Insurance Advocate July 25, 2016

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Serving New York, New Jersey, Connec cut, Eastern Pennsylvania and Washington, DC

It’s Ge ng Be er!

Vol.l 127 N V No. 13 | July 25, 2016

NY Metro Areas Ranked Among the1999-2016 Lowest in Vehicle The in the U.S.

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Contents

July 25, 2016 | Volume 127 Number 13

[ COVER STORY]

14

NY Metro Areas Ranked Among the Lowest in Vehicle Theft in the U.S.

22

News Notes: NFA: Adjusters Licensed

26

In Focus: Agency Branding: Do You Really Know What It Is? Kelly Donahue-Piro

28

On My Radar: Late Notice Defense Difficult to Prove Barry Zalma

30

Looking Back: July, 1991

32

Courtside: Ambiguity in Policy Voids Exclusion for “Insured vs. Insured” Lawrence N. Rogak

33

Classifieds

34

Guest Opinion: Making American Medicine Great Again Jane M. Orient, M.D.

[FEATURES] 4 6

Foreword: Rough Patch Ahead Steve Acunto, Publisher Exposures and Coverages: Non-Governmental Unemployment Insurance; Insurance “Gotchas” Jerome Trupin, CPCU

12

On the Level: Great Customer Service is an Advantage in Every Industry, Especially Ours N. Stephen Ruchman, CPIA

16

The Social Notebook: Your Image, Presence, and Agency Online Chris Paradiso

18

Guest Article: Uber & Insurance; How the Gig Economy Can Infuse Life Into a Legacy Industry Robin Smith

[ A D F E ATUR E S ] 23

PIA: Rely on PIA

24

MSO: The Dangers Below: Underground Storage Tanks

New York and New Jersey’s Leading Insurance Magazine Since 1889.

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INSURANCE ADVOCATE / July 25, 2016 3

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[ FOREWORD ]

STEVE ACUNTO

Rough Patch Ahead

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VOLUME 127, NUMBER 13 JULY 25, 2016

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or property and casualty insurers, 2016 could be a tough year, according to a new report just published by S&P Global Market Intelligence, a leading provider of multi-asset class research data and insights. The firm’s 2016 U.S. P&C Insurance Market Report suggests that a combination of elevated catastrophe losses, unfavorable results in the private passenger auto business, and declining bond yields could crimp underwriting results and reduce overall probability.

Using a bottom-up analysis of statutory financials for almost 2,700 individual, U.S.domiciled property and casualty entities filing NAIC statements, this report tracks performance over a 10-year period ending in 2015. Both historical and projected results are offered on a line-of-business basis in order to capture diverging trends across industry product types and produce projections that encapsulate how micro and macro factors affect growth rates, losses, and expenses. The report illustrates historical and projected pre-tax returns on equity (ROE) by business line.

Following are some of the key observations: • Reduced Profitability: The P&C industry’s pre-tax ROE is projected to decline roughly two percentage points in 2016 while its combined ratio, which measures expenses incurred relative to premiums earned, is projected to increase to 99.5%, the highest level since 2012.

• Increased Investment Risk: Declining Treasury yields in the aftermath of the U.K.’s Brexit referendum have reinforced the challenges the industry faces to earn reliable, low-risk investment income, putting additional pressure on underwriting discipline.

• Weak First Half: Big increases in the amount of insured catastrophe losses during the first half of 2016 will negatively impact loss ratios in several business lines that have produced historically favorable results during the past three years.

4 July 25, 2016 / INSURANCE ADVOCATE

• Personal Lines: Historically unfavorable results in the private-passenger auto business are projected to deteriorate further in 2016 as miles driven

by Americans continues to rise in a time of low gas prices. They will begin to improve once broad-based rate increases fully take hold, but this will take some time.

• Financial Results Hinge on Auto Line Performance: Private auto lines accounted for 34.4% of the industry’s 2015 direct premiums and, as financials demonstrated, the performance of those lines have played a significant role on the fate of underwriting.

• Future Issues: Favorable reserve development, broad access to reinsurance capacity, and a series of benign hurricane seasons have provided tailwinds to the industry in recent years.

But none of those elements will continue in perpetuity and the absence of any one of them could create additional hurdles for the industry from a profitability perspective in 2016 and beyond.

“Profit margins are projected to be much narrower than they have been in the last few years, unless something dramatic happens,” according to Tim Zawacki, Senior Editor, and Terry Leone, Manager of Insurance Research at S&P Global Market Intelligence and the authors of the report.

“While insurers have wisely accounted for the fact that they haven’t been able to depend on investment gains to subsidize underwriting losses, they still need to practice restraint as they seek growth.”

The S&P Global Market Intelligence report 2016 U.S. P&C Insurance Market Report is available at http://www.snl.com/ web/client?auth=inherit#news/article?id=37 162551&cdid=A-37162551-13357. S&P Global Market Intelligence is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit www.spglobal.com/marketintelligence.[IA]

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Kelly Donahue-Piro Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com COPYEDITOR & PROOFREADER Maria Vano mariavano9@gmail.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x111 circulation@cinn.com PUBLISHED BY CINN Media, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264 www.cinn.com | info@cinn.com President and CEO Steve Acunto

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[ EXPOSURES & COVERAGES ]

JEROM E TRUPIN, CPCU

Non-Governmental Unemployment Insurance; Insurance “Gotchas” An Ideally Insurable Risk: Unemployment Insurance? uA key insurance concept is “ideally insurable risk.” No, that doesn’t mean the old fire insurance chestnut about covering pig iron under water; it refers to the characteristics of a risk that make it suitable for insurance coverage. The characteristics are: • Large number of similar exposure units • Loss will be accidental and unintentional • No catastrophic loss exposure • Loss is determinable and measurable • The chance of loss is calculable • The premium is economically feasible There is no perfectly insurable risk. All risks have some features that make them less than desirable for insurers. Even a risk like fire, which has been commercially insured for centuries, falls short. For example, arson fires are not accidental and unintentional; conflagration and war pose catastrophic risks, etc. The task facing underwriters is finding ways to make the risk insurable despite the shortcomings. In the case of fire insurance, underwriters insert war risk and arson exclusions to eliminate hard-to-insure risks, and reinsurance to lessen the impact of a catastrophe.

A textbook example of a risk that’s not ideal has always been unemployment.

Unemployment has long been regarded as uninsurable due to the catastrophic exposure of mass unemployment during recessions and depressions, and to a lesser extent intentional loss (insurer-paid vacations).

There have been some attempts by insurers in the past to offer the coverage, but none have succeeded. Now, Great American Ins. Co. and Sterling Risk have leapt into the great unknown with “IncomeAssure.”

IncomeAssure (IA) is a supplement to state/federal unemployment insurance (UI).

Government UI is designed to provide 50% of the worker’s former earnings. However, it’s capped at relatively low amounts: $420 6 July 25, 2016 / INSURANCE ADVOCATE

a week in New York—other states range from a high of $698 in Massachusetts to a low of $240 in Arizona. IA is designed to bring the unemployed employee’s indemnification up to the 50% level.

For example, a worker earning $100,000 a year earns $1923.08 a week. Fifty percent of 1,923.08 is $961.54. For a New York insured, IA provides $541.54 to make the total of governmental and IA payments equal $961.54 per week ($420, the maximum NYS UI benefit, plus $541.54 from IA).

It is linked to government UI in another way: the benefit period is just 26 weeks.

However, it is subject to a two-week waiting period, not the one-week that applies to governmental coverage; IA will provide only 24 weekly payments. Governmental UI is frequently extended during recessions, but IA’s coverage is not.

I know it comes as a surprise to you that IA has exclusions. The most important are: • Unemployment during the first six months of coverage is excluded—the premiums paid to that point will be refunded.

• There’s no coverage for unemployment unless the employee has been approved by the state’s UI agency to receive state UI benefits.

The application asks if your employer has “announced or implemented a plan or program of job reduction, reduction in force, or departmental or company restructuring.” An affirmative answers leads to rejection of the application. A false answer will trigger a claim denial.

Since it is linked to UI, it won’t work for freelancers and others who are not covered by unemployment insurance.

A shortcoming of the IA coverage is that it’s an annual policy renewable at the rates in effect at the time of renewal.

Furthermore, the insurer can non-renew the coverage if it ceases issuing coverage to persons in the state in the same occupational classification as the insured. A 2008-like recession would undoubtedly lead to a siz-

Jerome “Jerry” Trupin, CPCU, is a partner in Trupin Insurance Services located in Sleepy Hollow, NY. He provides property/casualty insurance consulting advice to commercial, nonprofit and governmental entities.

He is, in effect, an outsourced risk manager.

Jerry has been an expert witness in numerous cases involving insurance policy coverage disputes and has taught many CPCU and IIA courses.

Jerry has spoken across the country on insurance topics and is the co-author of over ten insurance texts used in CPCU and IIA programs including Commercial Property Risk Management and Insurance and Commercial Liability Management and Insurance.

He regularly contributes articles to CPCU Society publication, the Insurance Advocate®, and others. He can be reached at jtrupin@aol.com.

Thanks to Jerry Trupin for this article and to the CPCU Society for letting us reprint it.

able increase in premiums or discontinuance of coverage for many or all insureds.

Nevertheless, there is a need for protection against losing a job. Even with unemployment at an eight-year low, millions of people lose their jobs each year. There’s been a steady increase in the number of jobs in total, but those who fill the new jobs are not necessarily those who lost the old ones.

If you have a sufficiently large rainy-day fund, you can do without the short-term coverage provided by IA. Most experts recommend a fund amount equal to at least nine-months’ salary.1 For someone with an annual salary of $100,000, that would be $75,000. Clearly there’s a market for this coverage.

Premiums vary depending on income, occupation, and state. A New York employCONTINUED ON PAGE 8

1 Michael Lerner “How big should your emergency fund be?” http://www.bankrate.com/finance/savings/howbig-should-emergency-fund-be.aspx

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[ EXPOSURES & COVERAGES ] CONTINUED FROM PAGE 6

ee earning $100,000 a year in the “financial activities” classification—that’s us—would pay $57.55 a month. For a NY construction worker, it would be $181.29 a month. The maximum payment in NY is $12,996.96 (24x541.54).

The premiums also vary by location. A construction worker in California would pay $224.15 a month. IA has a premium calculator online at https://www.incomeassure.com/.

It’s worth letting insureds know about it, but let them know its shortcomings, too.

Insurance Gotchas Searching for something I thought I’d seen online, I stumbled on “100 Insurance Gotchas” by Kenneth Hale.2 Ken’s posting provides concise insurance advice in an interesting format. I’d like to expand on a few of them. (The Q&As are from his list.)

WC Gotcha—Out-of-State Worker Q. I had an employee living in another state who was injured in an auto accident and made a workers’ compensation claim that has been denied.

A. If an employed sales rep, for example, works from home in another state, there is no coverage for an injury to the employee, such as an auto accident on the job, unless that state is listed on the workers’ compensation policy.

There is a solution to this loophole for salespersons for New York employers: NYSIF endorsement #70 (“Salesmen Outside of N.Y.S.”). It can provide coverage for claims of this type. Here’s the endorsement wording: The policy covers bodily injury to your salespersons who work in states other than New York, regardless of the state in which they are domiciled, if your principal place of business is in the state of New York and such salespersons report to and are paid, controlled and directed from the state of New York. We will pay benefits either under the New York workers compensation law or the workers compensation law of any state in

which the bodily injury occurs if benefits are awarded in that state, if the premium basis of the policy includes the remuneration of such salespersons.

(NYSIF Endorsement #70) Notice the conditions required to trigger coverage: • The insured’s principal place of business is in New York State, • The salespersons are paid, controlled and directed from New York, • The payroll of the employees is included in the premium basis for the salespersons.

This endorsement plugs a major gap.

Many states provide workers compensation benefits that are in some cases superior to New York’s. This endorsement provides coverage for New York salespeople working out of state.

What about employees other than sales people, such as installers for an alarm company located in New York who are working on installing fire and burglar alarms in a shopping center in Connecticut? The textbook answer is to add Connecticut as a covered state on the firm’s WC (workers’ compensation) policy. Covered states are those listed in item 3A of the insured’s workers compensation insurance policy. Other coverage is provided for states listed in item 3C. If the insured begins work in any of the 3C states after the effective date of the policy and is not insured or self-insured for such work, all provisions of the policy will apply as though that state were listed in item 3A.3 Even if the policy doesn’t list a state in either 3A or 3C, “extra-territorial coverage” might provide some coverage. For example, NY WC coverage can apply to a worker employed by a NY firm who lives in Connecticut and is injured when sent to a Connecticut location to do repairs, even though the policy lists only NY as a covered state. A NY employee who generally works in NY is eligible for benefits under the NYS Workers’ Compensation Law while temporarily working outside NY under the direction and control of his or her NY employer.

However, in such a situation a worker could elect to forgo NY benefits and file for benefits in the other state. To the extent that

the other state’s mandated benefits exceed NY’s, they would clearly not be covered by a NY-only policy.

A major complication is that the NY State Insurance Fund, far and away the largest writer of workers’ compensation insurance in NY, can only provide coverage under the NY WC law and cannot provide other states’ coverage.

If there’s a chance a client may have employees who are subject to another state’s WC law and the insured’s current insurer can’t or won’t cover in that state, get a policy that lists that state. Use the state’s assigned risk plan, if necessary.

An employer with sufficient premium attributable to states other than New York should be able to obtain a policy covering those states under 3A with 3C (other states) coverage included for the remaining states.

Another complication is the monopolistic state funds. There are only four such states at present: Ohio, North Dakota, Washington, and Wyoming.4 For employees subject to one of those workers compensation laws, coverage must be obtained through the state WC plan. Other states’ coverage in commercial WC policies does not apply to monopolistic states.

Caveat: the monopolistic state funds do not provide employers liability coverage, just workers compensation. That’s a serious gap in the insured’s protection. When a client has employees covered in a monopolistic state, be sure to add a stop-gap endorsement to either the insured’s general liability or workers compensation policy.

The endorsement closes the gap.

But if a client has a claim and doesn’t have coverage, you’ll certainly want to recommend exploring the extra-territorial coverage of the client’s policy.

Crime Gotcha–Police Notification Requirement Q. My embezzlement claim was denied because I did not turn it in on time.

A. After you discover a loss or situation that may result in a loss, you must Notify the insurance company Notify law enforcement (emphasis added) CONTINUED ON PAGE 10

2 Kenneth R. Hale, J.D., CPCU “Over 100 Insurance “GOTCHA’S” (sic) That Can Ruin Your Day (or Business or Personal Assets) http://cambridgeunderwriters.com/wp-content/uploads/2013/05/Over-100-Insurance-Gotchas.pdf 3 If the insured has worked on the effective date of the policy in any state listed in Item 3C, there's no coverage for work in that state unless the insurer is notified within thirty days.

4 Puerto Rico and the US Virgin Islands are also monopolistic WC jurisdictions.

8 July 25, 2016 / INSURANCE ADVOCATE

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[ EXPOSURES & COVERAGES ] be slapped with a nasty lawsuit by its insured on the grounds that “you told me I had to do it.” It may also derive from the influence that the American Bankers Association had in the drafting of what was originally known as a “Bankers Blanket Bond,” from which our present fidelity coverage developed.

Whatever the reason, there’s no police report provision in most crime forms.

Most of the larger insurers who use their own forms instead of ISO’s omit the requirement to notify the police in the event of an employee dishonesty loss, but some insurers do require that the insured notify the police—caveat emptor.

Assuming that employee dishonesty coverage requires a police report is a common misconception and can cause problems. I once had a protracted dispute with an insurance company claims manager who insisted that there was no coverage for an embezzlement loss because the insured had not promptly reported the claim to the police. Only when I finally prevailed on him to get the policy and show me where that requirement appeared did he back down.

CONTINUED FROM PAGE 8

Provide a “proof of loss” within 120 days In this one, Ken either made an error or the answer is based on a non-standard crime policy form. It’s true that insurance policies almost always require that the police be notified in the event of a crime loss. But that’s not true for every coverage.

Here’s the wording from the ISO crime form: Duties In The Event Of Loss 1) ...If you have reason to believe that any loss (except for loss covered under Insuring Agreement A.1. or A.2.) (emphasis added) involves a violation of law, you must also notify the local law enforcement authorities.

Insuring Agreement A.1 is the employee theft insuring agreement (A.2 is forgery or alteration). It may seem counter-intuitive that a police report isn’t required. The rationale often offered is that requiring the insured to report embezzlement to the police might expose the insured to false arrest—and the insurance company might

“

EPLI Gotcha Wage and Hour Claim Here’s one that is literally correct, but can be misleading: Q. An employee claims that we should have paid overtime, and we are now being audited by the U.S. Department of Labor for failing to comply with the law regarding overtime payments. Our legal fees are significant. Is this covered under general liability insurance?

A. No. You need wage and hour defense coverage under your Employment Practices Liability Policy.

Notice the question deals with legal fees. A quick reading of the Q&A might give the impression that the awards penalizing the insured for failure to pay timeand-a-half or double-time can also be covered. Very few, if any, insurers offer coverage for awards or settlements to resolve wage-and-hour claims. Even coverage for legal defense of such claims is not widely available; most insureds will not be able to obtain it. Most EPLI (employment practices liability insurance) policies exclude coverage for wage and hour claims.

Don’t mislead clients into thinking that there is coverage.[IA]

It has ha been our sincere pleasure to work with some of the most talented insurance professionals in the business for the past 30 years. We are proud of our comprehensive coverage offerings and superior customer service as we strive to offer only the best to our insureds. On behalf of Clermont,

”

port I thank you for your con nued support.

William J. Johnston President Clermont

years a W. R. Berkley Company

10 July 25, 2016 / INSURANCE ADVOCATE

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[ O N T H E L E VE L ]

N. STEPHEN RUCHMAN, CPIA

Great Customer Service is an Advantage in Every Industry, Especially Ours uRecently, I had a routine checkup at a new doctor’s office. After running typical blood work, the physician told me one of the tests seemed off and asked to repeat it.

I went back to the lab and got stuck again.

I was advised that my results would be posted on the “Doctor’s Portal,” a new online account through which I’m meant to access all of my health statistics. I’m sure this makes the health care professionals’ jobs easier and saves money as well: Sounds great! But, there was one problem. When I checked my test results, I didn’t understand what the numbers meant. Were they too high? Too low? I had no idea.

So, I called my doctor’s office and spoke with a very nice nurse, whom I asked, “What do these numbers mean?”

She responded, “Didn’t the doctor tell you what these numbers mean?”

“No,” I answered. So she said she would have him call me. I waited days for a response. Turned out the technology eased work for the doctor, but I still had to wait (for days) for information.

In the end, everything was fine with my test, but I switched my doctor. I didn’t go to medical school; I need someone who is willing to actually talk to me about my health concerns.

This all got me thinking: If we gave our clients service like that, I don’t think they would stay with us for long. Just like I wanted the doctor’s expertise, our clients want ours. The personalized service and knowledge we offer is what puts us above direct writers.

For a contrasting and positive example, I can share my experience with my bank.

The employees at my local branch pride themselves on their service. “We know you by your name,” they advertise. When I walk into the bank, they greet me with a smile and say, “Hi Mr. Ruchman.” (I reply “Call me Steve.”) Last week, I spoke with their newest employee, who came from a big national bank that wants their people to have as little interaction with customers as 12 July 25, 2016 / INSURANCE ADVOCATE

Great customer service is an advantage in nearly every industry, but especially in ours. Make sure you are using it to build your book.

possible. She told me this bank would rather their customers do business online to save time and money. I’ll stay with my small bank, thank you. Personal interaction is becoming so rare that it sets them apart from the competition.

Here’s a personal example of great customer service from our own industry: My daughter recently had a horrific experience driving on the Long Island Expressway with her two boys and one of their friends in the car. Another driver sideswiped her car and when the two vehicles pulled over, the other driver was aggressive and screaming. He reeked of alcohol. Before the police arrived the drunk ran to his car and left the scene. Fortunately, two other drivers saw this guy weaving and stopped to help my daughter. They had taken video of the man’s erratic driving, which they shared with the authorities.

Surprisingly, the drunk driver had insurance. And, my daughter’s experience with his carrier was extremely positive.

They were quick to help her get her car fixed, gave her a rental while it was being done and provided quick and helpful service throughout the claims experience. That insurance company was smart. Even though they were working with a third party, they knew great customer service made her a strong prospect if she was unhappy at all with her own company.

Excellent customer service is the best marketing a carrier can do.

So here is the lesson for all insurance agents: First, make sure you provide every customer and prospect with great service.

N. Stephen Ruchman, CPIA, is a retired independent agent and founder of Ruchman Associates, Inc., the agency he started in 1961. A past president of the Professional Insurance Agents of New York State, Inc., he is an active supporter of PIANY, and he has sat on or chaired nearly every committee including the Executive Committee and the Long Island Advisory Council and PIANY’s Political Action Committee. He can be reached via email at: nsruchman@gmail.com.

But second, find out how your clients are treated by the carriers with which you work. How do your companies treat your insureds? How do they treat the third parties with whom they interact?

A recent McKinsey survey of insurance consumers found that insurance shopping has slowed and that the percentage of customers who switch carriers has dipped below double digits. The survey found that this loyalty is determined primarily by two factors: price and customer service. Guess which one agents have the most influence over.

Now, imagine reaching out to a thirdparty prospect after they’ve had a claim and being able to say, “If you are happy with the service from our carrier, may I offer that service to you?” I know in my daughter’s case she would have considered it seriously. Agents who know their carrier has treated the third party well should make sure they get that information.

Great customer service is an advantage in nearly every industry, but especially in ours. Make sure you are using it to build your book.[IA]

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It’s Getting Better!

Four New York Metro Areas Rank Among Lowest in the Nation for Vehicle Theft 14 July 25, 2016 / INSURANCE ADVOCATE

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uThe New York State Department of Motor Vehicles (DMV) and the New York State Division of Criminal Justice Services (DCJS) announced that four New York metro areas were recently ranked among the lowest vehicle theft areas in the U.S. The National Insurance Crime Bureau’s (NICB) annual “Hot Spots” report found that in 2015, Ithaca, Glens Falls, Watertown-Fort Drum, and Kingston all had theft rates of fewer than 33 per 100,000 residents, making them some of the safest areas in the nation in terms of car thefts. The announcement came as traffic safety and crime prevention partners across the nation marked Vehicle Theft Prevention Month in July, when more cars are stolen than any other month. “Experts say that owner error contributes to as much as half of all vehicle thefts, and we want to make sure we are doing our part to keep vehicle theft on the radar of all of our customers so unfortunate situations do not happen to them or their loved ones,” said DMV Executive Deputy Commissioner Terri Egan. “While such thefts spike in the summer months, it is important to remain vigilant year-round. I urge all New Yorkers to take the necessary precautions to reduce the risk that their vehicle will be a target of car thieves.” The Federal Bureau of Investigation’s annual “Crime in the United States” report from 2014, the most recent full report available, indicates that New York has one of the lowest rates in the nation of motor vehicle theft per 100,000 people. While approximately 15,700 “Experts say that owner vehicles were stolen in New York State that same year, the number has been steadily declining in recent years. New York State works proactively to decrease incidences error contributes to as of motor vehicle theft. The state’s Motor Vehicle Theft and Insurance Fraud much as half of all vehicle Prevention program is overseen by a 12-member board that shapes the state’s thefts, and we want to approach for combating motor vehicle theft and insurance fraud. The program provides funding to public safety agencies serving urban communities with high rates make sure we are doing of fraud and theft, so they can develop strategies to combat such crime. DCJS colour part to keep vehicle laborates with the board and administers the grants, which have been awarded annually since 1997. In December, Governor Cuomo announced more than $3.7 theft on the radar of all of million in grant funding for two dozen public safety agencies across the state to our customers so fight motor vehicle theft and insurance fraud. “This program coupled with the diliunfortunate situations do gent work of our law enforcement partners across the state has helped reduce incidences of motor vehicle thefts to historic lows in New York,” said Michael C. Green, not happen to them or Executive Deputy Commissioner of DCJS. “Reported thefts have dropped more their loved ones.” than 80 percent since 1997, a fact that stands testament to our continued commitment toward keeping New York among the safest states in the nation.” DMV investigators also work year-round to combat motor vehicle theft. In New York State, every vehicle deemed totaled by an insurance company must be physically examined by a DMV investigator before it is allowed back on the road. The examination verifies that it is the correct vehicle and legitimate parts were used to repair the vehicle. Last year, motor vehicle investigators recovered approximately $3.6 million in stolen vehicles and parts from this program. The DMV also issues special title branding for these vehicles to ensure consumers are aware of what they are buying. NICB’s “Hot Spots” report examines vehicle theft data obtained from the National Crime Information Center for the nation’s 380 metropolitan statistical areas, or MSAs. MSAs are designated by the Office of Management and Budget and often include areas much larger than the cities for which they are named. The following data regarding areas from New York is pulled from the 2015 NICB “Hot Spots” report, and indicates the rank, MSA name, number of thefts, and theft rate per 100,000 residents.

2015 Rank

MSA Name

2015 Thefts

2015 Rate

222

Buffalo-Cheektowaga-Niagara Falls, NY Metropolitan Statistical Area

1,554

136.89

264

New York-Newark-Jersey City, NY-NJ-PA Metropolitan Statistical Area

22,391

110.94

293

Rochester, NY Metropolitan Statistical Area

1,003

92.70

306

Syracuse, NY Metropolitan Statistical Area

547

82.82

325

Albany-Schenectady-Troy, NY Metropolitan Statistical Area

641

72.69

360

Utica-Rome, NY Metropolitan Statistical Area

124

41.95

363

Elmira, NY Metropolitan Statistical Area

35

40.20

365

Binghamton, NY Metropolitan Statistical Area

94

38.21

372

Kingston, NY Metropolitan Statistical Area

59

32.75

373

Watertown-Fort Drum, NY Metropolitan Statistical Area

38

32.30

374

Glens Falls, NY Metropolitan Statistical Area

39

30.73

377

Ithaca, NY Metropolitan Statistical Area

26

24.78

The NICB reports that older vehicles are stolen primarily for their parts value, while newer, high-end vehicles are often shipped overseas or sold to an innocent buyer locally.[IA] INSURANCE ADVOCATE / July 25, 2016 15

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

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

Your Image, Presence, and Agency Online uLet me ask you something…when was the last time that you “Googled” your agency online? Or, while we are on the subject, when is the last time that you Googled your name, as the owner of the agency? It’s important that you understand how your audience perceives you online, and it should be no surprise that it starts with Google. The way your agency is perceived online can be seen in several areas, but I mention Google first and foremost because, let’s face it, they own a majority of the Internet. Your customers and clients can find and interact with your agency on multiple avenues online though, including social media, your agency’s website, on Google, and more. Let’s take a journey into your customers’ eyes to see how your agency is perceived online, and in turn, see how we can capitalize on our agencies’ online images to leave long-lasting, positive, and personable impressions on our audience.

As I mentioned earlier, Google owns a majority of the Internet, and that’s not a bad thing for us Independent Agents and Brokers, especially not when so many people are searching for “insurance” on

16 July 25, 2016 / INSURANCE ADVOCATE

Google on a daily basis. We live in a world where word-of-mouth referrals are the strongest way to generate new business, especially for small or local businesses, but it may not remain that way for much longer. When we consider the customer’s experience, the first step is identifying a problem or need, and the second is to look for a solution. People will ask friends and family before looking anywhere else, which is why word-of-mouth referrals are still great for our agencies, but the second most common place for them to look for a solution is on the Internet. As technology advances, and keeps on advancing, we may see that the Internet could jump to the first place a customer looks for answers to their problems, so it’s important we capitalize on our appearance online to make lasting first impressions.

If you haven’t already Googled your agency or your own name, I’d suggest that as the first place to start. Once you Google your agency, you’ll notice that your agency’s physical information, such as your phone number and address, should be listed at the right. There is a lot of information in this right-hand pane though,

Christopher Paradiso, CPIA , is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center.

In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies to not only survive, but compete in today’s complex online marketing world.

Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

and it’s important not to leave anything out. Have you claimed your business on Google yet? If not, you need to take care of that as soon as possible, before someone else claims YOUR insurance agency on Google (because that could become a difficult situation very quickly). By claiming your business on Google, you can edit the information that Google displays in this right-hand pane. To claim it, click on the link that says “Do you own this business?” and Google will direct you through the steps to authenticate your ownership.

Now that you own your business on Google, you can edit what is displayed when someone searches for your business online. This includes your open hours, the pictures that display of your business, your phone number and address, your website, and more. There is one thing you can’t edit by yourself though that shows up in this pane, and that’s Google reviews. Google reviews can be a very strong asset for your agency. Think about it this way, your customers first looked to their friends and

7-25-16.qxp_INA 7-25-16 8/2/16 11:15 AM Page 17

[ TH E S OC IA L NOTEBOOK ] family for a referral, and then came to the Internet for an alternate solution; if they can hear from their peers about their experiences with your agency, you’ll be one step closer to a warm lead. Reviews cost your agency nothing as well, except for your time and effort, of course. In order to get reviews, you have to ask your “raving fans” for them, or your most loyal customers to your agency. We request reviews as part of our automated onboarding email process to all of our new customers, but we also ask our most loyal customers in person or over the phone if they would be so kind as to leave our agency a review. If we discuss it with them over the phone, we follow up with an email that has a link to leave us a review on Google. If you need help setting up this type of a link, feel free to reach out to my agency’s Marketing Manager, Joe, at bestey@paradisoinsurance.com to get the ball rolling.

So now that your agency looks a bit sharper when you show up in Google search, the next place a prospect is going to land is your agency’s website.

This is where your prospects will get an idea of what it’s like to do business with your agency for the first time online. There are a few things you’ll want to keep in mind for your website, but at the forefront, your brand should be present in all aspects when it comes to the visual design. If you visit my website at paradisoinsurance.com, our brand will be jumping off of the page as soon as you arrive. There are pictures of our staff, our agency inside and out, and even our office mascot, Max, my rescue dog who greets customers at the door. We have featured reviews on our homepage as well, so people can get others’ opinions before they commit to giving us a call or asking for a free quote. Speaking of free quotes, we invite all of our website’s visitors to fill out a free quote request form when they arrive, making the process easy and seamless for them. We also have our mobile app download featured on our homepage, and a brief story about our agency. We talk about protecting the

American Dream, make promises to all of our customers and stick to them, and highlight our commercial clients to make them feel appreciated.

This is all done right on the homepage of our website, because we want our customers to know that they matter the most to us, and we wouldn’t be successful without their help. There are a few fundamentals for your agency’s website that I’d also like to mention while we are on the subject, because without these fundamentals you could miss out on opportunities to generate leads. First of all, your agency’s phone number should be at the upper right-hand corner of every page to make it easy to get in touch with your agency, and your logo should be at the upper lefthand corner to help your branding efforts.

You should have a way to request a quote on every page, or close to every page, and if a quote request is not present then shoot for another call-to-action, like a contact us form, a request to download your agency’s mobile app, or anything else you can think of. Your agency’s physical address and information should be at the bottom of every page as well, and if you can, try to include a map as well to make it easy to find your agency. Other than that, include your social network icons that are linked to your agency’s social profiles, to make it easy for your customers and clients to connect with you in the social world.

Speaking of social media, once a prospect has become a customer or client of your agency, it’s important that you invite them to connect with you on their favorite social media so you can nurture the relationships you develop online.

This is our last stop for how your agency is perceived online, and there are a few things that you’ll want to keep in mind for interacting with and posting to social media on your agency’s networks. First and foremost, when it comes to social media, you should have multiple networks to give your customers a choice on how they want to communicate with you. Our agency

makes use of Facebook, LinkedIn, Google+, Twitter, Pinterest, and Instagram, and we’ve found individual success on each of these networks. The next thing you’ll need to think about is how you use these networks. When it comes to social media, you can’t just constantly push out salesy messages like your agency’s products and/or services, or else people will not be encouraged to interact or engage with your networks (whether that means sharing your content, liking or commenting on your content). You have to have a personable approach, and remind them that your agency is made of real people with real solutions to their problems.

We have a healthy balance of personable posts and salesy related posts on our social media networks, but I can tell you right away that you will see the scale is tilted in favor of personable posts, and that gets us the most engagement online. We post pictures of our office mascot, Max, pictures of company events, community involvement and charities, pictures to honor our veterans, or just pictures of our staff and office, and our audience LOVES it!

We will from time to time also make some salesy posts to our social media accounts to highlight specific types of insurance we offer, discuss our mobile app, or ask our customers for referrals and so on, but we try not to go overboard with these posts.

We want our customers to see us as personable, and we want to have a warm and welcoming approach to our social media to encourage new customers to connect with us, and for existing customers to stick around.

No matter what angle you look from, whether it’s from Google, social media, or directly from your agency website, your audience will have a very strong impression of your agency after simply visiting you online. It’s our job to capitalize on our agency’s image in the digital world, and to do so we have to display a personable, positive image to “wow” our customers and earn their business. Good luck everyone, and I will see you all online.[IA]

®

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The association who give you access to the brand of the independent insurance agent.

www.iiabny.org/join INSURANCE ADVOCATE / July 25, 2016 17

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[ G UEST A R T I C L E ]

ROBIN SMITH

Uber & Insurance: How the Gig Economy Can Infuse Life Into a Legacy Industry uYou’re seeing it everywhere: oldschool business learning new tricks. From Expedia’s acquisition of Homeaway, SAP’s

buyout of Fieldglass, and the proliferation of Venmo, legacy industries are transitioning to digital platforms, offering personalized

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Robin Smith is the Co-Founder and CEO of WeGoLook, an Oklahoma City-based company that specializes in on-demand field inspection and verification services. With its web and mobile platform, the company empowers a 20,000+ mobile workforce, known as Lookers, to collect and verify information and fulfill custom tasks for businesses and consumers alike.

By harnessing elements of the gig economy, the insurance industry can join other legacy industries that have made the transition to digital, such as banking and telecom. communications and incorporating sharing and gig economy aspects in their business models, too.

As other industries are making this transition, the insurance industry is looking on.

Why? Unlike the tech industry, the insurance sector is one that is very traditional and a little slower to adopt new methods, namely because it has been around a lot longer than most (its origins go back to 17th century London). When it comes, however, to on-demand data gathering, claims handling and processing, the Ubers, Rocket Lawyers, and Airbnbs of the world provide great, forward-thinking business models.

While insurance has historically been a topdown space that is focused on accruing capital and doesn’t adapt, the gig economy has put the power in the people’s hands, and we are looking to a future where insurance will transition to become firmly on the side of the customer, as other industries have done.

For a space that is fundamentally built around risk aversion, uberization provides the perfect storm of opportunity for the insurance industry to adapt to a nimble, twenty-first century model. Here is what needs to happen for insurance to become uberized: CONTINUED ON PAGE 20

18 July 25, 2016 / INSURANCE ADVOCATE

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CONTINUED FROM PAGE 18

That’s Why They Call it Snail Mail Platforms like Airbnb rely on mobile technology to communicate with crowd workers, sending instant notifications and messages to homeowners and renters simultaneously, while the insurance industry is traditionally paper-intensive, which slows down the claims process immensely and frustrates customers.

Paper inspections are a hindrance to quality assurance as well, and providing

excellent Q&A is essential for an industry that relies on excellence. Looking to mobile apps and digital technology, the insurance industry can adapt to this model in order to create efficient and accurate communications and data processing.

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Help Wanted Crowdsourced labor solutions not only provide diversified earning opportunities, they also provide a broader variety of options to workers, consumers and businesses. All parties can scale up or down, but where and how do they participate and leverage the gig economy to provide for their financial or business goals? Rocket Lawyer, for instance, taps into the latent supply of lawyers while making legal representation accessible.

As these crowdsourced solutions grow, expand and diversify, companies and consumers will have the opportunity to test and identify the best of the best without long term commitments. After all, the most popular ridesharing and homeowner vacation rental solutions rose to the top before General Motors, Ford, and Expedia bought in.

Harnessing the Power of Local Some will argue the gig economy is the free market at its best, but the status of the market’s success depends on how individuals and companies strategically apply these solutions to their business challenges. As Airbnb and Uber do, if insurance companies can harness the power of local regions and their citizens, capitalizing on their desire to maximize their skills and services, insurance services can significantly cut costs and be equipped to provide more accurate, transparent and cheaper services to users.

Why dispatch an employee across the metro, county, state, or even country, incurring all the related expenses and time delays to gather data and take pictures when you can send someone who’s already there? Not only can companies save time, travel, and employee productivity, but they can save on training and onboarding costs as well.

By harnessing elements of the gig economy, the insurance industry can join other legacy industries that have made the transition to digital, such as banking and telecom. By taking insurance one step beyond digitization, incorporating the twenty-first century lessons from Uber, insurance can finally claim that it lies among the disrupted.[IA]

7-25-16.qxp_INA 7-25-16 8/2/16 11:15 AM Page 21

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NFA: Adjusters Licensed uNational Fire Adjustment Co., Inc. announces the appointment of two Licensed Adjusters, Salvatore T. Bonanza and Michael F. Duester. NFA services the entire USA and Canada.

National Fire Adjustment is a fourthgeneration family-owned and operated public adjusting firm that began in Buffalo, N.Y. in 1922. It is one of North America's largest public adjusting and loss-consulting firms. NFA has expanded covering losses wherever disaster strikes, serving the United States and Canada.

After graduating from Utica College of Syracuse University with a B.S. in Business Management, Salvatore Bonanza (pictured left) was employed with Utica National Insurance Group as a Senior Property Claims Specialist with a focus on Commercial and Personal Lines Insurance.

M i c h a e l Duester (pictured left) is a graduate of Canisius College with a B.A. in History/ Education, with a concentration in Asian Studies. He brings 22 years of property claims handling experience, with his most recent employment having been Harlesyville/Nationwide, where Mr. Duester held the position of Property General Adjuster.[IA]

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AGE NCY WOES KE E PING YOU U P AT NIG HT? RE LY Y ON PIA AN D S L E E P LIKE A BABY.

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ADVERTORIAL

The Dangers Below – Underground Storage Tanks UNDERGROUND storage tanks represent a unique hazard since, by their very nature, they are concealed.

Contamination of ground water, the drinking water source for nearly onehalf of America, is the greatest danger from underground storage tanks. In addition, explosions and fires are another problem posed due to the nature of the materials the tanks contain. In fact, the move towards placing tanks underground was an effort to reduce the fire and explosion hazard. This created other problems. Not only leaks, but the actual presence of the tank itself, may not be detected until after the damage is done. Alerting clients to the potential hazards of underground storage tanks is another value-added service of the professional insurance agent.

Spills can result from delivery problems, such as truck overturn, defective piping that is improperly attached or corroded, as well as leaks in the tanks themselves. It is not always possible to determine the cause or source of the leak. Since prompt and proper cleanup is the primary objective when a spill is found, time is not always taken to trace the source if it is not readily apparent.

Storage tanks are regulated on the federal level by the Environmental Protection Agency (EPA). The EPA maintains data on the number of tanks – both active and closed, confirmed releases and cleanups. They also monitor and keep track of facilities that are in compliance with regulations. There are approximately 563,000 tanks storing petroleum or other hazardous materials in the United States (www.epa.gov).

New York Department of Environmental Conservation maintains a database of USTs (www.dec.ny.gov). They estimate that statewide there are nearly 24,000 active USTs and over 8,600 UST facilities.

States may be in a better position than the federal government to monitor USTs, so under EPA regulations, states have the option to apply for State Program Approval (SPA). SPA means states are allowed to operate their own programs instead of the federal government. Currently 38 states, the District 24 July 25, 2016 / INSURANCE ADVOCATE

It is not always possible to determine the cause or source of the leak. of Columbia and Puerto Rico have SPA status. In July 2015, the EPA published updates to the UST and SPA regulations.

Changes include increased emphasis on proper operation and maintenance of USTs, in an effort to help prevent and detect leaks and protect groundwater.

Under the 2015 EPA revision, current SPA states have until October 2018 to reapply to maintain SPA status. Each state and territory has its own agency to deal with UST (www.epa.gov). One benefit of SPA is that in SPA states the owners and operators of USTs do not have two sets of regulations with which to comply. New York and New Jersey are not currently SPA states.

The National Fire Protection Association (NFPA) codes and standards govern installation of heating systems, including fuel storage. NFPA 30 (Flammable and Combustible Liquids Code) and 31 (Standard for the Installation of Oil-Burning Equipment) must be followed when installing underground storage tanks. NFPA 30 and 31 address requirements including type and location of tanks. This includes distance to buildings and property lines, and pro-

tection against movement/upheaval caused by flooding or increased groundwater levels (www.nfpa.org).

Cleaning up a spill can be very costly. It is estimated that cleanup of oil spills in New York alone could exceed $200 million per year. Determining the actual cost is difficult, since most spills in the state are cleaned up by the responsible party, and do not involve government funds. Nationwide, the EPA estimates that petroleum spill cleanup could run in excess of $32 billion (www.ag.ny.gov/environmental).

Pollution claims are typically excluded under standard personal and commercial lines policies, so preventing spills can save clients money. Coverage is available for tanks and pollution liability for both homeowners and corporations. Compliance with federal and state regulations is a key component. Helping clients understand and avoid the potential problems of underground storage tanks is another sign of the true insurance professional.

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[ IN FOCUS ]

K E L LY D O N A H U E - P I R O

Agency Branding: Do You Really Know What It Is? uAgency branding…many people think they know what it is but in reality they aren’t sure. Even more importantly, many agents don’t fully understand the power and opportunity in building a brand.

Just five years ago, having a better than average website was enough, but in today’s social world you really need to have a distinct image that cuts through the clutter of insurance marketing, speaks right to your target market, and delivers a clear message of why a client should work with you.

When you look at your brand where would you go first? Try this—take out a business card, letterhead or envelope, open your website, and grab a recent print piece.

How much of it is clear, clean, and consistent? If the answer is not much, your agency is lacking a true brand. A brand has very little to do with you and everything to do with a clear message to your exact target market.

In insurance we all want the same customer—a person who values our expertise, pays their bills and wants the best coverage.

I have yet to meet one agency owner who isn’t looking for this person. The problem is if your image is less than amazing you are never going to attract the crème of the crop.

So take a hard look at what your current image says about you. Take it one step further—what does your office look like? Does it match the type of clientele you want?

So let’s break down what branding is for an independent agent and why it’s critical to make investments in developing it.

1. Brand: Brand is what people think when they hear your name. Do they think old, outdated, difficult, or been there forever? Or do they think friendly, easy to deal with, and modern?

2. Branding: Influencing what people think about your brand. This is where you get to change perception. When I first started my company two years ago, I knew my biggest investment needed to be in a great website and brand. I had to look really awesome to get attention, look professional, modern, and pretty fun to deal with! If your brand is telling more about your products than you, it’s time to take a look at it.

26 July 25, 2016 / INSURANCE ADVOCATE

3. Influencing: Consistently communicating your brand across all customer touch points. The key word here is consistently. You can’t have a brochure that looks one way and an email signature that looks another. It’s amazing how powerful a consistent brand image can be.

4. Finding Your Brand: You may be struggling with what to tell people about your business. It should not be “We give great service” or “We have been in business for 300 years”; it needs to be about the customer and not you. In order to build a brand, you have to think “Why are we different?” It often helps to work with a real marketing and branding company. They will help you do the research about what your target markets really care about and how you rise to that occasion.

5. The Big Idea: Once you know what makes you different, it’s then time to boil that down to three-to-seven words that describes your business. In branding and marketing, simplicity is key so don’t overdo it!

6. Communication Silos: Next we need to determine how we are going to represent your brand in nonverbal ways, e.g. defined customer experience, how you represent your agency visually, and what your sales team says compared to the content on your website.

7. Documentation: Your brand needs to be documented and trained upon. It can’t just be in your head hoping everyone follows it. It needs to be clearly documented and adhered to!

8. Implementation: Now you need to start using your brand. Sometimes this means making some investments to display your branding assets such as stationary, social media images, email marketing, tradeshows, white papers, and your website.

9. Grow: Once that is all pulled together, you can grow! Great branding gives you the opportunity, and using it correctly will communicate your values and products to the right people.

We know branding can be a challenge—from really understanding your target market to training your team on your brand. What we often find is that agents

Kelly Donahue-Piro, founder and president of Agency Performance Partners, is a no-nonsense effectiveness expert who has helped hundreds of insurance agencies identify and capitalize on sustainable improvement opportunities. Her specialties include agency culture assessment and change; management and supervisory coaching and benchmarking; customer retention strategy development; digital marketing strategy, planning and implementation; and sales planning, management and skillbuilding.

In 2014, she created Agency Performance Partners with a mission to “partner with insurance entrepreneurs who dream to take their business to the next level and beyond, by relentlessly pursuing excellence in worldclass service and sales strategies.”

The centerpiece of the organization’s transformational work is its Agency Performance AssessmentTM, a comprehensive survey tool Kelly created to zero in on organization-wide improvement opportunities and provide the foundation for a customized agency action plan.

Mrs. Donahue-Piro is an engaging speaker who is available to conduct in-person and online agency success presentations that complement her firm’s one-on-one on-site and virtual consulting practice. Connect with her on social platforms, via email at kelly@agencyperformancepartners, or by phone at 401-415-6205.

don’t know someone who can help them build a brand. We recommend looking locally, but it’s also something we handle!

You can download an infographic on agency branding to learn more. https://www.agencyperformancepartners.c om/branding-infographic/[IA]

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[ O N M Y R A DA R ]

BA R RY Z A L M A

Late Notice Defense Difficult to Prove Notice Requirement Must be Clear and Unambiguous uEvery liability insurance policy contains a requirement that the insured report claims promptly. Each policy contains a variation on that requirement. Excess policies contain different reporting clauses than do primary policies. In Essex Insurance Company v. Village of Oak Lawn, United States District Court, N.D. Illinois 2016 WL 3058407 (05/31/2016), Essex Insurance Company (“Essex”) asked the USDC, Northern District of Illinois for a declaration that it has no duty to indemnify its insured, the Village of Oak Lawn (“Village” or “Oak Lawn”), because Oak Lawn breached the notice condition of Essex’s insurance policy with respect to an underlying lawsuit. Third-party Defendant Cannon Cochran Management Services, Inc. (“CCMSI”) seeks a declaration that it provided timely notice of that lawsuit to Essex on behalf of Oak Lawn.

BACKGROUND Charles Petrishe, Nikki CaputoPetrishe, and Dianne McGann sued the Village and obtained a $3 million settlement agreement between the parties, with Defendants’ two insurance companies— Essex and non-party Illinois Union Insurance Company (“ACE”)—paying out $1 million and $2 million, respectively.

Essex now seeks to recoup that $1 million payment, along with applicable interest, pursuant to a Non-Waiver Agreement that it entered into with Oak Lawn as a condition precedent to settlement. Essex argues that: (i) it is entitled to a finding that Oak Lawn breached its insurance policy; and (ii) Oak Lawn must therefore reimburse Essex for its settlement payment under the Non-Waiver Agreement. Oak Lawn disagrees, arguing that it did not breach the insurance policy and therefore has no obligation to reimburse Essex.

Essex issued to Oak Lawn an Excess Liability Policy covering a policy period of March 15, 2010 to March 15, 2011 (the 28 July 25, 2016 / INSURANCE ADVOCATE

Charles Petrishe, Nikki Caputo-Petrishe, and Dianne McGann sued the Village and obtained a $3 million settlement agreement between the parties, with Defendants’ two insurance companies—Essex and nonparty Illinois Union Insurance Company (“ACE”)— paying out $1 million and $2 million, respectively.

“Essex Policy”). The Essex Policy had a liability limit of $10 million per occurrence and $10 million in the aggregate, and was excess over other underlying policies, including the ACE Policy.

The Essex Policy also contained the following condition (the “Notice Condition”): “Duties in the Event of Accident, Occurrence, Claim or Suit. ¶ You must see to it that we or our authorized representative and your underlying insurers: ¶ a. are notified as soon as practicable of any accident or occurrence which may result in a claim if the claim may involve this policy or any underlying insurance; b. receive notice of the claim or suit as soon as practicable.

Notice shall include: ¶ 1) How, when and where the accident or occurrence took place; ¶ 2) The insured’s name and address; ¶ 3) The names and addresses of any injured persons and witnesses; and ¶ 4) The nature and location of any injury or damage arising out of the accident or occurrence. ¶ c. are assisted, upon our request, in the enforcement of any right against any person or organization which may be liable to you or any other Insured because of injury or damage to which this insurance may apply;

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide.

The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http:// shop.americanbar.org/eBus/Store/Pro ductDetails.aspx?productId=214624, or 800-285-2221 which is presently available.

Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

and ¶ d. receive the Insured’s full cooperation in the investigation, adjustment, settlement, or defense of any claim or suit.”

(Emphasis added.)

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[ ON MY RADAR ] Factual Background Both CCMSI and the Village were aware that the underlying plaintiff, Petrishe, had been in the ICU for six weeks following the shooting. By March 2011, Petrishe’s claimed medical expenses had surpassed $672,000—more than the Village’s SIR. At least by May 2011, the Village and its claims handlers knew that the Village’s exposure—but not its liability—could exceed the $150,000 SIR. Yet, the Village and CCMSI did not believe that the Petrishe claim implicated either the ACE Policy or the Essex Policy because they “did not believe that there would be liability for the allegations in the Petrishe matter until Mr. Petrishe was found not guilty” in the parallel criminal action, since Petrishe was charged with attempted first-degree murder for his attack on the Oak Lawn police officers. At this time, the officers’ actions appeared justified and warranted and therefore, they did not impose any negligence on the Officers and did not post a loss reserve for Petrishe’s claim.

In June 2012 and again in November 2012, defense counsel in the Underlying Action informed the Village and ACE that the criminal proceedings were ongoing.

Throughout this period, the Village and CCMSI held quarterly meetings to discuss the Underlying Action and other civil matters pending against the Village. At no time during 2011 and 2012, however, did the Village’s “potential liability” involve the ACE Policy or the Essex Policy.

On February 1, 2013, the criminal court acquitted Petrishe of all charges. Defense counsel in the Underlying Action advised the Village that the Plaintiff was acquitted in his criminal trial and plaintiff ’s attorney told defense counsel that the plaintiff’s medical bills are in excess of $1,000,000. The Village had been confident that the attempted murder charges brought against the plaintiff would result in a conviction. The unexpected acquittal eliminates any number of legal defenses and raises the possibility that the Village of Oak Lawn and the two responding officers could potentially be held liable. Counsel advised the Village that he expected that a demand from the plaintiff ’s attorney well in excess of $5,000,000– and likely in excess of $10,000,000–was forthcoming.

On January 21, 2014, the Petrishe plaintiffs made a $12 million settlement demand in the Underlying Action. On January 22, 2014, Essex issued a reservation of rights

letter, reserving its right to deny coverage to the Village on several grounds, including “on the basis that the Village failed to comply with the policy condition which requires notice as soon as practicable of any accident or occurrence which may result in a claim if the claim may involve the Essex Policy or any underlying insurance.”

The fourth factor—the Village’s diligence in ascertaining the availability of excess coverage—also weighs in favor of the Village.

ANALYSIS In construing the language of an insurance policy, a court must view the policy “as a whole and take into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract.” Illinois courts recognize that primary and excess insurance policies “inherently serve different functions, cover different risks and attach at different stages.”

The Notice Condition contains two principal notice provisions—Subsection (a) relating to “any accident or occurrence,” and Subsection (b) relating to “the claim or suit.” The language clearly specified that, in the event of “a” claim made or “‘suit’… brought against any insured,” MHM must give notice and forward copies of legal papers received “in connection with the ‘claim’ or ‘suit.’” This provision is nondiscretionary.

Considering the nature of excess insurance, Essex does not need—and chose not to require—notice of each and every claim made or lawsuit filed, regardless of coverage implications. The Essex Policy, therefore, did not require the Village to notify Essex of the Underlying Action unless and until it believed such lawsuit “may involve” either the underlying insurance (including the ACE Policy) or the Essex Policy.

Concluding that the “may involve” clause at issue is ambiguous and subjective and the fact that no evidence resolves the ambiguity, the Court found it must construe the clause in favor of the Village.

The Village’s Awareness of a Potentially Covered Event The Village knew about the Petrishe shooting on December 8, 2010, knew about the Underlying Action and its allegations on December 15, 2010, and gave ACE notice on March 15, 2011. Yet, Essex argues, the Village did not inform Essex of the incident or the lawsuit until May 21, 2013.

The Village responds that, while it had “awareness” of the Petrishe claim in 2010, it did not believe that such claim “may trig-

ger insurance coverage” until February 2013, after Petrishe’s acquittal. Indeed, the record reflects that CCMSI set an initial reserve of only $10,000 and—prior to 2013—did not anticipate the Petrishe claim exceeding the Village’s $150,000 SIR. The Village’s Diligence in Ascertaining Coverage Availability The fourth factor—the Village’s diligence in ascertaining the availability of excess coverage—also weighs in favor of the Village. The Court is not convinced by Essex’s argument that the Village’s delay had nothing to do with its belief about its liability. The Court further notes that defense counsel in the Underlying Action continued to view the case as “highly defensible” on liability grounds, even after the unanticipated acquittal.

Prejudice to Essex Lastly, the Court considers prejudice to Essex resulting from the 30-month delay in receiving notice of the Underlying Action. Once the Underlying Action became active, Essex waited several months to issue a reservation of rights letter, and then participated in settling the action through its eventual dismissal in November 2014.

ZALMA OPINION A potentially effective denial of a claim was destroyed by inadequate policy wording. By making the notice requirement of the policy subjective—only requiring a report when it “may” result in a claim—it made it impossible to prove that the insured did not, in good faith, believe, until the plaintiff was acquitted of the charge, that he attempted to kill the police officers and eliminated the civil defenses available to the police for shooting the plaintiff. The adverse result could have been eliminated by requiring notice of the filing of suit rather than a “suit that ‘may’ result in a claim.”[IA] INSURANCE ADVOCATE / July 25, 2016 29

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[ COURTSIDE ]

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

Ambiguity in Policy Voids Exclusion for “Insured vs. Insured” Boro Park Land Co., LLC v Princeton Excess Surplus Lines Ins. Co. A nursing home and its landlord were the insured and additional insured under a professional liability policy issued by Princeton. An employee of the nursing home slipped and fell in the parking lot and sued the landlord. Princeton denied coverage to the landlord under the “Insured versus Insured” exclusion which excludes coverage for any claim by one insured against another. The landlord brought this DJ action. The Supreme Court ruled in favor of coverage.

The Appellate Division affirmed, holding that the policy was not clear as to whether an employee of the nursing home was also an “insured” under the policy, and because of that ambiguity, the exclusion does not apply. — LNR

In an action for a judgment declaring that the defendant Princeton Excess Surplus Lines Insurance Company is obligated to defend and indemnify the plaintiff in an underlying action entitled Wickham v Boro Park Land Co., LLC, commenced in the Supreme Court, Kings County, under Index No. 21812/12, the defendant Princeton Excess Surplus Lines Insurance Company appeals from an order of the Supreme Court, Kings County (Bunyan, J.), dated November 17, 2014, which denied its motion for summary judgment dismissing the complaint and granted plaintiff’s cross motion for summary judgment declaring that Princeton Excess Surplus Lines Insurance Company is obligated to defend and indemnify the plaintiff in the underlying

Lawrence N. ("Larry") Rogak has been practicing insurance law since 1981.

He has defended over 23,000 lawsuits and arbitrations and has represented over 75 different insurance companies and self-insured corporations.

Lawrence N. Rogak LLC is listed in Best's Recommended Insurance Attorneys, a distinction that requires written recommendations from at least 12 insurance carriers.

A 1981 graduate of Brooklyn Law School, Mr. Rogak has published more books and articles on insurance law than any other New York attorney in the field.

action, and declared that Princeton Excess Surplus Lines Insurance Company is so obligated. ORDERED that the order and judgment is affirmed insofar as appealed from, with one bill of costs.

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7-25-16.qxp_INA 7-25-16 8/2/16 11:16 AM Page 33

[ COURTSIDE ] The plaintiff, Boro Park Land Co., LLC (hereinafter Boro Park), owns certain premises located in Brooklyn, which it leased to Boro Park Operating Co., LLC (hereinafter the Center), for the operation of a nursing home. The defendant Princeton Excess Surplus Lines Insurance Company issued a Senior Living Professional Liability, General Liability, and Employee Benefits Liability policy to the Center. Boro Park was named as an additional insured under the policy, as required by the lease agreement.

Vanessa Wickham, an employee of the Center, allegedly was injured when she slipped and fell in the parking garage of the Center when she arrived at work.

Wickham thereafter commenced an action in the Supreme Court, Kings County, entitled Wickham v Boro Park Land Co., LLC., alleging that Boro Park was negligent in maintaining the premises (hereinafter the underlying action). Boro Park forwarded the summons and complaint to Sedgwick Claims Management Services, Inc., Princeton’s third-party claims administrator, which was received on December 5, 2012.

In a letter dated December 14, 2012, Princeton denied coverage under the policy, inter alia, based upon the “Insured Versus Insured” exclusion in the policy.

Boro Park then commenced this action for a judgment declaring that Princeton is obligated to defend and indemnify it in the underlying action. Supreme Court denied Princeton’s motion for summary judgment and granted Boro Park’s cross motion for summary judgment declaring that Princeton is obligated to defend and indemnify it in the underlying action.

“An insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision” (Allstate Ins. Co. v Zuk, 78 NY2d 41, 45; see Cumberland Farms, Inc. v Tower Group, Inc., 137 AD3d 1068, 1070; Salt Constr. Corp. v Farm Family Cas. Ins. Co., 120 AD3d 568, 569). Policy exclusions are to be strictly and narrowly construed and are not to be extended by interpretation or implication (see Pioneer Tower Owners Assn. v State Farm Fire & Cas. Co., 12 NY3d 302, 307; Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311; Edwards v Allstate Ins. Co., 16 AD3d 368, 369). “To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegations

of the complaint in the underlying action cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision” (Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 175; see 492 Kings Realty, LLC v 506 Kings, LLC, 88 AD3d 941, 943; Exeter Bldg. Corp. v Scottsdale Ins. Co., 79 AD3d 927, 929). “If the language is doubtful or uncertain in its meaning, any ambiguity will be construed in favor of the insured and against the insurer” (Lee v State Farm Fire & Cas. Co., 32 AD3d 902, 904; see Insurance Co. of Greater N.Y. v Clermont Armory, LLC, 84 AD3d 1168, 1170; Pepsico, Inc. v Winterthur Intl.

Am. Ins. Co., 13 AD3d 599, 600).

Here, Princeton disclaimed coverage based upon the “Insured Versus Insured” exclusion, which excluded “any claim made by or for the benefit of, or in the name or right of, one current or former insured against another current or former insured.”

As it is not clear from the language of the exclusion at issue whether Wickham, as an employee, was an “insured” as that term was defined in the policy (see QBE Ins. Corp. v Public Serv. Mut. Ins. Co., 102 AD3d 442), the provisions are ambiguous and subject to more than one interpretation (see Pepsico, Inc. v Winterthur Intl. Am. Ins. Co., 13 AD3d at 600; Incorporated Vil. of Cedarhurst v Hanover Ins. Co., 223 AD2d 528, 529, affd as mod, 89 NY2d 293). Thus, the Supreme Court correctly determined that Princeton failed to establish its prima facie entitlement to judgment as a matter of law (see QBE Ins. Corp. v Public Serv. Mut. Ins. Co., 102 AD3d at 442-443; Insurance Co. of Greater N.Y. v Clermont Armory, LLC, 84 AD3d at 1170; Lee v State Farm Fire & Cas. Co., 32 AD3d at 904; Pepsico, Inc. v Winterthur Intl. Am. Ins. Co., 13 AD3d at 600).

Accordingly, the court properly denied Princeton’s motion for summary judgment dismissing the complaint, and granted that branch of Boro Park’s cross motion which was for summary judgment, declaring that Princeton is obligated to defend Boro Park in the underlying action, and declared that Princeton is so obligated (see Zuckerman v City of New York, 49 NY2d 557, 562).[IA] Edited by Lawrence N. Rogak 2016 NY Slip Op 04684 Decided on June 15, 2016 Appellate Division, Second Department

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[ G UEST O PI N I ON ]

J A N E M . O R I E N T, M . D .

Making American Medicine Great Again uThe Republicans are at it again: trying to tweak a bad idea, make it “bipartisan,” and set a flawed system more firmly in concrete. What we really need is a Republican reform—one that can restore the Republic, along with medicine.

Yes, ObamaCare needs to be repealed— every last syllable. But that’s not all. To make America and American medicine great again, we need to remember what made it great in the first place. It was, to quote Dinesh D’Souza’s great insight in his book Stealing America, the “anti-theft” society.

That’s what attracted people like him from all over the world, including India, to come here and become great Americans. They certainly did not risk everything to come to America and turn it into what they had left behind.

To put what we need to do into a few words: stop the lying and the stealing.

Simple. But far from easy. Once a country has become addicted to theft—redistribution of wealth—it’s hard to stop it. Almost everybody has something to lose, and the benefits are hard to see.

The benefits of stopping the plunder could include: • An immediate 15% raise for all working people; • A big increase in job opportunities; • An enormous drop in the price of medical care (50% or more); • Timely access to a doctor who is happy to see you and has plenty of time for you.

Does that sound worthwhile?

To get there, we have to get to the root of the problem: the tax code and Medicare.

During World War II, wage and price controls made it hard to find workers, so companies started paying in tax-free medical benefits. More and more medical care was paid for through third parties (“insurance companies”). Then came Medicare—for the people who needed the most care—which paid through government and its private partners, such as Blue Cross, that administered the system. Prices doubled or tripled overnight.

34 July 25, 2016 / INSURANCE ADVOCATE

My first proposal is to stop the Big Lie of the Social Security/Medicare system and abolish the payroll tax. There’s the 15% pay raise. The employer’s “contribution” has to come out of the worker’s earnings too.

Without the added expense of payroll taxes, more employers could hire more people.

The payroll tax is a first-dollar tax. No one can (legally) earn a dollar to buy milk for the baby or bus fare to get to work without paying 15 cents to Social Security/Medicare. And no, it is not a contribution to an individual’s retirement, even though it is represented as such. It is just a tax, as the U.S. Supreme Court determined long ago. The worker has no legal, contractual claim on any return at all. He’ll get whatever Congress allots when he reaches retirement age.

Minorities with a shorter life expectancy will end up getting less. When the government runs out of revenue—pyramid schemes always run out of enough new subscribers—that’s just too bad.

The worker’s “contribution” is immediately spent—on other people’s retirement or medical care (some of them very rich). And also on the well-compensated army of white-collar employees who shuffle the money around. Probably half or less of the revenue that comes into Medicare is spent on medical goods and services.

But what would we do without Medicare, or other “insurance”? How could we afford care? Well, if you can’t afford to pay for something, how can you afford to pay two to three times as much by passing the money through a third party?

Some people seem to think that enrolling in insurance is like the scene in Laurel and Hardy where Stan, faced with the lunch bill, puts his last nickel in the slot machine and hits the jackpot. Yet people know that slot machines aren’t a magic money-multiplying machine.

Insurance is a way to voluntarily share unpredictable but catastrophic risks. It is not a way to get other people to unwillingly pay your bills. Neither ObamaCare nor Medicare is really insurance. In fact, they outlaw true insurance for medical care and

Jane M. Orient, M.D. obtained her undergraduate degrees in chemistry and mathematics from the University of Arizona in Tucson, and her M.D. from Columbia University College of Physicians and Surgeons in 1974. She completed an internal medicine residency at Parkland Memorial Hospital and University of Arizona Affiliated Hospitals and then became an Instructor at the University of Arizona College of Medicine and a staff physician at the Tucson Veterans Administration Hospital. She has been in solo private practice since 1981 and has served as Executive Director of the Association of American Physicians and Surgeons (AAPS) since 1989. She is currently president of Doctors for Disaster Preparedness. Since 1988, she has been chairman of the Public Health Committee of the Pima County (Arizona) Medical Society. She is the author of YOUR Doctor Is Not In: Healthy Skepticism about National Healthcare, and the second through fourth editions of Sapira’s Art and Science of Bedside Diagnosis, published

by Lippincott, Williams & Wilkins. She is the editor of AAPS News, the Doctors for Disaster Preparedness Newsletter, and Civil Defense Perspectives, and is the managing editor of the Journal of American Physicians and Surgeons.

force most people into a beggar-thy-neighbor prepayment scheme.

Of course, we cannot suddenly cut off payments to older people who relied on politicians’ promises. But they will be hurt more than anyone else if we allow the American system to collapse.

ObamaCare loots Medicare to help fund the scheme. Some Republican proposals would impose Medicare risk-adjustment methods on the whole economy— without admitting that the system is insolvent.

We need an Operation: Restoring Honesty. Major surgery, not a tummy tuck.

It should start with Medicare.[IA]

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