May 12, 2014 by C Acunto

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VOLUME 125, NUMBER 9 / May 12, 2014

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Contents

May 12, 2014 | volume 125 number 9

[COVER STORY ] 18

HEIGHT OF ABSURDITY New York’s Dizzying Scaffold Bill

[FEATURES] 4

Foreword: Consolidating. Steve Acunto, Publisher

Insight: ENCORE! ENCORE! Peter H. Bickford

Exposures and Coverages: Another Hole in the Dike: Court of Appeals Allows Errors & Omissions Claim Business Income Coverage for Employees’ Payroll and Commissions The Mudslide Tragedy—Insurance Aspects Jerome Trupin, CPCU

Face to Face: Your Local Neighborhood MARKET-ing Michael Loguercio

On the Level: Taking a Lesson From March Madness Jamie Deapo

In the Associations: LIRAP: Draws More Than 300

Looking Back: April 1989

Courtside: Putative Class Action Challenges Use of “Shadow Insurance” Matthew Gaul

Classiﬁeds

Guest Editorial: Change is Not Always for the Better Marilyn M. Singleton, M.D., J.D.

34 Like us on Facebook… The Insurance Advocate Magazine

www.insurance-advocate.com INSURANCE ADVOCATE / May 12, 2014 3

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[ FORE WORD ]

Steve Acunto

Consolidating

oses Insurance Group has acquired Maloney Petrison Agency, a full-service firm in Williamsville, NY since 1978. The purchase was finalized some weeks back and just announced by Robert Moses. The acquisition of Maloney-Petrison Insurance is a strategic part of the Moses Insurance Group’s expansion and future growth plans in the Greater Buffalo/Western New York region, according to Mr. Moses, who noted “Moses Insurance Group customers enjoy a commitment to personalized service with a focused product line, an advantage that has helped solidify the agency’s reputation as one the most respected and committed insurance providers in the area. We have worked directly with Sandy and the Maloney Petrison Agency for the past 20 years, and we’re looking forward to providing the same high quality care to her clients. We’re a third-generation family insurance agency in Williamsville with the experience and expertise to offer a broad range of personal and business coverage options to meet all of BOB & KEN MOSES our clients’ needs.” Moses and Maloney Petrison owner Sandy Petrison had collaborated for two decades before Petrison’s recent retirement, making the acquisition near reach. Founded in 1955 by Charles “Herky” Moses, the Moses Insurance Group has been family owned since 1979 when son Robert Moses (CIC) joined the firm and later became its president. Sons Ken Moses (Vice President) and Douglas Moses followed, and in 1988 daughter Carol Holler and another son, Charles Moses, Jr. also joined the company. Ken Moses’ son Jeffrey Moses received his Property and Casualty Insurance Broker’s license in 2008, launching the third generation of insurance professionals within the family-owned and operated business. Moses Insurance Group specializes in writing personal auto, home and life insurance plans as well as insurance policies for small and medium businesses. MIG also offers a program set up for volunteer fire companies in NY. Like Charles “Herky” Moses, the current generation of the Moses Group is active in the Williamsville/Amherst and Western New York community. Moses Insurance Group is a TrustedChoice.com agency and a member of the Strategic Insurance Agency Alliance (SIAA), which provides the firm with a wide variety of insurance carriers and products to help customize plans to meet each client’s individual needs. We congratulate the protagonists on both sides and wish the Moses family continued success…. No stranger to IA readers, Applied Systems has announced that it has signed more than 1,000 insurance agency and brokerage customers in the U.S. and Canada using Applied CSR24, the online self-service application. As demand for online self-service has increased, Applied CSR24 adoption has grown by more than 50 percent each year since 2011. According to the company, “Applied CSR24 enables agencies and brokerages to enhance customer service by providing customers online access to their insurance information and extended service hours through the Applied CSR24 portal. The application also creates more efficient workflow by automating insurance certificate processing, enabling agents and brokers to devote more time to servicing customers and securing new business. Applied CSR24 seamlessly integrates with Applied Epic, Applied TAM and other agency and brokerage management systems and provides a customizable web interface that allows agencies and brokerages to apply their branding to the portal.” A spokesman added: “The insurance industry is rapidly changing, and insurance customers expect agencies and brokerages to deliver customer service through multiple channels, such as websites and mobile devices, alongside traditional types of service,” said Michael Howe, Senior V.P. of product management. “Applied CSR24 has become an essential solution for agencies and brokerages to compete in today’s marketplace by providing customers access to their insurance information online when and where they need it,” he added. In addition to exceeding 1,000 Applied CSR24 customers, Applied Systems also reported processing one million Applied CSR24 transactions during December 2013, the highest one-month aggregate transaction volume ever for the product. [IA] 4 May 12, 2014 / INSURANCE ADVOCATE

VOLUME 125, NUMBER 9 MAY 12, 2014

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Sari Gabay-Raﬁ Michael Loguercio 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 SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x126 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

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 ESR, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing ofﬁces. POSTMASTER Send address changes to Insurance Advocate®, P.O. 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 ESR, Inc. and is copyrighted 2014. 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

ENCORE! ENCORE!

ongratulations to the New York Liquidation Bureau! Yes, you read that right. For the second year in a row the Bureau has timely posted its annual report on its website (www.nylb.org). This is the statutorily

• During 2013 the Bureau made final distributions from estates of $23 million and interim distributions of $165 million. • Since 2006 the Bureau has made distributions from estates of almost $950

The depth and content of the report is also remarkable when compared to the Superintendent’s report as chief regulator of the insurance industry. The Bureau’s report is far more detailed, informative (even with all its shortcomings) and timely than the superintendent’s combined annual report on the insurance and banking businesses. Peter H. Bickford

required report of the Superintendent of Financial Services as receiver (liquidator, rehabilitator, conservator or ancillary receiver) on the status of the companies under the receiver’s management. Publicly posting the report also eliminated the need to file a Freedom of Information Law request to obtain a copy of it, which was de rigueur before last year. The 2013 report was posted on time and is a comprehensive document full of interesting information. Some interesting highlights of the report include: • As of December 31, 2013, the Bureau was responsible “for the administration of twenty-seven Domestic Estates, twenty-two Ancillary Estates, two Rehabilitations, three Conservations, and twenty-four Fraternal Benefit Societies.” • As of December 31, 2013 the Bureau employed 252 people (down from 413 at the end of 2004) with about half of those employees members of a union, the Civil Service Employees Association (CSEA). • During 2013, the Bureau closed ten domestic estates, four ancillary estates (estates with a primary liquidator in another state), two estates under conservation, and sixteen Fraternal Benefit Societies.

million with about $540 million of that total occurring in just the past two years. • The number of claims outstanding at the end of 2013 for domestic and ancillary estates totaled approximately 11,000, down from a total of approximately 15,000 in 2012 and 21,000 in 2011. • At the end of 2013 the Bureau had about $750 million of assets under management for companies in liquidation, compared to about $843 million at year end 2012; and about $17 million of assets for companies in rehabilitation compared to about $2.8 billion at year end 2012 (this sudden decline is another story for another time). The depth and content of the report is also remarkable when compared to the Superintendent’s report as chief regulator of the insurance industry. The Bureau’s report is far more detailed, informative (even with all its shortcomings) and timely than the superintendent’s combined annual report on the insurance and banking businesses. What makes this so remarkable is the depth and extent of the report of a bureau with less than $1 billion in assets currently under management, compared to the department of financial services report

in a state with 1,700 insurance companies with assets exceeding $4.2 trillion; and 1,900 banking and other financial institutions with assets of more than $2.9 trillion. The Bureau’s 2013 report includes one major improvement: a return to the old format of including a separate statement for each estate under its management as required by statute rather than continuing a cumbersome consolidated format instituted in 2007. While these statements are not full financial statements, and lack consistency and significant content, they at least respond to the minimum requirement of the law for separate statements for each estate under receivership. As thin as these statements may be, they are much more open and accessible than the consolidated format used in the past six reports of the Bureau. The Bureau’s report remains disappointing, however, in its failure to recognize its proper role, and in continuing to mask the deficiencies in the structure and accountability of the insurance receivership process in New York. The major disappointment in the report is its reflection of the Bureau’s continuing inability to understand the basics of the statutory charge to the receiver, particularly regarding the receiver’s statutory role as rehabilitator. On page 17, under the heading “Receivership Operations”, the report states: “After the entry of an order placing an impaired New York insurer into rehabilitation and/or liquidation, the Receiver and the NYLB have the statutory responsibility to marshal the assets and resolve the liabilities of the failed entity.” Wrong! When a company – for whatever reason including a number of reasons other than financial impairment – is placed into rehabilitation, the statutory charge to the rehabilitator is “to take possession of the property of such insurer and to conduct the business thereof . . .” Marshaling assets and resolving liabilities – a standard bankruptcy concept - is the statutory charge for liquidation but NOT for rehabilitation. This is a distinction that the Bureau historically seems to never have continued on page 8

6 May 12, 2014 / INSURANCE ADVOCATE

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[ INSIGHT ] Insurance Company of New York.) As pleasant a surprise as the Bureau’s current report appears to be, and as good a job as the Bureau says it is doing in its efforts to manage estates under its control, the fact remains that the Bureau continues to be an entity devoid of formal, statutory standards of accountability and oversight. Although much of what is wrong with the receivership process can only be fixed permanently through legislation, the current administration can take action to further

continued from page 6

been able to understand or accept. The idea of actually managing a business is simply alien to liquidators. There are numerous examples of the Bureau applying scorched-earth bankruptcy standards to insurance rehabilitations. (Among the more recent examples of a misconceived and mishandled rehabilitation of a viable entity is, of course, Executive Life

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its efforts to improve the transparency of and confidence in the process to its primary constituents – claimants of the estates. For instance, the superintendent as receiver, could, without any change in current law: • Continue to reduce the size and principal responsibility of the Bureau for the management of estates in receivership; • Develop a pool of authorized independent receivership professionals to be called upon in a more efficient and accountable as-needed basis; • Provide each receivership court with the tools necessary for effective oversight of insolvent estates, including regular, periodic, meaningful report, plans and conferences; • Provide for effective and timely participation by all interested parties in the process; and • Provide for appropriate oversight and accountability – not blanket immunity — for the receiver’s agents in the performance of their services. By taking these next steps towards full accountability and transparency, the administration can set the example for proper legislative changes aimed at providing a permanent fix to the receivership process and as a template for future administrations. I look forward to reading about the next level of improvements in the 2014 report of the receiver![IA]

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[ EXPOSURES AND COVERAGES ] Another Hole in the Dike: Court of Appeals Allows Errors & Omissions Claim Business Income Coverage for Employees’ Payroll and Commissions The Mudslide Tragedy— Insurance Aspects Another Hole in the Dike: Court of Appeals Allows Errors & Omissions Claim The New York Court of Appeals has again denied an insurance broker’s motion for summary judgment in an errors and omissions lawsuit. New York courts have always ruled that an insurance broker’s duty is to place the coverage ordered by the insured or notify the insured of its inability to do that in a reasonable time. Further, New York courts charge the insured with knowledge of the contents of the policy once the policy has been received. Most importantly, a broker has no duty to advise the insured during the policy period unless the insured and the broker have a “special relationship.” In case after case, insureds have been unable to establish a special relationship claim. That may be changing. Deborah Voss owned several businesses in Liverpool, New York. CH Insurance Brokerage Services (“CH”) was her insurance broker. CH is a successful insurance agency with offices in Syracuse, Rochester, and Rome, NY. In 2004, CH recommended Voss obtain a comprehensive policy that included $75,000 in coverage for business income losses. In 2006, she purchased a new building, thereby doubling the space occupied by her

Jerome Trupin, CPCU

…a broker has no duty to advise the insured during the policy period unless the insured and the broker have a “special relationship.”

business. The new building encountered numerous roof problems and Voss submitted several insurance claims that included claims for lost business income; she closed the business temporarily. In 2007, Voss discussed renewal of the insurance with CH. The policy was renewed and the business income limit was reduced to $30,000. In 2008 Voss sued CH claiming that it had failed to advise her on the proper amount of business income insurance she needed. The New York Supreme Court for Onondaga County granted the insurance company summary judgment dismissing Voss’s claim. This decision was affirmed by the Appellate Division. However, the Court of Appeals has reversed the lower courts and denied summary judgment to the broker.1 continued on page 12

1 Deborah Voss et al v CH Insurance Brokerage Services, Co., Inc. et al, NY Court of Appeals 2014 NY Slip Op 01259 Decided on February 25, 2014

10 May 12, 2014 / INSURANCE ADVOCATE

By Jerome Trupin, CPCU

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 publications, 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.

The New York Supreme Court for Onondaga County granted the insurance company summary judgment dismissing Voss’s claim.

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[ EXPOSURES AND COVERAGES ] continued from page 10

The decision recounts meetings between Voss and Joe Convertino, Jr., a representative of CH. It reads, in part, as follows: …Convertino recommended a comprehensive policy with defendant The Netherlands Insurance Company (formerly Peerless Insurance Company) that afforded…$75,000 per incident in coverage for business interruption losses. When Voss questioned whether the $75,000 limit was adequate, Convertino allegedly assured her that it would suffice based on the condition of the building as well as the size of her businesses. According to Voss, Convertino also averred that he calculated the level of coverage at a threshold level and reemphasized that, each year, CH “would take it up as the business evolved.” The Court of Appeals denied the broker’s summary judgment motion. Voss will be able to make her arguments when the case goes to trial. The claim may be settled before trial, which would be at least a partial victory for Voss. Without the Court of Appeals decision, she would have gone home with only legal bills to show for her efforts. Summary judgment motions are an important part of an attorney’s toolkit. They can end the endless legal maneuvering that runs up endless legal expense2. Here’s my layman’s take on summary judgment: In brief, the party making the summary judgment motion argues that: • Even if what the other party says is true, there is insufficient evidence to send the case to a jury, and • The law, which is the judge’s responsibility to interpret, supports the motion-maker’s position. The judge can act on a summary judgment motion without a full trial. Given the limited responsibility imposed on insurance brokers in New

…what if the insured continues to pay all employees even though there’s nothing for them to do because the business has been shut down by, for example, a devastating fire? Are these covered as continuing expenses? York, summary judgment in favor of the broker on an errors and omissions claim was the usual outcome. By denying CH Insurance Brokerage summary judgment, it appears that “he said-she said” arguments will be permitted. David B. Karel, a New York City attorney who represents policyholders, writes “Voss clearly makes it significantly easier to defeat motions for summary judgment and thereby easier to sustain litigation against brokers and agents. (The court’s finding) that a question of fact existed as to whether or not a special relationship existed… in Voss, is another chink, crack, opening to drive a truck through for plaintiffs.3” Stay tuned—and re-examine your errors and omissions insurance coverage and limits.

Business Income Coverage for Employees’ Payroll and Commissions A Westchester agent asks: I have an insured that suffered a Business Interruption claim for a Dependent Property. The insured’s customer suffered a fire loss which caused a Loss of Business for the insured… The insured pays a commission to his salespeople. The carrier has indicated that they will deduct the commission that is normally paid to salespeople when they calculate the business income loss because commission is not a continuing

expense. They make a distinction between “payroll” and “commission.” As I review the policy, barring a contractual requirement to pay the commission, the carrier may be on solid ground. Any thoughts? My thoughts: First, the agent deserves kudos for covering her insured’s dependent property exposure. Second, she’s probably correct that the insured does not have coverage for the salespeople’s lost commissions. In determining a business income loss, the insurer calculates the net profit that was lost and adds to that the insured’s expenses that necessarily continue. If there are no sales no commission is paid, therefore there’s no continuing expense for commission. What if the insured actually pays its employees? What if the insured actually pays the salespeople commissions even though there were no sales? More broadly, what if the insured continues to pay all employees even though there’s nothing for them to do because the business has been shut down by, for example, a devastating fire? Are these covered as continuing expenses? Coverage for payments made to employees who can’t work due to a covered interruption of operations has long been a disputed issue. The ISO business income form CP 00 30 10 124 contains a loss determination provision reading as follows: 3. Loss Determination a. The amount of Business Income loss will be determined based on: … (3) The operating expenses, including payroll expenses, necessary (emphasis added) to resume “operations” with the same quality of service that existed just before the direct physical loss or damage; Notice that I’ve emphasized the word “necessary.” Insureds argue that they must continue to pay employees or else they’ll find other jobs and be unavailable when operations resume. Insurers respond that continued on page 14

2 IBM’s Thomas Watson is often quoted as having said: “My legal staff has an unlimited budget and every year they exceed it.” 3 Extract from 4/14/14 email from David B. Karel, partner Wilkofsky, Friedman, Karel & Cummins 4 The wording of the actual policy did not exactly duplicate ISO business income form language, but to make my answer more useful for general readers, I’ve used ISO wording. My opinion based on the actual wording would be the same in this case.

12 May 12, 2014 / INSURANCE ADVOCATE

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[ EXPOSURES AND COVERAGES ] continued from page 12

in many labor markets, particularly today, most employees can easily be replaced and therefore continuing to pay employees who are not working is not a covered expense necessary. This dispute can be avoided. ISO has a new endorsement that makes the policy do what many insureds want, that is pay employees who have no work because the business is shut down by an insured peril: It’s Discretionary Payroll Expense form # CP 15 04 06 07 The endorsement adds coverage for payroll expenses for the job classifications or employees identified in the endorsement schedule. When the insured pays these employees, the payments are covered expenses. (Payroll expenses include: payroll, employee benefits, FICA and union dues payments paid by the insured, and workers’ compensation premiums.) The insured selects the maximum number of days for discretionary payroll expense, which is shown in the schedule. The number of days need not be used consecutively, but only those within the period of restoration are covered. If the insured’s policy doesn’t include the discretionary payroll coverage, the insurer will cite the availability of such coverage when arguing that payments to nonworking employees are not covered by the basic business income policy. If the insured doesn’t plan to continue some or all of its employees, you should eliminate or limit coverage for the payroll using Payroll Limitation or Exclusion endorsement CP 15 10 10 12. That reduces the insured’s coinsurance basis and the amount of insurance that must be carried.

The Mudslide Tragedy— Insurance Aspects The tragic mudslide in March in Darrington, Washington that killed at least 37 people with some still unaccounted for at this writing, has an insurance aspect. The insurance question is: what coverage might there be for the dozens of homes that were destroyed and for homes and businesses that might be destroyed in

If the insured’s policy doesn’t include the discretionary payroll coverage, the insurer will cite the availability of such coverage when arguing that payments to non-working employees are not covered by the basic business income policy.

future mudslides? With regard to the homes destroyed in Washington, ISO and most other homeowners policies contain earth movement exclusions that shut the door on mudslide claims. Here’s some of the ISO exclusion wording: Exclusions: 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; (emphasis added) That doesn’t leave much room for landslide or mudslide claims on homeowners policies. How about National Flood Insurance, doesn’t it provide some coverage for mud? It does. Here’s the pertinent wording: Flood, as used in this flood insurance policy, means: 1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from: a. Overflow of inland or tidal waters; b. Unusual and rapid accumulation or runoff of surface waters from any source; c. Mudflow. (emphasis added)5 You might think that triggers mudslide

coverage from NFIP until you read the definition of mudflow: Mudflow (is a) river of liquid and flowing (emphasis added) mud on the surfaces of normally dry land areas, as when earth is carried by a current of water. Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows (emphasis added). The key words are “liquid and flowing.” What happened in Washington does not meet the NFIP definition of mudflow. What about commercial coverage? Commercial property policies are quite similar to the homeowners when it comes to excluding mudslides and mudflows. NFIP commercial flood coverage is identical to NFIP personal coverage. Even the ISO commercial property flood endorsement limits coverage for mudslide to “a river of liquid and flowing mud.” There’s no coverage in those forms. So what is one to do? Many insurers provide flood and earth movement coverage by endorsement to their commercial property policies. Most mimic the coverage provided by the NFIP or ISO flood coverage and cover only earthquake, not mudslide or landslide. Some however, provide the coverage by eliminating the earth movement and water exclusion. The forms have to be carefully reviewed, but that might solve the problem. Otherwise, Difference in Conditions (DIC) coverage is a possibility.6 DIC policies were originally used to provide an insured with all-risk coverage wrapped around a named peril policy. With widespread availability of “all-risk” forms, they’re now mostly used to add flood and earthquake coverage. Unfortunately many DIC policies are no longer as broad as they once were. Many just mimic ISO and NFIP wording, which limits earth movement coverage to earthquake and flood coverage to the NFIP definition. That leaves a gap in coverage for events like the Washington mudslide. continued on page 16

5 National Flood Insurance Program General Property Form Standard Flood Insurance Policy December 31, 2000 6 Some independent (non-ISO) forms provide broader coverage than standard or NFIP forms for earth movement and water damage obviating the need for DIC coverage.

14 May 12, 2014 / INSURANCE ADVOCATE

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[ EXPOSURES AND COVERAGES ] continued from page 14

Many insurers use their own DIC forms, but that is becoming less common now that the American Association for Insurance Services (AAIS) and ISO have produced their DIC forms. The AAIS form is the most widely used. In that form, the mudslide and mudflow coverage reads as follows: c. mudslides or mudflows if caused by (emphasis added): 1) unusual and rapid accumulation or runoff of surface waters or waves; or 2) currents of water exceeding anticipated cyclical levels.7 Although the wording lists mudslides and mudflows, the “if caused by” wording that follows restricts the coverage to NFIPtype flood claims. This wording would not provide coverage for an event like the one in Washington. The ISO form has arguably better coverage. It includes coverage for water damage, which is defined to mean: a. Flood, surface waters, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not; b. Mudslide or mudflow; c. Water that backs up from a sewer or drain; or d. Water under the ground surface pressing on, or flowing or seeping through: (1) Foundations, walls, floors or

A quick review of the forms turned up an 80% coinsurance provision and a segmentation of the occurrence into 72 day pieces, which could trigger additional deductibles if the flooding lasted more than 3 days.

paved surfaces; (2) Basements, whether paved or not; or (3) Doors, windows or other openings. Furthermore, there’s no exclusion for landslides, so even if the event isn’t a mudslide it would be covered as a landslide. I haven’t seen any DIC policies written on ISO forms, have you? If you have or if you can find companies that use the form, let me know. I’ll check to see what I can turn up. Anything I find out will be in my next column. In the way of independently developed coverage, Poulton Associates located in Salt Lake City, Utah offers a catastrophe insurance program through underwriters at Lloyds for both homeowners and commercial firms on independent forms.8 The forms are not all-encompassing, but they do offer landslide coverage in addition to

earthquake and flood. Landslide is defined as “physical damage caused by the sudden movement of earth and/or rock… including sliding of land, mudflow, (and) land sinking, rising or shifting…”9 A quick review of the forms turned up an 80% coinsurance provision and a segmentation of the occurrence into 72 day pieces, which could trigger additional deductibles if the flooding lasted more than 3 days. Neither limitation is typically found in DIC forms There’s also a difference in the debris removal coverage. The Lloyds form provides debris removal coverage equal to the greater of $25,000 or 10% of the loss. The debris removal provision in ISO’s DIC form follows ISO’s other commercial property forms: 25% of the loss plus $10,000. For a loss that’s less than $60,000, the Lloyds form will provide more coverage for debris removal. Above $60,000, the nod goes to ISO. For a $1,000,000 loss, Poulton’s form would cover $100,000 of debris removal expense. ISO’s formula would provide $260,000 of coverage. Furthermore, Lloyds is non-admitted so there’s no guaranty fund coverage if the insurer becomes insolvent. The excess/surplus lines brokers you work with may have other forms available. Check with them and carefully review any form that you offer to your clients. Despite the shortcomings, let your insureds know that this coverage is available. [IA]

7 AAIS DIC form M 7801 04 07 Copyright, American Association of Insurance Services, Inc., 2007 8 See: https://www.catcoverage.com/faq.aspx (accessed 4/24/14) 9 From specimen homeowners and commercial forms supplied by Poulton Associates.

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[ COVER ]

By Casey O’Brien

LBANY, N.Y.—Governor Andrew Cuomo has stated there won’t be much movement on the Scaffold Law this year; but that doesn’t stop the issue from continuing to be highly contested throughout the state. Labor Law 240, more commonly known as the Scaffold Safety Law, was created in 1885, calling for the “absolute liability” of employers in regards to onsite work accidents and injuries. Today, the opposing stances are either to amend an out-of-date law, or keep the law as is, protecting workers on job sites. In a recent interview with Crain’s New York Business, the Governor told their editorial board the Scaffold Law was not high on the list of priorities for the rest of the year. “My calculus is you have to prioritize what you want to get done first. You get a much bigger bang for the buck waging these battles than [trying to reform the] scaffold law, or by the way another 10 battles that have to be fought. Even if you asked businesses writ large [to] prioritize the problems, they would have started: personal income tax, corporate tax, estate tax, property tax ... they would have gone right down the list. And I’m going right down the list. Now they would say scaffold, but they would say, scaffold what? No. 8? 12? Depends on what business you’re in, [and] you basically have to be in the construction business,” said Cuomo. “The New York Insurance Association (NYIA) urges the state to act this year in reforming the Scaffold Act. This antiquated law is suffocating the growth of business and our state’s infrastructure. Fewer New York City schools being built and the astronomical cost to rebuild the Tappan Zee Bridge are just two of the many examples of the profound negative impact the Scaffold Act has on our state,” said NYIA’s President, Ellen Melchionni. “We are the only state in the nation with this law on our books. It is not a construction problem or an insurance problem. The fact that a worker bears no responsibility for his or her

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[ COVER ]

actions, even if the person is drunk or ignored safety protocols, is a huge concern for small businesses, municipalities and ultimately New York taxpayers.” “The Scaffold Act does not increase workplace safety and in fact makes a job site less safe. The only benefactors of keeping the status quo are the personal injury lawyers who see the unfair law as a gold mine. A comparative negligence standard needs to be introduced in all height-related cases. New York will never be business friendly until this law is changed,” Melchionni said. NYIA, The Independent Insurance Agents and Brokers of New York (IIABNY) and Professional Insurance Agents of New York (PIANY) are in favor of the law being amended to include a “comparative negligence” standard. “If the worker contributed to his own injury, then that would be considered in the percentage at fault,” said Dan Corbin, Director of Research at PIANY. “We are in favor of amending the law to adopt a comparative or contributive negligence standard, which is lacking right now,” said Tim Dodge, Assistant Vice President of Research with IIABNY. “The New York Daily News reported on some cases; for example, a man was standing on wet waterproofing, and he knew it was wet, but decided that was a good time to use a power saw anyway, and got $300,000 for one of his fingers,” said Dodge. “Things like that happen, and that’s the part that’s very frustrating to our contractors and those of us who have to provide insurance to them, because those are things that the construction firm can’t necessarily prevent. They can tell people to use common sense, but you can’t force them to do it.” Dodge explains that the way the courts currently interpret the Scaffold Law finds the contractor ultimately responsible for an injury, which comes out of insurance policies, causing insurance premiums to rise. “The initial law, Section 240 was enacted in 1885, and back then there was very little protection for an employee who is working from a height,” said Corbin. “The law made sense back then, but now that we have so many other protections for

employees, of course the main one is worker’s comp that pays their doctor’s bills and loss of wages.” “You have to ask yourself, why does a worker who falls two feet get to sue everybody on the site, when some worker in a manufacturing plant slices off his hand and he can’t sue,” said Corbin. “It just doesn’t make sense anymore to have this law interfere with the construction business.” One concern with the Scaffold Law is the cost of liability insurance, which both Dodge and Corbin acknowledged. “The problem in New York is the cost of general liability insurance is higher than the surrounding states. There are several studies that have been done, by ISO and AIA that have suggested that in New York City the costs are 500 percent higher than surrounding states, and outside of New York City it’s about 250 percent higher,” said Corbin. “So the really only significant difference between the states is the Scaffold Law.” “I think contractors in New York pay high premiums for liability insurance or have trouble getting it because of the severe nature of Scaffold Law claims. It may not be all that frequent, but when they happen they are on the low end of hundreds of thousands of dollars, and on the high end, tens of millions of dollars,” said Dodge. “In some of those claims the defendant was actually at fault, the defendant was responsible for the injury. But there are some cases where the worker’s own behavior contributed to the accident, where the worker was the one who placed the ladder and didn’t do it properly,” said Dodge. “The courts have interpreted the Scaffold Law to say that even though the worker put the ladder up there, it was in the end the owner and the contractor’s responsibility to make sure it was properly placed. So the worker’s own carelessness in setting up that ladder is never taken into account.” If the law does not get amended, Dodge says the best case scenario would be the market staying the same, “which is that liability insurance for certain types of contractors is difficult to get, is expensive when you can get it, and sometimes is not terribly comprehensive.” “The worst case scenario is that it

ELLEN MELCHIONNI

“We are the only state in nation with this law on our books. It is not a construction problem or an insurance problem. The fact that a worker bears no responsibility for his or her actions, even if the person is drunk or ignored safety protocols, is a huge concern for small businesses, municipalities and ultimately New York taxpayers.”

becomes even less available, where the cut of policies becomes even skimpier. There are policies out on the marketplace now that effectively do not cover Scaffold Law claims,” said Dodge. “You could see more of those types of policies on the market if the law stays as it is, or prices climb even higher than they are now, or both.” According to Corbin, the cost of building will go up if the law is not amended. “Right now one source says that it costs about $10,000 for every home that’s built, and this law is adding to that cost. It’s not just contractors that are feeling the pain, anybody who is hiring the contractors are feeling it because the owners are responsible to pay these claims as well as general continued on page 18

INSURANCE ADVOCATE / May 12, 2014 19

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[ COVER ] continued from page 19

contractors, so that adds the cost to school projects, municipal projects, it adds to any commercial building that’s being built, and especially it seems to impact the transportation sector for bridges and elevated highway construction.” If the bill is amended, Corbin says insurance companies would be able to loosen their underwriting and provide coverage previously unavailable. “If we can get negligence standard, it will make it [easier] to underwrite general liability insurance in New York, and hopefully the market would improve,” said Corbin. “And the bottom line is the contractors will be better protected, and the owners will be better protected, and the costs will come down.” PIANY were among the 32 businesses who penned a letter to Governor Cuomo, dated April 29, in response to his statements made to Crain’s. The letter reaffirms their stance on amending the Scaffold Law, and urges the Governor to reconsider making it a priority. “The Scaffold Law drives up costs on virtually every segment of our economy, from major employers, small business and farmers seeking to make capital investments in their businesses, to school districts and local governments. They not only face higher construction costs, but are also on the hook for the Scaffold Law’s outrageous, only-in-New York absolute liability standard.” “State agencies and public authorities face the same challenges, and see their already generally constrained capital dollars being consumed by much higher insurance costs. Taxpayers and homeowners are paying the price, too, both in the form of higher residential construction costs and even higher tax bills. Even victims of natural disasters like Super Storm Sandy are being hurt by the Scaffold Law, as evidenced by the many relief and recovery organizations that have recently come out in favor of reform.” Among those who oppose an amendment of the Scaffold Law are the New York Public Interest Research Group (NYPIRG), the Center for Popular Democracy, and the New York State Trial Lawyers Association (NYSTLA). “The debate around the state’s Scaffold Law is another example of insurers claim20 May 12, 2014 / INSURANCE ADVOCATE

ing there’s a crisis, without publicly putting out any verifiable data to back up their claims,” said NYPIRG Legislative Counsel Russ Haven. “We’ve seen this before when it comes to the ‘out-of-control’ auto insurance fraud crisis and medical liability insurance. Workers who make their living building skyscrapers and at other risky jobs at high elevations need to know that reliable safety systems are in place and that’s what the Scaffold Law promotes.” “Every day, there is another reminder of the danger faced by thousands of construction workers in New York. Construction remains one of the most dangerous jobs in the state,” said Josie Duffy, of the Center for Popular Democracy. “That is why workers, especially those working at dangerous heights, need common sense safety laws like the Scaffold Safety Law, to protect them. This common sense law promotes safety by holding accountable those who control a construction site and are responsible for the safety of those who work there.” On May 6, the Lawsuit Reform Alliance of New York released a report titled “Power of Attorney: Exploring the Influence of the Trial Bar in New York State Politics,” which focused on the spending of New York’s Trial Lawyers. They found that in 2013, lobbying spending had increased 37 percent since 2010. “Aggregate reported lobbying expenditures between January 1, 2013 and December 31, 2013 totaled $1,147,139, which includes $1,057,139 for NYSTLA and $90,000 for NYATL (New York Academy of Trial Lawyers),” the report states. “This was the first year on record during which NYSTLA spent over $1 million on lobbying.” In a press release issued by the New York State Chapter of the Associated General Contractors of America, President and CEO Mike Elmendorf stated, “[The] report shows why issues such as Scaffold Law reform, which would create jobs, reduce taxes, and increase worker safety have failed to become law in New York. Governor Cuomo said they were the most powerful force in Albany and now we know there are more than 1.2 million reasons why he may be correct. It’s time for Albany to stand up to the trial lawyers and thier shadowy special interests and pass not only Scaffold Law reform, but many other important pieces of legislation cur-

MIKE ELMENDORF

”…It’s time for Albany to stand up to the trial lawyers and they shadowy special interests and pass not only Scaffold Law reform, but many other important pieces of legislation currently being blocked by the trial lawyersmany of which would create jobs, lower taxes, and improve New York’s economy for all New Yorker’s.”

rently being blocked by the trial lawyers many of which would create jobs, lower taxes, and improve New York’s economy for all New Yorkers.” Dodge had not seen the report, but said, “The trial lawyers, this is one of their issues, one of many issues that they have. To the extent that they are stepping up their spending on lobbying, they’re probably making their case either more loudly or more often, or some combination of the two. So I don’t think it should be a surprise to anyone that increased lobby spending by the trial lawyers might have something to do with the reform not happening this year.” “The law has never been under such scrutiny as it is now, so there is a much greater threat to it being revised which would not make the trial attorneys happy,” said Corbin. “So if they see that threat there could be a reason that they are spending more money to oppose any changes.” continued on page 22

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Spread the word

Don’t be shy, tell your good stories and spread the word about the great work of the insurance industry. Financial Backbone of Communities Insurance provides New Yorkers with financial security and enables people to live life to the fullest. People would not be able to own a home, drive a car or start a business without insurance. In 2012 alone property and casualty companies paid $32.4 billion in claims. Giving Back Insurance companies and agents are dedicated to serving their communities. The industry donates financially to a myriad of worthy causes with just one example of these efforts being the Insurance Industry Charitable Foundation raising $1.4 million at the 2013 Benefit Dinner. Even more importantly, individuals dedicate their time to help those in need—whether it’s Meals on Wheels, flood recovery efforts, building a playground or encouraging greater safety— the industry is always looking to make a difference. Economic Driver The industry is a major contributor to New York’s economy contributing $41.6 billion to the gross state product (GSP) in 2011, accounting for 3.6 percent of the GSP. In 2012, the industry provided 190,027 jobs in New York, paid premium taxes totaling $1.3 billion, and held more than $19.3 billion in municipal bonds.

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[ COVER ] continued from page 20

In February, the Nelson A. Rockefeller Institute of Government issued a study concerning the Scaffold Law, in conjunction with Cornell University. The report stated after Illinois repealed their version of the Scaffold Law in 1995, non-fatal construction injuries had dropped. The report was received negatively, after it was revealed the report cost $82,000 and was paid for by the state Civil Justice Institute, researchers for the Lawsuit Reform Alliance of New York, who are for amending the law. The Institute’s Director, Thomas L. Gais has condemned the report in recent weeks, stating the study suffers from “really big weaknesses,” and that it is not considered an official product of the Institute. On May 1, the Institute issued a statement saying, “The funder did not attempt to influence the development of the research design, collection, or analysis of data at any time during the study.” The Center for Popular Democracy announced on May 5 they had filed a Freedom of Information Law request with the Institute in regards to the study. Information the Center requested includes the original request for a study, as well as other communications between the Institute and the Lawsuit Reform Alliance pertaining to the Scaffold Law. “When industry funds bogus research in hopes of undercutting New York’s critical worker health and safety laws, the public needs to know,” said Connie Razza, Director of Strategic Research for the Center for Popular Democracy in a press release. “We take very seriously the fact that industry dollars were used to finance a ‘study’ that puts forward the incredible assertion that New York’s Scaffold Law, which protects workers working at a height, actually causes worker injuries… We are now turning our sights on the money trail that financed this bogus work. Industry should not be allowed to try to buy credibility from institutions like SUNY.” Assemblyman Francisco P. Moya (DJackson Heights) introduced bill A8745 in February, also known as the Construction Insurance Transparency Act. The bill also has a companion bill in the Senate, S6700, sponsored by Senator Andrew J. Lanza (RStaten Island). The sponsor’s memo 22 May 12, 2014 / INSURANCE ADVOCATE

explains its purpose as expanding “upon current insurance reporting laws by providing more detailed reporting requirements of liability insurers’ ‘financial statements’ and ‘closed claims’ data, where those insurers provide coverage against claims made under Labor Law 240.” The memo goes on to say, “This data collection will provide lawmakers with a source of reliable and accessible data that will better enable them to evaluate liability insurance in this area and assist in providing an optimal product to New York citizens.” “The Construction Insurance Transparency Act is a common-sense measure that seeks to inject some hard facts into the highly-politicized debate over the Scaffold Safety Law. Opponents of the Scaffold Safety Law claim that the law drives up costs, but the fact is, we just don’t know if that’s the case,” said Assemblyman Moya. “The Construction Insurance Transparency Act would close the fact gap by calling on insurance companies to open up their books. I am sure that advocates on both sides of the Scaffold Safety Law divide can agree that transparency makes sense. Support for the Construction Insurance Transparency Act is growing and we look forward to seeing it signed into law this year.” NYIA opposes S6700/A8745 sponsored by Senator Lanza and Assemblyman Moya that would mandate individual insurance companies to publicly disclose proprietary information related to labor law claims. Industry-wide data is already publicly available. First, each general liability insurer’s rates are already filed with and regulated by the New York State Department of Financial Services. Second, loss costs are calculated by the independent rate service organization Insurance Services Office (ISO) on an aggregate basis,” said Melchionni. “Analysis of ISO’s data shows: costs based on filed rates for New York City exceeded rates for six comparable states by 300 percent to 1200 percent for six construction classes, loss cost averages ranged from 225 percent to 500 percent in New York City for two construction classes, and rates for Long Island and Upstate New York ranged from two to four times the rates for Florida or Connecticut across six construction classes.” “The bottom line is if insurance companies were able to write this business for even a small profit, many would. The state

CONNIE RAZZA

“We take very seriously the fact that industry dollars were used to finance a ‘study’ that puts forward the incredible assertion that New York’s Scaffold Law… We are now turning our sights on the money trail that financed this bogus work. Industry should not be allowed to try to buy credibility from institutions like SUNY.”

needs to focus on determining what can be done to encourage more companies to write this type of liability insurance,” continued Melchionni. “The extremely limited number of companies currently in the market is a testament to the problems created by the Scaffold Act. The cost drivers need to be carefully examined. Absolute liability for height-related claims is a blank check in New York—leaving insurance companies, businesses, municipalities and ultimately taxpayers open to infinite threats. Comparative negligence is the overwhelming standard for liability cases in New York. Scaffold Act claims need to be held to that same standard.” Dodge said IIABNY had not taken a position on these two bills, but did not know if the financial reports would be beneficial. “I guess the sponsors of those bills have continued on page 24

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[ COVER ] continued from page 22

introduced them because they don’t really believe what the insurance companies are saying, so they want to see data on what kind of losses those companies are paying out,” said Dodge. “I think what gets forgotten is insurance companies compete with one another…companies are very much aware of the effect on their competitive position of raising rates when they don’t have to.” “So while I can understand why people would want to see hard data as to what the companies are paying out, I just think they wouldn’t be charging the prices they were unless they needed to do so to cover their losses. I can understand why people would want more specifics; I’m not sure how much more that would tell us,” said Dodge. In January, Assembly Majority Leader Joseph D. Morelle (D-Rochester) and Senator Patrick M. Gallivan (R-C-I, Elma) introduced legislation, A3104 and S111 respectively, which would “establish a comparative negligence standard for claims under Labor Law sections 240 and 241 with respect to a recalcitrant worker.” “This bill does not take away the right of any injured worker to sue. Rather it makes a recalcitrant worker responsible for his own conduct. This approach encourages workplace safety by encouraging

“This bill does not take away the right of any injured worker to sue. Rather it makes a recalcitrant worker responsible for his own conduct. …”

workers to take responsibility for their own safety,” states the sponsor’s memo. “There are conflicting court cases that apply the doctrine of recalcitrant worker and this bill would clarify worker responsibility. This bill would establish a uniform standard for the application of the recalcitrant worker doctrine. It also is a modest change in the absolute liability of the safe place to work statute that remains the only such statute in place among the other 49 states.” “My goal is to modify the law to a comparative negligence standard that will level the playing field and reduce mandated costs for small businesses, farms, manufacturers, municipalities and school districts, and ultimately taxpayers. I would hope that this is one of the priorities that we consider this session,” said Senator Gallivan. “NYIA supports S111/A3104 sponsored by Senator Gallivan and Assemblyman Morelle that allows for comparative negligence of an injured worker in certain situations,” said Melchionni. “The association also supports additional proposals that would permit comparative

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. 24 May 12, 2014 / INSURANCE ADVOCATE

negligence in all circumstances.” “We [PIANY] are in support of any bills that will change the strict liability standard to negligence standard,” said Corbin. Dodge stated IIABNY did not support these bills, saying they “don’t go far enough.” NYSTLA issued a memo in opposition of the bills in April, stating they would “undermine the protections of New York’s Scaffold Safety Law.” “[It would] abolish a long-standing public policy intended to protect workers, significantly increasing the opportunity for abuse by unscrupulous owners and contractors of construction sites,” states the memo. “It is also unnecessary given the existing defenses of the recalcitrant worker and sole proximate cause. The fundamental premise of Labor Laws 240, 241 and 241-a is to ensure that safety equipment to protect workers is in place in all circumstances.” “Unfortunately, this bill would allow site owners and contractors to unfairly shift the burden of safety from the site owner or contractor, who exercises control of the work site, to the worker, who is powerless to exercise such control and is clearly in a subordinate position,” the NYSTLA memo continues. “In doing so, this amendment would skew the playing field and allow such owners and contractors to avoid their obligation to provide workers operating under inherently dangerous conditions with the necessary safety devices as required by the statute.” Melchionni stated NYIA wishes the Department of Financial Services will take a stand on this issue as well. “NYIA encourages the Department of Financial Services to take a leadership position on this issue. The state’s insurance experts need to weigh in and explain the detrimental impact the Scaffold Act has on New York’s insurance market,” said Melchionni. “NYIA remains hopeful that the legislature will adopt a comparative negligence standard. We think DFS taking an active role in changing this antiquated law is instrumental to the likelihood of this issue being addressed in the near future.”[IA]

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[ FACE TO FACE ]

By Michael Loguercio

Your Local Neighborhood MARKET-ing

o many times you have heard me mention in this column, or in a conversation that we may have had, about how important it is to obviously market both yourself and your business products through community involvement. You have also heard me say many times how important both face to face (hey, just like this column!) and internet marketing are both equally important modules in your business advertising plan. So what do you think will happen if you can combine both of these proven strategies into one comprehensive marketing design?

You have also heard me say many times how important both face to face (hey, just like this column!) and internet marketing are both equally important modules in your business advertising plan. Michael Loguercio

The following is a piece written by WA based Independent Agent Claudia McClain. In it, Claudia discusses her agency’s use of blending technology and marketing to ‘win’ locally - with both consumers and her customers. Claudia discusses her strategies around community involvement, and how this integrates with automating her agency’s online and social presence with their management system. Claudia’s agency leverages industry resources, and also consistently uses process review to proactively implement ‘lessons learned’. The McClain Insurance Services agency’s results for retention rate, Net Promoter Score, and community involvement are a great example of what can be gained from direct writers by effective local action (or potentially lost by inaction). Thank you to newly appointed Executive Director for ACT (Agents Council for Technology) Rob Berg, I am pleased to bring this article to you. Using Technology to Drive a Community-Based Marketing Strategy It’s a great time be an independent insurance agent. Technology lets us reach, engage and retain customers in ways we couldn’t have imagined even a dozen years ago. It’s also a great time to live in the Seattle area. Last month, our Seahawks capped a stellar season by winning the Super Bowl. Recently, we were able to combine these two “greats” — our industry role and our local NFL franchise’s accomplishment — to engage the community and bolster our visibility. Here’s how: Several days after the Seahawks won the NFC championship, I was contacted by PEMCO, a Seattle-based mutual insurer that helped me get my start in the business. Our agency was chosen to host what PEMCO was calling its “12th Fan” banner signing. 26 May 12, 2014 / INSURANCE ADVOCATE

PEMCO has promoted the 12th Fan — its take on the term, “12th man,” which refers to fans that support the 11 players on the field — throughout the season. It was leveraging that promotion by creating a 100-by-40-foot banner. Fans were invited to sign the banner, which would fly over North Jersey’s MetLife Field during Super Bowl weekend. With less than four days to promote the event, our six-person agency went into high gear. We issued a press release that was picked up by our newspaper, two radio stations and a local blogger. We tapped social media to promote the event with photos and video. We created a Facebook event, invited fans to attend, and paid to promote the event, boosting our reach to nearly 20,000 Facebook users. We built a website landing page for the event and placed a button on the home page pointing to it. We created and distributed to local businesses 2,000 postcards they could share with employees and customers, and repurposed postcard artwork to build an online ad for a local independent blog. We reached nearly 1,900 clients with an email that pointed them to our website and a football-themed customer survey. The email enjoyed a 44.6% open rate. We picked up 20 great testimonials through the survey. And we earned an average grade of 4.95 out of five and a Net Promoter score of 95%, which means that more than 9 out of 10 clients are loyal enthusiasts who will keep buying and will refer others. We programmed the video sign in front of our office to announce the evening event and rented portable lighting to illuminate our parking lot. We ordered pizza, salad and Skittles — the favorite candy of Seahawks running back Marshawn Lynch — to feed McClain team members working the event. During the event, we gathered 1,632 banner signatures — including the 12,000th one. We took lots of photos, which we’ve shared with local media and posted on our site and social platforms. We raffled off a signed Seahawks jersey. We generated buzz that continues to this day. And then our entire team went home and crashed. As frantic and hectic as things were, we could pull this off very quickly because of what we’ve learned — through ACT and some wonderful friends and partners in the business — and what we already had in place to engage prospects and clients. Industry Resources Some years ago, I was blessed to meet ACT’s Jeff Yates when I served on Progressive’s National Agency Council. Staying in touch with Jeff led to opportunities to help on various ACT projects addressing agencies of the future, the social web, business intelligence and, our latest endeavor, the customer experience. The white papers and articles these and other work groups generated have been especially useful to our agency. Frankly, I wish more agents knew of and used them. It’s a living research center for things we encounter every day in our agencies. The exposure through ACT to future-facing visionaries — fellow continued on page 28

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[ FACE TO FACE ] continued from page 26

agents, associations, consultants, carriers execs and vendors — has helped us immensely as we bolster our technology and marketing capacity. These individuals focus not just on what we’re doing today, but what we must do tomorrow. Being surrounded by innovative thinkers like that — people I would not have met otherwise — gets my imagination going faster and more deliberately. Particularly valuable are ACT discussions and resources on today’s — and tomorrow’s — insurance buyer. When we talk about how the new consumers will want to do business, my attention piques. As agents, we must stop doing transactional things consumers can do themselves. We must focus on building stronger relationships. Good technology frees up time to do this. I get especially inspired at ACT meetings by some younger agents in the group and by vendors who are helping to make us more accessible to clients. I just wish more agents were listening to the conversation. Community-Based Approach The conversation has helped us grow organically. Today, we enjoy a 95-96% retention rate. By sustaining strong client relationships, we can grow much more effectively. Many agents say their biggest source of growth is referrals, but do they know why they are getting them? Do they have a strategy for increasing referrals beyond what just might normally trickle in? For me, community involvement and customer engagement are foundations of our growth strategy. I frequently ask my team, “What must we do to be worthy of referrals?” There has to be a reason clients feel so bonded with our agency that they want their close friends and relatives to do business with us, too. To be worthy of referrals, we need to continue to ﬁnd ways to give back to the community. We need to show a concern for things outside of insurance — things more important to our clients than insurance. Community involvement has been part of our agency’s existence for some time. Years ago, we got involved with our local police department’s National Night Out activities. We evolved from that into sponsoring our parks department’s outdoor movie series. Before long, we were hosting our own events, including an e-cycle day — held just after Christmas — when folks come to our parking lot and safely dispose of televisions, computers and other electronics. As an agency, we aim to do a community event every six weeks or so, but because we’ve done many of them before, it’s not that difficult to manage. When agents say they couldn’t maintain such a schedule, I suggest they start small. Master one event, learn what it entails, and then add a new event down the road. That’s how our community activities evolved. For example, each Flag Day, we do an American Flag exchange. I pull out last year’s press release, email, newsletter article and video sign, update them to promote it, and people show up. Automating Activity Several years ago, we began to capitalize on technology to expand our reach, promote events and build stronger relationships in the community. Of course, we had been using our agency management system to handle policy- and account-based relationships for years, and this still is the centerpiece of our business. In the mid-2000s, we ventured online to better reach an increas28 May 12, 2014 / INSURANCE ADVOCATE

ingly digital insurance-buying public. We brought on a high school student, who stayed on after graduation and through college, to launch our social media presence. We partnered with a digital marketing company that designed a new site and provided a marketing engine that operates behind the scenes. Now, when people click to “get a quote,” their information is sent to us by email, and they are subscribed to various marketing sequences we designate in that engine.

“What must we do to be worthy of referrals?” Our agency management system talks to the marketing engine several times a day. This conversation eliminates rekeying. If someone requests an auto quote, they’re in our marketing engine database as a prospect. If they don’t convert right away, they become a warm lead. If we write them, they become active in the agency management system, and the marketing engine realizes they’re no longer a prospect. Once they sign on, we trigger a welcome sequence that begins with a video from me and involves a series of communications over the course of the year. It’s all done seamlessly. We rely heavily on social media and digital community engagement to drive website traffic. I have a part-time person, Nathalie, who has worked with me since 2006. Between the two of us, we pretty much handle all of the online and other marketing. She works on everything from social media and newsletters to graphic design and programming our electronic sign. Everyone else is encouraged to participate in social media, too. Often, employees or their spouses share items we can promote or take part in. And whenever we come up with a hair brained idea like, “Wouldn’t it be fun if we got a 12th man flag signed?” or “We need help with a shredding event,” they give their time willingly. We’ve got a great team. Lessons Learned Part of the reason we could pull off the 12th Fan event so well was experience gained — and processes in place — from earlier initiatives. We had done press releases for other events, so we had that down. We are active in social media, of course, so that was a natural. Our experience with landing pages and relationships with a printer and local media let us turn on all the faucets and get the word out quickly. We have a marketing calendar for the year, which we post in our break room, that helps keep us — all of us — in the know and on track. Technology, of course, helps manage it all. Use of the various platforms and tools helped us reinvent the agency. They give us a forward motion and a clear view of where we need to go. Knowing that automation delivers a thought-through outcome that will happen every time a situation occurs is very freeing. It has definitely made our agency life and marketing a lot better. It also has made customer and community lives better. Today, there are so many ways we can communicate with customers and prospect questions. Our speed of response is up; we can connect pretty much 24/7. Technology helps us communicate our agency brand and be raving fans of our community. We even leverage the tools to help local nonprofits.

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[ FAC E TO FACE ] Meeting the Challenge The biggest difficulty we’ve faced in our journey is sorting through which tools may not deliver as much value. It’s the typical agent bandwidth issue. Do we do as good a job on some platforms as others? Probably not. But as a personal lines agency, we focus on those we should and try to make the best possible use of them. When fellow agents say they could never manage such an active campaign, I say, “First, get over the idea you don’t need to do it. Consumers expect us to be in these places. If you don’t have the energy or bandwidth, bring somebody in who understands the platforms and emerging technologies and can manage them.” There are a lot more vendors now than before that can make life so simple. For example, we just launched a new iPhone app with a vendor I met at the ACT / AUGIE /AIMS Society meetings a few weeks ago. Our earlier app took us an amazing amount of time to get developed, approved and implemented. The new app has much more functionality and was launched in a matter of minutes. My closing advice is simple: It’s easy and affordable to be in the game. Follow the trade magazines and blogs and get involved with groups like ACT; that’s where we get some of our best ideas. If you’re feeling overwhelmed, choose something, master it, and go on to the next thing. And I think you’ll agree it’s a great time to be an independent agent, wherever you are. Thank you, Ron, for allowing me to share this, and congratulations on your new position! If any of you would like to talk about ways that you can combine technology and community involvement to help increase revenue within your business, please give me a call or drop me a note, as it would certainly be my pleasure to discuss this with you. Speaking of local community involvement, PIA of NY recently held its annual Regional Awareness Program, at Crest Hollow Country Club on Long Island. Our Keynote Speaker, “Mr. Islander” himself, Bobby Nystrom, shared with RAP attendees some of the wisdom that he learned from the example set by his former coach, Al Arbour, whom Nystrom called “the best motivator that I ever met.” Bob spoke of how “Good is the enemy of great.” and that most people give up once they reach “good.” It’s few that push past “good” to become “great.” Also during the luncheon, I had the pleasure of presenting awards to John Farese of Travelers for the “Industry Professional of the Year;” and to Bob Birner of Morstan General Agency for the “Distinguished Service Award.” Michael Cracco of Completely Covered Insurance, presented Nassau Legislator Michael Venditto with the “Community Service Award.” As far as continuing education was concerned, this too was of championship caliber. In the morning, Cathy Trischan, CPCU, CIC, CRM, AU, ARM, AAI, CRIS, MLIS, led Certiﬁcates of Insurance—NY Construction Changes. Attendees learned about the New York Construction Certificate of Liability Insurance Addendum, and discussed both the mechanics of completing the form and coverage issues. In the afternoon, Ms. Trischan returned to lead another course, Ethical Issues in E&O. The class addressed the very delicate

BOBBY NYSTROM TALKS TO THE ATTENDEES ABOUT HIS HOCKEY CAREER, INSURANCE CAREER, AND HOW THE TWO WERE RELATED

CATHY TRISCHAN LED THE DAY'S TWO CONTINUINGEDUCATION COURSES

MICHAEL LOGUERCIO PRESENTS BOB BIRNER OF MORSTAN AGENCY WITH THE DISTINGUISHED INSURANCE SERVICE AWARD

continued on page 30

INSURANCE ADVOCATE / May 12, 2014 29

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[ FACE TO FACE ] continued from page 29

relationship between ethics and the choices insurance professionals make to protect their agencies against errors-and-omissions claims. Ms. Trischan specifically looked at the ethical responsibilities of insurance producers and the different approaches to decision-making, in a variety of situations. As PIA RAP Committee Chair, I was honored to work on the committee alongside such talented folks in the insurance industry (and dear friends of mine) like: • Keith Arnold, Mercury Insurance Group • Robert Boyle, CPCU, Lancer Insurance Co. • Dina Bruno, MetLife Auto & Home • Jennifer DeCristofaro, Lancer Insurance Co. • Donna Doyle, Narragansett Bay Insurance Co. • Linda Fazzio, Interboro Insurance Group • David Lande, JD, CIC, Total Management Corp. • Jeff Leibowitz, Atlantic Agency • Frank Malpigli, Malpigli & Associates Insurance Agency • Michael Plafker, CPIA, Member Brokerage Service LLC • Peter N. Resnick, Interboro Insurance Group • Robert Shapiro, Global Facilities Inc. • Steven Sternberg, BankDirect Capital Finance

MR. ISLANDER BOBBY NYSTROM POSES WITH THE NY-YIP BOARD OF DIRECTORS COMMITTEE CHAIR MICHAEL LOGUERCIO AS WELL AS PIANY EXECUTIVE DIRECTOR KELLY NORRIS AND PIANY PRESIDENT AND PRESIDENT-ELECT TONY KUBERA

Thank you for all of your hard work, as this year’s event may prove to be one of the finest that we have ever produced! Well, that’s what’s happening around town, and until next time, “Ciao for now!”[IA] Michael Loguercio is the Regional Sales Manager for EZLynx; and has been active in the insurance industry since 1978 as a licensed insurance broker and an insurance technology professional. He is an active Past President of the Young Insurance Professionals of New York State, 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. NY-YIP/PIA has honored Michael with a “Distinguished Service” award in 2001; “Insurance Professional of the Year” award in 2009; “Lifetime Achievement” award in 2012; and “Special Service” awards in 2013 and 2014. In his community, Michael is the Immediate Past President and current member of the Longwood Central School District Board of Education on Long Island, NY since 2004; is a Director on the board of REFIT NY (Reform Educational Financing Inequities) and is a member of The Middle Island, NY, Rotary Club and Central Brookhaven Lion’s Club. He also served two terms on his Church’s vestry, and in 2013 he was awarded the SCOPE “Community Service” award for his dedication to the public. 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. 30 May 12, 2014 / INSURANCE ADVOCATE

PIA LONG ISLAND RAP CONVENTION

THE LONG ISLAND RAP COMMITTEE POSES WITH THE EVENT'S KEYNOTE SPEAKER BOB NYSTROM.

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By Jamie Deapo

[ ON T H E LEVEL ]

Taking A Lesson From March Madness

hy do consumers believe that insurance is a commodity? Because an enormous amount of advertising money has been spent to teach them that. Conversely not enough time, money and effort has been spent to tell them the truth. Most independent agents and brokers know that not all coverage is alike and there are many opportunities for consumers to be duped into buying less protection than they currently have or that they need to be properly protected. Currently only Mayhem, the character from the Allstate ads, even hints to the consumer’s potential for inadequate coverage when he says if you bought cut rate insurance you might not be covered for this. We created the Trusted Choice® brand to highlight the benefits of doing business with an independent agent or broker. The ability to offer a consumer customized coverage providing the protection they want, from a choice of insurance companies backed up by professional advice and service especially at the time of a claim. Customized coverage chosen after being given professional advice on coverage eliminates the consumer’s worries of not getting the protection they need and want. It acknowledges that all insurance is NOT ALIKE and what may seem like a small difference in a policy could mean not enough or no protection when a claim occurs. Independent agents and brokers understand that and Trusted Choice® has worked hard to communicate it to consumers but our resources are limited. More education via advertising needs to come from local agents and brokers. Because our members are all independent business people, they choose the amount and type of advertising they wish to provide for their business. Doesn’t it make sense to allocate a good share of what is being spent on debunking the insurance is a commodity myth? The alternative is to allow the myth to exist, not gain market share and be forced to play the price game in getting consumers to become customers. It really upsets me to see the direct response carriers trivialize the education,

experience and expertise of independent agents and brokers as well as their staffs. Many of these dedicated people have spent

to the insurance buying process. We need to work aggressively to educate consumers on the pitfalls of buying coverage only

Most independent agents and brokers know that not all coverage is alike and there are many opportunities for consumers to be duped into buying less protection than they currently have or then they need to be properly protected.

Jamie Deapo

years training and hold professional designations like CPCU, CIC, AAI, ACSR to name a few. Trying to provide a consumer quality protection who has been misled to believe insurance is about price instead of value is very frustrating. I know it seems like an uphill battle but I’ve never known independent agents and brokers to back down when challenged. The recent NCAA men’s basketball tournament showed that determination and will can overcome what seem to be insurmountable odds. How many upsets were there? How many teams who were ranked low and outmanned did the impossible and won their game? Very few people thought UConn had the ability to beat Kentucky in the championship game but they were determined to out hustle and out play their opponent. Independent agents and brokers have to show that same determination. Although our opponents, the direct response carriers, can out spend us and have convinced consumers they are the better buy based on price we can still win back those consumers and their business. Recently several articles have indicated that many consumers research insurance on the internet but want the services of an agent or broker when they buy. That’s all the opening we need. Our game plan going forward should be to dispel the insurance is a commodity myth and bring back value

based on price. We need to inform them of all the subtle ways coverage can be written to deny them protection when they’ve had a loss. We need to make them believers in the skills that independent agents and brokers bring to buying insurance protection. It wasn’t easy for UConn and it won’t be easy for us. It will mean changing the way we sell and working harder to convince consumers why they should buy value. It may mean investing some more money to advertise the benefits of doing business with independent agents and brokers. Agents and their staffs will need to work on practicing the best methods of selling value to consumers. It will definitely take commitment and practice to stay true to value selling even when it seems like the odds are stacked against us.[IA]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com INSURANCE ADVOCATE / May 12, 2014 31

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[ IN THE ASSOCIATIONS ]

LIRAP: More than 300 drawn to PIANY in Woodbury Conference

ore than 300 insurance professionals attended The Professional Insurance Agents of New York’s Long Island Regional Awareness Program on May 1, 2014. This year’s Long Island RAP took place at Crest Hollow Country Club in Woodbury. The venue and perfect spring weather combined with inspired speakers and important networking opportunities to make this year’s Long Island RAP a success for agents and brokers in attendance. Former New York Islander Bob Nystrom, a.k.a., “Mr. Long Islander,” adopted Long Islander and 24-year insurance industry veteran—spoke to RAP attendees over lunch, sharing key leadership lessons from his coach, that served him well in both hockey and business. Though he won fame in the hockey rink, an eye injury in 1988 pushed him to find success outside professional sports. “It was kind of the best thing that ever happened to me,” Nystrom reflected. Picking up where one of his off-season jobs had left off, Nystrom began his new insurance career as a property/casualty agent before shifting to health insurance and employee benefits. “… [T]he insurance industry turned out to be a real blessing,” said Nystrom. Speaking of the company he subsequently cofounded, Nystrom continued, “We actually grew the firm from four people to becoming a public company of 125 offices around the country.” Nystrom emphasized the importance of PIA for agents and the entire industry. “PIA has certainly done a wonderful job over the last [75] years, and they continue to do incredible work for the insurance industry. They provide a wealth of information and updates to the insurance agents … [a]nd, needless to say, so many things have changed in the industry over the last few years; it has become so important for all agents to be kept up to date on new developments, changes in regulations and also new legislation.” Finally, Nystrom shared with RAP attendees some of the wisdom he learned 32 May 12, 2014 / INSURANCE ADVOCATE

from the example set by his former coach, Al Arbour, whom Nystrom called “the best motivator that I ever met.” His first lesson was, “Good is the enemy of great.” Nystrom explained that most people give up once they reach “good.” It’s few that push past “good” to become “great.” Arbour taught Nystrom and his teammates respect by demanding it. When a player took criticism poorly and smashed an egg on the coach’s head, Arbour didn’t shout. But, in two weeks, that player was off the team. Nystrom also learned, “[t]he only way you can be successful is to have goals.” Arbour set specific, attainable goals for his team, such as cutting their goals-against by 100 and scoring 60 points. Later, down three games against the Pittsburg Penguins in the 1975 playoff series, Arbour told the team, “Just win one shift. Then win the next shift and the next shift.” The Islanders went on to win the next four games and the series. Arbour also taught Nystrom and his teammates to take responsibility for their mistakes, but not to let fear of mistakes paralyze them. Nystrom remembered Arbour’s advice, “What’s the worst that can happen if you lose? You’ll wake up the next morning. The sun’s going to come up. But, isn’t it better to be on your toes, attacking and loving to win, rather than being on your heels, being afraid of losing?” The final piece of Arbour’s wisdom that Nystrom shared was, “There is nothing you can do about something that you did three seconds ago, five minutes ago, five years ago. You can’t do anything about it. Learn from it; file it; and forget it.” It’s this last piece of advice that allowed Nystrom to move past a game-losing performance in game five to score his famous winning goal in game six of the 1980 Stanley Cup finals, in overtime against the Philadelphia Flyers.

Award Ceremony Also during lunch, Nassau County Legislator Michael Venditto was honored with the 2014 Long Island RAP Community Service award for his work

with Superstorm Sandy relief centers, as well as his advocating for drug and alcohol prevention, community health care and small businesses. “When Superstorm Sandy hit in October 2012, we were all victimized,” PIANY Vice President Michael Cracco said as he presented the award. “He worked day in and day out, for months, to bring his community back to life.” “But he’s done more,” Cracco added. “As a legislator, he is in a unique position to enact change at higher levels, and he has worked hard to improve the lives of those who make up his community.” “It’s kind of a backward feeling, being up here receiving this award,” Venditto said as he accepted the award. “I really came here today to say thank you to each and every one of you for the work you are doing. I have seen people like you, in the trenches, doing grunt work, being there for our residents, helping them get back into their homes and back on with their lives.” PIANY also presented the Industry Professional of the Year award to John Farese, regional sales director for Travelers Insurance Co. The award recognizes an individual from an insurance company, general agency, managing general agency or other insurance industry profession, who has demonstrated qualities that foster a strong working relationship with agents and brokers, and who has exemplified a commitment to professionalism and service. “Throughout his career, John has demonstrated respect for colleagues and customers in the industry, and an unwavering passion and dedication to his craft,” Long Island RAP Committee Chair Michael Loguercio said to the crowd. Farese accepted the award with heartfelt comments, thanking his family, who was present, for standing by him, and to the industry for making his marriage possible. “I met my wife when we both worked with The Hartford,” Farese said, “and it was 23 years ago, almost to the day, in this very room, that we were married. And many of you were there. It was like an insurance event!”

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Finally, PIANY honored Robert Birner of Morstan General Agency with the Distinguished Insurance Service award. “The Distinguished Insurance Service award honors an individual who has dedicated his or her life to the insurance industry,” Loguercio said, “a distinction that represents our honoree, who has tirelessly worked for his community for more than 55 years.” “I’ve been in the field for about 55 years, and I made a lot of friends, believe it or not,” Birner said as he accepted his award. “I just would like to acknowledge some of them.” He then thanked his many friends and colleagues.

Education Thanks to two continuing-education courses, event-goers also were able to earn valuable CE credit during Long Island RAP. In the morning, Cathy Trischan, CPCU, CIC, CRM, AU, ARM, AAI, CRIS, MLIS, led Certificates of Insurance–NY Construction Changes. Attendees learned about the New York Construction Certificate of Liability Insurance Addendum, and discussed both the mechanics of completing the form and coverage issues. In the afternoon, Trischan returned to lead another course, Ethical Issues in E&O. The class addressed the very delicate relationship between ethics and the choices insurance professionals make to protect their agencies against errors-and-omissions claims. Trischan specifically looked at the ethical responsibilities of insurance producers and the different approaches to decision-making, in a variety of situations. This course was approved for E&O loss-prevention credit by Utica Mutual & Fireman’s Fund.

PIANY V.P. MICHAEL CRACCO INTRODUCED 2014 COMMUNITY SERVICE AWARD-WINNER AND NASSAU COUNTY LEGISLATOR MICHAEL VENDITTO

NASSAU COUNTY LEGISLATOR MICHAEL VENDITTO ACCEPTED THE 2014 COMMUNITY SERVICE AWARD

JOHN FARESE, REGIONAL SALES DIRECTOR FOR TRAVELERS PERSONAL INSURANCE, ACCEPTED THE 2014 INDUSTRY PROFESSIONAL OF THE YEAR AWARD

JOHN FARESE WITH LONG ISLAND RAP 2014 CHAIRMAN MICHAEL LOGUERCIO.

LONG ISLAND RAP 2014 CHAIRMAN MICHAEL LOGUERCIO MODERATED THIS YEAR’S AWARDS PRESENTATION AND KEYNOTE ADDRESS.

ROBERT BIRNER, MARKETING MANAGER FOR MORSTAN GENERAL AGENCY, ACCEPTED THE 2014 DISTINGUISHED INSURANCE SERVICE AWARD

Trade Show and Networking Throughout the day, industry professionals browsed a busy, sold-out trade show with scores of exhibitors displaying the latest products and innovations in the field. A variety of door prizes and contests created a palpable energy on the floor. After the awards luncheon and keynote address, attendees enjoyed the NY-YIP Ice Cream Social to network and make valuable contacts in the region and the industry.[IA]

INSURANCE ADVOCATE / May 12, 2014 33

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[ LOOKING BACK… Insurance Advocate, 25 years ago]

34 May 12, 2014 / INSURANCE ADVOCATE

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

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com INSURANCE ADVOCATE / May 12, 2014 35

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[ COURTSI DE ]

By Matthew Gaul, Denton’s

Putative Class Action Challenges Use of “Shadow Insurance”

new putative class action suit filed in the Southern District of New York alleges that the use of so-called “shadow insurance” transactions violates New York Insurance Law Section 4226(a)(4), which prohibits insurers from making “any misleading representation, or any misrepresentation of the financial condition of any such insurer or of the legal reserve system upon which it operates.” The April 23, 2014 complaint – filed by plaintiffs’ counsel Perkins Coie LLP– is the first of its kind and draws heavily from a June 2013 New York Department of Financial Services (NYDFS) report that criticized the use of “shadow insurance” by New York life insurers. Known more formally as “captive reinsurance,” the practice involves reinsurance of a subset of an insurer’s existing policies through a wholly owned subsidiary rather than through a

36 May 12, 2014 / INSURANCE ADVOCATE

third party. These subsidiaries are typically located outside of New York in jurisdictions with less stringent reserve and capital requirements. According to the National Association of Insurance Commissioners (NAIC), captive reinsurers underwrite more than 25 percent of reinsurance policies in the US life insurance industry. The complaint alleges that the use of captive reinsurance resulted in misrepresentations about the insurer’s exposure to the risk of financial loss, its financial condition and its reserve system. Relying on a section of the New York Insurance Law that governs ethical sales practices, the class action plaintiffs seek a statutory penalty in the amount of all premiums paid by class members for life insurance policies in effect during the class period. It is unclear whether putative class members’ policies would also be rescinded and far less clear whether such

rescission would actually serve the putative class policyholders’ long-term interests. It is equally unclear how the class representatives plan to show reliance on a class-wide basis given the individualized nature of the life insurance sales process. This lawsuit and the June 2013 NYDFS report highlight growing concerns about the use of captive reinsurance by a number of life insurance companies. At the 2014 NAIC Spring National Meeting, commissioners from New York and California expressed their inclination to impose moratoriums on all captive reinsurance transactions. Other commissioners supported less radical changes, such as new rules to require holding of additional hard assets, approval of the quality of assets used to support reinsurance credit, public disclosure and different risk-based capital calculations. The case is pending before the Hon. Jesse M. Furman. [IA]

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[ IN THE ASSOCIATIONS ]

RAA Elects Officers

ad Montross, President and Chief Executive Officer, General Reinsurance Corporation, was elected chair of the Board of Directors of the Reinsurance Association of America (RAA) at the 46th Annual Meeting of Members held in Washington. Elected to serve with Mr. Montross are vice chair Henry Klecan, President and Chief Executive Officer, SCOR U.S. Corporation and SCOR Reinsurance Company, and Michael Sapnar, President and Chief Executive Officer, Transatlantic Holdings, Inc., who will serve as secretarytreasurer. Mr. Montross is also chair of the Council of Reinsurers and Brokers, and Robert Hatcher, Executive Vice President and National Managing Director, U.S. Branch Network, Willis Re, was elected cochair of the Council of Reinsurers and Brokers. Tad Montross is Chairman and Chief Executive Officer of General Re Corporation. Prior to assuming that role in April 2008, he was President and Chief Underwriting Officer of General Re since 2001. Tad joined General Re in 1978 as a Casualty Facultative Underwriter. He was promoted to Senior Vice President in 1992. Tad is a graduate of Harvard College. He currently serves on the Executive Committee of the Board of St. John’s University’s School of Risk Management and the Executive Committee of the Board of Trustees of the American Institute for CPCU. He has served on the Board of Directors of the National Disaster Coalition and the Insurance Information Institute, and on the Advisory Committee of the Chicago Board of Trade. Henry Klecan is currently Managing Director of SCOR’s operations in the Americas. Mr. Klecan is also the President and Chief Executive Officer of SCOR U.S. Corporation and SCOR Reinsurance Company, SCOR Canada Reinsurance Company and Vice-Chairman of SCOR Global Life Americas Reinsurance Company (SGLA) and SCOR Global Life USA Reinsurance Company (SGLUSA); he also serves as the Chairman, President and Chief Executive Officer of General Security National Insurance Company and

General Security Indemnity Company of Arizona. Mr. Klecan is a past member of the SCOR Group Executive Committee (Paris). Mr. Klecan is a graduate of Concordia University earning a BA, Philosophy and Economics, and the University of Montreal, where he obtained his law degree. He is a member of the Quebec Bar Association. Michael Sapnar is President and CEO of Transatlantic Holdings, Inc. and its subsidiaries, Transatlantic Reinsurance Company (TransRe) and Fair American Insurance and Reinsurance Company (Fairco). Mike joined TransRe in 1995 as an Assistant Vice President in the Special Casualty Unit underwriting D&O, E&O and Medical Malpractice. He transferred to the London Office in June 1996. He was appointed Underwriting Manager of the London Branch in 1998 until 2002 when he returned to New York serving as the Chief Underwriting Officer for North America. He was appointed President and CEO in 2012. Mike earned a BA in Economics from the College of William and Mary and an MBA in Finance from New York University. Robert (Trey) Hatcher is Executive Vice President and National Managing Director, U.S. Branch Network, Willis Re, responsible for Willis Re’s 13 branch offices in the United States. He was appointed to that position in 2007. Trey is also Senior Account Executive responsible for the production of new business and account management. He is based in Philadelphia. Before joining Willis in 1994, he was Vice President and Principal with Towers Perrin. Trey started his career with Chubb & Son. The Reinsurance Association of America is the leading trade association of property and casualty reinsurers doing business in the United States. RAA membership is diverse, including reinsurance underwriters and intermediaries licensed in the U.S. and those that conduct business on a cross-border basis. The RAA represents its members before state, federal and international bodies. [IA]

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[ GUEST OPINION ]

By Marilyn M. Singleton, M.D., J.D.

Change is Not Always for the Better

ecently, I took a respite from my concerns about the Affordable Care Act, which I left simmering in the crockpot while I was re-visiting the Kingdom of Cambodia. Most people visit Cambodia for a brief trip to Siem Reap to experience the magnificent ancient temples at Angkor Wat, the symbol adorning its flag. Some visit the capital city, Phnom Penh, to experience mass graves and a torture camp, prison, and execution Marilyn M. Singleton, MD center. Cambodia has a haunting physical and emotional landscape and an intangible something about these inspirational people that lures many visitors back. The prolific and feared Khmer Angkor Empire that extended over Southeast Asia was transformed by years of civil or border wars and French protectionism. But the mother of all change was imposed by a native Khmer, Saloth Sar, better known as Pol Pot, in the name of creating an equal society. Pol Pot led the communist Khmer Rouge who overthrew the sitting Khmer Republic and renamed the country “Democratic Kampuchea.” Within hours of victory in 1975, armed soldiers began herding the two million residents out of Phnom Penh. Pol Pot assured them they could return. Instead, the Khmer Rouge razed Phnom Penh and other cities and towns. The residents were forced into the countryside to work collective farms up to 18 hours a day on meager rations. Villagers’ houses were burned to ensure they could not return. Pol Pot destroyed anything that represented capitalism and pre-revolutionary society, including hospitals, schools, Buddhist temples, and hotels. The goal was to return to “Year Zero” with a rice-based economy and a single agricultural class. To that end, Pol Pot immediately murdered the educated and people who wore 38 May 12, 2014 / INSURANCE ADVOCATE

glasses or had a high forehead (signs of intellect). Others were imprisoned in tiny cells and tortured “to confess” to “pre-revolutionary lifestyles and crimes,” which usually included some kind of free-market activity. The reward for a “confession” was execution or life in a labor camp with “reeducation.” Ironically, in 1979 the Vietnamese freed the Cambodians from their twisted leader when they extended their border war. All told, Pol Pot killed 2 to 3 million – at least 25 percent of the population – through murder, starvation, or disease. Many of the dead were buried in some 20,000 mass graves, or “Killing Fields” all over the country where human remains still rise to the surface. Despite the arrival of peace in 1993, Pol Pot’s legacy lives on. Fifty percent of the population is under age 25. Forty percent of people over age 40 have post-traumatic stress disorder (PTSD). With 95 percent of doctors and 80 percent of teachers murdered, the country is limping along to recovery with little infrastructure. Even knowing the government plays fast and loose with foreign aid, Cambodia draws more donor-based non-governmental organizations than any other country. Phnom Penh is growing, with new government buildings and hotels amidst the remains of once-elegant French colonial homes and burned-out buildings. Siem Reap has doubled its hotels in the last five years and boasts the best Mexican restaurant in Asia. (We preferred standard Khmer fare of rice, morning glories, and fish.) Although medical care is free to the certifiably poor in sparsely equipped clinics, 85 percent of children are seen in five modern hospitals established by Dr. Beat Richner with private donations. His hospital in Siem Reap is flanked by 5-star hotels. People arrive on foot or 3 to a motorbike: a driver, a patient, and someone holding the IV bag. By 5 a.m., hundreds of people are queued up. Street vendors sell French bread and crepes or rice and noodles to those in line. A written constitution, a three-branch government, and multi-party elections proved to be no guarantee of good government. Corruption, economic mismanage-

ment, and lack of transparency have become part of the government fabric. Consequently, some Cambodians have just tuned out. Fortunately, many people refuse to be miserable and are determined to overcome past and current abuses by their leaders. Some carry those little black and white composition books and are not shy about asking for help with their English so they can get good jobs. They have their own vision of a better life. Pol Pot destroyed Cambodian society by promising social and economic equity. Expressing no regret, his last words were reportedly, “Everything I did, I did for my country.” [IA] Marilyn M. Singleton, MD, JD is a board-certified anesthesiologist and Association of American Physicians and Surgeons (AAPS) member. Despite being told, “they don’t take Negroes at Stanford,” she graduated from Stanford and earned her MD at UCSF Medical School. Dr. Singleton completed 2 years of Surgery residency at UCSF, then her Anesthesia residency at Harvard’s Beth Israel Hospital. She was an instructor, then Assistant Professor of Anesthesiology and Critical Care Medicine at Johns Hopkins Hospital in Baltimore, Maryland before returning to California for private practice. While still working in the operating room, she attended UC Berkeley Law School, focusing on constitutional law and administrative law. She interned at the National Health Law Project and practiced insurance and health law. She teaches classes in the recognition of elder abuse and constitutional law for non-lawyers. Dr. Singleton recently returned from El Salvador where she conducted makeshift medical clinics in two rural villages. Her latest presentation to physicians was at the AAPS annual meeting about challenging the political elite.

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