VOLUME 124, NUMBER 11 / June 3, 2013
A CINN Group, Inc. Publication
Serving: New York, New Jersey, Connecticut, Pennsylvania and Washington D.C. Since 1889
NYIA ANNUAL CONFERENCE Addresses Most Pressing Issues in New York
Pictured: Financial Services Superintendent Benjamin Lawsky at right with NYIA President Ellen Melchionni and NYIA Chair Jeffrey Rice, President and CEO of Wayne Cooperative Insurance Company
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Contents
June 3, 2013 | volume 124 number 11
[COVER STO RY ] 16
NYIA Annual Conference
[FEATURES] 4
Foreword: Navigator. Steve Acunto, Publisher
6
Foil Redux: Disappearing Act Peter H. Bickford
10
On the Level: A Free Ride? Jamie Deapo
12
In the Associations: IIAASC Installs Officers & Directors
24
Face to Face: A Dream and a Mouse Michael Loguercio
28
Courtside: ELANY Has No Power to Sue to Enforce Insurance Law Violations Lawrence N. Rogak
35
Classifieds
36
Looking Back: June, 1988
16
10
24
[AD FEATURES] 15
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12 www.insurance-advocate.com
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[ FORE WORD ]
Steve Acunto
S
Navigator.
M
any of us attend seemingly endless board meetings, committee meetings, and council meetings; we may start to get bored, look at our cell phones, look out the window, get a water and generally get unwound by some of the monotony that is inherent in process driven circumstances. There are very few times in my life when I can recall attending a process centered meeting, that is, one in which rubrics for Associations or Universities were being established, wherein there was actually excitement and wherein you could sense that you were playing with a class of valedictorians rather than the usual mix. I will never forget meeting for the first time with Dick Kennedy, Dan Schmidt, Bob Mangino, Susan Mack, Charlie Havens, Ron Jacks, Mark Gurevitz, Charlie Foss, and Ed Rondepierre to form ARIAS•U.S. At that meeting, unlike other meetings where everyone is simply playing checkers just to get across the board, this was world class chess where extraordinarily bright people were moving players and moving ideas and all with a lofty common objective – to seize the moment and to create, out of a few good concepts, a viable process that would endure and grow as it has today into an enormously useful, intelligent organization for the top players in the international insurance-legal sphere. I refer to ARIAS•U.S. When I ED RONDEPIERRE learned of Ed Rondepierre’s passing, I thought to myself that I felt that it was almost impossible that this giant of a man and friend could have actually left that circle of intelligence and leadership that he helped spark in 1995. His life was rich and productive. Ed held a J.D. from the Temple University School of Law and a B.S. from the U.S. Merchant Marine Academy. He was admitted to and held membership in the District Of Columbia Bar, the Connecticut Bar Association, The American Bar Association, the Inter American Bar Association and the U.S. Supreme Court. Following Service as a licensed officer on merchant vessels and a commissioned officer on U.S. Navy vessels, Ed embarked on his insurance career in 1955 with INA (Insurance Company of North America) as a Marine Surveyor and would go on to become General Counsel of the INA Group in 1970 and Deputy Chief of Legal Affairs in 1976. He joined General Reinsurance Corporation in Greenwich in 1977, as Senior Vice President and General Counsel. He served on the Board of the International Association of Defense Counsel during his tenure and authored several industry books. After retiring in 1995, he was a co-founder and served as President and Director Emeritus of ARIAS•U.S. and as a highly respected certified arbitrator/umpire. An avid sailor, he was a member of the Stamford Yacht Club where he served as secretary on the board of directors. As a navigator, a leader in the most complex of insurance-legal waters, he will not soon be forgotten. Our sympathies to Nan and to the family. [IA] 4 June 3, 2013 / INSURANCE ADVOCATE
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VOLUME 124, NUMBER 11 JUNE 3, 2013
EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Michael Loguercio Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x126 circulation@cinn.com PUBLISHED BY CINN Group, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264 www.cinn.com | info@cinn.com President and CEO Steve Acunto
CINN G R O U P, I N C .
INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 21 times a year, and once a month in July, August and December by CINN Worldwide, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing offices. POSTMASTER Send address changes to Insurance Advocate®, PO Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $110.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN Worldwide, Inc. and is copyrighted 2013. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Office.
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By Peter H. Bickford
Foil Redux
I
have previously written about my efforts to fill some of the gaps in the annual report of the NY superintendent of financial services to the legislature and the governor through the use of Freedom of Information Law (FOIL) requests. As I reported, the result was a mixed bag – some success and some not so much.
cial risk license allows domestic insurers to write certain types of business traditionally written through the non-admitted excess and surplus lines market on the same basis, i.e., free of rate and form filing requirements. Logic would suggest that understanding the volume, growth and usage of the
Logic would suggest that understanding the volume, growth and usage of the “free zone” writings, including the use of the new “large commercial insured” category, should be as important to the regulators as the excess and surplus lines business. Peter H. Bickford
One of my successful FOIL requests was obtaining a schedule of excess and surplus lines business written in New York during calendar year 2011. This was one of those schedules regularly appearing in the old form of insurance department annual report but removed from the new department of financial services report. This schedule shows an increase in 2011 excess lines written premiums of $450 million over 2010 for a total of $2.47 billion. This total represented 6.84% of all property casualty insurance premiums written in New York during 2011, up from 5.77% in 2010. The schedule also includes a breakdown by line of business. In the same FOIL request, I sought similar information about special risk – or “free zone” — insurance writings. Under Article 63 of the NY Insurance Law domestic insurers can purchase a “special risk license” that allows them to write three classes of risks free of rate and form filing requirements: large risks meeting a minimum premium threshold; hard to place risks listed by regulation (Regulation 86); and a new class created last year of large commercial insureds as defined in the Non-Admitted and Reinsurance Reform Act (NRRA), a part of the 2010 Federal Dodd-Frank legislation. In short, the spe6 June 3, 2013 / INSURANCE ADVOCATE
“free zone” writings, including the use of the new “large commercial insured” category, should be as important to the regulators as the excess and surplus lines business. For instance, the legislative and regulatory implementation of the new large commercial risk class was criticized for its restrictive, redundant and unnecessary filing requirements that seemed to undermine and detract from its intent and purpose. The data on the writings in this new class, therefore, would seem to have value in assessing the importance of the new class from both a business and regulatory perspective. Curiously, however, unlike my request for the E&S details that was honored, my FOIL request for the same information regarding free zone business was denied! The main reason stated by the DFS in denying my request was that the information sought was available through the DFS website by accessing each special risk insurer’s electronically filed free zone schedules. In other words, all I had to do is look up the schedules filed by each of the over 200 special risk insurers and manually compile my own summary schedule. I assume that the counsel writing this position on behalf of the DFS was not intentionally trying to be condescending or
disingenuous. Intentional or not, however, it is a very troubling posture from a public access perspective. The DFS requires each special risk licensee to file a detailed annual report on its writings in each class, including a detailed spreadsheet providing for written premium information by line within each of the three classes. Furthermore, the circular letter incorporating these filing requirements states that “[t]he data compiled from insurer responses will be used to produce the Department’s Annual Free Trade Zone Update.” However, I have not been able to find any such Annual Free Trade Zone Update on the DFS website or elsewhere, nor was such an update offered in response to my FOIL request. Another reason given by the DFS for denying my FOIL request was that “FOIL does not require an agency to create a record that does not exist (i.e., a summary table).” Aside from ignoring the law (see Public Officer Law §86(a)(3), which states that “[w]hen an agency has the ability to retrieve or extract a record or data maintained in a computer storage system with reasonable effort, it shall be required to do so.”) the DFS position seems to be in conflict with its own statement that it will use the filings to produce an “Annual Free Trade Zone Update.” If the DFS prepared an update of the special risk business based on the information filed by special risk licensees as it said it would, why didn’t it provide that information in response to a proper FOIL request? If it did not prepare such summary as promised, why not? The insurance law and regulations are replete with requirements for insurers and others regulated entities to compile and report data to the department. It is a waste of everyone’s resources if that data is not cumulated, analyzed and the results appropriately and openly shared with all interested parties including industry participants, investors, service providers, consumers and legislators. For the most part, such information was regularly made available voluntarily as part of the insurcontinued on page 8
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ance department’s annual report to the Legislature and the Governor, but as we know, much of this information has been eliminated from the DFS version of an annual report. Regulatory oversight is not just about “enforcement,” but is also about proper monitoring the health of insurance entities and availability of product at reasonable and sustainable costs. To this end, the DFS should be expanding not contracting — sharing not suppressing — its compilation, review, analysis and dissemination of the information required be filed with it. And if the DFS chooses not to use the filed information, then the requirement for filing that information should be removed. Mandating filings that are not being used by regulators for a proper regulatory purpose are merely an unnecessary drag on our business and should be eliminated. By the way, the oversight of the Freedom of Information Law for all state agencies purportedly lies with an entity called the Committee on Open Government (COOG). By its own words COOG “oversees and advises the government, public, and news media on Freedom of Information, Open Meetings, and Personal Privacy Protection Laws.” (see http://www.dos.ny.gov/coog/) COOG was copied on the correspondence between the DFS and me regarding my denied FOIL request. Its silence in view of the clear statutory language and the electronic availability of the requested data is deafening. It would be refreshing if open government meant open government. [IA]
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[ ON THE LEVEL ]
By Jamie Deapo
A Free Ride?
R
ecently I was having a conversation with my adult sons and they started to complain about various issues and how someone ought to do something about them. I asked them why they thought someone else should be correcting things that had to do with them and they told me
realize there are a significant number of people who feel exactly the same when it comes to getting involved and creating change in our industry. They won’t attend meetings because they don’t have the time. They aren’t interested in being involved in the leadership structure of their association
When you’re not involved you are isolated and cut off from what is going on in our industry. Your future and the future of our industry are being determined by others many of whom don’t understand your issues and may not consider them in solutions that are developed.
Jamie Deapo
they don’t have time to do it. They went on to say even if they had time they’re not sure how to go about changing things and they weren’t interested in figuring it out. Then these familiar words were uttered, “somebody else will probably do something about it and if they aren’t successful, I guess we will have to deal with it.” So basically you free ride on someone else’s time and commitment and if they’re not successful at least you didn’t waste any personal time on it? At first I just thought it was their age and that their Mother and I had spoiled them. They usually took the path of least resistance unless they really wanted something and then they would move heaven and earth to get whatever it was they wanted. Based on that I knew they were capable and the problem was a lack of commitment to fixing the problem. Their attitudes are shared by so many people in the world today. They’re too busy to get involved. It doesn’t really matter because the deck is stacked against you. If someone else gets involved and they’re successful they will benefit right along with them. Why should I invest my time and energy? I’m sure there are plenty more excuses for inactivity and a lack of commitment to trying to make things better. When I think about our profession I 10 June 3, 2013 / INSURANCE ADVOCATE
but are some of the first to comment on what is wrong or isn’t getting done. They claim there business is too demanding and they don’t have the time to get involved. The excuses are never ending. When I really look at the problem it comes down to strength of character and wanting to give back to the industry that has provided you with a living, in many cases a very good living. Do you see yourself as a professional or just running a business? Is it only about making money or do you owe your time and commitment to your chosen profession? Recently I saw an interview of New York Times bestselling author Jim Wallis. The premise of his book was working for the common good. His book talks about the need to correct the current political and social ills of our country. He suggests that it is imperative that people, especially those who shape public policy, get involved and focus on instituting change that is directed at the common good. That same premise can be applied to the needs of our industry. There are a wealth of insurance related problems and issues that affect consumers as well as our industry and we need professionals from our industry to step up and offer their assistance in working to solve them. Attend meetings, get involved
in discussions and offer your input. Choose an issue that you feel strongly about and volunteer to work on a committee. If your business allows, offer to sit on industry boards and if possible become an officer. At the very least commit the time each year to be involved with legislative activities in Albany and Washington. Our problems will not solve themselves. We need the input and participation of professionals like you to make sure we are working towards solid solutions that are in the best interests of all concerned. When you’re not involved you are isolated and cut off from what is going on in our industry. Your future and the future of our industry are being determined by others many of whom don’t understand your issues and may not consider them in solutions that are developed. If you are already actively involved reach out to your friends and associates asking them to get involved. Let them know what you have received by volunteering and being a part of the solution. Many of the people I speak to who are active tell me that get more out of their participation than they put in. They also are quick to mention the lasting friendships they have developed that have provided them with a network of people they can reach out to for advice and help. I’ll close my article with a quote from Teddy Roosevelt that I first heard about from the Association Executive in our Georgia association and was later repeated in the closing remarks of our outgoing Chair of the Board, Tom Crowley. “Every man owes part of his time and money to the business or industry to which he is engaged. No man has a moral right to withhold his support from an organization that is striving to improve the conditions within his sphere.” This quote was part of Roosevelt’s New Nationalism speech of 1910. It was true then and is even truer now. Get involved. Be a part of the solution not part of the problem. You won’t regret it. [IA]
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[ IN THE ASSOCIATIONS ]
The Independent Insurance Agents & Brokers of Suffolk County Installs Officers and Directors for the New Term
A
lbertson, New York—The Independent Insurance Agents & Brokers of Suffolk County, Inc. installed new officers and directors for the 2013 through 2014 term. More than 110 IIABSC members and guests attended the May 22 event which took place at the East Wind Conference center, Wading River. NY. Thomas J. Crowley, CPCU, retiring Chair of the statewide Independent Insurance Agents & Brokers of New York, Inc. performed the installation ceremony along with John K. Mulvey, IIABSC past president who installed the new president. Joanne Bentivegna, CIC, CRM, of People’s United Insurance Agency in Hauppauge became the organization’s president. Aaron Stein, CPCU, CFP, Norton & Siegel, Inc. Babylon. will serve as vice president. Paulette Katz, CIC, Maurice B. Cunningham, Inc. in Southampton will remain as the association’s treasurer and Richard de la Sota, CPCU of MRW Group, Inc., Huntington will assume the position of secretary. IIABSC also installed the following directors: • David H. Borg, CISR, Borg & Borg, Inc. Huntington; • John J. Glennon of John J. Glennon, Inc., Hauppauge; • Joseph Gundermann, AAI, Gundermann & Gundermann, Inc., Huntington; • Eric Keiffert, CPCU, Hometown Insurance Agency, Bohemia; • Michael J. Romeo ll, CIC, Industrial Coverage Corp., Patchogue; • Laura Senn, CIC, People’s United Insurance Agency, Hauppauge; • Stephen H. Testa, CPCU, ARM, Testa Brothers, Ltd, Northport. Since 2005, the Vincent A. Alba Lifetime Achievement Award recognizes those individuals who for many years have demonstrated their commitment through exceptional service to the Big “I” associations and the American Agency System as a whole. This year, the award was presented to John D. Reiersen, CPCU, CFE, CIE for his outstanding leadership in the indus12 June 3, 2013 / INSURANCE ADVOCATE
THOMAS CROWLEY INSTALLED THE IIABAC BOARD FOR THE NEW TERM; (L-R) AARON STEIN, PAULETTE KATZ, RICH DE LA SOTA, DAVID H. BORG, ERIC KEIFFERT, LAURA SENN, MICHAEL ROMEO LL AND STEPHEN TESTA
JOHN K. MULVEY INSTALLED JOANNE BENTIVEGNA, CIC, CRM AS THE ASSOCIATION’S NEW PRESIDENT.
try for many years. Patricia Calvert received the distinguished Ferdinand Coste Award in recognition of her unselfish dedication to the Big “I” associations and for furthering the ideals of fellow independent insurance agents. Three award winners, from the Independent Insurance Agents & Brokers Association Annual Business Meeting held
on May 9, 2013 at the Ostego Resort Hotel in Cooperstown, NY, were recognized this evening. David H. Borg of Borg & Borg, Inc in Huntington was congratulated for receiving the Outstanding Committee Chair award; Patricia Calvert, executive director of the Independent Insurance Agents & Brokers of Suffolk County and continued on page 14
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[ IN THE ASSOCIATIONS ] continued from page 12
TriCounty Independent Insurance Agents Association had received a Distinguished Service Award in Cooperstown and both Long Island associations shared the award for 2013 Local Association of the Year for their exemplary work during the year and for helping their communities survive Superstorm Sandy. The Independent Insurance Agents & Brokers of Suffolk County, Inc. is comprised of more than 200 independent agencies and brokerages in Suffolk County, New York, dedicated to providing fair and proper insurance coverage and financial services products to families and businesses. [IA]
DAVID M. BORG (L) AND JAMES SUTTON FLANK JOHN D. REIERSEN, CPCU, CFE, CIE, RECIPIENT OF THE VINCENT A. ALBA LIFETIME ACHIEVEMENT AWARD.
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PATRICIA CALVERT, SHOWN HERE WITH THOMAS CROWLEY AND DAVID M. BORG, WAS PRESENTED WITH THE FERDINAND COSTE AWARD.
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914.966.3180 g@cinn.com www.insurance-advocate.com 14 June 3, 2013 / INSURANCE ADVOCATE
THOMAS CROWLEY, IIABNY’S IMMEDIATE PAST CHAIR WITH A REPLICA OF THE LOCAL ASSOCIATION OF THE YEAR AWARD AND THE 2 ASSOCIATION PRESIDENTS, DAVID M. BORG, (IIABSC) AND STEVEN VISCO (TRICOUNTY). THIS AWARD HAD BEEN PRESENTED BY IIABNY AT IT’S ANNUAL BUSINESS MEETING IN COOPERSTOWN OF MAY 9, 2015.
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Info@dblcntr.com Peter Doran, IHC Risk Solutions Regional VP of Sales pdoran@ihcrisksolutions.com *Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefi ts, 1999-2011. IHC Risk Solutions is a member of the IHC Group, an insurance organization composed of Independence Holding Company (NYSE:IHC) and its operating subsidiaries. Coverage underwritten by Standard Security Life Insurance Company of New York, also a member of the IHC Group.
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[ COVER ]
NYIA ANNUAL CONFERENCE
Addresses Most Pressing Issues in New York Sandy, impact of healthcare reform and latest in labor law among the topics discussed
T
he New York Insurance Association (NYIA) 2013 Annual Conference featured a variety of sessions and events that covered the gamut of key issues the industry is currently facing in New York. More than 200 people traveled to New York’s north country to enjoy the High Peaks of Property & Casualty Insurance May 29–31 in Lake Placid. New York State Department of Financial Services Superintendent Benjamin Lawsky keynoted the event on Thursday, May 31. His address focused on regulatory actions during and post Sandy and his desire to work more collaboratively with the industry moving forward. He acknowledged that DFS is going to “push” companies due to the vital nature of our industry: “Don’t take it as hostility toward your industry, rather it is because you are essential to New York State recovery,” he said. He also stressed the importance of consumers being better educated about
16 June 3, 2013 / INSURANCE ADVOCATE
insurance, particularly about the need to have flood insurance. He said it is the responsibility of DFS to take the lead on consumer education initiatives and will continue to work with stakeholders to increase awareness. The Superintendent also touched on auto insurance fraud and emphasized his goal to engage in bold, out of the box approaches and that DFS is looking to work with the industry on an extension to the commercial lines modernization law so more companies are able to take advantage of a streamlined approach to commercial filings. “Sandy created numerous challenges for insurance companies,” NYIA President Ellen Melchionni said. “NYIA has continually looked to create greater opportunities for dialogue between the industry and DFS. It is imperative that DFS and companies work together to address our mutual goal of best serving policyholders. I appreciated the Superintendent’s willingness to engage in an open dialogue as we all prepare for potential future crisis situations.” Following the Superintendent’s keynote, Robert Easton executive deputy
NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES SUPERINTENDENT BENJAMIN LAWSKY DELIVERED THE KEYNOTE ADDRESS AT THE NYIA 2013 ANNUAL CONFERENCE IN LAKE PLACID, N.Y.
superintendent of DFS participated in a forum to delve into policies, procedures and practices of the Property Bureau. NYIA Legislation & Regulation Committee Chair William Melchionni, senior state relations officer – New York & New England, American International Group, Inc. moderated the session entitled Today’s Property Bureau: Questions answered. NYIA's chair, Jeffrey Rice, president and CEO of Wayne Cooperative Insurance Company moderated a panel of company leaders who addressed What’s in Store for New York: Survival strategies in a challenging market. Key areas of concern that were brought to light during the session all centered on risk—survival and overall risk, political risk, regulatory and market risk, and terrorism risk. Panelists included John Hill, president & COO, Magna Carta Companies; David Nichols, president & CEO Interboro Insurance Company; J. Douglas Robinson, chairman & CEO, Utica National Insurance Group. Thursday’s sessions concluded with a topic hot on everyone’s mind—the changes com-
DFS EXECUTIVE DEPUTY SUPERINTENDENT ROBERT EASTON PARTICIPATED IN A FORUM AT THE CONFERENCE—TODAY’S PROPERTY BUREAU: QUESTIONS ANSWERED AND IS FLANKED BY NYIA FIRST VICE CHAIR BERNARD TURI, SENIOR VICE PRESIDENT OF UTICA NATIONAL INSURANCE GROUP AND NYIA LEGISLATION & REGULATION COMMITTEE CHAIR WILLIAM MELCHIONNI, SENIOR STATE RELATIONS OFFICER – NEW YORK & NEW ENGLAND, AMERICAN INTERNATIONAL GROUP, INC. WHO MODERATED THE SESSION.
continued on page 18
INSURANCE ADVOCATE / June 3, 2013 17
[ COVER ] continued from page 17
panies will need to make to comply with the Affordable Care Act. Todd Muscatello, health plan vice president of sales, Excellus BlueCross BlueShield provided an enlightening presentation, The Skinny on Healthcare Reform, which addressed the myriad of issues companies need to consider. A highlight of the event was on Thursday evening when Nicholas Masi of Farmers Insurance Group received the NYIA 2013 Chair’s Distinguished Service Award. Nick is incredibly active in the association and a great advocate for the industry. NYIA is fortunate to have such an engaged member and director. He is incredibly deserving of the honor. The education sessions continued on Friday, May 31. The first issue addressed was Evaluating Northeast Risk Post Sandy. Prasad Gunturi, senior vice president, Willis Re Analytics spoke about the current models and potential changes in light of recent storms. Brian Heermance, senior partner and co-branch leader of Morrison Mahoney LLP addressed an important topic in the Empire State—New York Construction Sites—Accidents & Litigation. Brian went into great detail about the most current cases involving litigation arising from these types of accidents and the numerous laws that come into play. Last, but not least, was the ever popular Small Company Roundtable where regional companies were able to discuss issues of common concern and interest. Mark Prechtl, executive vice president/CEO of Chautauqua Patrons Insurance Company facilitated the roundtable. Attendees made it clear that NYIA delivered on hosting the premier property and casualty insurance industry event in New York. If you weren’t able to attend this year, save the dates for next year’s conference now so you don’t miss out again. The 2014 Annual Conference will be held May 28–30 at The Sagamore Resort in Lake George, New York. [IA] Photos continued on next page…
18 June 3, 2013 / INSURANCE ADVOCATE
NICHOLAS MASI OF FARMERS INSURANCE GROUP WAS HONORED WITH NYIA’S 2013 CHAIR’S DISTINGUISHED SERVICE AWARD AT THE CONFERENCE. HE IS FLANKED BY NYIA PRESIDENT ELLEN MELCHIONNI AND NYIA CHAIR JEFFREY RICE, PRESIDENT AND CEO OF WAYNE COOPERATIVE INSURANCE COMPANY.
MASI HONORED AT NYIA ANNUAL CONFERENCE
L
AKE PLACID, N.Y., June 4, 2013—The New York Insurance Association, Inc. (NYIA) honored Nicholas Masi with the Chair’s Distinguished Service Award at the association’s annual conference May 30 in Lake Placid, N.Y. Masi is government and industry affairs manager for Farmers Insurance Group. “Nick embodies the true meaning of service,” NYIA chair and Wayne Cooperative Insurance Company president and CEO, Jeffrey Rice said. “He is incredibly active within the association and is dedicated to the advancement of the industry. He is a tremendous advocate for property and casualty insurance in New York.” In Masi’s current position, he oversees the legislative and regulatory functions for Farmers in New York, New Hampshire, and Vermont. He is responsible for all lobbying activities and interfaces with regulatory bodies on behalf of the company. Masi joined Farmers in 2001 as a field claims representative, covering the Rochester-Buffalo, N.Y. area. He later served in the roles of direct repair coordinator and government affairs representative before being promoted to his current position in 2012. He started his insurance career in 1997 with Progressive. He was responsible for auto liability and property damage claims, bodily injury claims, subrogation, and arbitration. Previously, he spent 13 years in lending and accounting. Masi has served on the NYIA Board of Directors since 2008. He has also served on a variety of different association committees. He received his Bachelor of Science in accounting from Florida Institute of Technology. Masi resides in Saratoga Springs, N.Y. with his wife Amy and their three children. The New York Insurance Association, Inc. (NYIA®) is a state trade association that has represented the property and casualty insurance industry for more than 130 years. For more information about NYIA, visit www.nyia.org.
NYIA congratulates the association’s 2013 Chair’s Distinguished Service Award recipient, Nicholas Masi of Farmers Insurance Group
Nick embodies the true meaning of the word service and is dedicated to the advancement of the indsutry. Thank you, Nick, for being such a tremendous advocate for property and casualty insurance in New York.
[ COVER ]
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4 4. NYIA SECOND VICE CHAIR STEVEN COFFEY, PRESIDENT AND CEO OF BROOME CO-OPERATIVE INSURANCE COMPANY WITH BRIAN HEERMANCE, SENIOR PARTNER AND CO-BRANCH LEADER OF MORRISON MAHONEY LLP, AND NYIA TREASURER MARLENE BENTON-SHERWOOD, PRESIDENT OF FULMONT MUTUAL INSURANCE COMPANY. 20 June 3, 2013 / INSURANCE ADVOCATE
3 1. L-R JOHN HILL, PRESIDENT & COO, MAGNA CARTA COMPANIES; DAVID NICHOLS, PRESIDENT & CEO INTERBORO INSURANCE COMPANY; J. DOUGLAS ROBINSON, CHAIRMAN & CEO, UTICA NATIONAL INSURANCE GROUP; AND NYIA CHAIR JEFFREY RICE, PRESIDENT AND CEO OF WAYNE COOPERATIVE INSURANCE COMPANY WHO MODERATED THE PANEL. 2. PRASAD GUNTURI, SENIOR VICE PRESIDENT, WILLIS RE ANALYTICS (CENTER) SPOKE ABOUT EVALUATING NORTHEAST RISK POST SANDY. HE IS JOINED BY NYIA SECOND VICE CHAIR STEVEN COFFEY, PRESIDENT AND CEO OF BROOME CO-OPERATIVE INSURANCE COMPANY AND NYIA FIRST VICE CHAIR BERNARD TURI, SENIOR VICE PRESIDENT OF UTICA NATIONAL INSURANCE GROUP. 3. TODD MUSCATELLO, HEALTH PLAN VICE PRESIDENT OF SALES, EXCELLUS BLUECROSS BLUESHIELD, PRESENTED THE SKINNY ON HEALTHCARE REFORM AND IS PICTURED HERE WITH NYIA TREASURER MARLENE BENTON-SHERWOOD, PRESIDENT OF FULMONT MUTUAL INSURANCE COMPANY
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[ FACE TO FAC E ]
By Michael Loguercio
A Dream and a Mouse
A
s president of The Longwood Central School District Board of Education here where I live on Long Island, I have the privilege of presenting the welcome address to the graduating class at their graduation commencement ceremony.
of independent agency preferences/views on their carriers. As chair of ACT’s “Agencies of the Future Work Group,” Peter produced this article for ACT, which provides great insights for the agency principal to consider in order to take his or her business to a higher level in the future, based upon
Remember that the agency brand isn’t tangible; it is a set of expectations and memories that reside in the minds of your stakeholders (owners, employees, customers, prospects, business partners and opinion leaders).
new ideas each time. Our industry is blessed to have some incredibly bright, talented and expressive people. • Show it at agency staff meetings to encourage fresh thinking. • Carriers, associations and user groups can show it at employee and agency meetings. Our work group plans a second video, “Agency Strategies for Growth,” that will focus on using marketing, social media, metrics and automation for future success. It’s been a year of excellent conversation. And, of course, it’s a cool topic—who doesn’t like envisioning such a bright future? In the original 2012 reports, we explored what we considered to be attributes of a successful agency of the future— the foreseeable future, to be specific. I’d like to comment on a few of these I find critical for principals to consider:
Michael Loguercio
Although I try to make it as short and sweet as possible because I know that the kids do not want to hear from me, or the United States Senator, or the Congressman, or any of the other elected officials that show up each year to address the crowd, I always try to as least sum up my “quickie speech” with a famous quote that is in my mind apropos to this defining moment and event in their young lives. This year I have decided to use a quote from Walt Disney, in order to illustrate to the graduates that no matter how impossible their dreams may appear to be, nothing is truly impossible if they really want it strongly enough. Walt’s quote that I selected for graduation this year is: “If you dream it, you can do it. Always remember that this whole thing was started with a dream and a mouse.” Well, I guess fate has once again combined me, my hobbies, and this thing of ours, as I was reading through some information that I received from ACT/AUGIE, and came across this article that was written by Peter van Aartrijk, CEO of Aartrijk, a marketing-communications firm specializing in insurance. What does this have to do with Walt Disney? Well, you know me…it will come soon, you’ll see! Peter is also a principal at the strategic branding firm Chromium and Channel Harvest Research, which conducts studies 24 June 3, 2013 / INSURANCE ADVOCATE
the innovations the author is seeing both within and outside the insurance industry. There has been a lot of very fruitful idea sharing going on within ACT’s Agencies of the Future initiative, as well as in ACT meetings and other forums. Peter shares the ideas that have particularly resonated with him, along with providing links to several excellent resources that will provide agency leaders with additional food for thought and action. I am very pleased to be able to share Peter’s article with you, and please note the quote that Peter uses to close out this piece…Annette Funicello would have been proud!
5 Ways Agency Principals Can Seize the Future It’s been about a year since ACT’s Agency of the Future Work Group produced a couple of thought pieces on the emerging consumer and how we believe agents should respond. Now we’re excited to release a video series to supplement our written work. The first video is entitled “Agency Perspectives on the Future” and focuses on leadership, the changing consumer and agency, and the outlook for the future. (Thank you Applied Systems for assisting ACT in producing the video.) Couple of points on the video: • Watch it at least twice; you’ll pick up
1. Brand Okay, I’ll admit it: I’m biased here. But a strong brand is the difference between winning and falling behind, period. Remember that the agency brand isn’t tangible; it is a set of expectations and memories that reside in the minds of your stakeholders (owners, employees, customers, prospects, business partners and opinion leaders). The objective is a clear/consistent 360-degree understanding of the brand among all stakeholders. This will take a while if you haven’t started the process. The insurance industry creates products and services, but people buy brands. Thus, your agency’s brand is the most valuable asset. From the owner’s perspective, it will guide employee behavior. From the consumer perspective, the brand will help them decide where to buy. That won’t change for the agency of the future. Strong brands build loyalty—reducing turnover and increasing revenue per customer. You attract talented people to work for you. You attract the best carriers. Your referrals increase. You can talk more about value than price with prospects. And you can go beyond clients to raving fans. Thus, it is important for the agency to go through the process of defining and codifying the agency’s brand attributes and personality. What are they today? What should continued on page 26
IN THE MATTER OF THE CONSERVATION OF THE TRUST FUND OF HIGHLANDS INSURANCE COMPANY (U.K.) LIMITED Supreme Court of the State of New York County of New York Index No.: 402246/11 NOTICE Pursuant to an order of the Supreme Court of the State of New York, County of New York (“Court”), entered September 29, 2011 (“Conservation Order”), the then-Superintendent of Insurance of the State of New York and his successors in office were appointed as conservator (“Conservator”) of a certain trust fund (“Trust Fund”) of Highlands Insurance Company (U.K.) Limited (“Highlands”) and, as such, has been directed to conserve funds in the Trust Fund pursuant to Article 74 of the New York Insurance Law (“Insurance Law”). The Superintendent of Financial Services of the State of New York has now succeeded the Superintendent of Insurance as Conservator of Highlands. The Conservator has, pursuant to Insurance Law Article 74, appointed Michael J. Casey, Acting Special Deputy Superintendent (“Acting Special Deputy”), as his agent to carry out the responsibilities of the Conservator, through the New York Liquidation Bureau (“Bureau”), 110 William Street, New York, New York 10038. The Conservator has submitted to the Court a verified petition (“Verified Petition”) seeking an order: (a) approving the conservation agreement (“Conservation Agreement”) dated January 4, 2013, between Dan Schwarzmann and Mark Batten in their capacity as liquidators of Highlands (the “Office Holders”) and the Conservator; (b) authorizing the Conservator to distribute the funds held in the Trust Fund to the Office Holders in accordance with the terms of the Conservation Agreement; (c) terminating this conservation proceeding upon distribution of the Trust Fund to the Office Holders without further order of this Court; (d) releasing and discharging, upon distribution of the Trust Fund in accordance with the terms of the Conservation Agreement, the Conservator, his predecessors and successors in office, their agents, attorneys and employees, from any and all liability arising from their acts or omissions in connection with this conservation proceeding; (e) authorizing and directing the Conservator, in his discretion, to destroy or otherwise dispose of any and all of the books, files, records and other property of Highlands in his possession without further order of this Court; and (f) providing for such other and further relief as this Court deems just and proper. A hearing is scheduled on the Verified Petition on the 25th day of June 2013, at 9:30 a.m., before the Honorable Cynthia S. Kern, JSC, New York Supreme Court at the Courthouse, IAS Part 55, Room 432, 60 Centre Street, New York, New York 10007. If you wish to object to the Verified Petition, you must serve a written statement setting forth your objections and all supporting documentation upon the Conservator and Clerk of the Court, at least 7 days prior to the hearing. Service on the Conservator shall be made by first class mail at the following address: Superintendent of Financial Services of the State of New York as Conservator of Highlands Insurance Company (U.K.) Limited 110 William Street New York, New York 10038 Attention: John Pearson Kelly General Counsel By filing the Verified Petition, the Conservator is seeking approval, from the Court, of the Conservation Agreement and termination of the conservation proceeding upon distribution of the Trust Fund to the Office Holders. The Verified Petition and supporting papers are available for inspection at the above address. In the event of any discrepancy between this notice and the documents submitted to Court, the documents control. Requests for further information should be directed to the Bureau’s Creditor & Ancillary Operations Division at (212) 341-6665. Benjamin M. Lawsky Superintendent of Financial Services of the State of New York as Conservator of Highlands Insurance Company (U.K.) Limited
INSURANCE ADVOCATE / June 3, 2013 25
[ FAC E TO FAC E ] continued from page 24
they be? What could they be? More important, with the proper strategy and investment, what will they be? Agency owners must clearly understand, embrace and communicate a direction for their firms. A strong brand is something you earn, not something you receive. Smart firms realize that customer and prospect communications are an investment, not an expense, and they will build agency value.
Best Practices agencies consistently are spending 1% to 3% of annual revenue on these activities (the larger the agency, the percentage typically drops). Some firms are redirecting more of the annual spend towards younger talent to handle social media initiatives; where in the past they might have directed more to paid media, for example. Refer to the Websites & Social Media page of the ACT website for more information. Are you just an agency name? Or a
brand name? Could it be more crisp, clear, consistent and visible? 2. Leadership Our work group has talked a lot about leadership—specifically, the value of transformational vs. transactional leadership. Organizations need both to succeed, but agencies typically are lacking in transformational leadership. Such a leader: • Always seeks improvement and is more willing to shake things up. • Realizes that the world is dynamic and sees change as an opportunity, not a threat. • Builds a culture that drives customer and employee happiness. • Develops employees, at the right levels and in the right places, and allows them ability to grow. • Has effective listening and communications skills. • Inspires staff to work as a team toward a common goal—and inspires the team to take its own initiative to accomplish goals without management’s handholding. For an agency, leadership means managing a business, not just being an insurance technician. Smart agency principals never seem satisfied—they always strive to get better. They have a voracious appetite to learn. Leaders are willing to gain new information and insights from any source—employees, clients, other industries and industry meetings. To that point, “Leaders are readers,” according to author/speaker David Nour. Improving just 1% per day in knowledge and skill means that in 70 days you’re twice as good as today, he says. Does your firm have a good dose of transformational leadership? 3. Staffing Over the next 10 years, 50% of current agency workers will have retired. But the next generation of leaders are ready to get involved now—don’t stand in their way. Smart agency owners invest in people and training. Some of your new hires may come from outside the industry—a great way to generate new ideas and also get strategic help, which agencies often lack. Many firms have a couple of family generations on board. But now these successful owners are handing over the reins to pro-
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[ FAC E TO FACE ] fessional managers who are not part of the family. And if you’re looking for the best talent, be prepared to pay the best salaries— but it’s an investment in your future. Another trend of which to be very aware: Who works at your firm, what is work, where we work, when we work, how we work—even why we work—is all evolving. It’s an exciting time. Be flexible. Some of your best talent of the future won’t commute to the office 9 to 5 every day. Some will be consultants, some employees; some will work full time, and some part time, and some remotely. And some of those highly talented would-be retirees I mention above might continue to contribute to the firm under alternative circumstances. Flexible work arrangements backed up by slick, enabling technology—such as Internet phone systems—are becoming more prevalent at agencies. Do you offer a place where insurance professionals want to work? What’s your story to a new recruit? Will you earn your fair share of tomorrow’s talent? 4. Social The successful agency of the foreseeable future isn’t going to dabble in social media marketing—it will be a social business. Sitting on the sidelines of this incredible consumer revolution isn’t going to cut it. Nor is looking at customer and prospect marketing as a series of projects. The future agency will be fully engaged, year round, in online and social networking activity. Social is not just an isolated initiative. It must be an integrated piece of your agency’s personality. It defines how the firm communicates and engages with customers and prospects. Agents say they struggle with creating (a) the time it takes to be a social business, and (b) ideas for content—the “what” and the “how” to do this. It’s easier than you think if you approach it from an honest and authentic standpoint. For example, I find it interesting how every day agents literally “speak” dozens of potential blog entries when they help explain a coverage or handle a claim. Write them down! Or use voiceto-text software. You don’t have to make this up on your own. For good material on developing and implementing an online, mobile and social policy, go to the ACT website. The reports will help you guide employee behavior. Once
you have a system in place to interact and respond to consumers, the rest will be easier. Relationships are key to the future of consumers and agencies. Everything you do should be about building relationships with employees, business partners, prospects and customers. Software and hardware and cloud technology and social media platforms can be distracting. Put your work into a strategy, setting goals and building relationships. The social media platforms— Twitter, Facebook, and more—that you use to communicate will be a secondary consideration. Are you building relationships online? Do you allow your employees to use these tools as well? 5. Metrics Agencies that measure effectiveness of marketing and sales efforts tend to be much stronger, period. Knowing your numbers is a key differentiator between the growing agency and the one that is not. Key metrics to understand include new business, retention and revenue per client; number of policies per client, and from where the business comes. For more on 12 key metrics, see this excellent article by Chuck Blondino, Safeco Insurance. Are you measuring your success? If you’re falling short in some areas, how soon will you know? In summary, these five areas should be at the top of your list to create or improve your agency of the foreseeable future. What’s your plan? What’s your dream for the future? In the words of the late Walt Disney, “If you can dream it, you can do it.” Thank you, Peter, and as you said I know that our work group will continue to explore this fertile area—considering both consumer expectations and agency responses. For our ACT/AUGIE/AIMs member who read this column, we hope to see you at the IIABA Special Event & ACT meeting in San Antonio on September 27th, when we will explore further effective agency strategies for the future. Around the northeast these past few weeks it was wonderful to attend some very interesting and informative insurance conferences and meetings, produced by industry leading organizations such as the Excess Lines Association of New York; Keystone Insurers Group; Council of Insurance Brokers; ASCnet; Plymouth Rock
Insurance Company; Professional Insurance Agents; SAN Group; and the Susquehanna Agents Alliance. Thank you for inviting me to partake in and speak at your meetings, as I very much appreciate the opportunity to share my thoughts and ideas with you and the members of your organizations. Well, that’s what’s been happening around town, so until next time when we will be talking about the annual “Momma needs a new pair a shoes, c’mon 7!” NY and NJ Professional Insurance Agents conference at The Trump Taj in Atlantic City, NJ, as Kasey Kasem used to say when signing off on his 70’s top 40 radio show, “Keep your feet on the ground and keep reaching for the stars!” “Ciao for now!”[IA] Michael Loguercio is the Regional Sales Manager for EZLynx; and has been active in the insurance industry since 1978 as an insurance technology professional and a licensed insurance broker. 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 a “Special Service” award in 2013. In his community, Michael is President of the Longwood Central School District Board of Education on Long Island, NY; 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. 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.
[ COURTSI DE ]
By Lawrence N. Rogak
Excess Lines Association Has No Power to Sue to Enforce Insurance Law Violations ELANY vs. Waldorf & Assoc.
I
n this action, the plaintiff Excess Line Association of New York (hereinafter “ELANY” or the “plaintiff ”) seeks an accounting of the defendants’ books and records and damages related to the defendants’ failure to report the placement of excess-line insurance policies and the defendants’ failure to pay premium taxes and stamping fees on excess-line policies from 1989 through 2011. The complaint alleges in the first cause of action that the defendants fraudulently filed Premium Tax Statements (as defined in the Insurance Law) that stated under oath that they had no business to report and avoided paying stamping fees. The complaint alleges in the second cause of action that the defendants violated General Business Law § 349. The complaint alleges in the third cause of action that the defendants were negligent. The complaint alleges in the fourth cause of action that the defendants violated General Business Law § 340. The complaint alleges in the fifth cause of action that the plaintiff is entitled to an accounting pursuant to Insurance Law § 2118 (c). The defendants Waldorf & Associates, Waldorf Risk Solutions, LLC, Waldorf Special Risk, LLC, Waldorf Servicing, LLC, William G. Waldorf, Stephen M. Waldorf, Christopher V. Waldorf, Sr., and The Waldorf Family Foundation, Inc. (hereinafter referred to as “the Waldorf defendants”) move by way of a pre-answer motion to dismiss the action on the grounds that a defense is founded upon documentary evidence, that the plaintiff lacks legal capacity to sue, and that the complaint fails to state a cause of action. In support of their motion, the Waldorf defendants contend that the plaintiff lacks capacity to maintain the present action. The Waldorf defendants argue that the plaintiff, a not-for-profit industry advisory association, is a creature of statute with specific 28 June 3, 2013 / INSURANCE ADVOCATE
insureds on direct or independent placements, which they believed were not subject to many of New York’s insurance laws and regulations. Mr. Waldorf avers that, sometime in 2010, the New York State Department of Insurance [FN1] conducted a review of the Waldorf defendants’ direct Lloyd’s placement program. The Waldorf defendants provided the Insurance Department with all of the documentation that it requested. Upon completing its review, the Insurance Department informed the Waldorf defendants that, in its view, certain of the placements should have been characterized as excess-line placements subject to Insurance Law§ 2118 and Insurance Regulation 41, which set out the requirements for excess-line placements, including the payment of a stated premium tax. In his affidavit Mr. Waldorf states that, following the Insurance Department’s review, the Waldorf defendants and the Insurance Department came to an agreement, which was memorialized in a letter dated April 12, 2011. The letter reveals that the agreement covered the Waldorf defendants’ placement of excess-line insurance policies with Lloyd’s of London brokers for which no excess-line premium taxes were paid from approximately 1995 through 2009. The Waldorf defendants agreed to pay a specified amount in premium taxes and penalties to the Insurance Department and to pay excess-line premium taxes on all excess-line business they produced during 2010 by including such taxes in Part IV of the 2010 premium tax statement due on March 15, 2011. They also agreed to make timely payments of all excess-line premium taxes in the future. The letter reveals that compliance with the foregoing would be accepted by the Insurance Department in full settlement of the Waldorfs’ premium
The letter reveals that the agreement covered the Waldorf defendants’ placement of excess-line insurance policies with Lloyd’s of London brokers for which no excessline premium taxes were paid from approximately 1995 through 2009.
enumerated powers and that such enumerated powers do not expressly or by implication include the ability to commence the current action. Moreover, the Waldorf defendants argue that, notwithstanding the foregoing, there is no private right of action that permits the plaintiff to maintain the current action. In response, the plaintiff argues that the provisions of the Insurance Law which contain ELANY’s enumerated powers should be liberally construed to create the requisite capacity to commence this litigation to enforce compliance with the excess-line law. William G. Waldorf states that his companies deal with Lloyd’s of London, which is recognized in the insurance industry as providing a market for some of the best insurance products available worldwide, that the syndicates of Lloyd’s are well-known and well-respected in the industry, and that such syndicates are eligible to write excess-line insurance for insureds located in New York. Mr. Waldorf further states that, since 1995, the Waldorf defendants have made their insurance placements with Lloyd’s on behalf of their
continued on page 30
INSURANCE ADVOCATE / June 3, 2013 29
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tax liability for all Lloyd’s placements from 1995 through 2009 and in lieu of any disciplinary action that could be taken by the Insurance Department against the Waldorf defendants. Finally, the letter makes clear that failure to fully comply with the agreement could result in the commencement of disciplinary action by the Insurance Department against the Waldorf defendants and/or any responsible individuals and entities. Mr. Waldorf states that the Waldorf defendants subsequently attempted to reach an amicable resolution with the plaintiff by giving the plaintiff financial information regarding the New York policies in question and by offering to provide the plaintiff with the documents that were provided to the Insurance Department. However, the plaintiff claimed that, notwithstanding the actions of the Insurance Department, there were unresolved issues that the plaintiff was empowered to investigate. The plaintiff demanded documents going back to 1989, which the Waldorf defendants declined to provide, and the instant action was commenced. Before turning to a discussion of applicable law, it is important to note that the Waldorf defendants submit the plaintiff ’s internet web page in support of their contention that the plaintiff is not entitled to commence the instant action against them. That page provides in pertinent part, as follows: The Excess Line Association of New York was created by statute in 1988 and began business in 1989. It is a non-profit industry advisory association. ELANY is charged with the duty to facilitate and encourage compliance with the excess line law. ELANY: • acts as a facilitator between brokers and the regulators. • conducts financial review and oversight of non-admitted markets. • provides continuing education: • certified provider for C.E. credits. • publications. • lobbies Regulators and Legislators. • maintains information database: • for reporting to regulators. 30 June 3, 2013 / INSURANCE ADVOCATE
In opposition, the plaintiff argues that the Waldorf defendants have a duty to report all excess-line policies and that they have failed to comply with § 2118 (c) of the Insurance Law…
• to assist members with tax reports. • reviews documents for compliance. • protects members, consumers and marketplace against fraud. • protects state revenues. • facilitates and encourages compliance. • acts as an industry representative organization. The Waldorf defendants also cite to portions of the plaintiff ’s procedure manual, particularly paragraph F, which states that any member who is more than 30 days delinquent in the payment of fees may be reported to the Superintendent of Insurance.[FN2] The Waldorf defendants point out that there are no other enforcement powers included in the manual. In opposition, the plaintiff argues that the Waldorf defendants have a duty to report all excess-line policies and that they have failed to comply with § 2118 (c) of the Insurance Law, which provides as follows: (1) The licensee shall keep a complete and separate record of all policies procured from unauthorized insurers under such license. The licensee shall also maintain files supporting declinations by authorized insurers. 2) Such records shall be open to examination by the excess-line association as provided for in section two thousand one hundred thirty of this article and by the superintendent, as provided in section three hundred ten of this chapter, at all reasonable times...
The plaintiff also argues that it has the right to collect stamping fees and that the Waldorf defendants’ failure to pay the stamping fees has damaged the plaintiff under New York General Business Law §§ 340 and 349. In addition, the plaintiff argues that it has the authority to commence a civil action pursuant to Insurance Law § 2130 (a) (11) which states, in pertinent part, that ELANY shall be authorized and have the duty to provide such other services to its members as are incidental or related to the purposes of the association. The plaintiff further argues that it is empowered by Insurance Law § 109 (d), which states, “The superintendent may maintain a civil action in the name of the people of the state to recover a judgment for a money penalty imposed by law for the violation of any provision of this chapter.” Finally, the plaintiff argues that Insurance Law § 2130 (a) (10) gives it the right to enforce the Insurance Law because it provides that ELANY shall be authorized and have the duty to “perform such other acts as will facilitate and encourage compliance by members with the excess line law of this state and rules promulgated thereunder.” The plaintiff submits the affidavit of Daniel F. Maher, Executive Director and Chief Operating Officer of ELANY, who avers that the settlement between the Waldorf defendants and the Insurance Department did not release the Waldorf defendants from their duties to the plaintiff and that the plaintiff has the right to pursue its own remedies. He states that the plaintiff has litigated a number of times in the past without prohibition. Although he does not include a description of such prior litigation, he contends that as licensed excess-line brokers, the Waldorf defendants are members of ELANY, that they have a duty to comply with the State’s laws and regulations, and that they have a duty to report all excessline procurements to the plaintiff for recording purposes and for the payment of stamping fees. As previously discussed, the Waldorf defendants argue, among other things, that ELANY lacks the capacity to maintain the instant action. The Waldorf defendants assert that there is neither express statutory authority for such a suit by ELANY, nor can
[ COURTSID E ] a private right of action to enforce the Insurance Law or to obtain the relief requested be fairly implied. In response, the plaintiff argues that the court should infer its capacity to maintain the instant suit from various provisions of the Insurance Law. An examination of the issue of ELANY’s capacity begins with § 2130 of the Insurance Law, which created ELANY and set forth its power and duties. Such duties can best be described as receiving and recording information, stamping documents, preparing periodic reports for delivery to the Superintendent of Insurance and each licensee, suppling forms and providing incidental services to ensure compliance with the Insurance Law and the regulations promulgated pursuant thereto. Section 2130 makes clear that ELANY must perform its functions under a plan of operation approved by the Superintendent of Insurance and that ELANY is supervised by the Superintendent of Insurance, thereby negating the argument that ELANY is empowered to act independently. Further, such section makes clear that nothing contained therein shall be deemed to diminish the powers of the Superintendent. Section 2130 makes no reference to the power to bring a judicial proceeding or any other type of enforcement action. In fact, the language of § 2130 contains no provisions that could be deemed enforcement powers. The conclusion that ELANY lacks any enforcement powers is further supported by ELANY’s plan of operation, which provides that members who fail to submit documents or pay fees shall be reported to the Superintendent. This notion that ELANY lacks enforcement power and that its remedy is to report non-compliance by its members to the Superintendent is consistent with the fact that it is the Superintendent who is given broad powers to enforce compliance with the Insurance Law (see Insurance Law § 109). Therefore, with respect to the question of capacity, there is no express statutory authority to support the plaintiff ’s claim. The court, however, must still determine whether capacity to maintain the instant suit can be properly or fairly inferred from ELANY’s duties and responsibilities. Although the Waldorf defendants do not specifically address this question, continued on page 32
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[ COURTSIDE ] continued from page 31
relying principally on their arguments regarding a private right of action, the plaintiff puts forth certain arguments under the heading Lack of Standing that bear on the question of necessary implication. For example, the plaintiff argues that, although Insurance Law § 2130 (a) (10) and (11) do not expressly reference enforcement matters, the language of such subsections should be liberally construed to answer the capacity question in its favor. Subsection (10) of § 2130 (a) provides that ELANY shall be authorized and have the duty to perform such other acts as will facilitate and encourage compliance by its members with the excess line law of this state and the rules promulgated thereunder.� Subsection (11) of § 2130 (a) authorizes ELANY to provide such other services to its members as are incidental or related to the purposes of the association.� The court finds that, in light of the provisions of the Insurance Law previously examined, this general language cannot be fairly read to infer the power to
maintain the instant action in which ELANY seeks to enforce provisions of the Insurance Law in a state court separate and apart from actions by the Superintendent of Insurance. Contrary to the plaintiff ’s contentions, these provisions are merely general in nature and specifically related to and limited by the remaining provisions contained within § 2130 (a). Neither this general language nor any other provision of § 2130 can be read to infer that enforcement action is a necessary implication of ELANY’s powers and duties. The court finds that the facts presented here are similar to those presented in Fiero v FINRA (660 F.3d 569 [2nd Cir 2011]). In that case FINRA, a self-regulatory organization registered with the Securities and Exchange Commission, commenced a federal court action to collect disciplinary fines that it had imposed against the plaintiff, who was one of FINRA’s member firms. The issue before the court was the same as in the instant case, i.e., did FINRA have the authority or capacity to commence an action to collect disciplinary fines. The Second Circuit held that, even
though FINRA had broad powers under § 15A (b) of the Securities and Exchange Act of 1934 to discipline its members and to impose fines, there was no express statutory authority for [FINRA] to bring judicial actions to enforce collection of fines�. The Second Circuit, using similar reasoning to that applied by the Court of Appeals in Community Bd. 7, reasoned that the absence of such express statutory authority was significant evidence that the legislature, in drafting the enabling statute, did not intend to provide FINRA with the authority to commence judicial proceedings. The present case is also substantially similar to HANYS Services, Inc. v Empire Blue Cross and Blue Shield (292 AD2d 61). In that case the Third Department found that, although the plaintiff had a statutory right and duty to collect insurance premiums, it did not have the right to maintain an enforcement action to collect unremitted fees. Finding that the plaintiff lacked authority to pursue an action, the continued on page 34
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Third Department held that a statutory command to collect insurance premiums does not necessarily carry with it the capacity to maintain an enforcement proceeding. In reaching its conclusion, the court went on to analyze the authorization to maintain a private right of action (see, infra). In the present case, the absence of express statutory authority, combined with provisions of the Insurance Law, provide convincing evidence that the legislature did not intend to give ELANY the power to sue, but expressly reserved such power to the Superintendent of Insurance. This conclusion is further supported by ELANY’s operating plan, as approved by the Superintendent of Insurance, which directs ELANY merely to notify the Superintendent of misconduct or non-compliance. Accordingly, the court finds that the plaintiff lacks the necessary authority or capacity to pursue this action. Closely related to the issue of capacity is the issue raised by the Waldorf defendants, i.e., whether the plaintiff has a private
34 June 3, 2013 / INSURANCE ADVOCATE
right of action under the Insurance Law. The record is clear that the Insurance Law does not provide a private right of action which could be employed by ELANY to enforce the excess-line law. However, when, as here, the statute is silent as to the availability of a private right of action, the court may find an implied private right of action by applying a three-part analysis (HANYS Servs., supra at 64). Each part of the analysis must be satisfied in order to find that a private right of action may be “fairly implied”). The court finds that the plaintiff has failed to satisfy all three parts of the analysis. To determine whether a statute implies a private right action, three factors must be considered: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted, (2) whether recognition of a private right of action would promote the legislative purpose, and (3) whether creation of such a right would be consistent with the legislative scheme (Goldman v Simon Prop. Group, Inc., 58 AD3d 208; Ahmad v Nassau Health Care Corp., 8 AD3d 512, 513, quoting Sheehy v Big Flats Community Day, Inc., 73
NY2d 629, 633; Pelaez v Seide, 2 NY3d 186). “Avoiding unwarranted interference with the legislative scheme is the ‘most critical’ factor in determining whether a private cause of action may be fairly implied from the enactment of a statute” (Goldman v Simon Property Group, Inc., supra at 215 [and cases cited therein]). Here, the plaintiff is not a member of a class for whose benefit the statute was enacted. As set forth in the legislative history of the excess-line law, the underlying purpose thereof is to protect persons seeking insurance in the State of New York, to permit excess-line insurance to be placed with reputable and financially sound unauthorized insurers, and to protect the revenues of the State of New York (L 1988 ch 630, § 1). Given these stated purposes, the class of persons for whose benefit the excess-line law was enacted is the people of the State of New York, not the plaintiff. The mere fact that the plaintiff has recited some of these purposes in its plan of operation does not make it a member of the protected class. The plaintiff fails on the second and
[ COURTS I D E ] third prongs as well. Even where the recognition of a private right of action might promote one aspect of a statute’s legislative goals, the greater concern is the consistency of doing so with the purposes underlying the legislative scheme’” (Sheehy v Big Flats Community Day, supra at 634, quoting Burns Jackson Miller Summit & Spitzer v Lindner, 59 NY2d 314, 329-331). A private right of action should not be judicially sanctioned if it is incompatible with the enforcement mechanism chosen by the Legislature or with some other aspect of the over-all statutory scheme” (Sheehy v Big Flats Community Day, supra at 634-635). As previously noted, the Superintendent of Insurance possesses broad regulatory powers over the sale of insurance policies in this state. Section 109 (d) of the Insurance Law reveals that only the Superintendent of Insurance is empowered to maintain a civil action. This provision, together with the broad disciplinary powers given to the Superindent of Insurance, make plain the legislature’s desire to establish the Superintendent as the sole regulator. This conclusion is supported by the express language of § 2130 (g), which provides, Nothing in this section shall be construed to...diminish the power of the superintendent to take any other disciplinary action otherwise authorized by this chapter.” As noted throughout this decision, if the plaintiff ’s members fail to provide documents or pay fees, the plaintiff is to report it to the Superintendent of Insurance. Allowing the plaintiff to act independently, and perhaps in contravention of the Superintendent of Insurance, would, in essence, set ELANY up as a co-regulator and undermine the clear legislative intent that ELANY’s actions be supervised by the Superintendent of Insurance. It is unlikely that the legislature would have intended for the plaintiff to be a co-regulator with the Superintendent, and the plaintiff has offered little evidence of this intention other than its assertion that the words facilitate” and encourage compliance” in Insurance Law § 2130 (a) (10) should be read that way. It is more likely that the legislature would not want a group of competitors to have the right to bring an action against a fellow competitor, which is exactly what has happened here. Given that the plaintiff ’s members are competitors in the
insurance industry, there is no way of knowing whether this litigation is a legitimate attempt to enforce the Insurance Law or an attempt to punish, injure, or obtain an unfair advantage. Therefore, the proper balance seems to be that the plaintiff may notify, advise, or inform the Superintendent of Insurance and allow the Superintendent to make an independent evaluation of what steps to take. If the Superintendent of Insurance finds that punishment is warranted it could respond in a variety of ways, including suspending the violator’s license for noncompliance with the statute (see Insurance Law § 2105 [a]). Thus, recognition of a private right of action under the present circumstances would not advance the legislative purpose and would be inconsistent with the legislative scheme (see Hudes v Vytra Health Plans Long Island, Inc., 295 AD2d 788). Accordingly, the court finds that ELANY does not have a private right of action under the Insurance Law. The court also finds that the complaint fails to state a cause of action. On a motion to dismiss pursuant to CPLR 3211(a)(7), the pleadings are to be afforded a liberal construction and the court is obligated to accept the facts alleged in the complaint as true and to accord the plaintiff the benefit of every possible favorable inference (Mandarin Trading Ltd. v Wildenstein,16 NY3d 173; Salles v Chase Manhattan Bank, 300 AD2d 226). Moreover, the court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint (Leon v Martinez, 84 NY2d 83, 88). Adhering to this standard, the court finds that the Waldorf defendants are entitled to dismissal of the complaint. The court finds that the plaintiff has failed to state a cause of action for fraud. In order to make a prima facie showing of fraud, a plaintiff must establish “a representation of fact, which is either untrue and known to be untrue or recklessly made, and which is offered to deceive the other party and to induce them to act upon it, causing injury”(Jo Ann Homes at Bellmore, Inc. v Dworetz, 25 NY2d 112, 119). Moreover, fraud must be pled “with particularity, including specific dates and items, if necessary and insofar as practicable” (Alexander Infusion, LLC v Professional
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[ COURTS I D E ]
38 June 3, 2013 / INSURANCE ADVOCATE
Home Care Services, Inc., 25 Misc 3d 1240 [A], * 4, citing CPLR 3016 [b]). Conclusory allegations of fraud are not sufficient (Sargiss v Magarelli, 50 AD3d 1117, affd as mod 12 NY3d 527; Dumas v Fiorito, 13 AD3d 332). The plaintiff has failed to allege facts which satisfy the elements of fraud, including, without limitation, the alleged reliance. In addition, the plaintiff has failed to allege the necessary facts with particularity. Therefore, the first cause of action is dismissed. The second cause of action alleges that the Waldorf defendants violated General Business Law § 340, also known as the Donnelly Act. The court finds that the plaintiff has failed to state a cause of action under the Donnelly Act. General Business Law § 340 prohibits a monopoly in the conduct of any business, trade or commerce, or in the furnishing of any service in this state which restrains competition or the free exercise of any activity in the conduct of any business, trade or commerce. There is no dispute that the plaintiff is a not-forprofit industry advisory association and does not conduct any business, trade, or commerce in the relevant market. Therefore, any alleged violations of the Donnelly Act would not adversely affect the plaintiff. Accordingly, the second cause of action is dismissed. The plaintiff has failed to state a cause of action for negligence. To establish a prima facie case of negligence under common law, a plaintiff must demonstrate that the defendants owed the plaintiff a duty, a breach thereof, and that the plaintiff suffered an injury proximately caused by defendants’ breach (Pollyester’s, Inc. v Bogdanoff, 10 Misc 3d 375, quoting Solomon v New York, 66 NY2d 1026). The plaintiff has failed to allege that the Waldorf defendants owe it a duty of due care, other than to comply with the excessline law. Thus, the allegation that the Waldorf defendants were negligent is duplicative of the allegation that the Waldorf defendants failed to comply with the excess-line law. The third cause of action is, therefore, dismissed. The fourth cause of action alleges a violation of General Business Law § 349, a statute based on broad consumer-protection concerns (Gaidon v Guardian Life Ins. Co.
of Am., 96 NY2d 201, 209). The plaintiff has failed to state a cause of action under General Business Law § 349, which provides that deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are unlawful. To state a claim under § 349, the plaintiff must show “that the defendant is engaged in an act or practice that is deceptive or misleading in a material way and that the plaintiff has been injured by reason thereof ” (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, N.A. 85 NY2d 20, 26). The typical violation contemplated by General Business Law § 349 involves an individual consumer who falls victim to misrepresentations made by a seller of consumer goods, usually by way of false and misleading advertising. Such is not the case here (Reed Constr. Data Inc. v McGraw-Hill Cos.,745 F Supp 2d 343). It is clear that the plaintiff is not a consumer or even a market participant. Therefore, the fourth cause of action is dismissed. The fifth cause of action alleges that the plaintiff is entitled to an accounting pursuant to Insurance Law § 2118. Insurance Law § 2118 does not provide for the remedy of an accounting. Moreover, although § 2118 (c) requires excess-line brokers to maintain records and permits ELANY to inspect such books and records, as the court has already discussed in detail, enforcement of such provisions must be sought by the Superintendent of Insurance and not directly and independently by ELANY. Therefore, the fifth cause of action is dismissed. Accordingly, the Waldorf defendants’ motion to dismiss the complaint insofar as it is asserted against them is granted. In sum, the motions by the Waldorf defendants and Pamela Waldorf to dismiss the complaint are granted. [IA] Footnote 1: The New York State Department of Insurance is now the Insurance Division of the New York StateDepartment of Financial Services (see, Financial Services Law § 205) Footnote 2: The Superintendent of Insurance is now the Deputy for Insurance and the Head of the InsuranceDivision of the New York Department of Financial Services (see, Financial Services Law § 203).
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