September 29, 2014 by C Acunto

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VOLUME 125, NUMBER 16 / September 29, 2014

Serving: New York, New Jersey, Connecticut, Pennsylvania and Washington D.C.

Big “I” Installs 2014-2015 Leadership Team page 10 “Employee Trust” Wins Award for Hagerty page 14 PIANY Elects New Leaders page 16 Griffith Awards $3,500 to Future Leaders page 18

A CINN Group, Inc. Publication

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Contents [FEATURES] 4

Foreword: “Reasoned Analysis” - An Important Letter to the Editor Steve Acunto, Publisher

Insight: Controlling Information Peter H. Bickford

In the Associations: Big “I” Installs New Leadership

In the Associations: New York and New Jersey Amond Excellence in Insurance Education Awardees

September 29, 2014 | volume 125 number 16 32

On My Radar: Must Insured First Prove Prima Facie Case? Barry Zalma

Looking Back: June 1989

Courtside: Unless Auto Policy Speciﬁcally Excludes Temporary Substitutes, They Are Covered for Sum Lawrence Rogak

Classiﬁeds

Guest Opinion: Obamacare, Goebbels and Ginsburg G. Keith Smith, M.D.

NY-YIP Elect New Ofﬁcers and Directors

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Company News: Hagerty Named “Great Place tow Work® 2014: Employee Trust is the Leading Factor for Great Workplaces

MSO: Chimney Fires and Fireplace Safety

MSO: Education Seminar 2014

In the Associations: PIANY Elects New Leaders

In the Associations: The Grifﬁth Insurance Education Foundation Awards $3,500

Risk Management: The Vulnerability of Art: Collection Risk Management Tips

On the Level: They Don’t Make ‘em Like They Used To N. Stephen Ruchman, CPA

Face to Face: Between You and Me, Keep This On The DownLOAD! Michael Loguercio

The Social Notebook: Dipping Your Toe Into the Social Media as an Agent Christopher Paradiso Like us on Facebook… The Insurance Advocate Magazine

Corrections: On the CONTENTS page in our last issue, September 15, 2014 - Vol 125, No. 14, the title of Chris Paradiso’s article was incorrect. The actual title of his article in that issue isπ “Ways toGet Ahead in the Social Media Arena.” We appologize to the writer for this oversight. INSURANCE ADVOCATE / September 29, 2014 3

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[ FORE WORD ]

Steve Acunto

“Reasoned Analysis”

An important Letter to the Editor

VOLUME 125, NUMBER 16 SEPTEMBER 29, 2014

RE: Jerry Trupin’s analysis of the ACORD 855NY form, Aug. 18 Dear Mr. Acunto, Jerry Trupin gave Insurance Advocate readers a reasoned analysis of the ACORD 855NY form in the Aug. 18, 2014, edition of the magazine. While relevant from the certificate holder’s point of view, I believe it will help to provide some background and clarification on the purpose of this form. A working group consisting of insurance industry representative and construction industry representatives developed this form over several months of deliberation. The problem arose when owners and general contractors in New York began to lack confidence in the standard ACORD 25 Certificate of Liability because of the disruption of customary insurance markets caused by unique circumstances in this state. Some safeplace-to-work sections of the Labor Law, specifically, Sections 240, 241 and 241-a, impose a “strict” liability standard (as opposed to a “negligence” standard) upon owners and general contractors for workers injured at their job sites. Because of this law, it is very difficult to procure comprehensive coverage for contractors performing certain kinds of work and in certain locations. Owners and general contractors began looking for more detailed information about the coverage afforded contractors at the job site. In response to adverse experiences with missing coverage, owners and general contractors (with their attorneys) began developing their own certificate forms in an attempt to obtain more information. In addition, some of these forms (often referred to as “attestation” forms) were designed to create legal liability for the producer issuing them with regard to warranties of coverage. This became a serious E&O problem for New York producers. The ACORD 855NY is voluntary, but is standardized for ease of use and consistency. When required by the certificate holder, this addendum should be used to supplement the ACORD 25 with more information about the policy’s coverage. It bears the ACORD 25 disclaimer language and is not intended to answer specific coverage questions, but merely to indicate areas of coverage where the solicitation of more details may be expedient (e.g., examination of the actual policy forms). Trust me when I say that no representative of producers on the working group favored the idea of asking producers to disclose more coverage information on certificates— adding to the already heavy administrative burden. This was a compromise to avoid the attestation requests and consolidate multiple proprietary forms into a single form. Below are my comments on some selected observations made by Mr. Trupin. Under item A. Insurer, what certificate holders want to know is whether the insurer files its forms for approval by the Department of Financial Services. Since Excess Line and Free Trade Zone policies do not require filing, there’s a good chance some of these forms will be nonstandard. Disclosing the licensing of the insurer will indicate to the certificate holder when the forms may need a little more scrutiny. This item was not intended to address the guaranty fund issue (which, by the way, only amounts to $1 million per claim). Under item D. Additional Insured Endorsement, it was decided not to show edition dates on endorsements because it is a cumbersome process and takes a long time for ACORD to revise its forms. It will be assumed that these endorsements are the most current ISO editions, which at the present time is April 2013. If the endorsement is not the most current, it should be shown under “Other.” Finally, we are, no doubt, raising the bar on the amount and quality of the information provided to certificate holders in order to address unique circumstances in New York. continued on page 12

4 September 29, 2014 / INSURANCE ADVOCATE

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Sari Gabay-Raﬁ Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com PROOF READER Maria Vano SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x117 circulation@cinn.com PUBLISHED BY CINN Group P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264 www.cinn.com | info@cinn.com President and CEO Steve Acunto

CINN G R O U P, I N C .

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 21 times a year, and once a month in July, August and December by CINN ESR, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing ofﬁces. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $110.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2014. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Ofﬁce.

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

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[ INSIGHT ]

By Peter H. Bickford

Controlling Information “When you control the mail you control . . . information.” - Newman

t has been almost twenty years since Seinfeld’s mailman Newman uttered that threat and, even with the passage of time and the ensuing digital age, it is

Now that the contractual obligations of ELNY have been transferred to a District of Columbia captive, Guaranty Association Benefits Corporation (GABC), owned by the various state guaranty associations, the NY superintendent as liquidator has successfully washed his hands of further responsibility for payment to

Sometimes the reasons for limiting access to officially collected information are clear, usually because of actual privacy or security issues, or because disclosure would be an embarrassment on some level. But just as often the reason is elusive and seems to defy common sense. Peter H. Bickford

still a timeless reminder of the importance of availability and access to information. Even today with seemingly unfettered access to information on just about every imaginable topic through the web, there are those in government who still appear to go out of their way to limit access to important information about their actions and programs. While Newman famously hid bags of mail in his apartment because the mail “never stops. It just keeps coming and coming and coming,” the motives for most governmental restriction of access are often less obvious. Sometimes the reasons for limiting access to officially collected information are clear, usually because of actual privacy or security issues, or because disclosure would be an embarrassment on some level. But just as often the reason is elusive and seems to defy common sense. Two recent examples involving the NY Department of Financial Services, both of which I have commented on in the past, illustrate this dichotomy: the understandable lack of openness with regard to the Executive Life (ELNY) embarrassment, and the baffling lack of disclosure of basic information about the insurance business in, among other places, the superintendent’s annual report.

ELNY’s annuitants. Additionally, he also seems to have avoided any responsibility for monitoring and reporting on the operations or financial soundness of GABC for the benefit of those annuitants to whom he repeatedly claimed to owe a fiduciary responsibility. Current financial information on GABC is not readily available from the ELNY receiver, the ELNY liquidation court, the NAIC or GABC itself. However, after a pleasant conversation with the Freedom of Information Law officer in the DC Department of Insurance, Securities and Banking (Note Insurance comes first!), I applied for and received the 2013 filed annual statement for GABC in less than 24 hours. After dealing so many times with NY’s cumbersome, time insensitive FOIL system, it was a pleasant change of pace working with the DC bureaucrats. There are few surprises in the report. With $1 billion in annuity obligations removed from the books, GABC’s financials show assets of $1.571 billion and liabilities of $1.488 billion, with total capital and surplus of about $83 million. Because GABC did not start paying out benefits to annuitants until mid-2013, it is far too soon to tell whether the assets will be sufficient to cover the reduced obligations, or whether a sweet deal has been made by the

guaranty associations at the expense of those annuitants with slashed benefits. But who will be monitoring GABC’s continuing financial viability or excesses? Early indications are that neither the ELNY liquidator nor the ELNY liquidation court will be doing so, distancing themselves even further from the already disenfranchised annuitants. As I stated, embarrassment over ELNY is an example of an understandable (but not excusable) failure to continue to monitor and report pertinent information. On the other end of the spectrum is the evershrinking and untimely availability of pertinent industry information through, among other sources, the statutorily required annual report of the superintendent to the governor and legislature. This annual report has not only been shrunk to a mere fraction of its former self, it is also now published so late in the year that what information is presented is stale upon delivery. DFS excuses some of this reduction by touting interactive links in the report to materials that used to be included in the report. These links, however, are few and far between and mask the significant reduction in published information. Despite the intimation, the DFS annual report does not provide a new delivery system for the full information previously provided – it is unmistakably a pronounced reduction in disclosure and retreat from transparency. Consider, for instance, DFS’s reporting – or absence of reporting - on surplus lines and domestic Free Trade Zone business. While surplus lines and Free Zone business is a small part of the overall insurance writings in the state, it is a significant market that is extremely important to insurance consumers, particularly commercial insureds. These are also the markets most susceptible to foreign or alien competition and loss of premium to other jurisdictions. One would think that these would be markets that regulators would be interested in helping to promote for the benefit of domestic insureds. Instead, the DFS annual reports no longer include continued on page 8

6 September 29, 2014 / INSURANCE ADVOCATE

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[ INSIGHT ] Through the wonders of FOIL, I have obtained DFS prepared summaries of Free Zone information gleaned from the required filings of individual Free Zone licensees. Unfortunately, the last period available is calendar year 2012, which is the first full year to include the new large commercial insured category added as a result of the Dodd-Frank Non-Admitted and Reinsurance Reform Act. The early returns do not show much support for the new category, with total Class 3 writings

continued from page 6

information on either market! For those interested, timely, complete information on the NY excess and surplus market can be obtained through the reports and website of the Excess Line Association of NY (ELANY), NY’s surplus lines stamping facility. For some inexplicable reason, however, Free Zone business goes totally unreported by DFS.

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These are but two examples of a lack of transparency by the DFS regarding the business of insurance – one of which is understandable but not excusable, and one that is neither.

in 2012 of about $7 million out of total Free Zone writings of $2.8 billion. It may take a few more years to fully understand the interest in or value of the new category, and whether restrictive regulations are thwarting an otherwise valuable industry tool (See my discussion of the new Free Zone category in the May 26, 2014 issue of IA, “Extra! Extra! Read it Here First!”). Unfortunately, it does not appear that the data and analysis for this understanding will come willingly from the DFS. These are but two examples of a lack of transparency by the DFS regarding the business of insurance – one of which is understandable but not excusable, and one that is neither. If it were not for Freedom of Information Laws the secretive conduct of many agencies would be even more impenetrable. Which is why I have a particular soft spot for the web portal SeeThroughNY (www.SeeThroughNY.net) that uses a number of tools including FOIL to collect and make publically available for free data from NY state and local government at all levels from the executive, legislature and judicial branches through counties, cities, towns, villages, school districts and public authorities. The site, which is sponsored by the non-profit Empire Center for Public Policy in Albany, includes easily searchable databases on payrolls, pensions, contracts and expenditures at all levels (Where else could one learn that the superintendent of financial services is far from the highest paid employee of the DFS?). SeeThroughNY is a truly remarkable site that demonstrates what government could do if it really had an interest in transparency other than as a meaningless political catch phrase. [IA]

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[ IN THE ASSOCIATIONS ]

Big “I” Installs New Leadership Team Michigan’s David Walker as Chairman, Louisiana’s Randy Lanoix as Chairman-Elect, Connecticut’s Spencer Houldin as Vice Chairman; Jon Jensen of South Carolina Joins Executive Committee

LEXANDRIA, Va.— community, having David Walker was served on the board of inaugurated as the directors for the Hartland new chairman of the Area Chamber of Independent Insurance Agents Commerce and as a & Brokers of America (IIABA trustee and president of or the Big “I”), with Randy the Fenton Area Public Lanoix as chairman-elect, Schools. Currently, he Spencer Houldin as vice chairserves as Tyrone man and Jon Jensen as an atTownship Trustee and on large executive committee the board of the member. The new officers Michigan Basic Property begin their terms at the conAssociation. Walker is clusion of the board meeting also a founding member held in conjunction with the of the Hartland Rotary. DAVID WALKER Big “I” Fall Leadership He and his wife Barbara Conference in Grand Rapids, Michigan. live in Fenton, Michigan and have two “The Big ‘I’ is pleased that such a dis- grown children and two grandchildren. tinguished group of professionals will be Randy Lanoix is president of Lanoix among the association’s leaders,” says Robert Insurance Agency in Lutcher and Brusly, Rusbuldt, Big “I” President & CEO. “David Louisiana. Lanoix has been active in the Walker, Randy Lanoix, Spencer Houldin independent agency system, serving as presand Jon Jensen, along with the rest of the ident of the Independent Insurance Agents executive committee, are an outstanding & Brokers of Louisiana (IIABL) in 2001 and team of industry leaders who position us as the Louisiana representative on the Big well for a productive year.” “I” national Board of Directors from David Walker, AAI, CIC, LIC, ARM, January 2005 to September 2010. He is a CRM, is president of Hartland Insurance recipient of the Lou Daniel award, which is Agency in Hartland, Michigan. He began the highest honor bestowed by the IIABL. his insurance career in 1979, joined Hartland Lanoix is also a past recipient of the “Mr. Insurance Agency as a producer and rose Chairman” award for his work as Louisiana’s through its ranks. Walker has served on the legislative chairman and his work with the Michigan Association of Insurance Agents Louisiana state legislature. On the national (MAIA) Young Agents Council, Education level, Lanoix has served on the Professional Committee, Legislative Affairs Committee Liability Committee, the Trusted Choice® and Agency-Company Relations Board of Directors, numerous task forces, Committee. Additionally, he has served on and two terms on the Government Affairs the board of directors and as president of Committee, where he was chairman of State MAIA and the Genesee County Government Affairs. He and his wife Nell Independent Agents. At the national level, have two grown sons who work in the famhe has served on the boards of the Big “I”, ily agency and two grandchildren. CAP and Big “I” Advantage, and as a memSpencer M. Houldin is president of ber of the Big “I” Professional Liability Ericson Insurance Services, LLC, a secondCommittee. Walker has received numerous generation insurance agency with offices MAIA awards, including the W.O. in Litchfield County, Connecticut and New Hilderbrand Award in 2006 for his lifetime York City. From 2008-2011, Houldin served service and achievement in the insurance as chairman of the Big “I” Government industry and MAIA. Walker is active in his Affairs Committee and testified before 10 September 29, 2014 / INSURANCE ADVOCATE

numerous Congressional committees on behalf of the association. He also represented the state of Connecticut on the IIABA Board from 2006 to 2011. In 2004, Houldin served as Independent Insurance Agents of Connecticut president. He has held seats on agent advisory councils for several insurance companies. Houldin is active in his local community, serving on the executive committees of The Western Connecticut Health Care Network, a multi-hospital organization. He is also past president of the local rotary. Houldin earned a Bachelor of Arts degree at Lafayette College. He resides in Roxbury, Connecticut, with his wife and two children. Jon Jensen, AAI, AIP, is president of Correll Insurance Group, headquartered in Spartanburg, South Carolina. As an industry leader, he has served on committees of the South Carolina Department of Insurance and as the chairman of the Independent Insurance Agents and Brokers of South Carolina. Jensen is the immediate past South Carolina national director for the Big “I”, is a past national chairman of the IIABA InsurPac Board of Trustees, and is past chairman of the National Government Affairs Committee. He was awarded the IIABA National Chairman’s Award in 2009 and the Sydney O. Smith Award in 2010, which is the highest legislative award given by the National Independent Insurance Agents & Brokers of America. He also serves on various boards including the Spartanburg Regional Health System Foundation – Cancer Division, SRHSF Grants and Allocation Committee, and is a founding member of its Legacy Society. Jensen is a graduate of Appalachian State University’s Insurance Executive Program. The 2013-2014 Big “I” chairman, Tom Minkler, who will serve on the committee as immediate past chair for one year, is president of the Clark-Mortenson Agency in Keene, New Hampshire.[IA]

INA 9-29-14_INA 9-29-14 10/9/14 2:45 PM Page 11

ADVERTORIAL

Chimney Fires and Fireplace Safety AS THE DAYS GET SHORTER and temperatures drop, the image of a roaring fire comes to mind. Fireplaces, woodstoves and other fuel burning appliances are not only nice to look at, they are often a necessity. It is estimated that they serve as the primary heating source for nearly one third of homes in the United States (www.usfa.fema.gov). However, there are nearly 25,000 chimney fires per year, causing damage to structures, injuries and about 10 deaths per year (www.csia.org). Helping clients understand the hazards of chimney fires and prevent accidents is another valueadded service of the professional insurance agent. Like any other form of home heating system, fireplaces and woodstoves, including their stovepipes and chimneys, should be inspected annually. According to the National Fire Protection Association (www.nfpa.org), approximately 28% of home heating fires are due to dirty equipment – chimneys in particular. Build up of creosote is one of the main dangers of wood burning appliances. The purpose of the chimney flue is to remove the byproducts of the combustion process, including smoke, unburned wood and water vapor, thereby keeping the air inside the home safe to breathe. As these materials travel through the chimney, they cool and condense, forming creosote. Creosote comes in a number of forms, but all are highly combustible. With enough of a build up and high enough flue temperatures, fire can ensue. Creosote can be tar like in appearance, or brown and crusty. Dirty chimneys cause chimney fires. Creosote buildup can be accelerated by several factors, including reduced air supply, unseasoned wood, and cooler than normal chimney temperatures. Failure to open the damper all the way also restricts air flow. Chimney fires can be very explosive with popping and crackling sounds that

…there are nearly 25,000 chimney fires per year, causing damage to structures, injuries and about 10 deaths per year. may be loud enough to alarm the neighbors. They may include dense dark smoke and a smell of something being hot. Perhaps more dangerous are the chimney fires that burn much more slowly, usually because there is not enough air flow to sustain a more dramatic fire. Temperatures in the slow burning fires are hot enough to damage the chimney and any nearby combustible parts of the house. Evidence of a pre-xisting chimney fire includes creosote flakes or pieces on the floor or ground outside, and flue tiles or roofing material that are cracked or damaged. Creosote that has a honeycomb appearance is another sign, as is a chimney rain cap that is discolored or distorted.

There are some safety measures that can help reduce the risk of a chimney fire. Stack thermometers are a good tool to let homeowners know that the chimney is getting too hot. Glass doors should not be closed when a fire is burning because this impedes the air flow needed for complete combustion. Instead, mesh screens are used when a fire is burning. Sometimes the firebox in a woodstove is overloaded to try to keep the fire burning—and the house warm—overnight. This can also increase creosote build up. Keep a screen over the top of the chimney to prevent birds and other creatures from getting in. Heating a home need not be hazardous to someone’s health. Chimney fires are completely preventable. Helping clients avoid the potential tragedy of chimney fires is another sign of the true insurance professional.

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[ IN THE ASSOCIATIONS ]

New York and New Jersey Among Excellence in Insurance Education Awardees

LEXANDRIA, Va.—Big “I” independent insurance agent associations in 24 states were recently recognized by the Independent Insurance Agents & Brokers of America (IIABA or The Big “I”) with Excellence in Insurance Education (EIE) Awards at the association’s Education Convocation in Grand Rapids, Michigan. “The Big ‘I’ Excellence in Insurance Education awards honor the outstanding contributions made by Big ‘I’ state associations through extraordinary efforts in education,” says Cindy Hower, chair of The Big “I” Virtual University curriculum and research committee and president of Kellerman Insurance in Holton, Kansas. “We are greatly pleased to recognize so many state associations that have taken on the challenge of providing quality education programs to our member agents.” The EIE awards celebrate and recognize state associations and staff who have made significant contributions to education for their members and the industry in the key areas of class offerings, continuing education (CE), professionalism, designation offerings, industry collaboration, planning goals, marketing, resources and more. Each entrant is scored based on a state’s overall educational offerings in a variety of areas and a short essay detailing its overall education programs. The 2014 EIE awards were presented as follows: Diamond: • Florida Association of Insurance Agents • Independent Insurance Agents & Brokers of New Jersey • Independent Insurance Agents & Brokers of New York • Independent Insurance Agents & Brokers of South Carolina • Independent Insurance Agents & Brokers of Washington • Independent Insurance Agents of Georgia 12 September 29, 2014 / INSURANCE ADVOCATE

• Independent Insurance Agents of Nebraska • Independent Insurance Agents of North Carolina • Independent Insurance Agents of Virginia • Kansas Association of Insurance Agents • Maine Insurance Agents Association • Massachusetts Association of Insurance Agents • Michigan Association of Insurance Agents • New Hampshire Association of Insurance Agents Gold: • Alabama Independent Agents Association • Insurance Agents & Brokers of Delaware • Insurance Agents & Brokers of Pennsylvania • Independent Insurance Agents of Oklahoma • Independent Insurance Agents of New Mexico • Independent Insurance Agents of Wisconsin • Vermont Insurance Agents Association Bronze: • Independent Insurance Agents & Brokers of Louisiana • Independent Insurance Agents & Brokers of Oregon • Independent Insurance Agents of Illinois “The Big ‘I’ greatly appreciates all the hard work by our state associations to develop, promote and implement education programs,” says Madelyn Flannagan, Big “I” vice president of agent development, education and research. “These continuing education programs are vital to our independent agents, brokers and the clients they serve.”[IA]

NY-YIP Elect New Officers & Directors

LENMONT, N.Y.–Officers of the New York Young Insurance Professionals were elected at its annual business meeting. • Jennifer DeCristofaro of Lancer Insurance Agency in Long Beach, N.Y. was elected president; • Jason Bartow of Eugene A. Bartow Insurance Agency in Deer Park, N.Y. was elected president-elect; • Dina Bruno of MetLife Auto & Home in Wantagh, N.Y. was elected vice president; • Tim Madden of Standard Security Life Insurance Co. was elected secretary/treasurer; • Gino A. Orrino, CPIA, principal of Orrino Capital Services in Corona, N.Y. will serve as immediate past president. In addition to the above, NY-YIP also elected to its board of directors: Carl Abramson of Associated Mutual Insurance Cooperative in Woodridge, N.Y.; George Hackney of Jimcor Agency in Saratoga Springs, N.Y.; Janal Montagna of Maxons Restorations in New York; Thomas Noﬁ of Lancer Insurance Co. in Long Beach, N.Y.; and James Smith of Premium Finance Brokerage in Shoreham, N.Y.[IA]

[ FORE WORD ] continued from page 4

Completion of the ACORD 855NY form will require greater sophistication on the part of its issuers, which is intended to increase the degree of coverage certainty for the certificate holder. However, we do not believe the form will result in more E&O exposures for producers. In fact, PIA’s investment in this project primarily was made to avoid producer culpability for errors when complying with certificate holder requests. Dan Corbin, CPCU, CIC, LUTC Director of Research, PIANY

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[ COMPANY NEWS ]

Hagerty Named “Great Place to Work® 2014: Employee Trust is the Leading Factor for Great Workplaces

agerty, a leading insurer of classic cars, was named by Great Place to Work® as one of the best small and medium workplaces in the United States on its annual 2014 Best Small & Medium Workplaces, just published in FORTUNE magazine. Ranked #6, this is the second year in a row that Hagerty has received this honor, moving up from a 13th ranking in 2013. Competing against hundreds of companies across the country, the insurance entity participated in a rigorous selection process, which included an employee survey and an in-depth questionnaire about benefits programs and company practices. Great Place to Work® evaluates each application using its unique methodology based on five dimensions: credibility, respect, fairness, pride and camaraderie. In compiling the list, Great Place to Work® has found that employees believe they work for great organizations when they consistently trust the people they work for, have pride in what they do and enjoy the people they work with, according to the article. Based in Traverse City, Michigan, Hagerty is the world’s leading insurance provider for classic vehicles and host to the largest network of classic car owners. Hagerty offers insurance for classic cars, trucks, motorcycles and motorcycle safety equipment, tractors, automotive tools and spare parts, and even “automobilia” (any historic or collectible item linked with motor vehicles). Hagerty also offers overseas shipping/touring insurance coverage, commercial coverage and club liability coverage. “Our employees are responsible for our success and we put a lot of effort into fostering a fulfilling workplace environment,” stated McKeel Hagerty, President and CEO. “I am especially honored by the knowledge that our employees continue to 14 September 29, 2014 / INSURANCE ADVOCATE

M C KEEL HAGERTY PRESIDENT AND CEO OF HAGERTY

“Our employees are responsible for our success and we put a lot of effort into fostering a fulfilling workplace environment. I am especially honored by the knowledge that our employees continue to have a high level of trust in Hagerty. Our trust index rose three percent from 2013, showcasing that 91% of our workforce have sincere love for their work.” - McKeel Hagerty, President & CEO

have a high level of trust in Hagerty. Our trust index rose three percent from 2013, showcasing that 91% of our workforce

have sincere love for their work.” 2014 represents the second time that Hagerty has received the Great Place to Work® designation. A sampling of the reasons cited as to why Hagerty was selected for the Top 50 listing includes: • The company’s dedication to professional and personal development of its workforce through education at its own Hagerty University and wellness programming at the corporate gym, Ironworks. • Connections with enthusiasts within the classic vehicle community through such activities as youth programming, hobby education and preservation, and the communities in which employees live and work, via Hagerty Cares, the company’s volunteer program. • Commitment to transparency and communication from the CEO, Senior Leadership and their direct managers. “The work of these companies is quite impressive,” said China Gorman, CEO of Great Place to Work®. “They provide an example that others can look to, to see what kind of outstanding workplace is possible – regardless of size, industry, or other circumstances. For example, the growth that many of these companies are experiencing is tremendous, and they are paying attention to culture every step of the way. This focus on a strong cultural foundation will help pave the way for continued success as they serve their employees and their customers. Organizations named on the list see many benefits that include better financial performance, less employee turnover, higher levels of customer satisfaction and loyalty, increased innovation and creative thinking, higher productivity and enhanced public perception.

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[ COMPANY NEWS ] 1967 CHEVROLET COMARO

The Most Popularly Collected Vehicles 1. Chevrolet Corvette 2. Ford Mustang 3. Chevrolet Camaro 4. Chevrolet Bel-Air

“[These companies] provide an example that others can look to, to see what kind of outstanding workplace is possible – regardless of size, industry, or other circumstances.…”

5. Ford Model A 6. Ford Thunderbird 7. Chevrolet Chevelle 8. Chevrolet Impala 9. Volkswagen Beetle 10. Pontiac GTO

FORD MUSTANG COUPE

- China Gorman, CEO, Great Place to Work®

To learn more about how to build a high-trust workplace culture, visit www.greatplacetowork.com. Great Place to Work® is the global authority on high-trust, high-performance workplace cultures. Through proprietary assessment tools, advisory services, and employer branding programs, including Best Companies lists and workplace reviews, Great Place to Work® provides the benchmarks, framework and expertise needed to create, sustain, and recognize outstanding workplace cultures. In the United States, Great Place to Work® produces the annual FORTUNE 100 Best Companies to Work For list and the Great Place to Work® Best Small and Medium Workplaces list. Divided into two categories, Small (50-250 employees) and Medium (251-999 employees), the Best Small and Medium Workplaces list has recognized companies with exceptional workplace cultures for the past ten years. Follow Great Place to Work® online at www.greatplacetowork.com and on Twitter at @GPTW_US. For information about global operations at Great Place to Work® visit www.greatplacetowork.net [IA]

The most Expensive Classic Cars to Sell at Public Auction 1. 1962 Ferrari 250 GTO Coupe Sold for $38,115,000, including buyer’s premium. Bonhams; Carmel Valley, US; August 2014 2. 1954 Mercedes-Benz W196 Sold for $29,700,000, including buyer’s premium. Bonhams; Chichester, UK; July 2013 3. 967 Ferrari 275 GTB/4*S NART Spyder Sold for $27,500,000, including buyer’s premium. RM Auctions; Monterey, CA; August 2013 4. 1964 Ferrari 275 GTB/C Coupe Sold for $26,400,000, including buyer’s premium. RM Auctions; Monterey, CA; August 2014 5. 1954 Ferrari 375-Plus Spyder Sold for $18,315,846, including buyer’s premium. Bonhams; Chichester, UK; June 2014 6. 1957 Ferrari 250 Testa Rossa Prototype Sold for $16,390,000, including buyer’s premium. Gooding & Company; Pebble Beach, CA; August 2011 7. 1961 Ferrari 250 GT California SWB Spyder (closed headlight) Sold for $15,180,000, including buyer’s premium Gooding & Company; Pebble Beach, CA; 2014 8. 1964 Ferrari 250 LM Sold for $14,300,000, including buyer’s premium RM; New York; NY; November 2013 9. 1953 Ferrari 340/375 MM Competizione Berlinetta Sold for $12,800,000, including buyer’s premium RM Auctions; Villa Erba, IT; May 2013 10. 1957 Ferrari 250 Testa Rossa Sold for $12,402,500, including buyer’s premium RM Auctions; Maranello, IT; May 2009 INSURANCE ADVOCATE / September 29, 2014 15

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[ IN THE ASSOCIATIONS ]

PIANY Elects New Leaders Kubera Elected President GLENMONT, N.Y.–Anthony A. Kubera, CIC, director of business development for Russell Bond & Co. Inc., in Buffalo, N.Y., was elected president of Professional Insurance Agents of New York State Inc., at a meeting of the association’s board of directors today. Kubera is a member of PIANY’s Political Action Executive and Governing Committees. He is an ex-officio member of the association’s Buffalo Advisory Council, Company Industry Relations and Member Benefits & Services Committees. Active in the industry, Kubera is a member of the Insurance Club of Buffalo, and he currently serves on that organization’s Past President Council. He is also past president and current member of the Western New York Insurance Association. In his community, Kubera serves on the board of trustees for Mount Mercy Academy and he served on the Insurance Education Advisory Council of Canisius College in Buffalo, N.Y. He is also a past member of the Hamburg Village Recreation Commission.

Officers 2014-15 Anthony A. Kubera, CIC, of Buffalo, N.Y. was elected president. He is director of business development for Russell Bond & Co. Inc. in Buffalo. Eugene L. Sandy, CIC, of Stony Brook, N.Y. was elected president-elect. He is director of marketing for the Millennium Alliance Group LLC in Syosset, N.Y. John Parsons II, CIC, CPIA, AAI, of Skaneateles, N.Y. was elected first vice president. He is executive vice president of Parsons and Associates Inc. in Syracuse, N.Y. Paul G. Casciaro, CIC, CSRM, CPIA, of Kingston, N.Y. was elected vice president. He is chairman and chief executive officer of Frank H. Reis Inc. in Kingston, N.Y. Jamie Ferris, AAI, CIC, CPIA, was elected vice president. Ferris is president of P.W. Wood & Son Inc. in Ithaca, N.Y. Eric T. Clauss of Buffalo, N.Y. was elected treasurer. Clauss is president of E.T. Clauss & Co., Inc. in Buffalo. Bruce D. Rowledge of Scotia, N.Y. was elected secretary. Rowledge is president of Rowledge Agency in Scotia, N.Y. Alan Plafker, CPIA, of Manhasset. N.Y. will serve as immediate past president. He is president and CEO of Member Brokerage Service LLC in Briarwood, N.Y. The following individuals were re-elected to serve for a threeyear term, ending in 2017: Eric Clauss of Buffalo, N.Y. Clauss is president of E.T. Clauss & Co. Inc. in Buffalo. Clauss will serve as treasurer of PIANY for 2014-15. He is also a member of the association’s Company/Industry Relations and Education/Conference Committees and chairperson of its Buffalo Advisory Council. Mike Skeele, CIC, CPIA, of Fayetteville, N.Y. Skeele is president of the Skeele Agency, Inc., DeRuyter, N.Y. Skeele Agency Inc. also has offices in Manlius, Cazenovia, Chittenango and New Hartford, N.Y. Skeele is chairperson of PIANY’s Nominations 16 September 29, 2014 / INSURANCE ADVOCATE

ANTHONY A. KUBERA, CIC AND ALAN PLAFKER, CPIA

Committee. He is also a member of the Executive/Budget & Finance, Government Affairs and Member Benefits & Services Committees. Skeele is also a member of the Glenmont National Alliance Committee. He served as president of PIANY in 201314 and he is an ex-officio member of its Syracuse Advisory Council. Alan Plafker, CPIA, of Manhasset, N.Y. Plafker is president and chief executive officer of Member Brokerage Service LLC, Briarwood, N.Y. Plafker served as PIANY president for the 201314 administrative year. He is also executive chairperson of the association’s Executive/Budget & Finance Committee and is an ex-officio member of several committees, including: the Education/Conference; Company/Industry Relations; Government Affairs and Member, Benefits & Services Committees. He also is also an ex-officio member of the association’s New York City Advisory Council. Jamie Ferris, CIC, AAI, CPIA, of White Plains, N.Y. Ferris is president of P.W. Wood & Son, Inc., Ithaca, N.Y. Vice chair of the Government Affairs Committee, he is also a member of the Executive/Budget & Finance and Member Benefits & Services Committees. Ferris is also vice-chair of the association’s Southern Tier Advisory Council. Robert Shapiro of Bellmore, N.Y. Shapiro is president of Global Facilities Inc. in Lynbrook, N.Y. He is a member of PIANY’s Education/Conference Committee and is an ex-officio member of its Long Island Advisory Council.[IA]

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[ IN THE ASSOCIATIONS ]

The Griffith Insurance Education Foundation Awards $3,500

ALVERN, Pa.—The Griffith Insurance Education Foundation presented $3,500 in awards to 10 students at the Future Business Leaders of America (FBLA) National Conference in Nashville, Tennessee. As an event sponsor, The Griffith Foundation supported an insurance and risk management competitive event as part of the FBLA’s Competitive Events Program. More than 60 students participated at the national level, and the top 10 students received between $100 and $1,500 in award funds. “By attending this year’s FBLA conference, we were able to connect with a number of students who have expressed interest in a business-related career, early on,” said Jessica Gaudio, The Griffith

Foundation’s program manager. “Our goal is to share with these students the career options available to them in the insurance industry.” The Griffith Foundation provides risk management and insurance educational resources for high school and college students, including: • Online insurance curriculum • Career guidance • Scholarships The Griffith Insurance Education Foundation is a 501(c) (3) not-for-profit educational organization that promotes the study and teaching of risk management and all lines of insurance through educational programs targeting students and public policymakers. The Griffith Foundation is affiliated with The Institutes, the leader in deliv-

ering proven knowledge solutions that drive powerful business results for the risk management and property-casualty insurance industry. For more information, visit www.GriffithFoundation.org. Future Business Leaders of AmericaPhi Beta Lambda, Inc. is a nonprofit 501(c)(3) student business organization with more than a quarter million members and advisers in 6,500 middle schools, high schools, and college chapters worldwide. Its mission is to bring business and education together in a positive working relationship through innovative leadership and career development programs. The association is headquartered in Reston, Virginia outside Washington, DC. For more information visit www.fblapbl.org.[IA]

Join NAPIA and Gain a Competitive Edge! The National Association of Public Insurance Adjusters (NAPIA) gives its members an edge on the competition by providing strategic advocacy, continuing education, marketing tools and other benefits required to succeed professionally, including: Seminar & Conference Registration Discounts Member Company Listing on Website Continuing Education (CE) Credits Discounts on E&O Insurance Legal Representation Legislative Updates NAIC Liaison

For a limited time, the Association is offering a savings on membership dues that allows public adjusters to join at 50% off the annual rate. Don’t delay! Join NAPIA soon to take advantage of great member benefits at half the cost. For more details or to apply, visit www.napia.com or call 703-433-9217. 18 September 29, 2014 / INSURANCE ADVOCATE

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IN THE MATTER OF THE LIQUIDATION OF CAPITAL MUTUAL INSURANCE COMPANY Supreme Court County of New York Index No.: 402044/00 NOTICE Pursuant to an order of the Supreme Court of the State of New York, County of New York (“Court”), entered on October 5, 2000, the then-Superintendent of Insurance of the State of New York and his successors in office were appointed as liquidator (“Liquidator”) of Capital Mutual Insurance Company (“CMIC”) and, as such, has been directed to take possession of CMIC’s property and liquidate its business and affairs pursuant to Article 74 of the New York Insurance Law (“Insurance Law”). The Superintendent of Financial Services of the State of New York has now succeeded the Superintendent of Insurance as Liquidator of CMIC. The Liquidator has, pursuant to Insurance Law Article 74, appointed Scott D. Fischer, Acting Special Deputy Superintendent (“Acting Special Deputy”), as his agent to liquidate the business of CMIC. The Acting Special Deputy carries out his duties through the New York Liquidation Bureau, 110 William Street, New York, New York 10038. The Liquidator has submitted to the Court a verified petition (“Verified Petition”) seeking an order: (i) approving the Liquidator’s report (“Closing Report”) on the status of and request to close the CMIC liquidation proceeding (“Liquidation Proceeding”) and the financial transactions delineated in such Closing Report; (ii) authorizing the continued payment of administrative expenses, including such expenses pertaining to the closing of the Liquidation Proceeding; (iii) terminating and closing the Liquidation Proceeding, subject to this Court’s approval of Court Order No. 547; (iv) authorizing the Liquidator, without further application to the Court, to continue, after the termination of the Liquidation Proceeding, to receive and disburse assets, pursuant to Insurance Law Article 74, to those creditors of CMIC with allowed claims who are eligible to share in a pro-rata distribution and to pay administrative expenses incurred in connection with the collection and disbursement of such assets; (v) releasing and discharging the Liquidator, his predecessors and successors in office, and their agents, attorneys and employees, from any and all liability arising from their acts or omissions in connection with the Liquidation Proceeding; (vi) authorizing and directing the Liquidator, in his discretion, to destroy or otherwise dispose of any and all of the books, files, records and other property of CMIC without further order of the Court; and (vii) providing for such other and further relief as the Court deems appropriate and just. A hearing is scheduled on the Verified Petition on the 8th day of October, 2014, at 9:30 a.m., before the Court at the Courthouse, IAS Part 16, 60 Centre Street, Room 222, New York, New York. If you wish to object to the Verified Petition, you must serve a written statement setting forth your objections and all supporting documentation upon the Liquidator and Clerk of the Court, at least seven (7) business days prior to the hearing. Service on the Liquidator shall be made by first class mail at the following address: Superintendent of Financial Services of the State of New York as Liquidator of Capital Mutual Insurance Company, 110 William Street, New York, New York 10038 Attention: John Pearson Kelly, Esq., General Counsel. The Verified Petition and Closing Report on the status of and request to close the Liquidation Proceeding are available for inspection at the above address. In the event of any discrepancy between this notice and the documents submitted to Court, the documents control. Requests for further information should be directed to the New York Liquidation Bureau, Creditor and Ancillary Operations Division, at (212) 341-6809. Dated: August 12, 2014 BENJAMIN M. LAWSKY, Superintendent of Financial Services of the State of New York as Liquidator of Capital Mutual Insurance Company.

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[ RISKMANAGEMENT ]

By Michelle Impey, Fine Art Director, Firemanâ&#x20AC;&#x2122;s Fund Insurance

The Vulnerability of Art: Collection Risk Management Tips

hen I visit the homes of high net worth clients to assess their art assets as the Fine Art Director with Firemanâ&#x20AC;&#x2122;s Fund Insurance, providing loss prevention advice is my primary objective. Whether it is a passion, investment, or family inheritance, every collection has a value worth protecting.

coverage for items in transit and automatic coverage for newly acquired items. With the globalization of the art market, these coverages are especially important for active collectors. But whether artwork is shipped abroad or just across town, an experienced art packer and shipper should always be hired. For ground shipments,

One simple preservation step is to attach a protective backing board to a painting (a qualified framer or conservator could affix one to the stretcher), which will reduce exposure of the canvas to rapid environmental changes, keep out dust and protect against damage during handling. Michelle Impey

Here are some collection risk management tips that will help preserve the future value of all types of collections.

Importance of a Collections Policy First, I want to stress the importance of a collections policy. It offers broader coverage than a homeowners policy; such as flood protection, breakage of fragile items, and mysterious disappearance/theft of jewelry and other collectibles. For example, a homeowners policy will typically limit mysterious disappearance of a jewelry piece to $5,000. A collections policy also provides worldwide* coverage and there is no deductible should a loss occur.

Considerations for Collection Risk Management Transportation Even though accidental breakage and damage in transit is the top cause of fine art losses, the standard liability limit in the transit business is only 60 cents a pound. If you ship a 10lb. painting valued at $500K, the shipping company will likely only cover up to $6 of damage. Fortunately, a collections policy provides worldwide* 20 September 29, 2014 / INSURANCE ADVOCATE

confirm that there will be two drivers and the vehicle is equipped with air-ride suspension, temperature control, and a security system. Depending on the territory, some companies will sub-contract out the service. If they do, you should make sure that a reputable sub-contractor will be handling your valuables. Proper installation and mounting Accidental breakage does not only occur while items are in transit. Many accidental breakage claims result from items simply falling off a wall or being knocked over. Often when I meet with a collector, I provide advice on how to improve the integrity of an existing installation. The hardware used needs to be appropriate for the weight and size of the piece, and should have at least two to three points of contact. In earthquake-prone areas, there are specifically designed earthquake hooks for hanging works. On one visit, I noticed that multi-million dollar paintings were hanging from nails, with deteriorated picture wires. Plastic coated picture wires can unravel and copper wires can wear over time. I recommend hiring an art handler/installer to periodically check the

installation hardware to assess if it needs to be upgraded. The installation of a three dimensional work, such as a Donald Judd sculpture, also requires specialized expertise. Although brushed stainless steel may appear to be a durable material, this type of sculpture can easily tarnish and sustain significant damage if accidentally dislodged from the wall. For this reason, it is important to hire an art installer who is knowledgeable about the artist and medium that they are handling. Select a safe location Avoid hanging paintings on exterior walls in your home. Due to minimal insulation in the walls of many buildings, exposure to severe fluctuations in temperature and humidity is a potential risk. In some cases, condensation and even mold growth can occur on the interior surface of the wall. One simple preservation step is to attach a protective backing board to a painting (a qualified framer or conservator could affix one to the stretcher), which will reduce exposure of the canvas to rapid environmental changes, keep out dust and protect against damage during handling. Air circulation behind a work is beneficial, and there are spacers for this purpose. One resourceful collector used wine corks as spacers, which protected his valuable work on paper from temperature extremes, and even buffered it from water damage when the upstairs washer leaked. When uncertain about a particular piece, seek the advice of a conservator. *Coverage is not provided in foreign countries where not permitted by law. Environmental conditions Donâ&#x20AC;&#x2122;t store artwork in basements or attics. Although gradual deterioration is not a covered loss, it is valuable to the collector to have these exposures pointed out. Works on paper are especially susceptible to damage when exposed to natural and artificial light. Light causes the oxidation of cellulose which causes the paper to discontinued on page 22

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[ RISKMANAGEMENT ] continued from page 20

color and weaken. One collector told me how her Matisse drawing completely faded after being exposed to sunlight over a period of time. Avoid direct sunlight, install UV film on windows, and consider framing works of art with a protective glazing. For artificial lighting, indirect and low voltage fixtures with UV filters are often recommended. Access to the collection Displaying items in direct traffic areas can leave them vulnerable to accidental damage. To prevent improper handling, outline specific housekeeping instructions on how to work around valuable works. Whether it is breakage or exposure to harmful cleaning products, damage during the housekeeping process is a common occurrence. Windex can corrode the patina on a sculpture and even non-direct contact with cleaning agents can be harmful. One conservator recounted how a housekeeper’s routine cleaning of a piano caused a chemical residue to form on a painting displayed directly above. If some items must be handled, prepare in advance. For example, gloves should be worn when handling metal objects because hand oils and perspiration can cause corrosion. Beware of how pets will behave but know that some losses are fortuitous. One collector’s British landscape painting was damaged when their dog jumped at the canvas to attack a rabbit depicted in the painting’s hunting scene. Alarm Protection An estimated $6 billion worth of art is stolen worldwide every year with a low recovery rate. The majority of thefts occur at private residences, and most are believed to be inside jobs. To prevent theft keep alarm systems active (it is surprising how many collectors don’t). Conduct background checks and consider setting up separate alarm codes for staff. In addition to traditional alarm contacts, there are RFID tags that monitor the local positioning of an asset and detect movement and vibration. If a collector does not want to alarm works of art, they may want to consider security hardware, which attaches the frame to the wall and locks it in place. After installation, the only way to remove 22 September 29, 2014 / INSURANCE ADVOCATE

Before loaning items to museums, I advise clients to first get an updated appraisal.

the frame is to use a special security wrench designed for that particular piece of hardware. No security hanging system is infallible, but it can reduce casual theft and tampering. Fire alarm systems should also be designed with the collection in mind. Smoke detectors should be installed in/near all areas where there is a high concentration of valuables. Oftentimes, smoke detectors are installed near the bedroom areas but not in the formal rooms of the home where the collection is typically displayed. Loans Before loaning items to museums, I advise clients to first get an updated appraisal. Review the museum’s insurance policy to confirm it offers ‘wall-to-wall’ coverage, meaning there is coverage from the time that it leaves the insured (taken off the wall) until it is returned. This includes coverage during packing, shipping, installation and display. As we learned above, understand how they will pack and ship the artwork, and ensure it will be displayed properly. Request a facility report of the museum, which evaluates the security and protection of the venue. Request a condition report before and after the exhibition, that way there will be a record of any existing damage and it will be easier to assess if any damage occurred during its display. I recall one collector who thought one of his works had been damaged while on exhibition. When the art conservator reviewed the prior condition report, it was determined that the small section of missing paint had been there previously, and in fact it was the artist’s intention. It is important to have an art conservator who has expertise in the particular artist complete the condition report. With some contemporary works especially, it is oftentimes difficult to distinguish between the artist’s intent and actual damage. One consideration for a collections policy is whether or not there is automatic coverage for scheduled items

on loan to museums or exhibitions worldwide with no reporting requirement. A few years ago, Picasso’s ‘The Actor’ was on exhibit at the Metropolitan Museum of Art in New York when a woman taking a class accidentally fell into the canvas, causing a 6-inch vertical tear along the lower righthand corner. When the painting returned to the Met’s walls it was behind plexi-glass. Most collectors don’t realize that they can specify how the artwork is displayed when it is loaned to a museum. Documentation aids recovery Should damage or loss occur, remind clients that documentation aids recovery. It expedites the claims process and aids retrieval efforts. Backup copies of documentation should be stored at a secure offsite location. These include (but are not limited to): appraisals, invoices, certificates of authenticity, photographs, provenance details and exhibition history. The collection should be periodically reappraised, which is typically recommended every 3 – 5 years. All these records can be effectively organized and stored using one of the several collection management tools on the market.[IA] This article provides general information and recommendations that may apply to many different situations. Any recommendations described in this article are not intended to be speciﬁc to your unique situation. Consult with your specialists to determine how and whether the information in this article might guide you in developing speciﬁc plans or procedures. This article does not substitute for legal advice, which should come from your own counsel. The insurance policy, not this article, forms the contract between the insured and the insurance company. The policy may contain limits, exclusions, and limitations that are not detailed in this article. Coverages may differ by state. Michelle Impey is Fine Art Director at Fireman’s Fund Insurance, where she keeps agents, brokers and policyholders informed on current trends affecting the fine art and private collections markets. She is responsible for providing expert loss-prevention advice and services that address the display, transportation, and storage of fine art and other valuables.

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[ ON TH E LEVEL ]

By N. Stephen Ruchman, CPA

They Don’t Make ‘em Like They Used To

f you stick around long enough, you acquire expertise, skills, loyalties and valuable relationships. These are what make a career; they are the dividends of time well invested. I’ve been around a while. And I’ve developed such relationships with people I know to be experts. One good friend of

industry’s move away from community; away from familiarity; and the loss of expertise one gains from having been around awhile. This led us to talk about the investment carriers can make in their employees, and specifically, we started talking about how underwriters are different now than they

For that matter, what about agents? Where does a newbie licensed broker get his or her training? Carriers and agents used to work together in training programs. I remember when my daughter came into the business. I worked with Stan Landberg, general manager of the New York City office of General Accident. N. Stephen Ruchman

mine, whom I respect and with whom I have worked for decades, is Bob Shapiro of Global Facilities. Bob began his career as an underwriter 57 years ago. We both started out working in New York City’s Financial District down in Manhattan, and we have some good memories. Whenever we get together, we inevitably talk about the good ol’ days. Recently, Bob and I were driving together from Long Island up to the Professional Insurance Agents of New York headquarters near Albany. Since we had a few hours, we began to talk about the business and how things have changed. The conversation was worth sharing. We recalled how we could walk down Maiden Lane in Downtown New York and it would take us half an hour to make it down the block, because everybody knew each other and we could discuss business right there on the street. …The street is almost unrecognizable now. What used to be a financial hub with offices from all the big insurance companies is now lined with condos. There just aren’t many national companies left; perhaps just a handful, where there used to be dozens. I’m not sure if I would know many, if any, of the pedestrians on the street anymore. What’s disappointing about this is that it represents the 24 September 29, 2014 / INSURANCE ADVOCATE

were in the past. Nowadays, young underwriters come out of college and move quickly from carrier to carrier. In the old days, underwriters stayed around and they learned the business. This develops long and trusted relationships among mutually respected professionals. These trusted relationships benefited agents, carriers and our clients. But now, the industry is not run by career insurance people; rather, financial people who move around to move up—not make a career with one firm. Carriers are beholden to stockholders, not their customers. College-trained MBAs are not real underwriters. Back in the day, Bob and I commiserated, a policy could be bound on a napkin. This wasn’t out of sloppiness, but out of a confidence in the people with whom we worked. When agents and underwriters maintained close, personal relationships, a good agent’s word was valuable. That would be unimaginable now. The Downtown exodus is symptomatic of a centralization that has underwriters working from across the country. They don’t know the nuances of a client’s location; they don’t trust their agent and they don’t know their own company’s coverages. Carriers don’t want underwriters dialoguing with their brokers—they see it as inefficient.

All correspondence takes place via email now. While this is efficient, it doesn’t build relationships or rapport; nor does it help employees develop instinct and communication skills. Underwriters are not receiving the same training they used to get either. For years and years, Bob and I noted during our conversation, carriers built their underwriters through training. Nowadays, that takes too long—so where do you get a good underwriter? You don’t train them; you steal them from another company. This is a problem. For that matter, what about agents? Where does a newbie licensed broker get his or her training? Carriers and agents used to work together in training programs. I remember when my daughter came into the business. I worked with Stan Landberg, general manager of the New York City office of General Accident. They had a program to help train children of the agents that was renowned for its excellence. My daughter learned how to underwrite and work claims until she became a true underwriter. That training program helped solidify the relationship between my office and the insurance company. Ultimately it was good for our mutual clients. Many years ago, I was on the producers panel of TransAmerica, which had moved their claims operations to the Bethlehem, Penn. office. Many agents complained that the adjusters no longer had any clue as to what was going on in our local Long Island and New York Metro area, so we (the agent and carrier together) developed a program where two new claims people would come to my office for several days. They would sit at the phones and handle claims as if they were employees of the agency, so they could relate to agents and learn how to build the relationship with their clients. Training is important; investing in staff is important. It also helps to attract new people to our industry, a problem we never seem to overcome. Becoming an independent agent is a great opportunity; there’s always a need for agents and brokers in their own communities. New ethnic communities continue to grow in our country where people trust their own people, and these communities are underserved. Unfortunately, these

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[ ON T HE LEVEL ] agents also are underserved. The agency system needs to promote the great entrepreneurial opportunity it offers, but also provide mentorship to new people coming in. There aren’t many agents or carriers willing to be mentors anymore. And yet, the best I’ve found have the least amount of time; they are busy, but they still find time to give back. Of course, personal responsibility is another factor that can’t be overlooked. Individuals need to invest time, effort and yes, even money to improve themselves. In this era of commoditization of our products, agents and their carriers need to stress that they offer their clients something more: knowledge. Small store-front brokers selling price, not knowledge, will not be around more than a few years. Not when clients can buy insurance online at 3 a.m. And, while we know they don’t shop and compare coverages, only prices (at their own peril), they don’t recognize the danger this presents. Agents need to focus on letting their communities know that they are experts, with important knowledge to help their clients protect themselves. “How do we do this?” Bob and I asked ourselves on our way to PIA. “How do we help agents build their expertise—the differentiating characteristic between us and the 3 a.m. online shop carriers now publicize?” We can start with education. Agents always have to be learning, acquiring more knowledge. As carriers have moved away from providing training, our association has stepped in to fill this need. As an association, PIA has an obligation to impart knowledge to its members: about sales and marketing; about coverages; and about laws and regulations to which our industry is bound. If nothing else it’s an E&O defense for an agent’s own protection. But again, there’s an element here regarding personal responsibility. Agents know they need continuing education credits. However, they need to make sure that they, and their employees, are getting value out of their education, not garbage. Just like the coverage we sell to our clients, agents need to recognize that when it comes to education, price should not be their primary concern. How can you help your customers if all you are selling is price? Never mind the embarrassment and black eye, how

about the E&O claim? Speaking of expertise and lessons learned from a long career, I want to conclude with a nod to John Gallagher, one of my best and long-time friends, who announced his retirement this month. I’ve known John since he was a marketing rep with TransAmerica and through his career as he moved up as marketing manager and vice president there. He built the best agent base I’ve ever seen—the agents with whom he worked on the company’s behalf were competitors, who became a great group of friends and resources for each other through their association with John. He was the catalyst for building one of TransAmerica’s best regions ever. After TransAmerica closed, John came to work for me for seven years. He ran my internal operations and built a cohesive agency for me. His insight to the workings of insurance carriers helped my agency immensely, but John, the ultimate company man, moved back to the carrier side. He worked for various companies including Kemper, Empire Mutual and several others until he came to his present job at Utica First. John was the ultimate marketing rep. He would fight for his agents, help them with underwriting problems and give them valuable advice. He knew how to appoint agents and his track record with companies has always shown it! Today’s marketing reps can’t hold a candle to

John—he was a perfectionist like you rarely see today. He started when a marketing rep was an integral part of an insurance company and agency relationship. Boy, do we agents miss those days. I’m going to miss John tremendously. He is a true gentleman in every aspect of life, as demonstrated by his exquisite handwriting. I wish him, and his wife Barbara, a long and happy life in retirement.[IA] N. Stephen Ruchman, CPIA, is a retired partner of B&B Coverage LLC, and founder of Ruchman Associates Inc., the agency he started in 1961. A past president of the Professional Insurance Agents of New York State Inc., he is an active supporter of PIANY, and has sat on, or chaired, nearly every committee including the Executive Committee and the Long Island Advisory Council and PIANY’s Political Action Committee. A graduate of Michigan State University, with a major in insurance, Ruchman is past president of the Peninsula Counseling Center and a member and past president of the Rockville Centre Chamber of Commerce board of directors. He is division chair for the Insurance Division of the United Jewish Appeal and has served on the business advisory board of The First National Bank of Long Island. He can be reached via email at nsruchman@gmail.com.

4441 Sepulveda Blvd., Culver City, CA 90230-4847 www.zalma.com | zalma@zalma.com 310-390-4455 | fax: 310-391-5614 http://zalma.com/blog Zalma Insurance Consultants provides expert advice to counsel for insurers and counsel for policyholders. Advice from Zalma Insurance Consultants is indispensable to the resolution of insurance disputes. Consultation from Zalma Insurance Consultants can save you, your counsel or client hundreds of hours of investigative and legal work. INSURANCE ADVOCATE / September 29, 2014 25

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[ FACE TO FACE ]

By Michael Loguercio

Between You and Me, Keep This On The DownLOAD!

o many times when I speak with an agency about purchasing a management system, or switching to the EZLynx Management System from their current provider, one of the questions almost inevitably posed to me is, “What carriers do you download with?”

industry utilization of download, and to provide insight into areas of opportunity. The ﬁrst results conﬁrmed that ACORD and IVANS have been VERY successful in their efforts over the past 30 years. Today, over 250 carriers send over 120 million ACORD download messages to 25,000 IA agencies

Most agencies are not aware that there are a good number of lines of business available that may be downloaded into their agency management system.

Michael Loguercio

My response is almost always the same, and typically includes the question, “What lines of business are you currently downloading to your present system?” of which I almost always hear in return, “What other lines are available besides personal lines?” Most agencies are not aware that there are a good number of lines of business available that may be downloaded into their agency management system. With many thanks to my friend Ron Berg, Executive Director of the Agents Council for Technology/Independent Insurance Agents & Brokers of America, Inc., I am able to share with you below an article written by Paul Warga, Vice President of Product Management for IVANS Insurance Solutions.

Connecting Agents with Download Identifying New Download Opportunities for Agencies Since the introduction of ACORD-based interface, the industry has struggled to identify the overall penetration of download into the independent agency channel, as well as help agents identify the available but unrealized carrier interfaces. In early 2013 IVANS began a project to measure the 26 September 29, 2014 / INSURANCE ADVOCATE

every year. That is amazing success for the entire industry. Based on that insight, IVANS then turned the question around, and used data analytics to identify download opportunities available from carriers that were NOT being used by their independent agencies. The results were staggering! For all of the success in interface that IVANS initially found, IVANS also discovered over 40% of all potential downloads from carriers to their agencies were not set up for delivery. That is a lot of efficiency to be gained by agencies, and thus the IVANS Connections project was born. Examining Agency Connections In late 2013, IVANS began a test project with Westfield Insurance Company to roll out Activity Notes download transactions and, at the same time, provide Westfield’s independent agencies with a Connection Report (example attached). The Connections Report for Westfield was a personalized company report used with agencies to identify any download connections from any of the agencies’ carriers that were inactive or not “turned on” with the carrier. IVANS also began to work with agency solution providers such as NASA, Applied Systems, Vertafore and SIS, as well as the major software user groups, to provide additional agencies personalized connections reports.

Dispelling Misconceptions The IVANS Connections Report has determined that more than 40% of the total available download connections from carriers are inactive, largely because many agencies have a misconception about the availability of download connections from their carriers. “When we received our connections grid, it was an eye opener,” said Casey Hearring, system administrator, Schultheis Agency. “I thought we were downloading EVERYTHING we possibly could. The IVANS Connections Report showed lines of business that we weren’t downloading and alerted us to new downloads offered by carriers.” IVANS Connections Report is an agency’s first step toward fully automating information exchange with carriers. By activating all lines of business available from carriers, an agency strengthens its carrier relationships and maximizes agency efficiency by reducing time spent on administrative tasks. “This is such a great tool,” said Christine Horne, system support manager, Bankers Insurance. “Seeing a real, tangible analysis of the download connections available to our agency has given us greater insight into our interface setups: where we are, where we want to go and what we need to do, strategically, to get there. This is a key part of leveraging interface to create greater value and efficiencies for our agency.” Maximizing Agency Efficiency According to the ACT/AUGIE 2013 Real-Time/Download Survey, personal lines download saves almost an hour and a half per employee per day; commercial lines download saves nearly one hour per employee per day. However, there are more benefits to fully automated download than just time savings. “Our report told me there were lines of business available from carriers that we weren’t leveraging,” said Debbie Miner, technical services manager and bond specialist, Henriott Group. “I was surprised to find out that we were missing commission downcontinued on page 28

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[ FACE TO FACE ]

SAMPLE AGENCY-CARRIER DOWNLOAD AVAILABILITY REPORT GRID

continued from page 26

load from a carrier whose statement has traditionally been difficult for us to manually enter into our system. One of the ﬁrst things we did after learning this was to sign up for their commission download.” Agencies can begin to see the immediate beneﬁts of turning on all available download connections by requesting a personalized IVANS Connections Report and activating on all available downloads. To request your personalized connections report, contact IVANS via email at connections@ivansinsurance.com. ***** Just the other day, local insurance associations on Long Island all came together for some friendly competition on the lanes! Members from CIBGNY, CPCU, IIABSC, 28 September 29, 2014 / INSURANCE ADVOCATE

PIANY, QCIP, TriCounty, IIAA and WINLI all teamed up in groups of six, and competed for the trophy! Although bowling may not be the sport that I excel in, and the next morning I found some aches and pains in places on me that I didn’t even know existed, we had a blast and the laughs just kept coming! Thank you to all of the organizations that made this possible! Also this month, officers of Professional Insurance Agents of New York State, Inc. were elected for the 2014-15 administrative year at the association’s annual business meeting. • Anthony A. Kubera, CIC, of Buffalo, N.Y. was elected president. He is director of business development for Russell Bond & Co. Inc. in Buffalo. • Eugene L. Sandy, CIC, of Stony Brook, N.Y., was elected presidentelect. He is director of marketing for

the Millennium Alliance Group LLC in Syosset, N.Y. • John Parsons II, CIC, CPIA, AAI, of Skaneateles, N.Y., was elected first vice president. He is executive vice president of Parsons and Associates Inc. in Syracuse, N.Y. • Paul G. Casciaro, CIC, CSRM, CPIA, of Kingston, N.Y., was elected vice president. He is chairman and chief executive officer of Frank H. Reis Inc. in Kingston, N.Y. • Jamie Ferris, AAI, CIC, CPIA, was elected vice president. Ferris is president of P.W. Wood & Son Inc. in Ithaca, N.Y. • Eric T. Clauss of Buffalo, N.Y. was elected treasurer. Clauss is president of E.T. Clauss & Co., Inc. in Buffalo. • Bruce D. Rowledge of Scotia, N.Y. was elected secretary. Rowledge is

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[ FAC E TO FACE ]

PIANY BOARD OF DIRECTORS FOR 2014-15 (FROM LEFT TO RIGHT), FIRST VICE PRESIDENT JOHN PARSONS II, CIC, CPIA, AAI, PRESIDENTELECT EUGENE L. SANDY, CIC, PRESIDENT ANTHONY A. KUBERA, CIC, IMMEDIATE PAST PRESIDENT ALAN PLAFKER, CPIA, VICE PRESIDENT PAUL G. CASCIARO, CIC, CSRM, CPIA, VICE PRESIDENT JAMIE FERRIS, AAI, CIC, CPIA, TREASURER ERIC T. CLAUSS AND SECRETARY BRUCE D. ROWLEDGE.

president of Rowledge Agency in Scotia, N.Y. • Alan Plafker, CPIA, of Manhasset. N.Y. will serve as immediate past president. He is president and CEO of Member Brokerage Service LLC in Briarwood, N.Y. Officers of the New York Young Insurance Professionals were also elected this month at its annual business meeting. • Jennifer DeCristofaro of Lancer Insurance Company in Long Beach, N.Y. was elected president; • Jason Bartow of Eugene A. Bartow Insurance Agency in Deer Park, N.Y. was elected president-elect; • Dina Bruno of MetLife Auto & Home in Wantagh, N.Y. was elected vice president; • Tim Madden of Standard Security Life Insurance Co., was elected secretary/treasurer; • Gino Orrino, CPIA, principal of Orrino Capital Services in Corona, N.Y. will serve as immediate past president. In addition to the above, NY-YIP also elected to its board of directors: Carl Abramson of Associated Mutual Insurance

Cooperative in Woodridge, N.Y.; George Hackney of Jimcor Agency in Saratoga Springs, N.Y.; Janal Montagna of Maxons Restorations in New York; Thomas Noﬁ of Lancer Insurance Co. in Long Beach, N.Y.; and James Smith of Premium Finance Brokerage, Shoreham, N.Y. Congratulations to everyone, and thank you for all that you do to help make this thing of ours the “best of the best” businesses! Well, that’s what’s going on around town this month, and until next time when we will be talking about some of the conferences that are coming up in the New York tri-state and New England area, “Ciao for now!”[IA] Michael Loguercio is the Regional Sales Manager for EZLynx, and has been active in the insurance industry since 1978 as a licensed insurance broker and an insurance technology professional. He is an active Past President of the Young Insurance Professionals of New York State, current ACT/AUGIE, Professional Insurance Agents of New York State, Independent Insurance Agents and Brokers of New York State, and Council of Insurance Brokers of

Greater New York committee member. NY-YIP/PIA has honored Michael with a “Distinguished Service” award in 2001; “Insurance Professional of the Year” award in 2009; “Lifetime Achievement” award in 2012; and “Special Service” awards in 2013 and 2014. In his community, Michael is the Immediate Past President and current member of the Longwood Central School District Board of Education on Long Island, NY since 2004; is a Director on the board of REFIT NY (Reform Educational Financing Inequities); and is a member of The Middle Island, NY, Rotary Club, Central Brookhaven Lion’s Club, and Ridge, NY, Volunteer Fire Department. Michael also served two terms on his Church’s vestry. In 2013 he was awarded the SCOPE “Community Service” award for his dedication to the public. Michael has been a regular Contributor to the Insurance Advocate since 2008, and may be contacted at 631-345-9359 or michael.loguercio@ezlynx.com. You may also follow him on Twitter @MLoguercioJr; and on Facebook at Michael Anthony Loguercio Jr. INSURANCE ADVOCATE / September 29, 2014 29

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[ THE SOCIAL NOTEBOOK ]

By Chris Paradiso

Dipping Your Toe Into the Social Media as an Agent

ne of the biggest questions I am asked on a regular basis is, “what can I do to kick start my agency’s marketing plan into the social media arena.” An excellent question and I would imagine if you ask 100 different people from outside of the insurance world, you would probably get 100 different answers. Let me start by speaking from my insurance experience. I feel that I need to give you the agency perspective. I would start with a personal Facebook page. Once

Chris Paradiso

ly by looking at other agents who are having success there. You can learn an awful lot from what other people post. When creating your agency’s fan page, make sure you include personal photos of your agency to create a personal feel. Don’t go corporate if you are not a corporate company. Image is everything, so make sure your image on your Facebook fan page matches the image of your agency. Make sure when filling out your interests and other important information on both your per-

A very important fact to remember about social media is that social media is not about you - it is all about others. 85–95% of your posts should be centered around your interests, your agency’s brand, and your agency’s identity, not around insurance or related products. People are not interested in what you are selling, people are interested in you and your interests so that they can find a common interest to connect with.

you have that completed, begin connecting with friends and family, including people who work inside your agency. The next step would be to connect with clients and/or prospects through your personal Facebook page. Many of you may think that this is very simple, but I think it’s critical to understand Facebook on a personal level before you jump into creating a Facebook fan page for your agency. Quite a few people outsource to a consulting or marketing firm to handle their social media marketing plan. A major drawback to this is that the outsourcing firm has little to no understanding of your agency’s identity or brand. You cannot take a cookie-cutter approach to this. There needs to be a very personal feel of who the agency is and what it stands for, as illustrated through your personal Facebook fan page. The next step in the social media arena would be to incorporate an agency Facebook fan page. Before you do that, I would recommend taking the time to understand how Facebook works, especial30 September 29, 2014 / INSURANCE ADVOCATE

sonal and fan page that you include your interests. For example, I included in my page my family, Yankees baseball, basketball, watches, triathlons, working out, small businesses, my children, the charities I am involved in, boxing, veterans of America, and my community. A very important fact to remember about social media is that social media is not about you - it is all about others. 85– 95% of your posts should be centered around your interests, your agency’s brand, and your agency’s identity, not around insurance or related products. People are not interested in what you are selling, people are interested in you and your interests so that they can find a common interest to connect with. Another key component of having success is spending the time to interact with other users by commenting on different posts, liking photos or statuses, or sharing other people’s posts. Success will elude your agency if you don’t interact with others because social media is all about them.

I understand and realize this is only a starting point, but remember we all need to start somewhere. Don’t listen to the people who believe Facebook is dead – it has over 1.23 billion users – yes that’s billion with a B! If Facebook were a country, it would be the fourth largest country in the world. So get focused, start slow, and move at your own pace. If you are just starting out in the social media arena as an independent insurance agent and you have questions or concerns, please feel free to call me. I would be more than happy to help you along the process. [IA] Christopher Paradiso, CPIA, is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center. In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies how not only survive, but compete in today’s complex online marketing world. Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

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

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[ ON M Y RADAR ]

By Barry Zalma

Must Insured First Prove Prima Facie Case? An LLC is not an Employee

hen an insured acquires an insurance policy the insured promises, among other things, to first prove that when presenting a claim for indemnity the insured will establish a prima facie (on its face) case that coverage is available. In Network F.O.B., Inc. v. Great

Great American provided insurance coverage to Network for business, property and commercial operations pursuant to an insurance contract (Policy). The Policy provided coverage for “loss of or damage to money, securities and other property resulting directly from theft committed by an

The Policy provides coverage only for the activities of those workers who are natural persons. If all potential “employees” were natural persons, however, such a provision would be superfluous.

Barry Zalma

American Ins. Co. of New York, Slip Copy, 2014 WL 3048369 (D.Minn.) the District Court for the District of Minnesota was asked to rule upon the motion for summary judgment by defendant Great American Insurance Company of New York (Great American) who claimed there were no facts that would support the claim.

employee.” Network tendered a claim to Great American for its losses resulting from the theft by Schwartz. Great American informed Network that the claim was not covered by the Policy because Schwartz was not an “employee” of Network within the meaning of the Policy.

DISCUSSION BACKGROUND This suit arose out of the theft of funds by non-party Laura Schwartz from her employer, plaintiff Network F.O.B., Inc. (Network). Schwartz worked for Network as a billing and bookkeeping clerk and, at all times relevant to the instant dispute, was classified as an independent contractor for tax purposes. Schwartz’s employment was initially governed by an Independent Contractor Agreement (2006 Agreement), which was signed by Network and Schwartz in her individual capacity. Schwartz established an LLC, LM ENT Services (LM ENT), which executed a new Independent Contractor Agreement (2009 Agreement) with Network. Schwartz engaged in numerous fraudulent transactions and stole approximately $183,000 from Network. Eventually Schwartz was convicted of six counts of theft by swindle. 32 September 29, 2014 / INSURANCE ADVOCATE

Insurance Coverage State law governs the interpretation of insurance policies. The parties agreed that Minnesota law governs this action. In Minnesota, the interpretation of an insurance policy is a question of law. Under Minnesota law, the insured has the initial burden of establishing a prima facie case of coverage. The policy defines the key term “employee”, since only theft by an employee is covered. It states that “‘Employee’ means: (1) any natural person: (a) while in your service and for the first 30 days immediately after termination of service …; (b) who you compensate directly by salary, wages or commissions; and (c) who you have the right to direct and control while performing services for you … ¶ (b) ‘Employee’ does not mean any agent, broker, factor, commission merchant, consignee, independent contractor or

representative of the same general character not specified in paragraph 5.a.” Network argues that because Schwartz, a natural person, committed and was convicted of the underlying theft, the court need not consider the fact that her employment relationship with Network flowed through a corporate entity. It was undisputed that Schwartz established LM ENT as an LLC. Thereafter, Network and LM ENT executed the 2009 Agreement, which detailed their relationship and identified LM ENT as an independent contractor. Thus, the proper analysis is whether LM ENT — not Schwartz — was an employee of Network as defined by the Policy since the theft was by Schwartz acting as LM ENT. The Policy provides coverage only for the activities of those workers who are natural persons. If all potential “employees” were natural persons, however, such a provision would be superfluous. The provision contemplates and rejects a definition of “employee” that includes non-natural entities, such as an LLC. As a result, LM ENT — as an LLC rather than a natural person — was not an employee within the scope of the Policy at issue in this case. Therefore, Network cannot establish a prima facie case of coverage. LM ENT is not, nor can it be, a natural person. Summary judgment is warranted.

ZALMA OPINION If Network wanted coverage for the actions of Schwartz acting as LM ENT it needed a different policy than the one it purchased. It needed one that insured against theft by employees or by independent contractors retained to deal with the funds of the insured. It bought limited coverage and could not convince the trial court to stretch the meaning of the policy from “employee” to any person or entity that steals from it. It took a certain amount of chutzpah (Yiddish for unmitigated gall) to argue that a limited liability company is a natural person and was intended to be insured by the insurer. The District Court simply refused

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[ ON M Y RADAR ] to fall for the argument and simply read the policy as written.[IA] Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Mr. Zalma recently published the ebooks, “MOM and the Taipei Fraud;” “Zalma on Insurance Fraud – 2013 , “Zalma on California Claims Regula-

If Network wanted coverage for the actions of Schwartz acting as LM ENT it needed a different policy than the one it purchased. It needed one that insured against theft by employees or by independent contractors retained to deal with the funds of the insured. tions – 2013 ; “Rescission of Insurance in California – 2013;” “Random Thoughts on Insurance”, a collection of posts on his blog; “Zalma on Diminution in Value Damages – 2013,”“Zalma on In-

surance,” “Heads I Win, Tails You Lose,” “Arson for Profit,” and others that are available at www.zalma.com /zalmabooks.htm. Specialty Technical Publishers recently published Mr. Zalma’s new e-book, “Getting the Whole Truth” which is available at http://www.stpub.com/ Gettingthe-Whole-Truth_p_254.html. Specialty Technical Publishers publishes Mr. Zalma’s book, “Insurance Claims: A Comprehensive Guide”, where you can get additional details on this subject by purchasing the book in print or digital format at http://www. stpub.com/insuranceclaims-a-comprehensive-guide-online. Mr. Zalma’s reports on World Risk and Insurance News’ web based television programing, http://wrin.tv or at the bottom of the home page of his website at http://www.zalma.com.

100 Annual Free Enterprise Award Luncheon th

Friday, November 7, 2014 Cipriani | 55 Wall Street | New York, NY

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11:30 a.m. Reception | 12:30 p.m. Luncheon R.S.V.P. by November 1, 2014 Registration card can be download at www.ifny.org or for further information, call (914) 966-3180, x113 | email g@cinn.com

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[ LOOKING BACK… Insurance Advocate, 25 years ago]

He noted that while IIAA and he have credibility in the Congress, politicians ulitmately are influenced by the volume of their mail and what the mail says. If the agents do not do it, and he charged that New York agents have the poorest record of contact, that credibility might be overcome. He said nothing can be further from the truth that agents “have no influence.” 34 September 29, 2014 / INSURANCE ADVOCATE

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[ LOOKING BACK… Insurance Advocate, 25 years ago]

FOR ADVERTISING OR SUBSCRIPTION INFORMATION Call 914-966-3180 insurance-advocate@cinn.com

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125th Year 2014 Watch for News and Other Events! INSURANCE ADVOCATE / September 29, 2014 35

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[ COURTSI DE ]

By Lawrence Rogak

Unless Auto Policy Specifically Excludes Temporary Substitutes, They are Covered for Sum Mechanic Driving Customer's Loaner Car Covered Under Customer's Auto Policy Matter of State Farm Mut. Auto. Ins. Co. v O'Brien

n a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for underinsured motorist benefits, the petitioner appeals from an order of the Supreme Court, Nassau County (Jaeger, J.), entered September 13, 2013, which denied the petition and directed the parties to proceed to arbitration. ORDERED that the order is affirmed, with costs. On December 23, 2011, Warren F. O'Brien, Jr., was employed as a mechanic at Massapequa Auto Repair, Inc. On that date, Robert Auletta, his customer, asked O'Brien to return Auletta's loaner Mercedes-Benz vehicle to Mercedes-Benz of Massapequa on his behalf. O'Brien, who was named an additional driver on the

36 September 29, 2014 / INSURANCE ADVOCATE

The Supreme Court denied State Farm's petition, determining that the plain language of the insurance policy provided SUM coverage for a "temporary substitute car." loaner vehicle agreement, acceded to Auletta's request. O'Brien sustained injuries when the Mercedes-Benz he was operating was struck in the rear by another vehicle. The vehicle that struck O'Brien's vehicle had a basic $25,000/$50,000 policy

through GEICO. O'Brien then commenced a personal injury action, and GEICO tendered the full amount of the policy to settle the claim. The petitioner consented to a $25,000 settlement. O'Brien then sought to receive compensation through Auletta's supplementary uninsured/underinsured motorist (hereinafter SUM) coverage with State Farm Mutual Automobile Insurance Company (hereinafter State Farm), by filing a request for SUM arbitration with the American Arbitration Association. State Farm commenced this article 75 proceeding to permanently stay arbitration, asserting that O'Brien was not entitled to SUM coverage. During the pendency of this proceeding, the parties stipulated that the vehicle used

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[ COURTS I D E ] by O'Brien was a "temporary substitute car" under Auletta's policy. The Supreme Court denied State Farm's petition, determining that the plain language of the insurance policy provided SUM coverage for a "temporary substitute car." "Generally, it is for the insured to establish coverage and for the insurer to prove that an exclusion in the policy applies to defeat coverage" (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 218). Whether the burden of proof rests on the insured to establish coverage, or on the insurer to establish an exclusion, rests on the language of the policy. "Where the provisions of the policy are clear and unambiguous, they must be given their plain and ordinary meaning, and courts should refrain from rewriting the agreement. The policy must, of course, be construed in favor of the insured, and ambiguities, if any, are to be resolved in the insured's favor and against the insurer" (United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232 [internal quotation marks and citations omitted]; see Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398). Here, State Farm bears the burden of establishing that O'Brien's use of a "substitute temporary car" was excluded from SUM benefits. The opening language of the SUM endorsement states: "This endorsement is a part of the policy. Except for the changes it makes, all other provisions of the policy remain the same and apply to this endorsement." Moreover, the opening language of the policy states: "We define certain words and phrases below for use throughout the policy. Each coverage includes additional definitions only for use with that coverage." The general definition section includes a definition of "temporary substitute car," which is to be applied throughout the policy: "Temporary Substitute Car means a car that is in the lawful possession of the person operating it and that: 1. replaces your car for a short time while your car is out of use due to its: a. breakdown; b. servicing; c. repair; d. loss; or e. destruction; and 2. neither you nor the person operating it own or have registered." This Court has held that the purpose of a provision relating to a "temporary substitute" vehicle "is to afford continuous coverage to the insured during the period that a vehicle scheduled under the policy is out

Whether the burden of proof rests on the insured to establish coverage, or on the insurer to establish an exclusion, rests on the language of the policy. "Where the provisions of the policy are clear and unambiguous, they must be given their plain and ordinary meaning, and courts should refrain from rewriting the agreement. The policy must, of course, be construed in favor of the insured, and ambiguities, if any, are to be resolved in the insured's favor and against the insurer."

of commission, and at the same time limit the risk to the insurer to one operating vehicle at a time for a single, fair premium. Coverage for a substitute vehicle ceases when the insured vehicle is repaired and returned to its owner" (Lancer Ins. Co. v Republic Franklin Ins. Co., 304 AD2d 794, 797 [internal quotation marks and citation omitted]). Here, the SUM endorsement fails to articulate any exclusion for a "temporary substitute car." Therefore, the Supreme Court properly denied State Farm's petition to permanently stay arbitration and directed the parties to proceed to arbitration.[IA] 2014 NY Slip Op 06096 Decided on September 10, 2014 Appellate Division, Second Department

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[ GUEST OPINION ]

By G. Keith Smith, M.D.

Obamacare, Goebbels and Ginsburg

friend recently opined to me about his increasing frustration with those who are unable to distinguish between politics and religion, particularly those for whom politics is their religion. This describes statists of all stripes, I think. Folks either want to use the power of the state to abscond with the

read it by the collar, pointing to the central planning that characterized both of these economic and political systems. Ginsburg’s quote indicates that she sees herself as someone who knows who should be born and who should not, perhaps who should be allowed to stay alive and who should not. I cannot say that I have ever met any-

That the federal government is mandating the collection of virtually everyone’s health information and data should be of great concern to anyone who has followed any history of what governments typically do with information. They desire this information simply because they intend to use it. To ration. G. Kieth Smith, M.D.

property of others in order to better complete “the Lord’s work,” or they justify the state’s trampling of individual rights in the name of “the greater good.” The fascist, Joseph Goebbels had the following to say: “My party is my church and I believe I serve the Lord best if I do his will, and liberate my oppressed people from the fetters of slavery. That is my gospel.” Or how about this one from Mr. Goebbels: “I am only the instrument that God uses to sing his song. I am only the vessel that nature smilingly ﬁlls with new wine.” It is no mistake that Germany’s national anthem is entitled “Deutschland uber Alles.” The supremacy of the state and the individual’s role in feeding this parasitic institution are unapologetically clear in the writings of men like Goebbels, while more subtle, but no less fascistic musings and thoughts surround us today. Here is a quote from Supreme Court justice Ruth Bader Ginsburg: “Frankly I had thought that at the time Roe was decided, there was concern about population growth and particularly growth in populations that we don’t want to have too many of.” Actually, that isn’t very subtle at all, is it? While the German fascists claimed to hate the socialists, Hayek’s “Road to Serfdom” shook everyone who 38 September 29, 2014 / INSURANCE ADVOCATE

one smart enough to wield that level of power. What does any of this have to do with health care? My old friend Lawrence Huntoon writes this in “AAPS News,” August 2014: “According to an article in the Wall Street Journal, insurance companies are paying oncologists $350 per patient per month for strict adherence to treatment protocols - which are geared to cost containment. It is very predictable. Obamacare forces physicians into accountable care organizations (ACOs), and then strict cost-containment protocols are implemented. In the realm of cancer care, these are death panels.” Combining health care with government invariably results in the individual’s interests versus the state’s interests scenario playing out. Guess who has historically won this battle? Once the “state” is paying for healthcare, the “state” determines what health care will be paid for - even what qualifies as meeting the definition of health care. After all, “public” resources are distributed by popular vote and that’s not good news for the sick minority. That the federal government is mandating the collection of virtually everyone’s health information and data should be of great con-

cern to anyone who has followed any history of what governments typically do with information. They desire this information simply because they intend to use it. To ration. Those same folks who claim to want all of this data for our own good, those same folks who mandate vaccinations to ostensibly prevent the spread of communicable diseases are the same ones who just brought the Ebola virus into Georgia. Doesn’t square, does it?[IA] Dr. G. Keith Smith is a board certified anesthesiologist in private practice since 1990. In 1997, he co-founded The Surgery Center of Oklahoma, an outpatient surgery center in Oklahoma City, Oklahoma, owned by 40 of the top physicians and surgeons in central Oklahoma. Dr. Smith serves as the medical director, CEO and managing partner while maintaining an active anesthesia practice. In 2009, Dr. Smith launched a website displaying all-inclusive pricing for various surgical procedures, a move that has gained him and the facility, national and even international attention. Many Canadians and uninsured Americans have been treated at his facility, taking advantage of the low and transparent pricing available. Operation of this free market medical practice, arguably the only one of its kind in the U.S., has gained the endorsement of policymakers and legislators nationally. More and more self-funded insurance plans are taking advantage of Dr. Smith’s pricing model, resulting in significant savings to their employee health plans. His hope is for as many facilities as possible to adopt a transparent pricing model, a move he believes will lower costs for all and improve quality of care. Dr. Smith resides in Oklahoma City, Oklahoma.

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