April 13, 2015 by C Acunto

VOLUME 126, NUMBER 7 / April 13, 2015

A CINN Group, Inc. Publication

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

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Contents [COVER STO RY ] 18

MISCALCULATING Majority of Americans Overestimate Cost of Life Insurance

[FEATURES] 6

Foreword: “Likeable Enough” Steve Acunto, Publisher

Insight: Mixed Messages Peter H. Bickford

Exposures and Coverages: What is Theft? Crime Coverage Terminates for Certain Employees Uber & Lyft Insurance Update The Drones are Coming Jerome Trupin, CPCU

The Social Notebook: Why Your Mobile Presence Matters Chris Paradiso

In the Associations: IIABNY CEO Dick Poppa Receives Lifetime Achievement Award

On the Level: Agency Impossible Jamie Deapo

On My Radar: Covenant Not to Execute Not a Release Barry Zalma

Looking Back: May, 1990

Courtside: Medical Provider Must Submit to EUO Whether it Gets an Assignment or Just Authorization to Receive Payment Lawrence N. Rogak Like us on Facebook… The Insurance Advocate Magazine

April 13, 2015 | volume 126 number 7 33

Classiﬁeds

Guest Opinion: ObamaCare Can Cancel Your Insurance, Warns AAPS Jane M. Orient, M.D.

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[ FORE WORD ]

Steve Acunto

“Likeable Enough”

Love this news: USAA reports the financial services industry’s reputation has “recovered considerably” from its recent low point in 2009, but it still falls far below other industries many people love to hate, including energy and telecommunications. Some financial firms escape the downbeat industry assessment, according to the 16th annual Harris Poll Reputation Quotient® (RQ) study. According to Harris, 35% of the general public say the financial services industry in general has a positive reputation, up from 11% six years ago. But only the government and tobacco sectors place lower in the survey, with just 15% of the general public saying each has a positive reputation. In comparison, a greater percentage of the general public give positive reputation ratings to other industries, including: • 45% for energy • 53% for telecom • 60% for consumer products • 46% for automotive • 54% for manufacturing • 77% for technology “Financial services’ poor reputation among roughly two-thirds of Americans should be a strong call to action. Our research shows that people clearly believe reputation matters and act on that belief,” a company source stated. “More than half of the general public actively seeks out information about companies they hear about or do business with, and 36% have decided against doing business with a company because of something they learned about its conduct.” For the RQ study, Harris Poll annually surveys the general public to establish the most visible companies and then ranks them according to their corporate reputations from excellent to very poor, with none falling into the very poor range based on this year’s results. Harris Poll expanded the list this year from 60 to 100 companies. In addition to the more detailed company rankings, Harris Poll also asks whether specific industries have a positive or negative reputation. Compared to the financial services industry overall, the reputations of the individual financial companies among the 100 most visible companies range widely from very good (scores of 75 to 79) to poor (scores of 50 to 64). Twelve financial firms make this year’s list of the 100 most visible companies, with USAA topping the group with a very good reputation rating of 78.22 and ranking 22 out of the 100 most visible companies overall. Insurance companies in general demonstrate stronger reputation than banks: Company USAA Fidelity Investments Progressive Corp. State Farm Insurance American Express The Allstate Corp. Wells Fargo JPMorgan Chase & Co. Citigroup Bank of America AIG Goldman Sachs

Reputation Quotient Ranking out of 100 22 35 50 51 55 62 74 87 89 91 99 100

Reputation Score 78.22 75.69 73.79 73.61 72.63 71.03 67.55 63.98 62.19 60.73 55.23 55.07

Reputation Range Very good Very good Good Good Good Good Fair Poor Poor Poor Poor Poor

Citigroup and Bank of America have shown the greatest reputation improvement among financial companies in recent years, although both still fall into the poor reputation range in this year’s study. Citigroup’s 2015 score has increased almost 12 points from 2010 while Bank of America’s reputation has risen nearly 11 points since 2012. “Financial firms have a clear choice now: Prioritize building their reputations and telling their stories, or let others continue to fill that void and remain lumped together with the rest of the industry,” the report concludes. A complete ranking of the RQ’s 100 most visible companies can be found in the 16th Annual RQ Summary Report.[IA] 6 April 13, 2015 / INSURANCE ADVOCATE

VOLUME 126, NUMBER 7 APRIL 13, 2015

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Sari Gabay-Raﬁ Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com PROOF READER Maria Vano mariavano9@gmail.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x117 circulation@cinn.com PUBLISHED BY CINN Group 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

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[ INSIGHT ]

By Peter H. Bickford

Mixed Messages

here were two recent, seemingly unrelated events involving NY’s superintendent of financial services – one in his capacity as the chief financial services regulator and one in his separate role as receiver of an insolvent insurer – that send strikingly opposite messages. First there was the very public castigation

Peter H. Bickford

to fire four employees who played central roles in the bank’s improper conduct, a partner of a prominent National law firm is cited in the article as commenting that the New York regulators, more than any other agency, “put their money where their mouth is” on holding individuals liable. Contrast the action against

Contrast the action against Commerzbank and certain of its employees with the failure of the same New York regulator in his capacity as receiver of ELNY to take any action to hold anyone accountable for ELNY’s $2 billion failure under the supervision of his predecessors or, possibly more troubling, his extraordinary efforts to shield those responsible and thwarting any and all efforts by the shortfall victims to independently seek redress for the mishandling of the ELNY estate.

of the New York branch of Commerzbank AG held accountable to the tune of $1.45 billion in fines ($610 million of which went to the DFS) for “Banking Law violations in connection with transactions on behalf of Iran, Sudan, and a Japanese corporation that engaged in accounting fraud.” In addition to the monetary fines, Commerzbank was forced to terminate employees found to have engaged in improper conduct, and to install an independent monitor to ensure future compliance with anti-money-laundering laws. The other event was the recent filing by representatives of the shortfall victims of the failed rehabilitation of Executive Life Insurance Company of New York (ELNY) of a petition to New York’s Court of Appeals in a last-ditch effort to get the contempt order against them reversed. What could these two events possibly have to do with each other? A Dow Jones News Service article on the Commerzbank settlement emphasized that the “weight of responsibility for potential unlawful conduct is increasingly being borne by individuals . . .” Referring to the settlement terms requiring Commerzbank 8 April 13, 2015 / INSURANCE ADVOCATE

Commerzbank and certain of its employees with the failure of the same New York regulator in his capacity as receiver of ELNY to take any action to hold anyone accountable for ELNY’s $2 billion failure under the supervision of his predecessors or, possibly more troubling, his extraordinary efforts to shield those responsible and thwarting any and all efforts by the shortfall victims to independently seek redress for the mishandling of the ELNY estate. (Refresher course: 20 plus years after having been placed in rehabilitation as a solvent company to “protect” its assets from its insolvent parent, ELNY was determined to be insolvent by almost $2 billion. In 2012 the court approved the receiver’s liquidation plan that addressed the shortfall through contributions from state guaranty funds and by slashing about $900 million in policyholder beneﬁts. The bulk of these cuts were visited on 1500 of the 10,000 or so policyholders, mostly structured settlement annuitants, many of whom were victims of accidents or other traumas deeply dependent on the payments – the so-called shortfall victims.) After the court approved the liquidation of ELNY and the receiver’s restruc-

turing plan slashing the benefits of the shortfall victims, and after all appeals for reconsideration of the plan were rejected, certain of the shortfall victims urged the superintendent as regulator to, at the very least, investigate the mismanagement of the estate and hold those determined to be responsible accountable for their misconduct. When the superintendent ignored these requests, the shortfall victims attempted to do so on their own by bringing a Federal lawsuit – not to overturn the restructuring plan approved by the courts, but to pursue those parties responsible for ELNY’s colossal failure while in state rehabilitation. What was the superintendent’s response? He went back to the State court that approved the liquidation plan and got it to hold the lawyers for these shortfall victims in civil contempt and fined. The basis for the contempt? Violation of the broad immunity provisions inserted into the liquidation order as insisted on by the superintendent for anyone who had anything to do with the rehabilitation of ELNY and the restructuring plan. Rather than risking ongoing contempt fines, the lawyers withdrew the Federal action. The current filing is an attempt to have this contempt determination reversed. The contrast with Commerzbank is striking. On one hand, the superintendent pursued and took action against Commerzbank for its misconduct, including action against individual employees of the bank directly involved in the misconduct. On the other, the same superintendent refused to investigate the mismanagement of the ELNY estate, sought and obtained immunity for all involved, and sought and obtained civil sanctions against the lawyers for their audacity in attempting to do what the superintendent refused to do. The actions by the superintendent in the ELNY matter were not simply passive. They were intentional. Because there is no provision for statutory immunity for the receiver or his agents in the Insurance Law, the superintendent had to proactively seek inclusion of immunity in the order, continued on page 10

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[ INSIGHT ] continued from page 8

and he did so on the broadest possible basis without regard for the claims of mismanagement. Why, some ask, do I keep harping on the failure of Executive Life? The answer is simple: the superintendent has publicly and repeatedly preached about the need for aggressive action to ensure that the consumer is protected from improper actions by regulated companies. He keeps making headline after headline about his

aggressive actions against wrongdoing, failure to comply with the law and protection of the consumer of financial services. And now, with the Commerzbank settlement, he is also pursuing individual employees involved in improper acts as well as the licensed company. There is no quarrel with these actions when pursued for the right reasons and against proven wrongdoing. However, the superintendent’s motive and sincerity must be questioned in view of his lack of pursuit of wrongdoing and mismanagement under

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There is no quarrel with these actions when pursued for the right reasons and against proven wrongdoing. However, the superintendent’s motive and sincerity must be questioned in view of his lack of pursuit of wrongdoing and mismanagement under his own roof.

his own roof. In ELNY, the superintendent as receiver not only failed to protect those policyholders most seriously affected by the decades-long mismanagement of the estate while in rehabilitation, he purposely cut off any and all attempts by those victims to seek their own recourse. Until the superintendent provides a plausible explanation for his failure to follow his own preaching by pursuing those responsible for a $2 billion loss, and why he intentionally prevented those most affected by that loss from filling the void, I will continue to ask the questions. Without answers, his white-knight legacy against the evil wrongdoers in the banking and insurance worlds must come with a very large asterisk.[IA] Peter Bickford has over four decades of experience in the insurance and reinsurance business, with particular focus on regulatory, solvency, agency, alternative market and dispute resolution issues. In addition to his experience as a practicing attorney, he has been an executive officer of both a life insurance company and of a property/casualty insurance and reinsurance facility. A complete biography for Mr. Bickford may be accessed at www.pbnylaw.com.

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[ EXPOSURES AND COVERAGES ] What Is Theft? Crime Coverage Terminates for Certain Employees Uber & Lyft Insurance Update The Drones are Coming What is “Theft”? “When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.” “The question is,” said Alice, “whether you can make words mean so many different things.” “The question is,” said Humpty Dumpty, “which is to be master — that’s all.”1

nsurance is often a very HumptyDumpty world. Policies define words and that’s what the word means. End of discussion. But what happens when the word isn’t defined? A word that’s often not defined, “theft,” was the subject of a dispute between Liberty Mutual and its insureds Donald and Sonja Wirth. The Wirths’ son took their pickup truck and trailer without their permission and wrecked both in a one-car collision. (Sadly, the Wirths’ son was killed in the accident.) The Wirths reported the vehicles stolen to the police and submitted a claim for the damage to their auto insurer, Liberty Mutual. The policy included “other than collision” coverage, but did not include collision. Liberty Mutual denied coverage.2 The Wirths admitted that the policy did not include collision coverage but they argued that “other than collision” included coverage for loss arising from theft and that this loss was caused by their son’s theft of the car. The auto policy lists ten different causes of loss that are considered “other than

Liberty could have put a definition of theft and larceny in the policy. Since it didn’t, a reasonable definition that affirms coverage for the insured is used. Theft was the proximate cause of the loss. collision,” including theft and larceny. Liberty argued that “theft” and “larceny” should be given the meaning found in the NY Penal Code, which would require plaintiffs to establish their son’s criminal intent. The lower court disagreed. It ruled that the common usage of the words was much broader and was the proper standard. That view was upheld on appeal. I’m surprised that Liberty didn’t pay the collision loss without an argument. I’d guess that every personal lines producer has seen losses involving collision damage to a stolen car paid by the insurance company under the “other than collision” coverage. Liberty could have put a definition of theft and larceny in the policy. Since it didn’t, a reasonable definition that affirms coverage for the insured is used. Theft was the proximate cause of the loss. But I’m glad the dispute arose. It gave me a chance to quote from the writings of Lewis Carroll! continued on page 14

1 Alice in Wonderland Quotes “Through the Looking Glass,” Chapter 6 http://www.alice-inwonderland.net/books/alice-in-wonderland-quotes.html accessed 3/31/15 2 Donald Wirth and Sonja Wirth v Liberty Mutual Insurance Company, 2014 NY Slip Op 08148 November 21, 2014 Appellate Division, Fourth Department

12 April 13, 2015 / INSURANCE ADVOCATE

By Jerome Trupin, CPCU

Jerome Trupin

Jerome “Jerry” Trupin, CPCU, is a partner in Trupin Insurance Services located in Briarcliff Manor, NY. He provides property/casualty insurance consulting advice to commercial, nonproﬁt 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 Society publication, the Insurance Advocate, and others. He can be reached at jtrupin@aol.com. Thanks to Jerry Trupin for this article and to the CPCU Society for letting us reprint it.

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[ EXPOSURES AND COVERAGES ] continued from page 12

Crime Coverage Terminates for Certain Employees The old saying was “Insurance companies giveth in the big print and taketh away in the small.” Today, hiding an exclusion in the fine print is not permitted. Insurance regulations in most states mandate a standard type-size for the entire policy, but the problem of reduction of coverage elsewhere in the policy wording remains. A good example is a new Travelers crime policy. It includes a broadening of coverage on one hand, combined with a reduction on the other. First let’s look at the broadened coverage. ISO employee theft coverage provides that coverage for any employee is terminated when the insured learns of a dishonest or fraudulent act by that employee, whether or not the act involved the employer and whether or not the employee was employed by the insured at the time. ISO’s wording is: Termination As To Any Employee This Insuring Agreement terminates as to any “employee”: (1) As soon as: (a) You; or (b) Any of your partners, “members”, “managers”, officers, directors, or trustees not in collusion with the “employee”; learn of “theft” or any other dishonest act committed by the “employee” whether before or after becoming employed by you. (“You” and “your” mean the insured. “Members” and “managers” refer to those holding such positions with a limited liability company.) Read literally, that could end coverage for a 50-year-old employee as soon as the insured learns that he stole a candy bar when he was a teenager. Insurers that use their own forms rather than ISO’s, often stipulate that the dishonest act must involve a minimum dollar amount before the employee’s coverage is terminated.

If the employee took postage stamps for personal use and the employer overlooks it when it is discovered, the employee’s crime coverage is instantly ended unless the insured obtains the insurer’s agreement to continue coverage.

Sometimes the amount is as little as $1,000. Travelers’ new form increases the waiver amount to $25,000. In addition, the Travelers form provides that termination will occur 60 days after discovery by the insured if the dishonest act was not related to the employee’s employment by the insured. These are worthwhile improvements. Now for the bad news. The ISO crime form termination is triggered only when those we might designate as “upper management” learn of the dishonest act. The Travelers form terminates coverage for knowledge by a much larger group of employees; knowledge by any employee with managerial or supervisory responsibility, not just “upper management,” triggers termination. The exact wording of the exclusion is: This Crime Policy terminates as to any Employee: a. as soon as the Insured’s partner, any of the Insured’s Management Staff Members or any Employee with managerial or supervisory responsibility (emphasis added) not in collusion with the Employee becomes aware of any dishonest or fraudulent employment related act involving an amount in excess of $25,000…3 In a large firm, that can be a huge number of people whose knowledge can cost their firm to lose coverage. It’s doubtful if many of them understand what’s at stake. A supervisor might well overlook a

dishonest act, not wanting to squeal on a fellow employee—unintentionally costing the employer its coverage. Other insurers handle this issue differently. Federal Insurance Company (Chubb) uses this termination provision: No coverage will be available under this Coverage Section for: Loss caused by an Employee which is sustained by an Insured: (a) after an Insured becomes aware of a Theft, Forgery, or other fraudulent or dishonest act committed by such Employee while employed with an Insured; (b) after an Executive or Insurance Representative acquires at any time knowledge of fraud or dishonesty, involving Money, Securities or other property valued at twenty-five thousand dollars ($25,000) or more, committed prior to employment with an Insured; or (c) more than sixty (60) days following the termination of such Employee. (Insured means the insured organization.) An insurance practitioner’s life is not an easy one. There are plusses and minuses to this provision, too. The group whose knowledge triggers the termination of an employee’s crime coverage is much smaller—which is good—but there’s no dollar waiver for dishonest acts involving the employer; the $25,000 waiver appears to apply only to acts not involving the employer. If the employee took postage stamps for personal use and the employer overlooks it when it is discovered, the employee’s crime coverage is instantly ended unless the insured obtains the insurer’s agreement to continue coverage. A client told me a few years ago that he’d received a strange letter from a prisoner in a federal penitentiary. The writer complimented my client on not being prejudiced against ex-convicts as evidenced by his hiring of Jim Jones who had been a fellow inmate at the prison. (The name has been changed.) We asked the insurance continued on page 16

14 April 13, 2015 / INSURANCE ADVOCATE

ADVERTORIAL

Combatting Auto Theft FBI RECORDS SHOW THAT a vehicle is stolen every 44 seconds in the United States. (www.rmiia.org) In 2013, that amounted to 699,594 stolen vehicles, totaling $4.1 billion in value. Every vehicle owner is at risk of being the victim of theft. Helping clients reduce their chance of vehicle theft loss is another value-added service of the professional insurance agent. California is the state with the highest incidence of vehicle thefts. Nine of the top ten cities for auto theft are in California. One reason is easy access to Mexico and seaports. High-end vehicles are shipped overseas whereas many others are driven over the border to Mexico. There is no way to determine what percentage of stolen vehicles are exported, as they are usually not recovered. Personal trucks and vans are most commonly stolen, followed by commercial trucks and trailers, motorcycles, and all other vehicles (recreational and farm; construction). Carjackings occur most often in urban areas. It is interesting to note that they account for only about 3% of all vehicle thefts. Older cars are more often stolen than newer ones. The average value of cars stolen in 2013 was $5,972. 1996 Honda Accords are among the most commonly stolen vehicles. While this may not seem logical at first, it is because cars are most often stolen for their valuable parts rather than for the cars themselves. The parts are definitely more valuable than the entire vehicle. Newer cars also have more theft deterrent features and are more difficult to steal. Auto theft is covered by comprehensive coverage. Comprehensive coverage also pays for vehicles that have been vandalized or set on fire. Stolen parts, such as air bags, hubcaps, tires and permanently installed stereo systems, are also comprehensive claims. Each year, more than 75,000 air bags are stolen in the United States. (www.iii.org) The good news is that the frequency

Personal trucks and vans are most commonly stolen, followed by commercial trucks and trailers, motorcycles, and all other vehicles (recreational and farm; construction). of auto theft has declined in recent years. This is mostly due to improved technology, such as ignition immobilization systems. These systems make it almost impossible to start a car without the ignition key. In fact, auto theft in New York City has decreased 96% since 1990. Many insurers offer discounts for the presence of anti-theft devices. It makes sense to buy a car with these devices. Slightly more than half of stolen vehicles are ever recovered, and the most thefts occur in July and August. About 40% of vehicle thefts are due to operator error. (www.nhtsa.gov) Surveys of auto theft victims reveal that in 1 out of 3 cases, the car was left running. 40% had valuables in the open, and 47% parked

in poorly lit areas. It goes without saying that cars should never be left running, even in the driveway. Vehicles should be parked in well lit visible areas whenever possible. The costs of auto theft far exceed the need to replace the vehicle. Hidden costs include the time, inconvenience and cost to find alternate transportation. Filing reports with the police and insurance company and finding a new vehicle are also time-consuming. Another hidden cost is the risk of identity theft if personal information, such as wallets, bank statements or other mail, is left in the vehicle. Claims can mean increased insurance premiums or even loss of insurance. Auto theft is an upsetting, time-consuming and costly occurrence. Fortunately, it is often preventable. Educating clients about the risks of, and suggestions for practices that can reduce or prevent, auto theft are another sign of the true insurance professional.

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[ EXPOSURES AND COVERAGES ] continued from page 14

company to continue coverage for the new employee. Unfortunately, we were turned down. My client felt he had no choice but to discharge the new employee. (My client wasn’t aware of the crime coverage implications of the letter. I was at his office to discuss renewal quotes we’d received and he mentioned it because he thought it was such a strange letter.) I didn’t know it at the time, but New York State subscribes to a federal program that provides up to $25,000 in fidelity coverage for people who may have difficulty obtaining work because they can’t be bonded due to a variety of reasons, including previous criminal conviction. 4 We might have been able to get coverage for this employee to apply excess over the federally provided $25,000. Next time, I’ll know better—and so will you.

I didn’t know it at the time, but New York State subscribes to a federal program that provides up to $25,000 in fidelity coverage for people who may have difficulty obtaining work because they can’t be bonded due to a variety of reasons, including previous criminal conviction.

The insurance coverage pot keeps boiling for Uber, Lyft and the other ride-sharing entrepreneurs. Here’s an intersting graphic from Lyft’s blog.5

is turned on and the time the driver is notified of a match is contingent. That is, Lyft’s policy responds only if the driver’s policy doesn’t. (Lyft seems to be acknowledging that there may be an argument over coverage with the driver’s personal auto insurer.) • Coverage limits between the time the app is turned on and the time the driver is notified of a match is just

Some interesting points: • No coverage until the app is turned on—a driver turns the app on to indicate that the car is available to pick up passengers. • Coverage between the time the app

$50,000/$100,000 for bodily injury and $25,000 for property damage liability. No collision coverage. No un/under-insured motorist coverage. • Coverage from the match notification until the passenger is dropped off is

Uber & Lyft Insurance Update

commercial auto coverage for $1,000,000 liability including un/under-insured motorists. $50,000 auto physical damage coverage with a $2,500 deductible is included, but unlike the liability and UIM coverage, physical damage coverage is contingent on the driver’s insurance not responding. (Uber’s website has a similar diagram. It shows the same coverage and limits except that the contingent collision deductible is $1,000.6) Having one policy that covers both personal use and use while driving for a TNC (transportation network company, such as Uber, Lyft, etc.) is a much better solution. Several companies are going in that direction. We’ll see how it plays out.

The Drones are Going to do Insurance Inspections Three insurance companies (AIG, State Farm and USAA) have received FAA approval to use drones to inspect properties. They won’t be peeking in your windows just yet, however. The insurers can fly drones over private property only with permission from an authorized party. Flights also must stay away from airports and most urban areas, take place during daytime and, in many areas, stay at least 500 feet from all non-consenting persons, vehicles and structures.7 Insurers feel that drones will be most useful to inspect catastrophe areas where adjusters can’t get access. They will also be useful to inspect damage that is not easily viewed from the ground, such as hail damage to a roof. We can expect that the uses will expand. Insurers may request consent to use a drone to take pictures and visually measure an applicant’s property. And the legal limits of what’s permissible may expand as we have more experience with drones. Scratch insurance inspector from the list of occupations available to the next generation.[IA]

4 “Federal Bonding Program Information” New York State Department Of Labor Division Of Employment And Workforce Solutions https://labor.ny.gov/formsdocs/does/ES699.3.pdf (accessed 4/10/15) 5 Lyft's Insurance Policy https://www.lyft.com/drive/help/article/1229170 accessed 3/31/15 6 Eliminating Ridesharing Insurance Ambiguity http://blog.uber.com/uberXridesharinginsurance accessed 3/31/15 7 Leslie Scism and Jack Nicas “Insurers Get Approval to Use Drones” Dow Jones News Service 04/08/2015 http://propfpn.advisen.com/fpnHomepagep.shtml?resource_id=2366689202222&userEmail=jtrupin@aol.com#top (accessed 4/10/15)

16 April 13, 2015 / INSURANCE ADVOCATE

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[ COVER ]

By Art Shea

18 April 13, 2015 / INSURANCE ADVOCATE

[ COVER ]

The results of the 2015 Life Insurance Barometer — the fifth annual measure of consumer trends and perceptions regarding life insurance, retirement and their financial well-being conducted by the non-profit Life Happens and LIMRA – found that while the majority of Americans know they need life insurance, a lack of awareness about the cost of life insurance is preventing them from purchasing it.

According to the report: • Cost remains the reason most Americans give for not owning life insurance, but 80 percent of consumers misjudge the price for term life insurance; - Millennials overestimate the cost by 213 percent - Gen Xers overestimate the cost by 119 percent • Only about a third of consumers knew that their credit histories and driving records could affect how much they pay for life insurance • Less than half realized their hobbies and lifestyle could impact the cost of their life insurance policy What's more — the overestimation of the cost is causing many to prioritize other short-term expenditures over longterm financial security: • 29 percent of Millennials cited saving for vacation as a priority over purchasing some or more life insurance; • 23 percent of Gen Xers said paying for recreational activities such as going out to eat, movies or shopping was a priority over purchasing some or more life insurance; • 49 percent of those 65 and older cited paying for expenses such as Internet, cable and cell phones as a priority over purchasing some or more life insurance. The study found that nearly one-third (30 percent) of Americans believe they need more life insurance and more than two in five (43 percent) say they would feel a financial impact within six months if the primary wage-earner died. However, the majority of Americans (54

percent) say it is unlikely they will purchase life insurance within the next 12 months. "We've consistently seen over the last five years that consumers think life insurance is more expensive than it really is, and now we're seeing many are also confused as to what factors determine the cost for life insurance," said Marvin Feldman, CLU, ChFC, RFC, President and CEO of Life Happens. "We need to help educate the public about how affordable life insurance can be and the factors they can control to ensure they get the best and most comprehensive protection possible."

Understanding Cost Factors While most consumers have a moderate understanding on how age and health factors can affect the cost of life insurance, many are unaware of other factors that can impact how much they pay for life insurance. "Only about a third of consumers knew that their credit histories and driving records could affect how much they pay for life insurance, and less than half realized their hobbies and lifestyle could impact the cost of their life insurance policy," said Todd A. Silverhart, corporate vice president and director, LIMRA Insurance Research. "In addition to believing life insurance is too expensive, our research has shown that consumers are intimidated by the process of buying life insurance — four in ten don't know how much they need or what to buy. Having a better understanding about the factors that influence pricing might help consumers feel more confident and encourage them to pursue getting cov-

erage they believe they need." The Barometer also found that information about those cost factors may not be reaching potential customers as effectively as previously believed. Younger Americans are more likely to use the Internet to shop for insurance, and older Americans are more likely to purchase offline, however the age at when those purchase preferences begins to change occurs at 45 – about a decade later than had previously been thought. This finding could help shed new light on the most effective ways to engage specific age groups about life insurance. 60 percent of Millennials said the same What is clear is that while Americans understand the importance of life insurance, they continue to prioritize other short-term expenditures, often failing to understand how affordable life insurance can be. Despite the misconceptions around the overall cost and what factors go into the pricing of a life insurance policy, Americans can lower the cost of their policies, as is widely known: • Living a Healthy Lifestyle: Life insurance companies factor in health choices including tobacco use, maintaining a healthy weight and keeping chronic conditions, like diabetes, under control when calculating life expectancy – a consideration when determining a premium. Reporting weight loss, beginning a tobacco cessation program and following prescribed treatment for chronic conditions can all result in savings on monthly premiums. • Non-Health Lifestyle Factors: Other lifestyle behaviors may be just as important to lowering the costs of premiums, including having a safe driving record and maintaining a good credit score. In addition, activities such as scuba diving, recreational flying and boat racing can impact the costs associated with life insurance premiums, so it is important to have a conversation with a financial advisor to review all certifications and licenses in advance. • Managing Policy: How one buys and manages a policy can be just as continued on page 20

INSURANCE ADVOCATE / April 13, 2015 19

[ COVER ] continued from page 19

important to lowering the cost of insurance as lifestyle choices. One of the best ways to save on life insurance premiums is to buy earlier on in life. Additionally, carriers may offer discounts for those who pay premiums annually rather than on a monthly basis. And all carriers agree that an annual review of the policy is an important way to make updates that may result in cost savings.

Study Methodology The 2015 Insurance Barometer Study was fielded in January 2015 using an online panel, which surveyed 2,032 U.S. adults age 18-75. The data were weighted by age, gender, education, race, region, and income to be representative of the general population. A propensity score adjustment was added to correct for biases inherent in Internet panels. The margin of error in this study is three percentage points.

About Life Happens Life Happens is a nonprofit organization dedicated to helping consumers take personal financial responsibility through the ownership of life insurance and related products. The organization does not endorse any product, company or insurance advisor. Since its inception in 1994, Life Happens has provided the highest quality, independent and objective information for people seeking help with their insurance buying decisions. The organization supports the insurance industry by providing marketing tools and resources and convening the industry each September for Life Insurance Awareness Month. Life Happens is supported by more than 140 of the nation's leading insurance company and financial services organizations. To learn more, visit www.lifehappens.org.

About LIMRA LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.[IA] 20 April 13, 2015 / INSURANCE ADVOCATE

Life Lessons Scholarship Program The loss of a parent or guardian is one of life’s most difficult ordeals. The emotional strain can be devastating to children and young adults. And for too many families, an untimely death also brings financial stress, making recovery all the more difficult. A college education is already a major financial challenge for most American families, but it becomes infinitely more difficult for a student when a parent dies, leaving little or no life insurance. Life insurance is an important financial safety net that parents can leave their families. Unfortunately nearly 100 million Americans don’t have life insurance, and most with coverage have far less than recommended. Recognizing the character and perseverance that so many young people show in the face of such adversity, Life Happens sponsors the annual Life Lessons Scholarship Program for college students and college-bound high school seniors. Qualified entrants who submit essays or videos about how the death of a parent impacted their lives are eligible for scholarship money. Over a million dollars in college scholarships have been awarded over the years. The total of scholarships for the 2015 Program is $225,000, and will be allocated in the following amounts: • Grand Scholarship Recipients (3): $15,000 • Board of Directors Scholarship (1): $10,000 • Life Lessons Swiss Re Scholarship (1): $10,000 • Life Lessons State Farm Foundation (2): $12,500 • First Runners-Up (10): $8,000 • Second Runners-Up (11): $5,000 Note to Students The Life Lessons Scholarship Program is an annual program. Online applications are solicited during the February timeframe and scholarship recipients are notified in the June timeframe. Entering is easy. First, read the rules to make sure you qualify, and then enter online. In addition to some basic information, you’ll need to submit either a 500-word essay OR a 3-minutes video discussing how the death of your parent or guardian affected your life financially and emotionally. Be sure to describe how the loss of your parent/guardian impacted your college plans, and explain how the lack of adequate life insurance coverage (or no coverage at all) impacted your family’s financial situation. To view the full description you can go to the application page here. If you have any questions, please email scholarship(at)lifehappens(dot)org, or call (202) 464-5000 x4446. Donate to the Life Lessons Scholarship Fund Individual contributions are accepted from those wishing to support this important initiative. Your financial support can make a world of difference for a young person struggling to afford a college education due to the loss of a parent or guardian. Donations to the Life Lessons Fund are tax-deductible. Visit http://www.lifehappens.org/life-lessons-scholarship-program/donate-tolife-lessons/

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[ THE S O CI AL NOTEBOOK ]

By Chris Paradiso

Why Your Mobile Presence Matters

as your agency ready for the April 21 update? Google made its biggest change to its algorithm ever. The Google mobile algorithm update will be influencing the display of

risking future business. Those who are interested in the services you offer will not be able to find your website easily. It also sends the message that you

Although it is going to improve the end user experience, some websites may disappear from the small screen altogether. The million-dollar question is, “Is your Agency ready?” Chris Paradiso

organic search results on mobile devices such as tablets and smartphones. This will not only be affecting insurance agency websites but all websites that have not been optimized to run on mobile devices. This means that these websites will be even harder to find after this update. This is going to be a big move and, in my opinion, the right move for Google. Although it is going to improve the end user experience, some websites may disappear from the small screen altogether. The million-dollar question is, “Is your Agency ready?” As written in the 26th of February 2015 update in Google’s Webmaster Tool Blog, “This change will affect mobile searches in all languages worldwide and will have a significant impact in search results.” On recent bulletin boards and comment areas, speculation turned to who would be the winners and who would be the losers when Google’s algorithm change is implemented. Google wants to provide a faster, smoother experience for mobile searchers and consumers. They will do their part by putting powerful analytic tools in the hands of the public and the community of marketers. Now you, the owner of the agency, must find a Webmaster who can update your agency’s website to make it mobile friendly. If you chose to do nothing you may be 22 April 13, 2015 / INSURANCE ADVOCATE

don’t care enough to be on the cutting edge. If you are proactive, this update will not cost you or your agency an excessive amount of time or money. In most cases we are talking about a negligible amount of cost and effort and in some cases nothing at all. Just about every Webmaster has seen rising mobile traffic over the past five years. In many cases, websites are accessed 35% or more by mobile devices over traditional web browsers. In the case of our agency’s website, mobile device access is between 65% and 68%. It is time to regard these mobile device warriors as a primary source of new opportunities and no longer as a secondary segment. We need to develop an amazing experience that they won’t reject or feel uncomfortable with. And although the April deadline is just weeks away, there is still ample amount of time to correct critical site errors that will be interfering with the mobile experience. To ease any doubts about this, please take a quick moment and follow through a few steps to see if your website is ready for Google’s new move. First and foremost, please take three minutes to see if your agency’s site is mobile friendly by going to this link and it will tell you if you pass or fail: https://www.google.com/webmasters/tools /mobile-friendly/ Some major issues you may find are: • You may have faulty redirects (causes

you to lose opportunities); • Slow mobile pages (makes for a bad experience); • Irrelevant crosslinks (which is an issue for your consumer); • Unplayable content (frustrating for a consumer); • 404 Errors (inefficient searches). These are just five issues that you and your agency may be experiencing, but there are even more. If you want to gather additional information about this, please go to Google and reference their mobile search engine optimization (SEO) guide. Within the guide is some great information made available to you at no cost. If, after you click on the Google link, you find that your search failed, please waste no time and contact your website designer or responsible IT person to put together a quick plan of attack to get this resolved. If you have passed this test, great! Now you are ready to move on to the next step. The second step will be to look into Google’s Pagespeed insights. Why should you do this? By passing step one, it’s now time to create a great user experience to achieve a positive ROI. Let’s look at how to do this and what you need to do. • Make sure, if you’re using any flash at all, that it is not interfering with your mobile friendly site. • Look at your scripts (render-blocking scripts). In many cases they may have to be repositioned. This is a very com-

[ THE SOCIAL NOTEBOOK ] mon problem but can be solved quite quickly. This is so common that Google recently reworked it so that it would be easier and quicker for website owners to fix it on their own. • Make sure Javascript is positioned properly and if not ask your website designer to make sure they are in the correct spot. • Look at your images and make sure they work properly and are compressed properly. In other words, they should look proportionate to the layout. • Assess the speed of your mobile site. These are several things you should have outlined for you by your website designer and SEO specialist. If you want to do this yourself, please refer back to Google’s Developer Pagespeed Insights. With all this being said the last piece of advice I would give to you is to obtain an Insurance Agency mobile app. This is incredibly important because Google will be crawling into mobile apps next and you should be prepared for this. My agency uses a mobile marketing app called www.goinsuranceagent.com. We’ve had great success with it and I would strongly urge you to start your search for the right app that fits your agency’s needs. If you have any questions about the April 21st algorithm change please reach out to me at cparadiso@paradisoinsurance. com and, if I can’t answer your question, our SEO consultant, Eddy DeMelo, can.[IA] Christopher Paradiso, CPIA, is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center. In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies to not only survive, but compete in today’s complex online marketing world. Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

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[ IN THE ASSOCIATIONS ]

IIABNY CEO Dick Poppa Receives Lifetime Achievement Award National insurance agents' organization honors industry veteran at Washington event

ashington, D.C. — Richard Poppa, CAE, AAI, president and chief executive officer of the Independent Insurance Agents & Brokers of New York (IIABNY), received the Jeff Yates Lifetime Achievement Award from the Independent Insurance Agents & Brokers of America (IIABA.) Poppa was honored during at ceremony at the IIABA's Big "I" Legislative Conference at the Hyatt Regency Washington on Capitol Hill in Washington, D.C. The Jeff Yates Award is the highest honor that the IIABA bestows on an individual who is not an insurance agent. It is presented for a lifetime of work in the independent agency system. Poppa (pronounced "Poppy") was recognized for a body of work spanning 36 years. Presenting the award, conference chair Dave Walker noted that Poppa "is known for his ability to build consensus ... In fact, many view him as the guru of association planning. It is a role he takes seriously because he cares so deeply about the future well-being of the (IIABA) and our members." A native of Indianapolis, Indiana, Poppa has served as IIABNY's chief staff executive officer since 1996. Prior to that, he served as senior vice-president and chief operating officer for the IIABA; executive vice-president of the Independent Insurance Agents of Indiana; administrative vice-president of the Independent Insurance Agents and Brokers of California; staff member at the Insurance Institute of Indiana; and press aide to the lieutenant governor of Indiana. Poppa holds the Certified Association Executive (CAE) designation from the American Society of Association Executives, and the Accredited Advisor in Insurance (AAI) designation from the Insurance Institute of America. In addition to his work with IIABNY, he held a temporary leadership position with TrustedChoice.com, a Web site that helps independent insurance agencies compete 24 April 13, 2015 / INSURANCE ADVOCATE

SEATED: RICHARD POPPA, CAE, AAI, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE INDEPENDENT INSURANCE AGENTS & BROKERS OF NEW YORK (IIABNY) STANDING LEFT TO RIGHT: ROBERT RUSBULDT, INDEPENDENT INSURANCE AGENTS & BROKERS OF AMERICA (IIABA) PRESIDENT & CEO; JEFF YATES; DAVID WALKER, INDEPENDENT INSURANCE AGENTS & BROKERS OF AMERICA (IIABA) CHAIRMAN

in the digital age. He is active in a number of service organizations, including the Rotary Club and the Insurance Industry Charitable Foundation. Dick and his wife of nearly 41 years, Kim, reside in a suburb of Syracuse, New York.[IA] The Independent Insurance Agents & Brokers of New York, Inc. has represented the common business interests of independent insurance professionals since 1882. More than 1,750 agencies and their 13,000 plus employees currently rely on the DeWitt, New York-based not-for-proﬁt trade association for legislative advocacy, continuing education and other means of industry support. In addition, most IIABNY members proudly identify themselves as Trusted Choice® agents and brokers, a national consumer brand uniting more than 21,000 independent agencies across the United States. For

The Jeff Yates Award is the highest honor that the IIABA bestows on an individual who is not an insurance agent. It is presented for a lifetime of work in the independent agency system. more information, go to www.trustedchoice.com or www.iiabny.org.

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[ ON THE LEVEL ]

By Jamie Deapo

Agency Impossible

here’s a show on the Food Channel called Restaurant Impossible that I enjoy watching. If you’re not familiar, English Chef Robert Irvine takes two days and $10,000 to turn around failing restaurants. His team is headed by two other people, his builder and his interior designer.

and/or time to properly run the business. The bottom line is a small business owner with a failing business who needs to either turn things around or continue to have their business suffer. What he finds during his initial conversations with an owner is that they:

Great management can’t overcome inadequate staff that are unwilling to carry out the agency’s direction and expectations. Staff that isn’t friendly and professional, even in the face of an unhappy customer, can’t be tolerated.

Jamie Deapo

On his first visit to these establishments many times he finds an owner drowning in loss but oblivious to all the problems associated with their business. Occasionally he encounters an owner willing to accept blame for some of the problems, indicating the problem is due to a lack of knowledge

• Believe their business is attractive and inviting when it isn’t. • Believe their product is good when it isn’t. • Believe they know what people want when they don’t and won’t even ask them.

4441 Sepulveda Blvd., Culver City, CA 90230-4847 www.zalma.com | zalma@zalma.com 310-390-4455 | fax: 310-391-5614 http://zalma.com/blog Zalma Insurance Consultants provides expert advice to counsel for insurers and counsel for policyholders. Advice from Zalma Insurance Consultants is indispensable to the resolution of insurance disputes. Consultation from Zalma Insurance Consultants can save you, your counsel or client hundreds of hours of investigative and legal work.

• Don’t understand that successful businesses are built on building relationships that make the customers want to keep coming back. During his initial assessment Irvine attempts to determine the following: • What does the restaurant look like? Is it inviting? Does it encourage customers to keep coming back? • How is the management? Are they capable and experienced or do they believe they are doing a good job when actually they are not competent and are also unwilling to change? • How is the staff? Are they competent, well trained and engaged? Do they take direction well and follow the procedures provided? Are they interested in creating an exceptional customer experience? • What does the marketplace look like? Who are the existing customers? Who are the potential customers? How can they attract the largest number of customers by modifying their offering to meet the customers’ needs? How do they change the business’ bad image and invite potential customers to return? • Lastly he looks at the product. Does the cost equal the value? Are they providing the value they promise? Does their product and service warrant the customer’s investment and will it encourage them to return and buy more? As I was watching the show recently, I realized that the issues these businesses had to deal with were no different than what many independent insurance agents deal with. You might think that an agency doesn’t need to worry about the attractiveness of their business but you would be wrong. When a prospect or new customer visits your agency their initial impression is based on the physical space, how they are greeted and the professional atmosphere they observe. In today’s world, we use social media and digital marketing to attract and gain new customers so that continued on page 29

26 April 13, 2015 / INSURANCE ADVOCATE

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[ ON M Y RADA R ]

By Barry Zalma

Covenant Not to Execute Not a Release Claim Against Broker Can Be Assigned

t is almost common for a plaintiff who gets a large judgment against a tortfeasor that cannot be collected to enter into an agreement with the defendant to not execute upon the judgment in exchange for an assignment of the defendant’s claims against its insurer. It is unusu-

construction of a Holiday Inn Express hotel in Loudon, Tennessee. The final judgment references the settlement agreement between JAG and Merit and the covenant not to execute on the judgment. After entry of the judgment, JAG was able to collect only a portion of

A covenant not to execute is merely a contract. It is not a release. Covenants not to execute are different from releases, as the legal liability remains in force against those who have covenants, whereas a release represents “total freedom from liability.”

Barry Zalma

al, however, for the insurer to go broke before the suit can be resolved. The assignee then sought recovery against the insurance broker who placed the insurance with the insolvent insurer. Just such a situation was presented to the Tennessee Court of Appeal in Littleton v. TIS Insurance Services, Inc., Slip Copy, 2015 WL 443740 (Tenn.Ct.App., 2/3/15) after the trial court granted a judgment to the broker.

FACTS During a prior lawsuit, a construction company – in exchange for a covenant not to execute against the company’s assets – assigned to the entity that obtained a judgment against it the company’s insurance coverage claims. The trial court entered judgment on the pleadings in favor of the insurance broker on the ground that the current plaintiffs would not be entitled to recover any compensatory damages at trial. The plaintiffs appeal. The plaintiffs, Joy Littleton, Grayling Littleton, and Will Allen Hildreth (“the Assignees”) were assigned a judgment and settlement order in the amount of $3.2 million. The Merit Litigation arose out of a contract between JAG and Merit for the 28 April 13, 2015 / INSURANCE ADVOCATE

its $3.9 million judgment against Merit because Merit’s Commercial General Liability (“CGL”) carrier, the Highlands Insurance Group (“Highlands”), was placed in receivership by the State of Texas during the pendency of the Merit Litigation. TIS Insurance Services, Inc. (“TIS”) was Merit’s insurance broker and the entity that placed Merit’s CGL coverage with Highlands. The current action was filed on January 28, 2011, seeking recovery from TIS of the unpaid balance of the judgment (approximately $2.67 million). TIS filed a motion for judgment on the pleadings. On October 12, 2012, the trial court granted the motion and held “that the [Assignee]s’ claim for compensatory damages which they may seek in the trial of this cause is limited to the $25,000 actually paid by Merit Construction in this matter.”

ISSUE The issue before the court of appeal is whether the trial court erred in entering judgment on the pleadings in favor of TIS on the ground that the Assignees would not be entitled to recover any compensatory damages at trial.

DISCUSSION The trial court’s ruling is directly contrary to our holding in Tip’s Package Store, Inc. v. Commercial Insurance Managers, Inc., 86 S.W.3d 543 (Tenn.Ct.App.2001), in which we held that a judgment creditor’s covenant not to execute on a judgment debtor’s assets does “not extinguish the underlying liability” of the judgment debtor for compensatory damages. The judgment debtor is “an injured party” that can pursue a negligence claim against its insurance provider for procuring a liability policy that allowed a gap in coverage. In light of our decision in Tip’s, JAG’s covenant not to execute on the judgment against Merit does not extinguish the underlying liability of Merit under the judgment. A covenant not to execute is merely a contract. It is not a release. Covenants not to execute are different from releases, as the legal liability remains in force against those who have covenants, whereas a release represents “total freedom from liability.” Gray v. Grain Dealers Mut. Ins. Co., 871 F.2d 1128, 1133 (D.C.Cir.1989) The Assignees, accordingly, are entitled to assert a claim against TIS for $2,701,607.67, the uncollected balance of the judgment against Merit.

ZALMA OPINION The assignment was an assignment of all rights the original defendant had against its insurer and everyone involved in the acquisition of the policy. The broker convinced the trial court that there was a limitation upon what could be recovered and that the assignment was limited by the covenant not to execute. Finding that the covenant was merely a contractual assignment and not a release, the broker was exposed to the entire amount of the judgment assigned. Of course, that does not resolve the situation since the assignees still need to prove responsibility of the agent to the original insured and knowledge that Highlands was not financially stable, a difficult mountain to climb.[IA]

[ ON MY RADAR ] It is unusual, however, for the insurer to go broke before the suit can be resolved.

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunder writer.com/ZalmaLibrary. The new books are Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Store /ProductDetails.aspx?productId=21462 4, or 800-285-2221 which is presently available. Mr. Zalma’s e-book, “Zalma on California Claims Regulations – 2013 explains in detail the reasons for the Regulations and how they are to be enforced; “Rescission of Insurance in California – 2013;” “Random Thoughts on Insurance” a collection of posts on this blog; “Zalma on Diminution in Value Damages – 2013,”“Zalma on Insurance,” “Heads I Win, Tails You Lose,” “Arson for Profit” and others that are available at www.zalma.com/ zalmabooks.htm. Mr. Zalma reports on World Risk and Insurance News’ web-based television programing, http://wrin.tv or at the bottom of the home page of his website at http://www.zalma.com.

[ ON T H E LEVEL ] continued from page 26

impression extends to an agency’s website, Facebook page, blog and other social media. I don’t think anyone would disagree that a well-managed agency is essential for success. The management staff has to be capable and experienced. They need to make sure business is being transacted in a professional manner and in accordance with the agency’s procedures and standards. They also need to make sure that customer expectations are being met and that the staff has the training and backup necessary to meet those expectations. Great management can’t overcome inadequate staff that are unwilling to carry out the agency’s direction and expectations. Staff that isn’t friendly and professional, even in the face of an unhappy customer, can’t be tolerated. Staff that is unwilling to get on-board with the agency’s value proposition, objectives and level of customer service can’t be accepted. The staff is the front line in any agency and if they are not on-board with everything they can destroy it. Most successful agencies have found a way to meet the needs of the agency and customers while providing the staff with the tools they need to do their job in an enjoyable and fun agency atmosphere. Does this sound like “pie in the sky”? It’s not really, it just takes commitment and hard work. From a market research perspective there are a number of questions. Who are your current customers and why do they choose to have you handle their needs? Do your current customers exhibit the characteristics of your ideal customer? How do you find more customers that meet the ideal definition? Are you struggling with attracting younger customers? What do you need to do to reach them? Are you overwhelmed by price shoppers that you and your staff can’t convince of your value? How do you attract more customers that see the value in the service you offer? How is your agency perceived in the community? Are you seen as professional and knowledgeable? Does the public recognize you as an expert in handling the types of insurance you offer? The key is to ask and get honest answers from clients and potential clients. If your agency isn’t where you want it to be with its image and marketing

Most successful agencies have found a way to meet the needs of the agency and customers while providing the staff with the tools they need to do their job in an enjoyable and fun agency atmosphere. then it’s time to sit down and devise a plan to turn that around. Last but most importantly, does the value your agency brings to the purchase of insurance protection equal the price the customer has to pay? Remember, you are working with a buying public that is being bombarded with advertising meant to convince them the only indicator of value is price. You need to show them otherwise. You need to convey an honest and sincere desire to do the best job protecting them, their families and their businesses. You need to convince them that although they don’t believe they will ever experience a significant loss, they need to protect themselves in the event of one. It’s important to educate them to the many differences in coverage that can exist and how that changes over time as a person, family or business grows. They need to see you as their trusted advisor who will be there to keep them updated with the correct coverages to provide the protection they want and need. So do you agree that any agency can benefit from a review of their operation similar to what they do on Restaurant Impossible? The difference is you don’t need to do it in two days and with $10,000 like Robert Irvine does. He’s making a TV show and instead you will be building and refining your agency which supports you, your staff and your customers. You need to move forward at a pace that makes sense and work on the priorities first. The key is to do the research and be honest in your assessment. Some of the necessary changes you can handle and some you may have to reach out for help with, like Irvine does with his builder and interior designer. Are you up for a little “Agency Impossible”? I think many agencies could benefit from the review.[IA] INSURANCE ADVOCATE / April 13, 2015 29

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[ COURTSI DE ]

By Lawrence N. Rogak

Medical Provider Must Submit to EUO Whether it Gets an Assignment or Just Authorization to Receive Payment Stracar Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co.

ppeal from an order of the Civil Court of the City of New York, Kings County (Devin P. Cohen, J.), entered January 29, 2013. The order granted defendant’s motion for summary judgment dismissing the complaint and denied plaintiff ’s cross motion for summary judgment. ORDERED that the order is affirmed, with $25 costs. In this action by a provider to recover assigned first-party no-fault benefits, the Civil Court granted defendant’s motion for summary judgment dismissing the complaint and denied plaintiff ’s cross motion for summary judgment, finding that defendant demonstrated that plaintiff

Even if we did not find that a prescribed authorization falls within the umbrella of the word “assignment”… we would still hold that the recipient of an authorization to pay is obligated to submit to an EUO.

C O M I N G

S O O N -

N E W

T H I R D

had failed to appear for duly scheduled examinations under oath (EUOs). It is undisputed that plaintiff ’s patient, the assignor herein, initially granted plaintiff the right to bill defendant and receive direct no-fault payments from defendant by executing an “authorization to pay” on a prescribed NF-3 form, and that he executed a prescribed assignment of benefits in favor of plaintiff at a later date. Plaintiff ’s main argument on appeal is that, because plaintiff was not the eligible injured person’s (EIP’s) assignee at the time plaintiff submitted the NF-3 forms to defendant, the language in the mandatory

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[ COURTS I D E ] personal injury protection (PIP) endorsement (11 NYCRR 65-1.1), which requires “the eligible injured person or that person’s assignee or representative” to “submit to examinations under oath,” did not require plaintiff to submit to an EUO, and, thus, defendant’s proffered defense, that plaintiff failed to appear for duly scheduled EUOs, lacks merit. In our view, the Civil Court properly rejected this argument, as we find that, pursuant to the regulations, both the recipient of an assignment of benefits and the recipient of an authorization to pay are required to submit to a duly scheduled EUO. 11 NYCRR 65-3.11 (a) states that an insurer shall pay benefits to an EIP “or, upon assignment by the applicant [or the applicant’s parent or legal guardian or any person legally responsible for necessities], shall pay benefits directly to the providers of health care services.” 11 NYCRR 65-3.11 (b) provides two ways in which a health care provider can receive direct payment from the insurer—by submitting an “Authorization to Pay Benefits as contained on NYS Forms NF-3, NF-4 or NF-5” (hereinafter “prescribed authorization”), or by submitting an assignment of benefits on an NF-3, NF-4, NF-5 or Form NF-AOB (hereinafter “prescribed assignment”). The prescribed authorization specifically states that the EIP retains “all rights, privileges and remedies” under the No-Fault Law; in contrast, the prescribed assignment states that such “rights, privileges and remedies” are assigned to the health care provider (which allows the provider to commence an action against the insurer to recover nofault benefits). While the regulations clearly specify that a prescribed authorization and a prescribed assignment are different with respect to whether there is a transfer of rights, there is nothing in the prescribed assignment or prescribed authorization, both of which require the signatures of the EIP and the provider in order to be properly executed, differentiating between the two with respect to the EIP’s obligations (such as the requirement to submit to an EUO). Furthermore, in the provision dealing with direct payments to a health care provider, the regulations seem to conflate the prescribed assignment and the prescribed authorization. While an insurer is required to pay benefits directly to a provider “upon

Accordingly, plaintiff, as the entity which submitted the claim forms to defendant, was obligated to submit to an EUO whether such entity be viewed as its patient’s assignee or as his representative. assignment by the applicant” pursuant to 11 NYCRR 65-3.11 (a), the word “assignment” in this context is not limited to a prescribed assignment, and indeed includes a prescribed authorization, since, pursuant to 11 NYCRR 65-3.11 (b), a provider demonstrates such “assignment” by submitting either a properly executed prescribed authorization or a properly executed prescribed assignment. Inasmuch as an “assignee” clearly must submit to an EUO, the regulations should be read to impose this obligation upon the recipient of both a properly executed prescribed authorization and a properly executed prescribed assignment. Even if we did not find that a prescribed authorization falls within the umbrella of the word “assignment” as used in 11 NYCRR 65-3.11 (a), we would still hold that the recipient of an authorization to pay is obligated to submit to an EUO. This is because, in addition to requiring the EIP or that person’s assignee to submit to an EUO, the PIP endorsement also obligates the EIP’s representative to submit to an EUO. Written proof of claim may be submitted to an insurer by the EIP’s representative (see 11 NYCRR 65-1.1), and the recipient of a properly executed prescribed authorization who submits proof of claim is clearly acting as the EIP’s representative under those circumstances since the EIP retains “all rights, privileges and remedies.” Accordingly, plaintiff, as the entity which submitted the claim forms to defendant, was obligated to submit to an EUO whether such entity be viewed as its patient’s assignee or as his representative. Accordingly, the order is affirmed. 2015 NY Slip Op 25079 Decided on March 2, 2015 Appellate Term, Second Department

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[ GUEST OPINION ]

By Jane M. Orient, M.D.

ObamaCare Can Cancel Your Insurance, Warns AAPS

ucson, AZ. One of the biggest selling points for the Affordable Care Act (ACA or ObamaCare) was the promise that insurers couldn’t cancel your plan if you get sick. But if the U.S. Supreme Court, in King v. Burwell, holds premium

pulled from the market. People had to buy an ACA-compliant replacement plan, usually much more expensive, and they could now lose that too.” “What will be left?” AAPS asks. “Will Congress repeal ObamaCare and all its

“Millions lost their existing plans, which they liked, when ACA forced them to be pulled from the market. People had to buy an ACAcompliant replacement plan, usually much more expensive, and they could now lose that too.”

Jane M. Orient, MD

subsidies to be illegal in Exchanges not established by States, the Administration will allow insurers to abrogate their contracts, says the Association of American Physicians and Surgeons (AAPS). “It’s déjà vu all over again,” states AAPS executive director Jane M. Orient, M.D. “When Medicare passed, seniors who had private insurance lost it. The insurers told President Johnson that they couldn’t unilaterally cancel subscribers’ contracts. But LBJ said they could cancel all the contracts, and they did. Private insurance for seniors was ended with a stroke.” “While the Administration assures HealthCare.gov policyholders that ‘nothing has changed,’ it has been conveying a contradictory message to health insurance companies,” writes Senator Orrin Hatch (R-Utah) in a letter to former CMS head Marilyn Tavenner. “Late last year, CMS altered the agreements to participate in the federal exchange, guaranteeing insurance companies the right to pull out of their contracts should federal subsidies such as the APTC come to an end—in other words, if the Administration loses before the Supreme Court.” The Administration apparently has a contingency plan to protect insurers, Orient notes, but what about patients? “Millions lost their existing plans, which they liked, when ACA forced them to be 34 April 13, 2015 / INSURANCE ADVOCATE

impossible mandates on insurers and the medical system? Or will Americans be forced into Obama’s preferred system of total dependence on government—and its completely untrustworthy promises?” Sen. Hatch has demanded documents from CMS so that the Senate Finance Committee can conduct oversight. Sen. Ben Sasse (R-Neb.) and other Republicans are proposing transition plans such as the Winding Down Obamacare Act, which are intended to protect patients from loss of insurance, and to prevent the Administration from exerting coercive pressure on States to establish Exchanges that would further cement ObamaCare in place. [IA]

became an Instructor at the University of Arizona College of Medicine and a staff physician at the Tucson Veterans Administration Hospital. She has been in solo private practice since 1981 and has served as Executive Director of the Association of American Physicians and Surgeons (AAPS) since 1989. She is currently president of Doctors for Disaster Preparedness. Since 1988, she has been chairman of the Public Health Committee of the Pima County (Arizona) Medical Society. She is the author of YOUR Doctor Is Not In: Healthy Skepticism about National Healthcare, and the second through fourth editions of Sapira's Art and Science of Bedside Diagnosis, published by Lippincott, Williams & Wilkins. She authored books for schoolchildren, and Professor Klugimkopf’s Spellling Method, published by Robinson Books, and coauthored two novels published as Kindle Professor Klugimkopf’s Old-Fashioned English Grammar books, Neomorts and Moonshine, More than 100 of her papers have been published in the scientific and popular literature on a variety of subjects including risk assessment, natural and technological hazards and nonhazards, and medical economics and ethics. She is the editor of AAPS News, the Doctors for Disaster Preparedness Newsletter, and Civil Defense Perspectives, and is the managing editor of the Journal of American Physicians and Surgeons.

The Association of American Physicians and Surgeons (AAPS) is a national organization representing physicians in all specialties, founded in 1943 to preserve private medicine and the patient-physician relationship. Jane M. Orient obtained her undergraduate degrees in chemistry and mathematics from the University of Arizona in Tucson, and her M.D. from Columbia University College of Physicians and Surgeons in 1974. She completed an internal medicine residency at Parkland Memorial Hospital and University of Arizona Affiliated Hospitals and then

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