Insurance Advocate June 12, 2017 by C Acunto

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

Vol. 128 No. 11 | June 12, 2017

Cyber Risk Beyond Compliance: Aspirin, Antibiotics, Surgery, or a (Super Potent) Apple a Day?

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[ FOREWORD ]

STEVE ACUNTO

Eternal Rest uThe eternal matter of fair compensation to agents and brokers placing business in the NYSIF may be laid to eternal rest if the “second floor”, legislators and regulators listen to the agents’ groups who have eternally pleaded for this measure of fairness. PIANY has just amended legislation to include a requirement for the New York State Insurance Fund to pay commissions to licensed brokers. The bill (S.4558-A), which is sponsored by Sen. Kenneth P. LaValle, R-1, and Assemblyman David I. Weprin, D24, has been sent to the Senate Insurance Committee for consideration. Read it and weep…or reap…the benefits of pushing your local representative to take this seriously and introduce some fairness to this process.… Physicians—possibly your clients—thinking of transitioning to a concierge model, have some legal and compliance issues to consider, apart from giving clients a sense of comfort (not abandonment) as the change is made. Here are some issues to share with them: • Medicare-covered services: If you don’t choose to opt out of Medicare, be careful about concierge services that could be considered Medicare-covered services. The Office of Inspector General of the U.S. Department of Health has not issued any specific guidance on which services may be considered covered services, leaving practices with some uncertainty. • Written contracts: Practices should have a written contact with each concierge patient. The contract should describe the fee the patient will pay and the services the practice will provide. • HIPAA issues: If you have a hybrid practice, where you combine traditional and fee-paying patients, and you use a separate company to provide concierge services, there may be a need for a business associate agreement with that company. Be sure you maintain privacy if you communicate with patients via texts or emails. Point here is that the failure of two major businesses that pioneered direct primary care practice has left the model in question. And then come these exposures. Ultra-elite concierge practices that charge as much as $80,000 a year to provide care to our state’s wealthiest patients, as interviewed by The New York Times, said business is booming. In addition to 24-hour access, these physicians will make house calls or meet clients at work or an airport. They also will provide their patients with immediate access to the country’s finest specialists and hospitals, unlike most people who have to wait as long as 29 days for an appointment.… Jan Scites and her bright team at MSO are marching straight onward, adding services to the mix for their members. They have just partnered with Finys, a leading national provider of insurance software and services. Finys is a modern enterprise platform with more than 25 implementations for property and casualty (P&C) insurance organizations. Worth a look.[IA] 4 June 12, 2017 / INSURANCE ADVOCATE

VOLUME 128 NUMBER 11 JUNE 12, 2017

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

CINN MEDIA, INC.

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in July, August, September and December by CINN ESR, Inc., 1030 Lake Street, Greenwich CT, 06831. Periodical postage paid at Greenwich, CT 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 $135.00. TO ORDER Call 914-966-3180, fax 914-613-1595, 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 2017. 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 digital rights, contact Gina Marie Balog at g@cinn.com or call 914-966-3180, x113

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Contents

June 12, 2017 | Volume 128 Number 11

Courtside: Construction Worker’s Slip and Fall on Wet Temporary Staircase is not Enough for Summary Judgement Lawrence Rogak

On My Radar: Agent Should Explain Effect of Coinsurance Barry Zalma

Looking Back: March, 1992

Classiﬁeds

Guest Article: Repair or Replacement Cost as a Measure of Indemnity in New York Jennifer M. Van Voorhis, Esq.

16 Cyber Risk Beyond Compliance

[ A D F E ATUR E S ]

[FEATURES] 4

Foreword: Eternal Rest Steve Acunto, Publisher

The Social Notebook: Interpersonal Customer Experiences via Video Chris Paradiso

Agency Notebook: Top 20 Things to Know About NY Paid Family Leave Richard White

MSO: Telematics and Usage-Based Insurance

IIABNY: DIY Hiring Toolkit

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

View Point: Dejá Vu (All Over Again) Martin Carus

FOR ADVERTISING OR SUBSCRIPTION INFORMATION

In the Associations: TriCounty IIAA Installs Ofﬁcers and Directors for 2017-2018 Term

Call 914-966-3180 | email g@cinn.com

PIACT Lauds House Passage of Amended TNC Bill

6 June 12, 2017 / INSURANCE ADVOCATE

info@insurance-advocate.com www.insurance-advocate.com

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2003 Bakeries 7998 Hardware Store 8001 Florist Store 8006 Food/Fruit/Deli/Grocery 8008 Clothing/Shoe/Dry Goods 8013 Jewelry Store 8016 Quick Printing 8017 Retail (Not Classified) 8031 Meat/Fish/Poultry Store 8033 Supermarkets 8039 Department Store 8043 Retail (including Food) 8044 Furniture Store 8046 Auto Accessories 8072 Book/Music Store 8105 Leather Store 8382 Self serve gas w/conv. store Residential Care Facilities

4310 Greeting Card Dealer 7390 Beer/Ale Dealer 7999 Hardware Store 8018 Wholesale Store/NOC 8021 Meat, Fish Dealer-Wholesale 8032 Dry Goods, Clothing, Shoe 8047 Drug Store 8048 Fruit & Vegetables 8111 Plumbers Supplies Dealer-Wholesale Restaurant

8864 Developmental Organizations 8865 Residential Care Facility Hotel/Motel 9052 Hotels NOC 9058 Restaurants in Hotels

9061 Clubs 9071 Full Service Restaurants 9072 Fast Food Restaurants– Including Drivers 9074 Bars & Taverns Social and Health Services 8854 Home Health Care – Prof. Employees 9051 Home Health Care – Non Prof. Employees 8857 Counseling – Social Work – Traveling Oil and Gas Dealer 5193 Oil Burner Installation 8350 Fuel Oil & Gas Dealer 8353 Gas Dealers, LPG & Drivers

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

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

Interpersonal Customer Experiences via Video uHave you ever had a difficult time communicating the details of a policy with a customer remotely? Well, technology is always evolving, and now there is a free and easy-to-implement tool that can transform the customer experience through the use of video. It sounds too good to be true, right? Well, this is the real deal, and I’d like to introduce you to a product that my agency recently started using called Loom Video. Loom is a tool that allows you to share your computer screen with a customer, prospect, or client, while including a small video in the corner of the screen of yourself and your voice using your webcam. For some, this may not sound like a game changer immediately, but when we discuss the fine features and how you can make use of this great tool, I’m sure you’ll see the benefit of implementing this powerful tool into your agency as well. But first, why exactly are we looking to focus on video?

Why Video? We turned to Hubspot, that recently ran a study in late 2016 showing that including a video on a landing page can actually increase overall conversions on that page by 80%. Did you also know that 92% of mobile video consumers share videos with their peers? While this data is incredibly powerful and should immediately convince you that your agency should be marketing via video, let’s focus more on direct communications with customers through video. Additionally, Hubspot also tells us that if you include a video within an email, there will be a 200-300% increase in clickthrough rates on that email campaign. That’s huge! Not only that, but after watching a video, 64% of users are more likely to purchase a product online. To top it off, 65% of executives visit a marketer’s website, and 39% call a company directly after watching a video as well. So how does this all add up for you and your agency? 8 June 12, 2017 / INSURANCE ADVOCATE

By using video, we have more face time with our customers, which is also helpful not only for our brand but in developing even stronger client/customer relationships, and can gain us more renewals.

Customer Communications Reimagined Here’s where Loom can really have a strong impact for your agency’s customer experience. Have you ever had a difficult time reviewing the fine details of a policy or coverage with a customer or client? In many situations, it’s critical that we as agents go through, line by line, the details on our customers’ insurance so they properly understand how they are covered and what their policy fully entails. If, for some reason, a client can’t visit you in person at your agency, discussing their policy could become difficult.

Thinking Outside the Box With the power of Loom video, it is now much easier to review a policy remotely with a customer. I can pull up a client’s policy onto my computer screen, and include a video of myself in the corner, while going over their policy. Loom records everything on my computer, my webcam, and my voice, so I can mouse over the details of a policy line by line, and speak to the customer directly about what each detail represents for them in terms of their coverages. After the video is finished, Loom saves the recording, allowing me to send it to the customer or client directly by email, worry- and hassle-free. More importantly, the product itself is free!

Christopher Paradiso, CPIA , is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center. In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies to not only survive, but compete in today’s complex online marketing world. Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

In Conclusion This should be a no-brainer—As we mentioned above, the power of video is that it will most definitely help the customer experience for those who shop through your agency. By using video, we have more face time with our customers, which is also helpful not only for our brand but in developing even stronger client/customer relationships, and can gain us more renewals. At the end of the day, we answer all of our customers’ questions and needs, they get to see a hard copy of their policy as part of the video, and everything is private between you and the customer, so there’s no breach of confidentiality. To get started with Loom video, visit https://www.useloom.com/ and follow their instructions for getting set up. Remember, the use of video is relevant now, and if you’re not getting on board, then you could be falling behind. Happy Marketing, everyone!

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[ AGENCY NOTEBOOK ]

RICHARD A. WHITE

Top 20 Things to Know About NY Paid Family Leave uWe’ve spent the last few weeks combing through Paid Family Leave draft regulations to pull out the most important information, so you don’t have to. Here are your absolute must-knows based on the drafts: 1. NY PFL is one of the most comprehensive paid family leave programs in the country. 2. All New York “covered employers” (typically private sector employers with 1+ employees who have to provide statutory disability insurance, commonly referred to as DBL) have to provide PFL as well. 1. As such, it covers all those employees who currently get DBL through their employment. 3. PFL phases in over four years with a gradually increasing benefit amount and duration. Benefits are calculated according to the following chart for full-time employees (as well as part-time**** employees taking paid leave in weekly increments). Full-time employment assumes five work days per week: 4. PFL provides job security for employees taking paid leave, similar Benefit Stage Effective Date*

Maximum Length of Paid Leave

01/01/2018 01/01/2019 01/01/2020 01/01/2021

8 weeks 10 weeks 10 weeks 12 weeks

There is no “waiting/elimination period,” but 30 days’ notice to employers notice is required for foreseeable leave. b. both DBL and PFL must be from the same insurance carrier. 6. Employers who are exempt from DBL, such as municipalities, schools, and unions can choose to provide stand-alone PFL. 7. Sole proprietors and partners in LLCs/LLPs can get voluntary PFL coverage similar to how they obtained their voluntary DBL coverage. 8. Employees pay for PFL through payroll deduction, but employers are not required to collect employee contributions. PFL law does not require employers to fund PFL, however, employers are obligated to remit premium whether deductions are collected from their employees

Payable % of Employee’s Average Weekly Wage (AWW) 50% 55% 60% 67%

retroactively, or withhold more than the maximum allowed employee contribution. 10. Starting in 2018, updated PFL rates are set by New York State by September 1 of each year for the following calendar year. 11. PFL rates have not yet been released. They will be community rated as either a defined dollar amount per week per employee, or a percentage of employee’s wages up to a cap. The actual rate classification methodology is yet to be determined and could range anywhere from single to three-tiered approach. 12. Full-time employees must have worked at least 26 weeks at their current employer to qualify for PFL. 1. Part-timers must have worked at least 175 days at their current employer; and their benefits are prorated proportionately based on hours worked. 13. Paid leave can be taken in daily increments, and—unlike Workers’ Comp—in intermittent intervals, such as every other Monday. There is no “waiting/elimination period,” but 30 days’ notice is required for foreseeable leave. If this is not possible due to the circumstances (such as an accident or heart attack), then the notification needs to happen as soon as practicable.

Maximum Benefit Amount*** To the Maximum % of NY Average Weekly Wage 50% 55% 60% 67%

$ Max based on current NY AWW of $1,305.92** $652.96 $718.26 $783.55 $874.97

*While this is the anticipated phase-in schedule, New York State may delay implementation at its discretion. **NY Department of Labor releases the updated statewide AWW by March 31 for the previous calendar year. ***Business owners (who don’t have employees) and self-employed people with voluntary coverage follow a different Maximum Beneﬁt Amount formula. ****Part-time employees taking leave in daily increments have “prorated” beneﬁts.

to unpaid leave under Family Medical Leave Act (FMLA). 5. PFL becomes part of DBL policy (in form of a rider)—this means: a. there will no longer be “just DBL alone” without PFL, 10 June 12, 2017 / INSURANCE ADVOCATE

or paid directly by the employer. 9. Employers must pay the PFL premium for their entire group whether they withhold from employees or not. As such, employers can’t make PFL deductions from employees

An employee can’t take DBL and PFL at the same time, i.e. receive benefits for both concurrently. They have to be taken in sequence. And if an employee qualifies CONTINUED ON PAGE 14

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ADVERTORIAL

Telematics and Usage-Based Insurance IN THE GEORGE ORWELL BOOK, 1984, the overriding theme was “Big Brother is Watching.” With telematics, science fiction is now closer to reality. Telematics is the branch of information technology that deals with sending and receiving information, as well as effecting control over remote objects. The data collected is the basis for usage-based insurance (UBI). Helping clients understand the use and impact of telematics and usagebased insurance is another value-added service of the professional insurance agent. The National Association of Insurance Commissioners estimates that by 2018, 20% of vehicle insurance will incorporate some type of UBI. The number of UBI policyholders around the world was nearly 12 million in 2015, including more than five million in the United States. The global number is expected to grow to 142 million by 2023 (www.ihsmarkit.com). Some insurers offer significant discounts for UBI. The “catch” is they want to install what amounts to an airplane’s “black box” in the vehicle. Telematics is an extension of the Global Positioning System technology (GPS). GPS was originally developed by the military to help keep track of equipment and personnel around the world. Dozens of GPS satellites are now orbiting the planet, offering pinpoint location accuracy. GPS was switched from a military application to a civilian one, and the United States government made available free basic GPS signals to anyone in the world. With the emergence of widespread use of the internet in the 1990s, the telematics industry expanded. Telematics uses the GPS location capabilities, and adds analysis of the data and communication with outside parties. The data collected is used to offer additional services, including navigation, information on the vehicle’s performance, and the latest sports scores. There are a vast number of potential uses for telematics. Telematics is not a new concept. One of the earliest systems, General Motors’ OnStar, was introduced in 1995. The Automatic Crash Notification system will contact both the driver and a 24-hour call center to send assistance. Roadside assis-

tance and vehicle theft recovery were additional services provided. Features are available to track, slow down and disable the ignition of stolen vehicles. The basic concept of UBI is that driver behaviors are measured in a real-time environment. Telematics uses technology to collect data on such variables as speed and locations driven, hard braking and hard cornering, time of day, air bag deployment, and other behaviors. Initial providers of UBI discounts for automobiles used miles driven as the criterion for premium reductions. UBI has expanded beyond its initial vehicle concentration. It has evolved from a device placed in the car to a comprehensive communication system, including integrated GPS and navigation systems. Smartphone applications are now available. Telematics with GPS is being used by fleet owners to track shipments and reduce costs. Fleet telematics systems include almost real-time location and status information on the entire fleet, in a web-based platform, eliminating the need for paper logs. This can save time and enhance safety. It can also track the amount of time the driver is behind the wheel. For safety reasons, drivers are often required to limit their hours driven. Telematics can be used to monitor someone with driving restrictions. For example, probationary or other teen drivers may be limited to the time they can drive,

such as between 7 am and 11 pm or are limited as to where they are allowed to drive. Telematics can be useful in expediting the claims handling process. When notice of an incident is received in the monitoring center, a claim file can be initiated, the car can be picked up and taken to a repair shop, and a rental car sent to the insured, all within a short period of time after the incident. Telematics data has been brought in as evidence in various claims situations, including workers’ compensation. For example, a truck driver might say he or she was injured while on the job, while telematics data show that the driver had in fact deviated from their prescribed route and was on personal business at the time of the incident. With technology, the world is becoming smaller. More and more information is available. Helping clients understand the use of telematics, including its advantages and disadvantages, is another sign of the true insurance professional.

139 Harristown Road Glen Rock, NJ 07452, Suite 100 (800) 935-6900 www.msonet.com INSURANCE ADVOCATE / June 12, 2017 11

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[ V I EW P OI N T ]

MARTIN CARUS

Déjà Vu (All Over Again) uThe NAIC held its 11th Annual International Forum in Washington, D.C. on May 15-16, 2017. The NAIC Press Release issued post-forum states as follows: “The two-day forum included more than 300 regulators and insurers from 20 jurisdictions representing more than 70 percent of global insurance premium.” While there were certainly late arrivals, i.e., too late to make it into the official listing, the listing itself indicated 272 attendees (inclusive of the 30 speakers/panellists). Since some jurisdictions and insurers had multiple attendees, the breadth of attendance portrayed by the release is somewhat overstated. Also, a fair number of people in the audience were neither regulators (taken in the broad sense, e.g., the FSOC representative technically not being a “regulator” even though he is a former regulator) nor insurer representatives, but rather people from law firms, accounting firms, and consultants, seeking perhaps a forum to interact and/or pick-up clients (I plead “guilty”). Nevertheless the Forum, in my estimation, could be described as a somewhat positive effort. As opposed to last year’s Forum whereat Daniel Tarullo spoke volumes and made headline news concerning how the U.S. will react to developing international regulatory and capital standards, this year’s Forum’s headline might relate to the FSOC representative putting “it” to the Secretary General of the International Association of Insurance Supervisors (IAIS) as to why he was not previously invited (and in fact, had his specific request denied) to attend a meeting to be held the very next day in Washington relative to systemic risk. The topics on the agenda were: Asia-Paciﬁc Regional Focus Emerging Risk Insights Transatlantic Regional Focus International Capital Standards Systemic Risk Reinsurance Issues The comments made by the various panellists were mostly the standard fare and it is not my purpose here to provide a summary (presumably the media, and the 12 June 12, 2017 / INSURANCE ADVOCATE

If you have a home exposed to the risk of fire damage, buying an insurance policy doesn’t “transfer” that risk; it provides an indemnification for a specific loss in a specifically defined calculable amount.

press did indeed attend, will provide that type of coverage). What is the standard fare? Uniform group capital standards should be developed, risk should be managed, there is a need for more cost containment in complying with new rules, etc. It seems a wonder as to how the industry, globalized for centuries, ever succeeded to its current level without these efforts. Whether the current level is a level of success is arguable considering, at least in the U.S., the declining share of GDP represented by the insurance industry. However, there were many things left out. First and foremost is the refusal to address the fundamental issue of why there hasn’t been cost-benefit analysis of each of the various efforts. One of the panellists did touch on the fact that, for instance, ORSA filing requirements have been implemented; however, the question unanswered is: What has been the quantifiable benefit? This is quite curious inasmuch as regulators evaluating insurer risk management systems certainly would look for their charges to employ such a procedure in managing a company. Moreover, the company’s comment noted that it had to file 11 separate and distinct ORSAs to various global regulators! There are various things that sound good, but ultimately are never proven to provide a benefit concomitant with the cost. A second missing link is an indication of understanding of the very nature of insurance products in that they are not exactly “risk transfer” mechanisms. If you have a

Martin F. Carus is President of Martin Carus Consulting, LLC and has spent 50 years in the insurance industry as one of New York’s acknowledged top regulatory thinkers and protagonists. From 1965 through 1999, he was a member of the New York Insurance Department (now the Department of Financial Services), rising to Chief Examiner. From 1999-2014, he was Senior State Relations Officer for the American International Group, Inc. where he acted as AIG’s Observer to the International Association of Insurance Supervisors.

home exposed to the risk of fire damage, buying an insurance policy doesn’t “transfer” that risk; it provides an indemnification for a specific loss in a specifically defined calculable amount. The risk of loss of a home cannot be completely transferred or allow for complete indemniﬁcation. You may love your home and have memories that cannot be replaced. That’s your loss. Essentially, insurance is a method by which the cost of being exposed to a specific risk is calculated and represented by the premium for the indemnification. Since people are subject to a wide variation of specific risks, there are various products designed to compute the costs of each of such exposures. This led to a discussion about a third matter, i.e., the simplification of coverage. A half-century or more ago, homeowners’ multiple peril and commercial multiple peril policies were the answer to this concern. The CEOs discussed the need for further effort using losses occurring as a result of water damage when, for instance, floods occur coincident to wind storms. Private flood insurance has recently been on the rise, and indeed many of the catastrophe losses that occur involve disputes as to whether losses were caused by wind or flood, much to the disadvantage of consumers. Another example is coverage for CONTINUED ON PAGE 14

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[ V I EW P OI N T ] CONTINUED FROM PAGE 12

health-related losses when injuries can be caused for various reasons and in various venues which, in turn, can involve workers’ compensation coverage, homeowners’ coverage, auto coverage, regulator accident and health coverage, Medicare, Medicaid, etc. When a person is injured, they need their coverage, as opposed to disputes as to who is primary, secondary, etc. A fourth matter that seems to escape the ken of regulators and standard-setters in particular (but some companies too) is the very nature of the insurance business. Insurers exist to, quite simply, make money. Capital providers invest for one of four reasons, namely to: (i) create the means of production in order to generate profits; (ii) seek a rate of return for loaned capital (e.g., the interest on a bond) in the form of scheduled cash-flows; (iii) seek capital appreciation (i.e., to have the capital generate profits which makes the investment grow in value (e.g., stock price increases; and (iv) some combination of reasons (i)(iii) (e.g., a preferred stock investment). Of course all investments are, or at least should be, weighted as to the risk of the desired outcome. In order for insurers to utilize any invested capital, they have to compete in the marketplace. This means they not only manage risk, they take risk (their own, not policyholders’). The actuaries cannot merely go in the back room, analyse the risks of their products and come to a price. They have to consider that competing entities are doing the same thing and if the determined price is too high, they won’t sell any product and there will be no risks to manage (which means no money made). The problem regulators are engendering here, through the plethora of new standards and capital requirements, is that they are ultimately imposing their view of risk into the competitive process by establishing capital parameters based on their view of the various risks that inure to the business of insurance. Well, regulators, capital providers haven’t invested in you, and will not automatically further invest in you; they seek to invest in the actual stewards of capital whose stewardship might be adversely impacted by your standards. It’s nice to desire to protect policyholders, but regulators may actually be shooting themselves in the foot if capital is not attracted to the industry because, in turn, the abilities to create competitive returns on invested capi14 June 12, 2017 / INSURANCE ADVOCATE

AGENCY NOTEBOOK A fourth matter that seems to escape the ken of regulators and standardsetters in particular (but some companies too) is the very nature of the insurance business. tal are too limited. It is noteworthy that regulators have no skin in the game since they are not the holders of capital available to be invested, and they cannot dictate that investments into the insurance industry be made. After all, the industry competes with other industries for the available capital which is not totally elastic in supply. This is why cost/benefit analyses are necessary to ensure that what sound like reasonably prudent regulatory measures are actually providing a return commensurate to policyholders and investors, and not merely raising prices and lowering rates of return.[IA]

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for both, the combined duration may not exceed 26 weeks in a consecutive 52-week period for the same qualifying event. There are three main categories of qualifying events for which an employee can take paid leave: a. Providing care for a family member with a serious health condition i. The common cold or taking off for general doctor visits don’t qualify—the person being cared for must meet definition of a “serious health condition.” b. Bonding leave after giving birth, adoption, or welcoming a child into foster care i. An employee may seek family leave benefits during the first 12 months after the child’s birth, adoption, or foster placement even if that event occurred in 2017. ii. An employee may take paid leave even for events leading up to adoption, such as travel to another country to complete an adoption. c. Qualifying military leave event i. An employee can take paid leave if the family member (spouse, domestic partner, child, or parent) is on active duty or has been notified of an impending call to active duty. Employees with health insurance remain covered during paid leave and continue to only pay their normal contributions to the cost of the health insurance premiums at the same level they did prior to their paid leave. If an employer is subject to FMLA (which applies to groups of 50 or more employees), they must coordinate PFL with FMLA.[IA] Richard A. White is the CEO of ShelterPoint Life Insurance Company. The opinions expressed in this article are his own.

For more information, call Gina Marie Balog at 914.966.3180, x113

gmb@cinn.com www.insurance-advocate.com

www.insurance-advocate.com

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Cyber Risk Beyond Compliance:

Stephen M. Soble is Chairman and CEO of Assured Enterprises, Inc. Jack Dufrene is Chief Technology Officer of Assured Enterprises, Inc.

Aspirin, Antibiotics, Surgery, or a (Super Potent) Apple a Day? BY ST E P H EN M. S OB LE AND JA CK D U F R E NE

The risks are ponderous, the exposures beyond most calculation, and the responsibility unrelenting. With the advent of Cyber compliance regs, the insurance industry faces baseline standards and a host of offtheshelf solutions to deal with the pain, but the profound goal may well be lost as C Suiters, GCs and brokers select aspirin or antibiotics or even surgery, but fall short of the real tests of cyber wellness—a sustained defense that won't require ongoing, costly visits to the pharmacy or the emergency room. There is a solution that has been developed by the top guns of cyber protection, now in the private sector, having left the service of major government intel agencies. Here is their thinking. SA 16 June 12, 2017 / INSURANCE ADVOCATE

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uCyber-attacks ranging from the recent WannaCry ransomware worldwide incident to the infamous “Struts 2” attack which stole online banking credentials a few years ago, are only two of hundreds of documented cyber-attacks. Nearly daily, data breach incidents plague virtually every industry. And there are so many “alerts of a possible attack” from devices on the networks of major institutions that a new genre of tool has been developed to distill truth from fiction before the consequences occur. And yet, when it comes to cyber risk insurance, despite years of trying to create a cyber insurance line which works for insurers and insureds alike, the insurance industry has been pursuing an insurance strategy for cyber risks, more akin to a trip to Las Vegas, than a traditional insurance model. Lots of hype. Lots of “What Happens in Vegas, Stays in Vegas” thinking, but even serious thinking about risk identification, measurement and risk mitigation, heretofore, has been incomplete. The essence of genuine insurance is missing. Insurance is financing the Digital Age. Only insurance links risk, loss, and recovery from damage. Bonds, stock, annuities and other instruments cannot do what insurance can. Perhaps the reality that cyber-attacks cause permanent damage to reputation gives us some pause. We are all enamored with the fact that boards of directors, clients, and prospective clients are so confused, if not fearful, about cyber-attacks that they now sometimes clamber for a cyber insurance policy. And like a good Las Vegas stage show, we all want to give the customer what they want and we want them coming back for more. How should cyber insurance work? We would like to empower the insurer and insured to understand objectively what their risks are, how to measure risk, how to mitigate those risks, and in the

process, bring down the risk and the premiums for such insurance. If you can’t truly measure the risk, you can’t properly fix the premium. And from a customer satisfaction perspective, the insurance broker ought to be equipped with a tool which turns him or her into a key member of the trusted risk advisory team for the insured. To date, this has not happened. But that is about to change. Assured Enterprises has innovated the winning formula to usher in this change. Assured Enterprises is a different breed of company. We ask tough questions and many more of them than others in the field. We believe in hard engineering and science. We find scalable answers and we rely on solid data. We are at the

…when it comes to cyber risk insurance, despite years of trying to create a cyber insurance line which works for insurers and insureds alike, the insurance industry has been pursuing an insurance strategy for cyber risks, more akin to a trip to Las Vegas, than a traditional insurance model. beginning of a new era for insurance in the Digital Age. What follows is not an advertisement for us, but a look at what needs to go into a meaningful, sustainable program.

Crossroads The Digital Age has reached a crossroads. We have the technological means of exchanging a vast and specific array of zeroes and ones (the binary language of the digital world). Yet, hardly a day goes by without news of someone getting hacked. And, the hacks—with ransomware, data theft and data manipulation are, incontrovertibly, on the rise. In fact, the loss history attributed to cyber-attacks is about $500 Billion per year. Sound cybersecurity is a sine qua non of the next phase of the Digital Age for the world of commerce. How can we allow autonomous vehicles without solid cybersecurity? How can auto insurance address this risk of loss? How can an auto insurer know whether the hack of IoT software or communications within the autonomous vehicle caused an accident? How can we shop online? How can we allow drones to deliver packages to our door? How can we bank online? The true losses of online shopping, banking and the future risk of automated package delivery and autonomous vehicles are mind boggling losses, taken together. How can we buy and sell stocks and bonds without securing those exchanges with exceptional cybersecurity? And, do we just trust the name brand of the provider? Major banks have been hacked—from PNC to JP Morgan to the Central Bank of Bangladesh. The entire economy and the cohesive feeling of connectedness which helps to define a vibrant polity is under siege. How can we invest in a new technology without knowing whether it is likely to be hacked? How can a company pursue a merger or acquisition without knowing whether their prospective partner is about to be hacked or worse, has been hacked and just doesn’t know it? Remember the Yahoo! cyber-attack and the impact which those revelations of an ongoing hack had on the purchase price from Verizon? Between the loss in purchase price and the cost of the hack probably a cool billion dollars was lost. Can anyone name another industry in which society and the insurance industry would tolerate $500 billion in losses? We can’t. Improperly constructed aircraft never get off the assembly line. Defective power plants rarely get built. But when it comes to the assets which companies have built up over time—intellectual property, confidential business arrangements, plans for new product releases, operational efficiencies, and even money—we are all at risk in the new Digital Age.

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How Did This Mess Come About? About thirty years ago, DARPA funded a program which enabled university research scientists to share electronic data over a network across the globe. No one thought about security. No one thought about the risk or the losses which could arise from stolen or disrupted data. University professors are a reliable lot, right? One of the earliest well-documented cases of cyber-attacks was unveiled in the good read, The Cuckoo’s Nest by Clifford Stoll. As the Internet morphed into a tool for everyone, as the world of personal computing took hold, as the mobility of computers became the smartphones and tablets of today, we, as humankind, were so enamored with the versatility, the innovation, the upside of new business and financial models that we simply did not pay thoughtful, careful attention to the issue of security. We had neither a market nor a governmental mechanism to insist that serious security be built into the very fabric of the Internet and of those devices permitted to access it. The constructive standards of privacy and security clashed with the commercial exigencies of speed to market, technological improvement, the freedom and equality created by smartphones in emerging market countries, and other factors. This gave rise to the disconnect between genuine cybersecurity and technological development in the Digital Age. Twenty-five years ago, spending on software games outstripped spending on security by a factor of more than 10 to 1. It hasn’t changed today. And, the Old-School advocates of cybersecurity solutions— those selling aspirin, antibiotics or offering snake oil surgery— were, and still are, part of the problem, not part of the solution. The Old-School relies on signatures and rules—that’s how your anti-virus protection and firewalls work. There’s nothing wrong with this, except that it is easy for a hacker to find a way around the rules and to change signatures, and thus relying only on these solutions creates a false sense of security, and a reality of low security. Then we had the rage of “end-point solutions”—everyone had a “silver bullet” designed to stop one problem. And any company which went for this plan spent a great deal of money on toys which didn’t work well together and which still allowed the hackers easy access to their networks. Great for the revenue stream of the cybersecurity providers, but were companies even buying things which they needed? And what was the ROI on these purchases, especially if one continued to get hacked? The Old-School model has been built on the model of “buy my protection (which won’t work), know that everyone will get hacked (which Assured believes is passé thinking) but be sure to call me in once you get hacked.” This approach is obscenely lucrative for the Old-School cybersecurity firms. When a client is in crisis mode, they tend to overspend and to throw more money at the problem than warranted—especially if the provider has the reputation or relationship with the board of directors that exudes an air of confidence. Actual solutions? Not so much. Adhering to the mantra of “No one gets fired for hiring XYZ”—we have all heard it before—drowns out other approaches. From the perspective of a business model to be discussed in business school— it is a brilliant model for the cybersecurity provider. But, it could prove devastating for the customer or the victims of data breaches. And, lo and behold, now we are deep into the first phase of the Digital Age and we are all emperors at a nudist colony. Speaking 18 June 12, 2017 / INSURANCE ADVOCATE

We focus on the data. We gather the data. We analyze and correlate the data to determine risk. No predictive analytics; no rules or signatures; no artificial intelligence which is often a disguise for some new rules, and no double speak. of which—would the insurance industry provide insurance to those emperors against mosquito bites, without even knowing how to deter, deflect or eliminate the likelihood of mosquito bites? And, without the ability to measure the likelihood of occurrence or loss from each bite? Yet that is exactly how Old-School cyber insurance operates. Lots of emperor-customers. Few, if any, hard insights into the risk and impact for each individual client. The misunderstanding of this fundamental problem led Assured first to create a new engineering archetype—a legitimate “paradigm shift.” We focus on the data. We gather the data. We analyze and correlate the data to determine risk. No predictive analytics; no rules or signatures; no artificial intelligence which is often a disguise for some new rules, and no double speak. How do we know how to do this? Our engineers. We have executives who handled some of the most sensitive digital security issues for the US Department of Defense and the Intelligence Community. We have engineers who devise innovative pathways to solve hard problems. We believe in the value of critical thinking. We are the guys who keep asking—“What if?” and “Why not?” There are no lemmings on our team.

The Core As one might expect, the core of our excellence is engineering. We have a superb team of hard core, nerdy cybersecurity engineers, comfortably facing the challenges of innovation. What one might not expect is the excellence of our leadership superstructure. We have members of our board of directors who have served in the intelligence community, defense department and in sensitive positions where they had major responsibilities for cybersecurity. We have added to these policy leaders a very active board of advisors which includes a former deputy undersecretary of defense, responsible for cybersecurity in mission critical areas; a former deputy secretary of energy; a member of the private sector team of ten experts assembled by President Obama to advise on the relationship between government and private sector needs in cybersecurity; a member of the defense science board; and a seasoned businessman who has served on the board of directors for Fortune 500 companies, for an aggregate of over 55 years.

Solutions We founded the company because we believe that a multilayered approach to cybersecurity makes sense. We devised a system of seven+ independent, yet interlocking layers of protection, so that clients could deploy the products which gave them the best ROI, without having to over-purchase. Then we asked ourselves—“How do we know what solutions people need?” CONTINUED ON PAGE 20

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Aree you reeady y? Aree your clients reeady?

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And this opened Pandora’s Box. We had to be able to assess everything affecting cyber risk. Our system needed to be dynamic, comprehensive and tailored to each client, yet scalable. And because this is incredibly difficult and complex, it has never been done before. In fact, no one has even come close. Thus, the rationale for inventing TripleHelixSM—the world’s most comprehensive cyber risk assessment system. Here is how it works: Measurement Cybersecurity poses a complex challenge for organizations of every size in every industry. And the challenge continues to grow while executives, boards of directors and technical staff attempt to stay out of the headlines, meet compliance standards and costjustify security. With increased pressure to protect data and the growing list of standards and regulations surrounding cybersecurity, C-Suites and Boards know they must address the challenge together with their technical staff in order to mitigate the risk of cyber-attacks. Just think about the NYS DFS Cybersecurity Regulations—which apply to even small companies in banking, finance and insurance, or the European Union’s GDPR—which apply to every entity in the world that “processes” identifying information belonging to any EU citizen. Fines under the NYS regulations are steep, but under GDPR they are astronomical. Fines for non-compliance with GDPR are a minimum of €20 million, but may rise to 4% of the last year’s annual revenue worldwide for any subject company. An insurance program which addresses this risk of exposure should be an invaluable, constant part of every major company’s governance, risk and compliance program. Until now there has been no clear methodology to link a client’s cybersecurity efforts to cost-efficient choices. Without reliable metrics, how can one benchmark cyber health today and to measure the ROI of what might be expensive efforts to remediate or to improve cyber health in order to reduce risk? TripleHelixSM With TripleHelixSM, Assured Enterprises built the most comprehensive risk assessment system available, which gives organ-

izations the capability to quantify and measure their cyber risk. It provides the granular information to inform legal, insurance, compliance, legal, and audit professionals. It is well-suited for government agencies, commercial enterprises and critical infrastructure. With TripleHelixSM, Assured’s clients receive a clear picture of their current cybersecurity posture, and a comprehensive, written Roadmap that details both costeffective improvements to their environment that can be implemented immediately, while it also lays out a plan for future improvements for which they can plan and budget for methodically. You need clear-cut recommendations for improvements to your cyber health. Why settle for a pass/fail “mark” without any guidance? The TripleHelix℠ risk assessment system analyzes: • Cyber Maturity–reveals existing gaps, weaknesses, and vulnerabilities in the client’s organization. • Threats–identifies the bad actors that pose the threats relative to the client’s organization, including state-sponsored adversaries, “hacktivists,” organized crime, commercial spies, insider threats and more. • Impacts–evaluates the impact of potential cyber breaches from the vantage point of data, reputation and monetary loss, theft of intellectual property, legal ramifications, fines and other factors. The correlation of these three strands yields a proprietary CyberScore®, a three-digit cybersecurity score akin to a FICO® score, that allows the management team to benchmark and to evaluate security readiness. The Assured CyberScore® empowers a CISO to chart a recommended course for improvement, even for a period of years, with a focus on what is most important for the organization, not on the latest fad in the cybersecurity marCONTINUED ON PAGE 22

20 June 12, 2017 / INSURANCE ADVOCATE

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American Transit Insurance Company The leading for-hire commercial auto liability carrier in New York State with over 40 years of experience insuring Taxis, Livery, Black Cars, Fleets, and Transportation Network Companies.

One MetroTech Center | Brooklyn, NY 11201 | (212) 857-8200 (800) 683-ATIC (2842) | www.american-transit.com

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TripleHelixSM captures thousands of data points in 25 different categories which is far more comprehensive than any other assessment on the market. Additionally, we also use multiple system analysis tools that identify vulnerabilities, gaps and ongoing attacks. It is capable of measuring not only technical risks, but risks resulting from policy and procedural gaps. Plus, it has a unique focus on insider threats. Assured uses a unique tool which identifies ongoing data breaches and allows us to remediate the attack immediately. As a corollary, Assured can provide a data breach detection continuous monitoring tool, to protect the client’s data with a daily scan. Covering All the Bases At the end of TripleHelixSM, the client enterprise receives three important deliverables: a Roadmap with objective recommendations to improve cyber health—reflecting policies, procedures, software, hardware, and more. Second, TripleHelix S M delivers an understandable CyberScore®, as noted above. Finally, most organizations are subject to multiple compliance standards or regulations. Instead of having to conduct multiple assessments—often with multiple vendors—to address compliance requirements for an organization, TripleHelixSM offers a one-stop, cost-effective, comprehensive assessment with the option of delivering virtually any regulatory compliance cyber report into a personalized Regulatory Compliance Dossier. Regulatory Compliance Dossier TripleHelixSM offers a one-stop, time- and cost-effective, comprehensive assessment and gives the client the option to have virtually any regulatory, compliance or best practices report prepared

Instead of having to conduct multiple assessments—often with multiple vendors—to address compliance requirements for an organization, TripleHelixSM offers a one-stop, cost-effective, comprehensive assessment with the option of delivering virtually any regulatory compliance cyber report into a personalized Regulatory Compliance Dossier.

and delivered into the client organization’s own Regulatory Compliance Dossier. Imagine having the regulatory agency’s report before the regulators ever arrive. TripleHelixSM ensures accuracy and demonstrates intent to achieve proactive cybersecurity and to begin the client’s remediation plan before the regulators deliver their critique. GDPR, PCI, HIPAA, NYS DFS, FISMA, FFIEC, NCUA, NIST, ISO and many other reports are now integrated into TripleHelixSM. If an organization needs a report which isn’t already integrated into TripleHelixSM, Assured will integrate it for a client at no additional cost. (The actual report is not free, of course.) The reports delivered within the Regulatory Compliance Dossier permit a company to anticipate and to remediate questions which might arise from the visit of a regulator. Moreover, these reports serve as a reliable double-check on the regulator’s accuracy. Deep Software Scanning is Essential How is it that hackers seem to have such an easy time getting into so many networks?

As we were building TripleHelixSM, we realized that, according to the most prestigious data breach reports (Verizon, HPE, NTT, Software Engineering Institute, etc.) between 70% and 99% of all successful cyber-attacks exploit known vulnerabilities in the software. Knowing this, Assured scoured the market for a scanner CONTINUED ON PAGE 24

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that could identify these known vulnerabilities in software. Such a tool would be valuable in assessing cyber risk clearly. Unfortunately, no such tool existed. So, we built our own: AssuredScanDKV®. AssuredScanDKV® is the only deep software scanning tool which Detects Known Vulnerabilities (hence, “DKV”) at the binary level in every version of the software resident on a network. Now there is some engineering jargon to explain! AssuredScanDKV® is a patent-pending technique which allows us to unbundle the bundled sections of the software code (executables) so that we can read all of the libraries. Yes, more engineering talk! Let’s explain this in layman’s terms: When software is newly developed, responsible software developers use a variety of tools to ensure that they have followed the best code development practices to guard against security defects. However, over time new vulnerabilities crop up in the world. NIST (the National Institute on Standards and Technology) adds over a hundred new vulnerabilities to their database each week, on average. How do we find whether those newly identified vulnerabilities are in the software we are using? The answer is that before AssuredScanDKV® there was no comprehensive way of doing this. And the reason why no one was conducting this essential scanning turns on the simple fact that most of the software code in a typical software package contains well-known, tried and truly performing libraries, dynamic loading libraries, and executables. Because these code elements are so reliable, they constitute over 80% of all applications, speeding development and insuring performance. Once bundled together, we discovered that no scanner on the market could get down to the binary level—the zeros and ones—that make up the actual software. And that is why AssuredScanDKV® represents a patent-pending breakthrough. We unpack or unbundle the executables so that we can detect software vulnerabilities within all components of the applications at the binary level. No one else can do this. As cool an engineering tool as this might be, we needed to make it useful—really useful. So, this tool is not a mere monitor—capable of detecting holes. We added features. We prioritize the vulnerabilities found so that we can advise on the order in which to remediate detected vulnerabilities. We also provide the precise remediation information so that the client can remediate their own proprietary software, or we can jump in and provide that service. By the way, on our website we have an approved Case Study from the US Department of Defense which explains that our tool detected known vulnerabilities in mission critical, proprietary software, even in a lab which had run many other scanners, including those claiming to compete with us. According to the other scanners, the DoD software was free of vulnerabilities. AssuredScanDKV®, however, found many vulnerabilities in every software package we evaluated. And AssuredScanDKV® does not require access to source code, nor to any data which the user created with the software. We just find the holes in the software and show you how to fix them, or if you like, we fix them for you. Now to take this hard science and make it easy to understand: 24 June 12, 2017 / INSURANCE ADVOCATE

We prioritize the vulnerabilities found so that we can advise on the order in which to remediate detected vulnerabilities. We also provide the precise remediation information so that the client can remediate their own proprietary software, or we can jump in and provide that service. as part of a TripleHelix SM assessment, we simply employ AssuredScanDKV® to find the vulnerabilities in software and to provide a remediation plan, if warranted. Reduce the Risk—Improve Cyber Health Let’s step back and see what the action plan might be to improve cyber health.

• Conduct a TripleHelixSM cyber maturity analysis, including a deep scan of software to detect known vulnerabilities, AssuredScanDKV®, as well as other tools that scour networks, SCADA, and business systems for cybersecurity gaps. • As part of this, we run a comprehensive threat assessment, which focuses on adversaries from nation-states to insiders, from hacktivists to supply-chain threats, insiders and more. • We also evaluate cyber readiness with a focus on assessing the impacts of potential data breaches from the perspective of both likelihood of a successful breach and likely monetary cost of a foreseeable data breach. • We study and analyze the data collected in order to produce CONTINUED ON PAGE 26

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I I A B N Y DI Y HIR IN G TO O LK IT YO U R START-TO -F INI S H G UID E TO H I R I N G G R E AT TAL ENT

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Proactive cybersecurity is possible. a Roadmap which provides options for improvements, considering cost-effectiveness in the client’s environment. • We correlate and issue a CyberScore®. • We provide a unique Regulatory Compliance Dossier that includes any reports which the client may need. Before TripleHelixSM, the process of satisfying the latest compliance requirements, standards and best practices was an exhausting, time-consuming, expensive and thankless task. More importantly, without TripleHelix℠, you simply have no way to achieve true visibility into the risk inherent in your enterprise. Reduce the Risk. Improve your Cyber Health. What This Means for Cyber Risk Insurance Imagine the future with a solid cyber risk insurance policy:

With CyberScore®, we layer the analysis so that we can determine: • Whether a prospective insured is insurable (under the cyber risk policy). • The maximum coverage possible. • The pure premium for each insured, based on industry, key factors, and personal history. • The appropriate program for evaluating improvements to cyber health. • The benchmarking of the prospective insured’s comprehensive cyber health. • The measurement of changes in the CyberScore® arising from the adoption of improvements and remediation actions. • The ROI on the cost of those improvements and remediations for the prospective insured. • Targeted improvements in cyber health which will impact the amount of coverage for which the prospective insured 26 June 12, 2017 / INSURANCE ADVOCATE

may be eligible and improvements in the premium charge, based on genuine lowering of risk factors. Some of this can be done wholly online in a few hours. Some requires the execution of the full TripleHelixSM assessment. Managing Continuous Improvement The results of a TripleHelixSM assessment include two critical components: a unique CyberScore® that distills Assured’s comprehensive analysis into one easy-to-understand number, and a Roadmap of detailed options for consideration to improve the client’s cybersecurity posture and CyberScore®. Cybersecurity is an ongoing process requiring changes and

updates to keep ahead of the threats. TripleHelixSM is designed for annual use, with periodic updates of the CyberScore® to measure the improvements from remediation and other actions. Assured sees the requirements of security as affecting everything that comprises the data of our world. We are mindful of the power of the Digital Age. To this end, we are incorporating cybersecurity solutions into a full array of biometric technologies, with our strategic partner, Qafis, Ltd. of the Netherlands. Together, cybersecurity and biometrics will provide the next generation of critical infrastructure security. And with other strategic partners, new technologies will be employed to build out the solutions called for by the TripleHelixSM assessments. Proactive cybersecurity is possible. Genuine risk assessment, based on hard-nosed factual engineering data and basic science is here. And, this is the story which will soon begin to change the cyber risk insurance world for the better. Think well past the aspirin and antibiotics.[IA]

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We are Security, Assurance, Solutions, Care, Reliability and Value-Driven. Amalgamated Family of Companies was created with the vision of providing insurance protection to hard working Americans. Our unwavering commitment to providing security is underscored by three decades of â&#x20AC;&#x153;Aâ&#x20AC;? (Excellent) rating from the A.M. Best Company. Since our founding in 1943, the people and companies that we serve have come to rely upon Amalgamated to deliver more than just life insurance protection. Through our family of companies we have grown to provide a diverse range of value-driven services and solutions, with the assurance of reliability built through seven decades of consistent care for working Americans and our client companies that they work for.

David J. Walsh President & Chief Executive Officer Amalgamated Life Insurance 333 Westchester Avenue White Plains, NY 10604 www.amalgamatedlife.com

Amalgamated Family of Companies Amalgamated Life Amalgamated Agency AliCare AliCare Medical Management AliComp AliGraphics

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[ I N T H E A S S O C I AT I ON S ]

PIACT TriCounty IIAA Installs Lauds House Officers and Directors Passage of for 2017-2018 Term Amended Awards and scholarship announcements accompanied TNC Bill the evening’s activities uALBERTSON, NY—New officers and directors took the helm on May 17 during the Long Island-based TriCounty Independent Insurance Agents Association annual installation dinner and awards ceremony. The gathering, held at Chateau Briand in Carle Place, NY, set the TriCounty leadership for the 2017 through 2018 term. More than 150 agents and brokers, company representatives, vendors, and other members of the insurance community joined the festivities of this special occasion, starting with a bountiful outdoor cocktail reception. Adam Erickson of Carlstan North Hills Agency, Inc. in Garden City was installed as president of TriCounty by his father, Kenneth Erickson. Additional officers and directors were installed by Kathleen Lawler, AAI, CIC, Assistant Vice President of Education of the Independent Insurance Agents & Brokers of New York, Inc. Alexander Giraldo of Club Agency Insurance Brokerage in Garden City will assume the position of Vice President, and Ronald Brunell, CIC, of The Signature B&B Companies in Garden City, NY was installed as Treasurer. Andrew Chong, ARC, Underwriting Partners, Inc. of Great Neck will be the group’s Secretary in the new term. The TriCounty Independent Insurance Agents Association, Inc. will have the following agents serving on the Board of Directors: • Christopher Dritsas, Advantage Partners, Inc., Port Washington; • Frank Elorza, Club Agency Insurance Brokerage, Garden City; • Steven Ferrar, Ferrar Insurance Agency, Inc., Franklin Square; • Neil Levy, CPA, CFP, CBS Coverage Group, Plainview; • Robert E. Mackoul, CLU, New Empire Group, Long Beach; and • Christopher Wukovits, AAA, New York Insurance Services, Inc., Garden City. 28 June 12, 2017 / INSURANCE ADVOCATE

The prestigious Joe Bonica Award presented to a member of the board of directors for outstanding work and accomplishments went to Peter Phillips, of Phillips Brokerage, Inc. for starting and maintaining the following scholarship program at John’s School of Risk Management eight years ago, and also for enhancing the association’s charity support over the years. TriCounty announced awards totaling $9,500 in scholarships this year—$2,500 went to each of three exceptional students of St. John’s School of Risk Management: Samantha Meneilly, Antonio Perciavalle, and Nicholas Smith. Each student surpassed specified criteria, including insurance-related study requirements, a high GPA average, and service to the community. The 2017 St. John’s education scholarship program was sponsored by three major insurance carriers: Narragansett Bay Insurance Company, National General Insurance, and Safeco Insurance. Winners of the two other $1,000 scholarships were announced and certificates will be presented at their school’s awards ceremonies. Madelyn Collins was the Joel S. Pollack Memorial Scholarship award winner for her essay on the pros and cons of driverless cars. Madelyn was chosen from a large number of submissions from high school seniors in the boroughs of Nassau, Queens, Brooklyn, and Staten Island. The Stephen T. Dooley Community Ser vice Award scholarship went to Madison Cinnamo, a graduating student from West Hempstead High School for outstanding community service during her high school years. Checks will be mailed to their chosen colleges to be applied towards tuition or allied expenses.[IA] The TriCounty Independent Insurance Agents Association is comprised of more than 300 independent insurance member agencies and brokerages doing business in the counties of Nassau, Queens, Kings, and Richmond.

uHARTFORD, Conn.—The Professional Insurance Agents of Connecticut commends the state House for passing H.B.7126, which has been amended to remove insurance coverage gaps that existed in the original bill. The amended bill passed the House [last Thursday] and has been sent to the Senate for consideration. PIACT President Kenneth A. Distel offered testimony last month supporting legislation that would create a comprehensive regulatory regime for transportation network companies, but cautioned the Senate Insurance & Real Estate Committee that the lack of definitions in the bill created insurance coverage gaps (e.g., when a taxi is picking up street hails or being dispatched via radio). To address the concerns raised by PIACT and other organizations, the amended bill would now create regulations to require any taxi owner or operator to use tiered rates when posting rates: on its website and online-enabled application, and in the taxi in a location visible to the passenger. The tiered-rating system will close the gaps created in the original legislation. “PIACT applauds the swift action the House took to amend the bill and level the playing field between taxicabs and TNCs across the state,” said Distel. “Coverage gaps can cause problems if accidents occur. We urge the Senate to pass the amended bill with its tiered-rating system, which would close these gaps and make the ridehailing vehicles and taxicabs safer for everyone involved.”[IA] PIACT is a trade association representing professional, independent insurance agencies, brokerages and their employees throughout the state.

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[ COURTSIDE ]

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

Construction Worker's Slip and Fall on Wet Temporary Staircase is Not Enough for Summary Judgment O'Brien v Port Auth. of N.Y. & N.J. Edited by Lawrence N. Rogak In this Labor Law case, a construction worker slipped and fell on a metal temporary staircase that was wet from the rain. The Court of Appeals held that the fact that a worker falls at a construction site, by itself, is not enough to create Scaffold Law liability. A trial is necessary to determine whether the staircase, which was designed with holes to let water pass through and raised nubs for traction, was sufficiently safe.—LNR uThe issue on appeal is whether the Appellate Division properly determined that plaintiff Thomas O'Brien was entitled to summary judgment on liability on his Labor Law § 240 (1) cause of action. We conclude that there are triable issues of fact and that, therefore, summary judgment should have been denied. Plaintiff was an employee of DCM Erectors (DCM), a subcontractor at the 1 World Trade Center construction site. Defendant Port Authority of New York & New Jersey was the owner of the premises and defendant Tishman Construction Corporation of New York was the general contractor. On the day of the accident, plaintiff was working a 6:00 a.m. to 11:00 p.m. shift, maintaining two welding machines located on ground level at the site. It had been raining periodically during the day. At around 8:00 p.m., plaintiff headed downstairs to DCM's shanty, one level below ground, to get his rain jacket. Plaintiff used a temporary exterior metal staircase — also referred to as a temporary scaffold. He testified at his examination before trial that the metal staircase was wet due to exposure to the elements, that his foot slipped off the tread of the top step and that he fell down the stairs, sustaining 30 June 12, 2017 / INSURANCE ADVOCATE

He testified at his examination before trial that the metal staircase was wet due to exposure to the elements, that his foot slipped off the tread of the top step and that he fell down the stairs, sustaining injuries.

injuries. Plaintiff testified that the stairs were "steep, slippery and smooth on the edges." He also stated that his right hand was on the handrail, but he was unable to hold on because the handrail was wet. Plaintiff commenced this Labor Law action and, as relevant here, sought partial summary judgment on his Labor Law §§ 240 (1) and 241 (6) causes of action. In support, plaintiff submitted an expert affidavit from Walter Konon, a professional engineer and licensed building inspector with expertise in construction engineering and construction safety. Konon did not view the stairs themselves, but based his opinion on photographs in the record. Konon opined that the stairs were "not in compliance with good and accepted standards of construction site safety and practice" or with an Occupational Safety and Health Administration (OSHA) provision, which requires that slippery conditions on stairways be eliminated before use. Konon also stated that the stairs were "smaller, narrower and steeper than typical stairs," making it more difficult to maintain proper footing, and that the front portion of

Lawrence N. ("Larry") Rogak has been practicing insurance law since 1981. He has defended over 23,000 lawsuits and arbitrations and has represented over 75 different insurance companies and self-insured corporations. Lawrence N. Rogak LLC is listed in Best's Recommended Insurance Attorneys, a distinction that requires written recommendations from at least 12 insurance carriers. A 1981 graduate of Brooklyn Law School, Mr. Rogak has published more books and articles on insurance law than any other New York attorney in the field.

the stairs, which comes into contact with the workers' footwear, tended to become worn and slippery with use. Konon claimed that the stairs showed signs of longstanding wear and tear. According to Konon, the only anti-slip measures in place at the time of plaintiff 's fall were "small round protruding metal nubs," which offer "limited anti-slip protection" even when they are not worn down, as he maintained they were here. He further asserted that steel stairs have a tendency to become slippery when wet and have a decreased coefficient of friction, particularly when worn down. Konon concluded that "[a]ll of these conditions coupled with the fact that the stairs were wet due to rain and that the workers were allowed to work and use the stairs despite the rain and the wet stair treads, created a dangerous condition that was not in compliance with good and accepted standards of construction site safety and created a significant risk of slipping on the stairs and of thus falling down the stairs." Plaintiff also submitted an affidavit from a coworker, who stated that the stairs were slippery when wet and that "almost everyone was aware of the slippery nature of the stairs."

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[ COURTSIDE ] Defendants submitted two affidavits from their construction safety expert, David H. Glabe. Glabe is a licensed professional engineer and a consultant to the construction industry, specializing in scaffolding and staircases at construction sites. Like Konon, in his first affidavit, Glabe based his opinion on photographs of the staircase. He opined that the staircase was designed for both indoor and outdoor use and was "designed and manufactured so as to provide traction acceptable within industry standards and practice in times of inclement weather." He found "no evidence" that the perforated steel treads had been worn down by foot traffic. He further observed that the staircase provided both perforated holes to allow rain to pass through and raised metal nubs for traction, and opined that these anti-slip measures were sufficient. Glabe also disputed that the staircase was smaller, narrower or steeper than usual — rather, based on his experience, training and familiarity with this type of staircase, "the tread depth and width met good and acceptable construction industry standards." In a subsequent affidavit, Glabe described his inspection of a staircase of the same make and model as the one at issue. He confirmed that there was adequate space on the tread surface of the steps so that a person descending the stairs could avoid contact with the "nose or front of the step." He characterized Konon's opinion that the stairs had a decreased coefficient of friction as "utterly meaningless" given Konon's failure to inspect or test the actual staircase either alone or in conjunction with testing plaintiff 's footwear. Glabe also opined that the use of both handrails could have helped prevent plaintiff 's fall. Finally, Glabe stated that, contrary to Konon's opinion, it was "not possible" to conclude from photographs in the record that the treads had been worn down. Rather, "the components of the staircase as designed will routinely outlast the use of a particular staircase and these types of staircases may eventually be replaced based only upon a new design rather than due to wear and tear." Supreme Court denied the crossmotions for summary judgment on plaintiff 's Labor Law § 240 (1) claim, finding that there were issues of fact as to whether the temporary staircase provided proper

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[ O N M Y R A DA R ]

BA R RY Z A L M A

Agent Should Explain Effect of Coinsurance Promise of Coverage Without Explanation of Coinsurance Can Be Fatal to Insurance Agent

uNo one seems willing to read the insurance policy they purchased. When they have a loss and the failure to read the policy costs the insured money he, she or it will always sue the insurance company and the insurance agent. Often courts, feeling sorry for the person insured, will place the importance of the failure to read on the agent instead of the insured. In a case where the court is required to believe all of the facts alleged in the complaint are true, a lifeline will usually be given to the insured even after it is given four tries to amend its complaint. In Kendall South Medical Center, Inc. v. Consolidated Insurance Nation, Inc., d/b/a Insurance Nation, District Court of Appeal of Florida, 2017 WL 1908376, No. 3D16-926 (May 10, 2017), Kendall South Medical Center, Inc. (“Kendall South”), the plaintiff below, appealed a final order dismissing its Fourth Amended Complaint with prejudice for failure to state a cause of action against one of the defendants below, Consolidated Insurance Nation, Inc. d/b/a Insurance Nation (“Insurance Nation”).

UNDERLYING FACTS Kendall South operates a medical center on leased premises located in North Miami Beach, Florida. On January 3, 2013, the sprinkler system on the leased premises was undergoing maintenance when a leak occurred, resulting in significant water damage to both the physical improvements (i.e., walls, flooring, baseboards) and to the contents (i.e., equipment and machinery). Kendall South had a commercial property insurance policy with Nation Insurance [SIC]—issued in August 2011, and later renewed—which provided $100,000 of coverage for the physical improvements and contents of the subject property, and 32 June 12, 2017 / INSURANCE ADVOCATE

It is well settled that where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages for negligence.

which contained a $1,000 deductible and a 90 percent coinsurance clause. As a result of the sprinkler leak, Kendall South suffered property damage totaling approximately $260,000. Kendall South made an insurance claim expecting to receive a $100,000 payout, but received only $16,562.67 due to the policy’s coinsurance clause because they failed to buy insurance with limits equal to the 90% of the value of the property, the risk of loss of which was insured. In its pleading, Kendall South alleged that it had met with Insurance Nation’s agent, Humberto Torres, on or about August 10, 2011, in order to obtain “a commercial property coverage policy of insurance in the amount of $100,000[.]00 that would cover the property, equipment, supplies, and improvements” of Kendall South. At this meeting, after informing the agent that the subject premises had “office equipment, supplies and furnishings in excess of $100,000.00 and that [Kendall South] had spent in excess of $100,000.00 for the buildouts, betterments or improvements.” Kendall South alleged it requested from agent Torres insurance coverage of

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http:// shop.americanbar.org/eBus/Store/Pro ductDetails.aspx?productId=214624, or 800-285-2221 which is presently available. Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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[ ON MY RADAR ] $100,000.00 to cover the property, supplies, furnishings, betterments or improvements of Kendall South Medical Center, Inc. Thereupon, it alleged Torres informed Kendall South that Defendant Insurance Nation would procure a commercial policy of insurance that would cover and protect all the property, equipment, furnishings and improvements of the Plaintiff Kendall South Medical Center, Inc., and as specifically requested by Plaintiff. After Kendall South paid the premium for a policy that provided property damage coverage of $100,000 with a $1,000 deductible and a 90 percent coinsurance clause, Kendall South renewed the policy under the same terms in August 2012. As a result of the sprinkler leak in January 2013, Kendall South’s premises purportedly suffered property damage in excess of $260,000. The subject policy, however, provided coverage in the amount of only $16,562.67 as a result of a penalty imposed by the coinsurance clause. Kendall South specifically alleged that Insurance Nation “had the duty to procure the insurance coverage as requested,” as well as a “duty of reasonable care in … properly explaining the policy of insurance procured on [Kendall South’s] behalf.” This duty was allegedly breached when the agent “failed to advise and or inform and or adequately and or properly explain to [Kendall South] the 90% coinsurance clause” where the agent “knew or should have known that the policy written by [Insurance Nation] with the 90% coinsurance clause would not cover and pay [Kendall South’s] property as requested by [Kendall South] in the event” of a covered claim. Insurance Nation moved to dismiss the Fourth Amended Complaint, once again alleging that Kendall South had failed to allege a claim for negligent procurement of insurance. Insurance Nation asserted, in pertinent part that: • it “explained this policy, including the coinsurance requirements, to Kendall South in the same way that Insurance Nation always explains similar policies to its customers as a matter of custom and practice”; • “[b]y procuring and explaining the insurance requested by Kendall South, Insurance Nation met its duty”; and • “Kendall South is attempting to manufacture a broker’s liability claim against Insurance Nation despite 1)

In reaching this decision, given the current state of the pleadings, this is a case where it has been alleged by the plaintiff that an agent or broker has a general duty to explain a coinsurance clause to any insured before issuing such a policy.

receiving the insurance it requested; and 2) never specifically asking for a higher level of insurance given the value of its office equipment.”.

ANALYSIS It is well settled that where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages for negligence. An action charging insurance agents with negligence in failing to procure the proper coverage requested by the insured is a recognized cause of action. More specifically an agent is required to use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs. Viewing the allegations of the Fourth Amended Complaint as true and in a light most favorable to Kendall South, the appellate court concluded that the allegations sufficiently stated a cause of action for negligent procurement of insurance. Kendall South asserts that, once it informed Insurance Nation’s agent: • that both the physical contents of the subject premises and the improvements thereon were each valued in excess of $100,000, and • that it wanted to procure just $100,000 of insurance with respect thereto, it was incumbent upon the agent to apprise Kendall South of the effect of the coinsurance clause, and to explain that different coverage was required to meet Kendall South’s expectations.

In short, Kendall South alleges, albeit somewhat inartfully, that liability arises here from the agent’s negligent failure to advise Kendall South at the August 10, 2011 meeting that the procured policy was inadequate to address Kendall South’s expressed insurance needs. At this stage of the proceedings, on these allegations, the appellate court agreed that Kendall South has stated a valid cause of action for negligent procurement of insurance. In reaching this decision, given the current state of the pleadings, this is a case where it has been alleged by the plaintiff that an agent or broker has a general duty to explain a coinsurance clause to any insured before issuing such a policy. When an insured alleges that it specifically communicated its insurance needs to an agent who then undertook to procure a policy addressing such needs, the insured states a cause of action for negligent procurement where it also alleges that, without providing an explanation that different coverage was required, the agent procured a policy not meeting those expressed needs. Accordingly the final order dismissing with prejudice Kendall South’s Fourth Amended Complaint against Insurance Nation was reversed and remanded to the trial court for further proceedings.

ZALMA OPINION The insured received the limits it requested. It renewed the policy in identical wording and limits for a second year. Both years contained a 90% co-insurance clause that was written to make sure that the insured purchased insurance equal to 90% of the value at risk. They reduced the premium charged by keeping a low limit and by not insuring to value. When the case is tried, they will be faced with the fact that they knew the values at risk and insisted that the agent only buy $100,000 in coverage when they had almost three times that value at risk. In so doing, they cheated the insurer out of proper premium and now wants more coverage for free.[IA]

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[ COURTSIDE ] CONTINUED FROM PAGE 31

protection. The court, however, granted plaintiff 's motion for partial summary judgment on the Labor Law § 241 (6) claim, based on its determination that there had been a violation of Industrial Code 12 NYCRR § 23-1.7 (d) (relating to slipping hazards). The Appellate Division modified the order, on the law, granting plaintiff 's motion for partial summary judgment on the Labor Law § 240 (1) claim and denying plaintiff summary judgment on the Labor Law § 241 (6) claim. The Court observed that there were conflicting expert opinions as to the adequacy and safety of the staircase but nonetheless held that it was "undisputed that the staircase, a safety device, malfunctioned or was inadequate to protect plaintiff against the risk of falling" (131 AD3d at 825). One Justice dissented in part and would have affirmed the denial of summary judgment on the Labor Law § 240 (1) claim. The dissent would have held that the conflicting expert affidavits gave rise to questions of fact concerning whether the accident was the result of a statutory violation.

In other words, "[l]iability may . . . be imposed under the statute only where the 'plaintiff's injuries were the direct consequence of a failure to provide adequate protection against a risk arising from a physically significant elevation differential'" The Appellate Division granted defendants leave to appeal by certified question, asking "Was the order of the Supreme Court, as modified by this Court, properly made?" We answer the certified question in the negative. Under Labor Law § 240 (1), contractors and owners engaged "in the erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure" must provide "scaffolding, hoists, stays, ladders, slings, hangers, blocks, pulleys, braces, irons, ropes, and other devices

which shall be so constructed, placed and operated as to give proper protection to a person so employed." Although the statute is meant to be liberally construed to accomplish its intended purpose, absolute liability is "contingent upon the existence of a hazard contemplated in section 240 (1) and the failure to use, or the inadequacy of, the safety device of the kind enumerated therein" (Narducci v Manhasset Bay Assoc., 96 NY2d 259, 267 [2001]). In other words, "[l]iability may . . . be imposed under the statute only where the 'plaintiff 's injuries were the direct consequence of a failure to provide adequate protection against a risk arising from a physically significant elevation differential'" (Nicometi v Vineyards of Fredonia, LLC, 25 NY3d 90, 97 [2015], quoting Runner v New York Stock Exch., Inc., 13 NY3d 599, 603 [2009]). To the extent the Appellate Division opinion below can be read to say that a statutory violation occurred merely because plaintiff fell down the stairs, it does not provide an accurate statement of the law. As we have made clear, the fact that a worker falls at a construction site, in itself, does not establish a violation of

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[ COURTSIDE ] We agree that such compliance would not, in itself, establish the adequacy of a safety device within the meaning of Labor Law § 240 (1), but we do not read defendants' expert's opinion to be so limited.

Labor Law § 240 (1) (see e.g. Berg v Albany Ladder Co., Inc., 10 NY3d 902, 904 [2008]; Toefer v Long Is. R.R., 4 NY3d 399, 407 [2005]; Blake v Neighborhood Hous. Servs. of N.Y. City, 1 NY3d 280, 288 [2003]; Narducci, 96 NY2d at 267). Moreover, the present case is distinguishable from "cases involving ladders or scaffolds that collapse or malfunction for no apparent reason" where we have applied "a presumption that the ladder or scaffolding device was not good enough to afford proper protection." Here, by contrast, there are questions of fact as to whether the staircase provided adequate protection. As noted above, defendants' expert opined that the staircase was designed to allow for outdoor use and to provide necessary traction in inclement weather. Moreover, defendants' expert opined that additional anti-slip measures were not warranted. In addition, he disputed the assertions by plaintiff 's expert that the staircase was worn down or that it was unusually narrow or steep. In light of the above, plaintiff was not entitled to summary judgment on the issue of liability. Although the dissent places great weight on Zimmer v Chemung County Performing Arts, the holding in that case was that "in light of the uncontroverted fact that no safety devices were provided at the worksite, it was error to submit to the jury for their resolution the conflicting expert opinion as to what safety devices, if any," should have been employed. By contrast, here, the experts differ as to the adequacy of the device that was provided. Notably, both of these experts framed their opinions in terms of whether there had been compliance with industry standards. We agree that such compliance would not, in itself, establish the adequacy of a safety device within the meaning of Labor Law § 240 (1), but we do not read defendants'

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expert's opinion to be so limited. Accordingly, the order of the Appellate Division, insofar as appealed from, should be modified, without costs, by denying plaintiff 's motion insofar as it sought summary judgment on the issue of liability on his Labor Law § 240 (1) claim, and as so modified, affirmed, and the certified question answered in the negative.[IA] 2017 NY Slip Op 02466 Decided on March 30, 2017 Court of Appeals DiFiore, J.

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[ G UEST A R T I C L E ]

J E N N I F E R M . VA N V O O R H I S , E S Q .

Repair or Replacement Cost as a Measure of Indemnity in New York uRecently we received a request from a reader inquiring as to who has the responsibility to determine whether a sustained covered loss to a dwelling can be repaired or must be replaced. We always urge a thorough reading of the policy first, in order to determine what coverages exist, but not all policies are clear. Here’s a breakdown of the law in New York. A standard fire insurance policy will provide coverage of either (1) the actual cash value (ACV) of the property at the time of the loss; (2) the amount which it would cost to repair or replace the property with materials of “like kind and quality” within a reasonable time after such loss, without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair, and without compensation for loss resulting from interruption of business; or (3) to an amount not exceeding a specified amount. The policy will generally state the coverage is for the lesser amount of the three cost valuations. Ins. Law § 3404(e). The definition of “Actual Cash Value”, as a measure of indemnity coverage, is generally defined as “replacement cost minus depreciation.” Replacement cost is not usually defined in the policy however. As it is not defined in the policies, the Courts have had to define the term in case law. A recent case in the Southern District of New York, SR International Business Insurance Co. LTD., v. World Trade Center Properties, LLC, et al. v. Allianz Insurance Company, et al., 445 F.Supp.2d 320 (S.D.N.Y.2006) dealt with litigation to determine the amount of property insurance recoverable for destruction of the World Trade Center. On cross-motions for summary judgment on issues affecting appraisal proceedings, Judge Mukasey held: “(1) hypothetical replacement cost included full replacement value of non-removable tenant improvements owned by insured; (2) actual replacement was not a condition precedent to calculation of hypothetical replacement cost; (3) strict congruity of tenants was not 38 June 12, 2017 / INSURANCE ADVOCATE

The third measure of indemnity coverage under §3404(e) is “to an amount not exceeding a specified amount.” requirement for new improvements in replacement buildings to constitute replacement of old tenant improvements; (4) insureds had an insurable interest in full value of improvements at time of loss; (5) broad evidence rule did not apply to calculation of actual cash value (ACV) under policy definition; (6) policy definition of obsolescence in formula for calculation ACV did not include economic obsolescence; and (7) market value had no role in calculation of ACV. The second measure of indemnity coverage starts out pretty straightforward; repair or replace to like kind and quality; the second part though states “without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair.” The New York Court of Appeals states in Midwood Sanatorium v. Firemen’s Fund Ins. Co. of San Francisco et al., 261 N.Y. 381 (1933), the Court reasoned that an insurer cannot be held to any liability beyond that which is assumed. In other words, the policy is written to protect an insured against certain perils, and upon that the premium is based. To allow an insured to recover on an amount not contemplated by the insurer would not be fair. The third measure of indemnity coverage under §3404(e) is “to an amount not exceeding a specified amount.” Just because your policy has a “Guaranteed Replacement Coverage” endorsement, it doesn’t mean that damages will automatically be replaced rather than repaired. The case of Kumar v. Travelers Ins. Co., 211 A.D. 2d 128, 627 N.Y.S.2d 185 (4th Dept. 1995), presented a case of first impression for the appellate courts in New York regarding that provision of a home-

Jennifer M. Van Voorhis dedicates her practice to the representation of policyholders engaged in disputed first party insurance claims. Jennifer received a BA degree from Hawaii Pacific University and her JD from Rutgers University School of Law. Prior to entering private practice, she was the law clerk of the Honorable F.J. Fernandez-Viňa in the Superior Court of New Jersey, Camden County. Following her clerkship, Jennifer focused her career on insurance litigation. She has represented policyholders in not only first party coverage issues, but as defendants in matters of automobile and premises liability defense.

owner’s insurance policy. The usual language in the clause is something to the effect that the insurer agrees to pay the full cost “to repair or replace the damaged dwelling or other structures with equivalent construction on the same premises” without regard to liability. The dispute arose regarding the interpretation that required replacement of the damaged dwelling on the same premises or whether it merely establishes the limit of liability on the insurer. Id. The Kumar court held: it does NOT require the replacement of a damaged dwelling on the same premises, it merely established the limit of coverage of what it would cost to replace the damage to the structure on the same premises in order to recover the replacement cost. Now, if you’re anything like me you’re thinking “but she never answered the question.” My answer is: “Depends on the policy.” Always look to see what the policy covers and how coverages are worded. In the standard fire insurance policy quoted above, “repair or replace” always appear together, even in the guaranteed replacement coverage endorsement. If you’ve read your policy and are still unsure, reach out to someone who can help interpret the policy language and has insight into how courts in the applicable state interpret certain provisions of the policies.[IA]

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