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VOLUME 125, NUMBER 14 / August 18, 2014
A CINN Group, Inc. Publication
Serving: New York, New Jersey, Connecticut, Pennsylvania and Washington D.C.
DISCORD: ACORD Introduces Form That Spells C of I Flux
SERIO on BICKFORD
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Contents [COVER STORY ] 16
DISCORD: Acord Introduces Form That Spells C of I Flux Jerome Trupin, CPCU
August 18, 2014 | volume 125 number 14 36
Courtside: Paying Out Policy Limits to One Insured Before Second Insured Files Claim is Not Bad Faith Lawrence Rogak
37
Classifieds
38
Guest Opinion: Will Medicare Become Like the VA? Jane M. Orient, M.D.
[FEATURES] 4
Foreword: Markham Rollins, Jr., James Inzerillo Served Industry and Community Steve Acunto, Publisher
8
Insight: Alphabet Soup Peter H. Bickford
10
The Social Notebook: Mobile Moments: Are You Ready? Christopher Paradiso
[ AD FEATURES] 15
MSO: Ridesharing Creates Coverage Gaps
19
LICONY: A Majority Agrees Life Insurance is Needed, But Do You Have It?
21
PIA: Hudson Valley Rap - Nov. 6, 2014
14
Letter to Editor: Serio on Bickford
23
FPCC: First Party Claims Conference October 20-22, 2014
22
On the Level: N. Stephen Ruchman
29
Israel Bonds: Insurance Division Luncheon - October 28, 2014
24
Face to Face: You’re Gonna Need a Bigger T.V. Michael Loguercio
28
In the Associations: PIWA Hotline: Newest Benefit for Wholesalers and members
29
In the Associations: Invest Awards 70 Academic Student Scholarships
30
On the Level: Staying #1 in Your Client’s Mind Jamie Deapo
32
On My Radar: Insurers Must Avoid the Gastonete; Insurer’s Duty is to the Insured Barry Zalma
34
Looking Back: June 1989
Corrections: On the CONTENTS page in our last issue, July 21, 2014 Vol 125, No. 13, we incorrectly identified ON THE LEVEL, page 36, as written by N. Stephen Ruchman. Though he also wrote a column in that issue, his article appears on page 28. The writer of the article misidentified is by Jamie Deapo. On page 44 of our last issue, July 21, 2014 Vol 125, No. 13, we incorrectly identified COURTSIDE as written by Betty Flood and Katlin Nash. The writer of this article is, in fact, Lawrence Rogak. We appologize to the writers for this oversight.
Like us on Facebook… The Insurance Advocate Magazine INSURANCE ADVOCATE / August 18, 2014 3
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[ FORE WORD ]
Steve Acunto
Markham Rollins, Jr., James Inzerillo Served Industry and Community
W
e note with sadness the passing of two professional gentlemen, truly worthy of the name: The first is Markham Rollins, Jr., aged 80, father of Markham III and Charles, and successor to his father in the operation of the Rollins Agency in Bronxville, founded in 1910, now located in Rye Brook. A former U.S. Marine, Markham built the agency through consistent, dedicated service to the Community and through care for the insured. In addition to his wife of many years, Sally, their sons and daughter Elizabeth, he leaves nine grandchildren… James Inzerillo, of Scarsdale, passed away at age 91. He served in WWII in the Pacific theater for 3-1/2 years, fighting in Guadalcanal, the Solomon Islands, and the Philippines. In 1956, he joined the Munich Reinsurance Company, U.S. Branch, as Vice President. In 1975, he became President, a position he held until his retirement in 1989. He was an active board member of many of the insurance industry's associations. He was also Chairman of the International Insurance Society and the International Insurance Hall of Fame, and was Trustee of the Griffith Foundation for Insurance Education and the College of Insurance of New York. James was a Knight of Malta. His daughter Jean, son-in-law Nicholas Savoye and his grandchildren Kristin and Mark Savoye, survive him. His wife Frances and son Anthony predeceased him… The New York Insurance Scholarship Foundation, Inc. (NYISF) awarded its 2014–2015 scholarship to Ashley Kadamthottu, a junior at St. John’s University studying actuarial science from Congers, N.Y. According to Ellen Melchionni, president of NYISF: “Her accomplishments during the first two years of her studies are nothing short of outstanding. Ashley will undoubtedly prove to be a tremendous asset to the insurance industry.” NYISF was founded to encourage scholastic achievement, community involvement and a commitment to further advancing the insurance industry. “Ashley embodies of all these qualities,” Melchionni continued. “Her academic record is exceptional, she is active in the community, and she has already gained valuable real world experience through various internships.” The development of future leaders is essential to ensure the viability of the insurance and risk management industry. NYISF addresses the great need to attract young professionals into the business. “Insurance and the needs of consumers grow increasingly more complex,” Melchionni said. “The cultivation of new talented leaders is critical to the future of the industry.” The New York Insurance Scholarship Foundation, Inc. (NYISF) is a public charity initiated by the property and casualty insurance industry that supports students studying the business of insurance in New York. The foundation is affiliated with the New York Insurance Association. For more information on NYISF, visit www.nyia.org/nyisf…SA 4 August 18, 2014 / INSURANCE ADVOCATE
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VOLUME 125, NUMBER 14 AUGUST 18, 2014
EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Sari Gabay-Rafi 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 PROOF READER Maria Vano SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x117 circulation@cinn.com PUBLISHED BY CINN Group P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264 www.cinn.com | info@cinn.com President and CEO Steve Acunto
CINN G R O U P, I N C .
INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 21 times a year, and once a month in July, August and December by CINN ESR, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing offices. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $110.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2014. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Office.
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For high-quality article reprints (minimum of 100), including e-prints, contact Gina Balog at g@cinn.com or call 914-966-3180, x113
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[ INSIGHT ]
By Peter H. Bickford
Alphabet Soup
L
ast August I took a semi-serious look at the acronymic National and International insurance regulatory agencies, institutions and forces of nature (“Late Summer Delights: Fishing for Acronyms,” IA, August 19, 2013), with a somewhat jaundiced view of how these paragons of regulatory expertise may affect
report itself. Like so many over-hyped premieres, the report, finally issued last December under the profound title “How to Modernize and Improve the System of Insurance Regulation in The United States,” came out with a melded approach between Federal and State regulation of insurance. The FIO report was probably a disappoint-
The FIO report was probably a disappointment to the supporters at both ends of the Federal v. State debate, but also a relief to most by not making any strong push for immediate intervention by the Feds.
Peter H. Bickford
the future course of the insurance industry and its denizens. I thought it would be interesting to take a look at what these initialized institutions have been up to these past 12 months in the name of saving our industry from itself. As a refresher and guide, the principal players reviewed below are: FSOC - Financial Stability Oversight Council FIO - Federal Insurance Office G20 - International Group of Finance Ministers and Central Bank Governors FSB - Financial Stability Board IAIS - International Association of Insurance Supervisors NAIC – National Association of Insurance Commissioners The most noise this past year was probably caused by the FIO, which was created by the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) for the purpose of collecting data from and monitoring the insurance and reinsurance businesses. The noise was all the industry talk and speculation about the FIO’s breathlessly anticipated, long-overdue report on the state of insurance regulation. The anticipation, however, was far more exciting than the
ment to the supporters at both ends of the Federal v. State debate, but also a relief to most by not making any strong push for immediate intervention by the Feds. Causing less obvious noise than the FIO but with decidedly more authority and ability to dispense pain to the insurance industry is the FSOC, also established by Dodd–Frank and charged with “identifying risks to the financial stability of the United States; promoting market discipline; and responding to emerging risks to the stability of the United States’ financial system.” You may recall that the FSOC has ten voting members but only one that has any insurance expertise, and five nonvoting members, including the director of the FIO and a state insurance commissioner designated by the NAIC. The major accomplishment of the FSOC this past year was to designate a third company, Prudential Financial, Inc., as a strategically important financial institution (SIFI) subject to enhanced oversight and capital standards by the Federal Reserve (the other two being AIG and GE Capital, with Met Life fighting the designation). The other major accomplishment of the FSOC was the publication of an annual report, which neatly divides the world into
two parts: banking and non-banking, but then treats them all as banking institutions. The report’s major observation regarding insurance was to note the strain that low interest rates place on insurers, particularly life insurers. Meanwhile the standard bearer for state-based regulation of insurance, the NAIC, continued to plod along with its promotion and development of its various ongoing initiatives including ORSA (Own Risk Solvency Assessment), and enhancements to group (i.e., holding company) reporting requirements, including ERM (Enterprise Risk Management). Because the NAIC has no enforcement authority other than the threat of dcertification much of the activity regarding these initiatives has necessarily come from the individual states. For instance, since the adoption of the revised holding company model act in 2012, close to half of the states and other NAIC member jurisdictions have passed amendments to their holding company statutes to conform or substantially conform to the enhanced reporting requirements of the model act. Then of course there is New York. In lieu of a legislative change, the NY regulators adopted a new “emergency” regulation governing its required ORSA and ERM reports from insurers, while seemingly trampling on the confidentiality protections of the NAIC initiatives. It is interesting to note, however, that many of these Federal and NAIC initiatives actually arise from or mimic international initiatives, particularly those of the IAIS as “requested” by the FSB, the entity chartered by the G20 to develop worldwide financial standards for financial institutions. Over the past year, the IAIS has been showing off its extraordinary skills in collecting, organizating and largely ignoring comments from the industry and industry experts. These comments have been solicited by the IAIS as part of its ongoing charge (from the FSB) to develop global capital standards to be applied to G-SIIs (Global Systematically Important continued on page 8
6 August 18, 2014 / INSURANCE ADVOCATE
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[ INSIGHT ] insurance capital standard (ICS) by the end of 2016 to be applied to internationally active insurance groups (IAIGs). Come on, I see the eyes glazing over. You have come this far, so stick with me a bit longer! For the past several years the agenda for regulation of the U.S. insurance industry has trended away from State regulators and the NAIC. However, the fact is that even the Feds have been following the lead
continued from page 6
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For the past several years the agenda for regulation of the U.S. insurance industry has trended away from State regulators and the NAIC. However, the fact is that even the Feds have been following the lead of the International community.
of the International community. The agenda seems to be controlled by G20 with the FSB and the IAIS as its principal agents. Consider for example all the games and manipulation between the Feds and the NAIC to ensure a place at the IAIS table as it pursues establishing global insurance capital standards, including the step taken earlier this year to have the IAIS add the Federal Reserve as a member. To their credit, I suppose, the Feds and the IAIS have each acknowledged that bank capital requirements are not necessarily appropriate for insurance companies. But in reading through their proposals, methodologies and formulae (no easy task, by the way) it is still not at all clear what the ultimate goal is for establishing capital requirements for insurance entities, or what consideration is being given to the downside of increasingly strict reporting and capital requirements on issues like availability, market flexibility or new product development. This top-heavy, ivory tower emphasis on capital standards has overwhelmed any consequential dialogue on the actual business of insurance. While insurance companies continue to get beat up by the Federal, State and International turf war over capital standards, the mundane regulation of the everyday conduct of the business of insurance at street level is left to an increasingly ignored, marginalized and underappreciated state-level bureaucracy.[IA]
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[ THE SOCI AL NOTEBOOK ]
By Christopher Paradiso, CPA
Mobile Moments: Are You Ready?
F
irst it was the “web.” Then it was “social.” Now it’s “mobile.” The pace of technological change is daunting. If you were late to the party for the first two, you better not be late for mobile. Mobile has fundamentally transformed every element of consumer behavior. And it’s transformed how businesses engage with shoppers and buyers. From my perspective, the mobile transformation is good for insurance agencies. That’s because mobile is the one platform that can put
Chris Paradiso
…People are using their smartphones to get things done. While very few business verticals deserve real estate on a smartphone, I’d say insurance is one of them. Although clients may not engage with insurance agencies often, when they do, it’s usually because some event…has occurred and they need you right away.
your business directly and immediately in the hands of your customers and prospects before, during and after events happen. Call them mobile moments. Is your agency prepared for mobile moments?
Mobile: What and why? Generally speaking, when people refer to “mobile” these days, they are referring to smartphones and tablets. A smartphone is a term for distinguishing mobile phones with advanced features from basic feature phones. Today, some 240 million mobile phones are used in the U.S. Up to threequarters of mobile phone users are using smartphones. And these are your customers and prospects. The number one activity of Americans is actually unlocking their mobile devices. There’s a phrase that’s been coined by Flurry Analytics, a firm that analyzes how people use “apps”—the programs that drive smartphone operations. They say, “It’s an app world. The web just lives in it.” They can say that because data show that, 10 August 18, 2014 / INSURANCE ADVOCATE
on average, the U.S. consumer spends more than 2.5 hours a day on smartphones and tablets—80% of which is spent inside apps and the rest on the mobile web. According to Flurry, overall app use in 2013 posted a 115% year-over-year growth. This growth was led by a 203% increase in the use of messaging and social apps, followed by a 149% jump for utility and productivity apps. Let’s cut to the chase: People are using their smartphones to get things done. While very few business verticals deserve real estate on a smartphone, I’d say insurance is one of them. Although clients may not engage with insurance agencies often, when they do, it’s usually because some event—or mobile moment—has occurred and they need you right away. With a mobile app, you can be there for them in a meaningful way with just one tap of the screen. You may have seen the new commercial from Geico with the cute piglet at the DMV. It focuses on convenience for the
consumer, you can store your ID card, make a payment and even start the claims reporting process. One thing the commercial doesn’t talk about is the reduction on service tasks for their staff. Less phone calls to their team drives profitability for the company.
Mobile Strategy for Agents There are three steps you can take to engage your clients on the mobile platform. A good first step is to optimize your website for viewing on a mobile device. Sometimes this is also called a “web app.” The boundaries “website” and “web app” become somewhat blurry when the developer implements some functionality into the web page. There are a few reasons to optimize your site for viewing on a mobile device. The number of searches done on a mobile device continue to grow. If a prospect looking to connect with you becomes frustrated by your website on their mobile device, the chances of conversion diminish substantially. The second step you should take is to build a “responsive” site, to achieve a measure of consistency across devices. Doing so creates a similar experience for users across platforms. While responsive web continued on page 12
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[ THE SOCIA L NOTEBOOK ] continued from page 10
design does bring consistency and improve user experience, there is a downside. It can lead to slower load times and potentially drive too much information for effective mobile use. It’s important to understand that websites—responsive or otherwise— are not apps. It’s for this reason that users access an app versus a website for banking or airlines. You can contact your website developer and inquire about optimizing your website for mobile devices. This leads to the third step in the strategy: get your agency a really good mobile marketing app. It’s important to do your homework before deciding which one is right for you. It’s important to understand the difference between mobile apps and mobile websites. Websites – responsive or not – have limited functionality vs. mobile apps. A responsive website responds to the device on which it’s displayed. For example, when your site is viewed on a smartphone, you might see a simplified version that contains fewer columns and a somewhat easier navigation. True mobile apps, on the other hand, are downloaded onto a mobile device, usually from Apple’s iTunes App Store or Google’s Play store. They actually incorporate features that are native to the device, that serve a specific purpose, and that pro-
…a mobile app is a proactive option to provide your customers and prospects certain benefits and services not available on your website. A good mobile app provides service to your customers 24 hours a day, so your agency can be available when your customer needs it.
vide features and benefits available only via your mobile application. In short, a mobile app is a proactive option to provide your customers and prospects certain benefits and services not available on your website. A good mobile app provides service to your customers 24 hours a day, so your agency can be available when your customer needs it. By your service team encouraging customers to download the app, over time you can see a substantial decrease in service activities. This alone allows your team to get even more proactive on renewals, account
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rounding and contacting lost business. As you start your exploration, be wary of marketing or design firms that say they don’t build apps but rather mobile websites. There’s probably a reason for that: they may not have the skill set to build native mobile apps. There are many digital marketing firms that tell insurance agencies that all they need to do to engage clients and prospects on a mobile platform is optimize their website for viewing on a mobile device. That’s just plain wrong. And if it’s the advice you’re receiving, look elsewhere. In my next column, we’ll dig deeper into mobile apps and look at questions to ask when building a mobile app as well as features you’ll want to incorporate. In the meantime, work on the first two steps—optimizing your website and making it responsive—and start thinking about the third.[IA] 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 how 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.
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[ LETTER TO THE E D ITOR ] RE: Peter Bickford’s View
efit from both of them. Sometimes, though, even the best of us and our passion for a subject or view of an issue can get tripped up by something as simple as the placement of an ad in a magazine. I just found that irony to be as sweet and enjoyable as my surroundings when I saw it.
July 24, 2014 Steve: The large pile of reading material that accompanied me on my summer encampment to Block Island included the May 12th edition of the Insurance Advocate (among a number of other editions in my quest to get up to date). I especially like to read Peter Bickford's Insight columns when I do pick up the Advocate; somehow, though, I seem to get more out of it when I am reading it while sitting on a deck overlooking the Atlantic. I enjoyed both the Block Island sunrise on one particular morning and my discovery of the rather coincidental placement of Peter's commentary on the ineffectiveness of the Department of Financial Services' management of the state Liquidation Bureau--and particularly his complaint that "the idea of actually managing a business is simply alien to [New York's] liquidators"--next to an advertisement for Interboro Insurance Group. Those responsible for laying out the Insurance Advocate can be excused if they could not appreciate the sheer artistry of their work, but regular readers would definitely "get the joke" of having a searing indictment of the Bureau followed by an advertisement for one of its greatest successes. For those who may not remember, Interboro was once a troubled company which landed in the hands of the Insurance Department (as the predecessor to the DFS). Contrary to Peter's assertion of the "Bureau's continuing inability to understand the basics of the statutory charge to the receiver, particularly regarding the receiver's statutory role as rehabilitator," the Liquidation Bureau has always understood its mission and oftentimes has even exercised the kind of intestinal fortitude necessary to try rehabilitations, or try rehabilitations at the location of the company rather than at the Bureau, or work out reinsurance deals to promote and foster rehabilitations, among other seemingly novel ideas. Not all rehabilitations work out as well as that in Interboro: some are necessary steps towards inevitable liquidation, and some start with good intentions but lose the battle 14 August 18, 2014 / INSURANCE ADVOCATE
Gregory V. Serio Superintendent of Insurance State of New York 2001-2005
against time. Still other rehabilitations, like Interboro, serve as catalysts for achieving the priceless amalgam of protecting policyholders or claimants and returning, under its own power or with the assistance of outside capital, an insurer to the marketplace. The context of Peter's criticism is "historical" as in the Bureau has never been able to appreciate the difference between rehabilitation and liquidation, and has always done a poor job in managing both functions. You don't have to take my word for it that such is not and has not been the case: just read the advertisement on page 9 of the May 12th edition, or think of Empire Mutual, or consider the stability that came with the "soft landing" of Frontier rather than the "scorched earth" (his words) approach that the Bureau allegedly applied to each and every rehabilitation. Don't think about Executive Life of New York, brought into rehabilitation under very unique circumstances, whose proverbial tires were kicked more often than the used car that looked good outside but had issues underneath, only to be discarded by those who may have shown an initial interest. It is, at best, very much an anomaly in the rehabilitation or liquidation worlds and certainly not the example of how these transactions have been "historically" managed by NYSID/NYSDFS. Peter Bickford’s contributions to the Insurance Advocate are very valuable and his insurance expertise is held in the highest regard by the many of us who have been fortunate enough to work, or even argue, with Peter, and have certainly derived ben-
Not all rehabilitations work out as well as that in Interboro: some are necessary steps towards inevitable liquidation, and some start with good intentions but lose the battle against time. Still other rehabilitations, like Interboro, serve as catalysts for achieving the priceless amalgam of protecting policyholders or claimants and returning, under its own power or with the assistance of outside capital, an insurer to the marketplace.
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ADVERTORIAL
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used in the service. Insurance coverage is only part of the issue. Safety of the driver and passengers is also a concern. Some ridesharing companies screen their drivers, including background checks. However, they may not screen the riders. Social media tools such as Facebook can be a way to check out potential riders prior to accepting their ride request. However, there is always a risk when allowing a stranger in your car, or accepting a ride with a stranger. Ridesharing may seem to be an attractive way to earn extra money, but it is not without its downside. Helping clients understand and mitigate possible problems is another sign of the true insurance professional.
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[ COVER ]
By Jerry Trupin, CPCU
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[ COVER ]
DISCORD: ACORD Introduces Form That Spells C of I Flux
T
he new ACORD form 855NY will shake up our already hectic certificate of insurance world. It’s an addendum to certificates of insurances for New York. It will provide detailed information about the policies shown on the certificate, particularly the CGL. This is good news for additional insureds and their risk manager. It’s bad news for producers: more work for no added pay. To make it worse, the information needed to complete form 855NY isn’t captured by most databases so, unlike the certificate itself, it won’t be computer-generated. Furthermore, answering the questions requires that the person completing the form have a working knowledge of insurance. The only possible positive for producers is that it may reduce the demand for special wording. Legislation to specifically bar such demands has passed both the NY Senate and Assembly, but appears stalled waiting for the Governor’s signature. He vetoed similar legislation last year. As of this writing (7/31/14) there’s no news. Why does almost everyone want to be added as an additional insured? Putting aside what you said to your mother---“all the other kids do it”---there are good reasons. Basically it’s letting someone else pick up the check. In risk management parlance, that’s called risk transfer. For self-insureds or insureds with high deductibles or retentions, the need is obvious because payments made by someone else go right to the additional insured’s bottom line. Do the others really need to be added as additional insureds? Yes. The most compelling reason for most additional insureds is protecting their own insurance loss records. In the long run, insureds pay their
own losses. Even in the short run, the impact of claims on premiums can be dramatic. And, of course, additional insurance at no direct cost is always welcome, particularly for liability insurance for which no one knows how high is up. In addition, it’s good risk management practice to have financial responsibility for accidents fall on the one closest to the work. The plumbing contractor is better equipped to enforce safety on the job than the building owner who may be located miles away and not know a wrench from a screwdriver. Additional insureds should tailor their contracts to take best advantage of the form. For producers my advice is much simpler: Take two aspirin and call your lawyer in the morning. Below are my thoughts about how additional insureds can use the new form.1 Let’s look at the form on the opposite page. The letters below refer to items in the 855NY form. A. Insurer The reply to this question indicates whether the forms used in the policy were filed with the NY Department of Financial Services (DFS). Forms used by admitted and authorized insurers are filed with and reviewed by the DFS except for policies written in the free trade zone. Free trade zone policies are also written by admitted insurers and are not insignificant. They account for more than $2.8 billion in premiums in New York—seven insurers write more than $100 million a year each.2 The form should have called for separate answers about free trade zone and excess line policies because only admitted or authorized insurers are covered continued on page 18
Jerome Trupin, CPCY
Jerome “Jerry” Trupin, CPCU, is a partner in Trupin Insurance Services located in Briarcliff Manor, NY. He provides property/casualty insurance consulting advice to commercial, nonprofit and governmental entities. He is, in effect, an outsourced risk manager. Jerry has been an expert witness in numerous cases involving insurance policy coverage disputes and has taught many CPCU and IIA courses. Jerry has spoken across the country on insurance topics and is the co-author of over ten insurance texts used in CPCU and IIA programs including Commercial Property Risk Management and Insurance and Commercial Liability Management and Insurance. He regularly contributes articles to CPCU Society publications, the Insurance Advocate, and others. He can be reached via email at atjtrupin@aol.com. Thanks to Jerry Trupin for this article and to the CPCU Society for letting us reprint it.
1 My comments are from my perspective as an insurance consultant. I'm not an attorney. These suggestions should be reviewed by an attorney before they are incorporated into contracts or other documents. 2 Derived from email from Peter H. Bickford, Esq. received 7/24/14 3 Some of these comments are based on an email message from Dan Corbin CPCU, CIC, LUTC Director of Research, Professional Insurance Agents, Glenmont, NY. Dan was part of the group that worked on creating the form.
INSURANCE ADVOCATE / August 18, 2014 17
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LIC
[ COVER ] continued from page 17
by the NY Property/Casualty Security Fund (colloquially called the Guaranty Fund). If only the “excess line and free trade zone” is marked, the additional insured will have to be sure the insurer is admitted. I think both boxes should be checked if it’s a free trade zone policy written by an admitted insured, but this may not happen. You can search for admitted/authorized insurers on the DFS website: https://myportal.dfs.ny. gov/web/guest-applications/ins.-companysearch. I recommend that clients require coverage that is provided by admitted or authorized insurers. If the insurer is not admitted or authorized, I recommend that
the certificate be rejected unless the additional insured is willing to accept a nonadmitted insurer. I recognize that for certain lines of insurance non-admitted insurers are the most common insurers and sometimes the only ones available. If an additional insured accepts a non-admitted insurer, it should be certain that the insurer is eligible to write non-admitted business in New York. Not all insurers are. The Excess Line Association (ELANY) website lists eligible insurers: http://www.elany.org/es.aspx?m=elf3 Eligible insurers file financial statements and other documents with ELANY as required by New York Insurance Regulation 41. ELANY points out that New York insurance law, in addition to filing requirements
AGENCY CUSTOMER ID:
ADDENDUM INFORMATION (continued)
imposed on insurers, requires brokers to use “due care” in selecting the unauthorized insurer. B. General Liability (CGL) Policy Form One answer for this item lumps ISO forms with ISO modified forms. That’s not helpful. “ISO modified forms” can encompass a multitude of sins. My recommendation is that contracts require a specific ISO form including the edition number. The additional insured should also have the right to obtain copies of policies and endorsements when it feels that’s necessary. The second answer is “other.” That almost always means wording that differs from current ISO forms. Whichever box is checked, a copy of the form should be reviewed by someone knowledgeable about coverage to see if it is acceptable.
J. Earth movement, excavation or explosion / collapse / underground property damage is excluded or restricted (GL policy Yes and
No changes made no other option is available with this insurer
K. Insured vs. insured suits (cross liability in the ISO CGL policy) are excluded or restricted (other than named insured Yes and
No changes made no other option is available with this insurer
L. Property damage to work performed by subcontractors (exception to the "damage to your work" exclusion in the ISO CGL p or restricted Yes and
No changes made no other option is available with this insurer
M. Excess / umbrella policy is primary and non-contributory for additional insureds Yes, by specific policy provision Yes, by endorsement
No and
AUTHORIZED REPRESENTATIVE SIGNATURE
no other option is available with this insur
DATE (MM/DD/YYYY)
C. Specific Operations Excluded or Restricted (CGL policy) If any operations are excluded or restricted, the additional insured will need a copy of the exact policy wording. If important operations are excluded or restricted, the certificate should be rejected. D. Additional Insured Endorsement This is another item that doesn't provide sufficient information. If the “other” box is checked, the additional insured definitely needs a copy of the endorsement. I'd want one even when one of the ISO boxes are checked as they don't specify which edition of the form is being used.4 There's a tremendous difference between editions. The consensus of risk managers is that the 11 85 version of the CP 2010 additional insured endorsement is the “class act.” It’s still available from ISO, BUT it’s very hard to get. Some contractors (generally large ones that spend a lot of money on insurance) can get it. Current additional insured forms do not include complete operations. For an additional insured to receive completed operations coverage, the Additional Insured - Owners, continued on page 20
ACORD 855 NY (2014/05)
Page 2 of 2
4 Corbin Op. cit. Dan Corbin commented that the intention was that a check in the ISO box would indicate that the current version of the form was used. If the current form wasn’t used, the form number and edition date are to be entered as “other” even if it is an ISO form. That can be confusing as not all insurance companies immediately adopt ISO changes. Furthermore, the 855NY form may be reviewed years after it was generated, making it even more difficult to determine just what edition of the endorsement was used. I think ACORD should have called for the edition date. 5 ACORD Instruction Guide (https://www.acord.org/) ACORD forms and guides are available without charge by registering at the website.
18 August 18, 2014 / INSURANCE ADVOCATE
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LICONY
ADVERTOR IAL
LICONY
A Majority Agrees Life Insurance is Needed, But Do You Have It?
M
any individuals, families, and businesses are still without life insurance or do not have enough insurance to provide essential, financial protection for their loved ones and their business associates. This is a major problem for many across the state of New York, and for the policymakers who serve them. For without life insurance, what or who will provide this financial protection? When life insurance is in place, life insurers provide the funds to cover the mortgages and car loans, continue paying for education, continue making the business payroll, continue to operate the family business, and provide financial assistance for other needs. While 80 percent of adults believe that most people need life insurance, only one in five people are very likely to recommend it, according to LIFE Happens and LIMRA. Furthermore, one in four Americans say they need more life insurance, but only 10 percent are very likely to purchase a policy within the next year1. The life insurance industry can only serve the public to the extent that they actually apply for and purchase this vital coverage. As of 2012, New York State residents own eight million individual life insurance policies, with coverage averaging $179,000 per policyholder. Group life insurance coverage in New York State amounts to $668 billion. This may seem to be an ample amount of coverage, however, while 68 percent of New York house-
…while 68 percent of New York households have life insurance, the average household owns enough to replace only 3.4 years of income. holds have life insurance, the average household owns enough to replace only 3.4 years of income.2 That’s not very long. For its part, the life insurance industry continues to work with New Yorkers so that they have the life insurance coverage they know they need. In fact, September is Life Insurance Awareness Month, and while every day is important to help people understand their life insurance needs, the industry further bolsters its efforts to educate and encourage consumers to purchase the important protection life insurers provide. The life insurance industry pays billions to New Yorkers annually—$27 billion in in 2012 ($104 million every business day)— and has the financial strength to continue paying. At the same time, the industry has the capacity to provide financial security to more families and businesses. Certainly the current state of the economy is a factor, but as the economy continues to improve, will we see a change in levels of life insurance coverage? That is a serious question. The Life Insurance Council of New York, Inc., along with its many life insurance company members, continue to work to have as many New Yorkers covered as possible. We know that state policymakers can make a positive difference by enacting legisltative proposals and simplifying the regulatory environ-
ment that facilitate the availability of life insurance products in New York State and encourage more consumers to secure this critical protection. Most New Yorkers know there is a great need for more life insurance protection. The life insurance industry and the state public policymakers in New York need to continue to work together to enact statutes and promulgate regulations that foster the purchase of this vital protection. [IA] Thomas E. Workman is the President and Chief Executive Officer of the Life Insurance Council of New York, Inc. LICONY is the principal voice of the life insurance industry in New York. LICONY works to create and maintain a legislative, regulatory, and judicial environment that encourages its members to conduct and grow their life insurance businesses here in New York State. For stories about New Yorkers who have benefitted greatly from purchasing the products of life insurers, go to www.licony.org, click on “Published Articles” in the NEWSROOM box on the homepage. 1 Source: LIFE Happens and LIMRA’s Life Insurance Barometer Study, 2014. 2 Source: LIMRA estimates for New York based on Closing the Life Insurance Gap: One Household at a Time, 2012.
O: (212) 986-6181 F: (212) 986-6549 551 Fifth Ave., 29th Floor, New York, NY 10176 website: www.licony.org INSURANCE ADVOCATE / August 18, 2014 19
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[ COVER ] continued from page 18
Lessees or Contractors - Completed Operations endorsement is needed. The number is CG 2037. The 07 04 and 10 01 versions are preferable to the 04 13 one. The additional insured’s contract should require form numbers with specific editions and the certificate should be rejected when it doesn’t meet requirements. E. Primary and Non-contributory CGL policy The additional insured’s contract should require that the insurance provided will be primary and non-contributory to any other insurance available to it. A “No” answer should generate a rejection of the certificate. There is a potential gray-area when the answer is “Yes.” Recent ISO CGL forms state that the policy is excess over any other primary insurance available to the insured when the insured has been added as additional insured by endorsement. However, ACORD, in the instructions for the 855NY, indicates that it may not work in all cases.5 Furthermore, not all liability policies include this provision. ISO has provided a solution to this problem: Endorsement CG 2001 0413 Primary and Noncontributory - Other Insurance Condition. The endorsement states that the insurer will not seek contribution from the policy of the additional insured if there is an underlying written contract or agreement stating that the coverage for the additional insured must be primary and noncontributory. The additional insured should require that endorsement CG 2001 0413 be attached to contractors’ CGL policies and should require that the contractors’ policies be primary and noncontributory. F. Additional Insured Will Receive Advance Notice If Insurer Cancels Additional Insureds want advance knowledge of cancellation. Few policies provide it and it is very difficult to obtain. Unless you have the negotiating upperhand, you'll have to accept what the policy provides. Last month, I wrote about the City of Atlanta Law Department’s decision to stop asking for written notice of cancellation and to ask instead for a copy of the notice of cancellation within two days of receipt by the contractor. That may be a 20 August 18, 2014 / INSURANCE ADVOCATE
wise alternative for most additional insureds. G. Blanket Contractual is Removed or Restricted—CGL policy If the “Blanket contractual liability” definition has been removed or restricted, the policy is not equal to ISO standard coverage and should be rejected. H. Insured Contract exception to the employers liability exclusion is removed or modified--CGL policy If the "Insured contract" exception to the employers liability exclusion is removed or modified, the policy is not equal to ISO standard coverage and should be rejected. I. Policy Does Not Cover Injury Claims by Employees of the Named Insured or Subcontractors–CGL policy If this question is answered “Yes,” reject the certificate. A “yes” answer means that the CGL policy does not cover the additional insured for claims involving injury to employees of the named insured or subcontractors. The draconian provisions of NY Labor Law Sections 240 and 241 MAKE THIS A SERIOUS PROBLEM IN NY. I’ve written extensively about this problem in the past.6 J. Earth Movement--CGL policy If “Earth movement, excavation or explosion / collapse / underground property damage” is excluded, reject the certificate when the project involves that type of work. K. Insured vs. Insured If this question is answered “Yes,” meaning that insured vs. insured suits (sometimes referred to as “cross liability”) are excluded or restricted, reject the certificate unless the exclusion is limited to named insured vs. named insured. L. Property Damage to Work Performed by Contractors or Subcontractor If this question is answered “Yes,” it means that property damage to work performed by subcontractors (exception to the "damage to your work" exclusion in the ISO CGL policy) is excluded or restricted. This is an undesirable exclusion. If you have negotiating power, reject the certificate.
M. Excess/umbrella policy is primary and non-contributory for additional insureds The situation for primary and non-contributory is even more complex for excess/ umbrella policies than for CGL coverage. By definition, excess/umbrella policies require that the underlying policies pay first. Arguments arise over whether the contractor’s excess/umbrella insurance must be exhausted before the additional insured’s excess/umbrella coverage starts to contribute. Further, some claims can involve a number of years’ policies, which generates arguments over whether all primary policies must be exhausted first.7 Nevertheless, additional insureds should require that the contractor’s excess/umbrella policies be primary and non-contributory to any other insurance available to the additional insured. If the contract contains such a provision, reject the certificate when this question is answered “No.” The 855NY form is a great step in the right direction. However, it is much more complex than certificates of insurance, which are often incorrectly completed. I fear that many 855 addenda will be in error. The additional insured may have little recourse when the certificate misstates coverage. The 855NY form and the certificate of insurance both clearly state that they do not amend, extend or alter the coverage afforded by the policies. Thus, a contractor’s insurance company may be able to dodge the claim unless it issued the certificate. It’s rare to see certificates issued by insurance companies. There will, without a doubt, be lawsuits against producers by additional insureds who find themselves with phantom coverage. My layman’s opinion is that they will not succeed in imposing liability on the broker who issued the erroneous 855NY form. When it was issued by an agent, it may be a different story. We’ll have to wait and see. In the meantime, make sure you have good E&O coverage. [IA] 6 For example, see: Jerome Trupin “Certificates of Insurance in the News Again” Insurance Advocate June 9, 2014 page 12 and Jerome Trupin “Perfecting Clients’ Protection is a Moving Target” Insurance Advocate September 10, 2012 page 16 7 Op. cit. The ACORD guide to the 855NY form has a good discussion of this problem:
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BRIDGES RIDGE ES TO SUCCE S SUCCESS CCESS networking, tworking ng, education education and and growth growth
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[ ON TH E LEVEL ]
By N. Stephen Ruchman, CPA
Goodbye, Lazy Days of Summer
W
hat a summer it’s been. I’ve been growing corn on my deck—yes, my deck!—with seeds I bought online that are made for growing in containers. Judging by their height, I’d say it’s time to start thinking about autumn.
a 5.61 earned-run average. Over the course of his 23-year career, Maddux improved, retiring with a .610 winning percentage and a 3.16 ERA. Tom Glavine was pursued by franchises in both baseball and hockey. After a first season that probably had him thinking he
A positive voice is important. Never underestimate the power of swagger. You just have to demonstrate to your clients that their need for insurance exists, and you have to have enough confidence in yourself to receive confidence from them. N. Stephen Ruchman
Earlier in July, I watched the Baseball Hall of Fame induction ceremony. It’s another tradition of the season, and some of my favorite ball players were inducted this year, so I made a point to see it. Something struck me while I was watching: Every single player named to the Hall of Fame this year had some degree of failure before being recognized as great. Though he had a promising start, Greg Maddux ended the 1987 season 6-14, with
should have gone the hockey route, Glavine posted only three more losing seasons over the next 18, and led the Braves to the National League West title in 1991. He later earned his first of two Cy Young Awards after they advanced to their first World Series. Frank Thomas, nicknamed “The Big Hurt,” started out as a football player for Auburn, but switched to baseball in the end. Finally at home, he piled up the num-
THE BASEBALL HALL OF FAME, COOPERSTOWN, NEW YORK 22 August 18, 2014 / INSURANCE ADVOCATE
bers with a .347 season batting average, the first of 10 .300-plus seasons in his 19-year career (eight of which were consecutive). Bobby Cox played third base for the Yankees in the late 1960s. After his playing days were cut short by injuries, he set out on a trail that led to a long and successful career as one of the game’s most highly regarded managers. Tony LaRussa, famous manager of the Chicago White Sox, Oakland Athletics, and St. Louis Cardinals, didn’t start off wanting to manage. He wanted to be a big league player, then, he wanted to be a lawyer. But when he finally found his true calling, he quickly took his place as one of the best skippers the game has ever seen. Finally, Joe Torre, topping my list of favorites. Joe Torre came to the Yankees with decades of on- and off-field experience. If not exactly storied, his career certainly had been deserving of respect. Yet, in 1996, when Yankees Owner George Steinbrenner hired Torre as his team’s manager, the media criticized the decision. But, Torre led New York to 92 wins that first season before winning the World Series. The rest is a history we all know, and I’d definitely call it “storied.” Despite their ups and downs, there is no disputing this is a group of baseball greats. While I watched the Hall of Fame game and celebrations, I began to think
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about my own career and business. Like the inductees, we’ve all had ups and downs. Some of us came to our careers unexpectedly and some considered detours along the way. But the strongest analogy insurance has to baseball must be about sales. The truth is; great ballplayers are lucky if they have a .300 batting average. That means they are successful if they hit three out of 10 times at bat. So it is with sales. As a salesperson, how many times are you going to hear “No” before you hit a home-run or even get on base? And, just as in baseball, resiliency is what makes a great player—and salesman. As I watched the biographies on TV, I noted that each player or manager had major setbacks. But, despite what might have permanently benched a lesser player, they kept on going. They believed in their talent, loved their sport, and they worked hard. Also, we need our own cheerleaders: managers; friends; parents; mentors; and most often, spouses. When I first started, I was single, with a thin book of business and
…resiliency is what makes a great player… not much in the way of prospects. But my father was behind me, pushing me to make my goals. After my wife and I married, we struggled together; sometimes when I felt like I didn’t have it in me anymore, she was my motivation and positive voice. A positive voice is important. Never underestimate the power of swagger. You just have to demonstrate to your clients that their need for insurance exists, and you have to have enough confidence in yourself to receive confidence from them. While I love baseball almost as much as insurance, I have to give credit to the National Baseball Hall of Fame Museum for their extensive biographical information, which helped me write this column. If you have any time left this summer, I recommend you get out and see it in Cooperstown, NY. I promise you’ll be inspired [IA].
N. Stephen Ruchman, CPIA, is a retired partner of B&B Coverage LLC, 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 has sat on, or chaired, nearly every committee including the Executive Committee and the Long Island Advisory Council and PIANY’s Political Action Committee. A graduate of Michigan State University, with a major in insurance, Ruchman is past president of the Peninsula Counseling Center and a member and past president of the Rockville Centre Chamber of Commerce board of directors. He is division chair for the Insurance Division of the United Jewish Appeal and has served on the business advisory board of The First National Bank of Long Island. He can be reached via email at nsruchman@gmail.com.
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[ FACE TO FACE ]
By Michael Loguercio
You’re Gonna Need a Bigger TV
I
f you have ever watched television, surfed the web, picked up a newspaper, been on Facebook, Twitter, or LinkedIn, spoken with your kids since last August, or if you have been to a Dunkin Donuts, then you know that today begins “Shark Week” on The Discovery Channel!
sharks are also common visitors from the shores of Monmouth County up through Long Island and even as far north as Boston Harbor. For instance, New Jersey is the most common place to find a Mako Shark, and many Dogfish (another little known shark) are common in the Great
Although only about twenty of the world's three hundred and fifteen species of shark are known to frequent this part of the Atlantic, many other types of sharks are also common visitors from the shores of Monmouth County up through Long Island and even as far north as Boston Harbor. Michael Loguercio
Although I am a huge fan of state, local, federal and religious holidays, birthdays, and even a fan of the Mets, Jets and Rangers (call ME a three time loser!),Shark Week is still my most favorite time of the year. It’s the time when families come together for hours on end; dinner is had in the living room with the TV on, kids are allowed to stay up late, folks put down their cell phones (except to tweet how frightened they are to watch The Discovery Channel) and not many children are conceived during this most exciting week of television! So why all the excitement over sharks, and why are so many folks fascinated over a fish that has been around longer than the cockroach? Well, for one thing, most people who live along the states that border the North Atlantic aren’t really too concerned with shark attacks because they believe that Jaws “doesn’t live in my back yard.” Sorry, but with this attitude you’re likely to find yourself to be “chum” for others who are also non-believers. Tens of thousands of sharks flourish in the warmer months in this area from depths of three to fifteen feet, to the deeper waters many miles offshore. Although only about twenty of the world's three hundred and fifteen species of shark are known to frequent this part of the Atlantic, many other types of 24 August 18, 2014 / INSURANCE ADVOCATE
South Bay of Long Island as they feed on small blue fish. According to the “International Shark Attack File” (ISAF, yes, this really does exist!), there were 47 unprovoked shark attacks in the United States in 2013 and 72 unprovoked attacks worldwide. As a matter of fact, unprovoked shark attacks have steadily increased in numbers since 1900, with each decade having more attacks than the previous one. However, in all fairness to sharks, their dietary tastes have not changed over the years. As the ISAF explains, this number probably has more to do with the increasing amount of time humans spend in the ocean. The ISAF goes on to explain that while the global population of humans continues to be on the rise, shark populations are actually declining due to over-fishing and loss of feeding grounds. The abundance of sharks in a particular geographic area is due more to meteorological and oceanographic conditions, which increases the risks of a close encounter of the Jaws kind. North American waters are still the most common location for a shark attack, making the United States more vulnerable for shark attacks. While a shark attack is still extremely unlikely, any beach-goer should still be very careful. To reduce the possibility of a
shark attack, there are certain precautions that the ISAF suggests: • Always swim in a group, especially since sharks are more likely to attack a solitary individual; • Avoid swimming in the dark or at twilight hours, as this is when sharks are most active and have a sensory advantage over humans; • Do not wander too far from shore; • Do not enter the water if bleeding from an open wound, as the blood attracts sharks; • Avoid wearing shiny jewelry in the water, as the sheen from reflected light can resemble fish scales; • Try to avoid murky waters or those being used by commercial fishermen; • Be careful in areas between sandbars or near steep drop-offs, as sharks are more likely to frequent these waters; • Do not go in the water if sharks are known to be present, and leave the water immediately if a shark sighting is reported; • Do not, under any circumstances, harass or provoke a shark if you see one. If you see a shark while you are in the water, stay calm and swim quickly but smoothly back to shore or deck. If the shark attacks, try to hit it on the nose with an object or your fist. If the shark bites, be as aggressive as you can and try to strike sensitive areas such as the eyes or gills. Playing dead will not help, as this just makes the shark’s only purpose in life (well, the other is “making little sharks”) easier. When the shark releases (good luck with that!), get out of the water as quickly as possible (trust me on this one!) as any blood in the water will likely encourage the shark, along with a plethora of his closest friends, to return and take another bite out of your butt. By the way, if you weren’t in the water in the first place, this whole plan of escape would most likely be moot. While shark attacks are more uncommon than being fatally struck by lightning, the following states have reported the most unprovoked shark attacks from 1837 to 2013. continued on page 26
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[ FACE TO FACE ] continued from page 24
10. Alabama and New York – 8; 9. Georgia – 12; 8. New Jersey – 15; 7. Oregon – 26; 6. Texas – 38; 5. North Carolina – 48; 4. South Carolina – 77; 3. California – 110; 2. Hawaii – 129; 1. Florida – 687. Why is Florida holding the dubious distinction of most unprovoked shark attacks in the United States? Well, with over 1,400 miles of coastline kissing warm ocean waters year-round, Florida averages approximately 21 attacks per year (from 2003-2012), and therefore experiences approximately 49% of the unprovoked attacks in the country. Volusia County (east coast of Florida, in the Daytona Beach to the Cape Canaveral area) experiences the most attacks within the state of Florida, as the county has recorded more than a third of all of Florida’s shark-human attacks to date. This is mostly attributed to the fact that it is also one of the most highly visited beach areas in the state. Hawaii is not too far behind Florida, with 13 attacks in 2013. This proved to be the highest total of attacks since 2012 (ten), and much higher than its ten-year annual average, which is just over four each year. Most shark attacks in Hawaii have occurred on the island of Maui, where four attacks were reported in 2013. Hawaii’s only fatal attack of 2013 was also reported from Maui—the first in Hawaii since 2004. The Big Island follows Maui with a reported four attacks in 2013, and single attacks were reported from Kauai and Oahu. So as you know from reading my column since the 33rd anniversary of the release of the film Jaws, everything I typically say relates back to this thing of ours, and my love and intrigue of sharks is no different. Although not too many sharks that I know (except those who star in my other favorite television show, “Shark Tank”) carry personal injury insurance, it’s important to remember something when traveling abroad: that health insurance coverage may vary and that it’s imperative to remind your clients who may be traveling to other 26 August 18, 2014 / INSURANCE ADVOCATE
countries that they may or may not have coverage for certain types of injuries and related expenses to such injuries…shark attacks included. For instance, according to a case described in “Insurance Marketing HQ” magazine, there was a very notable instance involving a Florida man who in 2010 visited a foreign country and was attacked (and lived to be a part of this insurance nightmare and ordeal) by a local shark. As described in “Insurance Marketing HQ”, Luis Hernandez was swimming off a boat in the Bahamas when he was attacked by a shark that shredded his arm to pieces. Blessed to be saved by his wife who pulled him safely onto the boat, the man literally had to sit and wait, bleeding in a large transport plane while his credit card was run for $7,500, covering the cost of the medical evacuation. Also using his credit card, the shark-bitten man was able to pay an additional $13,000 for Bahamian medical care and transportation to a specialized U.S. hospital, but all told, Luis was on the hook for close to $700,000 in medical costs for surgery and recovery. Facing financial ruin and reduced mobility with his arm, Luis followed all the protocols of his insurance company, which were extensive, and was able to recuperate his medical expenses while gaining 70% of his arm strength. Despite the somewhat happy ending, this whole scenario raises many questions about health insurance coverage when travelling out of the country. The fact is, not all health insurance plans operate the same when you leave the country. Fortunately, the government has taken steps to provide information for those travelling abroad by creating the Travel.State.gov website. On its homepage the site states the following: Before going abroad, learn what medical services your health insurance will cover overseas. If your health insurance policy provides coverage outside the United States, REMEMBER to carry both your insurance policy identity card as proof of such insurance and a claim form. Although many health insurance companies will pay “customary and reasonable” hospital costs abroad, very few will pay for your medical evacuation back to the United States. Medical evacuation can easily cost $10,000
and up, depending on your location and medical condition. Well, that’s all for now, as I have to prepare dinner for the opening of “Shark Week” later on this evening! So, until next time, stay out of the water and Ciao for now! [IA] Michael Loguercio is the Regional Sales Manager for EZLynx; and has been active in the insurance industry since 1978 as a licensed insurance broker and an insurance technology professional. He is an active Past President of the Young Insurance Professionals of New York State, current ACT/AUGIE, Professional Insurance Agents of New York State, Independent Insurance Agents and Brokers of New York State, and Council of Insurance Brokers of Greater New York committee member. NY-YIP/PIA has honored Michael with a “Distinguished Service” award in 2001; “Insurance Professional of The Year” award in 2009; “Lifetime Achievement” award in 2012; and “Special Service” awards in 2013 and 2014. In his community, Michael is the Immediate Past President and current member of the Longwood Central School District Board of Education on Long Island, NY since 2004; is a Director on the board of REFIT NY (Reform Educational Financing Inequities) and is a member of The Middle Island, NY, Rotary Club; Central Brookhaven Lion’s Club; and Ridge, NY, Volunteer Fire Department. He also served two terms on his Church’s vestry, and in 2013 he was awarded the SCOPE “Community Service” award for his dedication to the public. Michael is a regular Contributor to the Insurance Advocate since 2008, and may be contacted at 631-345-9359 or michael.loguercio@ezlynx.com.You may also follow him on Twitter @MLoguercioJr; and on Facebook @ Michael Anthony Loguercio Jr.
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[ IN THE ASSOCIATIONS ]
PIWA Hotline: Newest Benefit for Wholesalers and Members
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LENMONT, N.Y.—The Professional Insurance Wholesalers Association of New York State Inc. has announced a new, exclusive member benefit designed to provide quick, practical guidance on day-to-day issues facing
the insurance wholesaler. The association will launch a toll-free phone line, called the PIWA Hotline, at (844) FOR PIWA or (844) 367-7492, by which members will receive free general guidance from renowned insurance law expert Milton Thurm, Esq.,
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who is admitted to practice law in New York, Florida and other jurisdictions. Questions may also be submitted via email at piwahotline@piwa.org. “PIWA members deal with complicated issues that are specific to the wholesale/excess and surplus lines broker, and these seem to grow in complexity every day. To help members, PIWA is providing practical guidance on our members’ specific questions that arise from the wholesaler side of the insurance business, separate and apart from questions applicable to the brokerage industry in general,” said PIWA President Maya Cruz, CPCU. “... issues such as premium collection; direct communication with insureds; claims situations and complaints; and issuance of insurance certificates, just to name a few. In addition, PIWA will monitor court decisions in New York and elsewhere and keep members advised of the latest trends and developments in cases involving the wholesale brokerage industry.” Members who call the PIWA Hotline will speak with an industry and legal expert with many years of experience in representing brokers in general, and wholesale/excess and surplus lines brokers in particular. The Hotline is intended to provide responses to inquiries quickly, recognizing that the answers to some questions require greater research, depending on the nature and complexity of the issues involved. Limited legal research will be undertaken when necessary in order to answer the question. Established in 1978, the Professional Insurance Wholesalers Association of New York State Inc. is a trade association of New York state insurance wholesalers serving retail insurance producers with specialty and excess-line markets. (NB: No attorney-client relationship will be established between the caller and legal professional as a result of inquiries made to the PIWA Hotline, although every effort will be made to provide guidance in accordance with established case law and existing statutes. By using the hotline, users acknowledge that PIWA is not liable or responsible with respect to any guidance offered by the legal professional and that PIWA specifically disclaims any liability or responsibility with respect to actions taken or not taken by users as a result of such guidance.) [IA]
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[ IN THE ASSOCIATIONS ]
InVEST Awards 70 Academic Student Scholarships
I
nVEST has awarded $87,000 in scholarships to 70 students pursuing insurance-related degrees, breaking previous scholarship records. The program is a key incentive in attracting new talent to the insurance industry. Many of the winners are from New York schools. “InVEST congratulates the 70 students representing 17 schools and from eight states who earned scholarships this year,” says Robert G. Slocum, CPCU, CIC, InVEST board chair and president of The Slocum Agency, Inc., an independent agency in Warwick, R.I. “InVEST develops future industry professionals by educating high school and college students about insurance, risk management and financial services. Students from more than 500 InVEST programs across the country are equipped with knowledge to help them pursue careers in an agency, company or other insurance industry organization.” InVEST contributes to the education and development of future insurance professionals through academic programs and scholarships. In high schools, the program offers students a business curriculum which teaches them about the dynamics of insurance agencies and companies. At the college level, the program develops students’ risk management and financial analysis skills. Along with direct contributions, scholarships are funded through proceeds generated by the InVEST Silent and Live auctions held in conjunction with the Independent Insurance Agents & Broker’s (IIABA or the Big “I”) Legislative Convention. “A successful InVEST program is critical not only to the future of the independent agency system, but to the insurance industry as a whole and to the financial literacy of our young people,” says Robert Rusbuldt, Big “I” president & CEO. “Many are concerned that the average age of an insurance professional is around 54 and as baby boomers retire, the InVEST program has the potential to replenish our workforce and produce the next generation of industry professionals and leaders.” InVEST awarded two Bob Betters Memorial Scholarships and one Classroom to Career Scholarship. The Bob Betters Scholarship is the newest component of the InVEST program and was established in 2011. The scholarship
awards the highest dollar amounts; this year they are $5,000. Bob Betters with Watson Insurance Agency in Gastonia, N.C., passed away in February 2011, after battling brain cancer. Betters, who was appointed to the InVEST board of directors in 2009, served as the InVEST state champion for North Carolina. The InVEST board has agreed to award the top scholarships for five years to honor his commitment to the InVEST program. The Classroom to Career was developed for students who would like to enter the insurance industry immediately after graduating from InVEST. These students are eligible for $500 reimbursement for licensing or designation expenses. This year’s scholarship winners represent 18 schools and hail from California, Florida, Georgia, Illinois, Michigan, New York, Texas and Virginia. Here are the New Yorkers: $3,000 Scholarship Winners: • Ashley Palmer, Dryden High School, Dryden, N.Y. $2,000 Scholarship Winners: • Peyton Holl, Groton Central School, Groton, N.Y.
• Josh Hutchinson, Dryden High School, Dryden, N.Y. • Katherine Johnson, Dryden High School, Dryden, N.Y. • Taylor Schneider, Dryden High School, Dryden, N.Y. $1,000 Scholarship Award Winners: • Jonathan Becker, Dryden High School, Dryden, N.Y. • Kimberly Horner, McGraw Central High School, McGraw, N.Y. • Jordan Lynch, Dryden High School, Dryden, N.Y. • Troy Sutfin, Dryden High School, Dryden, N.Y. $500 Scholarship Award Winners: • Dylan Clapp, Dryden High School, Dryden, N.Y. • Tiffany Clark, McGraw Central High School, McGraw, N.Y. • Rachel Poirier, West Seneca West Senior High School, West Seneca, N.Y. • Courtney Poirier, West Seneca West Senior High School, West Seneca, N.Y [IA]
NEW YORK JOCKEY INJURY COMPENSATION FUND, INC. Open for Proposals for Coverage for 2015
The New York Jockey Injury Compensation Fund, Inc. (“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 workers compensation insurance for the following year. The “Fund” is now seeking offers for providing this coverage for the 2015 policy year. The current premium is in excess of $4 Million Dollars. The New York Jockey Injury Compensation Fund, Inc. will commence its twenty fourth year of actual operation on January 1, 2015. 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 race tracks 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, conditions and policy specifications regarding interest in presenting an alternative to the “Fund” may be obtained by contacting Karen Fenzl, c/o 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.
INSURANCE ADVOCATE / August 18, 2014 29
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[ ON TH E LEVEL ]
By Jamie Deapo
Staying #1 in Your Client’s Mind
T
he world of the independent agent and broker is changing rapidly and in many areas. Sometimes it seems things are changing so quickly it’s impossible to keep up. Competition is fierce. Clients are demanding more service, completed
tion of your clients and prospective clients. Many of them are more highly automated and have people on staff that are very effective in using social media. If you’re not able to keep your clients attention and nurture a positive relationship with your client’s they
Failure to provide exceptional customer service and to nurture your client relationship via your agency’s website, blog and social media leaves the door open for your carriers or your competition to take over. In a highly competitive marketplace like we have today an agency can’t afford to allow that to happen or it could spell disaster for its future. Jamie Deapo
faster and taken care of when it’s convenient for them. Running an agency isn’t getting easier and finding, training and retaining quality staff can be a nightmare. Add to that the ever increasing demands for volume by carriers and it’s no wonder agents and brokers are pulling their hair out. On top of all that, agencies are being advised that they need to get more involved in social media and digital marketing; an area that only a few years ago wasn’t really a factor. Effectively using social media is foreign to many agencies. Their confusion is only magnified by all the “experts” and consultants out there overwhelming them with a mountain of completely foreign techno babble. Many have come to the realization that there isn’t anybody on their current staff with the necessary knowledge to handle this important area. Others are trying the best they can. Still others have decided to take a wait and see attitude convinced this may just be a passing fad. Where do you stand? Social media is all about relationship building and there couldn’t be a more important time for agents and brokers to maximize their relationship with their clients and potential clients. Because of increased competition there are an increasing number of insurance providers vying for the atten30 August 18, 2014 / INSURANCE ADVOCATE
will move in and try to replace you. Remember some of them have enormous budgets earmarked for advertising. They are not the only folks you have to be worried about. Part of my role here at IIABNY is staying on top of what is occurring with independent agent carriers. It means reading tons of articles, blogs and white papers. One very significant trend I have noted over and over is carriers coming to the realization that they have to replace their existing legacy system with one that is more effective and consumer friendly. These articles encourage carriers to adopt new customer engagement models. Apparently the message is getting across as over 75% of carriers ranked this as a first or second priority. Carriers realize that consumers are demanding easily accessible information that allows them to research and educate themselves on insurance. They also want easy access when necessary via mobile apps on smartphones and tablets like the iPAD. This even extends over to claims with mobile apps available to report a claim and get the claims process started. Development and retention of current data on clients/consumers is called Big Data and offers carriers the ability to do predictive modeling and analytics. They want to leverage this new customer engagement by obtaining as much pertinent information
about the client as possible. This data then allows them to better analyze and predict profitability. The use of telematics is a great example of this. Customers and prospects are encouraged to plug a device into their car that provides the carrier with a wealth of information relative to their driving habits for the possibility of saving premium. This just further ties the customer to the carrier who owns that information and allows the carrier to better choose clients to insure long-term based on an analysis of the information provided. For quite some time agents have been proud of the fact that when you asked their clients who they were insured with they would say the agent or agency. That was reflective of the deep seated relationship the client felt with that agent or agency. The changes I outlined previously in this article will very likely affect that relationship possibly taking the agent out of this role in the future. Clients may start to recognize and value the relationship with their carrier over the one they currently have with their agent. That is definitely something I don’t believe any agent wants. In order to combat this it’s important that agents nurture and solidify their relationship with their client. Social media is an important part of doing exactly that. Coupled with a customer centric, highly effective agency service model you are almost assured of retaining the primary and most important relationship role with your client. Failure to provide exceptional customer service and to nurture your client relationship via your agency’s website, blog and social media leaves the door open for your carriers or your competition to take over. In a highly competitive marketplace like we have today an agency can’t afford to allow that to happen or it could spell disaster for its future. Social media is not a passing fad. It’s the current model for nurturing a relationship with clients and prospects. It may evolve in the future but for now it’s the way to go. Sift through the techno babble, learn how to use it effectively and then make it a part of your overall operation. It may involve an investment initially however you won’t regret it in the future. [IA]
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[ ON M Y RADAR ]
By Barry Zalma
Insurers Must Avoid the Gastonette; Insurer’s Duty is to the Insured
I
nsurance policies of all types have contribution or excess clauses. Sometimes the clauses conflict and when two insurers insure the same risk both will claim that the responsibility lies with the
health insurance for Teamsters and their families. Guarantee Trust, an insurance company, provides sports injury insurance for student athletes. This case involves thirteen high school and college students, all
Guarantee Trust’s contract answers the question another way. The contract contains a blanket coordination-of-benefits rule. If insurance provided by Guarantee Trust overlaps with insurance provided by anyone else, the other insurer always has primary responsibility. Barry Zalma
other. In Central States, Southeast and Southwest Areas Health and Welfare Fund v. First Agency, Inc. — F.3d —, 2014 WL 2933225 (C.A.6 (Mich.)) Central States and Guarantee Trust both issued insurance coverage for the same claims. Central States’ contract says that it will pay only if Guarantee Trust does not. Guarantee Trust’s contract insists that it will pay only if Central States does not. The Third Circuit Court of Appeal was called upon to break this “you first” paradox. The paradox has been called a gastonette [which can be defined as a dilatory “dance” in which each of two responsible parties waits until the other party acts – so that the delay seems interminable; esp., a standoff occurring when two courts simultaneously hear related claims arising from the same bases and delay acting while each court waits for the other to act first. The term was coined by Judge Jon O. Newman in In re McLean Industries, Inc., 857 F.2d 88, 90 (2d Cir. 1988), on the model of “After you, my dear Alphonse.” “No, after you, Gaston. Black’s Law Dictionary 795 (10th ed. 2014)].
athletes and all children of Teamsters. Each of them holds general health insurance from Central States and sports injury insurance from Guarantee Trust. Each suffered an injury while playing sports (most often football) between 2006 and 2009, after which they sought insurance coverage from both insurance companies. Each time Guarantee Trust refused to pay the athlete’s medical expenses. Each time Central States picked up the bill under protest. Invoking one of ERISA’s civil enforcement provisions, 29 U.S.C. § 1132(a)(3)(B), Central States sued Guarantee Trust and First Agency (a company that administers Guarantee Trust’s insurance policies).
BACKGROUND
ANALYSIS
Central States, an employee benefit plan governed by the Employee Retirement Income Security Act (ERISA), provides
Which company should pay for the students’ medical expenses? Central States’ contract answers the question one way. In
32 August 18, 2014 / INSURANCE ADVOCATE
TRIAL COURT RULING The district court ruled that, when Central States’ and Guarantee Trust’s coverage of student athletes overlap, Guarantee Trust must pay. It entered a declaratory judgment to that effect, ordered Guarantee Trust to reimburse Central States for the payouts to the thirteen students, and awarded Central States attorneys’ fees.
a provision captioned “Coordination of Benefits,” the contract lists rules that determine which insurer has “primary responsibility” when plans overlap. Under one of these rules, whichever insurer covers the insured “other than as a Dependent” has primary responsibility. Central States covers the thirteen students as dependents. The students have insurance because they are children of Teamsters. Guarantee Trust, by contrast, covers the thirteen students “other than as … [d]ependent[s].” The students have insurance in their own names. So under Central States’ contract, Guarantee Trust must pay for the students’ medical expenses up to its maximum before Central States will contribute anything. Guarantee Trust’s contract answers the question another way. The contract contains a blanket coordination-of-benefits rule. If insurance provided by Guarantee Trust overlaps with insurance provided by anyone else, the other insurer always has primary responsibility. So under Guarantee Trust’s contract, Central States must pay for the students’ medical expenses up to its maximum before Guarantee Trust will contribute anything. Therefore, the two insurers dance a gastonette with one insurance company saying: “You first, Central States.” To which the other responded: “After you, Guarantee Trust.” If an ERISA plan and an insurance policy “contain conflicting coordination of benefits clauses,” as a matter of federal common law “the terms of the ERISA plan, including its [coordination of benefits] clause, must be given full effect.” [Auto Owners Ins. Co. v. Thorn Apple Valley, Inc., 31 F.3d 371, 374 (6th Cir.1994)]. In this case, the terms of the ERISA plan — Central States’ plan — say that Guarantee Trust has primary responsibility for the students’ expenses. Guarantee Trust’s policy does not provide excess insurance, at least not pure excess insurance. An excess policy has a fixed threshold below which it never applies. If the insured has no other policy, Guarantee Trust’s policy covers all of his losses, however small.
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[ ON MY RADAR ] ERISA’s byzantine system of employee benefits would not work unless courts respect the written terms of ERISA plans. The importance of enforcing the plan’s terms, its coordination clauses included, does not shrink when the other insurance policy in the picture provides excess coverage in this way. The next worst thing to having no insurance at all is having two insurance companies cover the same claim. Coverage overlaps often prompt years of fighting about who must pay, a battle that can delay payment to the insured or the hospital. The Third Circuit concluded that it is best to keep rules about coordinating insurance benefits as simple as possible. Here, in the absence of Central States’ plan, Guarantee Trust’s policy would cover the sports injuries at hand without question. The ERISA plan insists that the policy keep doing in that plan’s presence what it would do in that plan’s absence. The district court got it right when it held that primary responsibility for the sports injuries in this case falls on Guarantee Trust, not Central States. As for the merits, Central States filed this lawsuit under a provision of ERISA that allows it “to obtain … appropriate equitable relief … to enforce any provisions of this [Act] or the terms of the plan.” [29 U.S.C. § 1132(a)(3)(B).] The judgment directing Guarantee Trust to pay Central States can thus stand only if it provides “equitable relief ” as opposed to legal relief. The district court’s money judgment, ordering Guarantee Trust to pay Central States around $112,000, looks by all appearances like an award of money damages. And money damages, the paradigm of legal relief, lie beyond the radius of the statute. The court ordered Guarantee Trust to pay money, and Guarantee Trust can satisfy that obligation by dipping into any pot it chooses. That means Central States sought legal rather than equitable restitution. The Act says nothing either way about coordinating benefits, and purposes and policies have their place when filling the gap. The Act by contrast says something about what relief a plaintiff can get in lawsuits under the statute: He can get only equitable relief. Under the Act, the district court in its
The prudent insurer will never dance the gastonette. When a dispute arises between two insurers, both of whom believe the other is primary and it is excess, should enter into a prompt agreement to share in the cost of protecting the insured without waiving the right to dispute who owes what to whom in a separate litigation.
discretion may allow a reasonable attorney’s fee to either party. The statute gives district courts more leeway to shift fees than the American Rule, the common-law principle that allows fee awards only in rare cases. The district court addressed all of the relevant factors with care. Its conclusion does not amount to an abuse of discretion. Declaratory relief was affirmed, Guarantee Trust is primarily responsible for the expenses of the injured students and the attorneys fees ordered were also affirmed. The money judgment was reversed because the ERISA plan did not have the right to legal remedies. Both of the dancers lost and in the future Guarantee Trust will be compelled to pay for such injuries as if the Central States ERISA plan did not exist.
ZALMA OPINION The prudent insurer will never dance the gastonette. When a dispute arises between two insurers, both of whom believe the other is primary and it is excess will create a problem. The two insurers should, rather, enter into a prompt agreement to share in the cost of protecting the insured without waiving the right to dispute who owes what to whom in a separate litigation. Central States, without such an agreement, paid the expenses because Guarantee Trust wrongfully refused. This suit resulted. Had they agreed they could
have submitted the dispute to a District Court or an impartial arbitrator who could have decided who was on first and that either Gaston or Alphonse must pay. This case should never have happened. Central States and Guarantee Trust should have worked together and avoided the litigation. No one wins, and the insured often loses, when insurers dance the gastonette. [IA] 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. Mr. Zalma recently published the ebooks, “MOM and the Taipei Fraud;” “Zalma on Insurance Fraud – 2013 , “Zalma on California Claims Regulations – 2013 ; “Rescission of Insurance in California – 2013;” “Random Thoughts on Insurance” a collection of posts on this blog; “Zalma on Diminution in Value Damages – 2013,”“Zalma on Insurance,” “Heads I Win, Tails You Lose,” “Arson for Profit” and others that are available at www.zalma.com/zalmabooks.htm. Specialty Technical Publishers recently published Mr. Zalma’s new E-Book, “Getting the Whole Truth” which is available at http://www.stpub.com/ Getting-the-Whole-Truth_p_254.html. Specialty Technical Publishers publishes Mr. Zalma’s book, “Insurance Claims: A Comprehensive Guide” where you can get additional details on this subject by purchasing the book in print or digital format at http://www. stpub.com/insuranceclaims-a-comprehensive-guide-online. Mr. Zalma’s reports on World Risk and Insurance News’ web based television programing, http://wrin.tv or at the bottom of the home page of his website at http://www.zalma.com. INSURANCE ADVOCATE / August 18, 2014 33
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[ COURTSI DE ]
By Lawrence Rogak
Paying Out Policy Limits to One Insured Before Second Insured Files Claim is Not Bad Faith Bliss v Farm Family Cas. Ins. Co.
T
he plaintiffs operate a farm on land leased from two brothers, Donald J. Keicher and Robert Keicher. On May 13, 2011, runoff from a heavy rainstorm allegedly caused manure that the plaintiffs had spread on their fields to contaminate several ponds on adjoining land. It is undisputed that Donald and Robert Keicher also own the land where the ponds are located. The record does not disclose the nature of the brothers’ ownership of the land. At the time that the ponds were allegedly contaminated, the plaintiffs had in effect an insurance policy with the defendant. The policy included coverage for property damage caused by farm pollutants. In the copy of the policy submitted by the defendant, the coverage is found within endorsement SF 0501 0709 at
36 August 18, 2014 / INSURANCE ADVOCATE
“Section E,” “Limited Farm Pollution Liability Coverage.” The farm pollution coverage is subject to an aggregate annual liability limit of $50,000.00 pursuant to endorsement SF 0707 1110 and the policy’s liability schedule. Following the rainstorm, Robert Keicher notified Robert Bliss of the damage to the ponds, and, on May 19, 2011, Robert Bliss contacted the defendant to request coverage under the policy. According to the affidavit of Patrick Manning, Mr. Bliss reported to him that “Robert Keicher’s ponds and fish were damaged” by the manure runoff. Thereafter, Manning met with Robert Keicher and personally examined the site. He also examined certain “damage estimates” provided by Robert Keicher. From
the damage estimates and his site investigation, Manning concluded “that the damages sustained by Robert [Keicher] were in excess of the $50,000 coverage limit.” Manning made an offer to settle with Robert Keicher for the policy limit an offer which Robert Keicher eventually accepted. On September 7, 2011, in exchange for $50,000.00, Robert Keicher signed a release discharging all property damage claims that he might have against the plaintiffs arising out of the May 13 manure runoff. Robert Keicher’s brother, Donald, signed the release as a witness. On January 11, 2012, Donald Keicher made his own claim for damage to the ponds, using in support the same damage estimates that Robert had used. The defendant disclaimed coverage on the grounds
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[ COURTS I D E ] that it had already fulfilled its obligations under the policy for the May 13 pollution of the ponds by paying to Robert Keicher the full annual liability limit. The Court observes that the applicable limiting language appears in the copy of the policy provided by the defendant in endorsement SF 0707 1110, on page 8. That endorsement obliges the defendant to defend the insured and pay valid claims falling within the Limited Farm Pollution Coverage only “up to OUR limit of Liability.” The endorsement also states that “OUR duty to defend ends when WE have exhausted the applicable limit of liability by the payment of judgments or settlements.” After Donald filed suit against the plaintiffs (the underlying action, Wyoming County Index No. 44756), the plaintiffs instituted this action against the defendant alleging that the defendant “carelessly, negligently and recklessly investigated, handled and settled the claim with Robert Keicher” and “carelessly, negligently and recklessly failed to obtain releases from all owners of the subject damaged property prior to settling the claim.” The defendant now moves for summary judgment. The Court finds that the defendant’s submissions are sufficient to establish, prima facie, that the defendant is entitled to judgment as a matter of law. Pursuant to its contractual obligations under the policy, the defendant promptly settled an apparently valid claim for damage to the ponds. Thereafter, under the policy, it disclaimed coverage with respect to Donald’s claim because the policy limits had already been exhausted. Thus, the defendant has sufficiently shown that it did not breach the explicit terms of the insurance contract. Furthermore, the defendant’s submissions sufficiently establish that it did not breach the policy’s implied covenant of good faith and fair dealing in handling the claims arising from the manure runoff into the ponds. Although the plaintiff questions the defendant’s conclusion that the damage to the ponds exceeded the policy limits, and asserts that the defendant’s investigation of Robert Keicher’s claim was negligently done, it must be noted that “[a]n insurer does not breach its duty of good faith when it makes a mistake in judgment or behaves negligently” (Federal Insurance Company v. North American Specialty Insurance Company, 83 A.D.3d
401, 402 [1st Dept., 2011]). A cause of action for bad faith must be founded upon conduct on the part of the insurer which “evinces a conscious or knowing indifference” or a “gross disregard” of the insured’s interests (Pavia v. State Farm Mutual Auto. Ins. Co., 82 N.Y.2d 445, 453 [1993]). Here, the defendant’s submissions sufficiently establish that it had, at a minimum, an “arguable basis” for its determination that Robert Keicher’s claim should be settled for the policy limit (Bennion v. Allstate Insurance Company, 284 A.D.2d 924, 925 [4th Dept., 2001]). Accordingly, the Court finds that the defendant has met its burden upon the motion to show that it did not act in bad faith. In responding to the defendant’s submissions, the plaintiffs have failed to show that material questions of fact remain to be determined. The supposition that the defendant could have also settled Donald’s claim within the policy limits had it delayed or handled differently the settlement of Robert’s claim is entirely speculative. Therefore, since the plaintiffs have failed to counter the defendant’s prima facie showing, the motion must be granted (see, Doherty v. Merchants Mutual Insurance Company, 74 A.D.3d 1870, 1872 [4th Dept., 2010], motion to dismiss appeal denied by 15 N.Y.3d 866 [2010], appeal withdrawn by 17 N.Y.3d 812 [2011]; Zuckerman v. City of New York, 49 N.Y.2d 557 [1980]). Summary judgment was granted to Farm Family. Comment: This decision should be very interesting to attorneys in the New York No-Fault field, where there are often multiple medical providers seeking benefits under the same $50,000 policy of first party benefits, and policy exhaustion is a frequent occurrence. [IA] 2014 NY Slip Op 31921(U) July 23, 2014 Supreme Court, Wyoming County Docket Number: 45445 Judge: Michael M. Mohun
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[ GUEST OPINION ]
By Jane M. Orient, M.D.
Will Medicare Become Like the VA?
M
ost veterans get most of their medical care from private doctors through Medicare or private insurance. Just think what those secret waiting lists would be like if they didn’t! Still, a VA-like system for all has been proposed as a replacement for our unsustainable current system—at least until the recent scandals broke. One enormous difference between the VA and Medicare is that veterans are free to go elsewhere—if they Jane M. Orient, MD pay privately. Some veterans use their VA doctor only to get free medications. Medicare patients, on the other hand, are trapped. There is virtually no private coverage available to persons over 65 to replace Medicare—President Lyndon Johnson wiped it out to prevent competition with “his” beloved system. There are only policies to “supplement” Medicare. And Medicare patients can’t just pay out of pocket for a “covered” service they can’t get otherwise, say because the Medicare-allowed price is too low—unless they see a doctor who opted out of Medicare or disenrolled. For doctors, Medicare is all or nothing, so most doctors are still enrolled. Most people don’t care about that—not yet. Who would want to pay for something that is free? So it’s a good idea to look at those “free” (taxpayer-paid) VA services. In an online survey by the Association of American Physicians and Surgeons (AAPS), less than two percent of 1,000 respondents said care at the VA was the equivalent of the care in the private sector or a model for the entire U.S. medical system. Only 4 percent said it was “generally good, but uneven.” A bare majority (52 percent) said that VA care was “good in some areas, but fraught with many serious problems,” and 22 percent responded that it was “ok if you can get it, but access is seriously limited.” Nearly 20% checked “other” and suggested a term equivalent to “poor.” One 38 August 18, 2014 / INSURANCE ADVOCATE
said “hard to tell how bad because they destroy or hide records.” Only about 9 percent of respondents said the problems could be “fixed” by firing people, and less than 3 percent by large increases in funding. The main problems, elaborated on in the more than 200 comments, are a huge, rigid bureaucracy and the “VA way” at the “VA Spa.” The bureaucracy interferes with care and punishes anyone who calls attention to problems. The main concern of the unionized workers appears to be to leave work on time. This means that surgery cannot be scheduled to start much later than 1:00 p.m. The response to a request to call a “code” for a patient who has had a cardiac arrest might be “I’m on break” or “it’s not my job.” Staff might record normal vital signs every 4 hours on a patient discovered to be dead and cold when physicians make morning rounds. “No VA employee, however incompetent, could ever be fired,” stated one physician. Another said, “Incompetence is accepted…, and keeping quiet about it is the accepted norm.” There are many dedicated physicians and workers who truly care about the veterans, rather than seeing them as “something to be endured in order to receive a paycheck.” And some facilities, mostly associated with medical schools, are described as excellent. But they seem to be exceptions to the rule. “Basically, patients need a doctor advocate in the private sector,” one respondent commented. And what will happen to the private sector under ObamaCare? Reformers want to abolish fee-for-service payment (payment for doing work) and replace it with VA-style incentives: a steady paycheck with “bonuses” for making the numbers look good. The VA’s electronic medical record is said to be particularly good for tracking those metrics, though private doctors complain that they cannot get a useful, accurate record for a VA patient, if they can get any record at all. ObamaCare’s Independent Payment Advisory Board will soon be clamping down on total Medicare expenditures, and then private expenditures also. It is already “fraud” to provide a “medically unneces-
“No VA employee, however incompetent, could ever be fired,” stated one physician. Another said, “Incompetence is accepted…, and keeping quiet about it is the accepted norm.” sary” service to a Medicare patient, and physicians can be excluded from all ObamaCare health plans for not “performing” as the bureaucrats think they should. Doctors may soon be escaping to the VA, instead of the other way around. But patients will have nowhere in the U.S. to go. [IA] Jane M. Orient, M.D., Executive Director of Association of American Physicians and Surgeons, has been in solo practice of general internal medicine since 1981 and is a clinical lecturer in medicine at the University Of Arizona College Of Medicine. She received her undergraduate degrees in chemistry and mathematics from the University of Arizona, and her M.D. from Columbia University College of Physicians and Surgeons. She is the author of Sapira’s Art and Science of Bedside Diagnosis; the fourth edition has just been published by Lippincott, Williams & Wilkins. She also authored YOUR Doctor Is Not In: Healthy Skepticism about National Health Care, published by Crown. She is the executive director of the Association of American Physicians and Surgeons, a voice for patients’ and physicians’ independence since 1943. Additional information on health-related issues: http://takebackmedicine.com/ Dr. Orient’s position on Obama’s healthcare reform: “The Obama plan will increase individual health insurance costs, and if the federal government puts price controls on the premiums, the companies will simply have to go out of business. The plan will deliver higher costs, more hassles, fewer choices, less innovation, and less patient care.”
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