempt to circumvent or defeat the security features of an Information System by attempting unauthorized penetration of databases or controls from outside or inside the Covered Entity’s Information Systems. (j) Publicly Available Information means any information that a Covered Entity has a reasonable basis to believe is lawfully made available to the general public from: federal, state or local government records; widely distributed media; or disclosures to the general public that are required to be made by federal, state or local law.

(1) For the purposes of this subsection, a Covered Entity has a reasonable basis to believe that information is lawfully made available to the general public if the Covered Entity has taken steps to determine:

(a) Cybersecurity Program. Each Covered Entity shall maintain a cybersecurity program designed to protect the confidentiality, integrity and availability of the Covered Entity’s Information Systems. (b) The cybersecurity program shall be based on the Covered Entity’s Risk Assessment and designed to perform the following core cybersecurity functions: (1) identify and assess internal and external cybersecurity risks that may threaten the security or integrity of Nonpublic Information stored on the Covered Entity’s Information Systems; (2) use defensive infrastructure and the implementation of policies and procedures to protect the Covered Entity’s Information Systems, and the Nonpublic Information stored on those Information Systems, from unauthorized access, use or other malicious acts; (3) detect Cybersecurity Events; (4) respond to identified or detected Cybersecurity Events to mitigate any negative effects; (5) recover from Cybersecurity Events and restore normal operations and services; and (6) fulfill applicable regulatory reporting obligations.

(i) That the information is of the type that is available to the general public; and (ii) Whether an individual can direct that the information not be made available to the general public and, if so, that such individual has not done so.

(c) A Covered Entity may meet the requirements of this Part by adopting a cybersecurity program maintained by an Affiliate, provided that the Affiliate’s cybersecurity program covers the Covered Entity’s Information Systems and Nonpublic Information and meets the requirements of this Part.

(k) Risk Assessment means the risk assessment that each Covered Entity is required to conduct under section 500.09 of this Part.

(d) All documentation and information relevant to the Covered Entity’s cybersecurity program shall be made available to the superintendent upon request.

(l) Risk-Based Authentication means any risk-based system of authentication that detects anomalies or changes in the normal use patterns of a Person and requires additional verification of the Person’s identity when such deviations or changes are detected, such as through the use of challenge questions.

Section 500.03 Cybersecurity Policy.

(m) Senior Officer(s) means the senior individual or individuals(acting collectively or as a committee) responsible for the management, operations, security, information systems, compliance and/or risk of a Covered Entity, including a branch or agency of a foreign banking organization subject to this Part.

16 January 16, 2017 / INSURANCE ADVOCATE

(a) Cybersecurity Policy. Each Covered Entity shall implement and maintain a written policy or policies, approved by a Senior Officer or the Covered Entity’s board of directors(or an appropriate committee thereof) or equivalent governing body, setting forth the Covered Entity’s policies and procedures for the protection of its Information Systems and Nonpublic Information stored on those Information Systems. The cybersecurity policy CONTINUED ON PAGE 18

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shall be based on the Covered Entity’s Risk Assessment and address the following areas to the extent applicable to the Covered Entity’s operations:

or equivalent governing body. If no such board of directors or equivalent governing body exists, such report shall be timely presented to a Senior Officer of the Covered Entity responsible for the Covered Entity’s cybersecurity program. The CISO shall report on the Covered Entity’s cybersecurity program and material cybersecurity risks. The CISO shall consider to the extent applicable:

(1) information security; (2) data governance and classification;

(1) the confidentiality of Nonpublic Information and the integrity and security of the Covered Entity’s Information Systems;

(3) asset inventory and device management;

(2) the Covered Entity’s cybersecurity policies and procedures;

(4) access controls and identity management; (3) material cyber risks to the Covered Entity; (5) business continuity and disaster recovery planning and resources;

(4) overall effectiveness of the Covered Entity’s cybersecurity program; and

(6) systems operations and availability concerns; (7) systems and network security;

(5) material Cybersecurity Events involving the Covered Entity during the time period addressed by the report.

(8) systems and network monitoring;

Section 500.05 Penetration Testing and Vulnerability Assessments.

(9) systems and application development and quality assurance;

(a) The cybersecurity program for each Covered Entity shall include monitoring and testing, developed in accordance with the Covered Entity’s Risk Assessment, designed to assess the effectiveness of the Covered Entity’s cybersecurity program. The monitoring and testing shall include continuous monitoring or periodic penetration testing and vulnerability assessments, and shall be done periodically.

Absent effective continuous monitoring, or other systems to detect, on an ongoing basis, changes in Information Systems that may create or indicate vulnerabilities, Covered Entities shall conduct:

(10) physical security and environmental controls; (11) customer data privacy; (12) vendor and Third Party Service Provider management; (13) risk assessment; and (14) incident response.

(1) annual penetration testing of the Covered Entity’s Information Systems determined each given year based on relevant identified risks in accordance with the Risk Assessment; and

Section 500.04 Chief Information Security Officer. (a) Chief Information Security Officer. Each Covered Entity shall designate a qualified individual responsible for overseeing and implementing the Covered Entity’s cybersecurity program and enforcing its cybersecurity policy(for purposes of this Part, “Chief Information Security Officer” or “CISO”). The CISO may be employed by the Covered Entity, one of its Affiliates or a Third Party Service Provider. To the extent this requirement is met using a Third Party Service Provider or an Affiliate, the Covered Entity shall:

(2) bi-annual vulnerability assessments, including any systematic scans or reviews of Information Systems reasonably designed to identify publicly known cybersecurity vulnerabilities in the Covered Entity’s Information Systems based on the Risk Assessment.

Section 500.06 Audit Trail. (a) Each Covered Entity shall securely maintain systems that, to the extent applicable and based on its Risk Assessment:

(1) retain responsibility for compliance with this Part; (2) designate a senior member of the Covered Entity’s personnel responsible for direction and oversight of the Third Party Service Provider; and

(1) are designed to reconstruct material financial transactions sufficient to support normal operations and obligations of the Covered Entity; and

(3) require the Third Party Service Provider to maintain a cybersecurity program that protects the Covered Entity in accordance with the requirements of this Part.

(2) include audit trails designed to detect and respond to Cybersecurity Events that have a reasonable likelihood of materially harming any material part of the normal operations of the Covered Entity.

(b) Report. The CISO of each Covered Entity shall report in writing at least annually to the Covered Entity’s board of directors

(b) Each Covered Entity shall maintain records required by this section for not fewer than five years.

18 January 16, 2017 / INSURANCE ADVOCATE

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Secton 500.07 Access Privileges.

As part of its cybersecurity program, based on the Covered Entity’s Risk Assessment each Covered Entity shall limit user access privileges to Information Systems that provide access to Nonpublic Information and shall periodically review such access privileges.

Section 500.08 Application Security. (a) Each Covered Entity’s cybersecurity program shall include written procedures, guidelines and standards designed to ensure the use of secure development practices for in-house developed applications utilized by the Covered Entity, and procedures for evaluating, assessing or testing the security of externally developed applications utilized by the Covered Entity within the context of the Covered Entity’s technology environment. (b) All such procedures, guidelines and standards shall be periodically reviewed, assessed and updated as necessary by the CISO(or a qualified designee) of the Covered Entity.

Section 500.09 Risk Assessment. (a) Each Covered Entity shall conduct a periodic Risk Assessment of the Covered Entity’s Information Systems sufficient to inform the design of the cybersecurity program as required by this Part. Such Risk Assessment shall be updated as reasonably necessary to address changes to the Covered Entity’s Information Systems, Nonpublic Information or business operations. The Covered Entity’s Risk Assessment shall allow for revision of controls to respond to technological developments and evolving threats and shall consider the particular risks of the Covered Entity’s business operations related to cybersecurity, Nonpublic Information collected or stored, Information Systems utilized and the availability and effectiveness of controls to protect Nonpublic Information and Information Systems. (b) The Risk Assessment shall be carried out in accordance with written policies and procedures and shall be documented.

Such policies and procedures shall include: (1) criteria for the evaluation and categorization of identified cybersecurity risks or threats facing the Covered Entity; (2) criteria for the assessment of the confidentiality, integrity, security and availability of the Covered Entity’s Information Systems and Nonpublic Information, including the adequacy of existing controls in the context of identified risks; and (3) requirements describing how identified risks will be mitigated or accepted based on the Risk Assessment and how the cybersecurity program will address the risks.

Section 500.10 Cybersecurity Personnel and Intelligence.

(1) utilize qualified cybersecurity personnel of the Covered Entity, an Affiliate or a Third Party Service Provider sufficient to manage the Covered Entity’s cybersecurity risks and to perform or oversee the performance of the core cybersecurity functions specified in section 500.02(b)(1)-(6) of this Part; (2) provide cybersecurity personnel with cybersecurity updates and training sufficient to address relevant cybersecurity risks; and (3) verify that key cybersecurity personnel take steps to maintain current knowledge of changing cybersecurity threats and countermeasures. (b) A Covered Entity may choose to utilize an Affiliate or qualified Third Party Service Provider to assist in complying with the requirements set forth in this Part, subject to the requirements set forth in section 500.11 of this Part.

Section 500.11 Third Party Service Provider Security Policy. (a) Third Party Service Provider Policy. Each Covered Entity shall implement written policies and procedures designed to ensure the security of Information Systems and Nonpublic Information that are accessible to, or held by, Third Party Service Providers. Such policies and procedures shall be based on the Risk Assessment of the Covered Entity and shall address to the extent applicable: (1) the identification and risk assessment of Third Party Service Providers; (2) minimum cybersecurity practices required to be met by such Third Party Service Providers in order for them to do business with the Covered Entity; (3) due diligence processes used to evaluate the adequacy of cybersecurity practices of such Third Party Service Providers; and (4) periodic assessment of such Third Party Service Providers based on the risk they present and the continued adequacy of their cybersecurity practices. (b) Such policies and procedures shall include relevant guidelines for due diligence and/or contractual protections relating to Third Party Service Providers, including to the extent applicable guidelines addressing: (1) the Third Party Service Provider’s policies and procedures for access controls, including its use of Multi-Factor Authentication as defined by section 500.12 to limit access to sensitive systems and Nonpublic Information; (2) the Third Party Service Provider’s policies and procedures for use of encryption as defined by section 500.15 to protect Nonpublic Information in transit and at rest;

(a) Cybersecurity Personnel and Intelligence. In addition to the requirements set forth in 500.04(a), each Covered Entity shall: CONTINUED ON PAGE 20

INSURANCE ADVOCATE / January 16, 2017 19

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Section 500.15 Encryption of Nonpublic Information.

(3) notice to be provided to the Covered Entity in the event of a Cybersecurity Event directly impacting the Covered Entity’s Information Systems or Non-public Information being held by the Third Party Service Provider; and

(a) As part of its cybersecurity program, based on its Risk Assessment, each Covered Entity shall implement controls, including encryption, to protect Nonpublic Information held or transmitted by the Covered Entity both in transit over external networks and at rest.

(4) representations and warranties addressing the Third Party Service Provider’s cybersecurity policies and procedures that relate to the security of the Covered Entity’s Information Systems or Nonpublic Information. (c) Limited Exception. An agent, employee, representative or designee of a Covered Entity who is itself a Covered Entity need not develop its own Third Party Information Security Policy pursuant to this section if the agent, employee, representative or designee follows the policy of the Covered Entity that is required to comply with this Part.

(1) To the extent a Covered Entity determines that encryption of Nonpublic Information in transit over external networks is infeasible, the Covered Entity may instead secure such Nonpublic Information using effective alternative compensating controls reviewed and approved by the Covered Entity’s CISO. (2) To the extent a Covered Entity determines that encryption of Nonpublic Information at rest is infeasible, the Covered Entity may instead secure such Nonpublic Information using effective alternative compensating controls reviewed and approved by the Covered Entity’s CISO.

Section 500.12 Multi-Factor Authentication. (a) Multi-Factor Authentication. Based on its Risk Assessment, each Covered Entity shall use effective controls, which may include Multi-Factor Authentication or Risk-Based Authentication, to protect against unauthorized access to Nonpublic Information or Information Systems. (b) Multi-Factor Authentication shall be utilized for any individual accessing the Covered Entity’s internal networks from an external network, unless the Covered Entity’s CISO has approved in writing the use of reasonably equivalent or more secure access controls.

(b) To the extent that a Covered Entity is utilizing compensating controls under(a) above, the feasibility of encryption and effectiveness of the compensating controls shall be reviewed by the CISO at least annually.

Section 500.16 Incident Response Plan. (a) As part of its cybersecurity program, each Covered Entity shall establish a written incident response plan designed to promptly respond to, and recover from, any Cybersecurity Event materially affecting the confidentiality, integrity or availability of the Covered Entity’s Information Systems or the continuing functionality of any aspect of the Covered Entity’s business or operations.

Section 500.13 Limitations on Data Retention.

As part of its cybersecurity program, each Covered Entity shall include policies and procedures for the secure disposal on a periodic basis of any Nonpublic Information identified in 500.01(g)(2)-(3) that is no longer necessary for business operations or for other legitimate business purposes of the Covered Entity, except where such information is otherwise required to be retained by law or regulation, or where targeted disposal is not reasonably feasible due to the manner in which the information is maintained.

(b) Such incident response plan shall address the following areas: (1) the internal processes for responding to a Cybersecurity Event; (2) the goals of the incident response plan; (3) the definition of clear roles, responsibilities and levels of decision-making authority;

Section 500.14 Training and Monitoring. (a) As part of its cybersecurity program, each Covered Entity shall: (1) implement risk-based policies, procedures and controls designed to monitor the activity of Authorized Users and detect unauthorized access or use of, or tampering with, Nonpublic Information by such Authorized Users; and (2) provide for regular cybersecurity awareness training for all personnel that is updated to reflect risks identified by the Covered Entity in its Risk Assessment.

20 January 16, 2017 / INSURANCE ADVOCATE

(4) external and internal communications and information sharing; (5) identification of requirements for the remediation of any identified weaknesses in Information Systems and associated controls; (6) documentation and reporting regarding Cybersecurity Events and related incident response activities; and (7) the evaluation and revision as necessary of the incident response plan following a Cybersecurity Event.

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Home Inventories—Helping Claims Settle Faster MOST AMERICANS are unprepared to deal with a personal property claim after a loss. It is estimated that 80% of the United States’ population has been impacted by severe weather in the past few years. In 2016 alone, catastrophe losses in the United States exceeded $17 billion (www.iii.org). When disaster strikes, be it natural or man-made, it may be impossible to reconstruct a list of all the household’s possessions. One essential tool to help speed up claims handling, as well as increase the chances of adequate reimbursement, is a home inventory.

Helping clients understand the value and proper use of home inventories, and how to use them, is another sign of the true insurance professional.

Essential components of a home inventory include receipts, and pictures or videos.

The more documentation that is available, the stronger the claim. A 2012 survey by the National Association of Insurance Commissioners (NAIC) revealed that 59% of homeowners did not have an inventory or list of their possessions. Of those that did have an inventory, 48% did not have receipts, 28% did not have photos of the items, and 27% did not maintain a backup copy outside the home (www.naic.org).

Having documentation after a loss is just one reason to maintain an updated home inventory. A home inventory is valuable even if there is never a loss. An updated inventory may disclose items that are inadequately covered. Over time, people accumulate a lot of “stuff ” and the values of certain possessions, such as antiques or jewelry, can greatly appreciate. A typical homeowners’ policy includes coverage for contents at 50-60% of the insured value of the home.

This may not always be enough. The value of electronics—televisions, computer, video games, and even home security systems, can be staggering.

Starting the home inventory is not difficult. Many resources are available. The NAIC offers a free home inventory smartphone app: MyHome Scr.APP.book. Those without a smartphone can download the NAIC’s home inventory checklist

Having documentation after a loss is just one reason to maintain an updated home inventory. (http://home.insureuonline.org/). New York’s Department of Financial Services (DFS) offers a template for a home inventory on their website (www.dfs.ny.gov).

Many insurers offer similar programs to help their insureds document their possessions.

A little advance preparation can make the process easier. Walking through the house with a video camera may sound like a great idea, but in order for the record to be worthwhile, some setup is required. If a video is being created, it is important to remember that many possessions may not be out in the open. Drawers and other storage areas should be documented. Seasonal items, decorations, lawnmowers, tools and other outdoor equipment represent significant investments.

A copy of the home inventory should be kept in a safe location, and preferably more than one. For example, stored in a bank safe deposit box, sending a copy to the insurance agent or company, or at a

minimum stored in a fire safe box in the home. In the event of a widespread disaster, such as a hurricane, tornado or wildfire, access to the home may be limited or denied for a significant amount of time after a loss.

The extent of the damage may mean it is impossible to find the inventory, or, as is too often the case, there may be no home to return to.

Keeping the inventory current is also important. Updates should be made regularly, but especially whenever significant purchases are made.

Inventories are important for businesses as well as individuals. Proper documentation can greatly improve and shorten the claims handling process for all types of insureds. Helping clients prepare for potential loss, as well as reduce the time it takes for them to recover, which can alleviate some of the stress of a difficult situation, is another value-added service of the professional insurance agent.

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Section 500.17 Notices to Superintendent. (a) Notice of Cybersecurity Event. Each Covered Entity shall notify the superintendent as promptly as possible but in no event later than 72 hours from a determination that a Cybersecurity Event as follows has occurred: (1) Cybersecurity Events of which notice is required to be provided to any government body, self-regulatory agency or any other supervisory body; and (2) Cybersecurity Events that have a reasonable likelihood of materially harming any material part of the normal operation(s) of the Covered Entity. (b) Annually each Covered Entity shall submit to the superintendent a written statement by February 15, in such form set forth as Appendix A, certifying that the Covered Entity is in compliance with the requirements set forth in this Part. Each Covered Entity shall maintain for examination by the Department all records, schedules and data supporting this certificate for a period of five years. To the extent a Covered Entity has identified areas, systems or processes that require material improvement, updating or redesign, the Covered Entity shall document the identification and the remedial efforts planned and underway to address such areas, systems or processes. Such documentation must be available for inspection by the superintendent.

(c) A Covered Entity that does not directly or indirectly operate, maintain, utilize or control any Information Systems, and that does not, and is not required to, directly or indirectly control, own, access, generate, receive or possess Nonpublic Information shall be exempt from the requirements of Sections 500.02, 500.03, 500.04, 500.05, 500.06, 500.07, 500.08, 500.10, 500.12, 500.14, 500.15, and 500.16 of this Part. (d) A Covered Entity that qualifies for an exemption pursuant to this section shall file a Notice of Exemption in such form set forth as Appendix B. (e) In the event that a Covered Entity, as of its most recent fiscal year end, ceases to qualify for an exemption, such Covered Entity shall have 180 days from such fiscal year end to comply with all applicable requirements of this Part.

Section 500.20 Enforcement.

This regulation will be enforced by the superintendent pursuant to, and is not intended to limit, the superintendent’s authority under any applicable laws.

Section 500.21 Effective Date.

This Part will be effective as of March 1, 2017. Covered Entities will be required to annually prepare and submit to the superintendent a Certification of Compliance with New York State Department of Financial Services Cybersecurity Regulations under section 500.17(b) commencing February 15, 2018.

Section 500.18 ConďŹ dentiality.

Section 500.22 Transitional Periods.

Information provided by a Covered Entity pursuant to this Part is subject to exemptions from disclosure under the Banking Law, Insurance Law, Financial Services Law, Public Officers Law or any other applicable state or federal law.

Section 500.19 Exemptions.

(a) Transitional Period. Covered Entities shall have 180 days from the effective date of this Part to comply with the requirements set forth in this Part, except as otherwise specified. (b) The following provisions shall include additional transitional periods. Covered Entities shall have:

(a) Limited Exemption. Each Covered Entity with: (1) fewer than 10 employees including any independent contractors, or (2) less than $5,000,000 in gross annual revenue in each of the last three fiscal years, or (3) less than $10,000,000 in year-end total assets, calculated in accordance with generally accepted accounting principles, including assets of all Affiliates, shall be exempt from the requirements of Sections 500.04, 500.05, 500.06, 500.08, 500.10, 500.12, 500.14, 500.15, and 500.16 of this Part. (b) An employee, agent, representative or designee of a Covered Entity, who is itself a Covered Entity, is exempt from this Part and need not develop its own cybersecurity program to the extent that the employee, agent, representative or designee is covered by the cybersecurity program of the Covered Entity.

22 January 16, 2017 / INSURANCE ADVOCATE

(1) One year from the effective date of this Part to comply with the requirements of sections 500.04(b), 500.05, 500.09, 500.12, and 500.14(a)(2) of this Part.

(2) Eighteen months from the effective date of this Part to comply with the requirements of sections 500.06, 500.08, 500.13, 500.14(a)(1) and 500.15 of this Part.

(3) Two years from the effective date of this Part to comply with the requirements of section 500.11 of this Part.

Section 500.23 Severability.

If any provision of this Part or the application thereof to any Person or circumstance is adjudged invalid by a court of competent jurisdiction, such judgment shall not affect or impair the validity of the other provisions of this Part or the application thereof to other Persons or circumstances.[IA]

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M A R I LY N M . S I N G L E T O N , M D , J D

You’re Old, You’re Sick, Get Over It One day in the hospital costs Medicare about $708. One day in hospice costs $183. One hundred twenty morphine tablets cost $20.88 retail. Health Savings Account money in the bank creates real options. But if you leave the choice up to the government, with a roll of the dice you could figuratively be in Jail rather than passing GO and getting another turn at life, just like in the game of Monopoly. uSenior citizens, don’t be fooled. The federal government asserts that Medicare sets a high bar for medical care and we are lucky to have it. Not so. It does, however, claim a virtual monopoly on health insurance coverage for all eligible persons.

All citizens who receive Social Security or Railroad Retirement Board benefits automatically receive a Medicare Part A card in the mail around their 65th birthday. Part A covers hospital, hospice, and limited skilled nursing services. This entitlement has very long strings attached. If retirees disenroll from Medicare Part A they lose future Social Security benefits and must return all past benefits. Even working seniors enrolled in Medicare or collecting Social Security cannot participate in Health Savings Accounts (HSA)/high deductible health plans.

Most new Medicare eligibles also automatically receive a Part B card (coverage for physician services and outpatient injectables, particularly cancer medications). Part B is voluntary and recipients are advised they can send the card back if they want to opt out. Medicare warns that a late enrollment penalty awaits the tardy: the monthly premium for Part B may go up 10% for each full 12-month period that they could have had Part B, but didn’t sign up for it—in perpetuity.

Bullying aside, it sounds pretty good.

But Medicare, whose expenditures are 15 percent of the federal budget, faces financial challenges, mainly due to our aging population. When Medicare started, life expectancy was 70 years. Now it is 78.8 years. In 2012, per person personal healthrelated spending for the 65 and older population was more than five times higher than spending per child, and three times the spending per working-age person. The Medicare Board of Trustees’ 2015 report 24 January 16, 2017 / INSURANCE ADVOCATE

The renewed focus on Medicare cost containment has produced various suggestions, including vouchers, tax credits, extending income-based premiums, increasing the eligibility age, and allowing contributions to HSAs in retirement. estimates that under current law the Medicare trust fund will become insolvent in 2030.

Enter the Medicare hospice benefit in 1982. Policymakers believed this program would lower costs by reducing “aggressive” end-of-life treatments. With hospice care, Medicare pays a daily rate for services to persons with life expectancies of six months or less who choose to forgo lifesaving or potentially curative treatment for the presumed terminal illness and related conditions.

But Medicare hospice expenditures are rising. Realistically, it isn’t easy to predict who will live and who will die and when.

Not only has the number of Medicare hospice patients with not immediately-terminal conditions such as heart failure and dementia dramatically increased, 19 percent of such patients receive services for much longer than six months.

The renewed focus on Medicare cost containment has produced various suggestions, including vouchers, tax credits, extending income-based premiums, increasing the eligibility age, and allowing contributions to HSAs in retirement.

Dr. Singleton is a board-certified anesthesiologist, professor and Association of American Physicians and Surgeons Board of Directors member.

She graduated from Stanford and earned her MD at UCSF Medical School. Dr. Singleton completed two years of Surgery residency at UCSF, then her Anesthesia residency at Harvard’s Beth Israel Hospital. While still working in the operating room, she attended UC Berkeley Law School, focusing on constitutional law and administrative law. She interned at the National Health Law Project and practiced insurance and health law.

She teaches classes in the recognition of elder abuse and constitutional law for non-lawyers.

Dr. Singleton can be contacted directly at marilynmsingleton@gmail.com, 510-421-5800 (reporters and journalists welcome!). For permission to republish this op-ed, contact AngelPublicity@aol.com.

Expanding HSAs presents the best opportunity to regain real choice and control over our medical care consistent with one’s personal values.

Instead, a culture of hastening death has gradually evolved, disguised as “death with dignity.” First, California, Colorado, Oregon, Washington, Montana, and Vermont have legal physician-assisted suicide, with 20 other states considering legalization. Second, when older folks fall ill, despite the uncertainty of medical prognosis, some families feel they are not merely offered hospice as a choice but are steered toward it. Third, disturbing news articles report hospice treatment plans for those who aren’t dying fast enough: “pain management” in terminal doses.

Finally, money talks. In the hospice program, if the patient goes to the hospital and the hospice “provider” (not one’s own physician) did not make the arrangements, the patient might be responsible for the

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[ G UEST OP I N I O N ] entire cost of the hospital care.

Additionally, the Affordable Care Act created a Patient-Centered Outcomes Research Institute. The Institute investigates the effectiveness of various medical interventions, but is prohibited from treating “the life of an elderly, disabled, or terminally ill individual as of lower value than extending the life of an individual who is younger, nondisabled, or not terminally ill.” However, the data may be used to determine coverage and payment rates.

The patient can choose a federally determined “low-value” service, but the cost would be prohibitive. And the low physician payment rates will ensure that physicians’ practices will not be actively seeking such patients. It is an empty choice.

One day in the hospital costs Medicare about $708. One day in hospice costs $183.

One hundred twenty morphine tablets cost $20.88 retail. Health Savings Account money in the bank creates real options.

But if you leave the choice up to the government, with a roll of the dice you could figuratively be in Jail rather than passing GO and getting another turn at life, just like in the game of Monopoly.[IA]

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To all persons or entities interested in the affairs of AMERICAN MEDICAL AND LIFE INSURANCE COMPANY Notice is Hereby Given: Maria T. Vullo, Superintendent of Financial Services of the State of New York (“Superintendent”), has been appointed by an order (the “Order”) of the Supreme Court of the State of New York, County of New York (“Court”), entered on December 28, 2016, as the liquidator (the “Liquidator”) of American Medical and Life Insurance Company (“AMLI”) and, as such, has been: (i) directed to take possession of AMLI’s property and liquidate AMLI’s business and affairs in accordance with New York Insurance Law (“Insurance Law”) Article 74; and (ii) vested with all powers and authority expressed or implied under Insurance Law Article 74, in addition to the powers and authority set forth in the Order and with title to AMLI’s property, contracts, rights of action, and all of its books and records, wherever located, as of the date of entry of the Order. The Liquidator has, pursuant to Insurance Law Article 74, appointed David Axinn, Special Deputy Superintendent (the “Special Deputy”), as her agent to carry out her duties as Liquidator. The Special Deputy carries out his duties through the New York Liquidation Bureau (“Bureau”), 110 William Street, New York, New York 10038.

The Order provides that: I. The Liquidator is permitted to deal with the property and business of AMLI in AMLI’s name or in the name of the Liquidator; II. All persons and entities are permanently enjoined and restrained from wasting the assets of AMLI, and all persons are permanently enjoined and restrained, except as authorized by the Liquidator, from transacting AMLI’s business or disposing of AMLI’s property; III. All persons and entities are permanently enjoined and restrained from interfering with the Liquidator or the proceeding, obtaining any preferences, judgments, attachments, or other liens, making any levy against AMLI, its assets or any part thereof, and commencing or prosecuting any actions or proceedings against the Liquidator, AMLI, or the New York Liquidation Bureau, or their present or former employees, attorneys or agents, relating to the proceeding or the discharge of their duties under Insurance Law Article 74 in relation thereto; IV. The Liquidator is vested with all rights in AMLI’s contracts and agreements, however described, and the Liquidator is permitted to, in her discretion, reject any executory contracts to which AMLI is a party, in which case all liability under such contracts or agreements shall cease and be fixed as of the date of rejection; V. Any bank, savings and loan association, other financial institution, or any other entity or person, that has on deposit or in its possession, custody, or control any of AMLI’s funds, accounts (including escrow accounts), or assets shall immediately, upon the Liquidator’s request and direction: (a) turn over custody and control of such funds, accounts or assets to the Liquidator; (b) transfer title of such funds, accounts or assets to the Liquidator; (c) change the name of such accounts to the name of the Liquidator; (d) transfer funds from such bank, savings and loan association or other financial institution; and (e) take any other action reasonably necessary for the proper conduct of the liquidation proceeding; VI. All persons or entities having property, papers (including attorney work product and documents held by attorneys) and/or information, including, but not limited to, insurance policies, underwriting data, reinsurance policies, claims files (electronic or paper), software programs and/or bank records owned by, belonging to or relating to AMLI shall preserve such property and/or information and immediately, upon the Liquidator’s request and direction, assign, transfer, turn over and deliver such property and/or information to the Liquidator; VII. The Liquidator is authorized, permitted, and allowed to sell, assign or transfer any and all stocks, bonds, or other securities at the best price reasonably obtainable at such times and upon such terms and conditions as, in her discretion, she deems to be in the best interest of the creditors of AMLI, and is further authorized to take such steps and to make and execute such agree-

26 January 16, 2017 / INSURANCE ADVOCATE

ments and other papers as may be necessary to effect and carry out such sales, transfers and assignments, without the further approval of the Court; VIII. All existing insurance policies of AMLI will be cancelled as of 12:01 a.m. local time on the date that is 180 days after the entry of the Order; IX. The date that is nine months after the entry of the Order is established as the bar date by which all claims by any claimant against AMLI or its insureds (other than the Liquidator’s claim or the claims of the Life Insurance Guaranty Corporation of New York, including those described in Insurance Law Section 7713(d), for administrative expenses (collectively, “Administrative Claims”)), and all supporting documentation evidencing such claims, must actually be received by the Liquidator (the “Bar Date”), and all claims and supporting documentation served upon the Liquidator after the Bar Date are time-barred; X. The Liquidator is authorized, in her discretion, to refrain from adjudicating claims of any class other than Administrative Claims or policyholder claims unless and until (a) she reasonably believes that adjudication of such claims would be in the best interests of the estate or (b) it is certain that the AMLI estate will have sufficient assets to pay claims of such class; XI. Immunity is extended to the Superintendent in her capacity as Liquidator of AMLI, her successors in office, the New York Liquidation Bureau, and their agents and employees, for any cause of action of any nature against them, individually or jointly, for any act or omission when acting in good faith, in accordance with the orders of the Court, or in the performance of their duties pursuant to Insurance Law Article 74; XII. AMLI is insolvent within the meaning of Insurance Law § 1309(a); XIII. The Liquidator may at any time make further application to the Court for such further and different relief as she sees fit; XIV. The Court shall retain jurisdiction over this matter for all purposes.

XV. All communications relating to AMLI and to the liquidation proceeding thereof should be addressed to: New York Liquidation Bureau, 110 William Street, 15th Floor, Attention: General Counsel, New York, New York 10038. (212) 341-6400.

A copy of the Order may be viewed at http://www.nylb.org. To the extent there are any discrepancies between this notice and the Order, then the Order controls.

MARIA T. VULLO, Superintendent of Financial Services of the State of New York as Liquidator of American Medical and Life Insurance Company; DAVID AXINN, Special Deputy Superintendent and Agent of the Liquidator.

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[ O N M Y R A DA R ]

BA R RY Z A L M A

Set-Up of Injured Plaintiff Fails; Clear and Unambiguous Exclusion Must Be Applied uWhen a liability insurer is presented with a claim seeking defense and indemnity and the facts appear to exclude all coverage, it will provide a defense under a reservation of rights so that it can take the time needed to determine whether coverage applies or not. If the insured refuses the defense, fires the defense lawyer appointed because of the reservation of rights, and then settles with the plaintiff and assigns to the plaintiff rights against the insurer, the insured rejects the good faith action of the insurer and forces it into a suit with the defendant.

However, if the insured and its independent counsel believe the insurer is correct and there is no coverage, entering into a separate settlement with the plaintiff and receiving a covenant not to execute is a brilliant way of defeating the plaintiff ’s claim and leaving it with a judgment that is only valuable as wallpaper if only they let the settlement become final.

In State Farm Mutual Automobile Insurance Company v. White, United States District Court, S.D. Mississippi, — F.Supp.3d —-, 2016 WL 4702372 (September 7, 2016), the USDC, Southern District of Mississippi, proved the wisdom of the insured and only cost State Farm the cost of defending the bad faith action and the insured avoided a judgment of more than $2 million.

BACKGROUND In May 2015, Defendants John and Rita White filed a complaint in Mississippi state court against Defendants Bobcat Tree Work, LLC (Bobcat), and Christopher Joe Wilson (Wilson), the owner of Bobcat, “alleging personal injuries and a derivative claim for loss of consortium under circumstances caused by alleged negligence, gross negligence and willful and/or negligent infliction of emotional distress.” In the state court case, the Whites allege that while 28 January 16, 2017 / INSURANCE ADVOCATE

State Farm is not obligated to provide coverage to Defendants Wilson or Bobcat under the Policy based on any claim made by the Whites as a result of the subject accident, and the Court need not consider State Farm’s additional arguments for summary judgment. working for Bobcat, Mr. White suffered injuries when “a portion of a felled tree collided with the elevated ‘bucket’ of a boom lift that was affixed to a truck and the force of the collision damaged the bucket in which he stood, resulting in his falling to the ground from an elevation of sixty-three (63) feet….”

Wilson had a commercial automobile liability insurance policy through State Farm (“the Policy”). Accordingly, State Farm agreed to defend Wilson and Bobcat under a reservation of rights. It also instituted a declaratory judgment action against Defendants to determine coverage.

However, on October 30, 2015, “Wilson and Bobcat, by and through their personal counsel, terminated the services of the attorney[s] hired by” State Farm after State Farm refused their request to withdraw the reservation of rights. The attorneys hired

by State Farm thereafter withdrew from the state court case.

Wilson and Bobcat, through personal counsel, then agreed to the entry of judgment in the state court case in favor of the Whites in excess of $2.8 million, but at the same time entered into a Covenant Not To Execute and/or Enroll Judgment with the Whites.

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide.

The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http:// shop.americanbar.org/eBus/Store/Pro ductDetails.aspx?productId=214624, or 800-285-2221 which is presently available.

Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

INA 1-16-17.qxp_INA 1-16-17 1/16/17 12:51 PM Page 29

[ ON MY R A DA R ] State Farm intervened and the parties represented that the Whites rescinded the Covenant Not To Execute and moved to withdraw the Motion for Entry of Judgment. Bobcat and Wilson also instituted a separate state court action against State Farm based on its intervention for alleged tortious interference and other causes of action.

Defendants contend that there is insurance coverage under the Policy for the Whites’ injuries. State Farm claims that no coverage exists based on Policy exclusions, and because Wilson and Bobcat “fail[ed] to cooperate under the terms of the [P]olicy.” It requested a judicial determination that it has no duty to defend or indemnify Bobcat or Mr. Wilson for any claims arising out of the accident at issue.

DISCUSSION The parties appear to agree—and the insurance policy states—that Mississippi law applies. In applying that law, the Court begins by determining whether the exclusion is ambiguous and in need of interpretation. Under Mississippi law, interpretation of an insurance contract presents a question of law. The goal in performing this interpretation is to ascertain the intent of the parties and the Court should take into account the subject matter of the contract, the circumstances under which it was made and the purpose sought to be achieved by the parties. If the language in an insurance contract is clear and unambiguous, the court should construe it as written. A term within an insurance policy is ambiguous if it can be interpreted to have two or more reasonable meanings. Of course, where a policy term is worded so that it can be given a definite or certain legal meaning, it is not ambiguous and will be enforced as written.

The exclusion contained in “Endorsement 6018KK Commercial Vehicle” of the Policy is dispositive. That exclusion states in pertinent part that “[t]here is no coverage for an insured for damages arising out of the operation, maintenance, or use of any equipment that is…mounted on…any vehicle.”

A claim need only bear an incidental relationship to the described conduct for the exclusion to apply. Here, White fell from an elevated bucket of a boom lift that was mounted to a truck. Although Defendants argue that “[t]he fact that Mr. White was in an alleged attachment on the

That exclusion states … “[t]here is no coverage for an insured for damages arising out of the operation, maintenance, or use of any equipment that is…mounted on…any vehicle.”

vehicle does not necessitate that his injuries arose out of its use.” The Court finds that the undisputed facts fall squarely within the exclusion.

Nevertheless, Defendants also contend that “equipment” and “mounted on” are ambiguous and are not defined in the policy. A disagreement over the meaning of a provision or term in a policy of insurance does not make it ambiguous as a matter of law. Lack of a definition in the policy does not equate to ambiguity either.

White testified, and his state court complaint allegations confirm, that he was in a bucket apparatus attached to a truck at the time of his accident.

The bucket apparatus was an article or implement used for a specific purpose or activity, especially a business operation.

There is no dispute that the bucket apparatus was designed for use in tree removal.

Furthermore, the photographs of the bucket apparatus clearly show that it is “mounted” on the truck, as that term is ordinarily understood. As such, the claims at issue are excluded from coverage under the Policy. State Farm is not obligated to provide coverage to Defendants Wilson or Bobcat under the Policy based on any claim made by the Whites as a result of the subject accident, and the Court need not consider State Farm’s additional arguments for summary judgment.

[ I N THE A S S OC IAT I ONS ]

NYIA Elects 2017 Officers and Board of Directors uALBANY, N.Y.—The New York Insurance Association (NYIA) announces the election of its 2017 officers and board of directors.

The following officers were elected for a one-year term ending Dec. 31, 2017: • Chair: Steven Coffey, president and chief executive officer, Broome Cooperative Insurance Co., Vestal, N.Y. • First vice chair: Elizabeth Heck, president and chief executive officer, Greater New York Mutual Insurance Company, New York, N.Y. • Second vice chair: Mark Prechtl, executive vice president and CEO, Chautauqua Patrons Insurance Company, Jamestown, N.Y. • Treasurer: Norman Orlowski, Jr., president/CEO, Erie and Niagara Insurance Association, Williamsville, N.Y. The following directors were elected for a three-year term ending Dec. 31, 2019: • Mark Gardner, regional counsel, Allstate Insurance Company, Hauppauge, N.Y. • Thomas Hyman, government affairs manager, Farmers Group, Inc., Rocky Hill, Conn.

• Charles Makey III, senior vice president, insurance operations, Merchants Insurance Group, Buffalo, N.Y. The New York Insurance Association (NYIA®) is a state trade association that has represented the property and casualty insurance industry for more than 130 years.[IA]

ZALMA OPINION The insured’s lawyers set up a beautiful set-up of the injured person who was ready to take an assignment of a judgment and give the insured a covenant not to execute, only to destroy the plan by fighting the intervention where State Farm would argue over the amount of the stipulated judgment.

As a result, the deal went away, coverage was found to not apply, and Wilson or Bobcat are now responsible to pay from its own assets to the injured person.[IA]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889

www.insurance-advocate.com INSURANCE ADVOCATE / January 16, 2017 29

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[ COURTSIDE ]

L AW R E N C E R O G A K

Intercompany Arbitration: Though Award Exceeds Policy Limits, Court Will Not Vacate

Lawrence N. ("Larry") Rogak has been practicing insurance law since 1981.

He has defended over 23,000 lawsuits and arbitrations and has represented over 75 different insurance companies and self-insured corporations.

Lawrence N. Rogak LLC is listed in Best's Recommended Insurance Attorneys, a distinction that requires written recommendations from at least 12 insurance carriers.

A 1981 graduate of Brooklyn Law School, Mr. Rogak has published more books and articles on insurance law than any other New York attorney in the field.

Nationwide Mut. Ins. Co. v. Geico Cas. Edited by Lawrence N. Rogak In this property damage loss transfer arbitration, Geico contended that the amounts sought by Nationwide exceeded Geico’s policy limits. Despite this, the arbitrator made an award in excess of those limits. Nationwide moved to confirm the award, which was granted by District Court. The Appellate Term affirmed, holding that an Arb Forums arbitrator does not exceed his authority by granting an award in excess of policy limits, and that Geico’s option, under AFI rules, was to opt out of arbitration.— LNR

J U S T

Appeal from an order of the District Court of Nassau County, First District (Michael A. Ciaffa, J.), dated September 18, 2014. The order granted a petition to confirm an arbitration award and denied respondent’s “cross motion” to vacate the award. ORDERED that the order is affirmed, without costs.

Nationwide and Geico were signatories to an agreement with Arbitration Forums, Inc. (AFI) to arbitrate a claim for property damage which arose out of an April 13, 2013 motor vehicle accident involving a vehicle insured by Geico, which had come into contact with a vehicle owned and

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[ COURTSIDE ] operated by Raymond Stanczuk and insured by Nationwide. After the impact, Stanczuk’s vehicle hit two parked vehicles, both owned by Edward and Dorothy Paroulek. The Stanczuk vehicle and the Paroulek vehicles sustained property damage as a result of the accident. At the time of the accident, Geico’s policy with its insured had a property damage limit of $25,000.

On July 17, 2013, Nationwide filed for inter-company arbitration, seeking $21,837.28. In its response, Geico raised, as an affirmative defense, that it had a low property damage limit. Geico further stated, among its contentions, that Nationwide was aware of the policy’s $25,000 property damage limit, that the amount of damage to the three vehicles involved in the accident exceeded the property damage limit in the policy, and “is pending signed releases to issue all parties a pro rata amount for reimbursement.” The arbitrator, in a decision published on September 10, 2013, noted that Geico had not submitted a declarations page from the policy to confirm the policy limits, and awarded Nationwide the total sum of $22,337.28 ($21,837.28 plus a $500 deductible).

On May 20, 2014, Nationwide commenced this proceeding, pursuant to CPLR 7510, to confirm the arbitration award (see CPLR 7502 [a]). In its petition to confirm, Nationwide conceded that it had received $17,399.95 from Geico, but stated that it was still owed the remaining unpaid balance of $4,437.33.

Geico opposed Nationwide’s petition to confirm the award and “cross-moved” to vacate and set aside the award on the ground that the arbitrator had exceeded her authority (see CPLR 7511 [b] [1] [iii]). In an accompanying affirmation, Geico’s senior claims examiner noted that there was a $25,000 property damage limit in the insurance policy which had been issued by Geico, and annexed a copy of the declarations page which had been in effect at the time of the April 13, 2013 accident. The claims examiner further stated that the entire $25,000 had been exhausted in the following pro rata manner: $17,399.95 to Nationwide as subrogee of Stanczuk for property damage to the Stanczuk vehicle; $729.89 to Stanczuk for loss of use/rental reimbursement; and $6,870.16 to New South Insurance Company as subrogee of

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[ IN THE NEWS ]

John Roberts to ShelterPoint’s Board of Directors Richard White, CEO of ShelterPoint Life has announced the election of John Roberts to the Company’s Board of Directors. uMr. Roberts is a senior-level insurance executive with 37 years of experience in disability, life, dental, and special risk businesses. He held leadership roles in group insurance, as well as operational management positions in underwriting and claims organizations, specializing in profit and loss management, organization redesign, merger integration, and people development. Most recently, he was President and CEO of Assurant Employee Benefits, where he transformed that company from a group carrier to a major player in the voluntary benefits space, growing the voluntary product premium at two times the market rate. In his previous position as President at Disability RMS

“I am honored to welcome John to our Board. He brings a wealth of experience and expertise in the insurance industry and will be a tremendous asset.”

(Reinsurance Management Services), he grew the reinsurance premium at a CAGR of 14%, secured $48 million of additional premium, and added over 75 new jobs, making that company the #1 large employer in the 2006 and 2007 “Best Places to Work in Maine.”™ Mr. Roberts spent the first 24 years of his career at

Unum, ultimately heading up their Enterprise Underwriting Division as Senior Vice President. He has held several board member positions at industry associations throughout his career, including the American Council of Life Insurance (ACLI), and is a contributing author to The Handbook of Employee Benefits, published

by McGraw Hill.

“I am honored to welcome John to our Board,” said Richard White, CEO of ShelterPoint Life. “He brings a wealth of experience and expertise in the insurance industry and will be a tremendous asset.”

ShelterPoint Life, with its origin and expertise in short-term disability, is ranked #1 in New York for statutory short-term disability.1 The Company has grown its product line into a full suite of employee benefits and is making its products available on a national scale. Staying true to the mission of keeping group benefits simple and to-the-point for small businesses is a key priority for ShelterPoint Life’s national expansion.

1 State of New York Workers’ Compensation Board, form DB-680, 2014 – applies to statutory disability premiums under ShelterPoint Life Insurance Co. only.

[ COURTSIDE ] CONTINUED FROM PAGE 33

the Parouleks for property damage to their vehicles. Negotiated checks which had been issued by Geico on April 14, 2014 were annexed as evidence of Geico’s payments.

Geico contended that the arbitrator’s award was subject to vacatur because the arbitrator had exceeded her authority by issuing an award which was $4,437.33 in excess of Nationwide’s pro rata share, and in excess of the $25,000 policy limits. In support of its contention, Geico cited “Article Second” of the AFI arbitration agreement, which specifically provided that: “no company shall be required, without its written consent, to arbitrate any claim or suit if: ... any payment which such signatory company may be required to make under this Agreement is or may be in excess of its policy limits.” The District Court, in an order dated September 18, 2014, from which Geico appeals, granted Nationwide’s petition to confirm the award, and denied Geico’s “cross motion” to vacate the award.

34 January 16, 2017 / INSURANCE ADVOCATE

…the provision affords Geico the option to reject arbitration, but Geico did not exercise that option.

CPLR 7511 (b) (1) (iii) provides that an application to vacate an arbitration award by a party who participated in the arbitration may be granted upon the ground that the rights of that party were prejudiced by the arbitrator exceeding his or her power. Furthermore, where the arbitration agreement provides that the arbitrator may not make an award in an amount beyond the policy’s limits, an award in excess of those limits is subject to vacatur, pursuant to CPLR 7511 (b) (1) (iii), as an award in excess of the arbitrator’s power (see Matter of Brijmohan v State Farm Ins. Co., 92 NY2d 821 [1998]). Geico contends that even if it did not produce sufficient evidentiary support regarding its policy limits (e.g., the declarations page) at the arbitration hearing, “Article Second”

of the arbitration agreement is a specific limitation on the arbitrator’s power, which Geico may assert in opposition to Nationwide’s petition to confirm the arbitrator’s award (see e.g. Matter of Silverman [Benmor Coats], 61 NY2d 299, 309 [1984]; see also Matter of Brijmohan v State Farm Ins. Co., 92 NY2d 821).

The provision upon which Geico relies, however, is not a specific limitation on the power and authority of the arbitrator to make an award in excess of the policy’s limits. Instead, the provision affords Geico the option to reject arbitration, but Geico did not exercise that option. Consequently, the award should not be vacated on the basis that it was in excess of the limits fixed by the policy and, therefore, exceeded the arbitrator’s power (see CPLR 7511 [b] [1] [iii]).

As Geico did not demonstrate any other grounds for vacatur, the order of the District Court is affirmed.[IA] 2016 NY Slip Op 51700(U) Decided on November 21, 2016 Appellate Term, Second Department

INA 1-16-17.qxp_INA 1-16-17 1/16/17 12:51 PM Page 35

An essential component to our continued success at Hamond is the experience and knowledge of our staff.

Averaging over 35 years in the field of Workers’ Compensation Insurance, we are able to provide our clients with the expertise they are looking for.

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Providing Excellence in…

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Group Members are not just another policyholder.

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50% of the Service Fee Paid to Brokers for the first three policy terms!* Unbroken string of dividends since group inception!

Direct quote requests to:

800.285.2258 | Fax 516.488.2167 ryu@hamondgroup.com

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Underwritten by the New York State Insurance Fund

INA 1-16-17.qxp_INA 1-16-17 1/16/17 12:52 PM Page 36

E x p ec t big thing s in workers’ c omp ens ation. E x p ec t to s ave a third of your clients 3 0% or more. M ost c lasses ap prove d , n ationw id e. F or infor m ation c all ( 8 7 7 ) 2 3 4 - 4 4 5 0 or v isit au w.c om /us. F ollow us at big d o ghq.c om.

Š2017 Applied Underwriters, Inc., a Berkshire Hathaway company. Our insurance carriers are rated A+ (Superior) by A.M. Best.

Insurance plans protected U.S. Patent No. 7,908,157.