Insurance Advocate August 21, 2017 by C Acunto

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Contents

August 21, 2017 | Volume 128 Number 14

Cyber Update: Cybersecurity Secrets Unveiled for the Insurance World Steven M. Sobel

In Focus: Running a Killer Sales Meeting Kelly Donahue-Piro

News Notes: Trusted Choice® Chooses New Executive Director Argo Group Hosts Local High School Robotic Teams

On My Radar: Chiropractors Cannot Own & Control Medical Practice Barry Zalma

Looking Back: April, 1992

Courtside: Prior Written Notice Required for Suit Against City for Icy Sidewalk Injury Lawrence Rogak

Classiﬁeds

Guest Article: It’s Not about Health Care—It’s about Control Jane M. Orient, M.D.

14 Main Street “Amazoned” into Miasma [F EAT URE S ] 4

Foreword: Stick to the Stick Steve Acunto, Publisher

Exposures and Coverages: Protective Safeguard Endorsement: Who’s it Protecting; NY Court Holds Crime Policy Covers Spooﬁng Loss of Funds; Short Takes; Class Action Data Breach Lawsuits; $795 an Hour Jerry Trupin

[ A D F E ATUR E S ] 12

On the Level: Headline Jamies Deapo

Guest Article: Surprise! Your Company May Have Insurance Coverage for a Consumer Class Action Finley T. Harckham

WC Update: Insurers Pushing Drugs for Pain Management, Ignoring Successful Alternative Treatments

MSO: The Importance of Employee Liability Insurance

ShelterPoint: Paid Family Leave NY

info@insurance-advocate.com www.insurance-advocate.com INSURANCE ADVOCATE / August 21, 2017 3

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[ FOREWORD ]

STEVE ACUNTO

Stick to the Stick uWhile I really dislike overly self-referential articles and TV guests and hosts—like Geraldo Rivera on FOX and Joe Scarborough on MSNBC—I will start this column on a personal note: I drive one of the few—maybe the only—Porsche Cayenne in the USA with a manual transmission, or what was called a “stick” back when I learned to drive in Italy on an Alfa Romeo Spider in the late 1960s. I have always had a stick shift in my cars. Perhaps that might explain why I have EXTRA reservations, or over-skepticism, about so-called “autonomous vehicles.” That is, I actually feel that I drive my car something like a pilot who must actually navigate with only some key instrument panel help. So when Governor Cuomo announced a few weeks ago that Audi of America Inc. was approved to perform an autonomous vehicle demonstration in New York State, I did not feel so positive. Earlier the Governor had announced that New York would now accept applications from companies interested in testing or demonstrating autonomous vehicles on public roads. “Autonomous vehicles are a major part of the future of the automotive industry and this pilot program will help ensure New York continues to be a hub of innovation and cutting edge technology,” our ambitious Governor said. “This emerging technology has the potential to decrease accidents and save lives on our roadways, and with this approval we are one step closer to a safer and stronger New York for all.” Included in the FY 2018 Budget, new legislation allows for testing autonomous technology through a year-long pilot program. Audi of America Inc. was the first company to apply for the rights to demonstrate this technology in New York and the first to be approved under the program. The technology they plan to demonstrate in the Capital Region is considered to be a Level 3 in autonomous vehicle operations by the Society of Automobile Engineers, meaning it is capable of safely allowing hands-free driving at posted highway speeds, but requiring a person to take over if required. Two trained engineers will be in the vehicle to monitor the system and ensure safety, one in the front seat and one in the back seat. The vehicle has already logged thousands of miles on highways across the U.S. safely. The company’s vehicle routing information has been pre-approved by the New York State Police and its application was approved by the Department of Motor Vehicles on Friday, May 26. Responsible parties weighed in on this new introduction: DMV Executive Deputy Commissioner Terri Egan said, “Governor Cuomo’s commitment to enhancing highway safety through technology has made New York State one of the safest places to drive in the nation. These first tests and demonstrations that will take place in New York truly are the building blocks of safer, more flexible and accessible means of transportation. Autonomous vehicle technology will soon take highway safety to a whole new level, and thanks to the Governor’s leadership I am confident that New York State will be ready.” New York State Police Superintendent George P. Beach II said, “The State Police Department is committed to oversight of the autonomous vehicle testing process and eager to be a part of it. We will work with the individual companies and the Department of Motor Vehicles to ensure that the technologies are evaluated safely and appropriately.” Brad Stertz, Director, Audi Government Affairs in Washington, D.C. said, “Automated vehicles have enormous potential to improve safety on New CONTINUED ON PAGE 20

4 August 21, 2017 / INSURANCE ADVOCATE

VOLUME 128 NUMBER 14 AUGUST 21, 2017

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

CINN MEDIA, INC.

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in July, August, September and December by CINN ESR, Inc., 1030 Lake Street, Greenwich CT, 06831. Periodical postage paid at Greenwich, CT and additional mailing ofﬁces. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $135.00. TO ORDER Call 914-966-3180, fax 914-613-1595, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2017. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Ofﬁce.

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[ EXPOSURES & COVERAGES ]

JEROM E TRUPIN, CPCU

Protective Safeguard Endorsement: Who’s it Protecting; NY Court Holds Crime Policy Covers Spoofing Loss of Funds; Short Takes uA good crop of interesting cases this month. Which is great, because I’ve retired as of 7/1/17. I hope to continue following insurance and may contribute articles to the Insurance Advocate from time to time, but this will be my last regular column. I started in the insurance business by working Saturdays in my father’s insurance agency when I was 12 years old. That was 75 years ago. Ave, atque, vale.

Protective Safeguard Endorsement: Who’s It Protecting? A fire severely damaged Jin Zun Zou and Hua Ying Gao’s home in St. Paul, MN on November 24, 2013. The fire investigator, James Novak, arrived at the house just as the firefighters were winding up their work. Novak reported: “In the hallway [of the main floor], I observed that the smoke detector had been disconnected prior to the fire and was nowhere to be found. Light smoke damage was observed throughout the hallway. The rear master bedroom suffered light smoke damage. The smoke detector in this room was also missing....The third bedroom had suffered light to moderate smoke damage throughout. There was no smoke detector in this room. Upon examination of the hallway closet, I found three smoke detectors on the shelf.”i

“…Upon examination of the hallway closet, I found three smoke detectors on the shelf.”

Jin Zun Zou and Hua Ying Gao carried insurance with American Modern Home Insurance (AMI). They reported the claim, but AMI denied coverage. The basis of AMI’s denial was the Protective Safeguard endorsement that was part of the policy. In brief, the endorsement provided that the insurance company will not pay for loss caused by fire if, prior to the fire, the insured: 1. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact; or 2. Failed to maintain any protective safeguard listed in the endorsement in complete working order. The insureds sued. In the action that followed, both sides moved for summary judgment. The insurance company pointed to the fire investigator’s report, but the insureds responded that there were other working fire detectors in the house and one in fact was what had awoken them. The court granted summary judgment to

Jerome “Jerry” Trupin, CPCU, is a partner in Trupin Insurance Services located in Sleepy Hollow, NY. He provides property/casualty insurance consulting advice to commercial, nonprofit and governmental entities. He is, in effect, an outsourced risk manager. Jerry has been an expert witness in numerous cases involving insurance policy coverage disputes and has taught many CPCU and IIA courses. Jerry has spoken across the country on insurance topics and is the co-author of over ten insurance texts used in CPCU and IIA programs including Commercial Property Risk Management and Insurance and Commercial Liability Management and Insurance. He regularly contributes articles to CPCU Society publication, the Insurance Advocate®, and others. He can be reached at jtrupin@aol.com. Thanks to Jerry Trupin for this article and to the CPCU Society for letting us reprint it.

insureds.ii Jin Zun Zou and Hua Ying Gao were fortunate that they had a working fire detector. First, because it may have saved their lives, and second it saved their insurance claim. Two points to note for us: • Fire detectors can save lives. • Protective safeguard endorsements can imperil coverage. Let’s look at the safeguard endorsement. The case doesn’t identify the form that was used by AMI, but the language quoted in the decision is similar to that found in ISO endorsement PROTECTIVE SAFEGUARDS (CP 04 11 09 17). The ISO form requires that the insured: CONTINUED ON PAGE 8

i Jin Zun Zou And Hua Ying Gao v. American Modern Home Insurance Company, US District Court, Minnesota, 86 F.Supp.3d 1050 (February 17, 2015) ii Ibid

6 August 21, 2017 / INSURANCE ADVOCATE

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[ EXPOSURES & COVERAGES ] CONTINUED FROM PAGE 6

1. Maintain the listed protective safeguards over which it has control, in complete working order; 2. Actively engage and maintain in the “on” position at all times any automatic fire alarm or other automatic system listed in the Schedule; and 3. Notify the insurer of any suspension or impairment of any protective safeguard listed in the Schedule. The endorsement adds an exclusion to the policy eliminating coverage for loss resulting from fire if the insured failed to comply with any condition set forth in the endorsement. Five specific types of protective safeguards are listed: • Automatic Sprinkler System • Automatic Fire Alarm • Security Service with a recording system or watch clock, making hourly rounds covering the entire building, when the premises are not in actual operation • Service Contract with a privately owned fire department • Automatic Commercial Cooking Exhaust And Extinguishing System Any or all of them can be required by an entry on the endorsement. But that’s not all—the form contains a final option for the insurer to add additional requirements. (The requirement to maintain fire detectors that led to the dispute between AMI and Jin Zun Zou and Hua Ying Gao was added using this final option.) Tell your insureds about fire detectors— they can save lives—but watch out for a protective safeguard endorsement. Try to have it removed; failing that, be certain the insured knows about it. A broker friend reviewed a prospect’s insurance and found that it contained a requirement for a sprinkler system. The building did not have one. It was a no-brainer for the insured to give him a broker-of-record letter.

NY Court Finds Crime Policy Coverage for Spoofing Theft of Funds Medidata is a large technology com-

…even though Medidata’s computers were not directly hacked, Computer Fraud coverage was triggered because the thief sent the fraudulent emails containing computer code that made them appear as though they came from Medidata’s president. pany providing cloud-based computer services to medical research organizations around the world. Despite its technical sophistication, Medidata lost $4.8 million to a spoofing scam. (“Spoofing” is disguising an email so that it appears to come from an address other than the one actually belonging to the sender.) In September 2014, an employee in Medidata’s finance department received an e-mail apparently sent by Medidata’s president, instructing her to initiate a wire transfer of funds for an imminent corporate acquisition. The message also said that an attorney, who was copied on the message, would call her. The employee believed the message was legitimate because it contained the president’s name, email address, and picture. (Medidata’s email system inserted the picture when the sender’s email address matched one in Medidata’s system.) The same day, she received a phone call from the supposed attorney demanding a wire transfer. The employee told the attorney she would need an email authorizing the transaction from Medidata’s president, the vice president and the Director of Revenue. The employee, the vice president, and the Director of Revenue then received a group email purportedly from the president approving the payment. The employee transferred $4.8 million to a bank account provided by the attorney. The message was actually sent by a criminal using altered email accounts. The funds went to criminals in China.

Medidata submitted a claim under the Computer Fraud, Fund Transfer Fraud, and Forgery coverages of its Federal Insurance Executive Protection policy. Federal denied coverage; Medidata sued Federal. The US District Court for the Southern District of New York agreed with Federal on the Forgery coverage, but ruled in favor of Medidata on Computer Fraud and Fund Transfer Fraud coverages.iii It held that even though Medidata’s computers were not directly hacked, Computer Fraud coverage was triggered because the thief sent the fraudulent emails containing computer code that made them appear as though they came from Medidata’s president. The court also ruled that Fund Transfer Fraud cover applied because the fraud induced Medidata to transfer funds from its bank account. Forgery coverage did not apply since there was no financial instrument, e.g., a check or a note, involved. So far, so good for Medidata, but it’s not over yet. You can bet the case will be appealed. Medidata’s legal expense headaches haven’t ended. Pursuing a $4.8 million coverage claim on appeal doesn’t come cheap. Tell your clients about this case. Here’s a technologically sophisticated insured with good loss control procedures—two corporate officers had to sign off before the employee could transfer the funds—but it still lost $4.8 million. Loss control is the first line of defense, but it doesn’t always work.iv Even sprinklered fire-resistive buildings burn down. As to relying on this case for coverage even if it’s affirmed, don’t do it. Less than two weeks after Medidata was decided, a Michigan Federal court decided against an insured on a similar claim.v The Michigan court specifically discussed the Medidata decision and disagreed with it. Insurers will continue to resist these claims under crime policies and will most likely tighten exclusionary language. In the overwhelming majority of cases like this, courts hold there’s no coverage under crime insurance policies.vi (A disconcerting feature of the Michigan decision is the court’s reliance CONTINUED ON PAGE 10

iii Verne Pedro “Federal Court Finds Coverage for Company Spoofed by E-Mail Fraudsters” Property Insurance Coverage Law Blog, Merlin Law Group 8/1/17 www.propertyinsurancecoveragelaw.com/2017/08/articles/insurance/federal-court-finds-coverage-for-company-spoofed-by-e-mail-fraudsters/ iv Some insurers exclude social engineering/fraudulent impersonation claims unless the insured confirms the transfer by a phone call to a previously determined phone number. You don’t want a policy that requires that—insureds slip up—but it’s an excellent way of avoiding the scam. Insureds should consider it as an internal procedure.

8 August 21, 2017 / INSURANCE ADVOCATE

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[ EXPOSURES & COVERAGES ] CONTINUED FROM PAGE 8

on the policy’s requirement that the insured peril be the direct cause of the loss. That’s a standard provision. It appears 16 times in the ISO crime form for the various perils insured.) There is a better way: social engineering/fraudulent impersonation coverage combined with good cyber coverage. If you’ve recommended the coverage and your insureds haven’t purchased it, shame on them. If you haven’t recommended it, shame on you.

SHORT TAKES Loss Control for Brokers & Agents C.S. Osborne & Co., a Harrison, NJ manufacturer of industrial hand tools and supplies since 1826, was drenched by Superstorm Sandy. Osborne’s damages far exceeded the $1,000,000 flood coverage provided by its Travelers policy. Osborne sued its broker, Bollinger & Co., for not providing quotes for higher limits of flood coverage. The Appellate Court affirmed the lower court’s decision in favor of Bollinger, commenting that Bollinger was an insurance broker and not an insurance consultant; it had no duty to recommend coverage.vii That seems to be the law in New Jersey and New York, as well as other states. What’s especially interesting about this case is a blog comment by an attorney who represents insureds in claims against insurance companies. He wrote: “Bollinger’s March 2012 renewal proposal specifically stated: ‘Higher limits or sub-limits may be available so please advise us if you are interested in higher limits options so that we may secure quotations for your consideration.’ ...the Court probably could have decided the case in the broker’s favor based on this statement (in the renewal proposal) alone.” (Emphasis added.) The loss control tip for producers should be self-evident. Practice Point: Burying a suggestion to get a quote for higher flood limits in the blizzard of items in a renewal proposal may be sufficient for a producer’s loss control needs, but it’s a losing sales technique. It may have made practical sense prior to

Class actions give defendants nightmares while attorneys dream of sugar plums.

Sandy, but it doesn’t any more. Get quotes. And bring them to your clients’ attention. You’ll improve their protection and you’ll increase your earnings. Class Action Data Breach Lawsuits Class actions give defendants nightmares while attorneys dream of sugar plums. A roadblock to that new yacht for your neighborhood class-action attorney in cases involving data breaches was the inability to convince Federal courts that there was sufficient injury to satisfy constitutional requirements for standing to sue. That changed in the 2015 Neiman Marcus decision when an appellate court held that the plaintiffs’ fear of future harm from the breach was sufficient to establish standing to pursue their claims.viii The result has been a flood of claims, many of which, on a consolidated basis, have reached some of the US District Courts of Appeal (the level just below the US Supreme Court). The latest is the Appeals Court for the District of Columbia. The case is Chantal Attitas et al v Care First, et al.ix The case brought by Attitas, et al, was rejected for lack of standing to sue by the lower court, but the Appeals Court has ruled that it can go forward. With this decision, the DC Court joins the 3rd Circuit (DE, MD, NJ), the 6th Circuit (OH, KY, MI, TN), the 7th Circuit (IL, IN, WI), and the 11th Circuit (AL, FL, GA). However some circuit courts have decided against letting the claims proceed, including the 2nd Circuit (CT, NY, VT) and the 4th Circuit (NC, SC, VA, WV). We in the Metro-New York area are in an anomalous situation. The appeals court covering New York and Connecticut has decided a computer breach alone does not afford standing to sue,

whereas the appeals court covering New Jersey has decided that the claims can proceed. Because the costs to defend such a case can be tremendous, just allowing the case to proceed may put extreme pressure on the defendant to settle. Insureds shouldn’t ignore the problem. As judges become more familiar with data breaches, the possibility of allowing these cases to proceed will increase. In addition, the Supreme Court might step in and rule that plaintiffs have standing to sue. Class actions can result in huge settlements—if a group consists of 50,000 claimants, even $200 for damages and expenses for each claimant totals $10,000,000. $795 an Hour On October 3, 2008, David Vasquez, a building engineer, was fatally injured in a fall at Cohen Brothers Realty’s building at 622 3rd Avenue in New York City. Cohen Brothers called their insurance broker and was told that this was a workers’ compensation case, so there was no need to report it to their liability insurance company. On March 6, 2009, Vasquez’s estate obtained a court order to conduct discovery for purposes of filing a complaint against Cohen Brothers based on negligence and violations of NY Labor Law. Upon receiving the notice, Cohen Brothers notified its liability insurer, RLI Insurance Company. RLI denied for late notice on April 1, 2009.x The court decided that Cohen Brothers had a reasonable good faith belief that this was a workers’ compensation claim. Therefore late notice did not vitiate coverage. The State Fund offered to provide defense, but Cohen Brothers elected to use its own attorney; State Fund paid its cost of $150 per hour towards Cohen Brothers’ attorney’s charges of $795 per hour. RLI argued the difference was a voluntary payment and therefore not covered, but the court ruled that because RLI had denied liability, it lost its right to control the defense and had to pay the fee that Cohen Brothers had agreed to. As Frank Sinatra sang: “Nice work if you can get it, and if you get it, tell me how.”[IA]

v American Tooling Center, Inc. v Travelers Casualty and Surety, US District Court Eastern District Of Michigan Case No. 16-12108 Filed 08/01/17. Last July there was a similar case in Canada where the court held that there was no coverage. See: The Brick Warehouse LP v. Chubb Insurance Co. of Canada, 2017 ABQB 41 vi For example, see Taylor Lieberman v. Federal Insurance Company, US Court of Appeals, Ninth Circuit No. 15-56102 March 9, 2017 vii C.S. Osborne & Co. v Travelers, et al,. NJ Superior Court, Appellate Division A-2182-15T4 May 1, 2017 viii Hilary R Emijas et al v Neiman Marcus Group LLC, US Court of Appeals 7th District 14-3122 July 20, 2015 ix DC US Court of Appeals 16-7108 August 1, 2017 x This claim occurred prior to the 2009 change in New York insurance law requiring that an insurer show prejudice to deny coverage for late notice.

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ADVERTORIAL

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The steps in the claims payment process must be clearly outlined in the plan documents and provided to the employees other helpful resources for consumers and employers (www.dol.gov/ebsa). Compliance with ERISA consists of three parts: reporting, disclosure, and paying claims. Employers must follow annual reporting procedures outlined by ERISA and the IRS. Disclosure of certain facts about the benefit plans must be disclosed to employees. The steps in the claims payment process must be clearly outlined in the plan documents and provided to the employees (www.thehrspecialist.com). Under the Affordable Care Act (ACA), most employers with 50 or more full-time employees are required to offer health coverage to their full-time employees, or make “assessable payments” to the Internal Revenue Service (IRS). An employer may attempt to circumvent these requirements by converting employees to “part time” or classifying them as “independent contractors.” A “misclassified employee” or one who is inaccurately classified as an “inde-

pendent contractor” or “part-time employee” may have a cause of action against their employer under ERISA. In addition, the Department of Labor and IRS may also take action against employers for failure to offer coverage as outlined under ACA. Providing improper advice to employees can lead to an EBL claim. In a recent case, an employee notified her employer that she required hospitalization. The employer advised the employee that the Health Maintenance Organization (HMO) insurer did not need to be notified, which was incorrect. The HMO denied coverage to the employee for failure to notify. The employee subsequently sued the employer for the improper advice that led to denial of benefits. The case was settled for the full limits of the EBL policy ($500,000) plus attorney fees (www.airbrokers.com). Employee benefits liability can be a very important coverage for any employer. Helping clients understand the importance, as well as the coverages and when they might be needed, is another value-added service of the professional insurance agent.

139 Harristown Road Glen Rock, NJ 07452, Suite 100 (800) 935-6900 www.msonet.com INSURANCE ADVOCATE / August 21, 2017 11

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[ O N T H E L E VE L ]

JAMIE DEAPO

These Are Confusing Times uThe insurance industry has gone crazy! What was once a conservative, well organized method for protecting people, their belongings and their business has exploded. A marketplace full of direct to consumer coverage, peer to peer insurance, marketing based on buying preference and 24/7 customer service using chatbots is reality. Technological support for the insurance process has exploded and artificial intelligence is rumored to replace real people in most of the process going forward. Consumers, especially younger ones, are attracted to buying protection where it’s convenient and cheap without concern to the level of protection they buy and whether it will protect them should something happen. If you’re an independent insurance agent and this stuff isn’t keeping you up at night, then you’re either on the edge of selling your agency or you have your head stuck in the sand. These are tumultuous times! As I travel around and speak with various agents, the level of concern and reaction to what is going on goes from oblivious to fully engaged in dealing with today’s marketplace and what the future will bring. I have to say there are probably more leaning toward oblivious and shell-shocked about what is going on than there are those making the necessary changes to stay relevant and compete in today’s world and beyond. Read any insurance article or listen to any speaker and you’re going to hear the times are changing and you need to get on the bus or be left behind. I spend a fair amount of time reading or watching videos, most made by young people a third to half my age, talking about how to effectively operate an agency and sell insurance protection to today’s consumer. Social media, digital marketing, mobile apps, data analytics, video marketing and customer experience are the buzzwords of the day. If you’re an average agency, trying to help people buy adequate protection and assist them with a claim and grow your agency, this is the stuff that nightmares are made of. You’re probably asking yourself how can I afford all of this, how will I train 12 August 21, 2017 / INSURANCE ADVOCATE

If you’re an independent insurance agent and this stuff isn’t keeping you up at night, then you’re either on the edge of selling your agency or you have your head stuck in the sand. my staff to use it and if I don’t do it how long before I go out of business. Well the good news is relax, take a breath and remember how to eat an elephant sandwich, one bite at a time. That doesn’t mean sit back and do nothing. You’re going to have to assess where you’re at and make a game plan to move forward and start the process of change. Like any good plan you should attack the weakest part of your operation first. Once you figure out how you will improve that area, implement the changes and move on to the next weak area. There are really two ways you can go about identifying and implementing the changes step by step. As with any independent business you can either do it yourself or hire someone to help. That’s a personal decision. Just remember the time you spend researching, identifying and implementing the necessary changes is going to take you away from your normal activities at the agency. That may mean some lost revenue. The alternative is to focus on writing more business to generate the money necessary to get the outside help you need. Take advantage of all the resources at your disposal. If you’re a member of IIABNY we can assist with information and direction on where you can find the resources you need. If you are in a cluster or friends with other agents, maybe you can work together and share your information back and forth. There are plenty of resources available; the key is to focus on the most important issues first. I honestly believe way too many agency owners don’t take the time to really assess their overall operation and develop a game

Jamie Deapo is AVP of Membership & Member Programs for IIABNY and is an approved CE instructor in New York. Prior to being with IIABNY, he was an independent agent in the Syracuse area for 15 years. Jamie started his career in 1972 working for insurance carriers, and he has held various underwriting and marketing positions with several national as well as regional companies. He is a past president of the Independent Insurance Agents of Central New York and served on the board of directors of IIABNY.

plan for improving and modernizing it. If you believe you can’t afford to take the time you’re wrong—you can’t afford not to take the time and make the effort. I’ll bet there are already areas of your agency you know need fixing; did you ever wonder what that has cost you already by not taking the time to fix it? Just remember you have time to make the fixes necessary, your world isn’t going to crumble overnight. Start by making an honest assessment of your operation. If you are unable to do it, there are people who can help. Once the plan has been developed, begin with the most important and pressing items first. Ask for help and take advantage of all that is available. Keep in mind it’s a process and very likely it should be a regular ongoing process. Like Nike says the real key is to “JUST DO IT.” [IA]

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Aree you reeady y? Aree your clients reeady?

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Main Street “Amazoned” into Miasma …But professional commercial realtors see expeditious planning and execution as key to avoiding blight and preserving property values

14 August 21, 2017 / INSURANCE ADVOCATE

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Main Streets are mean streets and Malls are meandering with lower market shares these days.

“It’s now a known and accepted fact that online shopping has changed both the presence and the form of bricks-and-mortar retail outlets in the United States— including Florida – and it will continue to do so.” BRIAN ANDRUS President Florida Gulfcoast Commercial Association of Realtors

uA June report from Credit Suisse estimates that between 20% and 25% of the nation’s shopping malls will close in the next five years as shoppers’ habits continue to shift from in-store to online buying. Traditional mall anchors such as Macy’s, J.C. Penney, and Sears have announced widespread store closings in recent months, and a number of niche clothiers like American Apparel and BCBG Max Azria have filed for bankruptcy. The report estimates that around 8,640 stores will close by the end of the year. These problems will be particularly acute in retail-intensive areas like shopping streets and malls, the report states. “It’s now a known and accepted fact that online shopping has changed both the presence and the form of bricks-and-mortar retail outlets in the United States— including Florida—and it will continue to do so,” says Brian Andrus, President of the Florida Gulfcoast Commercial Association of Realtors (www.fgcar.org/) “Property owners and municipalities should not be caught asleep at the wheel. There are developers, entrepreneurs and municipalities today who can engage with the vast talent inherent in the commercial real estate professional community in Tampa Bay to take action.” He continues to explain that it is negligent to do otherwise and thereby inherit the inevitable shuttered stores, vacant buildings and sites that can become blight and result in the decline of the physical asset’s value, as well as that of property values. Brian Andrus operates a brokerage in Clearwater and is a licensed real estate broker in both California and Florida, having also earned the CCIM (Certified Commercial Investment Member) and the ALC (Accredited Land Consultant)

accreditations (both volume transactions of commercial properties and land). A spokesman for a New York investment group, who asked to be unnamed for this article, laid the problem on the doorstep of the State house, saying: “New York’s taxes, minimum wage expenses, its cost of benefits and mandates, its sales tax, and all of the red tape required to operate here give retailers nothing more than reasons to either close, use robots, consolidate or just shut down and leave. The retail sector needs help to hold its own and to sustain New York’s Main Streets and Commercial rental vitality.” It is widely known that the closing of mall anchors like Macy’s and Sears has a ripple effect. Once a department store goes vacant, life can become extremely difficult for middle-mall retailers like nail salons, jewelry stores, and the like—those who to some degree depend on traffic from the larger stores. According to an article in the Atlantic, from rural strip-malls to Manhattan’s avenues, it has been a disastrous two years for retail. “There have been nine retail bankruptcies in 2017—as many as all of 2016. J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. Sports Authority has liquidated, and Payless has filed for bankruptcy. Last week, several apparel companies’ stocks hit new multi-year lows, including Lululemon, Urban Outfitters, and American Eagle, and Ralph Lauren announced that it is closing its flagship Polo store on Fifth Avenue, one of several brands to abandon that iconic thoroughfare,” the article points out. A deep recession might explain it all, but the GDP is way up, as is income for lower and middle class citizens. Here are three explanations for the recent demise of America’s storefronts, presented by the Atlantic in its April 10th issue in the piece penned by Derek Thompson. “1. People are simply buying more stuff online than they used to; 2. America built way too many malls; 3. Americans are shifting their spending from materialism to meals out with friends.” The writer concludes, very astutely we CONTINUED ON PAGE 16

INSURANCE ADVOCATE / August 21, 2017 15

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believe: “There is no question that the most significant trend affecting brick-andmortar stores is the relentless march of Amazon and other online retail companies. But the recent meltdown for retail brands is equally about the legacy of the Great Recession, which punished logo-driven brands, put a premium on experiences (particularly those that translate into social media moments), and unleashed a surprising golden age for restaurants. Finally, a brief prediction: One of the mistakes people make when thinking about the future is to think that they are watching the final act of the play. Mobile shopping might be the most transformative force in retail— today. But self-driving cars could change retail as much as smartphones. Once autonomous vehicles are cheap, safe, and plentiful, retail and logistics companies could buy up millions, seeing that cars can be stores and streets the ultimate real estate. In fact, self-driving cars could make shopping space nearly obsolete in some areas. CVS could have hundreds of selfdriving minivans stocked with merchandise roving the suburbs all day and night, ready to be summoned to somebody’s home by smartphone. A new luxury-watch brand in 2025 might not spring for an Upper East Side storefront, but maybe its autonomous showroom vehicle could circle the neighborhood, waiting to be summoned to the doorstep of a tony apartment building. Autonomous retail will create new conveniences and traffic headaches, require new regulations, and inspire new business strategies that could take even more businesses out of commercial real estate. The future of retail could be even weirder yet.” According to Morningstar Credit Ratings, the U.S. has the greatest amount of retail space per capita—23.5 square feet per feet per person—of any country in the world. Canada is second, with 16.4 square feet per person, followed by Australia’s 11.5 square feet—less than half that of the U.S. Some feel there may be a longer way to fall before the industry hits bottom. The wrong response to this situation on the part of property owners and/or municipalities, Andrus notes, is to overthink it. The best approach is to engage in creative repurposing, a term now commonly used and illustrated both inside and outside of Tampa Bay—an example being 16 August 21, 2017 / INSURANCE ADVOCATE

“I have seen some municipalities overthink and overanalyze what to do. They need to play to their strengths - land use, zoning, utilities, roads, etc. – and step back and provide opportunities allowing the private sector to participate.…”

spots where slowed shopping activity has moved away from strictly shopping to creating a more experiential destination. Take Grapevine Mills, located two miles from Dallas/Fort Worth Airport, which has more than 200 retail outlets and restaurants, but now offers a Sea Life aquarium, a Legoland, and an amusement center that features 24 lanes of bowling, billiards, video games, and a karaoke studio. “Just one of several good-news pieces is a New York Times study that rated the Tampa Bay area as the fourth fastest-growing job market in the U.S. Like everyplace else in the country, we’re confronted with a fundamental change in people’s shopping habits,” Andrus points out. He added, “I have seen some municipalities overthink and overanalyze what to do. They need to play to their strengths—

land use, zoning, utilities, roads, etc.—and step back and provide opportunities allowing the private sector to participate. Developers, entrepreneurs and others of the private sector bring their specialties and strengths—capital, creativity, and plans upon which they take on the risk/reward burden. The link between these two is the professional expertise of commercial real estate practitioners who are daily working out ideas and providing possibilities to both sides.” The wrong, fatalistic way to look at it is that the future simply arrives on its schedule, not ours. Rather, by being proactive and engaging the impressive amount of talent, we can create our own desired future. Malls and centers may indeed morph from purely shopping venues to destination sites with more entertainment value, or they may become something different. Regardless which way it goes, the point is that we can put it there—the major players must move forward in an expedited, efficient manner. That is common sense. It means much more face-to-face sessions and other forms of collaboration, such as roundtable discussions and summits of participants that result in action plans from passionate leadership and not just more yak. Andrus explained that to lessen current and potential blight and make the future something people want, participants would be prudent to seek input from commercial real estate professionals. They exist as a link between municipalities and the private sector.[IA]

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

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[ G UEST AR T I C L E ]

F I N L E Y T. H A R C K H A M

Surprise! Your Company May Have Insurance Coverage for a Consumer Class Action uEvery day, class actions are commenced on behalf of consumers against manufacturers, retailers, financial institutions, and service providers. Some companies assume that such cases are not covered by their insurance because class actions must be crafted to address issues common to all of the plaintiffs, and therefore tend not to seek monetary damages that are covered by liability insurance. That skepticism is understandable because many, or even most, consumer class actions seek only relief that is not covered, such as damages for defective products failing to perform as intended, or to punish for deceptive practices barred by consumer protection statutes. However, all class action complaints should be read carefully for any covered claims, bearing in mind that most companies have coverage under their general liability policies not only for third-party property damage and bodily injury, but also for personal and advertising injury. Policyholders may also have coverage for a variety of “wrongful acts” under directors and officers, errors and omissions, and employment practices liability policies. Further, invasion of privacy claims may be covered personal injury under general liability policies, covered under cyber policies, or in cyber coverage found in other types of policies. Most importantly, even if a class action complaint does not clearly contain covered allegations, it will frequently assert claims that are potentially covered, and that is all that is needed to trigger valuable defense coverage. Here are a few examples of class action complaints that may be covered in whole or in part: • Product defect claims: As a general rule, claims alleging product defects are covered by general liability insurance if they seek damages for bodily injury or damage to third-party property, but not if they are based solely upon purely economic loss resulting 18 August 21, 2017 / INSURANCE ADVOCATE

from a product that does not function as expected. Many class action complaints allege that products are dangerous due to a design or manufacturing defect. Often, they provide examples of alleged bodily injuries or damage to third-party property that have been caused by the product. Such complaints often use vague and general terms to describe the relief sought, including “damages,” and should be read carefully to determine whether they leave open the possibility that the plaintiffs are alleging covered harm. The answer can often be found in two places in the complaint: (1) the section

describing the class, which may or may not specifically exclude individuals who have suffered damage or injury; and (2) any alleged statutory basis for claims, such as the Uniform Commercial Code, or warranty or consumer protection acts, which address not only the repair, replacement or sale of defective products but may also allow recovery of undefined damages that result directly from a

Finley T. Harckham is a senior litigation shareholder in the New York office of Anderson Kill. Mr. Harckham regularly represents corporate and government entity policyholders in insurance recovery matters, including arbitration and litigation.

Policyholders may also have coverage for a variety of “wrongful acts” under directors and officers, errors and omissions, and employment practices liability policies.

breach of warranty. Such damages may be based upon alleged bodily injury or third-party property damage. • Product defect claims where the product has affected the functionality of third-party property: For example, a claim that adulterated heating oil has affected the performance of a furnace could be covered “loss of CONTINUED ON PAGE 20

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[ IN TH E A S S OC IATI ONS ]

NYISF Selects Leconte as 2017–2018 Recipient ALBANY, N.Y.—The New York Insurance Scholarship Foundation, Inc. (NYISF) awarded its 2017–2018 scholarship to Jean Emile Leconte II, a senior at St. John’s University studying risk management and insurance from Queens, N.Y. “The New York Insurance Scholarship Foundation is pleased to recognize a student as accomplished as Jean,” Ellen Melchionni, president of NYISF said. “His accomplishments, both academically and professionally, are quite admirable. Jean will undoubtedly make tremendous contributions to the insurance industry.” NYISF was founded to encourage scholastic achievement, community involvement and a commitment to advancing the insurance industry. “Jean embodies all of these qualities,” Melchionni said. “He carries a commendable grade point average, is devoted to giving back to the com-

munity, including as an instructor in an after-school program for underprivileged students, and is keenly interested in using his real-world experience to further the contributions of insurance to society.” 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. “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, Inc.

PIANJ Announces John Laux Memorial Scholarship Winner uTrenton, N.J.—The Professional Insurance Agents of New Jersey has announced that Samantha Lanzano, daughter of Rebecca Lanzano, client account manager at Kape Insurance Agency in South Plainfield, N.J., has been named the first annual PIANJ John Laux Memorial Scholarship winner. The $5,000 award is bestowed to the child or grandchild of a PIANJ member agency owner or employee, who has been chosen for his or her essay describing the importance of insurance. Lanzano, who resides in Toms River, N.J., is attending Ocean County College and intends to attend Stockton University to obtain her bachelor’s degree and become a registered nurse. "PIANJ is pleased to present this scholarship to a member of our association fam-

ily," said PIANJ President Kacy Campion Renna, CIC. "John Laux was a beloved insurance professional and New Jersey Young Insurance Professional. We are thrilled to honor his legacy in this manner." Funds for the scholarship are provided by The Fore John Charitable Foundation, which has raised more than $235,000 for scholarships and local charities in John Laux’s name since 1995. John’s decade-long work in the industry was tragically cut short after a brief and hard-fought battle with cancer. He has been recognized posthumously by PIANJ for his impact on the industry and remains fondly remembered as one of the strongest supporters of NJYIP. "Samantha has grown up with an insurance mom as a role model. Rebecca has instilled many of her own outstanding qualities and values in her daughter, and you can see them in Samantha as she pursues her own life dreams," said Alan Kape, principal of the Kape Insurance Agency. "John Laux was our own FMI marketing representative and an outstanding person, still often fondly remembered, "The scholarship award will be very special to Samantha, the Lanzano family, our agency staff, and everyone who helped make this an ongoing legacy for John."

"John Laux was a beloved insurance professional and New Jersey Young Insurance Professional.…”

SAMANTHA LANZANO, RECIPIENT OF THE FIRST ANNUAL JOHN LAUX MEMORIAL SCHOLARSHIP INSURANCE ADVOCATE / August 21, 2017 19

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[ F EAT URE ] CONTINUED FROM PAGE 18

use,” which commonly falls within the definition of “property damage” in general liability policies. Indeed, a number of cases have interpreted loss of use coverage to include damages for diminished functionality. Also, coverage may exist for defect claims if replacing the defective product would cause damage to other property. For example, allegations that electrical wiring used in homes is defective would not ordinarily be covered if the plaintiffs sought only to recover the cost of the product, but damage caused to other property in order to remove and replace the product, such as walls, might be covered. • Claims of improper fees or other charges by ﬁnancial institutions: Numerous class actions have alleged that banks and other financial institutions have charged hidden fees or otherwise improperly handled transactions or accounts. Such claims seek the recovery of improper charges, which generally fall within the coverage grant of D&O and E&O policies. However, insurance companies typically deny coverage for these claims based upon exclusions that apply to the disgorgement of ill-gotten gains. However, those exclusions are often found in court to not apply, either because they are limited to instances where there has been a judicial determination that the policyholder was not entitled to the money, or because the enrichment of the policyholder is not a necessary element of the claim. • Invasion of privacy claims: Many class actions assert invasion of privacy by employers or by a wide array of players in the computer, internet and telecommunications industries. Such claims may be covered under a variety of insurance policies, including general liability (personal injury), employment practices liability, cyber, D&O, and E&O. For example, in recent class actions alleging that personal information was acquired by an application installed into mobile phones, some defendants successfully invoked invasion of privacy coverage under their general liability policies. 20 August 21, 2017 / INSURANCE ADVOCATE

So, all that must be shown in order to secure defense coverage is that the plaintiffs might be able to prove that something is not excluded.

The Value of Defense Coverage Policyholders should not give up if a covered claim does not jump off the page of a class action (or any) complaint, or if the main thrust of the action is an excluded claim. Under most liability policies, the insurance company’s defense obligation is triggered as long as any claim in the complaint is potentially covered. So, all that must be shown in order to secure defense coverage is that the plaintiffs might be able to prove that something is not excluded. This standard is to be liberally applied by the courts. In most jurisdictions the duty to provide defense coverage is an issue of law that is typically decided on summary judgment based only upon a comparison of the complaint and the insurance policy, without discovery or consideration of any other extrinsic evidence. Therefore, the defense obligation often can be determined quickly and inexpensively—at least compared to litigating other issues. The question of whether the defense obligation is triggered may not be the end of the dispute over defense coverage. Whether the insurance company must pay all defense costs or just those necessary for potentially covered claims, and whether the insurer may later be able to recoup defense costs depending upon the outcome of the case, varies from policy to policy. Nonetheless, defense coverage is valuable not only for the payment, or at least advancing, of litigation costs, which are often the greatest expense of a class action, but also because an insurance company that is incurring defense costs is likely to be willing to pay, or at least contribute to, the settlement of a class action to bring finality to its obligation. Thus, corporate policyholders should not assume that class actions against them by consumers will not be covered. Instead, they should review the complaints carefully and consider the potential for coverage under all their insurance policies.[IA]

FOREWORD CONTINUED FROM PAGE 4

York roads, ease congestion and open up new mobility choices across the state’s diverse landscape. We applaud Governor Cuomo for his leadership and stand ready to assist in defining how this future will unfold in the Empire State now and for years to come.” Applications for testing may be submitted by manufacturers of “autonomous vehicle technology,” or companies creating such technology working in conjunction with manufacturers. All vehicles will also have to comply with federal safety standards and all applicable New York State inspection standards, and a person holding a valid driver’s license must be present in the driver’s seat at all times while it is operated on public highways. Each vehicle to be used must be listed in the application, and a $5 million insurance policy must be in place for any vehicles to be tested. I still don’t know if this is progress or fantasy or just great entertainment and experimentation. I remember the Jetsons and can adjust to drones to a degree, but giving up my stick is not my “shtick,” especially if I cannot see my new chauffeur. I wonder how a self-driving car would handle a “white out” on route 81 near Homer—one that almost resulted in a near-death situation for me on the way home from Syracuse some years back. Would you get a recorded notice to “stay home” or “pull over” or “check your life insurance”? Or would you rely upon experience to navigate your way out of it, by downshifting, braking, and avoiding disaster? Jury is out on autonomous vehicles.[IA]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com

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[ WC UPDATE ]

Insurers Pushing Drugs for Pain Management, Ignoring Successful Alternative Treatments Following our July focus on WC issues, here we have an alternate viewpoint on opioid use: current insurance models continue to push for opioid and NSAID drug treatment for pain management, despite the spreading opioid abuse epidemic. Successful alternative medicine clinic owner JinLi Wang points to treatments for chronic pain including chiropractic spinal manipulative therapy, which treats pain with few side effects while improving function.–SA uOpioid abuse has become a serious public health concern reaching epidemic levels in the United States. Misuse of opioids accounts for over 1,000 emergency room visits every day. As many as one in 10 adults suffers from a condition causing chronic pain typically treated with prescription pain medications. Despite this news, current insurance models favor traditional pain management. JinLi Wang, Co-Founder of the chiropractic marketing group Local Marketing, LLC (www.localchiromarketing.com), indicates that current insurance models favor prescription drug treatment with opioids or NSAIDs over alternative treatments— despite the published benefits of alternative treatments. JinLi Wang was a successful practitioner and owner of the largest and most profitable Chinese Medicine Clinic in the U.S. In communicating report findings with chiropractors, she discovered that the key missing factor in most practices was a consistent flow of new patients. Her passion for natural healthcare led her to shift her focus to helping the chiropractic profession with comprehensive marketing, something that was lacking. As natural medical professionals, chiropractors weren’t familiar with the difference between marketing and sales, much less how to reach out for help in marketing their practice. As doctors and patients look for alter22 August 21, 2017 / INSURANCE ADVOCATE

natives to opioids, chiropractic marketing experts are touting the benefits that chiropractic therapy can provide. A recent study indicates that the spinal manipulative therapy used by chiropractors can provide both improvements in pain and function. Preliminary data from another study suggests that there is approximately a 56-57% reduction in opioid use when chiropractic care has been utilized in a patient’s treatment. “Most insurance companies charge a much greater co-payment for visiting a chiropractor versus a general practitioner,” says Wang. “For years, these doctors were encouraged to prescribe opioids to treat chronic pain.” Opioids were pushed by pharmaceutical companies as a safe alternative to short-acting narcotics. Doctors were instructed that, because opioids were time-released, they would not produce a high that would lead to addiction. In addition to the benefits of chiropractic therapy, the risk of serious adverse reactions is negligible. Patients receiving opioid narcotics for chronic pain, on the

other hand, are less likely to recover function and may experience constipation, sexual dysfunction, cognitive impairment, addiction, and overdosing. Patients receiving opioids long-term may also become more sensitive to pain. Opioids numb pain and may persuade a patient that their condition is less serious than it is, potentially leading to a patient hurting themselves through overexertion. Opioid abuse levels and the growing body of research validating chiropractic services has led the medical community to re-examine its approach to pain management. The new American College of Physicians (ACP) guidelines for low back pain treatment recommend trying a noninvasive, non-drug treatment prior to resorting to pharmaceutical therapies. The 2017 ACP guidelines cite heat therapy, massage, acupuncture and spinal manipulative therapy as alternative methods. Similarly, the 2016 Centers for Disease Control and Prevention published guidelines for chronic pain treatment that promote non-drug treatments. The Joint Commission—an organization that is responsible for accrediting 20,000 healthcare systems in the United States—has also added chiropractic and acupuncture therapy to its pain management standard. JinLi Wang added that “Chiropractors and alternative medicine practitioners will need to become proficient in marketing their skills to combat the issues of insurance diversion—in order to help a greater number of patients and have a positive effect on the growing opioid epidemic.[IA]

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Introducing the IIABNY DIY Hiring To oolkit

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YOU BELONG WITH IIABNY. IIABNY is THE trade association for independent insurance agents and brokers in New York.

Contact Kathy Lawler klawler@iiabny.org 800-962-7950 ext. 218 iiabny.org/di d yhiring d

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(' / ' ( $%) ' ( $( ' $% ' + ' .-,+.((*'$%' ' $% ,( '+ ' ( '+%',+.$ ', ),') (' $ ,' ) + %*', (' + %( ')%*'%((*',+' ('+%' + ' )*) ' ( .$% ' + ' ,) '+%',+.

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YOU BEL LONG WITH IIABN NY. IIABNY is TH T E trade association for independent insurance agents and brokers in New York.

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IN-HOUSE TR AINING IIABNY provides classes designed to meet the nee eds of your agency, on a time schedule that works for you. Classes at your location focus

Institute courses to help your employees gain designations.

Visit our website for a complete listing of classes, s webinars, and n upcoming events. iiabny.org/edc calendar

YOU BEL LONG WITH IIABN NY. IIABNY is THE trade association for independent insurance agents and brokers in New York.

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[ CYBER UPDATE ]

STEPHEN M. SOBLE

Cybersecurity Secrets Unveiled for the Insurance World

Stephen M. Soble is Chairman and CEO of Assured Enterprises, Inc.

Not All Vulnerabilities are Created Equally This is the ﬁrst in a series of regular columns on topical issues relating to cybersecurity for the insurance industry, from Stephen M. Soble, a cybersecurity thought leader. His article, “Cyber Risk Beyond Compliance” was the cover story of our June 15 issue, and it has received wide acclaim. We hope you enjoy and beneﬁt from Steve’s contributions.–SA uWhether it is the buzz over the WannaCry, Petya or NotPetya ransomware, Russian hackers, North Korean hackers or whatever today’s news headline about cybersecurity might hold, we constantly hear the word “vulnerability.” But, what is a cybersecurity vulnerability? And why should you even care? Just when you think you know the meaning of this common English word, the digital world shifts the sands of perception and understanding. Let’s explore.

Not all Vulnerabilities are Created Equal In common usage, a vulnerability is a weakness, a corner of our emotional life susceptible to a minor hurt. People don’t die from vulnerabilities, save for the “death from a broken heart” predicament of a Jane Austen protagonist. Dying is reserved for disease, virus, and unforeseen calamity. But everyone suffers some hurt of the heart because of their personal vulnerabilities. And sometimes we even say that vulnerabilities—which can lead to injury— strengthens our character, improves our heart and is a necessary growing pain. The kind of vulnerability which lives in the hardcore engineering cyber world appears in many flavors: • Poor software development or coding practices • Defective or weak system design • Dangerous gaps in network connections • Ineffective or unsecured interaction of hardware and/or software on the network • Gaping holes in deployed software that can be readily exploited—some so wide open that a Mack truck 26 August 21, 2017 / INSURANCE ADVOCATE

Dying is reserved for disease, virus, and unforeseen calamity. But everyone suffers some hurt of the heart because of their personal vulnerabilities. without power steering can slip through the hole. In software development, “vulnerabilities” typically mean a defect in the code that can be exploited by a hacker. There are many scanning tools that can detect these poor code defects. Some are very reliable. When we look at the network system and operations, the interaction of various devices on the network with one

another, we might see vulnerabilities, too. But here the vulnerabilities are often characterized as gaps that create a pathway by which a network may be penetrated; a gap that may be so difficult to locate or so buried beneath other security devices that risk of loss is not measurably increased by the presence of such a gap. Apart from your security provider, who wants to spend more money to fill every gap? The mortar in brick houses gives rise to air gaps, and unless energy efficiency or another overriding concern arises, we don’t rush out to seal the mortar in order to feel good about eliminating the gaps.

The Real Problem is Holes Vulnerabilities in software already deployed on your enterprise are entirely a different matter. Think of vulnerabilities CONTINUED ON PAGE 28

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INSURANCE ADVOCATE / August 21, 2017 27

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[ CYBER UPDATE ] CONTINUED FROM PAGE 26

in deployed software as holes in the bottom of a boat. You have three choices— repair and seal the hole, turn on the pumps to remove the water, or sink. Vulnerabilities in deployed software are the genuine Achilles heel of our digital systems today—networks, computers, mobile devices, biometrics, even the Internet of Things (IoT). Why? Some 80% of the successful cyber-attacks (including WannaCry, Petya, NotPetya, the Russian hack on the DNC, and the North Korean hack against the Central Bank of Bangladesh) exploited known vulnerabilities in deployed software. Once the bad guys can look for the hole in the software operating on your system, find it, and exploit it, you are most likely in for a serious data breach, a ransomware attack or other malicious attack.i The WannaCry and Petya attacks have demonstrated that systems which haven’t been patched (repaired and sealed) to close the hole (the vulnerability in the deployed software) are susceptible to rapid and devastating breaches by these attacks. Some companies do not have a solid program of patch management. Many software providers do not push their remediation patches out to their clients, but rather rely on their clients to take the initiative to download the patch from a repository and then take the responsibility to make sure the patch was properly deployed. Defining liability for a data breach between the network operator (the insured, most likely under a cyber risk policy) and the software developer (another insurer, probably for E&O insurance) has been a donnybrook in the courts. Insurance policies and the stakeholders may talk past each other, each using the word “vulnerability,” but each meaning something different from the other. In some of these cases, insurance companies have forced settlements, rather than create precedent which may result in a poorer result in the future. Most cybersecurity companies like to sell pumps to pump out the water flooding through the hole in the bottom of a network’s boat. That way they have long-term clients who become dependent on them. Dependency and crisis management increase costs. Over time, larger and more powerful pumps are deployed because the network (ship) is taking on more water (exploited known vulnerabilities in the 28 August 21, 2017 / INSURANCE ADVOCATE

Many software providers do not push their remediation patches out to their clients, but rather rely on their clients to take the initiative to download the patch from a repository and then take the responsibility to make sure the patch was properly deployed.

software deployed on their networks). It is a never-ending cycle. Consider this: several hundred new vulnerabilities are documented each week around the world. Keeping up is a problem.

What Does This Mean for the Insurance Industry? We have yet to see an insurance policy which clearly differentiates or properly defines—from a cybersecurity engineering perspective—which vulnerabilities are eligible for coverage and which are excluded. As we have seen, vulnerabilities exist on a spectrum ranging from weaknesses to defects in the structure (design or architecture of a system) to gaps, which may augur the need for monitoring, repair or even salutary neglect, to holes in the software which may need to be repaired and

sealed to ward off the next global attack. Other milestones (definitional points) along the spectrum from weakness to holes probably exist. Those responsible for claims, compliance, litigation and drafting of policies at the insurers/re-insurers level need to be cognizant of the variety of meanings and ramifications arising from the type of vulnerability referred to in the documentation. The insured may want to know what is and what is not covered with clarity. Brokers and agents may want to work with their best clients to reduce the client’s cyber risk, while providing the greatest coverage in a policy. Actuaries and analytics professionals need statistically correlative points of comparison in order to make proper judgments. Yet, if the insurance industry persists in the vague, imprecise use of the term vulnerabilities in the cyber world, the industry may lose control over its destiny with the most active new genre of insurance on the market—cyber risk insurance. Instead of controlling its destiny, the insurance industry may discover one day that a judge in some jurisdiction has resolved matters by defining vulnerabilities according to their own biases and criteria. Let’s hope the judge does not have a heartbroken teen at home. Court roulette is not a comforting game, especially when the stakes are so high.[IA] i The solution is deep software scanning, which is only available through one source.

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[ IN FOCUS ]

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

Running a Killer Sales Meeting uIs your agency currently running sales meetings? If not, why not? Did you try them for a while and give up because they fell flat? Or do you currently run them and it’s the best part of your week? Remember, nothing happens until something is sold in an agency. Sales needs to be at the center of everything that the agency does. Sales meetings are a great way to rally the troops and get psyched to sell insurance. Let’s first start with who should be in your sales meeting. If you have producers, they should be included. If you also have people who service and sell, I recommend having two sales meetings: one for producers and one for your service and sales team. Since their roles are different, the content of the meetings should be, too. Don’t worry, our sales meetings are not 10 hours long, so you will be able to fit it in. Next, when and how often should you have sales meetings? We recommend biweekly. You need at least two meetings per month. Why? If things are off track, waiting until the next month should not be an option. You need to rally the troops and get everyone back on track as soon as possible. Waiting too long means it will impact this month and next month. Why wait? Meeting twice a month for 45 minutes is necessary for success. So many owners stress about the content of the meeting. You’ll have no worries if you use our format and your prep time should be minimal. You want a sales meet-

Sales needs to be at the center of everything that the agency does. Sales meetings are a great way to rally the troops and get psyched to sell insurance. ing to be encouraging and interactive. Resist the idea that lecturing the team is the way to go. True salespeople will check out and you won’t get them back. Here is our recommended format: • Everyone shares one success. (If they haven’t had any success in two weeks, do you think they really should be there? I don’t—move on.) • Everyone shares one lesson. Lessons are things you learn. It could be a failure, carrier update, something you tried. Learning from each other allows for greater team building. • Numbers. Yes you need to share sales numbers and you need to figure out how to track it and make it accurate. News flash—it’s not optional for producers to not update a sales tracker. How are they going to manage their X dates if they don’t? - Number of prospects added - Number of quotes - Number of sales (revenue, premium, policy)

Kelly Donahue-Piro, founder and president of Agency Performance Partners, is a no-nonsense effectiveness expert who has helped hundreds of insurance agencies identify and capitalize on sustainable improvement opportunities. Her specialties include agency culture assessment and change; management and supervisory coaching and benchmarking; customer retention strategy development; digital marketing strategy, planning and implementation; and sales planning, management and skillbuilding. In 2014, she created Agency Performance Partners with a mission to “partner with insurance entrepreneurs who dream to take their business to the next level and beyond, by relentlessly pursuing excellence in worldclass service and sales strategies.” The centerpiece of the organization’s transformational work is its Agency Performance AssessmentTM, a comprehensive survey tool Kelly created to zero in on organization-wide improvement opportunities and provide the foundation for a customized agency action plan. Mrs. Donahue-Piro is an engaging speaker who is available to conduct in-person and online agency success presentations that complement her firm’s one-on-one on-site and virtual consulting practice. Connect with her on social platforms, via email at kelly@agencyperformancepartners, or by phone at 401-415-6205.

- Closing ratio - Pipeline for the month • Everyone then shares any bottlenecks. This is something that someone is struggling with. The group can then help with feedback. • Training. Share a video, strategy or script. This should be about 15 minutes to review and discuss. • One word close. How is everyone doing right now? 30 August 21, 2017 / INSURANCE ADVOCATE

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[ IN FOCUS ] Now the key to a successful sales meetings is consistency. Meaning no matter what, the sales meeting happens. If you are on vacation, then elect a second-incommand. No excuses! Your team needs to know you are serious about having these meetings and that their participation is not optional. Sales meetings work when you work them. You can expect some pushback when you first launch your sales meetings. There may be one or two people who say they are too busy for this. They most likely are your least producing. The reality is they don’t want to face their numbers in a group setting. It’s okay. Once the crew gets a bit more comfortable with the process, they should look forward to going and sharing their progress. It’s all about being better than the month before. A big key to success is you making sure you have the metrics ready to review. The numbers are the meat of the meeting. If you get too busy, forget or have a soft spot for your least producing producer, you may shy away from the numbers. Identify who is the best person to run these reports. Really, once they are perfect anyone can run the numbers. Your goal is to have them ready for review and distribution as you walk into the meeting. Remember, no excuses! Take the time and book your first of many sales meetings. Your team will benefit by having structure and access to all the great knowledge of the team. You will find small problems faster before they become big problems. Also, hopefully your team will develop a healthy sense of competition…Remember, iron sharpens iron![IA]

[ NEWS NOTES ]

Trusted Choice® Chooses New Executive Director uTrusted Choice®, the consumer branding program for the Big “I” that appears regularly in ads on cable and regular TV, has promoted Kevin Brandt as its next executive director. “Trusted Choice® is excited to announce that Kevin Brandt will succeed Dave Evans as executive director,” says Bob Rusbuldt, Trusted Choice® president. “He is prepared to fill huge shoes and to take the wheel for Trusted Choice® at this exciting time for the program. Kevin will be working closely with the TrustedChoice.com team and Trusted Choice® carriers to ensure Big ‘I’ members and all of the Trusted Choice® players are evolving along with consumers and the marketplace. Trusted Choice® and TrustedChoice.com are in business for one reason—to drive business to Trusted Choice® Big ‘I’ members and Trusted Choice® carriers.” Brandt joined the Big “I” team in 2003 as a software developer and has risen through the ranks. Since 2007, he has run the Trusted Choice® day-to-day business as director of operations. He previously worked for a think tank, World Webmasters, in Fort Lauderdale, Florida. Brandt earned a Bachelor of Arts degree from Elon University in Elon, North Carolina. He also holds a graduate certifi-

cate in eMarketing from the University of Virginia. “The Big ‘I’ and Trusted Choice® are grateful to Dave Evans for his 19 years of excellent service,” continues Rusbuldt. “Dave was instrumental in the birth and development of Trusted Choice® and has been a wonderful colleague in his numerous roles at the association. We wish him all the best in his future endeavors.” Trusted Choice® was launched by the Big “I” and several independent agency companies to highlight the benefits independent agencies and brokerage firms offer consumers—choice of companies, customization of policies and advocacy support. The Association refers to it as the premier consumer brand for independent insurance agents providing, as it does, national advertising and other strategic tools to reach consumers. Trusted Choice® also educates consumers about the benefits of using independent agents and brokers for their insurance needs: choice of companies, customized policies and advocacy support. Trusted Choice® is the consumer marketing identity for more than 26,000 independent insurance agencies and brokerage firms and 71 leading insurance companies. For more information, go to www.TrustedChoice.com.[IA]

Argo Group, a sponsor of Faraday Future Dragon Racing, hosted a group of local high school robotics teams from Brooklyn high schools at the Formula E race in Red Hook in July. The high schoolers got to tour the garages, meet the drivers, and Argo Group announced a $10,000 matching donation to their robotics competition teams in support of STEM education. For every dollar a student raises, Argo will match it and the money will go directly towards preparing and sending teams to regional and national robotics competitions. Nice work, Argo. Photo credit: Jack Jeffries INSURANCE ADVOCATE / August 21, 2017 31

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[ O N M Y R A DA R ]

BA R RY Z A L M A

Chiropractors Cannot Own & Control Medical Practice “Doc-in-the-Box” Scheme Defeated uInsurance fraud appears in many different schemes. When a chiropractor wishes to increase his practice and the fees charged in order to defraud insurers who compensate people injured in accidents, creates a “Doc-in-the-Box” scheme where the physician merely sells his or her name and license to a chiropractor for a fee, the action is a fraudulent violation of state law. Plaintiff Allstate Insurance Company (Allstate) sued a group of doctors and lawyers who created what Allstate believed was a scheme to commit insurance fraud against defendants Robert P. Borsody, Esq., a New York attorney, and Daniel H. Dahan, a California chiropractor (collectively, defendants). After a bench trial, defendants were found to have violated the Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to 30, by assisting a New Jersey chiropractor in the late 1990s in the creation of an unlawful multi-disciplinary practice, which submitted medical insurance claims to Allstate. The trial court determined that Borsody and Dahan violated the IFPA to the extent they promoted and assisted in the creation of a practice structure that was designed to circumvent regulatory requirements with respect to the control, ownership, and direction of a medical practice. In Allstate Insurance Company v. Northﬁeld Medical Center, P.C. (A-27-15), Supreme Court of New Jersey (076069), 2017 WL 1739692 (May 4, 2017 ), the Appellate Division reversed because it held Allstate had not established that defendants knew that a violation of those regulatory requirements could constitute insurance fraud under the provision of the IFPA that creates liability for one who “knowingly assists, conspires with, or urges any person or practitioner to violate any of the provisions of [the IFPA].” Defendants extensively promoted a professional practice structure that a factfinder could reasonably conclude was little more than a sham intended to evade well32 August 21, 2017 / INSURANCE ADVOCATE

Defendants extensively promoted a professional practice structure that a factfinder could reasonably conclude was little more than a sham intended to evade well-established prohibitions and restrictions governing ownership and control of a medical practice by a non-doctor. established prohibitions and restrictions governing ownership and control of a medical practice by a non-doctor.

State of New Jersey Rules for Medical Practices The Board of Medical Examiners established limits on the corporate practice of medicine. Section 6.16(f) lists the appropriate types of private practices—for example, solo practice, partnership, and medical corporation—and explicitly provides that a medical doctor with a plenary scope of practice may not be employed by a licensee with a more limited scope of practice, such as a chiropractor.

FACTS New Jersey-licensed chiropractor John Scott Neuner testified in the trial of the IFPA complaint filed by Allstate against the multi-disciplinary practice that he had incorporated as Northfield Medical Center (Northfield), as well as the various other professional entities and persons named as defendants. In the 1990s, Dahan, a chiropractor licensed in California, began organizing a series of lectures throughout the country through his company, “Practice Perfect.” Practice Perfect lectures were marketed toward chiropractors and focused on

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

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[ ON MY RADAR ] the creation of multi-disciplinary practices in which chiropractors work with physicians and other medical professionals. Borsody, a New York-based healthcare attorney, made presentations at Practice Perfect lectures on the legal issues arising from such multi-disciplinary practices. On March 28, 1997, after attending the Practice Perfect seminar Neuner signed a contract with Dahan to become a client of Practice Perfect. Neuner spoke with Borsody about establishing a medical corporation and management company as had been described. In late 1998, Allstate, which had been receiving insurance claims for treatment provided at Northfield, began investigating the legality of Northfield’s practice structure and ceased paying claims to the practice. Neuner retained Borsody to represent him with respect to the investigation. On January 28, 1999, Borsody wrote to Neuner, informing him that because the doctors hired to work at Northfield did not own stock in the medical practice, Neuner’s employment of those doctors likely violated existing guidance from the Board. As a result of its investigation, Allstate refused payment on approximately $330,000 in claims of patients treated by Northfield. For present purposes, the salient charges of the complaint allege that Borsody and Dahan violated the IFPA by knowingly assisting Neuner in the creation and operation of a multi-disciplinary practice whose insurance claims were fraudulent under the IFPA. Based on the record presented, the trial court found that Borsody and Dahan violated the IFPA when they “knowingly assisted, conspired with and urged Neuner to operate in a fashion that violated the law.” The trial judge rejected defendants’ argument that because the law was unclear the evidence did not establish a knowing violation of the Act. In a Statement of Reasons, the trial court set forth the essence of its determination: “Borsody and Dahan promoted what they knew was essentially a lie. The business model they promoted was intended to appear to be one way and yet, in reality, be another way. They both were motivated to provide to the chiropractor the ability to manage a practice which included medical doctors. Dahan knew that a chiropractor could not own a majority interest of a multi-disciplinary practice

since his California corporation was established so that he was a minority shareholder himself. Borsody knew that he was placing in the hands of the chiropractor the control that was lacking in his first experience in New York. The simple fact that the practice was intended to look as though a medical doctor was in control, yet with various side agreements he was not, constitutes a sufficient basis for the Court to conclude that Borsody knew what he was doing was not proper.”

ANALYSIS This is not a criminal case. And the Legislature did not incorporate the criminal definition of a “knowing” mens rea in its adoption of a knowing violation for IFPA civil liability, as is applicable in criminal insurance fraud prosecutions. There is no need for contortions in understanding the word “knowing.” It is well understood to be an awareness or knowledge of the illegality of one’s act. There is ample precedent supporting the proposition that a party’s knowledge as to the falsity or illegality of his conduct may be inferred from the surrounding factual circumstances. As has been stated often, circumstantial evidence is not only sufficient but may also be more certain, satisfying and persuasive than direct evidence. The failure of a healthcare provider or service to adhere to the statutory requirements or any other significant state statute or agency regulation, renders that provider or service ineligible for reimbursement under the statute. In New Jersey a practice entity must comply with all statutes and regulations governing the permissible structures for control, ownership, and direction of a medical practice, including the use of professional services interconnected with a medical practice. Borsody, as well as Dahan, knew of the regulatory requirements at issue, promoted a practice scheme specifically designed to circumvent those requirements while appearing compliant, and therefore knowingly assisted in the provision of services, the foreseeable result of which was the submission of invalid and misleading claims under the IFPA. The documents and structure promoted and designed by defendants accomplished what the regulations sought to avoid. They placed control over the medical practice in the hands of a chiropractor, subjecting plenary licensees to his effective

control through interconnected contracts and the imposition of the threat of substantial monetary penalties. Importantly, the plan sought to conceal those features to appear compliant. The scheme vested bare legal title in a physician. However, the physician, besides being subject to direction and financial control by a chiropractor-owner of a management company, in reality was a stranger to the medical practice and was not operationally in control, having been demonstrated to have “sold” her license to multiple practices utilizing the so-called “Doc-in-the-Box” structure in New Jersey and many other states. There was an abundance of proof that the contracts and penalties—imposed on the doctor named as nominal owner in title of this practice—placed control of the medical practice in the hands of a chiropractor. The lengths that defendants went to in shielding the true controller of this practice from view undermine any basis for interfering with the trial court’s assessment of the mixed question of fact and law that was presented to the court. Considering all of the circumstances involved in defendants’ interactions with Neuner, the trial court reasonably concluded that defendants knowingly assisted Neuner in violating the Board’s rules and submitting ineligible and fraudulent medical claims for reimbursement through that practice structure, contrary to law. Knowledge or a “knowing” state of mind for purposes of a statutory civil violation under the IFPA was inferred by the Supreme Court and, as a result, reversed the judgment in favor of Allstate.

ZALMA OPINION The type of scheme defeated by this case was designed for the sole purpose of profiting from fraudulent claims made to insurers whose insureds had allegedly injured third parties. Allstate, and its persistent and effective counsel, defeated an insurance fraud scheme and may have deterred other chiropractors from entering into the scheme. The Supreme Court was careful to note this was not a criminal case, but should have referred the parties to the Attorney General to prosecute the criminal provisions of the IFPA.[IA]

www.insurance-advocate.com INSURANCE ADVOCATE / August 21, 2017 33

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[ LOOKING BACK ]

I N S U R A N C E A D V O C AT E - 2 5 Y E A R S A G O

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See ou

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[ COURTSIDE ]

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

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

Puzhayeva v City of New York Edited by Lawrence N. Rogak Plaintiff slipped and fell on an icy sidewalk below elevated subway tracks. She sued the City and the Transit Authority, alleging that water dripping from the tracks froze on the sidewalk. The Court granted summary judgment to the Transit Authority, holding that plaintiff had no proof that water dripping from the tracks froze on the sidewalk, and to the City, holding that the City had no prior written notice of the icy condition.—LNR In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Baynes, J.), which granted the

J U S T

"An owner owes no duty to warn or to protect others from a defective or dangerous condition on a neighboring premises, unless the owner had created or contributed to it." motion of the defendants New York City Transit Authority and Metropolitan Transit Authority for summary judgment. The plaintiff allegedly was injured when she slipped and fell on a patch of ice while walking on the sidewalk to a subway

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T H I R D

E D I T I O N

The Law and Procedure of Insurance Appraisal For: Insurance Counsel, Claims Executives, Independent and Public Adjusters, Appraisers, Judges and Umpires Explains Recent Changes in Law The Guide to the Appraisal Process Legal Precedents Strategies Waiver Issues Public Policy State by State Comparison Issues of Coverage Forms Detailed Index Almost 850 pages of Material Table of Cases and Authorities Written for Insureds, Insurers and Neutrals Readable and User Friendly Table of Cases Scope of the Appraisal Provision Appraisal of Scope of Loss and Issues of Causation AVAILABLE IN HARDCOVER ON CD VIA EMAIL TO ORDER OR FOR MORE INFORMATION: CALL: 1-888-791-7781 EMAIL: APPRAISALBOOK@GMAIL.COM

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[ COURTSIDE ] station located on Kings Highway in Brooklyn. She commenced this action against the City of New York, the New York City Transit Authority (NYCTA), and the Metropolitan Transit Authority (MTA), alleging that the dangerous icy condition was caused by construction on the tracks above that created runoff onto the sidewalk below. At her deposition, the plaintiff testified that she did not see water dripping from the overhead tracks and platform; however, she assumed that was how the patch of ice formed since she had seen similar conditions under other elevated platforms. The defendants moved for summary judgment dismissing the complaint insofar as asserted against them. In an order dated June 6, 2014, the Supreme Court granted the TA defendants' motion and denied the City's motion. As a general rule, "liability for a dangerous or defective condition on property is . . . predicated upon ownership, occupancy, control or special use of the property . . . Where none is present, generally a party cannot be held liable for injuries caused by the dangerous or defective condition of the property" (Noia v Maselli, 45 AD3d 746). "An owner owes no duty to warn or to protect others from a defective or dangerous condition on a neighboring premises, unless the owner had created or contributed to it" (Galindo v Town of Clarkstown, 2 NY3d 633). Here, the evidence submitted in support of the TA defendants' motion demonstrated, prima facie, that the sidewalk where the plaintiff fell was owned by the City. Furthermore, the TA defendants established, prima facie, that there was no construction taking place on the elevated tracks by the NYCTA on the date of the accident. In opposition, the plaintiff's contention that the NYCTA created the dangerous condition was too speculative to raise an issue of fact. Accordingly, the Supreme Court properly granted that branch of the TA defendants' motion which was for summary judgment dismissing the complaint insofar as asserted against the NYCTA. Furthermore, the Supreme Court also properly granted that branch of the TA defendants' motion which was for summary judgment dismissing the complaint insofar as asserted against the MTA. The TA defendants demonstrated, prima facie, that the MTA was not the proper party to

this action since the functions of the MTA with respect to public transportation are limited to financing and planning, and do not include the operation, maintenance, and control of any facility (see Delacruz v Metropolitan Transp. Auth., 45 AD3d 482, 483; Cusick v Lutheran Med. Ctr., 105 AD2d 681, 681). In opposition, the plaintiff failed to raise a triable issue of fact. The Supreme Court erred in denying the City's motion for summary judgment. Administrative Code of the City of New York § 7-201(c) "limits the City's duty of care over municipal streets and sidewalks by imposing liability only for those defects or hazardous conditions which its officials have been actually notified exist at a specified location" (Katz v City of New York, 87 NY2d 241, 243. Accordingly, "prior written notice of a defect is a condition precedent which plaintiff is required to plead and prove to maintain an action against the City". The only recognized exceptions to the prior written notice requirement involve situations in which either the municipality created the defect through an affirmative act of negligence, or a special use confers a special benefit upon the municipality (see Yarborough v City of New York, 10 NY3d 726. Neither exception is applicable here. "Transitory conditions present on a roadway or walkway such as debris, oil, ice, or sand have been found to constitute potentially dangerous conditions for which prior written notice must be given before liability may be imposed upon a municipality" (Farrell v City of New York, 49 AD3d 806, 807; see Min Whan Ock v City of New York, 34 AD3d 542; Estrada v City of New York, 273 AD2d at 194). Here, the City established its prima facie entitlement to judgment as a matter of law by demonstrating, through a search of Department of Transportation records and maps submitted by the Big Apple Pothole and Sidewalk Protection Corporation, that it had not received written notice of the alleged dangerous condition. In opposition, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court should have granted the City's motion for summary judgment dismissing the complaint and all crossclaims insofar as asserted against it.[IA] 2017 NY Slip Op 05107 Decided on June 21, 2017 Appellate Division, Second Department

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[ G UEST O PI N I ON ]

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

It’s Not about Health Care— It’s about Control uAs Congress struggles to do something about the ObamaCare disaster, Senators may be getting calls pleading, “Don’t take my healthcare away!” But the more influential voices will be whispering, “Don’t take my ObamaCare dollars away!” The American Medical Association (AMA), for example, is urging people to call about “cuts” (constrained growth) to Medicaid. Let’s get the terminology straight: The government cannot “take away” or “give” you health care. Caring for your health is something you do—or don’t do—yourself. It costs practically nothing; in fact, it saves you money. Nonsmokers save thousands of dollars a year. Walking around the block every day is free—and maybe you’ll meet your neighbor. Healthy foods like fresh fruits and vegetables cost something, but less than Starbucks coffee-flavored milkshakes or fast-food lunches. Being faithful to your spouse pays huge dividends. You can go to a “healthcare provider,” get counseled on smoking cessation, and have all your bad habits, risk factors, and soon probably your DNA and political views recorded in an electronic database, accessible to the government and thousands of other entities. They will constantly score you—on your value to society, eligibility to own a self-defense tool, suitability for a loan or a job, and eventually perhaps your qualifications to have a child. Your health depends on basic necessities not included in the $3 trillion poured into the “health care system” every year. Lacking a place to stay warm and dry, one homeless person lost his feet to frostbite, while Medicaid was paying someone $563 every month just to have him on a list of enrollees. Last year, Nevada Medicaid paid managedcare companies as much as $213 million for more than 30,000 people who received no care at all. Maybe that money was taken from housing or law enforcement. Does the money given to Medicaid contractors perhaps pay safety-net hospitals to care for the needy who do need care during the year? We don’t really know where all the money goes. A preliminary 38 August 21, 2017 / INSURANCE ADVOCATE

Let’s get the terminology straight: The government cannot “take away” or “give” you health care.

look at publicly available documents of Arizona’s Medicaid system, allegedly the most efficient in the U.S., revealed that managed-care contractors made more than $225 million in pre-tax profits in just one year. And in five years, nearly $400 million of Medicaid funding was transferred to other state agencies. From a basic economics standpoint, it is just absurd to use third-party payment schemes for routine, predictable (hence uninsurable) costs. It doubles or triples the costs, while making services look free or worth $5 at the time of service. It perpetuates the illusion that somebody else is paying, while managed-care stockholders, administrators, arbitrageurs, and purveyors of ridiculously overpriced drugs or procedures rake in profits. Of course, there is the risk of a car crash, cancer, heart attack, or other true emergency. I’d like to buy catastrophic insurance to cover my risk for those things, without buying everybody else’s contraceptives, fertility treatments, smoking cessation counseling, drug abuse treatments, and blood pressure pills. Such insurance became very difficult to obtain years ago, and ObamaCare outlawed it. We’re moving toward the end-game of single payer, which assures the continued diversion of funds to the Swamp. These funds are no longer available for people to choose to spend. And worse, the System will carefully control the funds that actually provide care, say by punishing doctors for deviating from government-dictated “best practices.” It will allow nothing it calls “snake oil” (things like vitamin D, hormone supplements for aging, or other generally benign items that people find worthwhile but that drain profits from government-approved treatments).

Jane M. Orient, M.D. obtained her undergraduate degrees in chemistry and mathematics from the University of Arizona in Tucson, and her M.D. from Columbia University College of Physicians and Surgeons in 1974. She completed an internal medicine residency at Parkland Memorial Hospital and University of Arizona Affiliated Hospitals and then became an Instructor at the University of Arizona College of Medicine and a staff physician at the Tucson Veterans Administration Hospital. She has been in solo private practice since 1981 and has served as Executive Director of the Association of American Physicians and Surgeons (AAPS) since 1989. She is currently president of Doctors for Disaster Preparedness. Since 1988, she has been chairman of the Public Health Committee of the Pima County (Arizona) Medical Society. She is the editor of AAPS News, the Doctors for Disaster Preparedness Newsletter, and Civil Defense Perspectives, and is the managing editor of the Journal of American Physicians and Surgeons.

Nothing “futile” like experimental treatment for Charlie Gard. Nothing experimental outside the control of the FDA (that might compete with lucrative drugs). Nothing that is not “value based” (such as life-sustaining treatment including food and water to patients not valuable enough to treat for pneumonia, heart failure, or a bleeding ulcer). The system is also striving to eliminate nonadherence. Patients will take all their vaccines or lipid-control medicine, like it or not, because the benefit (to “society”) is claimed to outweigh the risk (to them personally). The system wants Americans to trade their freedom for the illusion of “health care.” But Americans will soon learn that freedom is of the greatest importance when life is at stake.[IA]

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