Insurance Advocate February 4, 2013 by C Acunto

VOLUME 124, NUMBER 3 / February 4, 2013

A CINN Group, Inc. Publication

Serving: New York, New Jersey, Connecticut, Pennsylvania and Washington D.C. Since 1889

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Contents

February 4, 2013 | volume 124 number 3

[COVER STO RY ] 18

Cuomo Focuses on WC Reform Industry Leaders See Potential Gains Betty Flood Morrow and Katlin Nash

[FEATURES] 4

Foreword Steve Acunto, Publisher

Insight: A Matter of Opinion Peter H. Bickford

Notebook: Big “I” Applauds Passage of NFIP’s New Borrowing Level

On the Level: My Wish for the Future of Our Business Jamie Deapo

In the News: Robinson Elected Chairman of I.I.I

Exposures and Coverages: Department of Ampliﬁcation Jerome Trupin, CPCU

Face to Face: I’ve Fallen and I Won’t Get Up… and I’m Suing Michael Loguercio

Courtside: Earth Movement Exclusion Fails Because Movement of Fill Found to be Effect, Not Cause, of Damage Lawrence N. Rogak

Classiﬁeds

Looking Back: January 30, 1988

[AD FEATURES] 17

Michael Fliegelman: What is the Sign of a Good Decision®

18 6

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[ FORE WORD ]

Steve Acunto

Mr. Chairman

t has been difficult to speak with John Filice these days. John is showing great strength together with his staff at U.S. Surety in the aftermath of Superstorm Sandy. That’s right, it’s January 30th and he is still climbing the stairs, struggling with electronics and having each day be that much more of a challenge, downtown where the flood waters crashed through everything and ruined so many lives and so much property. We salute John and his team for keeping his business going with only the few interruptions he’s let it have, despite continued adversity. No one north of New York’s 14th Street or outside Long Island and Staten Island and most of the coast of New Jersey can really understand the ongoing effects of the super storm. John’s company, located on Greenwich Street just south of the World Trade Center site is housed in one of the many buildings still experiencing connectivity problems, despite many man hours of work and despite the incredible rents in the district. It all boils down to courage and determination, which John and his staff seem to have. We wish them the very best of luck together with many other insurance professionals who are still in the same position after the storm. Incredible that in this day and age our infrastructure is both so complex and yet so poorly assembled and architected that getting it back together again this long after the devastation is this difficult. Cannot understand it. Keep punching, John… Kevin Cahill has become Chairman of the New York Assembly Insurance Committee, replacing Assemblyman Morelle in that role. Just about everyone in the business issued press releases immediately stating how optimistic they are to work with Cahill. The assemblyman represents the 103rd District, near Kingston. His insurance record was handsomely outlined by PIANY whose communication KEVIN CAHILL was the first to reach this screen. Here is what they wrote: “Cahill is supportive of professional agents and their employees. He has long maintained relationships with local PIA agents in the Kingston area, meeting regularly to discuss insurance-related issues; and he has voted consistently in favor of PIANY priority legislation to help promote better understanding of the applicability and amount of hurricane windstorm deductibles in homeowners and dwelling fire policies and to establish reasonable standards for the operation of hurricane windstorm deductible triggers; to restrict direct-writer commercial advertisements in official state mailings to avoid misleading the public; and to help contain automobile insurance premium costs by preventing the imposition of surcharges for minor accidents. He also was sponsor of legislation introduced last year in response to PIANY’s request to require insurers of property to eliminate from the claims record of an insured, any claim of loss made and paid in good faith, which is discovered to be false and the proceeds of such claim are repaid to the insurer.” The other associations’ missives followed in a similar vein, all expressing a desire to work with him for the shared goals legislators, insurance professionals and consumers have or some words to that effect – as well they must. A little about Cahill: he is a lifelong resident of Kingston and has had experience in the Ulster County Legislature as minority leader. He joined the State Assembly in 1992, where he has been a force for civil rights, labor and women’s issues and healthcare. In recognition of his environmental efforts, he was named Legislator of the Year by the Environmental Planning Lobby in 2008. Appointed to the position of Chair of the Assembly Standing Committee on Energy in February of 2008, Cahill has made energy efficiency and independence a top priority and led the way on initiatives promoting renewable power generation, sustainable building practices and the development of a green workforce. Now he graduates to the insurance world and its opinion leaders. It’s a nice appointment. [IA] 4 February 4, 2013 / INSURANCE ADVOCATE

VOLUME 124, NUMBER 3 FEBRUARY 4, 2013

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Michael Loguercio Sari Gabay-Raﬁy Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x126 circulation@cinn.com PUBLISHED BY CINN Group, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264 www.cinn.com | info@cinn.com President and CEO Steve Acunto

CINN G R O U P, I N C .

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 21 times a year, and once a month in July, August and December by CINN Worldwide, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing ofﬁces. POSTMASTER Send address changes to Insurance Advocate®, PO Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $110.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN Worldwide, Inc. and is copyrighted 2013. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Ofﬁce.

For high-quality article reprints (minimum of 100), including e-prints, contact Gina Balog at g@cinn.com or call 914-966-3180, x113

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[ INSIGHT ]

By Peter H. Bickford

A Matter of Opinion Q: May a licensed insurance agent or broker co-sponsor seminars with a law firm in order to provide general insurance advice to employers? A: Yes. (NY Insurance Department, Office of General Counsel Opinion No. 11-01-07) Q: May an insurer require a third-party claimant to execute a release before the insurer will pay a settled claim? A: Yes. (OGC Op. No. 11-04-01) Q: May a licensed insurance producer, upon the request of a New York state agency, complete a certificate of insurance that effectively amends, expands, or otherwise alters the terms of the applicable insurance policy? A: No. (OGC Op. No. 11-01-08)

hese are but a few randomly selected Office of General Counsel opinions issued by the New York Insurance Department in 2011 before the Department was merged into the

pretation of the insurance law and promulgated regulations. In the nine months of 2011 before the merger, there were 41 opinions issued. Since the birth of the Department of Financial Services in October

What has precipitated this “cold turkey” withdrawal from the issuance of advisory opinions, and does this mean that the industry can no longer ascertain how its regulators will react to a specific set of facts or circumstances under a broad or non-specific statute or regulation? Peter H. Bickford

Department of Financial Services in October of that year. These opinions are representative of the numerous opinions that have been requested over the years by or on behalf of regulated entities – whether agents, brokers, insurers or other licensed service providers — about certain fact situations or circumstances that are not specifically addressed in the insurance law or promulgated regulations, or where there was uncertainly in their interpretation. Rather than facing penalties, fines, disruptions in the conduct of business or worse, regulated entities regularly sought to understand the position of their regulators by requesting an opinion based on a specific set of facts or circumstances. For the eleven-year period 2000 through 2010, the NY Insurance Department issued 2,682 general counsel opinions—an average of 244 per month— providing the insurance industry and its advisors with invaluable insight into and understanding of the Department’s inter6 February 4, 2013 / INSURANCE ADVOCATE

2011, there has not been one single Office of General Counsel Opinion issued. What has precipitated this “cold turkey” withdrawal from the issuance of advisory opinions, and does this mean that the industry can no longer ascertain how its regulators will react to a speciﬁc set of facts or circumstances under a broad or non-speciﬁc statute or regulation? First some background: Section 301 of the NY insurance law grants the superintendent authority to prescribe regulations for the purpose of, among other things, interpreting the provisions of the insurance law. Regulation #1 (Yes! There is a Regulation #1!) outlines the requirements for promulgating, recording and indexing regulations, but also authorizes “[t]he superintendent, all deputy superintendents, the department counsel and bureau heads” to issue written opinions. The regulation gives specific requirements for the information to be provided and considered, and the scope of any opinion.

The regulation concludes that “[a]n opinion is deemed to be sufficiently important as a guide to the future action of the Insurance Department [now the DFS] to justify the keeping of a permanent record thereof . . .” In other words, OGC opinions, along side regulations and circular letters, have long been recognized as an integral part of the regulatory scheme in New York. The importance and value of OGC opinions is also demonstrated by the frequency in which they are cited as authority in legal texts and court decisions. Interestingly, Regulation #1 authorizes any deputy superintendent or bureau head to issue opinions, not just the department counsel. For as long as I can remember, however, opinions have been issued solely through the Office of General Counsel. These opinions have been regularly published even if they are in response to a very specific and limited set of facts. The opinions are currently available on the DFS website back to 2000, and are in a searchable format so you can find opinions related to a specific issue or a range of issues. Why has the DFS abruptly stopped issuing opinions? There is no official statement on the record explaining this decision. The only statement on the Opinions page of the DFS website is: “More information coming soon.” It has been fifteen months since the moratorium was instituted. An explanation is long overdue! With the consolidation of insurance, banking and consumer services under one roof, and an overhaul of the statutory framework for enforcement of the law against regulated entities, the need to understand regulators’ positions under the law is greater than ever. Perhaps it is understandable why a new administration would seek a brief moratorium to coordinate the issuance of opinions under the newly implemented merger to ensure consistency and refinement of the criteria. The DFS may also believe that opinions were being requested too frequently or for trivial matters. Narrowing the scope of issuance is one thing; eliminating them altogether, however, is an overly drastic remedy. continued on page 17

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[ NOTE BOOK ]

Big “I” Applauds Passage of NFIP’s New Borrowing Level

ASHINGTON, D.C.—The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) praised Congress for acting to increase the borrowing authority of the National Flood Insurance Program (NFIP) by $9.7 billion to ensure that the current funds are not exhausted any time soon. The increase in borrowing authority is needed by the NFIP in order to pay the enormous number of flood claims expected from Superstorm Sandy. The U.S. House of Representatives voted in favor of the effort through a process called “suspension of the rules” which requires two thirds approval of the House. The Senate voted by “unanimous consent” on the same measure. Both chambers passed the measure and President Barack Obama is expected to sign it shortly.

“Both the House and Senate should be commended for this action that will protect homeowners and small businesses.”

“The Big ‘I’ commends Congress for today’s action on flood insurance which ensures that flood insurance claims are paid promptly, so homeowners and small businesses can begin recovering from the horrible damage inflicted by Sandy,” says Robert Rusbuldt, Big “I” president & CEO. “Both the House and Senate should be commended for this action that will protect homeowners and small businesses.”

Integro Aligns with Verisk’s CargoNet

ERSEY CITY, N.J.—Verisk Crime Analytics has announced a strategic alliance between its CargoNet division and the insurance brokerage and risk management firm Integro Insurance Brokers, to support the cargo theft prevention efforts of Integro’s domestic Property Broker and Forwarder clients.). Through the agreement, Integro will provide complimentary CargoNet membership for all of its Logistics Liability Program clients. CargoNet is centered on a national database and information-sharing system managed by crime analysts and subject matter experts. By providing coordinated incident communications, recovery support, and deterrence measures, CargoNet helps its members prevent cargo theft and improve chances of recovery. Philip DiChiara, Integro’s Trade & Logistics Practice leader, has agreed to serve on CargoNet’s advisory board. “This initiative demonstrates Integro’s willingness to do all that it can for its clients to mitigate cargo theft and supply chain

“CargoNet’s unique program adds considerable client value” interruption,” noted Garry Rivell, vice president of insurance services at CargoNet. “Integro is clearly a thought leader, and we recognize the value in having a strategic alliance with such a company.” “CargoNet’s unique program adds considerable client value,” said Philip DiChiara. “This is yet another tangible example of Integro investing to build the logistics practice that sets the industry standard in client service. I look forward to working with CargoNet on further expanding its product offerings to transportation and logistics companies.” Integro’s Trade & Logistics Practice offers cutting-edge insurance programs for the transportation and logistics industry. Its experienced team of brokers brings an unparalleled level of service and expertise

After a multi-year lobbying effort by the Big “I” and others, the “Biggert-Waters Flood Insurance Reform and Modernization Act of 2012,” was signed into law late last year. The new law extended the NFIP for five years and made needed reforms to the program. The association continues to be on the forefront of this issue and was a strong advocate for provisions in the bill that put the program on more solid financial footing. “Some experts estimate that damage from Sandy could generate as many as 139,000 claims, but without an increase in the borrowing authority only about 12,000 of these can be covered from existing funds,” said Charles Symington, Big “I” senior vice president of government affairs. “In fact, FEMA itself recently acknowledged it could run out of money as early as next week. The Big ‘I’ strongly supports raising the NFIP borrowing authority in order to ensure that NFIP policyholders who had the prudence to purchase protection and have been paying their premiums receive the claims payment they are due.” [IA]

to this niche market with the know-how and market relationships necessary to design and place comprehensive insurance coverage tailored to each clients’ needs. Verisk Crime Analytics is a leading provider of crime-prevention services for retailers, manufacturers, logistics companies, equipment owners, and insurance companies and offers data and analytical support to law enforcement. Verisk Crime Analytics provides a comprehensive suite of data management, analytic, and theftprevention services that include prediction, mitigation, response, and recovery. Verisk Crime Analytics is a unit of Verisk Analytics (Nasdaq:VRSK). For more information, visit www.verisk.com/crimeanalytics. [IA] Integro is an insurance brokerage and risk management firm designed to serve organizations with complex risks. Repeatedly praised and awarded for dedicated client service, Integro’s industry-leading brokers operate from offices worldwide. Its headquarter office is located at 1 State Street Plaza, 9th Floor, New York, NY 10004. For more information, call 1-877688-8701 or go to www.integrogroup.com.

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[ ON TH E LEVEL ]

By Jamie Deapo

My Wish for the Future of Our Business

s I enter the end of my career I look at the young people I work with and I wonder what this business will be like for them. Insurance is the only real work I have known and all things considered it has been very good to me. I’m not sure this business will be the

and highlights weak leadership operating without moral fortitude and willing in some situations to exhibit unethical and in some extreme cases even criminal conduct. The funny thing is in our business you regularly hear companies talk about relationship but any relationship that existed or may exist in

Insurance, like so many other businesses today, has lost its moral compass. Rather than work hard to find solutions to problems and issues, the current solution is to just walk away from the problem and leave it for someone else to figure out or deal with.

Jamie Deapo

same for them or the rest of the young people who join in the future. It has transitioned from a people business to a profit at all costs business. Please understand I am not adverse to profit, it is the purpose of business. I am against profit at all cost. Insurance, like so many other businesses today, has lost its moral compass. Rather than work hard to find solutions to problems and issues, the current solution is to just walk away from the problem and leave it for someone else to figure out or deal with. I can’t believe with all the talent and knowledge that exists in our industry we can’t develop viable solutions to the problems that exist today. Unfortunately, finding solutions takes time and money and does not fit the model of an industry where many are only interested in easy, short term profit. In order to get my AINS designation I had to take an ethics course and is my nature I joked about it. However, moral and ethical behaviors are not a joke. They are the foundation of any successful business that cares about the people that work for them as well as the people and businesses that are their customers. Currently too many financial institutions, including insurance companies, are operating under a profit at all cost credo. This is sad commentary on business today 10 February 4, 2013 / INSURANCE ADVOCATE

the future goes right out the door if profit, especially short term profit, is in jeopardy. As an industry we are faced with many challenges: • Climate changes that result in catastrophic weather related losses affecting the profitability of property insurance. • We are faced with an aging employee base, soon to retire, without enough young people to replace them. • We are challenged by supporting diversity in the agency force that will allow us to provide a diverse consumer base with professionals that are multi-lingual and understand their cultural differences. • Technological advances that may mean cars that drive themselves in the future and currently allow for usage based auto insurance as well as highly refined underwriting selection. • The increased risk associated with safely storing important information and securely transmitting that information over the internet. • Consumers who have been brainwashed into believing that a highly personalized and important product like insurance is merely a commodity to be purchased based primarily on price.

• The inflexibility of our system to attract and support young professionals who want to be entrepreneurs, owning and operating their own business. • Laws and regulations that make it more complicated to do business and add to overhead. • The conservative nature of insurance coupled with the limited innovation of the products we sell and the services we provide. I’m sure you can think of other challenges I haven’t listed. The point is the world around us is changing rapidly and we have to change rapidly as well. We also need strong leaders in every area of our business that are willing to balance profit with people. Decisions have to be made on what is right for both. Those same leaders have to have the moral fortitude to find solutions to problems that work for all concerned and not just run away when things get complicated or costly. I would love to see the insurance business truly be a relationship business. The root word in relationship is relation and the definition is: the state of being mutually or reciprocally interested (as in social or commercial matters). Companies and agents need to have a relationship meant to support and protect each other. They also both need to have a relationship with the consumers they protect with their products. The relationship I mentioned is not some pipe dream and actually existed in years past. The type of moral and ethical leadership I outlined is also very real and possible but requires leaders who stand up for principles and are always looking for the solution that is best for all concerned. Decisions of this type aren’t easily made and require hard work and strength of character. This is the future that a hope for my young colleagues and those that follow. There are those that will say that what I am hoping for is far too altruistic and doesn’t occur in business. I don’t believe that and am not willing to accept it. It is possible in any situation; the real issue is a willingness to compromise by all parties with the goal being the best situation for all concerned. [IA]

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[ IN THE NEWS ]

Robinson Elected Chairman of I.I.I.

EW YORK, N.Y—J. Douglas Robinson, CPCU, Chairman of the Board and CEO of the Utica National Insurance Group, was elected 2013 Chairman of the Insurance Information Institute (I.I.I.). He succeeds Gregory Ator, President, CEO and Chairman, Bituminous Insurance Companies.

12 February 4, 2013 / INSURANCE ADVOCATE

“I’m extremely pleased and honored to serve as chairman of the I.I.I. Board of Directors,” said Robinson. “For more than 50 years, the I.I.I. has provided information to help reporters, businesses, regulators, legislators and researchers understand the trends and statistics shaping the insurance industry. I look forward to sharing ideas with my fellow

Board members as we advance the critical work of this organization.” Mr. Robinson joined Utica National in 1983 as Director of Agency Services. He was named Assistant Secretary in 1984 and appointed Director of Cash Management later that year. He was named Regional Marketing Manager in the company’s Eastern Regional Office in 1985 and promoted to V.P. and General Manager of Utica’s Risk Management Corporation in 1986. The following year he was promoted to V.P and Director of Commercial Lines Sales. In 1988 he was promoted to V.P. and Senior Marketing Officer and later that year was named S.V.P. In 1993 he was promoted to E.V.P. In 1995 he was named President of UticaLIFE, and in 1996 he was promoted to President and COO of Utica Mutual. In 2000, Mr. Robinson was named CEO and in 2006 he was elected Chairman of the Board. He earned a bachelor’s degree in business administration from Syracuse University and a master’s degree in management science from the New York Institute of Technology. He has earned the Chartered Property and Casualty Underwriter designation and has completed the American Institute and Wharton School’s Advance Executive Education Program. Prior to joining Utica National, he was an independent insurance agent. Mr. Robinson is a member of the boards of directors of all Utica National member companies and subsidiaries. In addition to the I.I.I., he serves on the boards of the Property Casualty Insurance Association of America, the Property Loss Research Bureau, and the Mohawk Valley EDGE. He has previously served on the boards of Utica College, SUNY IT College Council, the Central New York Community Arts Council, the Utica Rescue Mission and the United Way. He received the Outstanding Alumni Achievement Award in 2006 from the State University of New York Institute of Technology, their highest alumni honor, and has been recognized on prior occasions by SUNY as an alumnus and for his work as a business and community leader. In 1997 he received the SUNY Alumni Honor Roll award, and that same year he received the Institute of Technology Alumni Association’s Distinguished Service award. He’s a member of the Iron Butt Association and Hamsters USA Motorcycle Club. [IA]

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Department of Amplification - Notice to Broker is Not Notice to Insurer - Late Notice Update - A Broker’s Duties to the Insured - Improving Crime Protection for Employee Benefit Plans Let’s look at some recent developments in areas we’ve looked at before.

Notice to Broker is Not Notice to Insurer This combines three topics that we’ve looked at in the past few months: • NY Labor Law Section 240, • Late notice, and • Broker’s errors and omissions. In March 2007, Joseph P. Stoeckeler hired a contractor to replace the garage doors for a tenant’s auto repair shop in the building Stoeckeler owned. Kenneth Rosier, an employee of the contractor, was working about three feet above the garage floor on a five or six-foot ladder disassembling a door when he fell into the garage pit and was injured. Two or three months later, Stoeckeler heard about the accident from his tenant. This case has Section 240 written all over it—an employee repairing a building falls from a ladder and is injured. Sure enough, in November 2008 Stoeckeler receives a letter from Rosier’s attorney asserting a Section 240 claim against Stoeckeler as the building owner. At that point Stoeckeler notifies his broker, C.S. Benson & Sons, Inc. (Benson) To continue this comedy of errors, Benson, doesn’t forward the report to the insurance company. In February 2009, Stoeckeler is served with a summons and complaint that he promptly delivers to Benson. However, Benson (you can’t make this stuff up) misplaces the documents and doesn’t send them to American Western

Home Insurance until June 1, 2009. That is the first notice of the claim that American Western has received and it promptly denies coverage claiming late notice. The court agreed. It pointed out that notice to the broker is not notice to the insurer. Stoeckeler is left to defend the action himself.1 The result of any errors and omissions claim against Benson hasn’t been reported. However, this accident occurred before the 2009 change in the law on late notice to an insurance company. Prior to that date, unreasonably late notice voided the insured’s coverage without the requirement that the insurance company show that the late notice prejudiced2 its interests. Therefore, if the November 2008 notice that Stoeckeler gave to Benson was unreasonably late, Stoeckeler may be unsuccessful in any claim against his broker. This may very well be the case. The accident occurred in March 2007 and the insured learned of it in May or June of 2007, much more than a year before Stoeckeler gave the first report to his broker. Even if Benson had promptly sent the insurance company the first report it received from Stoeckeler, it would still have been late. Thus, the broker’s mistake in not forwarding the notice to the insurer wasn’t what caused Stoeckeler to lose coverage (No harm, no foul.) If the current late notice law had been in effect at the time of the accident, the broker’s defense would be more difficult. The delay in giving notice until Stoeckeler received the attorney’s letter may not have been prejudicial, but the added delay created by Benson’s failure to promptly transcontinued on page 16

1 Rosier v Stoeckeler 2012 NY Slip Op 08605 12/13/12 2 “Prejudice” in this sense, means something detrimental to the insurance company’s interest.

14 February 4, 2013 / INSURANCE ADVOCATE

Jerome Trupin, CPCU

Jerome Trupin, CPCU, is a partner in Trupin Insurance Services located in Briarcliff Manor, NY. He provides property/casualty insurance consulting advice to commercial, non-proﬁt and governmental entities. He is, in effect, an outsourced risk manager. Jerry has been an expert witness in numerous cases involving insurance policy coverage disputes and has taught many CPCU and IIA courses. Jerry has spoken across the country on insurance topics and is the co-author of over ten insurance texts used in CPCU and IIA programs including Commercial Property Risk Management and Insurance and Commercial Liability Management and Insurance. He regularly contributes articles to CPCU Interest Group Newsletters, the Insurance Advocate, and other publications. He can be reached at cpcuwest@aol.com. Thanks to Jerry Trupin for this article and to the CPCU Society’s Risk Management Interest Group newsletter for letting us reprint it.

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[ EXPOSURES AND COVERAGES ] continued from page 14

mit that notice to the insurer, or the added delay in forwarding the summons, might very well be deemed prejudicial.3

Late Notice Update I haven’t seen any reports of cases involving late notice under the new law— don’t worry, we will. However, a recent case sheds some light on what prejudicial to the insurer may mean. In March 2003, KNK Poultry rented a truck from Budget Rent A Car. While driving the vehicle, KNK’s employee Barry Barker, collided with a vehicle driven by Samuel Weber. Weber claimed serious bodily injury and, as he was working at the time, filed a workers compensation claim. Barker claimed that Weber had backed into him. In 2005, Weber sued Barker, Budget and KNK. Primary auto liability coverage was provided by Budget’s insurer, Empire Fire & Marine. KNK auto liability coverage with Travelers provided excess liability coverage.4 In 2007, Weber moved for summary judgment on the question of liability. Barker was no longer employed by KNK and the defense counsel provided by Empire was unable to locate him. As a result, no affidavit by Barker giving his side of story was submitted to the court. On January 25, 2008, the court granted Weber summary judgment on the issue of liability. In March 2008, the claim was reported to Travelers. Travelers promptly denied for late notice. Under the prior law in NY, which is what applied to this accident, it looks like an open-and-shut case; notice was first given five years after the accident. That’s hardly prompt. However, the Travelers policy contained a provision not commonly found in New York policies prior to the 2009 late-notice law change. It said that coverage was precluded only if

A recent decision based on Alabama law held that the requirement to give prompt notice was a condition precedent.7 (A condition precedent is a provision that a party must comply with before the other party is obligated to perform its part of the agreement.)

the failure to provide notice “is prejudicial to us (Travelers).” That’s similar to what the revised New York law says. Travelers asserted that the late notice was prejudicial to its interests. It that it was prevented from conducting its own investigation, attempting to locate Barker prior to the summary judgment motion, canvassing the area for witnesses and seeking a reconstruction of the accident prior to the destruction of the truck Barker was driving, KNK argued that Travelers as the excess insurer must show more than lost opportunities to establish actual prejudice. The cited numerous cases in other jurisdictions in support of that position. However, the New York Court of Appeals, our highest court, has ruled that “excess carriers have the same vital interest in prompt notice as do primary insurers.”5 The court in this case ruled that Travelers was prejudiced by the delay in providing notes and therefore, it had no duty to defend or indemnify KNK. Two Learning Points: The three rules for dealing with liability insurance claims are still: Report, Report, and Report. If this case is any guide, New York courts may be more lenient in finding that late notice is prejudicial to the insurer than courts in

other states.6 In addition, while most states agree that the insurer must show prejudice to deny liability for late notice, that’s not true in all states. A recent decision based on Alabama law held that the requirement to give prompt notice was a condition precedent.7 (A condition precedent is a provision that a party must comply with before the other party is obligated to perform its part of the agreement.) You don’t want your insured forced to go to court to establish its rights. Tell your clients to report all occurrences promptly. The second point involves notice to an excess insurer. Excess liability policies usually provide that notice is required when the claim appears likely to involve the excess insurer. For example, ISO’s commercial umbrella form says: You must see to it that we are notified as soon as practicable of an “occurrence” or an offense, regardless of the amount, which may result in a claim.8 As this case shows, not every excess policy contains that wording; that’s particularly true when the excess policy is one that is ordinarily primary as was the case here. If the excess policy does not contain such a provision, it would be wise for insureds to give prompt notice of all occurrences to excess carriers also. I know that this will generate a flurry of meaningless reports to excess insurers, but unless the insurer agrees to waive the notice requirement, Report, Report, Report.

A Broker’s Duties to the Insured Last month I discussed the New York Court of Appeals decision that the insured’s failure to read the policy was not fatal to the insured’s errors or omissions claim against its broker. The Court held that the insured should have a right to look to the expertise of its broker with respect to insurance matters. The issue of the

3 Under the new law, because the June 2009 report was more than 2 years after the occurrence, the burden of proof to show that the insurer was not prejudiced would fall on the insured. That increases the chance that the delay will be found to be prejudicial. 4 Budget Rent A Car System, et al v St. Paul Travelers et al NY Supreme Court for Suffolk County Index No 09-1454 (2011). 5 American Home Assurance Co v International Ins, Co., 90 NY2d 433,443 (1971) 6 This was a decision in Suffolk County Supreme Court. Attorneys have told me that they don’t give much weight to State Supreme Court decisions because they’re not binding on other courts. Decisions by the Appellate courts are binding on the courts in that Appellate District. Court of Appeals decisions are binding on all New York courts. 7 Realty & Management, LLC v. Capitol Specialty Ins. Corp., 2013 WL 56701*2(11th Cir. January 4, 2013) 8 Commercial Liability Umbrella form CU 00 01 04 13 copyrighted Insurance Services Office, Inc., 2012

16 February 4, 2013 / INSURANCE ADVOCATE

[ EXPOSURES AND COVERAGES ] insured not having read the policy would be one of comparative negligence, not an absolute bar to the insured’s claim. A Second Department Appellate Court decision was just published holding essentially the same position. The decision affirmed the Supreme Court’s denial of summary judgment to the insurance company. The court held that broker “did not satisfy its … burden of demonstrating that the plaintiffs’ failure to read the terms of the applicable insurance policies, despite their having been in effect for approximately nine months prior to the fire, warranted judgment in its favor as a matter of law.9 We’ll have to wait to see if the insured will actually be indemnified for its loss. If the parties settle, there may be no published decision on the resolution of the insured’s claim. As I pointed out, these cases represent a loosening of the standard for insurance broker E&O in New York. I should have mentioned one area where a broker does have a clear obligation to the insured. That’s the obligation “to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so.”10 The issue to be resolved now is whether the insured’s failure to read the policy, and complain about its shortcomings, will outweigh the insured’s claim that the broker did not obtain the requested coverage. On the plus side for agents and brokers, there doesn’t seem to be any change in the court’s position that agents and brokers “have no continuing duty to advise, guide or direct a client to obtain additional coverage.” (Although New York courts don’t see any legal obligation for agents and brokers to advise clients once the policy has been procured, I think there’s an ethical obligation. And besides, it’s good way to build lasting relationships with clients.)

Improving Crime Protection for Employee Benefit Plans In the January 24, 2011 issue of the Insurance Advocate. I recommended com-

bining the crime protection for a firm with the coverage ERISA requires for the firm’s employee benefit plans in. The chief advantage of combining them is the increased limit available to both the plans and the firm, if the amount of insurance carried by the firm on its own is increased by the amount that the plans would carry in separate policies. To illustrate, if the firm has $2,000,000 crime coverage and the plans would carry $500,000 on their own, the combined policy would have a $2,500,000 limit. One of the other advantages that I cited was broader coverage for the plans beyond just the employee theft. For example, the firm has have funds transfer fraud coverage (and should) that could apply to the plan also. What I should have pointed out is that the combined policy will have to be extended to provide coverages other than fidelity. ISO’s and other insurers’ standard crime wording provide only fidelity insurance for employee benefit plans. Employee benefit plans are exposed to crime perils in addition to employee theft. Pension, profit-sharing, and 401k plans can have substantial assets that need protection. One of our clients, a firm with approximately 50 employees has over $10,000,000 in it employee benefit accounts. Even without the added coverages for the ERISA plans, I still recommend combining the coverages. A stand-alone ERISA fidelity bond that I looked at named the ERISA plan as the named insured. It defined “employee” to mean an “employee, trustee, officer, administrator or manager” of the ERISA plan. The only non-employees covered were directors or trustees of the plan sponsor while handling funds or other property belonging to the plan. That leaves out coverage for theft by an employee of the sponsor who is not an employee, trustee, officer, administrator or manager of the plan. Under a combined policy, an employee of any insured is considered to be an employee of every insured. Get the policy amended. Many insurers will broaden your insured’s coverage. [IA]

[ INSIGHT ] continued from page 6

If you look at the record of the number of opinions issued, it tends to track major insurance or financial events. For instance, the number of OGC opinions issued spiked considerably in the years following 9-11, including a high of 369 opinions issued in calendar year 2002. Toward the end of the century the number tapered off considerably to a total of 85 opinions posted for the calendar year 2010. It would seem that the merger of banking, insurance and consumer services would qualifies as a major insurance regulatory event, making it even more difficult to understand a moratorium on OGC opinions. For the DFS to go “cold turkey” on rendering opinions following the implementation of the merger and enforcement of the revised statutes is unconscionable. There is simply no excuse for failing to recognize the value and importance for both the regulators and the regulated to have a means of determining how the law and promulgated regulations will be interpreted and enforced under different facts and circumstances. Shutting down the process entirely for over 15 months is not only a disservice to the industry, but also to the professional staff of the DFS, who have as much an interest in providing clarity to their positions as regulated entities do in understanding the position of the regulators. There will never be full agreement between regulators and regulated entities over the interpretation and implementation of the law, but it is essential for both sides to understand and appreciate the differences to the fullest extent possible. OGC opinions have historically provided a means of obtaining a clear understanding of those differences in a manner that can be relied upon in determining a course of action in the successful conduct of the business of insurance without the fear of unknown or unanticipated repercussions. If the law and regulations are to be a guide for the proper conduct of business rather than a trap to punish the unwary, then bring back the OGC opinion process as soon as possible![IA]

9 Gagliardi v Preferred Mut. Ins. Co. 2013 NY Slip Op 00179 January 16, 2013 There is no mention in the decision of the Court of Appeals decision in Petrocelli. This decision may have been written before the Petrocelli case was published. 10 Murphy v Kuhn, 90 NY2d 266, 270 [1997]

INSURANCE ADVOCATE / February 4, 2013 17

[ DFS ]

[ IN T H E NEWS ]

Department of Financial Services Fines HealthNow $700,000 for Failing to tell Consumers their Rights And Benefits

PRI / Parker Set Accord

DFS Finds Violations Including Failing to Provide Complete Explanations of Benefits Statements in Approximately 164,000 Cases

enjamin M. Lawsky, Superintendent of Financial Services announced that HealthNow New York Inc. has been fined $700,000 for failing to explain coverage and benefit rights to certain health plan members. HealthNow also failed to tell members how to appeal claims denials. HealthNow, a Buffalo based not-forprofit insurer, was cited for approximately 164,000 instances of failing to provide what are known as explanation of benefits statements that contained all the necessary wording. The statements, required under state law, are intended to describe what services the plans cover and how consumers can appeal when they believe claims are improperly denied. In addition, the company was cited for failing to: file certificates of appointment for its agents; timely notices of appointment of agents; notify the Department of the company’s termination of agents; and ensure that commissions were paid only to licensed producers. Further, HealthNow failed to provide to its members written acknowledgement of grievances within fifteen business days, as required by law. “Consumers have a right to know what their health plans cover, what the plans don’t cover, and what they can do when their claims have been denied improperly,” Superintendent Lawsky said. “This fine reflects the serious and systematic nature of the practices uncovered by the Department. We are however, encouraged by HealthNow’s commitment to addressing the Department’s findings and improving its performance going forward.” The violations found in the DFS exam include: • Failing to send explanation of bene18 February 4, 2013 / INSURANCE ADVOCATE

Further, HealthNow failed to provide to its members written acknowledgement of grievances within fifteen business days, as required by law.

fits statements that contained all the wording required by law for certain claims which were denied in part or in full. This included instances when the explanation of benefits statements failed to contain proper appeal rights. • Failing to file certificates of appointment for its insurance agents. • Failing to file notices of appointment of producers with the superintendent within fifteen days from the date that the agency contract was executed or the first insurance application was submitted. • Failing to notify the Department of its insurance agents’ terminations. • Failing to ensure that commissions were paid only to licensed producers. HealthNow was also cited for failing to provide written acknowledgement of grievances within 15 business days. In a settlement with the Department, HealthNow agreed to take steps necessary to prevent the violations from occurring again. The company agreed to revise procedures regarding issuing explanation of benefits statements and making mandated filings regarding its producers. The stipulation signed by HealthNow can be found on the Department’s website, http://www.dfs.ny.gov/about/stip/healthnow_ny_stip_2012.pdf. [IA]

OSLYN, LI—Physicians’ Reciprocal Insurers (PRI) has announced that Parker Jewish Institute for Health Care and Rehabilitation of New Hyde Park, New York has named PRI to serve as its medical professional liability insurer. Parker Jewish Institute is one of the nation’s preeminent long term care facilities. It offers sub-acute care/post acute care, short term rehabilitation, a nursing home, a comprehensive network of community health programs and services, and medical transportation. On-site dialysis is provided at Parker by the Queens-Long Island Renal Institute, Inc. Anthony J. Bonomo, PRI’s CEO, said: “Parker is one of the metropolitan area’s leaders in long term care. They work diligently to treat their patients and residents with dignity and respect, and their results are impressive.” Lenny Tanzer, Chairman of Parker’s Board of Trustees, and Michael N. Rosenblut, Parker’s President and Chief Executive Officer, remarked that PRI was selected as its partner for medical professional liability insurance based upon PRI’s 30 year track record in risk management and claims management. “We are pleased to join the PRI family of insureds and look forward to working closely with PRI on quality care initiatives,” they said. PRI is the second largest medical professional liability company in New York State, serving over 13,000 physicians and several hundred facilities since 1982. They have been formally recognized for their groundbreaking initiatives in risk management.[IA]

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[ CAPITAL HILL ]

By Betty Flood and Katlin Nash

Insurance Committee Chair Morelle Named Majority Leader

LBANY, N.Y.—Assemblyman Joseph D. Morelle (D-Rochester), the Assembly Standing Committee on Insurance has been named Majority Leader of the Assembly. Assemblyman Morelle represents the 132nd Assembly District, which includes the Maplewood, Charlotte and North Winton Village neighborhoods in the city of Rochester and the Monroe County suburbs of Irondequoit and Brighton. His focus on job creation and making New York more competitive stems in part from his own experience as a small business owner. Morelle was President and CEO of MMI Technologies, Inc., a Rochester based computer software development company for ten years. In 2005, Assemblyman Morelle published a groundbreaking report, entitled “Creating a State of Innovation: Unleashing the Power of New York’s Entrepreneurial Economy,” which offers new policy prescriptions for some of New York’s toughest economic challenges. In June of 2007, Assemblyman Morelle

Morelle chairs, is to give the manufacturing community in New York a greater voice in state government. More than 100 laws authored by Assemblyman Morelle include major was appointed Chairman of reforms to the workers’ comthe Assembly Standing pensation system, which have Committee on Insurance, and provided needed relief to New in that role he has been a York businesses. To encourage leader in the effort to expand companies to make movies and health care options for New television shows in New York, Yorkers and establishing pruAssemblyman Morelle also dent regulatory controls in penned the highly successful order to prevent the type of Empire State Film Production reckless speculation that conTax Credit, which has created tributed to the financial crisis 10,000 new jobs and billions in of 2008. He has become a new economic activity. ASSEMBLYMAN leader on this issue in his role JOSEPH D. MORELLE He is a graduate of as Chair of the National Eastridge High School and Conference of Insurance Legislators’ received his Bachelor’s degree in Political Financial Services and Investment Science from the State University College Products Committee. at Geneseo. Assemblyman Morelle has previously Assemblyman Morelle’s wife, Mary served as chair of the Assembly’s standing Beth is a teacher at East Irondequoit committees on small business and tourism, Middle School; their children Lauren, arts, and sports development. Joseph Jr., and Nicholas have all attended At Assemblyman Morelle’s request, East Irondequoit schools. Speaker of the Assembly Sheldon Silver Speaker Sheldon Silver (D-NY) has not created the subcommittee on made a new appointment for Chairman of Manufacturing. The main objective of the the Assembly Standing Committee on subcommittee, which Assemblyman Insurance. [IA]

[ IN THE ASSOCIATIONS ]

PIACT Seeks Nominations for Insurance Industry Stars

ARTFORD, Conn.—The Professional Insurance Agents of Connecticut Inc. is calling for nominees for its 2013 Distinction of Professionalism Awards. These three awards will be presented at the upcoming PIACT Annual Convention, March 14-15, 2013, at the MGM Grand at Foxwoods. Nominations for the Company Person of the Year and Community Service Award are due Friday, Feb. 1, 2013. Nominations for the Professional Agent of the Year are due Sunday, Feb. 10, 2013. Each year, PIACT honors insurance professionals who exemplify the qualities and actions that serve as a model of excellence in the insurance industry and for the independent agency system. Awards for 20 February 4, 2013 / INSURANCE ADVOCATE

which nominations are being sought include: • Professional Agent of the Year: This award is presented to an agent who demonstrates excellence and achievement in insurance marketing and service; exhibits a personal commitment to professionalism; and contributes to PIACT and the local community. • Company Person of the Year: This honor is awarded to a person who embodies qualities that best foster sound working relationships between insurance agents and companies. • Community Service Award: This distinction is bestowed upon the agent who took on a leadership role in a sig-

nificant activity for the betterment of the community and its individuals. Nominators are asked to provide support for each of their nominations, which can include, but is not limited to, the following: contribution to the industry; support of PIA; community involvement; employment history; and education. If you know a deserving candidate(s), you can nominate an individual(s) via PIACT’s website (www.pia.org). From the association’s home page click “Nominations open!” under “What’s New” on the righthand side of the screen. PIACT is a trade association representing professional, independent insurance agencies, brokerages, and their employees throughout the state.[IA]

D D

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[ COVER ]

By Betty Flood Morrow and Katlin Nash

Cuomo Focuses on WC Reforms Industry Leaders See Potential Gains

22 February 4, 2013 / INSURANCE ADVOCATE

[ COVER ]

lbany, N.Y.—In a much needed change to workers’ compensation, Governor Andrew M. Cuomo recommended in his State of the State his plan to introduce legislation that will continue to reduce the cost and improve the administration of workers’ compensation for New York’s business and workers. Governor Cuomo’s proposals include: • Provide savings to New York State’s employers; • Eliminate unnecessary friction in the system; • Alleviate, and ultimately resolve, the burden facing employers who are members of an insolvent Group SelfInsurance Trust; • Simplify and reduce assessments on employers; • Promote system-wide transparency, efficacy, equity, and consistency; and • Create more competition in the insurance marketplace. The Governor’s proposal to reform the Workers’ Compensation and Unemployment Insurance programs would result in $1.3 billion in savings to businesses. “The legislation achieves these benefits by, among other things, closing unnecessary funds, and establishing a bonding program, and establishing a pass-through assessment process,” said Governor Cuomo. “The legislation will provide immediate savings to these employers, capping employers’ outstanding liabilities and giving employers an opportunity to resolve their respective obligations,” the Governor concluded. State Senator James Seward (ROneonta), Chairman of the Senate Insurance Committee, as well as Assemblyman Joseph Morelle (D-Rochester), Chairman of the Assembly Insurance Committee were excited about the recommendations. “I do expect this will be a big issue in 2013. It’s been a prickly problem of long standing of the last few years anyway,” explained Senator Seward. “Let me just say I applaud the Governor for getting involved in this issue. The workers’ compensation reforms that we implemented back in 2007 have not benefitted the employers as efficiently in terms of making the system less expensive. Costs continued to go up for employers and it

has been a drag on our economy “…We have and job creation,” explained Senator Seward. “In particular there looked at this and is a problem of the group self-intalked about it sured trusts. That has been a for several years. lingering problem. I am aware of many businesses and employI am pleased that ers who were members of trusts the Governor has through no fault of their own moved to try to and all of a sudden their trusts were insolvent. They had been address this ASSEMBLYMAN hit with huge bills.” concern” MORELLE “The bonding aspect of assisting with particular groups of the self-insured trust problem I think is ed to self-insured trusts and a number of one part of a multi-faceted solution here. the participants in those trusts which has We may very well need to resort to some since run into significant financial trouble bonding in order to make sure that our they have joint and several responsibility. injured workers needs are met, but also What the Governor intends to do, and help to alleviate the exorbitantly high costs asked us to consider, is for the State to to employers,” continued Senator Seward. enter into a bonding so that we can evenWhen queried on where the money tually finalize the obligations of the surwould come from or who would be paying vivors of the trust so they will know with for the bonding the Senator said, “I am definitively how much their liability is awaiting more details and the bill copy, but going to be. Cap it and then we will prefrom what I know it is all part of a package sumably ask a private company to come in that I think is overall very positive. We will and manage those claims on a going forhave to work out the details once we ward basis. I think it makes significant receive them.” sense. We have looked at this and talked The Senator said he is looking forward about it for several years. I am pleased that to working with the Governor and his col- the Governor has moved to try to address leagues and working out a solution because “it’s been a drag “The bonding on our economy and many aspect of assisting employers are uncertain about with particular the future. They have these lingering bills from the years they groups of the selfwere in trust,” explained insured trust Senator Seward. problem I think is Senator Seward also said “of course the high cost of one part of a workers’ compensation covermulti-faceted age in general is a drag on our SENATOR solution here.…” economy and increases the cost SEWARD of doing business in New York State. So if we can help to bring down the this concern,” explained Senator Morelle. cost, settle the self-insured trust issue, and “Otherwise the alternative is that the get that behind us, I think that will be very surviving members of the trust could have positive for the economy,” concluded open-ended liability and would not have Senator Seward. a way to accentually budget for their obliAssemblymen Morelle, former gations going forward.” Chairman of the Assembly Standing “Ultimately, those individuals who Committee on Insurance and now have obligations under the current trusts Majority Leader of the Assembly, is equally would pay for it (the bonding) primarily encouraged by the Governor’s proposal for through assessments. This allows it to be changes to workers’ compensation. “We had a number of challenges relatcontinued on page 24 INSURANCE ADVOCATE / February 4, 2013 23

[ COVER ] continued from page 23

but more change. For instance, there has been a lot of talk in the past about certain medical guidelines at workers’ comp. I don’t think that is necessarily budgetary.” Assemblyman Barclay said the Governor recommends more competition in the insurance marketplace. Does that mean more insurance companies offering workers’ compensation? Is that it? “How do you encourage more competition?” said Barclay. “Obviously, unless there are some regulatory changes they suggest that is going to allow insurers easier workers’ compensation in New York State.” Concerning the proposal to reform workers’ comp and unemployment insurance programs to result in $1.3 billion in savings, Barclay said, “there was a lot of talk last time to reform workers’ comp on how big the savings were going to be. There was a lot of excitement afterward. I don’t know if those savings ever really materialized as much as they thought they did. So whatever the Governor is propos-

paid for in an orderly way to put, as I said, a cap on their obligation going forward and the revenues presumably big enough to pay off the bonds,” explained Assemblymen Morelle. “I would like to see the proposal obviously in much greater detail to see if it is as it is described. As you know the devil is in the details. I certainly think, conceptually, it is something I would be supportive of. I want to see the details and obviously I want to confer with my colleagues.” Morelle continued, “I had actually spoken with members of the administration over the last eighteen months, perhaps longer, concerning the recommendations of the Governor for workers’ compensation.” “Perhaps longer, since we had the issue of self-insured trusts and the remaining members so I have been very involved in conversations with them as well as the Workers Comp Board and others to understand what it is they were hoping to do and certainly I made “I think the my opinions known about Governor is prothese issues.” Senator Neil Breslin (Dposing an easier Albany), Chairman of the way to allow workSenate Minority Insurance ers to be paid. Committee offered his feelings on the proposed recommendaThe bonding will tions to workers’ compensaallow employers tion, “I think the Governor is not to have to pay proposing an easier way to SENATOR allow workers to be paid. The a lot of interest.” BRESLIN bonding will allow employers not to have to pay a lot of interest. There will be details in the Budget. I ing, you want to make sure the subjective applaud the Governor for trying to correct is actually going to lead to savings going and streamline the workers’ compensation forward.” process.” “I would love to see who is going to Assemblyman Will Barclay (R-C-I: pay the debt service on the bonding in the Onondaga), Chairman of the Assembly proposal. That is the biggest problem with Minority Committee on Insurance said, “I those where the money is going to come am happy the Governor is talking about to try to bail out some of these companies. workers’ comp. We have heard from a lot I am sympathetic to the people who have of small businesses in my district and I huge liabilities. Their insurers are no think throughout the State. That is one of longer solvent to pay them,” concluded the costs of doing business out of propor- Barclay. tion in New York State.” Michael Barrett, Legislative “Specific funding things to try to low- Representative for the Independent er workers’ comp will depend on the budg- Insurance Agents & Brokers of New York et, no doubt,” explained Assemblyman said, “I have seen an outline of the proposBarclay. “Some of the more policy type al and just my comment of it would be we situations are not so driven by the money, are very supportive of the Governor’s pro24 February 4, 2013 / INSURANCE ADVOCATE

posal to streamline the workers’ comp system and particularly the deal with the ongoing problem of self-insured trusts which has been invested in the last several years,” explained Barrett. Barrett said he is “very supportive of the Governor’s efforts particularly in the area of self-insured trusts to try to come up with a method to solve that problem which has been out there for several years.” Self-insured trusts were a grouping of businesses that set up a self-insured trusts that was self-funded and it turns out they were underfunded, according to sources. So when the Workers’ Comp Board looked at their financial viability, they were way underfunded. Therefore, they didn’t have the resources to the pay the losses. So there has been this huge amount of money that is out there and the Workers’ Comp Board has been trying to figure out how to recoup some of those funds totaling something like $800 million. Referring to the self-insured trusts, our source said, “it is a real mess is what it is.” The businesses in the trusts were essentially assessable so if the trust went down each of the businesses that were in there could be assessed to make up the difference and of course with those kinds of numbers you are talking about some huge assessments. Ellen Melchionni, President of the New York Insurance Association said she “was pleased to hear Governor Cuomo is making Workers’ Compensation Insurance a priority as the system in New York cries out for reform.” “We encourage the Governor to take a broad look at the multitude of problems with workers’ comp in the state and seek to make meaningful changes. The system is currently beleaguered with problems. There is an established practice of artificial rate suppression occurring on a nearly annual basis, which in the long term benefits no one,” Melchionni continued. “Additional reforms are needed to rein in costs and develop a mechanism that is affordable for businesses while protecting injured workers,” said Melchionni. “The current workers’ compensation system is burdened with escalating medical costs and wages and stretched even thinner by expenses to comply with increased regulation, not to mention continually plagued with fraud.” continued on page 26

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and the legislature to create a better system. The current workers’ comp environment is unsustainable without adequate rates being paid and costs being cut in a manner that is in the best interest of the entire workers’ compensation market,” continued Melchionni.

“The role of the New York State Insurance Fund (NYSIF) does not help matters. NYSIF was created as the market of last resort, but in actuality, it is not. NYSIF is able to offer reduced rates because of their unfair “…The Governor competitive advantage and rouhas projected that tinely writes business that could be readily placed within $300 million will the voluntary market,” be saved in closing explained Ellen Melchionni. the [NYSIF] fund, “NYSIF is exempt from the regulatory requirements private so we look forward companies are burdened with to those savings including any rigorous form of being realized.” reporting, pays a reduced ELLEN assessment, and does not subMELCHIONNI scribe to the industry standard of paying agent commissions.” Regarding the measures the Governor “Property and casualty insurance comput forward in the State of the State, panies fully understand the challenges with Melchionni believes the Governor’s pro- operating a business in New York since posals could have promise. “Closing the these companies are a part of the business fund for reopened cases could be positive community. The last thing NYIA wants is for both employers and the insurance for the cost of doing business to increase, industry, but a clearer outline of how the but like all businesses, the price of a prodfund will be closed and on what timeframe uct or service needs to correspond with is crucial. The Governor has projected that the actual costs of running that business. $300 million will be saved in closing the The NYIA is hopeful that the fund, so we look forward to those savings Governor and the Legislature being realized.” can put measures in place this “The concept of consolidating the year that will reduce costs withassessments on the outset sounds good, in the Workers Compensation but NYIA needs additional information system that will benefit insurabout how the change would be imple- ance companies and employers mented and eagerly awaits the specifics. It alike,” concluded Melchionni. is important to note that the assessments “Governor Cuomo took a need to be reduced. New York’s assess- strong first step towards fixing ments on workers’ comp premiums are New York’s Workers’ Compensubstantially higher than any other state sation system with the agenda PAUL in the nation. In fact, New York’s 18.8 per- laid out in his State of the State cent surcharge is nearly five times the address,” said Paul Jahn, Chief national average of 3.8 percent and more Research Officer for Workers’ Compensathan double than the second highest sur- tion. “The legislative details still need to charge of 8.3 percent in Minnesota,” said be worked out. However, the Governor is Melchionni. not shying away from longstanding chal“The Governor’s initiative to address lenges facing the Workers’ Compensation the growing concerns with the group self- system in New York.” insured trusts sounds admirable. NYIA The Workers’ Compensation Policy believes that any solution to help resolve Institute’s research on premium assessthe problem of the group self-insured ments showed that New York employers trusts being underfunded needs to remain and taxpayers pay the highest premium strictly between the state and the trusts.” surcharge in the country. “Currently, this “NYIA welcomes the opportunity to tax stands at 18.8% of premium, nearly five work with the Governor’s administration times the national average,” explained Jahn. 26 February 4, 2013 / INSURANCE ADVOCATE

“A well-regarded Oregon study found that New York businesses pay the fifthhighest premium rates in the country, 150 percent of the national median,” Jahn said. “The very high assessments are included in this study’s data and contribute significantly to New York’s poor showing.” “Finally, the Work Loss Data Institute (WLDI) measures outcomes of injuries in a biennial State Report Card for Workers’ Compensation. This study analyzes Occupational Health and Safety Administration (OSHA) data and grades states on both current outcomes and longterm trends. New York received a grade of F VI, the lowest possible score,” said Paul Jahn. “The program bill will shut down the Special Fund for reopened cases and begin the process of eliminating the second largest assessment charged to New York employers. Whether savings will be realized immediately or over the long term depends on how ongoing losses will be funded,” explained Jahn. “The largest assessment funds the Second Injury Fund. This fund was closed to new injuries in 2007. Employers continue to be assessed to fund existing obligations of the fund and expected savings have not yet been realized,” said Jahn.

JAHN

“The bill intends to simplify the assessment process by creating a single statewide surcharge for all participants in the compensation system.…”

“The bill intends to simplify the assessment process by creating a single statewide surcharge for all participants in the compensation system. Currently the system is funded by separate assessments on the New York State Insurance Fund, carriers, and self-insured entities. This universal surcharge should assure equity among the players and be simpler to administer.” “As with all legislation, the jury will be out on the Governor’s proposal until continued on page 28

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[ COVER ] continued from page 26

deal with Workers' Compensation insurance, including measures to: • Authorize the care and treatment of injured workers by acupuncturists; • Exempt occupational diseases caused by tobacco smoke from a statute that requires injured workers to file a claim within two years after knowing that the disease was due to the nature of employment; • Provide that assessments of selfinsurers, the State Insurance Fund and all insurance carriers for the workers' compensation special disability fund shall be based on 110 percent, rather than 150 percent, of total disbursements from the fund during the preceding year, less the amount of the fund's net assets as of December 31st of such preceding calendar year; • Exempt injured workers injured by a sexual assault from the exclusive remedy of workers' compensation; • Require employers of farm workers to provide workers' compensation coverage and grant a host of other rights, including collective bargaining and overtime pay; and • Authorize the Workers' Compensa-

actual language is drafted and reviewed, and the bill passes the Senate and Assembly. Assessments are hardly the only issue involving workers’ compensation that cries out for reform. The Governor’s program agenda is a good first step to fixing the system that hopefully will result in a solid and effective law,” concluded Jahn. "The Council of Insurance Brokers of Greater New York (CIBGNY) is generally supportive of the workers' compensation reforms proposed by the Governor in his State of the State message, although CIBGNY reserves the right to comment on the actual legislative language once submitted in bill form,” explained CIBGNY President Joe Bosnack, Jr. “The Administration should also bring the State Insurance Fund fully under the control of the Department of Financial Services, so as to place the voluntary insurance market on equal footing with SIF, which CIBGNY has long advocated. Moreover, anything that can be done to reduce the underlying medical costs of workers' comp claims that are spiraling out of control, should be pursued as well,” said Bosnack. “While the Professional Insurance Agents of New York State Inc. (PIANY) have not taken a for“We look forward mal position on the Governor’s to seeing the proposals on workers’ compensation, we support the idea of proposed making it easier to do business legislation and to in our state and implementing providing input reforms to the system that will deliver essential benefits to that will improve injured employees at a manageour system” able expense,” said Director of Research Dan Corbin for DAN CORBIN PIANY. “Governor Cuomo outlined a number of workers' compensation initiatives in his State of the State address, including protion Board to approve a monthly dolposals to resolve employer group selflar allowance or treatment frequency insurance trusts liability; combine all of for an injured worker to continue the workers’ compensation assessments specialized treatment for workers into one assessment and create a single whose injuries are long-term or perprocess for calculating assessments irremanent.” spective of how an employer maintains “Additionally, Governor Cuomo outworkers’ compensation coverage; and lined a number of workers’ compensation reducing costs for stakeholders by closing proposals in his State of the State address, unnecessary funds.” including proposals to resolve employer Corbin said “these initiatives come on group self-insurance trusts liability; comtop of 16 separate legislative proposals that bine all of the worker’s compensation 28 February 4, 2013 / INSURANCE ADVOCATE

assessments into one assessment and create a single process for calculating assessments irrespective of how an employer maintains workers’ compensation coverage; and reducing costs for stakeholders by closing unnecessary funds,” explained Corbin. “We look forward to seeing the proposed legislation and to providing input that will improve our system,” concluded Corbin. ***** After the writing of this story —Governor Cuomo said the Executive Budget contains a series of reforms, which will benefit all businesses with employees by reducing the cost of purchasing workers' compensation insurance. Reforms will provide $900 million in savings to employers by reducing assessments and streamlining the system, while a new bonding program will assist 10,000 businesses in defaulted trust and resolve their liabilities. These reforms result in significant economic benefits to businesses in the State without affecting the rights of workers. Governor Cuomo under the headline of mandate relief and local government aide said the Executive Budget contains a series of reforms to reduce the cost of purchasing workers' compensation insurance without affecting the rights or benefits of workers. This will provide financial relief for all insured government entities. During the Budget Presentation for 2013-2014 the Governor announced workers compensation reform/rightsizing SIF: Scheduled increased, proposed increased, and savings of $250 million. Speaker Sheldon Silver that he has appointed Kevin A. Cahill (D-WF of Kingston) as the new Chair of the Assembly Majority Insurance Committee replacing Assemblyman Joseph Morelle who has been promoted to Assembly Majority Leader. [IA]

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[ FACE TO FAC E ]

By Michael Loguercio

I’ve Fallen and I Won’t Get Up...and I’m Suing!

e have all seen the commercial, and most likely repeated the phrase, I’ve fallen and I can’t get up!” in a mock emulation of the TV spot. Of course when we exclaim that expression we say it in jest, and not by any means attempting to diminish the value and importance of the product that it represents, as it has saved the lives of many an elderly person (that is my hold harmless disclosure of the day). With January and February being two of the coldest months here in the Northeast, typically there are more outdoor slip and fall accidents (and claims) than any other time of the year. Along with those slip and falls, many are accompanied Michael Loguercio by claims against the owner of the building, tenant of the premises, snow plow driver who cleared the lot, maintenance person who shoveled the walk and anyone else who may have had the unfortunate experience of touching anything having to do with the location where the fall occurred. Although most people that encounter a slip and fall accident are thoroughly embarrassed by the experience and get up quickly, all the while gazing around hoping that no one saw them fall, and then quickly flee the scene, many immediately believe that they have hit a jackpot and lay there withering in pain, screaming for someone to call 9-11...and their attorney. The National Safety Council indicates that 25,000 slip and fall accidents occur daily in the United States, and that most go unreported, and if no real damage is done there is usually no claim made. It also states that 60% of all falls are experienced by women and 55% of those falls occur on walking surfaces. From those claims the average cost of a slip and fall accident was $22,802 in 2003 and 2004, and is the second costliest type of accident behind motor vehicle accidents. According to an article published by The Atlanta Insurance Claims Resource, “…a surface becomes slippery when the traction between two objects is lost. Traction is the factor that affects the walking surface. If the 30 February 4, 2013 / INSURANCE ADVOCATE

surface is smooth and the bottom of the shoe is smooth, traction is lost. The surface must have enough traction or coefficient of friction to resist lateral motion and prevent the feet from flying out to the side. Friction can be thought of as the interlocking of two surfaces in contact, such as a walkway and a shoe. When we try to pull the shoe’s surface across the surface of the walkway, the force needed to start the movement of walking will depend on the force pressing them together and how well the two surfaces interlock. Coefficient of friction is the ratio of the load to the force required to move an object. No surface has its own coefficient of friction. Friction is a function of the interaction between two surfaces—the surface of the walkway and the surface of the bottom of the shoe. The term “slip resistance” is often used instead of the term “coefficient of friction.” Slip resistance is used by writers in standards for slips-trips and falls incidents.” A “trip”, on the other hand, is something different than a “slip”, although the resulting injuries and claims made are typically of the same magnitude. In a piece written and published by the University of Wisconsin in Milwaukee, “A trip occurs when a person’s foot contacts an object in their way or drops to a lower level unexpectedly, causing them to be thrown off-balance. A trip most often results in a person falling forward, while a slip most often results in the person falling backward. A “fall” occurs when you are too far off-balance. There are many situations that may cause slips, trips, and falls, such as ice, wet spots, grease, polished floors, loose flooring or carpeting, uneven walking surfaces, clutter, electrical cords, open desk drawers and filing cabinets. Loose, irregular surfaces such as gravel, shifting floor tiles, and uneven sidewalks, can make it difficult to maintain your footing. Most slip, trip and fall incidents are preventable with general precautions and safety measures. Injuries from falls may be caused by a variety of sources. Many of these sources, like curbs, flaws in parking lots and uneven lawns, are not of significant height, but have the potential to cause significant injuries. The best way to prevent injuries such as these is to be aware of where you are going and pay attention to your walking surface.”

As insurance agents and risk managers, it is recommended by many to suggest to your clients ways to minimize the potential of slip and/or trip and falls both in the workplace and in the home. Some suggestions include: • Identifying spills and wet areas and cleaning them immediately; • Thoroughly remove snow and ice on walkways; • Remove debris from floors and maintain them in good condition; • Remove obstacles from walkways and keep them free of clutter; • Firmly secure mats, rugs and carpets that may pose a hazard; • Keep file cabinet or storage drawers tightly closed; • Cover cables that cross walk areas, and identify them as a hazard; • Keep all walkways/work areas well lit; • Replace faulty switches and old light bulbs; • Ensuring that carrying items do not prevent you from seeing any potential hazards; • Wearing proper footwear commensurate to what it is that you are doing; • Watch where you are going and pick up after one another. Lastly, use good common sense. I remember those days when my Mother would say to me, “Get that out of the way before someone gets hurt!” Well, she was probably right, so be a Mom as it’s easier to warn than it is to settle a claim. Many times I get calls and emails from agents and non-agents, asking me to do some research and find out if certain incidents or events are may or may not be covered by a certain coverage or policy. Being in this business for over 30 years, and a licensed agent myself, sometimes I am able to answer the question correctly, but most of the time I need to solicit the help of many of you. Recently a question was posed to me about whether or not there would be coverage for damage that may occur to the first floor of a home, where the homeowner’s above ground pool collapsed in their backyard and the ensuing 20,000 gallons of water entered continued on page 32

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INSURANCE ADVOCATE / February 4, 2013 31

[ FACE TO FAC E ] continued from page 30

the home causing extensive water damage. Well, the reason that I am sharing this challenge as opposed to the other questions that I receive is that this one has stumped many an agent and underwriter with whom I have asked. However, my friend, client, and fellow PIA of NY committee member John Tomassi of The Winﬁeld Group in NY researched this for me, and I thought that instead of notifying all of you who didn’t

know the answer, I would share it in this column in the event that others may not be aware as well. John said that “Homeowners won’t cover the resulting water damage as it is considered surface water. Flood insurance won’t cover it as it doesn’t fall under the definition of a flood.” Flood— • A general and temporary condition of partial or complete inundation of two or more acres of normally dry

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land area or of two or more properties (at least one of which is the policyholder’s property) from: —Overflow of inland or tidal waters; or —Unusual and rapid accumulation or runoff of surface waters from any source; or —Mudflow; or • Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above. Thank you, John, and to the person who originally asked me this question (you know who you are!), looks like your client needs a retaining wall! Hopefully by the time this column goes to print, we will be talking about pitchers and catchers reporting to spring training, will A-Rod sit out the entire season, who won the Super Bowl, and who looks good for the Stanley Cup (in half a season of play). In this thing of ours, a couple of insurance conventions are just around the corner as well that we will chat about live and in color within this column, so until then, watch your step and “Ciao for now!”[IA] Michael Loguercio is the Regional Sales Manager for EZ Lynx; and active Past President of the Young Insurance Professionals of New York State. He is a current ACT/AUGIE, Professional Insurance Agents of New York State, Independent Insurance Agents and Brokers of New York State, and Council of Insurance Brokers of Greater New York committee member. In 2010 Michael was honored with the NY-YIP/PIA Insurance Professional of the Year award; and in 2012 with a NYYIP/PIA Lifetime Achievement award. Michael is also Chair of the 2013 Professional Insurance Agents Regional Awareness Program on Long Island. Michael is a regular Contributor to the Insurance Advocate since 2008, and may be contacted at 631-345-9359 or michael.loguercio@ezlynx.com.You may also follow him on Twitter @MLoguercioJr; and on Facebook @ Michael Anthony Loguercio Jr.

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[ COURTSI DE ]

By Lawrence N. Rogak

Earth Movement Exclusion Fails Because Movement of Fill Found to be Effect, Not Cause, of Damage Trezza v New York Cent. Mut. Fire Ins. Co.

his is an action, declaring the plaintiffs' right to coverage under a homeowner's insurance policy issued by the defendant. The plaintiffs own and reside at the property located at 8 Greenbrier Avenue, Farmingville, New York. According to the plaintiffs, on February 1, 2012, two pipes beneath the slab under the kitchen floor burst, causing a sustained leaking of hot water which compromised the foundation and resulted in extensive damage to the home and its fixtures. The plaintiffs promptly notified the defendant of the loss. In response to the notice, the defendant retained an engineer to conduct an inspection of the premises. The engineer conducted a site inspection on February 18, 2010 and issued a report of his findings on February 22, 2010. While noting his inability to define the exact cause of the damage because of its subterranean source, the engineer determined that the physical damage to the home was a "direct result of an ongoing water damage event originating from leaking piping" beneath the slab and along the rear wall. As evidence of the damaged piping, he noted an exterior

patio expansion board "forced upward" by hydrostatic water pressure at a site directly aligned with the probable leak location below the slab. He also determined that some the observed damage, including gaps and separations of moldings from first-floor ceilings and misalignments of certain doors, windows, and cabinets, was consistent with a settlement of the slab in the area of the suspected leak. By letter dated March 9,2010, the defendant disclaimed coverage for the loss based upon language in the policy excluding losses resulting from "earth movement" and "settling." Our expert has determined there was long-term water seepage beneath the slab of the home. The water seepage caused soil displacement and earth movement to the ground under the slab. The expert’s conclusion was that there was a pipe leaking into the soil, but [sic] was not able to examine the pipe to confirm the source of the

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299 Broadway , Suite 1700, New York, NY 10007 212-285-0510 (FAX) 212 285-0531 Web Site: www.wfkclaw.com • Email: info@wfkclaw.com OFFICES IN: NEW JERSEY • PENNSYLVANIA • LOUISIANA • TEXAS • FLORIDA 34 February 4, 2013 / INSURANCE ADVOCATE

[ COURTS I D E ] water. There was no direct physical damage caused to the home from the water discharge. In addition, our investigation found the problem with the pipe existed before you purchased the home. Please be advised that it is the intent of your homeowner policy to afford coverage for losses that are single, sudden, and accidental in nature. In order for there to be coverage, there must be direct physical damage to the home from the water leaking from the plumbing source. As outlined above, the displacement of the soil and the settling of the home, are specifically excluded from coverage. Furthermore, we have not been shown the damaged pipe, and we find your failure to protect the property from further damage has violated the conditions of the policy. Therefore we must respectfully deny your claim in its entirety. By letter dated April 8,201 0, the defendant confirmed that it had disclaimed coverage, based on the engineer's report, because "the direct cause of loss was earth movement and settling" and, further, because "the plumbing problems existed prior to the purchase of the home and before our policy was in force." This action followed. The plaintiffs now move for summary judgment invalidating the disclaimer and declaring that the defendant is obligated to provide coverage for their loss. Notwithstanding the defendant's stated reliance on the engineer's report, the plaintiffs contend that the reasons cited by the defendant as justification for its disclaimer do not, in fact, appear in that report and, in particular, that nowhere in the report did the engineer advance any opinion that the damage was the result of earth movement beneath the slab. Even allowing, further, that the "earth movement" exclusion were otherwise applicable, the plaintiffs contend that the damage was caused by the displacement of fill beneath the slab, not by the movement of earth, so that the exclusion does not apply in any event.

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The plaintiffs annex to their moving papers a copy of the policy, which provides, in pertinent part, as follows: SECTION I - PERILS INSURED AGAINST A. Coverage A - Dwelling and Coverage B - Other Structures 1. We insure against risk of direct physical loss to property described in Coverages A and B. 2. We do not insure, however, for loss: a. Excluded under Section I - Exclusions; *** c. Caused by: *** (2) Freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to a: *** (b) Footing, foundation, bulkhead, wall, or any other structure or device that supports all or part of a building, or other structure; *** (5) Any of the following: *** (f) Settling, shrinking, bulging or expansion, including resultant cracking, of bulkheads, pavements, patios, footings, foundations, walls, floors, roofs or ceilings; *** Exception To Paragraph c.(5) Unless the loss is otherwise excluded, we cover loss to property covered under continued on page 38

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Ask For Richard or Evan Bower. 516-576-0400 Ext. 0 E-Mail: rbower@thebggroup.com www.thebggroup.com INSURANCE ADVOCATE / February 4, 2013 35

[ LOOKING BACKâ&#x20AC;Ś Insurance Advocate, 25 years ago]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com 36 February 4, 2013 / INSURANCE ADVOCATE

[ LOOKING BACK… Insurance Advocate, 25 years ago]

INSURANCE ADVOCATE / February 4, 2013 37

[ COURTSIDE ] continued from page 35

Coverage A or B resulting from an accidental discharge or overflow of water or steam from within a: *** (ii) Plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance on the "residence premises". This includes the cost to tear out and replace any part of a building, or other structure, on the "residence premises", but only when necessary to repair the system or appliance. However, such tear out and replacement coverage only applies to other structures if the water or steam causes actual damage to a building on the "residence premises". *** SECTION 1 - EXCLUSIONS A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. *** 2. Earth Movement Earth Movement means: a. Earthquake, including land shock waves or tremors before, during or after a volcanic eruption; b. Landslide, mudslide or mudflow; c. Subsidence or sinkhole; or d. Any other earth movement including earth sinking, rising or shifting; caused by or resulting from human or animal forces or any act of nature unless direct loss by fire or explosion ensues and then we will pay only for the ensuing loss. *** B. We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not precluded by any other provision in this policy is covered. *** 3. Faulty, inadequate or defective: a. Planning, zoning, development, surveying, siting; b. Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction; c. Materials used in repair, construction, renovation or remodeling; or d. Maintenance; of part or all of any property whether on or off the "residence premises". "Generally, it is for the insured to establish coverage and for the insurer to prove that an exclusion in the policy applies to defeat coverage" (Consolidated Edison Co. of N. Y. v Allstate Ins. Co., 98 NY2d 208, 746 NYS2d 622,625 [2002];accord Bread & Butter v Certain Underwriters at Lloyd's, London, 78 AD3d 38 February 4, 2013 / INSURANCE ADVOCATE

1099, 91 3 NYS2d 246 [2010]). "To negate coverage by virtue of an exclusion. an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation. and applies in the particular case" (Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 593 NYS2d 966,972 [1993]). Here, as it is apparently undisputed (and tacitly acknowledged by the defendant) that the plaintiffs' claim falls within the general coverage provisions of the policy, the only question presented is whether the defendant established the applicability of some exclusion to coverage. The court finds that it did not. The defendant submits only the affirmation of its attorney, which is of no probative or evidentiary significance (see e.g. U.S. Natl. Bank Assn. v Melton, 90 AD3d 742, 934 NYS2d 352 [ 2011]). Although the attorney refers in his affirmation to certain deposition testimony in which Anthonv Trezza is claimed to have acknowledged that there were problems with the plumbing even before he purchased the home, the attorney's reading of the testimony is not borne out on review of the transcript, nor is it shown how such general knowledge on the plaintiffs' part might translate to an exclusion from coverage. Even were the court to consider the unsworn statements contained in the report of the defendant's retained engineer-likewise not in evidentiary form-it would not avail the defendant. As the plaintiffs correctly note. the report does not refer to any movement of earth or soil. To the extent that the defendant may seek to rely on the policy exclusion for "settling," it is clear that the settlement of the slab described in the report is not so much a physical cause of the loss as an effect. And while the report does make reference to water pressure as a possible cause of the loss, the defendant does not expressly rely on the policy exclusion for "pressure or weight of water" as a basis for disclaiming coverage. Accordingly, since the defendant failed to present evidentiary proof in admissible form sufficient to defeat the plaintiffs' right to summary judgment, the motion is granted and the plaintiffs are entitled to a declaration of coverage in their favor. The court directs that the claims as to which summary judgment was granted are hereby severed and that any remaining claims for monetary relief shall continue. [IA] 2013 NY Slip Op 30111(U) January 16, 2013 Supreme Court, Suffolk County Docket Number: 10-43870 Judge: Hector D. LaSalle

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