Insurance Advocate July 23, 2012 by C Acunto

VOLUME 123, NUMBER 13 / July 23, 2012

A CINN Group, Inc. Publication

PIANJ/PIANY Joint Annual Conference PAGE 13

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Mobile Device Risk - “BYOD” PAGE 34

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July 23, 2012

CONTENTS

[LETTERS] RE: Deapo Article, Insurance Advocate, June 18, 2012 Dear Editor: I would like to ask your permission to copy Jamie Deapo’s article in the Insurance Advocate of June 18 (“A Lesson in a Tragic Loss”) and hand it to every broker that I visit. It makes it clear in a very striking manner how important the independent agent/broker is to the public. Great article. Sincerely, Gary Bacchi Marketing Manager Simon Agency

[ COVER STO RY ]

Permission granted enthusiastically– Ed.

Jamie: I just got through reading your latest article in Insurance Advocate. First, let me say, I’m sorry for your loss. Second, your article should be required reading for all in our industry, but especially younger people. I have the opportunity to interview/speak to a fair number of young people coming into our industry and many of them are stuck on the negative impression of the stereotypical insurance salesperson you describe in your column. When I ask if they’d be interested in sales most decline, indicating they don’t want to be ‘that guy’ pushing a lot of stuff at people that they don’t want/need. They go on to explain they want a job with an insurance company, so they don’t have to sell. Of course that opens up a great discussion about how everyone sells, every day, and how those most successful among us are often the most skilled salespeople, regardless of our line of work. At any rate, your thoughts really hit home for me and be forewarned I’ll be stealing your ideas in future conversations.

[FE ATURE] The Creeping Risk of Mobile and Personal Devices in Insurance, By Andreas Baumhoff, CTO, ThreatMetrix . . . . . . . . . . . . 32

[DEPA RTMENTS] Letters ..................................................................................................................3 Forward .............................................................................................................. 4 In the Associations.................................................................................12, 38 Insight, By Peter H. Bickford .............................................................................30 Face to Face, By Michael Loguercio................................................................36 Courtside, By Lawrence N. Rogak ...................................................................40 Claims Focus ...................................................................................................42 Classiﬁeds.........................................................................................................43 Looking Back...................................................................................................44 Guest View.......................................................................................................46

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Joseph W. Headd CPCU, ARM Regional Vice President Peerless Insurance continued on page 39

www.insurance-advocate.com INSURANCE ADVOCATE / July 23, 2012 3

[ FORE WORD ]

Steve Acunto

On my mind…

VOLUME 123, NUMBER 13 JULY 23, 2012

Been a hot summer so far for this “bachelor” whose family is in Italy for July. From my occasional porch-perch overlooking the Hudson and from my more likely post, looking over your e-mails, press releases, letters and receiving VM messages and even the occasional anonymous letter, I have kept a number of news and opinion items that you might enjoy reading, together with the eye opening articles on BYOD, hacking, and the rest in this mid summer number of the Insurance Advocate, our 123rd July serving as your business’s advocate. We take particular pleasure in the thoughtful letters to the editor that praise Jamie Deapo’s moving personal piece in our June 18th issue and Peter Bickford’s observation about the new styled, slimmer DFS Annual report.… News of Bob Bill’s passing can only sadden anyone who knew him. Bob worked hard and played hard and was a credit to the agency force. In no special order, we offer these observations and opinions. Enjoy your summer… until we

see you in August on these pages.

EDITOR & PUBLISHER Steve Acunto, 914-966-3180, x110 sa@cinn.com CONTRIBUTING EDITOR Peter Molinaro CONTRIBUTORS Peter H. Bickford Jamie Deapo Michael Loguercio Sari Gabay-Raﬁy

The Points….and the Point

Lawrence N. Rogak

We are now three years into the Internet-Point Insurance Reduction Program I-PIRP (5) year Pilot Program that enables drivers to reduce their accrued “points” via the internet. To us, this program’s results, after speaking at length with some private providers, seems like an idea that needs revisitng. The potential for fraud seems real, according to sources, since students may take courses for other individuals and may be able to defeat User/Student Identity Validation measures. The requirement that I-PIRP on-line courses, in order to be approved, must have proof of effectiveness in reducing both accidents and repeat traffic offenses (because on-line courses have in fact no proof of effectiveness), has been eliminated. The whole point of the courses, driver safety, is being compromised, many are saying. For the industry, automobile insurance rate cost drivers are not lessened since there is no apparent improvement in safety. And that’s the whole point.The on-line course (5) Year Pilot Program sunsets soon and might best be set aside. “Covert monitoring” complicates the process and misses the simple, direct point of the whole program. New York has the best Motor Vehicle Department anywhere and has the power to get PIRP education back to basics and make it work. Ease of completion on the point holder’s part does not equal a safer system nor better educated and practiced drivers.

N. Stephen Ruchman

PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog, 914-966-3180, x113 g@cinn.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x117 circulation@cinn.com PUBLISHED BY CINN Group, Inc.

NYSIF Praised In Steve Ruchman’s May 21 column he was less than kind to the NYSIF. Response to the Steve’s opinions has been mixed. Interestingly, and unrelated to the column per se is this recent opinion from the pen of Dick Poppa to members of the IIABNY praising a “new era” in the NYSIF’s relations with the agency community. We quote in pertinent part: “We’ve recently been introduced to the new leadership at NYSIF that offers great hope for improving the day-to-day working interaction with brokers. The fund’s new board chairman Donald T. DeCarlo, board member Eileen A. Frank (President of Manhattan-based JP West Brokerage and a former IIABNY regional director) and Chief Executive Deputy Director Dennis J. Hayes have offered an open ear to hear and understand broker and client problems. They have established a board committee focused on constituent relations that includes insureds, their brokers, safety group managers and others served by NYSIF. These steps demonstrate good faith efforts by the Fund leadership to work with us, and we are grateful for that opportunity. Incumbent upon us will be to clearly describe our issues, learn and understand the statutory limitations placed on the State Fund, then do all we can together to make things better. This is not to say we won’t ﬁnd areas we simply don’t see eye-to-eye, but we must do what is right for our members and their clients, continued on page 6

4 July 23, 2012 / INSURANCE ADVOCATE

Jerry Trupin

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[ FORE WORD ] continued from page 4

and that means doing all we can together to make improvements. Agents and brokers know that our business is a relationship business. Our goal is to build the right relationship with the State Insurance Fund to accomplish our goals with a win-win outcome.” In fact, Don De Carlo has done a lot personally these many years to improve the processes and professionalism of all parties in the WC sphere, notably through the founding of AMCOMP and through his published works. Eileen and Dennis are known to the Insurance Advocate as earnest professionals, making Dick’s observations seem on target. Steve is entitled to his opinions and we respect him enough to publish them with little more than an occasional grammatical correction or typo change. He is also, like Poppa, a careful observer of the business. For me, I cannot imagine that agents and brokers would not give the new administration a solid chance to let communications work to everyone’s advantage, notably the insureds’ best interests. Look for an interview in these pages with Dennis Hayes before long.

The U May Now Mean Universal A few years ago, the CPCU Society removed the word “national” from its vocabulary, given the Society’s expanded presence outside of the United States. Today, more than 200 CPCUs live and work outside of the U.S. This geographic diversity comes with a number of obstacles: taking CPCU exams in a second language; finding support for study; and explaining what CPCU stands for in Belgium, Bermuda, China, France, Germany, India, Italy, Japan, Korea, Puerto Rico, Saudi Arabia, United Arab Emirates, and other countries. Anthony Fienberg, a CPCU living and working in France, led a team of internationally focused CPCUs to create the CPCU Society International Ambassador (CSIA) program. This program recognizes a foreignbased CPCU for his or her efforts in promoting the CPCU designation across borders, and provides financial support to attend the CPCU Society Annual Meetings and Seminars. Washington D.C., the 2012 venue, will provide the setting for recognizing the CSIA inaugural winner, Shahid Nadeem. Shahid Nadeem works at Gulf 6 July 23, 2012 / INSURANCE ADVOCATE

General Cooperative Insurance Company as an underwriting manager and, in addition to CPCU, has achieved the Associate in Risk Management (ARM), Associate in Marine Insurance Management (AMIM), and Associate in Reinsurance (ARe) professional designations. Nadeem was selected for his commitment to promoting the designation and the CPCU Society in Saudi Arabia and beyond, through a series of “Connections” visits encouraging Society membership and generating interest among future CPCUs. He will also write an original article for a CPCU Society interest group upon returning home from the Annual Meeting and Seminars. Nadeem hopes to soon realize his goal of creating a CPCU Society Chapter in the Middle East. Good luck, CPCU society and Nasheem.

Putting “Force Placed” in Place The Department of Financial Services (DFS) has ordered insurers offering forceplaced insurance in New York to submit proposals for new premium rates after it was found that they overcharged New York homeowners to the tune of millions of dollars. Rates for force-placed insurance can be three times to as much as ten times the cost of normal homeowner's insurance, while offering less protection to the homeowner. According to the Governor’s press release, the evidence of higher than necessary insurance premiums was made clear at a recent DFS hearing. Also, DFS discovered that the force-placed insurance market lacks the sort of competition that would keep premiums down. In New York, two companies have 90 percent of the market. In addition, the hearings made clear that high force-placed insurance costs are having a terrible impact on homeowners, while banks and insurers are profiting off of the payments. Financial Services Superintendent Benjamin M. Lawsky said, “Our hearings suggest a lack of competition, high prices, and low loss ratios, all of which hurt homeowners. Based on what we learned at the hearings, it is now appropriate for insurers to propose new rates along with justifications for those new rates.” As a result of the foreclosure crisis, the size of the force-placed insurance market has grown from $1.5 billion in 2004 to $5.5 billion in 2010. new rates are in the offing, justifiably, we think.

“Truly Hard” Market For P/C Insurers, Unlikely While insurance rates have been drifting upward in recent months, the property-casualty industry is unlikely to see a return to the “traditional hard market” this year or next, Bob Hartwig told a group of reinsurance actuaries at the Casualty Actuarial Society’s Seminar on Reinsurance. Hartwig, president and economist of the Insurance Information Institute, noted that four criteria have to be present for a “truly hard market” one in which rates climb sharply - in excess of 10 to 15 percent or more: • First, the industry must endure a sustained period of large underwriting losses. Only when underwriting losses are large and sustained do insurers turn disciplined, Hartwig said. But this may be beginning, he said. Underwriting losses hit $36.5 billion last year, driven by above average losses from U.S. catastrophes. In the United States, 2011 saw no Katrina-like megacat, but there was an unusually heavy tornado season. Tornadoes in Joplin, MO, and Tuscaloosa, AL, grabbed the biggest headlines, but there was so much bad weather last year that there was “nowhere to run, nowhere to hide east of the Rockies.” Last year was the fifth worst ever for insured catastrophe losses in the United States, adjusted for inflation. So far this year, catastrophes have been relatively benign. • Second, the industry suffers a material decline in industry surplus or capacity. When surplus falls, rates rise as customers compete for access to the surplus. But industry surplus remains high, Hartwig said, hitting a record $565 billion as of first quarter 2011 and falling off only slightly during 2011, despite all the catastrophic losses. • Third, the reinsurance market must be ‘tight,’ meaning reinsurance costs are rising and there is a shortage of reinsurance capital. That’s somewhat in place, Hartwig said. Much of the excess capacity in reinsurance at the beginning of 2011 was eaten up by the cost of earthquakes in Japan and New Zealand and floods in Thailand. Reinsurance rates have risen, especially continued on page 8

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in markets where the mega-catastrophes occurred. And in the United States, reinsurance prices for catastrophe business are “modestly higher,” Hartwig said, about 8 percent. But the current increases pale in comparison to increases seen after other bad years for catastrophe, he observed. After Hurricane Andrew, the 1993 catastrophe market suffered “tremendous dislocation,” Hartwig said, with rates rising 68 percent. After Hurricane Katrina, rates rose 76 percent. More important, the current environment contradicts “this notion that somehow big catastrophe losses are somehow [by themselves] going to affect prices here,” he said. “That notion is incorrect.” • Finally, the industry must show renewed underwriting and pricing discipline. There are some signs this is beginning to happen, Hartwig said. Rates are creeping up in commercial lines, after having fallen steadily for several years. Commercial insurance rates rose 4.4 percent in the first quarter, which was the

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third consecutive quarter of higher rates, according to the Council of Insurance Agents and Brokers. That followed 30 consecutive quarters of declining rates. Of all lines, workers compensation rates are rising fastest, up 7.4 percent in first quarter. But that’s in part because results have deteriorated so much in that line. Workers comp combined ratios were 110.6, 116.8 and 115.0 over the past three years, vs. 99.5, 101.0 and 107.5 on commercial lines overall. Comp results are as bad as they were a decade ago, he said, the last time the industry experienced a hard market. Smart guy, Hartwig. He has the busiest speaking schedule of anyone in the business, for sure,, so his opinions actually wind up influencing outcomes as much as describing them in some cases. Listen to him for the old E F Hutton commercial effect these days.

P/C Insurers' Profits and Profitability Rose ISO is also worth listening to. According to their quarterly results report, private U.S. property/casualty insurers' net income after taxes rose to $10.1 billion in first-quarter 2012 from $7.8 billion in first-quarter 2011, with insurers' overall profitability as measured by their annualized rate of return on average policyholders' surplus climbing to 7.2 percent from 5.6 percent. Driving the increases in insurers' net income and overall rate of return, net losses on underwriting receded to $0.2 billion in first-quarter 2012 from $4.5 billion in first-quarter 2011. The combined ratio - a key measure of losses and other underwriting expenses per dollar of premium - improved to 99 percent in firstquarter 2012 from 103.3 percent in firstquarter 2011, according to ISO, a Verisk Analytics company (Nasdaq:VRSK), and the Property Casualty Insurers Association of America (PCI). The improvement in underwriting results is primarily attributable to a drop in net losses and loss adjustment expenses (LLAE) from catastrophes. ISO estimates that insurers' net LLAE from catastrophes fell to $3.4 billion in first-quarter 2012 from $6.6 billion in first-quarter 2011. Those amounts exclude LLAE that emerged after insurers closed their books for each period but do include late-emerging LLAE from events in prior periods. Partially offsetting the improvement in underwriting results, net investment gains - the sum of net investment income and realized capital gains

(or losses) on investments - dropped $1.2 billion to $12.3 billion in first-quarter 2012 from $13.6 billion in first-quarter 2011. Also limiting the improvement in insurers' overall results, insurers' miscellaneous other income receded to $0.4 billion in first-quarter 2012 from $0.5 billion in first-quarter 2011, and insurers' federal and foreign income taxes rose to $2.3 billion from $1.8 billion. Pretax operating income - the sum of net gains or losses on underwriting, net investment income, and miscellaneous other income grew to $11.8 billion in first-quarter 2012 from $8.6 billion in first-quarter 2011.Reflecting insurers' net income after taxes and unrealized capital gains on investments (not included in net income), policyholders' surplus - insurers' net worth measured according to Statutory Accounting Principles - increased $20.4 billion to a record-high $570.7 billion at March 31, 2012, from $550.3 billion at December 31, 2011. The 7.2 percent annualized rate of return for first-quarter 2012 is insurers' highest first-quarter annualized rate of return since the 13.3 percent for firstquarter 2007. Since the start of ISO's quarterly data in 1986, insurers' first-quarter annualized rate of return has ranged from as low as negative 2.6 percent in 1994 to as high as 17.9 percent in 2005 and has averaged 10 percent.The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.

First Rehab Continues to Innovate After its initial launch of BenePaks in Pennsylvania in January, First Rehab Life now offers these employee benefit packages in New York to make insuring easier for producers and employers alike. BenePaks simplifies the application and administration of multiple products in one package: one application for the employer, one enrollment form per employee, and only one group number for employees to remember. Additionally, beneﬁt levels and prices are pre-set for each package. These features make the presentation and application process easy for brokers and the decision and enrollment process simple for employers as well as employees. Employers can choose which packages continued on page 10

[ FORE WORD ] continued from page 8

to offer to their employees, or have their employees select the package of their choice. First Rehab Life currently offers three BenePaks to choose from: • CorePak includes basic protection in the form of Term Life, AD&D, and Hospital Cash Insurance. • ClassicPak and ChoicePak provide higher benefit levels for the CorePak products and include Dental and Vision. These packages apply to groups as small as two participating employees with guaranteed acceptance. To accommodate today’s tight benefits budgets, BenePaks come with a built-in package discount and can be written as employer-paid, contributory, or voluntary plans that are employee-paid at the same pre-set price: rates are the same regardless of employee ages, funding option or participation level (within underwriting requirements). BenePaks also come with a two-year rate guarantee to provide peace of mind. Spouse/partner and/or dependent coverage is available at additional cost. As an increasing number of New York property/casualty agencies are focusing more of their attention to group benefits. First Rehab Life’s is banking on its DBL roots and close-knit relationship with the independent broker community to allow the company to offer products that complement other P/C agents and brokers’ offerings. Actuaries are always the brunt of household humor in the business, from being considered a ‘crystal ball’ profession to a lot worse. Fact is, since their irrationally challenging job is to forecast the implications of events that have yet to occur, they do merit some ribbing, even with their increasingly reliable analytical tools and training. Predicting the future of the actuarial profession itself may be more challenging, especially in this age that has been called the educational era of the nouveau dumb. At their recent conference society members dished their views on their profession. Participating in the discussion were Alice Underwood, an executive vice president at Willis Re; Mark Vonnahme, clinical professor of finance at University of Illinois at Champaign-Urbana, and Steven Armstrong, a Fellow of the Casualty Actuarial Society. The panel agreed that the profession is changing, with heightened competition arising from various 10 July 23, 2012 / INSURANCE ADVOCATE

sources. To most insurers, actuaries have been thought of as the numbers experts. But as insurers look deeper into their databases for a competitive edge, they’ve hired more “quants”—newly minted graduates with advanced math or statistics degrees who build sophisticated predictive models. The models are designed to help price and manage a company more effectively. How can actuaries respond? By adding to their skill set, even after receiving their actuarial credentials, Vonnahme said. Some actuaries will become predictive modelers, but if they don’t become modelers, actuaries have a role to play by using their insurance knowledge and communication skills in important ways. At first, predictive modeling can seem intimidating, Armstrong said. He had to supervise a predictive modeling team without having been a modeler. But once he spent some time with the group, he realized, “it’s not really rocket science, even if they have Ph.D’s in rocket science.” After about six months, he knew enough to ask challenging questions in peer review. Actuaries have professional standards and a code of ethics that non-actuaries might lack, Armstrong said. So the partnership between modelers and actuaries can be a beneficial one. Actuaries also act as intermediaries. They can develop “a way to frame a problem” that modelers can understand, Underwood said, and then help management understand the modelers’ analysis. Actuaries also play a valuable role in enterprise risk management, or ERM – a discipline that has grown over the past decade as companies have tried to deal with the risks they face in a holistic manner. With their training, actuaries would seem well suited to key ERM roles, such as chief risk officer. But actuaries haven’t always been at the forefront of the new discipline, Underwood said. That may change, as the CAS becomes one of several actuarial organizations conferring the new interdisciplinary Chartered Enterprise Risk Analyst (CERA) designation. Actuaries have often struggled for recognition outside the insurance industry, Armstrong said. “It’s a PR issue more than anything else.” Outside the insurance field, he said, actuaries need to show they have the skills to justify the higher salaries they typically command. Vonnahme said, “We have to be more proactive in marketing ourselves in a way we haven’t done before.”

Upbeat Plumieri Views Claims Pro’s Role Using the the image of One World Trade Center in New York approaching its topping off ceremony as a testament to the crucial work of the insurance claims community, energetic Joe Plumeri, Chairman and CEO of Willis addressed the Swiss Re Americas Claims Conference in Chicago and said: “The role of insurance carriers and insurance brokers working as quickly as possible to settle claims when people need resources to rebuild must not be undervalued. These are great stories of the insurance industry doing its job, and claims professionals should be justifiably proud of their critical role in the process.” Plumeri applauded the audience of senior claims professionals on a steady improvement in performance as measured by Willis’s own carrier rating system, the Willis Quality Index, which was initiated in 2007 to give insurance carriers direct feedback on a range of measures about their services. The average score for claims performance across areas such as attitude, technical support, and timely approval and payment, has increased steadily over the last three years. In his keynote address, “A Decade’s Journey Through the Insurance Industry (and What The Next Decade Holds),” Plumeri used the occasion to review the major challenges the industry has faced, highlight some of the new risks that have emerged over the last ten years, and chart a course for the next ten years in which economic recovery and an emergent global middle class will create increased demand for coverage, and claims management, to address a new set of risks. In his presentation, Plumeri discussed six trends that Willis has identified through its Strategic Outcomes Practice, which manages major claims on behalf of its clients. These trends include 1) an increase in underwriting scrutiny, documentation and claim audit; 2) the impact of issues such as supply chain risk, government-ordered blackouts and post-catastrophe movements of populations on business interruption coverage; 3) the emergence of “haboobs,” or massive movements of sand, into commercially-sensitive areas; 4) the impact of solar flares on communications systems; 5) the emergence of ‘space junk’ as a new risk to operational satellites and ground populations; and 6) conflicting forecasts for severe weather among expert groups.[IA]

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[ IN THE ASSOCIATIONS ]

The 12th Annual PIANJ/PIANY Joint Annual Conference

he industry’s biggest show in the Northeast gathered at the Trump Taj Mahal Casino Resort in Atlantic City, N.J., June 10-12. Participants at the PIANJ/PIANY Joint Annual Conference enjoyed grand banquets; recognized industry stars; networked; learned cutting-edge sales techniques, earned continuing education credit; and rocked the night away at a new venue for the YIP Nitecap—the Casbah night club. Finally, on Tuesday, the industry gathered once again at the NJYIP Fun Run, pushing total PIA/YIP contributions to Special Olympics over $3 million.

Change of Administration Both PIANJ and New Jersey Young Insurance Professionals installed officers and directors. 2012-13 PIANJ officers: • President Anthony Bavaro, CIC, CRM, of Herbert L. Jamison & Co., West Orange • Vice President Stephen Tague, CPIA, of van de Heuvel & Fountain, Branchville • Vice President Glenn Tippy, CPCU, CLU of GBW Insurance, Flanders • Vice President Charles Caruso, CIC, CPIA, Herbert L. Jamison & Co., West Orange • Treasurer Donald F. LaPenna Jr., of Donald F. LaPenna Associates, Cranford • Secretary Kacy Campion Renna, CIC, of Connelly Campion Wright, Belmar • Immediate past President Keith Savino, CPIA, of WRG in Mahwah 2012-13 NJYIP officers: • President Thomas Wilkens, of Red Bank • Vice President Casey Yarger, CIC, of Milltown 12 July 23, 2012 / INSURANCE ADVOCATE

PIANY PRESIDENT RICHARD SAVINO, CIC, KICKS OFF AN EVENING OF AWARDS, FOOD, MUSIC AND DANCING AT MONDAY’S RECOGNITION BANQUET.

PIANJ IMMEDIATE PAST PRESIDENT KEITH SAVINO, CPIA, PRESENTED THE EVENING’S AWARDS.

• Treasurer Natalie Bruno, of Hammonton • Secretary Daniel Tague, of Morris Plains • Immediate past President Danielle Priori, of Cedar Knolls

Gala Awards Help Stars Shine The gala recognition dinner filled the Diamond Ballroom, recognizing deserving

professionals—some 500 conference goers enjoyed dinner, congratulated award winners and danced to live music late into the evening. PIANY President Richard Savino, CIC began by thanking sponsors and guests and recognizing each of the winners from the association’s events throughout this past year, as well as the PIANY officers. He also congratulated NY-YIP Insurance Professional of the Year Dina Bruno and Lifetime NY-YIP Member Michael Loguercio, who received their awards earlier in the day at the YIP recognition luncheon. Kicking off the evening’s awards, Savino recognized PIANY director Peter Resnick with the PIANY Award for Community Service. “Our honoree measures success by what he does for others. His volunteer work for many charitable organizations has benefitted many helps to improve our industry image for each of us,” he said. Resnick, with his son Justin, founded Ally Oop for Autism. “Over the past six years, this event has brought together a community, raised awareness of autism spectrum disorders and importantly, it has raised some six hundred thousand dollars for the cause, which is the fastest growing developmental disability in our country.” Savino also presented PIANY’s Distinguished Service award to PIANY past President Lewis L. Wilson CIC, CPCU, CPIA for his history of service, dedicated leadership, and attention to the concerns of independent agents and their clients. “An independent agent since 1950, Lew has served on the PIANY board of directors for more than 30 years. He has participated in every committee and in 1987, he received the Professional Agent of the Year award. He served as president in 1989. He is a national leader for political action, having served as chairman of the continued on page 14

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PIANY Political Action Committee for several years and currently as vice chair,” Savino said. “He has also served as PIANY’s National Director, as vice president of PIA National and as chairman of the Government Affairs Committee and the National PIA PAC.” PIANY’s Agent of the Year award went to John W. Bailey, CIC, who, Savino said,

“... literally grew up in our business. He has followed in the footsteps of his father and his forefathers in running a successful agency, and in his support of PIA.” Bailey served as PIANY’s president in 2002, and he has led every committee of the association. He is a past president of the New York Young Insurance Professionals, and currently serves on a the PIA Group Trust, and as First Vice Chairman of PIA Management Services Inc.

Bailey’s most visible work with PIA may be as the association’s spokesperson on producer compensation disclosure and contingent commissions as PIA spoke on agents’ behalf at public Insurance Department hearings. “John truly epitomizes the term ‘professional,’ and represents the very best of our members,” Savino said. Outgoing PIANJ President Keith Savino, CPIA, congratulated NJYIP Insurance Professional of the Year Natalie Bruno and PIANJ Director of the Year Donald F. LaPenna Jr., who received their awards earlier in the day at the YIP recognition luncheon. Savino then presented the evening’s awards. Tower Group Cos., Mark McDonnell received the PIANJ Company Person of the Year award. “Mark has worked in the insurance industry for more than 25 years, helping companies develop positive partnerships with the independent agency system,” he said. “I know many of us in the room tonight feel honored to have worked with him.” Travelers’ James Brewi was awarded the PIANJ Community Service Award for his work to raise money and awareness of primary lateral sclerosis, or PLS, a rare and debilitating disease with which he was diagnosed in 2008. Savino read one of the many nominations for this award to demonstrate the admiration his colleagues voice for Brewi: “It is the rare person, when stricken with tragedy, who spends time and effort assisting those going through similar anguish in their lives. A person like this exemplifies extraordinary selflessness and courage.” PIANJ past President Donna M. Cunningham, CPIA was recognized as the association’s Professional Agent of the Year. “In an industry that has been slow in the establishment of women in leadership roles, there are a few ‘champions,” who stand out in the encouragement of this pursuit by example and accomplishments,” he said. “Donna one of our state’s finest agents, and if anyone deserves this award it’s her.”

President Bavaro’s Inaugural Address Finally, Savino presented the newly elected PIANJ officers, including President Anthony Bavaro, who in his inaugural continued on page 18

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[ IN T HE ASSOCIATIONS ]

PIANJ/PIANY Joint Annual Conference

PIANY PAST PRESIDENT JOHN W. BAILEY, CIC, RECIPIENT OF THE 2012 AGENT OF THE YEAR AWARD.

PIANY DIRECTOR PETER RESNICK, RECIPIENT OF THE 2012 COMMUNITY SERVICE AWARD.

PIANY PAST PRESIDENT LEWIS L. WILSON CIC, CPCU, CPIA, RECIPIENT OF THE 2012 DISTINGUISHED SERVICE AWARD.

PIANJ PAST PRESIDENT DONNA M. CUNNINGHAM, CPIA, RECIPIENT OF THE PROFESSIONAL AGENT OF THE YEAR AWARD.

PIANJ IMMEDIATE PAST PRESIDENT KEITH SAVINO, CPIA, AND PRESIDENT ANTHONY BAVARO, CIC, CRM, PRESENT MARK M C DONNELL OF TOWER GROUP COS. WITH THE COMPANY PERSON OF THE YEAR AWARD.

TRAVELERS’ JAMES BREWI RECEIVES THE PIANJ COMMUNITY SERVICE AWARD.

16 July 23, 2012 / INSURANCE ADVOCATE

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[ IN T HE ASSOCIATIONS ] continued from page 14

address acknowledged a false and disparaging image vexes the industry, but, he asserted professional independent agents have major points of differentiation, including character and community, which distinguish them. He cited the business acumen of industry volunteers and the distinguished award winners recognized at the event as evidence that such derogatory generalizations are inaccurate myths. “I’ve been around PIA for about 15 years and I’m still impressed with the collective business sense of this group. There’s always a good idea, a better or smarter way to serve our clients better; to be more profitable and to create better value for all of our stakeholders …” “Yet,” Bavaro continued, “we often still have a negative reputation. It would not be a surprise to anyone in this room if I said that the insurance industry faces a constant struggle with how we are perceived. Each of tonight’s award winners, however, demonstrates that these myths are completely inaccurate, and I am proud to be part of an industry that includes such honorable and prestigious individuals.” “PIA is unrivaled as the leader in updating tools that enable us to communicate with customers, as well as business and underwriting tools to help us work with our industry partners. But as we forge ahead, I want to attend to some basics. The strength of the independent agent is our knowledge of our products, our familiarity with each of our clients their unique needs and our communities. While we need new tools and continue to evolve, our communities are at the heart of what we do.” Likewise, he said, PIA is a community. “Bringing together diverse individuals and organizations to raise ideas is critical to our collective progress.” Bavaro reminded his audience that they have responsibilities toward this end. “Take part in PIA initiatives. Help your association develop information to improve our business. And, consider our future: Encourage your brightest young agents to join the Young Insurance Professionals. This group of truly talented individuals will take our industry into the future and they are helping to improve the inaccurate image I mentioned.” Bavaro said he intends to work with YIP toward building the industry’s future 18 July 23, 2012 / INSURANCE ADVOCATE

and to continue initiatives initiated by his predecessors during his administration, including efforts to increase diversity and bring new people into the industry and to reduce the cost of doing business for agents and their carrier partners, ultimately reducing costs for their mutual clients. Thanking his family for their support and the audience for their cooperation and participation in PIA, he encouraged them to share the benefits of joining with colleagues. “As many of us have learned from our families, support is really the necessary cornerstone to success,” he said. “You will forge greater networks and you will be a better insurance professional because of your involvement. There is no better place to network, learn and grow than with PIA.” (Video of all the speeches from the conference can be found on the PIA YouTube channel, at http://www.youtube.com/user/ pianewsandmedia)

Focus on education As always, continuing education was front and center. The conference opened Sunday, June 10, with Managing the Virtual Insurance Agency, instructed by Steve Anderson, CIC for three continuing education credits. Monday morning offered a choice of Property Exposure Lessons Learned from Irene taught by Sheldon Hansen, CIC, CRM, CPIA; Identifying Insurance Fraud: You’ve Been a Victim of Fraud and Probably Don’t Know It! with Steven D. Lyon, CPCU, CIC, CRM, AAI, ARM, AIS,

CRIS, CWCP; each of which offered continuing education credits, or The Changing Consumer and How to Use Digital Marketing to Grow Your Agency taught by Lucas Jans, Director of Innovation at of Agency Revolution. That afternoon was packed as well, with another three selections, including Cyber Liability and Data Breach with Sheldon Hansen and the Top 10 Misunderstood Coverages, with Steve Lyon, each for three CE credits, or Motivating Key Employees—From Producers to CSRs with Michael Jans, founder of Agency Revolution. Education also closed the conference as well, with Legal and Ethical Responsibilities, presented by Steve Lyon, which offered CE and Ethics credit, as well as E&O loss prevention credit for agents covered by Utica Mutual and Fireman’s Fund.

28th Annual Fun Run Nearly 150 insurance professionals, family and friends gathered on the Boardwalk early Tuesday morning for the annual NJYIP Fun Run to benefit the Special Olympics of New Jersey. The event raised more than $140,000, bringing the total amount that PIANJ and NJYIP have raised through an annual golf classic and the run to more than $3 million.

Save the date! The joint annual conference grows in size and stature every year —plans are already underway for next year’s main event, June 9- 11, 2013.[IA]

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but insured losses were about $100 million. The difference is due to the fact that many of the businesses did not carry special insurance on such items, and those that did had very high deductibles, typically $25,000. Many of these items were irreplaceable, and the loss has changed how the industry looks at protection for large concentrations of priceless art and collectibles. There are a number of reasons that Inland Marine coverage may be preferred over standard property policies. Coverage is broader than normal contents coverage, usually including “mysterious disappearance” as a covered cause of loss. So, if the insured accidentally throws away their diamond ring, or loses an earring, there is coverage. Standard policy limitations do not apply. For example, standard personal lines policies often impose dollar limits on property such as jewelry, furs, silverware and collectibles. These limits may apply for “theft” losses only, but in some policies, the limit applies to loss from any cause. Similar limitations are found in many commercial policies. Breakage coverage for fragile items is also available. Unlike standard contents/personal property, Inland Marine coverage is often written without a deductible. Typical property insurance covers property that is on premises, with limited extensions of coverage for items in transit. With Inland Marine coverage, the territory is expanded to a worldwide basis. Much of Inland Marine coverage is not regulated, giving companies flexibility to write miscellaneous property and charge rates that correspond to the perceived risk. There are certain conditions of Inland Marine loss settlement that are important to understand. It is the insurance company’s option to repair or replace the item. Even if the item is scheduled for a “value”, that may not be the amount of money the insured receives as payment for the claim if the company can provide a replacement item for less money.

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Condo Issues, Gaps and Coverages 1 CE (PC, BR, C3, PA) NYCR-236661

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AUGUST - DECEMBER 2012 :: CLASSROOM SCHEDULE :: VI BUFFALO Aug 28 Sept 12 Sept 20 Sept 27 Oct 10 Oct 17 Oct 23 Oct 31 Nov 6 Nov 13 Nov 27 Dec 11

AAI 82 - Segment B Workplace Worries AAI 82 - Segment A NYAIP Certification Best Practices E&O Loss Control ACSR 1 - P/L Homeowners AAI 82 - Segment C ACSR 4 - E&O Loss Control ACSR 6 - Commercial Property There's Insurance for That? NYAIP Certification Program The Adventures of ACE Insura Claims Detective

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SYRACUSE Aug 30 Sept 11 Sept 14 Sept 28 Oct 16 Oct 25 Oct 30 Nov 8 Nov 28 Nov 29 Dec 4 Dec 13

AAI 82 - Segment B NYAIP Certification Progr Workplace Worries Best Practices E&O Loss C ACSR 1 - P/L Homeowner AAI 82 - Segment C ACSR 4 - E&O Loss Contro ACSR 6 - Commercial Pro There's Insurance for Tha AAI 82 - Segment A NYAIP Certification Progr The Adventures of ACE In Claims Detective

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DUTCHESS Sept 20 Oct 11 Oct 25 Nov 1 Nov 14

NYAIP Certification Program There's Insurance for That? The Adventures of ACE Insura Claims Detective Best Practices E&O Loss Control Workplace Worries

5 CE (PC,BR,C3,PA) NYCR-236153 5 CE (All Licenses) NYCR-237039 AM - 3 CE (PC, BR, C3, PA) NYCR-236835 PM - 3 CE (PC, BR, C3, PA) NYCR-236834 7 CE (All Licenses) NYCR-236613 8 CE (All Licenses) NYCR-236861

WESTCHESTER Aug 31 Sept 20 Oct 10 Oct 18 Oct 24 Oct 26 Oct 31 Nov 6 Nov 7 Nov 13 Nov 28 Dec 5 Dec 7

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5 CE (PC,BR,C3,PA) NYCR-236153 6+1 CE (PC, BR, C3, PA) NYCR-236950+ NYCX-236950 5 CE (All Licenses) NYCR-237039 8 CE (All Licenses) NYCR-236861 AM - 3 CE (PC, BR, C3, PA) NYCR-236835 PM - 3 CE (PC, BR, C3, PA) NYCR-236834 5 CE (PC,BR,C3,PA) NYCR-236153 7 CE (All Licenses) NYCR-236613 7+1 CE (All Licenses) NYCR-236787+ NYCX-236787 7+1 CE (PC, BR, C3, PA) NYCR-236949+ NYCX-236949 7+1 CE (PC, BR, C3, PA) NYCR-236788+ NYCX-236788 7+1 CE (PC, BR, C3, PA) NYCR-236948+ NYCX-236948 7+1 CE (PC, BR, C3, PA) NYCR-236786+ NYCX-236786 5 CE (PC,BR,C3,PA) NYCR-236153

QUEENS Sept 29 Oct 9 Nov 9 Nov 13 Dec 14

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SUFFOLK Sept 12 Sept 13 Oct 17

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[ COVER ]

By Jerome Trupin, CPCU

24 July 23, 2012 / INSURANCE ADVOCATE

[ COVER ]

ackers emptied a construction firm’s bank account to the tune of $558,000. Another firm lost $125,000 when the office manager, in violation of the firm’s written policies, had logged into a social networking site, triggering what computer security consultants call a “corporate account take-over.” If misery loves company, these firms should be very happy; information technology experts estimate that 1 in 10 firms have had their accounts hacked with the total losses exceeding $2 billion a year.1 When they called their banks expecting that the bank would cover the loss, they got some really bad news—the bank was not responsible for the loss. That may seem counter-intuitive; if someone intercepts a check payable to me, forges my name and cashes the check at a bank, the bank that accepts the check is responsible for the loss, not me. That’s not the case with theft from on-line business accounts with most banks. Fortunately there is insurance available to protect insureds from losses like this: computer and funds transfer fraud. It’s widely available as an endorsement to employee dishonesty and employee theft forms, but it’s also widely overlooked. ISO splits the coverage into two parts: Computer Fraud and Funds Transfer Fraud, which are insuring agreements 6 and 7 in the ISO Commercial Crime Coverage Form: 6. Computer Fraud We will pay for loss of or damage to "money", "securities" and "other property" resulting directly from the use of any computer to fraudulently cause a transfer of that property from inside the "premises" or "banking premises": a. To a person (other than a "messenger") outside those "premises"; or b. To a place outside those "premises". 7. Funds Transfer Fraud We will pay for loss of "funds" resulting directly from a "fraudulent instruction"

directing a financial institution to transfer, pay or deliver "funds" from your "transfer account".2 Fraudulent instructions include electronic, telegraphic, cable, teletype, telefacsimile or telephone instruction, so there’s coverage for more than just Internet fraud, but Internet fraud is the big one. (Many insurers combine computer and fund transfer fraud coverage, which makes it easier to decipher.) Insurance is just one piece of the solution; loss control is the other. Insurance won’t compensate for the time spent in coping with the problem and all insurance coverages have limits and exclusions. The New York Times article reporting this story includes a number of steps businesses can take to avoid becoming victims. I’ve combined their suggestions with some of my own, as follows: 1. Credit card companies monitor transactions to spot out-of-the ordinary charges; some banks have similar systems for on-line banking. The article points out that the larger banks have more robust automated systems than do smaller banks. Find out what protection your bank provides. Consider changing banks to get better protection. 2. See if a bank will accept responsibility for fraudulent transactions. If your account is attractive enough to the bank, they’ll sometimes agree. 3. Follow best practices in computer operations, including up-to-date firewalls, installing security patches, limiting the number of employees with access to bank accounts, enforcing strict rules for use of business computers, and forbidding social media. 4. Monitor account balances daily. There is often a brief window to cancel fraudulent transactions. Travelers has a brochure posted online about computer and funds transfer fraud. It recounts how a payroll supervisor noticed three suspicious wire trans-

Jerome Trupin, CPCU

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

1 Pamela Rickman “Owners May Not Be Covered When Hackers Wipe Out A Business Bank Account” New York Times, Thursday, June 13, 2012 http://www.nytimes.com/2012/06/14/business/smallbusiness/protecting-business-accounts-fromhackers.html?pagewanted=all 2 Commercial Crime Coverage Form (Loss Sustained Form) CR 00 21 05 06 copyright ISO Properties, Inc., 2005

INSURANCE ADVOCATE / July 23, 2012 25

[ COVER ] continued from page 25

fers from the firm’s account totaling $704,632. She notified the firm’s bank, which shut down the account and was able to recover $465,851 of the stolen funds.3 5. Consider dedicating one computer solely to financial transactions. Use that computer solely for funds transfer transactions. This is an opportunity for producers to add value to their services to their clients: • Quote computer and funds transfer fraud coverage to every insured with employee dishonesty/theft policy that doesn’t include it. • Notify all other clients of the employee dishonesty and computer/funds transfer fraud gaps in their coverage. • Recommend that they contact their banks. • Discuss it when quoting a new account. A copy of the New York Times article mentioned above is a great point-of-sale piece. And don’t forget to look at your firm’s insurance and to see what you can get from your bank.

Appraisal is a Faster and Less Expensive Way to Settle Property Insurance Valuation Disputes— Except When it isn’t. It’s an article of faith among insurance claim professionals that the appraisal provision in property insurance policies is a valuable tool for insureds to use when faced with a valuation dispute in connection with an insured loss. (For those of you who don’t spend your spare time reading insurance policies, a recap may be in order.

Appraisal is regarded as so valuable an option for insureds that consumer advocates pushed the legislature in 1990 to override New York case law that permitted insurers to decline to participate in appraisal.

The appraisal provision gives both the insured and the insurer the right to demand binding appraisal if they disagree on the value of the property or the amount of the loss. Each side selects its appraiser and the appraisers pick an umpire. If they can’t agree on an umpire, either may request a court to appoint one. The appraisers each state the value of the property and amount of loss. If the don’t agree, they submit their differences to the umpire. A decision agreed to by any two is binding. Each side pays its own appraiser and half of the expenses of the appraisal and the umpire.) There are often no lawyers involved and there’s no requirement to follow any particular rules of procedure. New York State Insurance Law provides that an appraisal, if ordered, “shall proceed pursuant to the terms of the applicable appraisal clause of the insurance policy and not as an arbitration.” 4 Appraisal is regarded as so valuable an option for insureds that consumer advocates pushed the legislature in 1990 to override New York case law that permitted insurers to decline to participate in appraisal. When a court decision in 2002 did not compel the insurer to participate in appraisal, the legislature passed additional legislation in 2010 clarifying that either party can require the other to participate in appraisal.

Appraisal is almost always a much less expensive and faster way of resolving a claim dispute than a lawsuit. Notice that I said “almost always.” Here’s one that didn’t turn out that way5: Amerex distributes outerwear as an intermediary between wholesale customers in the United States and overseas clothing manufacturers. It stores the merchandise awaiting shipment to customers in a warehouse in Avenel, New Jersey on a large complex rack system that facilitates the shipping process. On August 3rd, 2001, a storage rack collapsed rupturing the sprinkler system pipes, which flooded the premises. Amerex’s merchandise was extensively damaged and its computer system was inoperable for up to three weeks. In addition to the damage to physical property, it claimed a large business income loss. The direct property loss was settled, but the business income loss proved more difficult. The insured’s business income claim exceeded $8.5 million. The coverage was written in two layers. Fireman’s Fund covered the first $2.5 million. Lexington and Westchester Surplus Lines shared equally in the next $10 million of coverage. Fireman’s Fund paid its $2.5 million limit, but the insured and the insurers could not agree on the amount of the excess loss. The excess insurers felt that they owed only a small amount; the insured felt it was entitled to over $6 million. When attempts to settle the loss between the parties stalled, the claim was submitted to non-binding mediation. That too, was unavailing, Four years after the loss, the insured started suit. The insurers responded by demanding appraisal. The insured fought the appraisal on the grounds that the insurers had waited too long to assert their right. When that argument failed, the appraisal process began. The appraisal process took almost 2 ½ years. Finally, two of the appraisers agreed that Amerex’s total loss was $1.3 million—less than half of the primary policy limit—so that the excess carriers did

3 “Travelers Wrap: Funds Transfer Fraud and Computer Fraud” https://www.travelers.com/business-insurance/management-professionalliability/documents/59545.pdf 4 N.Y. Ins. Law § 3408(c). 5 Amerex Group, Inc. v. Lexington Ins. Co. et al. US Court of Appeals, 2nd Circuit 10-4163-cv (May 10, 2012)

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[ COVER ] continued from page 26

not owe the insured anything. As might be expected, the insured returned to court. It lost in district court and appealed the decision. On May 10, 2012 the appeals court ruled in favor of the insurance companies. So more than ten and a half years after the loss, the matter concluded leaving the insured with a pile of legal and appraisal bills, but no further payment. WHO IS THE OWNER AND WHAT’S ITS INSURABLE INTEREST? Jeffrey Gilbert bought a building as a tenant-in-common with his business partner, Alice Gardner, but he purchased insurance in his name only. The premises were destroyed by fire on October 2, 2009. The insurance company paid Gilbert 50% of the loss since he had a 50% interest in the property. Gilbert argued that he had an insurable interest equal to full value of the property since he was legally entitled to the “full use and enjoyment of the premises.” The court ruled otherwise. Since his partner was not named as insured, Gilbert was insured for only his 50% interest in the property.6 Learning Point: Getting the right name of the owner of the property seems so basic, but it’s easy to get wrong. Many people use the word “I” very broadly. They say, “I’m buying a building, send me a binder for the closing.” What they mean is, “The partnership, co-tenancy, LLC, corporation, etc. that I’m part of is buying a building.” After you ask the location of the property, your next question should be, “In whose name is property titled?”

Don’t Rely on Someone Else’s Insurance—Their Misrepresentation Can Void Your Coverage, Too

Debris continues to fall from the crane collapse that killed seven people in midtown Manhattan on March 15, 2008. The New York Court of Appeals just ruled that the coverage carried by Joy Contractors, Inc., the crane operator, was void from inception if the crane operator made material misrepresentations and that the additional insureds on the policy would then also have no coverage.7 The insurers claimed its underwriters were told that the crane operator specialized in drywall installation, did not do exterior work and performed no work at a level more than two stories above grade other than drywall interior work. According to the insurer, Joy was actually the structural concrete contractor, performing work on the building's entire exterior with the tower crane. The insurer stated that had it known the true facts, it would have declined the insurance or offered it subject to different terms, conditions or premium. That’s the standard for determining if a misrepresentation is material. Only a material misrepresentation voids coverage. For example, if I tell my insurer that my house is painted white when in fact it’s yellow, that’s a misrepresentation, but it’s not material so it doesn’t void my coverage. Two Learning Points: (1) A material misrepresentation can void coverage. Be careful how you describe a client’s operations to underwriters and be sure that all questions are answered correctly to the best of your knowledge. (2) Advise insureds not to rely on insurance provided by others. I’m sure the general contractors and owners in this case had their own coverage in addition to being named as additional insureds on Joy’s policy, However, property owners often specify that netlease tenants and others purchase insurance covering property and/or liability exposures and name the property owner as an insured. Many of these property owners then do not purchase their own insurance. Bad idea. If the tenant’s representations or acts lead the insurer to void the coverage, the property owner loses its coverage also.[IA]

왘

A D

I N D E X

1-800-ADJUSTERS 1-800-235-8783 . . . . . . . . . . . . . . . . . . . . . . . . 35 American Transit Insurance Company www.american-transit.com . . . . . . . . . . . . . . 41 Applied Underwriters www.auw.com . . . . . . . . . . . . . . . . . . . . . . . . . BC Complex Coverage 631-547-5959. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Empire Safety Council 800-246-3603. . . . . . . . . . . . . . . . . . . . . . . . . . 19 Edwards Wildman Palmer LLP www.edwardswildman.com . . . . . . . . . . . . . . 9 First Niagara Risk Management, Inc. 585-367-2722. . . . . . . . . . . . . . . . . . . . . . . . . . 17 First Rehab Life www.kingstoneinsurance.com . . . . . . . . . . . 17 Friedman & Levine, Inc. 888-712-LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Guard Insurance Group www.guard.com/apply . . . . . . . . . . . . . . . . . . 13 Hamond Group 516-488-2800. . . . . . . . . . . . . . . . . . . . . . . . . IBC IIABNY www.iiabny.org. . . . . . . . . . . . . . . . . . . . . . . . . 21 Interboro AutoOne www.interboroinsurance.com . . . . . . . . . . . 11 Maple Technologies 732-863-5523 . . . . . . . . . . . . . . . . . . . . . . . . . . 14 MSO www.msonet.com . . . . . . . . . . . . . . . . . . . . . . 20 National Safety Council 800-962-3434. . . . . . . . . . . . . . . . . . . . . . . . . . 33 Park Insurance Co. www.parkinsuranceco.com . . . . . . . . . . . . . . . 5 PIA www.pia.org . . . . . . . . . . . . . . . . . . . . . . . 27 PREMCO 516-668-1234. . . . . . . . . . . . . . . . . . . . . . . . . . 29 Prestige Employee Administrators www.prestigeemployee.com. . . . . . . . . . . . . 29 Wilkofsky, Friedman, Karel & Cummins, www.wfkclaw.com . . . . . . . . . . . . . . . . . . . . . . 42

6 Jeffrey Gilbert, appellant, v Allstate Insurance Company, respondent. ) Appellate Division 2nd Department NY Index No. 4323/10 (May 15, 2012) 7 Admiral Insurance Company, Respondent-Appellant, v. Joy Contractors, Inc., et al., New York Court of Appeals Slip Op 4670 (N.Y. June 12, 2012),

28 July 23, 2012 / INSURANCE ADVOCATE

This index is provided as an additional service to our readers. The Publisher does not assume any liability for errors or omissions.

[ INSIGHT ]

By Peter H. Bickford

Let The Free Zone Ring!

he insurance and financial industries are constantly seeking new risk spreading options. In recent years these new options have included, among other things, cat bonds, sidecars, special purpose vehicles and insurance linked securities. Alternative risk facilities and options exploded on the scene in the 1980s as a result of tremendous swings in capacity and availability. For instance: • The first Vermont captive insurance company was licensed in 1981. • The first liability excess facilities were established in Peter H. Bickford Bermuda in 1986. • The Liability Risk Retention Act that allowed for the creation of risk retention groups and risk purchasing groups was enacted in 1986. The revolution actually began, however, in 1978 with the enactment in New York of Article 62 (the New York Insurance Exchange) and Article 63 (Special Risks) of the Insurance Law. While the exchange experiment – seeking to create a Lloyd’s type facility in the US – was short-lived (more on this topic in the future), the Special Risk article, commonly referred to as the Free Zone, lives on. The Free Zone law allows New York licensed insurers to obtain a special Free Zone license to write large commercial or hard-to-place risks free from rate and form filing requirements. The standards and requirements for defining large commercial risks, and the list of hard to place risks that can be written in the Free Zone are set out in Regulation 86, which has been amended and expanded over the years to address changing conditions and needs. The current administration is continuing this effort through the promulgation of a new amendment to the Free Zone regulation, Regulation 86. To the credit of the Department of Financial Services, the Fourth Amendment to Regulation 86, published in the State Register on June 20th, makes significant im30 July 23, 2012 / INSURANCE ADVOCATE

provements to the existing regulation by lowering the threshold for large commercial risks, improving the premium to surplus ratios for Free Zone licensees, and expanding and updating the list of hard-to-place risks that can be written through the Free Zone. The regulatory impact statement accompanying the proposed regulation does a good job summarizing the background of the Free Zone and the purpose of the changes to the regulation. Most significantly, the regulatory impact statement discusses the extent and nature of suggestions received by the DFS from industry groups on changing Regulation 86, with an explanation of why it accepted some changes, rejected others or took a different approach to address a particular issues raised. While not everyone may be happy with the final regulation, this kind of explanation and analysis is helpful to and welcomed by the parties that utilize the Free Zone in their business, and to know that their concerns and comments are being considered in a meaningful manner. It is hoped that this open approach will be the standard for the DFS and not an exception. I would also urge that the DFS consider an additional level of disclosure. In the 2010 Report of the Superintendent of Insurance to the Legislature, it was reported that there were 222 companies with Free Zone licenses as of year-end 2009 that wrote approximately $1.54 billion in net premiums written during the year, bringing the net premiums written in the Free Zone since inception to approximately $15.18 billion. This report is far too limited and perfunctory to be of any meaningful value to industry or potential industry participants. But even this limited information was more than provided in the stripped down 2011 annual report of the new DFS, which includes no information on or discussion of business written through the Free Zone, or any other specific line or type of business. It would be very helpful to the industry, its customers and investors to have far more detail — both current and historical — about such aspects of the Free Zone as volume, usage, category of risk, efficiency and cost effectiveness. This is the kind of information

I would also urge that the DFS consider an additional level of disclosure. that successful managers use to consider their business or investment strategies. The more extensive the availability of reliable information, the more confident managers can be in their business or investment decisions. The value of such disclosure is not just to the business and investment decision makers. Such information should also be of interest to regulators and legislators in assessing the effectiveness of particular legislation and regulations, leading to appropriate improvements or adjustments to both. Case in point: in November 2011 the DFS issued the third amendment to Regulation 86 to implement a change to the Free Zone statute to add a new category of permissible placements – to large commercial insureds as defined in the Non-Admitted and Reinsurance Reform Act (NRRA), a part of the 2010 Federal Dodd-Frank legislation. The amended Free Zone legislation and enabling regulation were criticized for the restrictive, redundant and unnecessary filing requirements that undermine and detract from the intent and purpose of the large commercial insured concept in the NRRA (See, for instance, my article, Strike One! appearing in the December 19, 2011 issue of Insurance Advocate). Keeping track of and reporting on the usage of this new category would assist the DFS and the legislature in determining the effectiveness or ineffectiveness of the law and regulations that could lead to improvement in both, including the possibility of proving the criticism to be wrong. There are a number of statutory or regulatory requirements for companies, agencies and others to compile and report data to the department. It is a waste of everyone’s resources if that data is not cumulated, analyzed and the results appropriately and openly shared with all interested parties including industry participants, investors, service providers, consumers and legislators.[IA]

By Michael Fliegelman, CLU, ChFC, AEP, RFC

ADVERTORIAL

How Long Term Care and Life Insurance Fit Together

ife Insurance is one of the key pieces of a successful financial plan, but have you thought about how it can be used to pay for your clients Long Term Care? The Long Term Care market has been experiencing numerous changes. Currently, only a handful of companies are selling regular long-term care insurance. Those still in the industry are pulling back, limiting their products and rapidly changing their pricing. Why is this happening? The Long Term Care industry knows that in the future, claims are going to be very large and last for a longer duration. Due to advanced medical technology, people are living longer, and increasing the need for all types of services. These services range from home care, assisted living facilities and nursing homes. Due to the likelihood of our extended life spans, it is increasingly risky for people to enter their retirement years without a strategy in place to protect their life savings from the inevitable cost of Long Term Care. Now more than ever, it is clear that Long Term Care insurance is essentially a planning tool for retirement. So what are your clients’ potential solutions? There are a few different ways to purchase Long Term Care (LTC). First there are the traditional, stand alone products that have gone through significant changes. Then we are seeing new and creative solutions coming to market, where life insurance is used as a potential Long Term Care solution. These products are sometimes known as Hybrid Products or Linked Benefit Products. In a typical stand alone LTC product, it is a clear case of Use it or Lose it. So if Aunt Anna lives until she is 75 and never needs to use her Long Term Care Insurance, then upon her death, it just goes away. A Hybrid, on the other hand, is actually Long Term Care plus Life Insurance. So if Aunt Anna had paid the premiums on this product, her cumulative payments would have created a long term care benefit, as well as a death benefit and a cash surrender value. Keep in mind that the market has recognized that new solutions are needed to meet the advancing age of today’s baby boomers. America’s 78 million baby boomers are over the age of 65 and each year, millions of new boomers add to the swelling aging population. While the baby boomer population is well educated, relatively well off and healthier than previous generations, as they grow older, they will need more help. The question is how will families meet the rising Long Term Care costs without wiping out their entire portfolios?

Planning ahead is the key to success. Many people don’t take the time to look at the big picture when it comes to financial planning for their old age. If you wait until you are in the stage you’re planning for, you might find yourself inadequately prepared. The availability of high quality solutions presents a tremendous opportunity for property and casualty agents to protect their clients so that their entire portfolios are not put at risk. There is no right or wrong in comparing the traditional LTC products versus the newer hybrid products. In fact it may be worthwhile to consider a smaller traditional product combined with a hybrid product. Give your clients the best of both worlds and offer them a plan that limits rate increases and the potential that all the premiums could be lost at death. By adding the hybrid products you: 1. Resolves the Use It or Lose It potential that most traditional policies have. 2. The premiums in many of these hybrid policies are often guaranteed and cannot be subject to price increases. 3. Allows an exit strategy for the client who might want to surrender the contract for its cash value. 4. The policy can provide other valuable benefits, for instance it can provide forced savings, building cash value, and providing needed life insurance for family estate liquidity These products come in different shapes and sizes from various carriers. My job is to help educate you and your clients so you can help them make good decisions to protect their wealth. Your questions and feedback is very important to me. Please email me at michael@ michaelfliegelman.com or call me at: 631-262-9254, to discuss how we can be of help to you and your agency. Michael Fliegelman, CLU, ChFC, RFC, AEP®, Michael is a Mass Mutual brokerage director and the CEO and founder of SWAN Strategic Wealth Advisors Network www.swanwealth.com Michael is a leading authority on estate and business succession planning and has extensive experience in analyzing life, disability and long-term care insurance policies. He has a special talent for helping clients and insurance professionals to do their financial planning in a holistic and comprehensive manner. He has been a featured commentator on Fox News and in Newsday INSURANCE ADVOCATE / July 23, 2012 31

[ FEATURE ]

By Andreas Baumhoff, CTO, ThreatMetrix

The Creeping Risk of Mobile and Personal Devices in Insurance

o doubt you've heard about the 'consumerization of IT' or the Bring Your Own Device (BYOD) trend. BYOD is nothing new in the insurance industry – for many years, independent agents and brokers have used their own computers to access insur-

As much as we love our mobile devices, we're not always careful about what types of software we download to them, or how secure the Wi-Fi networks are where we use them.

Andreas Baumhof

Hidden URLs: Shortened URLs, common on sites like Twitter, make it difficult to determine exactly where a link will take you. Image searches: Cybercriminals embed drive-by downloads in popular images, then make sure those images show up in image searches. Syndicated ads: With multiple levels of ad syndication, an attacker can implant a malware-infested ad on an otherwise trusted site, without the site ever seeing or vetting the ad. All of these can easily infect the typical agent's computer, smartphone, iPad, or other devices. In 2011, ThreatMetrix found that on a typical day, between 4-7% of the transactions reaching customers come from compromised devices.

ance company applications and run their businesses. But you may not be aware of the creeping cybersecurity risks from personal devices – a risk that affects independent agents, policy holders and insurance companies alike.

Growing Risk of Malware Cybercriminals have been busy crafting new malware that targets user’s login credentials and financial information. The objective of many malware programs is to steal accounts and passwords to sensitive accounts. According to the Aite Group, 2011 saw 25 million new unique strains of malware, and that number is expected to reach 87 million new variants by the end of 2015. Even platforms once considered immune, such as the Mac, are now targets of malware. It's getting harder to avoid the growing number of malware Trojans, or various strains of malware. Once it was enough to be vigilant about never opening suspicious emails. Today, malware threats come in many forms: Shared devices: Children use a home or parents business computer at ever-younger ages, and may unknowingly download malware that silently infects the computer. Topical event searches: Cybercriminals use SEO techniques to make sure their sites are ranked highly for breaking events (such as Whitney Houston's death), and then infect those sites with drive-by downloads, which compromise well-known websites by distributing malware Trojans automatically. 32 July 23, 2012 / INSURANCE ADVOCATE

Percentage of transactions from compromised devices, 10 days in November 2011. The company proﬁles nearly 1 billion devices on a monthly basis.

The Rise in Mobility Agents and customers are connecting to insurance applications through more channels and devices than ever before. For instance, we use iPads to work remotely at the local Starbucks, or to check email on a mobile device on your way home from work. Customers use mobile insurance apps to file and view claims or track investment-linked insurance policies. People may switch between devices many times during each day. As much as we love our mobile devices, we're not always careful about what types of software we download to them, or how secure the Wi-Fi networks are where we use them. The increase continued on page 34

Help your insured drivers reduce risk and grow your business Partner with the National Safety Council to sell the New York Point & Insurance Reduction Program (PIRP). Your agency will: r (BJO B DPNQFUJUJWF BEWBOUBHF PWFS PUIFS BHFODJFT r %SJWF NPSF USBGGJD UP ZPVS XFCTJUF BOE CVTJOFTT r *ODSFBTF OFX DVTUPNFS JORVJSJFT r 3FUBJO DVSSFOU DVTUPNFST r .BLF B EJSFDU JNQBDU PO ESJWFS TBGFUZ BOE MJWFT TBWFE

Call (800) 962-3434 to find out more today or visit ddcnsc.org/ny. ou You Y o have three ways to offer the course: 1. Online: Earn commission every time a new or returning customer takes the course. Provide your clients with a direct link to the NSC PIRP web page. 2. Classroom: T each out to companies where you can gain even more exposure and new business. 3. Take a advantage of o both these training options!

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Choose a name you can With more than 11 1 million drivers in New Yo ork, don’t your drivers deserve the very best? The National Safety Council, leader in driver safety, was the first PIRP approved in the state of New York. o NSC curriculum is chosen by more corporations than any other provider. NSC has spearheaded safety innovation for 100 years, developing best practices for driver safety. NSC is committed to spreading the message about today’s fastest growing driving issue – cell phone distracted driving.

Our partners support our mission The National Safety Council saves lives by pr preventing eventing injuries and deaths at work, in homes and communities, and on the rroads oads thr through ough leadership, rresearch, esearch, education and advocacy advocacy.. NOTE: This 6-hour course iss New Yo ork state DMV approved. Students receive up to a 10% discount on their motor vehicle collision and liability insurance pre emium each yea year for three years. Plus they receive up to a 4 point reduction on their driver’s license. 0712 000083273a

[ FEATURE ] continued from page 32

in devices means a corresponding increase in risk. Looking again at the ThreatMetrix network data, we found the number of transactions from mobile devices doubling in less than a year:

Cybercriminals are Looking for Identities and Money Criminals are turning their focus to identity theft and exploits for financial gain – and insurance systems have a wealth of identity and financial information. Cybercriminals will target systems containing financial information with identity takeover – using stolen credentials to gain access to applications. These attackers can often cover their tracks well, making it difficult to discover their presence until the damage is done. They may even hide cookies and disguise device characteristics to look like a legitimate agent or customer. Passwords are not a strong enough defense. Some insurance companies give agents tokens or other multi-factor authentication methods to secure their logins. While multi-factor authentication is good at determining that someone is who they claim to be, an infected device can still intercept

While multi-factor authentication is good at determining that someone is who they claim to be, an infected device can still intercept and exploit an authenticated session. A man-in-the-browser (MitB) malware attack can get around multi-factor authentication. and exploit an authenticated session. A man-in-the-browser (MitB) malware attack can get around multi-factor authentication. Insurance agencies need layered, integrated defenses to get an accurate picture of who is connecting to applications, and whether their devices are infected with malware or disguising as a criminal.

Mitigate the risks with policies and technologies It's time for the insurance industry to implement a new security policy around the BYOD trend. In this case, it's your own risk

NEW YORK JOCKEY INJURY COMPENSATION FUND, INC. Open for Proposals for Coverage for 2013

The Fund is a not-for-profit corporation, which by law, is the employer of all thoroughbred jockeys and exercise people in the State of New York for workers’ compensation purposes. Each year the Fund obtains proposals for providing the workers’ compensation insurance for the following year. The Fund is now seeking offers for providing this coverage for the 2013 policy year. The current premium is in excess of $3 Million Dollars. The New York Jockey Injury Compensation Fund, Inc. (Fund) will commence its twenty second year of actual operation on January 1, 2013. The Fund was created by the New York State Legislature in 1990. It went into operation on January 1, 1991 to provide workers’ compensation insurance coverage for all licensed jockeys, apprentice jockeys and exercise people working at thoroughbred racetracks in the State of New York. The workers’ compensation benefits are provided from one policy, which affords coverage throughout the state. Details of the terms and conditions of the policy and specifics regarding presentation to the Fund may be obtained by contacting Karen A. Fenzl, CIC, consultant, First Niagara Risk Management, Inc., 726 Exchange Street, Suite 900, Buffalo, New York 14210; or email Karen.fenzl@fnrm.com; or phone 716-819-5506; or phone Gail Gray, Manager of the Fund at 585-367-2722.

34 July 23, 2012 / INSURANCE ADVOCATE

that you're insuring, by putting policies and technologies around application access. Only through a combination of training, education, behavior and technology can you reduce the risk of the unmanaged devices reaching insurance applications. Here are a few guidelines for creating BYOD defenses in the insurance industry: 1. Analyze the entry points Create a general profile of the applications and access points used by unmanaged devices, whether they belong to customers or agents: • Who is accessing applications remotely from their own devices? For example, you can require agents and brokers to take certain measures, but imposing access criteria on customers is more difficult. • What devices are they using to access critical applications and data? Can you identify those devices as 'good' and free from malware? • Which business applications are open to remote access, and what sensitive or regulated data resides in those applications? You can't 'lock down' sensitive applications, but you can apply layers of defenses around them. 2. Establish guidelines for agents' and brokers' devices With independent agents, you can put some controls around the devices that the agents use to connect to internal applications, including: • Use of anti-virus software • Anti-malware scanning • Maintaining up-to-date OS patches, or operating systems • Passwords policies (complexity, strength, change) • Multi-factor authentication However, education and policies are only a small part of your defenses, as even well-intentioned users can easily pick up malware, and their devices’ measures for preventing cyber-attacks will be implicated. 3. Trust but verify It's not enough to train agents and brokers about best practices – you need to automate policy enforcement as well. For example, there are ways to add client-side verification of the security status of an

[ FEATURE ] agent's computer before allowing them access to your applications. And by looking for malware in the real-time connection from any device, you can prevent customers with infected devices from compromising the privacy of their own insurance information. 4. Look for imposters So far we've been talking about legitimate agents and customers accessing your applications with devices that may have malware. The other essential challenge is protecting applications and customer data from malicious or fraudulent users impersonating legitimate agents and customers. For this, you need device identification technologies that can spot devices disguising their real locations, turning off cookies, and/or hiding behind proxies. These technologies can also spot devices used by many email addresses, or devices known to belong to bots or criminals. 5. Re-assess the risk regularly. You should continuously track the compromised devices reaching your network or the trends in threats, and take appropriate actions through technology and/or agent education. The technologies to do this are readily available today, and are already widely deployed in the financial services industry. They include: Device identiﬁcation. These technologies can find anomalies like disguised location, IP address or device types. They can also spot known compromised devices. Global threat intelligence: The only way to stay on top of the changing threat environment is to connect with a network of sites sharing information about corrupted devices, malicious users and new exploits. Malware identiﬁcation. Web session profiling software can detect compromised devices and potential Trojans, such as malicious JavaScript that steals login credentials. Client-side protection. Give agents tools to identify and lock

down malware on their systems, ensuring safe transactions or sessions with your business systems. Assessing and mitigating risk is at the heart of the insurance business – it's time to put risk mitigation in practice for the applications driving the insurance business. Doing so, you can create a healthy balance of security and convenience that supports your business objectives while

protecting agents, policyholders and your core business from fraud and crime.[IA] Andreas Baumhof is the Chief Technology Officer at ThreatMetrix, a provider of integrated cybercrime prevention solutions. Baumhof is an internationally renowned cybersecurity thought leader and expert with deep experience in the encryption, PKI, malware and phishing markets.

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INSURANCE ADVOCATE / July 23, 2012 35

[ FACE TO FAC E ]

By Michael Loguercio

“So Call Me Maybe…but not while driving!”

few weeks ago I wrote a piece in this column about the deadliest time of the year to drive, of which we are currently right smack in the midst of. After speaking with a number of friends of this column, they asked me if it were possible to drill down a little deeper to see if certain times of the day were deadlier than others. Sure enough, this is what I discovered: According to the AAA, the most risky

the late afternoon and evening there are more discretionary drivers on our roads, combined with drivers who may have had that happy hour umbrella drink or two after work as well. In addition, studies have indicated that people tend to drive faster on their way home from work than to work, which is a major contributor to these statistics as well. Other events that contribute to accidents are rain: but not the amount of rain, but the time span between rain events. Reason being is that Furthermore, according rain causes oil and other slick substances to loosen from its to the AAA, studies have grasp on the roadways, causing shown that driving when a slippery pavement and ultithere is a higher traffic mately more crashes. The longer the time span between volume does not rainy days, the greater the risk necessarily indicate an of a crash is. In addition, the increase in traffic injuries. first few hours of a rainfall is more likely to cause a slick Michael Loguercio roadway environment than once it has been raining for a times of the day to be on the road are by far longer period of time, as the rain will begin the very late hours of Saturday into the early to wash the oil substances away. morning hours of Sunday. Reason being is Same goes for a bright sunny day, as that during these hours there is an increase sun glare is a major contributor to acciin alcohol abusing drivers, along with many dents as well. Of course, so are snow, sleet, unsupervised teen drivers and drivers who hail, airplane parts, and whatever else may are fatigued. This combination in conjunc- fall from the sky. I remember a time just a tion with typical accidents caused by animal few years ago when I was driving at the strikes, etc., shows a dramatic increase in speed limit south on the Taconic Parkway, accidents over any other times of the day. and saw at about a 45 degree angle (at my Furthermore, according to the AAA, approximate “10 O’clock”) what appeared studies have shown that driving when there to be a large bird headed towards me like a is a higher traffic volume does not neces- belt high fastball. sarily indicate an increase in traffic injuries. Within seconds this SOB hit my driver For instance, driving during the morning side-view mirror, exploding on impact, rush hour may present the highest crash sending feathers, turkey stuffing, and mirrisk because of the additional vehicles on ror parts flying everywhere…leaving a trail the roads, however in terms of most dan- of turkey all over the side of my car. Thank gerous crashes the morning drive is safer. God it was a rainy day out and I had the One theory for this is that in the mornings roof up and windows closed, because if of a “school day” people are sober, awake, that thing would have come in my window and are concentrating on getting to work… I may not have been writing this article safely. right now. However, “the drive at five” is not nearly After pulling into the diner near the as safe as the morning commute. As a mat- Mobil station (you know which one I mean, ter of fact, the morning commute to the of- about 30 minutes south of the parkway enfice is twice as safe as the way home. Reason trance off I-90), I ordered a “turkey sandfor this is attributed to the fact that during wich” (wanted to get him and his family 36 July 23, 2012 / INSURANCE ADVOCATE

back for what he did to me!), I then headed to the car dealer to have my car repaired. After convincing the service writer and the technician at the dealership that it was in fact a bird strike (I guess the blood on the side of my car, along with the dark suit and sunglasses I was wearing caused him to wonder), the car was repaired…for quite a few hundred dollars I might add! Bottom line: respect the weather, road conditions, and environment, and make a clear conscious effort to know and understand the risks of driving…and adjust your driving habits accordingly. Speaking of auto repairs required because of accidents, I recently asked a few young drivers for their opinions on car insurance. Interestingly enough, one of recipients of my survey was a young lady by the name of Alisa Ortiz, who last month graduated from Longwood High School and will be attending Sarah Lawrence College in Bronxville, NY this the fall to study journalism. Alisa articulated in true editorial style her opinion of what car insurance means to her, and what I believe providers of auto insurance to young adults might find informative. With her permission I have reprinted her piece below: Invest in Your Safety by Alisa Ortiz “There appears to be a wide misconception that, when shopping for insurance on a budget, buying the cheapest package or simply meeting the minimum requirements will save money. The problem with this theory is that it approaches insurance simply as a monthly fee instead of a monthly investment. When shopping around, it is important to remember our mothers' words: "It's better to be safe than sorry." Most culprits of this faux pas are those who compromise on their car insurance--especially in New York state where the minimum requirements still cover more than what is considered the minimum in many other states. This is a particular shame considering that so many people in New York need their cars. I can't walk from my house to the nearest Wal-Mart. I can't walk to school, my mother can't walk to work and my brother can't walk to the gym. We all need cars to get around just for daily life and own-

[ FAC E TO FACE ] ing a car costs serious money--but the idea that one can save money on their car expenses by purchasing cut-rate insurance is more than a bit off-kilter. While shopping for a new car, most people are not considering future repair when caused by an accident. It is understood that every car will be accompanied with its own maintenance and/or future problems, but all in all, a shopper wants a reliable car. No one goes out and buys a jalopy to get them to work every day. Ironically, buying a “beater” and fixing it up would cost, on average, the same amount of money as paying for car repairs caused by an accident without physical damage insurance coverage. Cars in disrepair cause accidents, and typically people who have cars in disrepair buy cheap insurance. The illusion that buying cheap insurance is saving money is created by the association of total cost with the amount of money currently in one's account. People see extra money in their bank account and they think they've saved money. Then they find out they need an inspection, they need their brake pads replaced and they need all new tires. Suddenly they're spending anywhere from an extra $200-400 and all that "extra money" they had goes back into their car. Don’t do the repairs? Well then you’re putting yourself at risk for an accident so now you better have more than just the minimum coverage. When people pay for insurance, they see it as a fee or a monthly cost--a flat rate--when it's much more than that. Insurance is an investment. No one knows when they're going to blow a flat on the LIE and skid to the side, cutting off another car and getting their back bumper taken off. No one knows when they're going to be caught in a storm and hydroplane in the middle of Patchogue Mt. Sinai Road. No one knows when they're going to see a pair of doe-eyes one second too late and get their hood smashed in by a deer on Rocky Point Road. Car accidents are unpredictable and unfortunately common. The roads of Long Island are curved and hilly, they aren't always newly paved and they aren't always well lit. With the amount of driving one must do as a resident of the island, and the danger that the roads present, car insurance that covers a vast range of accidents and repair costs is imperative to actually saving money. The fact is that the cash one doesn't spend on a better insurance package, one will spend on future maintenance and repair. If

you're on a budget, it's more important to have better insurance than to have extra spending money. Of course you don't have to spend a fortune or buy the fanciest package-you don't have to spend any more than you can afford, but you can't cut corners when it comes to insurance. Spending the extra fifty to one hundred bucks a month is better than spending an extra twelve hundred. When it comes to insurance, you'll get exactly what you've invested, so invest in your safety and start saving for real.” Nice job, Alisa, I am sure you will be a fantastic journalist! All of us here wish you the very best! Around town it was wonderful to see people like Tamara Storch of Scott Danahy Naylon in Amherst, NY; Jim Goodman of Goodman Insurance in Shelton, CT; Jake, Jimmy and Carlo Ferrara of Street Smart Risk Managers in Freehold, NJ; and Colleen Acierno of Kevin Nilsen Agency in Middletown, NY. Well, until next time when we will be talking about some of the summer events happening in this thing of ours. “Ciao for now!”[IA]

Michael Loguercio is the Regional Sales Manager for Webcetera-EZ Lynx; active Past President of the Young Insurance Professionals of New York State; current ACT/AUGIE, Professional Insurance Agents of New York State, Independent Insurance Agents and Brokers of New York State, and Council of Insurance Brokers of Greater New York committee member. In 2010 Michael was honored with the NY-YIP/PIA Insurance Professional of the Year award; and in 2012 with a NY-YIP/PIA Lifetime Achievement award. In his community, Michael is President of the Longwood Central School District Board of Education on Long Island, NY; and is a member of The Middle Island, NY, Rotary Club and Central Brookhaven Lion’s Club. He is a regular Contributor to the Insurance Advocate since 2008, and may be contacted at 631-345-9359 or michael@webcetera. com. You may also follow him on Twitter @MLoguercioJr; and on Facebook @ Michael Anthony Loguercio Jr.

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[ IN THE ASSOCIATIONS ]

TriCounty Independent Insurance Agents Association Installs Officers and Directors

fficers and directors of the Tri County IIA took the helm on June 21 during the Long Island-based TriCounty annual installation party and awards ceremony. The gathering, held at The Fox Hollow in Woodbury, NY drew approximately 140 association members and guests joined the festivities of this special occasion which took guests back to the 1950’s and 60’s with vintage decorations, traditional music, classic cars and a comedian. Steven Visco, Ph.D., AAI, of C.H. Edwards, Inc., Farmingdale, NY, was installed as president of TriCounty IIAA by his father, Gerard Visco, CIC, a past president of the statewide Independent Insurance Agents & Brokers of New York, Inc. (IIABNY) Additional officers and directors were installed by Thomas J. Crowley CPCU, IIABNY’s Chair of the Board. Officers included Robert E. Mackoul, CLU, of Mackoul & Associates in Island Park, NY, vice president, and Frank Elorza of Club Agency Insurance Brokerage, LLC in Garden City, NY, Treasurer. Peter Phillips of Phillips Brokerage, Inc. in Astoria will be the group’s Secretary for the new term. The TriCounty IIAA also installed the following directors: Dean Aloia, Aloia McKinnon Insurance Brokerage, Brooklyn; James G. Bastian, of Advantage Partners, Inc., Astoria; Ronald Brunell, CIC, B&B Coverage, Ltd., Valley Stream; Adam P. Erickson, Carlstan North Hills Agency, Inc., Floral Park; Alex Giraldo, Club Agency Insurance Brokerage, LLC, Garden City and Theodore Garatziotis of Narrows Insurance Agency, Inc., Brooklyn. In addition, awards were presented that evening. The Joe Bonica Award—given to a board member for untiring dedication and resultant contributions made towards the betterment of fellow agents – was presented to Kevin R. Crossley, a past president of the association and currently serving as Regional Director for IIABNY. The Bob Morris Award—presented for commitment to the association and furthering industry professionalism-- was awarded to Stephen J. Folan, a past president of the TriCounty IIAA. The Babette Traub Award—selected by the Women’s Insurance Network of LI., and presented for her unselfish contributions in education, went to Marcia Reynolds, CPCU, ARM. The association announced awards totaling of $10,000 in scholarships this year. Two $2,500 awards went to Anna Heliotis and Gregory Tucker, both exceptional students at St. John’s College of Risk Management, for meeting specified criteria, including insurance related study and a minimum cumulative GPA of 3.0. The 2012 St. John’s Education Scholarship Program was again sponsored by Tower Group Companies and Safeco Insurance Company. The awards were presented by Michele Russo, Tower’s Business Development Manager on L.I. and by Terry Moore, Safeco’s NY-NJ Regional Manager. Winners of three other scholarships were announced and checks totaling $5,000 were presented at their school’s awards cer38 July 23, 2012 / INSURANCE ADVOCATE

TOM CROWLEY, IIABNY CHAIR, INSTALLED THE NEW TRICOUNTY BOARD OF DIRECTORS, INCLUDING (L-R) JAMES BASTIAN, ALEX GIRALDO AND BOB MACKOUL

STEVEN VISCO, PH.D/AAI TAKING THE OATH OF OFFICE AS THE ASSOCIATION’S PRESIDENT

emonies. Mark Folan and Ryan Pfingst were the 2 Joel S. Pollack Memorial Scholarship award winners for their essays on ‘what to do after an automobile accident’. They were both chosen from a large number of submissions from high school seniors in Nassau, Queens and Brooklyn. The Stephen T. Dooley Community Service Award scholarship went to Kayla Babbush for outstanding community service during her high school years. All students received vouchers to be applied to tuition and allied expenses at their chosen educational institutions. 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. [IA]

[ GUEST V I EW ] continued from page 46

in the form of new taxes—which will be passed on to consumers. • Punishment for consumers who buy “generous” health insurance policies, as the tax on insurance companies is passed on to purchasers. • Punishment for States that elect to participate in Obamacare. The Medicaid expansion will catastrophically burden State budgets that are already stretched. • Punishment for insurance companies and limited choices of insurance policies for patients. New compliance regulations eat into profits and raise premium costs, while “generous health insurance plans” will be hit with higher taxes.

[LETTERS] continued from page 3

RE: Deapo Article, Insurance Advocate, June 18, 2012 Jamie, Just had to tell you how much I enjoyed your article and how true that is. I am a producer, as you know, and my style of sales has never been aggressive or forceful, always wanting to help people. However, it isn’t that easy especially having the conversation with your friends & family…..they think you are trying to push it on them. Will try to remember your article and the truly great loss you sustained and dealing with your guilt. When I think of something I’m going to try to discuss it with them…..thanks for writing it. Debbie Blanchard, CIC Robert J Hanafin Inc. Endicott, NY

RE: Peter Bickford’s Article on DFS Report Dear Steve: In the June 18th issue of the INSURANCE ADVOCATE, in the column Insight

• Punishments for all—except for exempted elite Federal politicians and their cronies, such as labor unions, who receive waivers. The exempted elite keep their private care, yet are the very ones forcing more taxes, penalties, higher costs, and less freedom as punishment on the rest of us. We must repeal the entire Obamacare law and restore market-based, patient-centered health reform that maintains privacy and freedom for patients and their physicians.[IA] Elizabeth Lee Vliet, M.D. is a preventive and climacteric medicine specialist with medical practices in Tucson AZ and Dallas TX that take an integrated approach to evaluation and treatment of women and men with complex medical and hormonal problems. Dr. Vliet

by Peter H. Bickford, we note with interest his remarks indicating that those interested in reading the various items of information that had always previously been provided by the Superintendent’s Annual Report, can no longer get that information. He discusses the various examples of items no longer available. Apparently, since the change to the DFS (Department of Financial Services), the public is getting short changed! As Mr. Bickford states, he believes that this is “another example of continuing diminution of the status of the insurance business in the state.” Perhaps most people may not have much interest to read the various reports that previously had been provided by the Insurance Department. I wish to express my disappointment with an entirely different matter and procedure that is no longer provided by the DFS. Until September, 2011, which is around the time that the DFS came into existence, many agents, brokers, and others connected with the insurance industry, obtained valuable information provided by the Office of General Counsel, with the publishing of the opinions on matters of inquiry to the Insurance Department. These opinions were very informative, and helpful for the professional insurance producer. It is almost one year since these are no longer provided, and another

is also President of International Health Strategies, Ltd., whose mission is twofold: liberty and privacy in treatment options and preservation of the Oath of Hippocrates focus on the individual patient. Dr. Vliet writes as an independent physician, not as an official spokesperson for any political party or organization. Dr. Vliet has no financial ties to any health care system or health insurance plan. Her allegiance and advocacy is to and for patients Dr. Vliet is the 2007 recipient of the Voice of Women award and is a Director of the Association of American Physicians and Surgeons. She has appeared on FOX NEWS, Cavuto, Stuart Varney Show, Fox and Friends and syndicated radio shows across the country addressing the economic and medical impact of the new healthcare bill.

unwelcome change, since the formation of the Department of Financial Services. It certainly would be appreciated if the DFS would return to providing the Opinions of the Office of General Counsel. Stuart Fries, CIC, Vice President Garber Atlas Fries Oceanside, LI

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 insurance-advocate.com facebook.com/InsuranceAdvocate INSURANCE ADVOCATE / July 23, 2012 39

[ COURTSI DE ]

By Lawrence N. Rogak

College Pitcher Assumed Risk of Being Hit by Line Drive During Batting Practice Bukowski v Clarkson Univ.

lmost every day, we are reminded of the injury risks attendant to participation in organized sports. The question presented in this personal injury action is whether a college baseball pitcher assumed the risk of injury associated with his participation in indoor practice. We conclude that plaintiff Bukowski assumed the inherent risk of being hit by a line drive and affirm the order of the Appellate Division. Plaintiff had played organized baseball since he was five years old and pitched at the varsity level in high school for three years. He was recruited by Clarkson University to play on their Division III baseball team as a pitcher. During the winter of his freshman year, Bukowski began indoor training in February and was informed by his coaches that he would be practicing "live" in a nylon cage, meaning the pitcher would throw from an artificial mound at regulation distance to the batter and catcher. On the day before his accident, Bukowski observed pitchers throwing "live" practice without an Lscreen[FN1] in the indoor facility. Despite never having practiced "live" indoors and without an L-screen, Bukowski entered the cage on March 2, 2006, threw about six pitches without batter contact, and then threw a fastball which the batter hit directly back at him, striking Bukowski in the jaw and breaking his tooth. Plaintiff brought suit against Clarkson University and head coach James Kane to recover damages for injuries sustained. After discovery, Supreme Court denied defendants' motion for summary judgment. Plaintiff 's theory at trial was that the risk of being hit by a batted ball was enhanced due to the multi-colored pitching backdrop and low lighting at the indoor facility, which made it harder to see the white ball, and the failure to use an Lscreen. At the close of evidence, the trial court granted defendants' motion for directed verdict on the ground that plaintiff assumed the commonly appreciated 40 July 23, 2012 / INSURANCE ADVOCATE

"If the risks of the activity are fully comprehended or perfectly obvious, plaintiff has consented to them and defendant has performed its duty." risk in baseball of being hit by a line drive. The Appellate Division affirmed, and the appeal followed based on the two-Justice dissent in the court (see CPLR 5601[a]). For the reasons that follow, we affirm. The assumption of risk doctrine applies where a consenting participant in sporting and amusement activities "is aware of the risks; has an appreciation of the nature of the risks; and voluntarily assumes the risks" (Morgan v State, 90 NY2d 471, 484 [1997]). An educational institution organizing a team sporting activity must exercise ordinary reasonable care to protect student athletes voluntarily participating in organized athletics from unassumed, concealed, or enhanced risks (see Benitez v New York City Bd. of Educ., 73 NY2d 650, 658 [1989]). "If the risks of the activity are fully comprehended or perfectly obvious, plaintiff has consented to them and defendant has performed its duty" (Turcotte v Fell, 68 NY2d 432, 439 [1986]). Relatedly, risks which are commonly encountered or "inherent" in a sport, such as being struck by a ball or bat in baseball, are "risks [for] which various participants are legally deemed to have accepted personal responsibility" (Morgan, 90 NY2d at 484). The primary assumption of risk doctrine also encompasses risks involving less than optimal conditions (see Sykes v County of Erie, 94 NY2d 912, 913 [2000] [playing on an irregular surface is a risk inherent in outdoor basketball activities]; Maddox v City of New York, 66 NY2d 270, 274 [1985] [baseball player assumed the risk of playing on a wet and muddy field]; see also Martin v State of New York,

64 AD3d 62, 64 [3d Dep't 2009],lv denied 13 NY3d 706 [2009]). Here, plaintiff was an experienced and knowledgeable baseball player who assumed the inherent risk of being hit by a line drive. Plaintiff testified at trial that he was aware of the risk of getting hurt in baseball, had seen other pitchers get hit by batted balls, had experienced balls being batted back at him, and had hit batters with his own pitches. Bukowski also testified that in over 13 years of playing baseball, he played on numerous fields and facilities under a wide variety of conditions, including variations in lighting and pitching backdrops. Plaintiff was also aware of the obvious risk of pitching without the protection of an Lscreen, and he had the opportunity to observe the lighting in the facility as well as the color of the pitching backdrop prior to his accident. Bukowski testified at trial that despite his appreciation of the conditions, he decided "to go along with how the coach set up practice." Defendant fulfilled its duty of making the "conditions as safe as they appear to be" (Morgan, 90 NY2d at 484), and there were no concealed risks unknown to Bukowski. Even if Clarkson's pitching backdrop and indoor lighting were considered less than optimal for baseball, they still did not constitute risks beyond those assumed by plaintiff. In Siegel v City of New York (90 NY2d 471, 488-489 [1997] [decided with Morgan v State of New York, supra]), we found that the plaintiff did not assume the risk of tripping on a torn tennis net, as the risk of playing with a torn net is not inherent to the sport of tennis. Likewise, in Owen v RJS Safety Equip., (79 NY2d 967 [1992]), this Court found that a professional race car driver did not assume the risk of racing with a defective guard rail and faulty track design, which were risks that did not "inhere in the sport" of racing. There is a distinction between accidents resulting from defective sporting equipment and those resulting from sub-optimal playing conditions.

[ COURTS I DE ] In the present case, the risks of pitching in an indoor facility without a protective screen were inherent to the sport of baseball and readily apparent to plaintiff. There was expert testimony at trial that multi-colored pitching backdrops were common in many college baseball practice facilities, since resources had to be shared with other sports teams. Furthermore, fans sitting behind home plate commonly wear white or multi-colored shirts; it is only the batter that gets the benefit of a dark background to see the pitched ball, not the pitcher. Therefore, the conditions in the indoor facility did not create "a dangerous condition over and above the usual dangers that are inherent in the sport" (Morgan, 90 NY2d at 485 [internal quotation marks and citation omitted]). Tellingly, plaintiff does not assert that the Clarkson coaching staff violated any established safety protocol or the NCAA Rulebook by holding their indoor pitching practices without an L-screen or a dark backdrop. Bukowski's reliance on Zmitrowitz v Roman Catholic Diocese of Syracuse, (274 AD2d 613, 614 [2000]) and Baker v Briarcliff School Dist., (205 AD2d 652, 653 [1994]) is misplaced because both cases involved coaches who allegedly failed to enforce established safety standards. The only mention in the NCAA Rulebook of an L-screen was that one must be available to a visiting team for batting practice.  As this Court stated in Trupia v Lake George Cent. School Dist., sporting activities possess "enormous social value" but also "significantly heightened risks" (14 NY3d 392, 395 [2010]). The doctrine of assumption of risk "facilitate[s] free and vigorous participation in athletic activities" (Trupia, 14 NY3d at 395, quoting Benitez v New York City Bd. of Educ., 73 NY2d 650, 657 [1989]) and shields college athletics from potentially crushing liability. Clarkson University, a college located in upstate New York, should be able to allow its sports teams to practice indoors during the cold winter months without fear of liability for inability to replicate the ideal conditions of the outdoor spring season. Plaintiff 's injuries are simply the result of a "luckless accident arising from vigorous voluntary participation in competitive . . . athletics" (Benitez, 73 NY2d at 659). Considering the facts in the light most favorable to the plaintiff, there was insuf-

ficient evidence from which a jury could have concluded that plaintiff faced an unassumed, concealed, or enhanced risk, even though it was his first time pitching live in the cage. Accordingly, the order of the Appellate Division should be affirmed, with costs. * * * * * * * * * * * * * * * * * Order affirmed, with costs. Opinion by Chief Judge Lippman. Judges Ciparick, Graffeo, Read, Smith, Pigott and Jones concur. Decided June 5, 2012 [IA]

Footnotes FN1: A L-screen is a net strung on a thin, metal frame shaped like a block L that protects pitchers from balls that are batted back at them. 2012 NY Slip Op 04274 Decided on June 5, 2012 Court of Appeals Lippman, Ch. J.

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INSURANCE ADVOCATE / July 23, 2012 41

[ CLAIMS FOCUS ]

By Burke Coleman, Demotech, Inc.

Third Circuit Interprets 'Arising Out Of' Clause for UM Benefits Broadly

or uninsured motorist coverage to apply, vehicle liability policies provide that the injury to the insured must be “caused by accident and arise out of the ownership, maintenance, or use of an uninsured auto.” The “arising out of ” clause defines the required causal link between the uninsured vehicle and the injury. Insurers have consistently argued for a narrow interpretation of the phrase while policyholders have advocated for a broader reading. The Third Circuit Court Appeals recently issued one of the broadest interpretations of the necessary causal link between the use of an uninsured vehicle and the injury to the insured, holding that an accident caused by a box lying in the middle of the road arose out of the use of an uninsured auto. In Allstate Property and Casualty Insurance Co. v. Squires, 667 F.3d 388 (3rd. Cir. 2012), a pickup truck was driving on

a country road when the driver swerved off the roadway to avoid a cardboard box lying the middle of the road. The driver was seriously injured and filed a claim for uninsured motorist benefits with his insurer, Allstate. He submitted that because the box had fallen from an unidentified, and therefore uninsured, vehicle, the accident arose out of the use of a vehicle. Allstate stipulated that an uninsured vehicle had dropped the box, but dismissed the claim because the injury was caused by the box, not a vehicle, and any causal connection between the injury and the “use of an auto” was too tenuous to support an uninsured motorist claim. These competing interpretations of the “arising out of ” language of the policy presented an interesting question for the court: “whether an accident caused by a box which fell from an uninsured motor vehicle can be attributed, as a matter of

law, to the ‘ownership, maintenance, or use’ of an automobile.” Squires, 667 F.3d at 390. The trial court and the appellate court agreed that the Pennsylvania Supreme Court’s decision in Manufacturers Casualty Insurance Co. v. Goodville Mutual Casualty Co., 170 A.2d 571 (Pa. 1961), provided the controlling law. The court in Goodville held that “‘arising out of ’ means causally connected with, not proximately caused by. ‘But for’ causation, i.e. a cause and result relationship, is enough to satisfy this provision of the policy.” But, while acknowledging that the analysis was one of “cause in fact” rather than “proximate cause,” the two courts disagreed as to the scope of the required causal connection. The trial court affirmed Allstate’s position and stated that uninsured motorist coverage is “designed to compensate victims for vehicle-caused injuries.” Allstate Property and Casualty Insurance Co. v.

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[ CLAIMS FOCUS ] Squires, 782 F.Supp. 2d 146 (W.D. Pa. 2011). Relying on previous case law, the court determined that the analysis hinges on “the instrumentality used to cause the injury” and that “the vehicle must be more than merely incidental to the injury-it must be the instrumentality which caused the injury.” Squires, 782 F. Supp. 2d at 150. This is not to say that contact with a vehicle is necessary, but simply that the vehicle must have directly caused the accident. The court held that whether the box was lying in the road because it fell off of a car was irrelevant because the “determinative fact is that the instrumentality causing the Underlying Accident was a box – not a vehicle.” Squires, 782 F. Supp. 2d at 152. Although the trial court’s decision relied on strong precedent, the Third Circuit disagreed and reversed the ruling. The Third Circuit acknowledged that previous courts “quite broadly have indicated that if injuries are caused by an ‘instrumentality or external force other than the motor vehicle itself,’ the vehicle will not be regarded as having contributed to the cause of the injuries pursuant to the ‘arising out of ’ language.” Squires, 667 F.3d at 392. But, whereas the trial court focused on the instrumentality causing the harm, the circuit court centered its analysis on the chain of causation and thus constructed a broader interpretation of the policy language. The court noted that the “central inquiry in assessing whether an incident ‘arose out of the maintenance, ownership, or use’ of a motor vehicle concerns causation, which is informed by – but does not necessarily turn on – the ‘instrumentality’ directly causing the accident.” Squires, 667 F.3d at 395 (emphasis added). Whether the uninsured vehicle directly caused the accident is relevant but is not dispositive. The Third Circuit turned to the decision in Smith v. United Services Automobile Association, 572 A.2d 785 (Pa. Super. Ct. 1990), to illustrate the distinction. In Smith, a cyclist was denied coverage for an injury that occurred after a boy riding on hay wagon threw hay in the cyclist’s face. The trial court had relied on the case to support its position that coverage does not apply where the vehicle is not the instrumentality causing the harm. The circuit court observed, however, that coverage was denied in Smith not because the instrumentality causing the harm was not

the vehicle, but rather because the injury was caused by an intervening force, the boy throwing the hay. Under the Third Circuit’s analysis, the causal relation was interrupted by an independent force, which precluded coverage. Applying this principle to the present case, the court found no interruption in the causal chain. The causal relation between the uninsured vehicle, the box that it left behind, the accident, and the resulting injury was close enough and pure enough to implicate the “arising out” provision. The decision represents one of the most liberal applications of the “arising out of ” clause but the conclusion is not unyieldingly broad. The court noted that while “arising out of ” means causally connected, it does not implicate “every incidental factor that arguably contributes to an accident.” Squires, 667 F.3d at 394. The court also suggested that the injuries sustained must be attributable to common uses of a vehicle. Here, transporting the box as cargo was determined to be a common use of vehicles. But the court distinguished a number of cases in which uninsured motorist coverage was denied, including cases where a passenger was bitten by a dog chained inside a van and where motorists were involved in a postcollision fistfight. Arguably, such instances could be said to have “arisen out of ” the use of vehicle, but reasonable constraints limited coverage. The causal connection articulated by the Third Circuit is much broader than previous interpretations of the ‘arising out of ’ provision but is not without limit. Although the decision does not require the instrumentality causing the injury to be the vehicle, it does require an uninterrupted causal relation stemming from the common use of a vehicle. [IA] Burke Coleman is Legal Counsel and Compliance Manager for Demotech, Inc. Demotech provides actuarial consulting and Financial Stability Ratings® (FSRs) for property and casualty insurance companies and title underwriters. Burke can be contacted at bcoleman@demotech.com. This article is for informational purposes only, is not intended as legal advice, and is not a substitute for independent legal analysis and advice on a particular issue.

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[ O BITUARY ]

R.I.P. Robert E. Bill (1940-2012) Robert Edmund (Bob) Bill, 72, of North Palm Beach, Florida, and Bethel, ME died of heart failure in June. Bob had just spent a weekend at his 50th college reunion in South Bend, IN and was en route to his grandson’s high school graduation in Cold Springs, NY. He was born March 29th, 1940 to Joseph G. and Lillian Maran Bill in Mineola, New York. He attended Sacred Heart Academy and graduated Garden City High School in 1957. Bob attended Notre Dame University, where he enjoyed a decorated college football career as a three year “60 minute man” at Notre Dame, starting on both offense and defense, while also playing special teams. In 1963, he was drafted by the AFC San Diego Chargers and the NFC New York Giants. He was signed to a two year nocut contract by the New York Football Giants.

In 1972, Bob founded Robert B. Bill Associates, a commercial Insurance agency and risk management company based on LI. A talented business leader, Mr. Bill served on insurance industry and not for profit boards. He later merged his business with FIRH Insurance Brokers and was appointed Vice Chairman of New York. Bob is survived by his wife of 35 years, Joyce Skinner Bill, his children, Robert Charles of Lloyd Harbor, NY, Katherine A. Bill of Islandia, NY and Christian R. Bill of Stamford, CT. Beloved grandfather of Charlie, Maggie and Jack Bill and of Lloyd Harbor, NY, Bob is also survived by his brothers, Joseph G. and Michael M. Bill both of Indianapolis.. Memorial contributions in Bob’s name can be made to The Cleveland Clinic Heart & Vascular Institute. [IA] INSURANCE ADVOCATE / July 23, 2012 45

[ GUEST VI E W ]

By Elizabeth Lee Vliet, M.D.

Leading M.D. Views the Supreme Court “Obamacare” Decision

he Supreme Court has ruled that Obamacare is constitutional and has upheld the law – a victory for those who want the Federal government to micromanage your life and medical care. This is a tragic defeat, however, for those who support our Founder’s vision of liberty and privacy and the right to control

mates, adding massively to the staggering US debt. PPACA is not protective of patients either. Doctors are leaving Medicare, making it harder for seniors to access medical care. Cancer drugs are increasingly scarce. Insurance companies are getting out of the health insurance business, so that patients

In an unprecedented show of solidarity, 26 states came together to sue the federal government to overturn ObamaCare and its takeover of one-sixth of our entire economy—the most massive power grab I have seen in my lifetime. Elizabeth Lee Vliet, M.D.

our private property, such as our medical records, and our medical decisions in the privacy of personal consultations without government intrusion. So what happens now? What does it really mean for patients and their doctors and their privacy and their freedom to choose their medical care? With Obamacare upheld, dangerous threats lie ahead for patients and their healthcare professionals, both from ObamaCare and from the “stimulus” bill passed in 2009. This President’s campaign promises— no new taxes, lower insurance premiums, the ability to keep your doctor and your insurance if you liked it—were shredded in the secret back room deals of the single-party bill, which Congress did not read before its frantic midnight passage. Now that people have read the law over the past two years, we see that the Patient Protection and Affordable Care Act (PPACA) is neither protective of patients, nor affordable. The Congressional Budget Office recently revised its earlier cost estimate, saying that Obamacare will cost over 2 Trillion dollars, double their original esti46 July 23, 2012 / INSURANCE ADVOCATE

now have less choice of plans. As estimated 30-40% of employers can no longer afford to offer health insurance plans, instead pushing people onto Medicaid programs with long waits for care. In an unprecedented show of solidarity, 26 states came together to sue the federal government to overturn ObamaCare and its takeover of one-sixth of our entire economy—the most massive power grab I have seen in my lifetime. Along with the power grab, ObamaCare has been an assault on religious liberty and medical privacy, while tracking gun ownership in medical databases. PPACA also violates the 5th Amendment of our Constitution by allowing the federal government to take control of your private property—your medical records and your money—to serve its healthcare agenda. What the Democrats have done to our medical freedom and privacy is nothing short of a crime in my book. Punishment won’t fall on Congress and the President, however, but on the American people, especially the elderly. Many groups of Americans face punishment under the PPACA healthcare

“reform” unless we completely repeal and replace the entire Obamacare law with market-based and patient-centered real reforms: • Punishment for the sick. Medical expenses will no longer be taxdeductible until they reach 10% of adjusted gross income (AGI), instead of the current 7.5% AGI. • Punishment for the elderly. Medicare cuts of $500–573 billion penalize the elderly by delaying, rationing, and denying treatment. • Punishment for low income seniors, Hispanics, and blacks who will lose their Medicare Advantage program. Cutbacks have begun now, but the most severe cuts occur after the November 2012 election. • Punishment for those who value their medical privacy. Under the Stimulus Bill or TARP, patients’ medical records will be sent directly to the federal health czar without permission from patients. • Punishment for those with Health Savings Accounts who want to control how they spend money on healthcare—HSAs are further restricted, shifting power away from patients, where it belongs, into the controlling hand of big government elites. • Punishment for those who want rapid access to specialists or primary care physicians. Various surveys report that more than 45% of doctors may leave medicine rather than practice under government control. • Punishment for specialists serving mainly elderly patients, such as cardiologists and oncologists, who will see payments for their services slashed, and for their patients, whose access to care will be reduced. • Punishment for all doctors, who will have to purchase expensive new computer systems or face further payment cuts…or go out of business. • Punishment for medical device makers continued on page 39

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