September 26, 2016 Insurance Advocate by C Acunto

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

Breach Blankets: Vol. 127 No. 15 | September 26, 2016

Statutes in NY, NJ, CT Prescribe No ďŹ ca on Rules for Data Breaches

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[ FOREWORD ]

STEVE ACUNTO

Charting Courses

VOLUME 127, NUMBER 15 SEPTEMBER 26, 2016

uEngagement Labs, a technology and data company, has ranked the top ‘Total Social’ insurance companies in the U.S. based on online and offline conversations. Here are the top five Total Social insurance companies in the U.S., as well as the top five Total Social insurance companies based on only offline and online performance. Ranking Total Social Total Social Just Offline 1 Allstate GEICO 2 GEICO Allstate 3 Blue Cross/Blue Shield State Farm 4 Aetna USAA 5 State Farm Blue Cross/Blue Shield

Total Social Just Online United Health Aetna Blue Cross/Blue Shield Cigna Kaiser Permanente

When analyzing the data, the Company found that the insurance industry is effectively driving online conversations, indicating a sharper focus on social media strategy. However, the brands are suffering from lower sentiment when compared to other financial industries, bringing to bear the industry’s need to focus on developing marketing campaigns to spread positive word of mouth. Paul Cohen, Property Casualty Bureau Supervising Insurance Examiner, has retired from the DFS after a career spanning more than 51 years! Paul came to the then-Insurance Department on June 10, 1965 (two weeks before me and I retired 17 years ago). Thought you might want to include a blurb on that because that’s either the all-time record or second best in terms of length of service (some believe a Dottie Wilson who started at the Department during WWI may have served a year longer). LEFT: PAUL COHEN RECEIVING A RETIREMENT GIFT AT HIS LUNCHEON AT CHINA CHALET HELD 9/7/16. SERVICE IS 51 YEARS AND 3 MONTHS (LESS TWO DAYS). PAUL ALSO WORKED QUITE BRIEFLY AT THE NYS BANKING DEPARTMENT.

The number of insurance agency mergers and acquisitions in the first half of 2016 ranked as second-most-active six-month period according to OPTIS Partners, which began tracking M&A transactions in 2008. There were 232 announced deals over the period, one fewer than the 232 done in the first half of 2015, according to OPTIS Partners’ M&A database. The database covers U.S. and Canadian agencies selling primarily property-and-casualty insurance, agencies selling both P&C and employee benefits, and those selling only employee benefits. Agency M&A activity has climbed steadily over the past four years, other than the spike at the end of 2012 and related drop in early 2013 related to the tax-law change, OPTIS notes.[IA] 4 September 26, 2016 / INSURANCE ADVOCATE

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

CINN MEDIA, INC.

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in July, August, September and December by CINN ESR, Inc., 22 Bedford Road, 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 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2016. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Ofﬁce.

For high-quality article reprints (minimum of 100), including digital rights, contact Gina Marie Balog at g@cinn.com or call 914-966-3180, x113

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Contents

September 26, 2016 | Volume 127 Number 15

The Social Notebook: Improving the Customer Experience Matters to Your Bottom Line Chris Paradiso

On My Radar: Intentional and Wrongful Eviction Not Covered Barry Zalma

Looking Back: September, 1991

Guest Article: Americans Unprepared for a Major Disaster

Classiﬁeds

In the Associations: Parsons Elected President of PIANY

BREACH BLANKETS

[FEATURES] 4

Foreword: Charting Courses Steve Acunto, Publisher

Exposures and Coverages: Fooled by a Phisher; Business or Hobby; Hurricanes and Civil Authority Orders Jerome Trupin, CPCU

On the Level: Ethics is Its Own Reward N. Stephen Ruchman, CPIA

On the Level: Metamorphosis Jamie Deapo

In Focus: What’s Your End-of-Year Plan? Kelly Donahue-Piro

Guest Article: Protecting Your Client—and Your Bottom Line— With a Crisis PR Plan Katherine Heaviside

PIANY Elects Ofﬁcers for 2016-2017 PIANY Names Holender Director of the Year

[A D F E ATUR E S ] 21

PIA: Hudson Valley RAP

MSO: Pros and Cons of Pesticides

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

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[ EXPOSURES & COVERAGES ]

JEROM E TRUPIN, CPCU

Fooled by a Phisher Business or Hobby? Hurricanes and Civil Authority Orders Cat Bonds Come of Age uAqua Star, a New York fish importer, received an email supposedly from one of its suppliers, a fish exporter in China, instructing Aqua Star to change the bank information it used to wire payments to the supplier. Aqua Star’s employees complied with the request. Unfortunately, the supplier’s computer had been hacked and the instruction came from the hackers not the supplier. Aqua Star wired $713,000 in payments to the new bank address before the fraud came to light. It was too late to reverse the transaction. Aqua Star’s only hope to recoup the $713,000 was its commercial crime policy with Travelers. The commercial crime policy included Computer Fraud coverage which applies to loss caused by the fraudulent entry of electronic data into any computer system owned, leased, or operated by the insured. At first glance, it appears that Aqua Star had a valid claim. Not so, said Travelers. It pointed to an exclusion that eliminated coverage for losses caused, even in part, by an authorized user’s entry of electronic data into the company’s computer system. The court agreed with Travelers, ruling that the employee was clearly an authorized user. The fact that the employee was deceived by the email from the hackers did not trigger coverage. Is coverage available for such a loss? Yes, it is. There’s an ISO endorsement

called “fraudulent impersonation coverage” (CR 04 17 11 15). Other insurers refer to it as “social engineering” coverage. I wrote about this coverage in the October 12, 2015 issue of the Insurance Advocate. Fraudulent impersonation losses are all too common. Three of the first four items in a Google search for “cyber coverage for phishing loss” dealt with claims for multimillion-dollar fraudulent impersonation losses. Unfortunately it appears that $250,000 is generally the most coverage currently being offered. That may change. Nobody asked me, but insurers should be providing $100,000, $250,000, or the policy limit, if lower, as an automatic additional coverage for computer fraud with an option to purchase higher limits. Your insureds should alert accounting personnel to watch out for email phishing fraud. More importantly, counsel clients to add fraudulent impersonation or social engineering coverage to their crime policies.

Homeowners Policies and Business Pursuits: Can a Hobby Be a Business? In 2011, an Ohio couple, Annie and Samuel Bullock, bought a home on 10.5 acres that included a pool house and an unused barn. In 2012, Annie surprised Samuel with a gift of chicken and turkey chicks. Most such gifts wind up in the

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.

garbage pail, but the Bullocks were the exception. They liked raising chickens and turkeys. In 2013, they bought three or four hundred more chickens, plus 75 turkeys and bought more still in 2014. They sold the eggs at their church, from their home, and at a farmer’s market where they rented space. In 2014, the barn burned down. The Bullocks submitted a claim to Erie Insurance. The claim was denied by Erie, citing the exclusion of structures used for a business. The policy defined business as CONTINUED ON PAGE 10

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[ EXPOSURES & COVERAGES ] CONTINUED FROM PAGE 8

“a trade, profession or occupation engaged in on a full-time, part-time or occasional basis.” (That’s standard ISO wording.) The Bullocks sued. The Bullocks didn’t record their sales and didn’t keep bills or receipts. To them, it was a hobby; a wholesale chicken butcher was interested in having them raise chickens for him, but they turned him down. Samuel Bullock testified that it was “just for fun” and that it “helped me cope with PTSD.” Furthermore, he was not making any money based upon the costs of the operation. They did obtain the required licenses from the Department of Agriculture and registered with the County Health Department using the name “Nickel Plate Farms.” The Bullocks lost. The court ruled that there was “no genuine issue of material fact as to whether appellants’ operation was a business pursuant to the definition provided in the homeowner’s insurance policy.”1 PRACTICE POINT: Make clients aware that what they think of as a hobby can be a business that can trigger a policy exclusion. Second, when you get information about a hobby that may cross the line into a business, alert your clients of potential insurance problems. An interesting sideline of this case is that the Bullocks called their agent to ask about liability coverage should someone become sick from eating the eggs. The agent told them that their homeowners policy would not cover that exposure. That should have set off an alarm about the application of the business pursuits exclusion to a property loss. The agent was sued for not having the policy amended, but the Bullocks lost that claim also. But, even an E&O claim that you win is a blemish on your record and your reputation.

Hurricanes and Civil Authority Orders Governor Cuomo orders evacuation of beach-front towns on Long Island due to an impending hurricane. (Governor Christie shuts down the George Washington Bridge.) Most everyone remembers Sandy and evacuates. Businesses can’t operate; there are no employees and no customers available. Those fortunate enough, or smart

…even an E&O claim that you win is a blemish on your record and your reputation. enough, to have business income insurance call their insurance advisers who in turn scramble to read the policy. If it’s the current version of ISO’s business income form or one of the many forms patterned on ISO, here’s what they find: When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply: (1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; (emphasis added) and (2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.2 The requirement that property within one mile of the insured’s property be damaged to trigger coverage was introduced in the 2007 revision of the form. Prior to that there had been court decisions allowing civil authority claims for hurricanes that never made landfall in the US, but did do damage in other countries. A test: In which of the following situations would there be coverage for the loss of business income sustained by insureds with coverage provided by ISO Business Income and extra expense form CP 00 30 10 12 and Basic, Broad or Special Perils coverage?

1. The hurricane veers offshore with only heavy rain and some coastal flooding. There is no wind damage. 2. The hurricane materializes, and damages property a mile-and-a-half away from the insured’s premises. 3. The hurricane materializes and damages property adjacent to the insured’s premises, but because there’s no problem with access to the area, the state does not issue any further orders to evacuate. The answer, of course, is none of the above. (For coverage under scenario one, your insureds need flood as a covered peril. And Federal flood coverage won’t do. It doesn’t cover business income losses.) ISO homeowners policy language is different and probably worse for the insured: Here’s the wording from ISO HO 00 03 05 11 (the other current ISO HO forms contain similar language): 3. Civil Authority Prohibits Use If a civil authority prohibits you from use of the “residence premises” as a result of direct damage to neighboring premises by a Peril Insured Against, we cover the loss as provided in 1. Additional Living Expense and 2. Fair Rental Value above for no more than two weeks. Note that instead of a one-mile requirement, it’s damage to “neighboring premises.” In our part of the world, most insurers would define “neighborhood” as much less than a one-mile radius. I don’t know about the wilds of Alaska. Also notice that coverage is limited to two weeks. Some insurers of commercial property (but not ISO) provide what is known as “ingress/egress” (entry and exit) coverage. One such endorsement reads: Loss of Ingress or Egress: This policy covers loss sustained during the period of time when, as a direct result of a peril not excluded, ingress to or egress from real and personal property not excluded hereunder, is thereby prevented. Not the most felicitously worded endorsement, but it would provide coverage when, for example, trees blown down by a CONTINUED ON PAGE 12

1 Aqua Star (USA) Corp v. Travelers Casualty and Surety Company of America, No. 2:2014cv01368 - Document 101 (W.D. Wash. 2016) 2 Erie Insurance Exchange v. Samuel E. Bollock, etal. Court Of Appeals Stark County, Ohio Fifth Appellate District 2015-Ohio-5406.

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[ EXPOSURES & COVERAGES ] CONTINUED FROM PAGE 10

windstorm block the roads leading to or from the insured’s premises. If a policy providing flood coverage has ingress-egress coverage, it would respond when roads are washed out, something that might shut down an insured for a long time. ISO endorsement Civil Authority Change(s) CP 15 32 06 07 can extend both the radius of coverage and the number of days of coverage for civil authority losses. Thirteen square blocks surrounding the World Trade Center were closed for more

than two months following 9/11. Insurers may resist extending the coverage, but if you can get it, it’s another way for you to stand out in the eyes of your clients.

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Transit Authority to cover the damage NY City’s transit system might suffer from another Sandy. Today there are $72 billion in cat bonds outstanding. The bonds outstanding amount to 12% of the capital invested in the reinsurance business.3 The increase in capacity is creating downward pressure on reinsurance rates. Cat bonds are attractive because of the low interest rates available on traditional investments; cat bond purchases receive higher interest rates to compensate purchasers for the possibility that they may lose their investment should the stipulated catastrophe materialize. Reinsurers argue that they are more reliable sources for protection. To evaluate that assertion, Standard & Poors examined 13 cat bond issues that made claim payments. They found “no evidence that cat bonds lack the ability or willingness to pay claims in a timely manner.”4

Should Insurers Look First for Coverage not Exclusions? Gene Killian, a New Jersey attorney who frequently represents policyholders in claims against their insurers, publishes an interesting blog. In his July 6, 2016 posting he quotes this from a Travelers 1980s-era claim handling manual: “Ambiguity… means that the words are capable of being understood in two or more reasonably logical ways. Ambiguity should be resolved in favor of the insured. Prompt decisions must be made and effectively communicated to the insured. Defense obligations are broader than the obligation to pay. More and more jurisdictions require the insurer to look beyond the allegations in a lawsuit to determine if the loss is covered. Underlying these principles is the requirement to meet the duty of good faith to the insured. The most positive way to do that is to look for coverage in our policies, and not to look for ways to deny coverage.” (Emphasis his.) Those were the days. [IA] 3 Business Income (and Extra Expense) Coverage Form 00 30 10 12 © Insurance Services Office, Inc., 2011 4 Leslie Scism and Anupreeta Das, “Catastrophe Bonds Shake Up Insurance Industry” The Wall Street Journal August 7, 2016. (This comparison understates the capacity of standard reinsurance. $1 of capital held by a reinsurer can support as much as $2 or more of insurance writings; cat bond protection is limited to the face amount of the bond.) 5 “Cat Bond Payments Match Traditional Reinsurers on Reliability Scale: S&P” Carrier Management August 31, 2016

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[ O N T H E L E VE L ]

N. STEPHEN RUCHMAN, CPIA

Ethics is Its Own Reward uThis summer, I participated in a webinar on ethics, offered by PIA and taught by Steve Lyon. Steve is the cream of the crop when it comes to teaching continuing education courses for our industry. I always encourage those who want something more than just credit from their professional education to take PIA’s classes— but especially when Steve’s teaching. This webinar was among the most rewarding classes I’ve ever taken. Steve crammed so much material into the threehour session that I easily could have filled a pad with notes, and I wish I had. It was brimming with the structured information of the curriculum, but also keen personal insights. One moment from the beginning of the class stands out. Steve noted that direct writers seem to rely heavily on two tactics in their advertising these days: promises of savings (We can save you 15 percent!) and humor. Humor. Humor is fine; humor is great. But, can we all agree that insurance is not a funny business? It’s serious. If someone is in an accident, hurt or worse, that is no joke. If someone is underinsured—or perhaps not covered at all—because of some direct writer’s misleading filed form, it is a serious matter. We deal in lives, not punchlines. But, I digress. Steve’s class had me thinking. Every agent should take a course in ethics. Yes, of course, it keeps us abreast of changes in regulations. Sure, it’s great to have hidden pitfalls revealed and illustrated with realworld examples. But, it also reminds us of our strongest appeal to customers: For independent agents, it’s in our best interest to do right by our clients. Honestly, you could accurately call any ethics course “How to win back your personal- and auto-lines policies.” Let me give you an example from a parallel industry. My wife’s car came off lease some time ago and a local auto mechanic has long taken care of it. An itch to compare hit me, and thought I would have a nearby dealer check it out. After 14 September 26, 2016 / INSURANCE ADVOCATE

Speaking of ethics, at the recent board dinner for the Professional Insurance Agents of New York State, PIA announced it was honoring Robert Shapiro of Global Facilities with its Distinguished Insurance Service award. reading two-year-old magazines for nearly a half-hour, a “special advisor” brought me to his office and asked what brought me in today. “I’m looking for an oil change and to have the car looked over, especially the brakes.” He glanced over my paperwork and gave me an estimate for $700. “So, that includes the brakes?” I asked. No, that’s a separate charge. Even as my eyebrows shot up, he already was offering to reduce the cost a few hundred dollars by “blowing out the pipes” or some such nonsense. I didn’t go there to bargain. I just wanted a fair deal. My auto mechanic got the job done— including brakes—for $350, and I know he did a thorough job. This reminds me of the direct writer experience, only in reverse. Where the dealership piled on charges, trying to take advantage of my relative ignorance, direct writers pull essential coverages away from unsuspecting prospects, trading on a naïve focus on price to make the sale. This dealer sent me back to my local auto mechanic, and I feel more comfortable with him than ever. Once people understand the value of an independent agent—of a trusted partner—they’ll be back. Eager, honest service is an advantage in almost every industry, but especially in ours. Make sure you are using it to build your book. Speaking of ethics, at the recent board dinner for the Professional Insurance Agents of New York State, PIA announced

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

it was honoring Robert Shapiro of Global Facilities with its Distinguished Insurance Service award. I will be writing about the new administration in a subsequent article, but since I’m writing now on ethics, I have to make note of how fitting this award is. Bob is a long-time member and volunteer with PIA (he joined in 1984), a passionate advocate for our profession, and a model of ethical behavior. He is an active past president of the Professional Insurance Wholesalers Association and is a member of its Legislative and Nominations Committees as well as their Premium Finance Task Force. Shapiro also is a member of PIWA's Abe Snyder Memorial Committee. Bob also is a founding board member, past chairman, and current board member of the Excess Lines Association of New York. PIANY’s distinguished service award recognizes an individual who has a history of significant contributions to and support for the insurance community. Bob certainly fits that bill, but he also is a model of ethical behavior, a good friend and a great advocate and friend of PIA. He’s a great friend to many of us in the industry, including me. He deserves our congratulations! [IA]

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Breach Blankets: Statutes in NY, NJ, CT Prescribe Notification Rules for Data Breaches By James Westerlind, Arent Fox LLP James Westerlind is Counsel in Arent Fox’s litigation, insurance, cybersecurity & data protection, and automotive practice groups. He focuses on cyber risk issues, including insurance coverage and potential data breach liability for companies and their board members. James has also taken the lead in a number of appeals in the New York State Supreme Court, First and Second Judicial Departments, and the Second and Eleventh Circuits of the US Courts of Appeals. James’ practice also focuses on resolving insurance and reinsurance disputes, including insurance and reinsurance coverage issues on behalf of policyholders and carriers. He has also represented brokers, agents, and MGAs in disputes with insurance and reinsurance carriers. James has substantial litigation experience in both state and federal trial courts within and outside of New York, representing plaintiffs and defendants in insurance and noninsurance disputes. In addition to insurance litigation, he has defended a number of prominent US companies in product liability actions. He has also defended toxic tort cases. He has first-chaired applications for emergency relief, evidentiary hearings for emergent relief, and contempt

16 September 26, 2016 / INSURANCE ADVOCATE

hearings. He tried a major jury trial in the Southern District of Florida, obtaining a jury verdict finding that a life insurance policy was valid and enforceable, despite the jury finding that the trust that owned the policy made material misrepresentations in the policy’s application and engaged in a civil conspiracy to defraud the insurance company and engage in a stranger-originated life insurance (STOLI) scheme. He has also defended a number of well-known tire manufacturers and large domestic retailers in product liability actions commenced in New York state and federal courts by alleged injured product users. James has devoted a substantial portion of his time to pro bono matters, including not-for-profit public interest endeavors and family court litigation. In fact, James is a recipient of the Arent Fox Albert E. Arent Award for outstanding pro bono achievement (Fall 2013) and the Commitment to Justice Award (February 2014) from Her Justice, a nonprofit organization devoted to helping women in need. In addition, he is a member of the Insurance Law Committee of the New York City Bar Association, where he assists in shaping New York insurance law and public policy in an effort to help the public and the profession. Prior to joining Arent Fox, James was an associate in the New York office of a large law firm.

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INTRODUCTION Connecticut, the District of Columbia, Florida, New Jersey, New York, and Pennsylvania have enacted data breach notification statutes which apply to any business (including any insurance company or insurance producer) that acquires, owns or licenses computerized data that includes personal information of individuals who reside within the state. Personal information is typically defined to include the resident’s name (e.g., first name or initial and last name) in combination with any one or more of the following non-public data elements that relate to the resident, when the data elements are not encrypted, redacted, or secured by any other method rendering the name or the element unreadable or unusable: (1) social security number; (2) driver’s license number or state identification number; and (3) account number or credit or debit card number, in combination with any required security code, access code, or password that would permit access to a resident’s financial account. A data breach is typically defined as the unauthorized acquisition, or reasonable belief of unauthorized acquisition, of personal information that compromises the security, confidentiality, or integrity of the personal information maintained by the entity. Most statutes exclude from the definition of data breach data that: (1) was encrypted or substantially redacted; (2) is already publicly available through lawful means; or (3) was improperly acquired in good faith by an employee or agent of the entity for legitimate purposes and is not otherwise used or subject to further unauthorized disclosure. The statutes generally require notification to be provided to those individuals residing within the state whose personal information has been, or may have been, compromised. In addition, some states require notice to be provided to the Attorney General of the state, other state agencies (including, in many instances, law enforcement), or credit reporting agencies (or all of these institutions), depending on the number of residents within the state to whom notice must be sent. Notice typically must be sent in the most expeditious time possible and without unreasonable delay, and may only be delayed in some jurisdictions if law enforcement determines that notice should be delayed for purposes of its investigation of the matter, or if necessary to determine the scope of the data breach and to regain the integrity of the system. Generally, notice must be provided in one of the following ways: (1) in writing; (2) electronically (subject to certain specific rules that vary by state); (3) by telephone;1 or (4) by substitute notice. Substitute notice is usually permitted only if the entity demonstrates that the cost of providing notice through the other permissible manners would exceed a certain dollar threshold (which amount varies by jurisdiction), or that the affected class of subject individuals to be notified exceeds a certain number (which number also varies by jurisdiction), or the entity does not have sufficient contact information. If substitute notice is permitted, it typically must be sent in all of the following manners: (a) email, if the entity has an email address for the resident; (b) conspicuously posting the disclosure on the website of the entity, if the entity maintains a website; and (c) providing a notice to major statewide media.

Many jurisdictions do not specify what the notice must say to affected residents or regulators (e.g., Connecticut, District of Columbia, and New Jersey). Those jurisdictions that do have specificity in this regard generally require the notice to provide:

Notice typically must be sent in the most expeditious time possible and without unreasonable delay, and may only be delayed in some jurisdictions if law enforcement determines that notice should be delayed for purposes of its investigation of the matter, or if necessary to determine the scope of the data breach and to regain the integrity of the system. (1) a description of the categories of information that were, or are reasonably believed to have been, acquired by an unauthorized person, including which of the elements of personal information were, or are reasonably believed to have been, acquired; and (2) contact information for the entity making the notification. See N.Y. Gen. Bus. Law § 899-aa(7). Florida, for example, also requires that specific notice be provided to the Florida Department of Legal Affairs, which must include: (1) a synopsis of the events surrounding the breach at the time notice is provided; (2) the number of individuals in the state who were, or potentially have been, affected by the breach; (3) any services related to the breach being offered or scheduled to be offered, without charge, by the entity to affected individuals; (4) a copy of the notice to be provided to state residents; and (5) the name, address, telephone number, and email address of the employee or agent of the entity from whom additional information may be obtained about the breach. See Fla. Stat. § 501.171(4)(e). Most state breach notification statutes are only enforceable by the Attorney General. And most such statutes impose specific statutory penalties for violations thereof. None of the statutes that are the subject of this survey have industry-specific requirements.

CONNECTICUT STATUTE: Conn. Gen. Stat. § 36a-701b,2 2015 S.B. 949, Public Act 15-142.3 WHO MUST COMPLY? Under § 36a-701b(b)(1), any person who conducts business in Connecticut, and who, in the ordinary course of such person’s business, owns, licenses or maintains computerized data that includes personal information must comply. CONTINUED ON PAGE 18

1 The District of Columbia does not include telephonic notice as one of the permissible methods of notification. See D.C. Code § 28-3851(2). 2 Available at: http://law.justia.com/codes/connecticut/2012/title-36a/chapter-669/section-36a-701b. 3 Available at: https://www.cga.ct.gov/2015/ACT/PA/2015PA-00142-R00SB-00949-PA.htm.

INSURANCE ADVOCATE / September 26, 2016 17

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WHAT DATA IS COVERED? Under § 36a-701b(a), personal information is covered. “Personal information” means an individual’s name in combination with any one or more of the following data: (1) social security number; (2) driver’s license number or state identification card number; or (3) account number, credit or debit card number, in combination with any required security code, access code or password that would permit access to an individual’s financial account. WHAT CONSTITUTES A DATA BREACH? Under § 36a-701b(a), a data breach means unauthorized access to or unauthorized acquisition of electronic files, media, databases or computerized data containing personal information when access to the personal information has not been secured by encryption or by any other methods or technology that renders the personal information unreadable or unusable. WHO MUST BE NOTIFIED? Under § 36a-701b(b)(1), any resident of Connecticut whose personal information was, or is reasonably believed to have been, accessed by an unauthorized person through such breach of security must be notified. Under § 36a-701b(b)(2), the Attorney General must be notified. Under § 36a-701b(c), the owner or licensee of the information of any breach of security of the data must be notified. WHEN MUST NOTICE BE SENT? Under § 36a-701b(b)(1), notice shall be made without unreasonable delay, subject to the provisions of subsection (d) of this section and the completion of an investigation by such person to determine the nature and scope of the incident, to identify the individuals affected, or to restore the reasonable integrity of the data system. IN WHAT FORM AND MANNER MUST NOTICE BE SENT? Under § 36a-701b(e), notice may be provided by one of the following methods: (1) written notice; (2) telephone notice; (3) electronic notice, provided such notice is consistent with the provisions regarding electronic records and signatures set forth in 15 U.S.C. 7001; or (4) substitute notice, provided such person demonstrates that the cost of providing notice in accordance with subdivision (1), (2) or (3) of this subsection would exceed $250,000, that the affected class of subject persons to be notified exceeds 500,000 persons, or that the person does not have sufficient contact information.

…notice shall be made without unreasonable delay, subject to the provisions of subsection (d) of this section and the completion of an investigation by such person to determine the nature and scope of the incident, to identify the individuals affected, or to restore the reasonable integrity of the data system.

Substitute notice shall consist of the following: (A) electronic mail notice when the person has an electronic mail address of the affected persons; (B) conspicuous posting of the notice on the web site [sic] of the person if the person maintains one; and (C) notification to major state-wide media, including newspapers, radio and television. WHAT MUST THE NOTICE SAY? No specific requirements. The notice must simply carry out its purpose of notifying affected individuals of the breach. ARE THERE ANY EXEMPTIONS? Under § 36a-701b(d), any notification required by this section shall be delayed for a reasonable period of time if a law enforcement agency determines that the notification will impede a criminal investigation and such law enforcement agency has made a request that the notification be delayed. Any such delayed notification shall be made after such law enforcement agency determines that notification will not compromise the criminal investigation and so notifies the person of such determination. WHO MAY ENFORCE AND WHAT PENALTIES MAY BE IMPOSED? The Attorney General may investigate any violation of this section. If the Attorney General finds that a contractor has violated or is violating any provision of this section, the Attorney General may bring a civil action in the Superior Court for the Judicial District of Hartford under this section in the name of the State against such contractor. Nothing in this section shall be construed to create a private right of action. ARE THERE ANY INDUSTRY-SPECIFIC REQUIREMENTS? None.

NEW JERSEY STATUTE: N.J. Stat. §§ 56:8-161, 163.10

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10 Available at: http://lis.njleg.state.nj.us/cgibin/om_isapi.dll?clientID=33831296&depth=2&expandheadings=off&headingswithhits=on&infobase=statutes.nfo& softpage=TOC_Frame_Pg42.

18 September 26, 2016 / INSURANCE ADVOCATE

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WHO MUST COMPLY? Any business that conducts business in New Jersey, or any public entity that compiles or maintains computerized records that include personal information of residents of the State, even if done on behalf of another business or public entity. N.J. Stat. § 56:8-161. WHAT DATA IS COVERED? An individual’s first name or first initial and last name linked with any one or more of the following data elements: (1) social security number; (2) driver’s license number or State identification card number; or (3) account number or credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual’s financial account. Dissociated data that, if linked, would constitute personal information is personal information if the means to link the dissociated data were accessed in connection with access to the dissociated data. N.J. Stat. § 56:8-161. WHAT CONSTITUTES A DATA BREACH? The unauthorized access to electronic files, media or data containing personal information that compromises the security, confidentiality or integrity of personal information when access to the personal information has not been secured by encryption or by any other method or technology that renders the personal information unreadable or unusable. Good faith acquisition of personal information by an employee or agent of the business for a legitimate business purpose is not a breach of security, provided that the personal information is not used for a purpose unrelated to the business or subject to further unauthorized disclosure. N.J. Stat. § 56:8-161. The statute does not apply if the data subject to the breach is encrypted or has been secured by any other method or technology that renders the personal information unreadable or unusable. The statute does not define encryption. WHO MUST BE NOTIFIED? Any customer who is a resident of New Jersey whose personal information was, or is reasonably believed to have been, accessed by an unauthorized person. N.J. Stat. § 56:8-161(a). If the breach affects a person that maintains or stores covered information, that person must notify the owner or licensee of that information, who shall notify its New Jersey customers. N.J. Stat. § 56:8-163(b). The Division of State Police in the Department of Law and Public Safety must also be notified before the business or public entity discloses the breach to the customer. N.J. Stat. § 56:8-163(c). In the event that a business or public entity discovers circumstances requiring notification pursuant to this section of more than 1,000 persons at one time, the business or public entity shall also notify, without unreasonable delay, all consumer reporting agencies that compile or maintain files on consumers on a nationwide basis, as defined by subsection (p) of section 603 of the fed20 September 26, 2016 / INSURANCE ADVOCATE

The unauthorized access to electronic files, media or data containing personal information that compromises the security, confidentiality or integrity of personal information when access to the personal information has not been secured by encryption or by any other method or technology that renders the personal information unreadable or unusable.

eral Fair Credit Reporting Act (15 U.S.C. § 1681a), of the timing, distribution and content of the notices. N.J. Stat. § 56:8-163(f). Disclosure of a breach of security to a customer shall not be required under the statute if the business or public entity establishes that misuse of the information is not reasonably possible. Any determination shall be documented in writing and retained for five years. N.J. Stat. § 56:8-163(a). WHEN MUST NOTICE BE SENT? The disclosure to a customer shall be made in the most expedient time possible and without unreasonable delay, following discovery or notification of the breach, consistent with the legitimate needs of law enforcement, or any measures necessary to determine the scope of the breach and to restore the reasonable integrity of the data system. N.J. Stat. § 56:8-163(a). IN WHAT FORM AND MANNER MUST NOTICE BE SENT? Notice must be provided by one of the following methods: (1) written notice; (2) electronic notice, if the notice provided is consistent with the provisions regarding electronic records and signatures set forth in § 101 of the federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7001); or (3) substitute notice, if the business or public entity demonstrates that the cost of providing notice would exceed $250,000, or that the affected class of subject persons to be notified exceeds 500,000, or the business or public entity does not have sufficient contact information. Substitute notice shall consist of all of the following: (i) email notice when the business or public entity has an email address; (ii) conspicuous posting of the notice on the Internet website page of the business or public entity, if the business or public entity maintains one; and (iii) notification to major statewide media. N.J. Stat. § 56:8-163(d). WHAT MUST THE NOTICE SAY? The statute does not address the contents of the notification. CONTINUED ON PAGE 22

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ARE THERE ANY EXEMPTIONS? A business or public entity that maintains its own notification procedures as part of an information security policy for the treatment of personal information, and is otherwise consistent with the requirements of the statute, shall be deemed to be in compliance with the notification requirements of the statute if the business or public entity notifies subject customers in accordance with its policies in the event of a breach of security of the system. N.J. Stat. § 56:8-163(e). WHO MAY ENFORCE AND WHAT PENALTIES MAY BE IMPOSED? The statute does not address who may enforce. ARE THERE ANY INDUSTRY-SPECIFIC REQUIREMENTS? None.

NEW YORK STATUTE: N.Y. Gen. Bus. Law § 899-aa,11 N.Y. State Tech. Law § 208.12 WHO MUST COMPLY? Any person or business which conducts business in New York State, and which owns, licenses, or maintains computerized data which includes private information. Any person or business which maintains computerized data which includes private information that such person or business does not own. N.Y. Gen. Bus. Law §§ 899-aa(2), (3). WHAT DATA IS COVERED? Any information concerning a natural person which, because of name, number, personal mark, or other identifier, can be used to identify such natural person in combination with any one or more of the following data elements, when either the personal information or the data element is not encrypted, or encrypted with an encryption key that has also been acquired: (1) social security number; (2) driver’s license number or non-driver identification card number; or (3) account number, credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual’s financial account. Private information does not include publicly available information which is lawfully made available to the general public from federal, state, or local government records. N.Y. Gen. Bus. Law §§ 899-aa(1)(a), (b). The statute does not apply if the data subject to the breach is encrypted. The statute does not define encryption. N.Y. Gen. Bus. Law § 899-aa(1)(b). This exception does not apply if the encryption is compromised. 11 Available at: http://public.leginfo.state.ny.us/navigate.cgi. 12 Available at: http://public.leginfo.state.ny.us/navigate.cgi.

22 September 26, 2016 / INSURANCE ADVOCATE

Any information concerning a natural person which, because of name, number, personal mark, or other identifier, can be used to identify such natural person in combination with any one or more of the following data elements, when either the personal information or the data element is not encrypted, or encrypted with an encryption key that has also been acquire… WHAT CONSTITUTES A DATA BREACH? The unauthorized acquisition of computerized data that compromises the security, confidentiality, or integrity of personal information maintained by a business. Good faith acquisition of personal information by an employee or agent of the business for the purposes of the business is not a breach of the security of the system, provided that the private information is not used or subject to unauthorized disclosure. N.Y. Gen. Bus. Law § 899-aa(3)(c). WHO MUST BE NOTIFIED? If the breach affects a person that maintains or stores covered information, that person must notify the owner or licensee of that information. N.Y. Gen. Bus. Law § 899-aa(3). Affected persons must be notified, as well as the State Attorney General, the Department of State and the Division of State Police as to the timing and distribution of the notices, and approximate number of affected persons. In the event that more than 5,000 New York residents are to be notified at one time, the person or business shall also notify consumer reporting agencies as to the timing, content and distribution of the notices, and approximate number of affected persons. Such notice shall be made without delaying notice to affected New York residents. N.Y. Gen. Bus. Law §§ 899-aa(8)(a), (b). WHEN MUST NOTICE BE SENT? Notice must be sent immediately following discovery, consistent with law enforcement needs. N.Y. Gen. Bus. Law §§ 899-aa(1), (3). IN WHAT FORM AND MANNER MUST NOTICE BE SENT? Notice shall be provided by one of the following methods: (1) written notice; (2) electronic notice, provided that the person to whom notice is required has expressly consented to receiving said notice in electronic form and a log of each such notification is kept by the person or business who notifies affected persons in such form; provided further, however, that in no case shall any person or business require a person to consent to accepting notice in such form as a condition of establishing any business relationship or engaging in any transaction;

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(3) telephone notification, provided that a log of each such notification is kept by the person or business who notifies affected persons; or (4) substitute notice, if a business demonstrates to the State Attorney General that the cost of providing notice would exceed $250,000, or that the affected class of subject persons to be notified exceeds 5,000, or such business does not have sufficient contact information. Substitute notice shall consist of all of the following: (1) email notice when such business has an email address for the subject persons; (2) conspicuous posting of the notice on such business’ website page, if such business maintains one; and (3) notification to major statewide media. N.Y. Gen. Bus. Law § 899-aa(5). WHAT MUST THE NOTICE SAY? Such notice shall include contact information for the person or business making the notification and a description of the categories of information that were, or are reasonably believed to have been, acquired by a person without valid authorization, including specification of which of the elements of personal information and private information were, or are reasonably believed to have been, so acquired. N.Y. Gen. Bus. Law § 899-aa(7). ARE THERE ANY EXEMPTIONS? The statute does not address any exemptions. WHO MAY ENFORCE AND WHAT PENALTIES MAY BE IMPOSED? The Attorney General may enforce the statute. In such action, preliminary relief may be granted under article sixty-three of the civil practice law and rules. In such action, the court may award damages for actual costs or losses incurred by a person entitled to notice pursuant to this article, if notification was not provided to such person pursuant to this article, including consequential financial losses. Whenever the court shall determine in such action that a person or business violated this article knowingly or recklessly, the court may impose a civil penalty of the greater of $5,000 or up to $10 per instance of failed notification, provided that the latter amount shall not exceed $150,000. N.Y. Gen. Bus. Law § 899-aa(6)(a). CONTINUED ON PAGE 24

Gov. Cuomo Announces Proposal of First-in-the-Nation Cybersecurity Regulation Proposed Rule Aims to Protect Consumer Data and Financial Systems from Terrorist Organizations and Other Criminal Enterprises uGovernor Andrew M. Cuomo announced that a new first-in-the-nation regulation has been proposed to protect New York State from the ever-growing threat of cyber-attacks. The regulation requires banks, insurance companies, and other financial services institutions regulated by the State Department of Financial Services to establish and maintain a cybersecurity program designed to protect consumers and ensure the safety and soundness of New York State’s financial services industry. “New York, the financial capital of the world, is leading the nation in taking decisive action to protect consumers and our financial system from serious economic harm that is often perpetrated by statesponsored organizations, global terrorist networks, and other criminal enterprises,” said Governor Cuomo. “This regulation helps guarantee the financial services industry upholds its obligation to protect consumers and ensure that its systems are sufficiently constructed to prevent cyberattacks to the fullest extent possible.” The proposed regulation is subject to a 45-day notice and public comment period before its final issuance. It requires regulated financial institutions to establish a cybersecurity program; adopt a written cybersecurity policy ; designate a Chief Information Security Officer responsible for implementing, overseeing and enforcing its new program and policy; and have policies and procedures designed to ensure the security of information systems and nonpublic information accessible to, or held by, third-parties; along with a variety of other requirements to protect the confidentiality, integrity and availability of information systems. The proposed regulation by the Department of Financial Services includes certain regulatory minimum standards while maintaining flexibility so that the final rule does not limit industry innovation and instead encourages firms to keep pace with technological advances. New York State Department of

Consumers must be confident that their sensitive nonpublic information is being protected and handled appropriately by the financial institutions that they are doing business with.

Financial Services Superintendent Maria T. Vullo said, “Consumers must be confident that their sensitive nonpublic information is being protected and handled appropriately by the financial institutions that they are doing business with. DFS designed this groundbreaking proposed regulation on current principles and has built in the flexibility necessary to ensure that institutions can efficiently adapt to continued innovations and work to reduce vulnerabilities in their existing cybersecurity programs. Regulated entities will be held accountable and must annually certify compliance with this regulation by assessing their specific risk profiles and designing programs that vigorously address those risks.” Prior to proposing this new regulation, the Department of Financial Services surveyed nearly 200 regulated banking institutions and insurance companies to obtain insight into the industry’s efforts to prevent cybercrime. Additionally, it met with a cross-section of those surveyed, as well as cybersecurity experts, to discuss emerging trends and risks, as well as due diligence processes, policies and procedures governing relationships with third party vendors. The findings from these surveys led to three reports which helped to inform the rulemaking process.[IA] INSURANCE ADVOCATE / September 26, 2016 23

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IIABNY, PIANY, NYIA Set Guiding Principles For Information Security uALBANY, N.Y.—The insurance industry is intensifying its efforts related to information security and has established guiding principles to protect retained policyholder data. The Independent Insurance Agents and Brokers of New York (IIABNY), New York Insurance Association (NYIA) and Professional Insurance Agents of New York (PIANY) released Guiding Principles to Advance Information Security in New York with the facilitation of the Center for Internet Security (CIS). The principles are designed to provide a general road map for agents and companies and are the outcome of a roundtable discussion of representatives from the agent and carrier communities. The goal of the principles is to create a strong working relationship within the insurance industry to ensure agencies, companies and policyholders are better protected. “The insurance industry remains intently focused on information security,” NYIA President Ellen Melchionni said. “Collaboration is essential to most effectively address the challenges presented by this ever evolving issue. NYIA members have been proactive on security issues and are committed to seeking new ways to shield our businesses and policyholders from threats.” “Information security threats grow more severe every day,” Richard Poppa, IIABNY president and CEO said. “Independent insurance agencies and brokerages are committed to helping their clients protect themselves and to protecting client and employee information they possess. We are pleased to work with our peer associations on such an important challenge. These guiding principles will help insurers and producers strengthen their defenses against cyber threats.” “As professionals, our members have exceptional access and responsibilities with regard to our clients’ information. Our industry, therefore, is in a vanguard position with regard to cyber security,” PIANY Executive Director Kelly Norris said. “As their association(s), it is imperative that we provide information and guidance to help agents and companies guard the information with 24 September 26, 2016 / INSURANCE ADVOCATE

“The insurance industry’s concerted efforts to address information security are commendable.… Coordination is critical to effectively prepare for and respond to potential breaches.”

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The Attorney General may seek injunctive relief and damages for actual costs or losses incurred as a result of the breach. The Attorney General may also seek a statutory penalty of up to $150,000 if the defendant knowingly or recklessly violated the statute. N.Y. Gen. Bus. Law § 899-aa(6)(a). There is no private right of action. New York City Administrative Code § 20117 contains a notice statute with the same requirements in the event of a data breach. Subsection (h) allows for a fine of up to $500 for a person that violates the statute, as well as a civil penalty of $100 for each violation.

Steven Spano, CIS President and COO which they are entrusted. PIA is committed to this goal, and to helping every professional, independent insurance agency to ensure its own information and privacy is secure.” “The insurance industry’s concerted efforts to address information security are commendable,” Steven Spano, CIS President and COO said. “Coordination is critical to effectively prepare for and respond to potential breaches.” The New York Insurance Association, Inc. (NYIA®) is a state trade association that has represented the property and casualty insurance industry for more than 130 years. The Independent Insurance Agents and Brokers of New York (IIABNY) has represented the common business interests of independent insurance professionals across the Empire State since 1882. Headquartered in Glenmont, N.Y., the Professional Insurance Agents of New York (PIANY) is a trade association comprised of 80 experts and representing professional, independent insurance agencies, brokerages and their employees throughout the state. The Center for Internet Security (CIS) is a 501(c)(3) organization dedicated to enhancing the cybersecurity readiness and response among public and private sector entities.[IA]

ARE THERE ANY INDUSTRY-SPECIFIC REQUIREMENTS? None.

PENNSYLVANIA

STATUTE: 73 Pa. Stat. § 2301 et seq.13 WHO MUST COMPLY? Any entity that maintains, stores or manages computerized data that includes personal information regarding a Pennsylvania resident. 73 P.S. § 2303(a), (c). WHAT DATA IS COVERED? Covered information includes a Pennsylvania resident’s first name or first initial and last name, plus: (1) social security number; (2) driver’s license or state identification card number; or (3) financial account, credit card or debit card number in combination with any required security or access code or password that would permit access to a resident’s financial account. 73 P.S. § 2302. The statute does not apply to information that is encrypted or redacted, so long as the encryption key was not accessed or acquired. 73 P.S. § 2303. WHAT CONSTITUTES A DATA BREACH? CONTINUED ON PAGE 26

13 Available at: https://govt.westlaw.com/ pac/index?__lrTS=20160526195352426&transit ionType=Default&contextData=(sc.Default).

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ADVERTORIAL

Pros and Cons of Pesticides PESTICIDES ARE A PART OF our daily lives – used by everyone from individual home gardeners to national pest control contractors. Businesses using pesticides range from farmers to lawn care and landscapers, and arborists. Helping clients understand the hazards and proper use of pesticides is another value-added service of the professional insurance agent. Pesticides can be either organic or synthetic. They include herbicides, insecticides, fungicides and disinfectants. Pesticides are used to kill everything from insects and weeds to mold, mildew and harmful bacteria. In the United States, use of pesticides is regulated by the Environmental Protection Agency (EPA) under the Federal Insecticide Fungicide and Rodenticide Act (FIFRA). Using pesticides in a manner inconsistent with the package label is illegal (www.epa.gov). This includes recommending use of a pesticide for an application it is not registered for. This is true for individuals as well as businesses. Illegal acts are excluded under most standard general and personal liability policies. It is important to use contractors that are not only insured, but licensed in the use of pesticides. In New York, for example, pesticide applicator licensing is under the auspices of the New York Department of Environmental Conservation (DEC). Certifications are offered in three categories: commercial and private pesticide applicators, and commercial pesticide technicians. The type of application that can be done is dependent upon the certification. (www.dec.ny.gov). In order to be licensed, some states require proof of insurance, including chemical drift liability and coverage for damage resulting from use of any pesticides by the business requesting the license (http://www.isco.purdue.edu). Advice on the use of pesticides is available through local cooperative extension offices. In New York, Cornell University offers a pesticide management education program. Cornell also emphasizes to their staff that recommendations for pesticide use must not

be made unless the pesticide is fully registered for such use. Cornell will not extend liability coverage or indemnification to staff making improper recommendations. (http://pmep.cce.cor nell.edu/). The economic impact of environmental pests is staggering. Pesticide expenditures in the United States are approximately $13 billion per year. Agriculture, in particular food crop production, is dependent on pest control. It is estimated that nearly 40% of crops, in excess of $122 billion in economic loss, is due each year to pests (www.study.com). Without pest control, 70% of the crops could be lost. Improper use of pesticides can have disastrous consequences – both human and environmental. Over the years, many pesticides, such as DDT and Chlordane, have been banned in the United States due to their harmful effects on animal life. Pesticides can pollute groundwater, and stay in the environment for years. In addition to harmful effects on humans and animals, pesticides can kill beneficial insects as well as destructive ones. One third of the world’s crops require pollinators. (www.eolss.net). Populations of such pollinators as bees and monarch butterflies have decreased drastically in recent years, due in part to the use of pesticides and herbicides that kill the pollinators or destroy their habitat (www.pollinator.org).

Oregon State University, in cooperation with the EPA, runs the National Pesticide Information Center (NPIC). Information on pesticides, including contact information for state regulatory agencies, is available on their website: www.npic.orst.edu. Organic pesticides have been gaining in popularity. “Organic” does not necessarily mean “safe,” however, since the goal of all pesticides, whether organic or synthetic, is to kill things. Their use should be limited whenever possible. When considering pesticide use, the benefits must be weighed against the risks. For example, DDT is effective in killing mosquitoes that carry malaria, which kills over 600,000 people each year. When contracting for pest control, use of a licensed and insured professional is essential. Pesticide poisoning can be avoided. Steering clients in the right direction in proper use of pesticides is another sign of the true insurance professional.

139 Harristown Road Glen Rock, NJ 07452 | Suite 100 (800) 935-6900 www.msonet.com INSURANCE ADVOCATE / September 26, 2016 25

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CONTINUED FROM PAGE 24

The unauthorized access or acquisition that materially compromises the security or confidentiality of a database of covered information and that causes, has caused, or will cause loss or injury to any resident of Pennsylvania, excluding certain good-faith acquisitions by employees or agents. 73 P.S. § 2302. WHO MUST BE NOTIFIED? Any resident of Pennsylvania whose unencrypted and unredacted personal information was or is reasonably believed to have been accessed and acquired by an unauthorized person. 73 P.S. § 2303(a). A vendor that maintains, stores or manages computerized data on behalf of another entity shall provide notice of any breach of the security system following discovery by the vendor. 73 P.S. § 2303(c). If more than 1,000 persons are notified, all nationwide CRAs must be notified without unreasonable delay of timing. 73 P.S. § 2305. WHEN MUST NOTICE BE SENT? Notification must be made without unreasonable delay, taking any necessary measures to determine the scope of the breach and to reasonably restore the integrity of the system. Notification may be delayed if law enforcement determines and advises the covered entity in writing that notification will impede a criminal or civil investigation. 73 P.S. § 2303(a). IN WHAT FORM AND MANNER MUST NOTICE BE SENT? Notice must be provided by any of the following methods: (1) written notice to the last known home address for the individual; (2) telephonic notice, if the customer can be reasonably expected to receive it and the notice is given in a clear and conspicuous manner, describes the incident in general terms and verifies personal information but does not require the customer to provide personal information, and the customer is provided with a telephone number to call or provided with an Internet website to visit for further information or assistance; (3) email notice, if a prior business relationship exists and the person or entity has a valid email address for the individual; or (4) Substitute notice, if the entity demonstrates one of the following: (i) the cost of providing notice would exceed $100,000; (ii) the affected class of subject persons to be notified exceeds 175,000; or (iii) the entity does not have sufficient contact information. Substitute notice shall consist of all of the following: (a) email notice when the entity has an email address for the subject persons; (b) conspicuous posting of the notice on the entity’s Internet website if the entity maintains one; and (c) notification to major Statewide media. 73 P.S. § 2302. WHAT MUST THE NOTICE SAY? 26 September 26, 2016 / INSURANCE ADVOCATE

In addition, a financial institution that complies with the notification requirements prescribed by the Federal Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice is deemed to be in compliance with the statute. 73 P.S. § 2307(b). Notice must be clear and conspicuous, describe the incident in general terms, verify the covered information (the consumer is not required to provide the covered information to the entity), and provide a telephone number or website for further information or assistance. 73 P.S. § 2302. ARE THERE ANY EXEMPTIONS? Yes. An entity that maintains its own notification procedures as part of an information privacy or security policy for the treatment of personal information which is consistent with the notice requirements of the statute shall be deemed to be in compliance with the notification requirements of the statute if it notifies subject persons in accordance with its policies in the event of a breach of security of the system. 73 P.S. § 2307(a). In addition, a financial institution that complies with the notification requirements prescribed by the Federal Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice is deemed to be in compliance with the statute. 73 P.S. § 2307(b). Further, an entity that complies with the notification requirements or procedures pursuant to the rules, regulations, procedures or guidelines established by the entity’s primary or functional federal regulator shall be in compliance with the statute. 73 P.S. § 2307(b). WHO MAY ENFORCE AND WHAT PENALTIES MAY BE IMPOSED? The Office of the Attorney General shall have exclusive authority to bring an action under the Unfair Trade Practices and Consumer Protection Law for a violation of this act. 73 P.S. § 2308. Private rights of action are not permitted. No other penalties are specified in the statute. ARE THERE ANY INDUSTRY-SPECIFIC REQUIREMENTS? None

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[ O N T H E L E VE L ]

JAMIE DEAPO

Metamorphosis uThe independent agency business is going through a metamorphosis. The slow but steady caterpillar that served the public so well for so many years has become wrapped up in a cocoon of change and now must break out into an agile and quick flying modern day butterfly if it intends to survive. There are many forces at work creating this change. An aging baby boomer population being replaced by millennials that see the world differently both as workers and as consumers. Agency ownership, employee turnover, changing buying habits and new competition are all greatly affected by changing demographics. Technology, once lauded as the end of paperwork, now has opened a Pandora’s box of change for independent agents. Consumers have access to significant amounts of information. Business is transacted at lightning speed and whenever the client wants it. Insurance protection has become a commodity purchase for many without regard for professional advice related to coverage needs and differences. Artificial intelligence, data analytics and sophisticated algorithms have replaced professional agents, underwriters and actuaries. Agency revenue is not keeping up with the ever increasing costs of running an agency. Shrinking profit margins force out smaller agencies who are gobbled up by the survivors hungry for increasing volume and the economies of scale. Agencies are forced to merge or acquire, creating the significant premium growth necessary just to retain current commission levels. Some mega-agencies are growing fast enough to create volumes with carriers that allow them to negotiate increased commissions. Two major cost areas for agencies today are technology and employees. These two areas impact each other and create a seesaw effect. New and constantly evolving and improving technology replaces manual work previously handled by employees. That reduces overall costs and frees up remaining staff to help retain existing 28 September 26, 2016 / INSURANCE ADVOCATE

On the other hand, the cost to acquire, train and retain quality staff is significant. Identifying good hires, giving them the best training in the most cost effective manner and then keeping them happy and highly functional is not easy.

clients and grow the agency. Because of the speed at which automation is changing and the cost associated with purchasing and implementing new hardware and software, many agencies have to weigh the cost of change against the potential of increased revenue. On the other hand, the cost to acquire, train and retain quality staff is significant. Identifying good hires, giving them the best training in the most cost effective manner and then keeping them happy and highly functional is not easy. Agencies need the support of HR professionals that can help them through this process. There is one other area impacting agents and that is the ever changing world we live in. Insurance is designed to protect the public against the risks they face operating in the world we live in. Self-driving vehicles, drones, cyber theft, terrorism, the internet of things, the sharing economy and the ever increasing involvement of technology and the internet in everyday life has created a whole new area of risk. That risk requires a solution for protecting the public, which in many cases is handled by insurance. It’s incumbent on independent agents to understand the issues and to know where and how they can find the protection their clients will need. If any of this makes sense to you. If you are experiencing these same issues in your agency. If you stay awake at night

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.

worrying about these issues and how you can overcome them. Then you need to join me on October 14th, 2016 at the Sheraton Hotel Times Square for NYiDAY. A taste of what you could learn more about: Solutions for Emerging Exposures; Maximizing Your Agency Management System Investment; Agency Acquisition & Perpetuation; Hiring & Retaining Employees; Shock & Awe: What Does Your Customer Experience? This isn’t a sales pitch to come to an event, it’s a good answer to problems you either have now or will encounter soon. NYiDAY.com will help get you in the door. These are new and unusual times. But there are solutions. There is a way to enjoy this business and make money doing it, all while offering the, needed more now than ever, safety net.[IA]

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[ IN FOCUS ]

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

What’s Your End-of-Year Plan? uKids are back to school, Pumpkin Spice is everywhere and the leaves are changing. For our area it’s the most perfect time of year. While all may be distracted by football, we should be getting serious about how we want to end the year. What are all the little projects, goals and details you wanted to tackle in 2016? Write them down and get ready to knock them out. Next, be brutally honest with yourself. What are things that quite frankly you just can’t get done this year? Maybe it’s budget or bandwidth; set an honest plan that is attainable. Let’s face it, once Thanksgiving hits we are all in a Christmas Party haze. We only have a few weeks to make sure that 2016 goes down as the best year ever. Once you have your list, then it’s time to delegate. Yes, delegate to all the people who tell you how busy they are. Sounds crazy right? Nope, even the busiest of people will find time for a special project from an agency owner. It helps give people ownership of special projects and breaks up the day. Start getting your team involved so you can move efficiently through your last dash of the quarter. Also, look for the best vendors in the business. If someone has perfected something then investigate it, learn about it and budget for it. You should not have to recreate the wheel. Your time could be better spent growing the agency doing things like revising websites, training, and carrier training work with a great team to help you get the job done. Partnerships with vendors are critical in insurance. When you find your dream team that becomes an extra set of hands then you can spend more time to focus on growth. You also need to communicate your plan. Getting everyone’s buy-in can seem like an over the top endeavor but it all starts with communication. Tell people your passion, your dream for the agency. Share with them your vision for success. Set the goal and set the deadline. Force yourself to update the team weekly on the progress. It can take some time but the more you meet and work with the team the greater depth you will have! 30 September 26, 2016 / INSURANCE ADVOCATE

Once you have your list, then it’s time to delegate. Yes, delegate to all the people who tell you how busy they are. Sounds crazy right? Nope, even the busiest of people will find time for a special project from an agency owner.

The final step is the best step. Determine in great detail how you will hold yourself accountable to getting the job done. As the leader of the organization there is no one else but you. When your agency has a blunder, it’s on you to find out what happened, and why and how to prevent it. Also, when something doesn’t happen to execution the finger can only point right back at you. There are so many great ways to hold yourself accountable but I have three favorites. First, tell everyone you know, I mean everyone. Staff, spouses, kids, your pet, your trainer, everyone. The more people remind you, the more likely it gets done. Next, break it all down into very specific steps. You eat an elephant one bite at a time and you do the same with big goals, projects and tasks. Finally, plan for the worst. Think of the worst thing that can happen and have a plan for it. For example, if the worst thing that can happen is your team doesn’t buy in, plan today on how you will make it work. What will you do? Are you willing to terminate someone? Know now what you will do! Here are some common end-of-year items our clients are working on: • Evaluate your current marketing strategy, build one for 2017 • Tracking retention • Looking at carrier books to maximize commission • Change management systems • Build processes • Hire producers

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.

• Build an agency brand • Determine a sales process • Find an acquisition • Start video marketing • Set goals • Get proactive [IA]

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IN THE MATTER OF THE LIQUIDATION OF PROFESSIONAL LIABILITY INSURANCE COMPANY OF AMERICA Supreme Court County of New York Index No.: 400986/10 NOTICE Pursuant to an order of the Supreme Court of the State of New York, County of New York, entered on February 10, 2014, the Superintendent of Financial Services of the State of New York and her successors in office were appointed as liquidator (“Liquidator”) of Professional Liability Insurance Company of America (“PLICA”) and directed to take possession of PLICA’s property and liquidate its business and affairs pursuant to Article 74 of the New York Insurance Law (“Insurance Law”). The Liquidator has, pursuant to Insurance Law Article 74, appointed Scott D. Fischer Special Deputy Superintendent (“Special Deputy”), as her agent to liquidate the business of PLICA. The Special Deputy carries out his duties through the New York Liquidation Bureau, 110 William Street, New York, New York 10038. PLEASE TAKE NOTICE that the Supreme Court of the State of New York, County of New York, has issued an order, entered August 25, 2016, establishing June 30, 2017 as the bar date for the submission to the Liquidator of all claims and documents supporting those claims against PLICA or its insureds, including claims reportable under any extended reporting period endorsements of policies issued by PLICA, other than the Liquidator’s claims for administrative expenses, after which date, no new claims or evidence of claims shall be accepted by the Liquidator. Requests for further information should be directed to the New York Liquidation Bureau, Creditor and Ancillary Operations Division, at (212) 341-6241. Dated: September 1, 2016 Maria T. Vullo Superintendent of Financial Services of the State of New York as Liquidator of Professional Liability Insurance Company of America

INSURANCE ADVOCATE / September 26, 2016 31

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[ G UEST A R T I C L E ]

K AT H E R I N E H E AV I S I D E

Protecting Your Client — and Your Bottom Line — With a Crisis PR Plan uHere’s how it usually works. You’re finally enjoying a well-deserved day off when frantic coworkers begin sending you texts and emails about XYZ Company, your agency’s biggest client. There’s been a data breach impacting tens of thousands of customers. The company is all over social media and popping up on mainstream news sites. As you scroll through the messages, your phone rings. It’s the CEO. You clear your throat, knowing you’re about to be on speaker in front of top management and legal counsel. Before you utter a single word he asks, “What do we do? Reporters are calling every second. The bottom’s falling out!” At this point you have several choices. You can panic, hit “end call” and head for the hills, or you can put the golf clubs down, take a deep breath, and answer, “Don’t worry. We prepared for this in the crisis plan. Let’s get to work.” Every day, in almost every corner of the world, the above scenario is being played out. At its most extreme you have industry giants like Volkswagen and Chipotle, both of which recently underwent crises that wound up costing millions and even billions of dollars—and wreaked havoc on their insurers’ bottom lines. The vast majority of corporate crises, however, involve businesses and organizations that are primarily known at the local or regional level. There is a good chance these are the types of companies your agency insures. The private supermarket chain that finds itself an overnight YouTube sensation after baking an old sneaker in a birthday cake. The multi-location day care provider or nursing home operator whose license is suspended following a criminal complaint, or the not-for-profit whose treasurer absconds with a sizeable chunk of the annual operating budget. While it’s true you can’t stop these incidents from happening, you can play a key role in containing the damage and protecting your firm’s exposure. Insurance professionals are often front and center in a time 32 September 26, 2016 / INSURANCE ADVOCATE

A public relations firm specializing in crisis management is often brought on board when a problem is brewing or when a crisis actually strikes—and can make all the difference in how messages are communicated to key stakeholders, employees, customers, and the media.

Katherine Heaviside is president and founder of Epoch 5 Public Relations (Huntington, NY), a regional leader in the fields of crisis communications and issues management. She has written and lectured extensively on the subject and appeared in national publications. More information is available at www.Epoch5.com.

of crisis and you should consider advising your corporate clients that a crisis communications plan can be one of the most valuable tools in the company toolbox.

Finding the Experts A public relations firm specializing in crisis management is often brought on board when a problem is brewing or when a crisis actually strikes—and can make all the difference in how messages are communicated to key stakeholders, employees, customers, and the media. But the best course of action is to call the experts before trouble erupts. The first step is to make sure the PR firm you select has done this before— hopefully quite often and with stellar results. Check out their website. Read their case histories. Make calls to the business desks at area dailies to hear what editors have to say about them. If you have contacts at a nearby law firm, ask questions. Lawyers are rarely shy about their opinions and often work with crisis management PR firms on behalf of their clients. They’ll let you know who they like and why. Once you are comfortable with your choice and have met with the firm’s principals, it’s time to set up a meeting with you, your client, and the firm. Don’t feel uneasy if you are not familiar with every last detail about to be discussed. This is

when you get to sit back and let the PR professionals take over. They have done this before and understand that the initial hurdle is gaining your client’s trust so that negative issues can be discussed openly and realistically. What can you expect will be covered? Chances are you will learn about the need for establishing a crisis team—key senior managers, technical advisors, and legal counsel led by the crisis management/public relations firm. These are the players who will help develop strategic responses to all affected stakeholders, such as shareholders, employees, business partners, vendors, and customers. You will also explore the need for positive communications and discuss documents that the public relations experts will draft in the coming days, including fact sheets, Q&A documents, company history, and background material on community/charitable involvement. However, one area that will undoubtedly be front and center in your crisis plan is media preparedness.

CONTINUED ON PAGE 35

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

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

Improving the Customer Experience Matters to Your Bottom Line uThere are many traditional and nontraditional practices related to giving a great customer experience. Insurance companies are spending millions of dollars on studying what is working and what is not, but the million dollar question is this: how many independent insurance agencies are actually investing in a rewarding customer experience? My guess is not enough, because every agency needs to have both a traditional and non-traditional customer experience.

There needs to be a handwritten thank you card with each and every new client, along with other mailings within the first 30 days that they become a client.

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

Remember, you only have seven seconds to make a great first impression, so make sure you have it planned out and practiced.

What is a customer experience? That is one of the most asked questions I get when I’m on the road speaking at different events and workshops in the insurance industry. My answer is that we should start with a digital customer experience; your agency needs to have a CRM tool to be able to push out a series of emails to help with onboarding new clients, along with a thank you video and surveys to find out how well the agency did with managing expectations and following through. This is absolutely critical in today’s times, but it doesn’t stop there. Let’s look 34 September 26, 2016 / INSURANCE ADVOCATE

at the traditional portion of the customer experience of onboarding a new client. There needs to be a handwritten thank you card with each and every new client, along with other mailings within the first 30 days that they become a client. For example, our second mailing is a postcard about our agency’s mobile app, and our third piece of mail is a marketing piece all about our agency’s 12 promises that we make to you, our client. But with all this being said, there are three key questions that each agency must ask themselves in order to figure out how to give a great experience. Question one: do you understand who your clients are,

and are they the clients you want and are marketing to? Question two: what are the influences that create a great experience (and without an agency survey you will never have this answer)? Question 3: are you tracking the results and making changes when needed? A great example of making a change is that in our digital customer experience we track open ratios; when we see numbers fall, we adjust the header and visuals in our emails, along with the time the email is going out. Tracking is key, and making the necessary changes to improve the open ratio is critical to your success. Let’s take a step back to question number one: Who are the agency’s clients? It sounds easy to answer, right? Hold on a minute—have you mapped out the ideal client to your insurance team? The answer

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I usually get is that any client who pays the bills is a great client, and that is not the right answer. You need to figure out who your ideal client is. Is it a 30-year-old single male, a 25-year-old single female, or is it a married couple in their mid-30s? The only right answer is who you are looking to

where their business is coming from, most people shy away because they realize that they should be doing it, but aren’t! Tracking is absolutely critical to your agency’s future. So, does improving the customer experience really matter to your agency’s bot-

GUEST ARTICLE CONTINUED FROM PAGE 32

A Jump on the Reporters Not long ago, media coverage of a corporate crisis unfolded at a far slower pace than today. Even if 60 Minutes showed up in your lobby, you still had days and sometimes weeks to prepare before the segment aired. Not today. Because of 24-hour news coverage and social media, bad news is often posted within minutes. And it spreads like wildfire, able to destroy a company’s reputation as completely as any conflagration. Little wonder then that one of the most important elements in a crisis plan is the section that contains canned media responses.

Nobody likes to have a crisis, but when one is handled well, a company can preserve its business, protect its reputation and may even become more respected. write. For example, here at Paradiso Insurance, we are looking for married couples with families with a $125k combined income who own a home and some toys, such as snowmobile/motorcycle, etc. Question two, which asks about what influences a great experience, is interesting because we have learned a lot from our clients. For example, within our survey we ask why our clients started looking for an insurance quote, and one of the most common answers is “my agent hasn’t returned my call for the past two days.” So, within our promises, we explain that we will set a timeline with each and every prospect/client for the next call, because we want to make sure we set expectations. Without these, you can’t give a great client experience. Another interesting fact that we have learned is that our clients wanted Saturday hours, and so we added them over a year ago, and it has been key to our agency’s success. I guess what I am saying is that you should ask your clients what they want and listen to them. Question three is all about tracking, and I can tell you I have given many workshops and even more speaking engagements around this. When I ask the question of how many of you are tracking your lost business, or how many are tracking

tom line? Yes, yes and YES, it absolutely does. I’ve talked about only two ways— digitally and traditionally—that we can capitalize on the client’s experience, but I would like to add that it shouldn’t stop there. Do you practice the way your team answers the phones, and does your agency record the phone calls? If your answer is no, then I would tell you to invest in the technology of recording the calls, and bring in a sales coach to work with your team on answering the phones. It matters, and it matters in a big way. One last step I would recommend is that when you have walk-ins, do you have a director of first impressions? Remember, you only have seven seconds to make a great first impression, so make sure you have it planned out and practiced. People who walk into your agency should have a great first experience every time. So, why all this talk about the client’s experience? It truly matters because they are the ones who write your checks, and they are the shareholders of your agency. Without your clients, what would you have? Not much! Invest in their experience, and it will pay your agency back tenfold, and it will allow you to remain open in a very competitive industry.[IA]

Canned media responses? Think of them as those obituaries written for famous people that sit around newsrooms until the subject passes on. At that point they’re dusted off and updated. The same is true for prepared media statements. Your public relations professional will explore with you and your client every possible crisis scenario that may need a response, from embezzlement, management malfeasance and environmental concerns, to class action lawsuits, labor issues, data breaches, and embarrassing arrests of corporate officers or workers. These statements are vetted ahead of time by legal and ready to go at a moment’s notice once updated. When a reporter is about to post a negative article and giving you five minutes to tell your side of the story, having a head start on a statement may be the only bright spot of your day. Nobody likes to have a crisis, but when one is handled well, a company can preserve its business, protect its reputation and may even become more respected. If handled poorly, however, the company may never recover. The difference is in the planning and execution—and selecting the right firm to oversee both. [IA] INSURANCE ADVOCATE / September 26, 2016 35

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[ O N MY R A DA R ]

BA R RY Z A L M A

Intentional and Wrongful Eviction Not Covered A “Wrongful Eviction” May or May Not Be Intentional uLiability insurance policies, under the personal injury cover, agree to insure against certain offenses, including the offense of wrongful eviction. In State Farm Fire and Cas. Co. v. Otten, Not Reported in N.W.2d 2016, Court of Appeals of Minnesota, WL 2946110 (May 23, 2016), was asked to hold State Farm responsible for an agreed judgment arising from an intentional wrongful eviction. The insured complained that the offense was specifically insured against, while the insurer convinced the trial court that the intentional nature of the eviction was not an “occurrence” and intentional conduct was specifically excluded.

In May 2011, Braun and his then-wife entered a lease agreement to rent the home from June 1, 2011 to May 31, 2012. Before entering the lease, the Brauns inquired about the presence of mold in the home because Braun’s stepdaughter had respiratory problems. The Ottens said they were unaware of any mold.

FACTS Joseph and Kristen Otten and T.E.O. Properties, Inc. own a rental home insured under a Rental Dwelling Policy issued by State Farm. The policy provides business-liability coverage as follows: “If a claim is made or a suit is brought against any insured for damages because of bodily injury, personal injury, or property damage to which this coverage applies, caused by an occurrence, and which arises from the ownership, maintenance, or use of the insured premises, we will: ¶ 1. pay up to our limit of liability for the damages for which the insured is legally liable; and ¶ 2. provide a defense at our expense by counsel of our choice. We may make any investigation and settle any claim or suit that we decide is appropriate. Our obligation to defend any claim or suit ends when the amount we pay for damages, to effect settlement or satisfy a judgment resulting from the occurrence, equals our limit of liability.” (Emphasis added.) The policy also contains an intentional-acts exclusion, which excludes coverage for: “a. bodily injury, personal injury, or property damage: ¶ (1) which is either expected or intended by an insured; or ¶ 36 September 26, 2016 / INSURANCE ADVOCATE

(2) to any person or property which is the result of willful and malicious acts of an insured; b. bodily injury, personal injury, or property damage arising out of the rendering or failing to render professional services….” In addition, the policy contains a separate exclusion related to mold. In May 2011, Braun and his then-wife entered a lease agreement to rent the home from June 1, 2011 to May 31, 2012. Before entering the lease, the Brauns inquired about the presence of mold in the home because Braun’s stepdaughter had respiratory problems. The Ottens said they were unaware of any mold. On May 16, 2012, a toilet malfunctioned in the home, causing water to flood the bathroom floor. When Joseph Otten visited the home to perform repairs, Braun asked him to have the home inspected for mold. According to Braun, Joseph Otten then revealed that the home had mold when he purchased it. Joseph Otten refused to have the home inspected and asked the Brauns to move out. On May 18, 2012, the Ottens gave the Brauns a letter titled “Notice to end lease,”

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 ] stating: “The rental agreement ends May 31, 2012 12:00 noon. You must be moved out by that time. An unlawful detainer will be filed if this is not met.” The Brauns vacated the home on May 31. Braun sued the Ottens and T.E.O., alleging several claims, including wrongful eviction. The parties in Braun’s lawsuit entered a Miller–Shugart agreement in which the Ottens and T.E.O. agreed there was a substantial likelihood they would be found liable and (1) consented to pay $500 on Braun’s fraudulent-inducement claim and all issues related to mold and (2) consented to a $35,892 judgment on Braun’s breach-of-contract and wrongful-eviction claims. Braun agreed not to collect the judgment from the Ottens and T.E.O. but only to “seek to satisfy this judgment from State Farm.” The district court entered judgment for Braun against the Ottens and T.E.O. in the amount of $35,892. State Farm sued the Ottens, the Brauns, and T.E.O., seeking a declaratory judgment that it had no duty to indemnify the Ottens and T.E.O.

Because there is no genuine issue of material fact that the Ottens knew that the notice given was inadequate and that the Brauns would suffer financial losses, the trial court properly concluded that the insurance policy does not cover the Ottens’ intentional and wrongful eviction of the Brauns as a matter of law. State Farm therefore was not required to indemnify the Ottens, and the district court did not err by granting summary judgment to State Farm.

DECISION

acts exclusion, which excludes from coverage claims for “personal injury” when the injury is “expected or intended” by the insured. The plain and unambiguous language of the “occurrence” requirement and the intentional-acts exclusion requires a wrongful eviction to be accidental and the resulting injury to be unintended for coverage to apply. Neither definition of wrongful eviction requires intent. It is possible for a landlord to accidentally dispossess the wrong tenant or to make another mistake that unintentionally results in a wrongful eviction and, in such a case, coverage would apply. The questions of whether an injury is the result of an accident and whether coverage is excluded because the injury is the result of an intentional act are, for all practical purposes, identical issues. On May 18, 2012, the Ottens provided notice to the Brauns to vacate the home by May 31, just 13 days later. There was, as a result, no genuine issue of material fact that the Ottens intentionally provided inadequate notice to the Brauns. In her deposition, Kristen Otten testified that the Ottens knew that the Brauns would incur costs associated with moving and finding a new place to live. This undisputed evidence supports the conclusion that the Ottens intended “some harm.”

A district court must grant summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law.” Generally, the extent of an insurer’s liability is determined by its insurance contract with its insured. The district court concluded both that coverage was not triggered because there was no “occurrence” and that, even if coverage had been triggered, the intentional-acts exclusion applied because the injuries were expected or intended. Braun is correct that the insurance policy generally contemplates coverage for wrongful eviction. The policy generally provides coverage for “personal injury,” including injury arising from a “wrongful eviction.” The policy, however, provides coverage for personal injury only if the injury is “caused by an occurrence.” An “occurrence” is defined as an “accident.” While “accident” is not defined by the policy, our supreme court has defined “accident” as it appears in an insurance policy to mean an unexpected, unforeseen, or undesigned happening or consequence. The policy also contains an intentional-

ZALMA OPINION For insurance to cover a claim of damages, the injury-causing event must be fortuitous. Since the landlords intentionally, without proper notice, and with an intent to cause damage to the tenant, wrongfully evicted them, there could be no coverage. The plaintiff was damaged again when their lawyers agreed to take an assignment against the insurer who owed nothing, instead of collecting against the assets of the landlord who caused them damage and got nothing for their effort.[IA]

Looking to buy, sell or hire, merge, sublease, or simply promote an agency or product? Post a classified ad the old-fashioned way and reach the audience you are looking for.

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gmb@cinn.com www.insurance-advocate.com INSURANCE ADVOCATE / September 26, 2016 37

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[ G UEST A R T I C L E ]

Americans Unprepared for a Major Disaster uIn the wake of the floods in Louisiana and as disaster season peaks, a national consumer survey commissioned by Trusted Choice® and the Independent Insurance Agents & Brokers of America (IIABA or the Big “I”), reveals that many homeowners lack adequate insurance coverage, do not fully understand their homeowners policies and do not have enough savings to support their households in the event of a disaster. The August 2016 homeowner survey found: • At least 73% of respondents don’t have a flood insurance policy that is separate from their homeowners coverage; • More than 40% of those surveyed don’t have or don’t know if they have

“Most people think that a basic homeowners policy will cover them in the event of a disaster, however these new findings highlight that a startling number of homeowners have not taken some of the most basic steps to adequately prepare for a disaster such as a hurricane, flood or fire.” coverage that will fully replace their belongings and home in the event of a disaster;

• At least 28% of homeowners polled do not have enough savings to support their households for even one month after a disaster if they had to leave their home. Only one-third said they could support their household for more than three months in this circumstance. • Less than one-third of respondents have an up-to-date and complete home inventory stored away from their premises. “Most people think that a basic homeowners policy will cover them in the event of a disaster, however these new findings highlight that a startling number of homeowners have not taken some of the most basic steps to adequately prepare for a disaster such as a hurricane, flood or fire,” says Robert Rusbuldt, Trusted Choice® president and Big “I” president and CEO. “This is disturbing as hurricane and wildfire seasons are about to peak, affecting many parts of the country.” With almost three-quarters of respondents lacking proper flood insurance coverage, they are completely vulnerable and have no protection from damage caused

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by rising water or flooding including common problems such as seepage of underground water into a home, leaky roofs and toppled trees from saturated soil. According to FEMA, floods are the leading disaster in the United States, and people outside high-risk flood areas file more than one-fifth of all National Flood Insurance Program (NFIP) flood insurance claims. “It is very troubling—with flooding being so pervasive and hurricane season in full swing—that this large majority of homeowners is risking everything,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “A little planning and knowledge can go a long way. Homeowners should consult with their Trusted Choice® independent insurance agent to find out more about flood coverage and other gaps in their insurance.” The survey also showed a lack of basic understanding regarding standard homeowners insurance coverage. More than one-fifth of survey respondents didn’t know whether they have replacement cost coverage for their belongings and home (which allows them to replace lost possessions with new items) or if they have actual cash value coverage (which takes depreciation of the structure and personal items into consideration). In most standard homeowners policies actual cash value is the default coverage. “The risk of financial ruin in the event of a major disaster is significantly higher for those homeowners who have only actual cash value coverage because they cannot fully recoup their losses,” continues Flannagan. “Sadly, this survey shows that only 58% have replacement cost coverage. Trusted Choice® recommends homeowners purchase replacement cost coverage and take a hard look at their finances to ensure they are prepared.” Unfortunately, this new research shows that more than half of those surveyed (56%) have just enough savings to support their households for three months or less if they had to temporarily move away as a result of a disaster to their property. Notably, 28% said they couldn’t sustain for even a month. Most alarming, 14% of those surveyed reported that their savings would be drained in less than a week. For off-premises living expenses in these cases, a standard homeowners policy provides only limited protection (usually 10% of the coverage on your home) and a flood policy

provides NO COVERAGE. The survey was conducted for Trusted Choice® and the Big “I” by MFour Mobile Research, Inc. using MFour’s Surveys on the Go® Smartphone Application Panel, which includes Apple and Android mobile device users. MFour is an independent research company headquartered in Irvine, California. Interviews of a nationally representative sample of 1,000 U.S. homeowners were conducted in August 2016 and weighted by age and gender to represent the general U.S. population over age 18. To request a copy of the complete survey results or an interview with a national spokesperson or a Trusted Choice® insurance agent in your area, please contact Sue Nester (broadcast), (703) 706-5448, susan.nester@iiaba.net or Margarita Tapia (print and online) at (703) 706-5374, margarita.tapia@iiaba.net.[IA]

Looking to buy, sell or hire, merge, sublease, or simply promote an agency or product? Post a classified ad the old-fashioned way and reach the audience you are looking for.

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

Parsons Elected President of PIANY uGLENMONT, N.Y.—John C. Parsons II, CIC, CPIA, AAI, executive vice president of Parsons & Associates in Syracuse, N.Y., was elected president of Professional Insurance Agents of New York State Inc., at a meeting of the association’s board of directors recently. Parsons is a third-generation professional independent agent, succeeding his father and grandfather as president of PIANY. An active member of PIANY’s board of directors since 2006, Parsons served as president-elect in 2015-16; as first vice president in 2014-15; as vice president from 2011-14; and was treasurer in 2010-11. He is vice president of the Government Affairs and Nominations Committees. He also is a member of the Executive/Budget & Finance and Company/Industry Relations Committees. Parsons also is chair of the association’s Syracuse Advisory Council. He has served on the board of the PIA of New York Young Insurance Professionals and received the PIANY Young Insurance Professional of the Year award in 1999. PIANY-YIP is an organization dedicated to

JOHN C. PARSONS II, CIC, CPIA, AAI

the professional and personal growth of newcomers to the insurance industry and an affiliate of PIANY. In his community, Parsons has been active with the U.S. Coast Guard Auxiliary and has volunteered with the Boy Scouts and Cub Scouts. He also is an active blood donor for the American Red Cross and has volunteered with the American Diabetes Association helping with its Tour de Cure.[IA]

PIANY Names Holender Director of the Year uGLENMONT, N.Y.—Fred Holender, CLU, CPCU, ChFC, MSFS, of Williamsville, N.Y., was named the Professional Insurance Agents of New York's Director of the Year at a meeting of the association's board of directors today. Holender is director of administration for Lawley Service Inc., in Buffalo, N.Y. The award recognizes the hard work and dedication of a member of the association's board of directors who has contributed remarkable time and talent to help support the association and its many programs. An active member of PIANY, Holender has been a member of the board of directors from 2013 and served as vice president in 2015-16. He also is chair of the Member, Benefits and Services Committee and is a 42 September 26, 2016 / INSURANCE ADVOCATE

FRED HOLENDER

member of the Executive/Budget & Finance and PIANYPAC Governing committees. He also is chairman of the association's Buffalo Advisory Council as well as the primary

PIANY Elects Officers for 2016-2017

uGLENMONT, N.Y.—Officers of the Professional Insurance Agents of New York State Inc. were elected for the 2016-17 administrative year at the association’s annual business meeting today. • John Parsons II, CIC, CPIA, AAI, of Skaneateles, N.Y., was elected president. He is executive vice president of Parsons and Associates Inc. in Syracuse, N.Y. • Fred Holender, CLU, CPCU, ChFC, MSFS, was elected president-elect. He is director of administration for Lawley Services Inc. in Buffalo, N.Y. • Jamie Ferris, AAI, CIC, CPIA, was re-elected vice president. Ferris is president of P.W. Wood & Son Inc., in Ithaca, N.Y. • Paul G. Casciaro, CIC, CSRM, CPIA, of Kingston, N.Y., was elected vice president. He is chairman and CEO of Frank H. Reis Inc., in Kingston, N.Y. • John R. Tomassi, CPCU, was elected vice president. He is president of the Winfield Group in Clifton Park, N.Y. • Bruce D. Rowledge of Scotia, N.Y. was elected treasurer. He is president of Rowledge Agency in Scotia, N.Y. • Anthony Kammas of Flushing, N.Y. was elected secretary. He is president of Skyline Risk Management Inc., in Flushing. • Eugene L. Sandy, CIC, of Stony Brook, N.Y., will serve as immediate past president. He is director of marketing for the Millennium Alliance Group LLC in Syosset, N.Y.[IA]

coordinator for PIANY's Legislative district office visits. For 2016 alone, Holender met with 18 lawmakers to discuss issues of concern to professional agents and their clients. Active in his community, Holender is president of the Buffalo Niagara Business Ethics Association. He also has served on several not-for-profit boards, taking on committee and leadership roles.[IA]

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