Insurance Advocate October 26, 2015 by C Acunto

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VOLUME 126, NUMBER 17 / October 26, 2015

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

A CINN Group, Inc. Publication

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Focus. Vision. Reach.

New York Insurance Association

KNOW KNOW BE BETTER T TER NEW NE W YORK YORK CONNECTIONS CONNEC TIONS www.nyia.org w w w.nyia.org

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Contents

October 26, 2015 | volume 126 number 17

[ COVER STORY ] 22

Pamela J. Newman: Insurance Advocate’s 2015 Insurance Professional of the Year Frederick Wertz

[FEATURES] 6

Foreword: Businesses Upping Cyber Cover Purchases Steve Acunto, Publisher

Agency Proﬁle: LG Insurance Kelly Donahue-Piro

On the Level: Claims Handling is Always King N. Stephen Ruchman

The Social Notebook: Outside-In vs. Inside-Out Customer Experience Chris Paradiso

On My Radar: Conviction of Murder Establishes Beyond a Reasonable Doubt that Killing Was Intentional Barry Zalma

Courtside: Without a Timely Denial, Prima Facie Case Requires Only Proof of Mailing Lawrence Rogak

Looking Back: November 3, 1990

Classiﬁeds

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Like us on Facebook… The Insurance Advocate Magazine INSURANCE ADVOCATE / October 26, 2015 3

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[ FORE WORD ]

Steve Acunto

Businesses Upping Cyber Cover Purchases

VOLUME 126, NUMBER 17 OCTOBER 26, 2015

s we go to press, Zurich Insurance released its fifth annual Advisen Cyber Survey of U.S. risk managers looking at trends in information security and cyber liability. Zurich presented the key findings, analysis and conclusions during a presentation at the Advisen Cyber Risk Insights Conference in New York on October 20th. The results reflect responses from more than 400 respondents representing U.S.-based risk managers, insurance buyers and other risk professionals covering both large and small companies. The survey shows that demand for the coverage and for higher limits is up to what a spokesman for Zurich calls "double digit growth year over year." Bryan Salvatore, president of Specialty Products for Zurich North America stated “That is why we are heavily invested in identifying risks and delivering solutions and why we are committed to staying at the forefront of this issue.” According to the results, the overall upward trend of organizations purchasing cyber liability insurance is accelerating in 2015, up nine percentage points over 2014. Since the first survey in 2011, there has been a 26 percentage point increase in the number of business respondents with cyber liability coverage. Other key findings include: • Two-thirds of respondents have either increased their policy limits or are considering increasing their limits. The vast majority of respondents purchase cyber coverage on a standalone basis. • Organizations are increasingly developing data breach response plans, up 10 percentage points since last year.

… THE OVERALL UPWARD TREND OF ORGANIZATIONS PURCHASING CYBER LIABILITY INSURANCE IS ACCELERATING IN 2015, UP NINE PERCENTAGE POINTS OVER 2014. SINCE THE FIRST SURVEY IN 2011, THERE HAS BEEN A 26 PERCENTAGE POINT INCREASE IN THE NUMBER OF BUSINESS RESPONDENTS WITH CYBER LIABILITY COVERAGE.

• Ninety-three percent of respondents are at least moderately concerned about cyber related business interruption (BI) and contingent business interruption (CBI) exposures – with 23 percent extremely concerned. • Risk professionals increasingly view cyber risks as an extremely serious threat. • Boards and executive management continue to view cyber risks more seriously. • The primary reason why respondents have yet to purchase coverage is that their superiors do not see the need. • Privacy violation/data breach of customer records is the biggest concern of respondents. • More organizations view information security as an organizational challenge rather than just an issue to be addressed by the Information Technology (IT) department. Resilience requires an understanding of changing exposures, including those created due to our increasing reliance on technology. The survey touched on some of these emerging risk issues as well. Social media has many positives but also exposes organizacontinued on page 8

6 October 26, 2015 / INSURANCE ADVOCATE

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Kelly Donahue-Piro Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com PROOF READER Maria Vano mariavano9@gmail.com 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, 20 times a year, and once a month in July, August, September 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 2015. 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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[ FORE WORD ] continued from page 6

tions to certain risks like reputational damage, privacy issues, and data breaches. Seventy-six percent of respondents said their companies have a written social media policy. Due to its cost effectiveness and storage capacity, the cloud has become a popular alternative to storing data in-house. Warehousing proprietary information on someone else’s server, however, makes

some organizations uncomfortable. Nonetheless, the benefits continue to outweigh the security concerns. When asked “Does your company use cloud services?” sixty-seven percent responded yes. Organizations are increasingly concerned with the security of non-companycontrolled mobile devices. Seventy-nine percent have a mobile device security policy. Fifty-six percent of respondent companies now have a "bring your own device" policy, which is a 20 percentage point

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A NEWER CHALLENGE IS THE INTERNET OF THINGS, DEFINED AS EVERYDAY OBJECTS THAT HAVE NETWORK CONNECTIVITY.

increase in just three years. A newer challenge is the Internet of Things, defined as everyday objects that have network connectivity. Businesses increasingly look to smart technology to increase efficiency and overall competiveness. When asked if your company has an exposure to the IoT, 43 percent of respondents said yes. This will be an interesting exposure to continue tracking in the years to come. “With the increase in frequency and severity of data breaches and new exposures continuing to surface, these results enhance our ability to help businesses better understand and protect themselves from cyber related risk,” Salvatore added. Readers can gain access to the complete survey results The Fifth Annual Survey … Information Security and Cyber Liability Risk Management on the current state of and trends in information security and cyber liability risk management at https://www.zurichna.com/cyber. The survey reflects the attitudes of 448 respondents representing businesses from all sizes but is slightly weighted towards larger companies, with 52 percent of respondent companies having revenues in excess of $1 billion. In addition, all 13 macro industry segments are represented. Healthcare has the highest representation, accounting for 23 percent of the total respondents; followed by Professional Services at 17 percent; Industrials at 11 percent; Government and Nonprofit at 10 percent; Nonbank Financial at 8 percent; Consumer Discretionary at 6 percent; Education at 5 percent; Consumer Staples, Energy and Materials at 4 percent; Banks and Utilities at 3 percent; and Telecommunications at 2 percent.[IA]

8 October 26, 2015 / INSURANCE ADVOCATE

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[ AGENCY PROFILE ]

By Kelly Donahue-Piro, President, Agency Performance Partners

LG Insurance: Can’t Stop, Won’t Stop

hat do you think of when you first meet Aaron Levine, owner of LG Insurance? Impressive. Aaron started LG Insurance in 2009 as a scratch agency; in fact this was his first full-time insurance position. In 2007, Aaron focused on commercial real estate and obtained his commercial real estate license. Understanding that you could increase your earning potential, he also obtained his insurance licenses and partnered with a local agency. It was a great match to be working on commercial real estate development and having insurance as some extra income. Now if you do some math and think back to 2008, a major event happened that pushed Aaron into the insurance realm full-time. The housing and real estate market crashed. Aaron contemplated jumping full-time into insurance or going into the next best recession-proof industry, owning a liquor store. Insurance won and he was off to the races. As a scratch agency located in Long Branch, NJ, he quickly realized he had the ability to generate opportunities but finding markets was harder. In November of 2009 he joined NJAN. From there Aaron started selling anything and everything he could. After two years in business he hired his first support person, and now six years later he has a team of four. He attributes his success to networking. Aaron frankly admits “You aren’t making money if you are in the office. Agents need to be out and about attending networking events, meeting centers of influence and seeing their clients. You aren’t going to win getting bogged down in paperwork.” It was not very long after Aaron got started that two major hurricanes impacted the coastline of New Jersey. Hurricane Irene hit in 2011 and then Hurricane Sandy hit the following year. As an agency owner in a coastal town, Aaron comments, “Hurricane Irene helped us understand how weak we really were on things like disaster plans and flood insurance. It opened my eyes big time and I invested in 10 October 26, 2015 / INSURANCE ADVOCATE

A SUNNY DAY IN LONG BRANCH! AARON LEVINE, FOUNDER, LISA LEWIS, MARGARET PEREZ, AND JOSH MCMANIGAL

making sure our agency was tight and right on processes, compliance and planning.” Aaron also comments, “In some ways those two storms helped me out tremendously. When people don’t understand the value of insurance because times are quiet, it’s harder to sell the products we know people need but they aren’t always convinced they should have. Currently in coastal New Jersey, we don’t even ask about flood insurance. We quote it and people realize they need it.” During the two major storms Aaron found a way to capitalize by being nimble. He was able to provide personalized customer service and reach out to all of his

commercial and personal lines clients. During this time the larger agencies he found were not equipped to return calls, process claims and be there in spirit for their clients. This was a time that really fueled LG Insurance to springboard to the next level of growth. When you ask Aaron what the biggest challenge is that is facing the independent agents today, he is quick to respond – “Consolidation. The big agencies are eating up the little agencies and it’s happening in the aggregator and carrier worlds as well. The challenge independent agents need to face and strategize against is how can we be different. If everyone can get the

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[ AGENCY PROFILE ]

AARON LEVINE, FOUNDER, LG INSURANCE AGENCY

same markets through aggregators, how can a smaller agency stick out?” Being a very sharp entrepreneur, Aaron has focused on bringing in good and talented people and reinvesting over and over again in his agency. “If you are building a business you better be willing to invest. It can’t be about a pay check. That will come; it has to be about constant reinvestment to fuel your success.” One of the frustrations Aaron is passionate about solving is the challenge of technology inside an agency. As a younger agency owner, Aaron believes in technol-

ogy but often struggles with the carriers’ management system and marketing software’s lack of integration. “Technology is meant to help streamline us but we too often have to focus on thinking ‘Did that work right?’ Technology partners have to work together to make things work in synergy with each other. It will help save us all time, effort and energy so we can focus on sales which will drive the growth of our technology partners as well.” After a real estate crash, two major hurricanes and starting a successful agency you would think Aaron would be exhausted. Nope, he is refueled by the newest addition in his life, his five-month-old baby girl, Elle. Aaron commented “Elle may be the richest person in our household! We are working hard to put money into her college savings account before anything else. But in all reality having a baby reinvigorated me to grow the business. I want to be able to go to every dance class because the agency is thriving with the right people and processes. I’ll never not network but if we can get a few people like me out there, I can rest easy knowing Elle will be able to go to Yale three times over!” When not running his agency or spending time with his family, Aaron also serves on the New Jersey Young Insurance Professionals as Vice President, is a Committee Member of PIA NJ Government Affairs and is Vice President of the Greater Long Branch Chamber of Commerce.[IA]

DAY 1 - OCTOBER 20, 2009. A COMPUTER, AN OFFICE, NO DESK AND NO CLIENTS!

Kelly Donahue-Piro

Kelly Donahue-Piro, founder and president of Agency Performance Partners, is a no-nonsense effectiveness expert who has helped hundreds of insurance agencies identify and capitalize on sustainable improvement opportunities. Her specialties include agency culture assessment and change; management and supervisory coaching and benchmarking; customer retention strategy development; digital marketing strategy, planning and implementation; and sales planning, management and skillbuilding. In 2014, she created Agency Performance Partners with a mission to “partner with insurance entrepreneurs who dream of taking their business to the next level and beyond, by relentlessly pursuing excellence in world-class service and sales strategies.” The centerpiece of the organization’s transformational work is its Agency Performance AssessmentTM, a comprehensive survey tool Kelly created to zero in on organization-wide improvement opportunities and provide the foundation for a customized agency action plan. Mrs. Donahue-Piro is an engaging speaker who is available to conduct in-person and online agency success presentations that complement her firm’s one-on-one onsite and virtual consulting practice. Connect with her on social platforms, via email at kelly@agencyperformancepartners.com, or by phone at 401-415-6205. INSURANCE ADVOCATE / October 26, 2015 11

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[ ON TH E LEVEL ]

By N. Stephen Ruchman, CPIA

Claims Handling is Always King

very other year, the PIA affiliates managed from Glenmont (PIA of Connecticut, New Hampshire, New Jersey and New York) conduct the oldest and largest survey measuring agents’ opinions of their carriers’ performance. As they say in sports, this is a “bi-year” for PIA’s Company Performance Survey. So, the asso-

However, the importance of how carriers deal with customers and agents in the claims process would, and does, remain paramount to agents, regardless of the economy. No matter how the market fluctuates, or how new technologies affect the industry, the issues that mattered most to professional, independent insurance agents six years

People buy coverage because they want to be protected in the event of a claim. They buy insurance because they don’t know whether they will have a claim or not, but if they do have a claim, they want to know that their insurer will back them. N. Stephen Ruchman

ciations conducted the Benchmark Survey to make sure that next year’s Company Performance Survey will measure the items that are most important to agents. More than 300 agents participated in the survey earlier this fall. When asked what the attributes are that agents want most in their carriers, the agents’ top-10 responses included: 1. “Adjusts claims fairly”; 2. “Pays claims promptly”; 3. “Communicates clearly, honestly”; 4. “Resolves issues quickly”; 5. “Products and pricing”; 6. “Listens, responds to agents”; 7. “Claims handling”; 8. “Underwriter knowledge, experience”; 9. “Easy, intuitive functionality”; and 10. “Consistent underwriting.” Compared to the findings of the 2009 PIA Benchmark Survey, most of the attributes have not changed this year, nor has their importance. While there were small deviations—the rise of two new performance items to the top 10 (eight of the top10 performance items have remained the same). “Products and pricing” and “claims handling” are new categories to this year’s top-10 list, replacing “stable market” and “flexibility when warranted,” which fell to Nos. 12 and 11, respectively, from 2009. This shouldn’t be a surprise. The degree to which it’s happening may be debatable, but our economy has stabilized since 2009. 12 October 26, 2015 / INSURANCE ADVOCATE

ago still matter the most to them today: How carriers handle claims. Many carriers seem to forget what they are in business for: They are in business to pay claims—that’s why people buy insurance! It’s the only reason they buy insurance. Anyone who has taken a Chartered Property Casualty Underwriter (CPCU) or any other advanced insurance course knows that there will be some number of claims each year. The carriers bet on actuarial assumptions to build their business models. We don’t know who is going to have a claim, but we know pretty well how many of our insureds will have one. People buy coverage because they want to be protected in the event of a claim. They buy insurance because they don’t know whether they will have a claim or not, but if they do have a claim, they want to know that their insurer will back them. As for agents, if their client has a bad claim experience, we know this will affect our account. Too often, a long-standing account suddenly has a claim and an underwriter says, “We don’t want this account anymore—we need to get off this line.” Meanwhile, nothing has changed with the account. And all the good things the underwriter saw when they wrote the line suddenly don’t matter—all that matters is that

the insured had a claim. Unfortunately, many underwriters succumb to home office influence or they are reacting reflexively to a claim. They don’t have the local knowledge about the area or people they are insuring, nor do they have to look their customers in the face when they deny a claim. Nowadays, it seems like the carriers are all about cutting costs. How many carriers even send out inspectors to review the lines before underwriting them anymore? We may be investing in grand technologies, but I worry that we are forgetting the people we insure. I was watching television coverage about flood damage in North Carolina this month and I saw that insurance carriers are using drones to check roof and other property damage. That’s impressive. But, when a client calls the company to discuss a claim, will they even speak with a real person? I can guarantee it makes all the difference. Smart companies get that, though sometimes it’s too late. As PIA Director of Industry Affairs Jim Pittz said, “Agents have told PIA that one of the most crucial times in their relationship with a client is during a difficult claims process…. Look at the carriers that dropped out of the Write-Your-Own flood market after Superstorm Sandy: Even though WYO is a federal program, the carrier’s name is on the insureds’ insurance policy. When claims trouble occurred, the carriers received the brunt of the blame. Now, some carriers have stopped writing flood insurance through the federal program.” So, if PIA’s Benchmark Survey demonstrates anything, it’s this: The economy won’t be the primary reason customers are driven to (or away) from a company; the way a company handles the claims process will.[IA] N. Stephen Ruchman, CPIA, is a retired independent agent and founder of Ruchman Associates, Inc. the agency he started in 1961. A past president of the Professional Insurance Agents of New York State, Inc., he is an active supporter of PIANY, and he has sat on or chaired nearly every committee including the Executive Committee and the Long Island Advisory Council and PIANY’s Political Action Committee. He can be reached via email at: nsruchman@gmail.com.

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[ GUEST ARTICLE ]

LIC By Dr. Robert P. Hartwig, CPCU and Dr. Steven N. Weisbart, CLU

Property/Casualty Insurance - 2015 First Half Results Highlights The U.S. property/casualty industry had a strong first half in 2015. Overall net income after taxes (profits) in the property/casualty (P/C) insurance industry increased by $5.0 billion (up 19.2 percent) in the first half of 2015 to $31.0 billion from $26.0 billion in the year earlier period. The industry’s overall rate of return (profitability) on capital—as measured by policyholders’ surplus—rose from 8.1 percent in the first half of 2014 to 9.2 percent in the first half of 2015. Both insurance operations and investments contributed to the strong showing. Net written premium growth continued at its prior pace—up 4.1 percent in the first half of 2015, the same rate of growth as in the first half of 2014. The industry’s insurance operations, as captured in its combined ratio, improved by 1.3 points to 97.6 during the first half of 2015 compared to 98.9 a year earlier. (A ratio under 100 means that the industry paid out less in claims and expenses than it took in via premiums; lower is better.) Maintaining combined ratios below 100 is absolutely essential in order for the industry to continue posting reasonable levels of profitability in an interest rate environment that remains challenging. Despite the low interest rates, the industry’s $31.6 billion in net investment gains—consisting of net investment income plus realized capital gains—were the highest for the first half of a year since ISO’s records began in 1986. The industry results were released by ISO, a Verisk Analytics company, and the Property Casualty Insurers Association of America (PCI).

Profitability Drivers: Modest Claims Growth Helps The property/casualty industry’s performance in the first half of 2015 was positive but bore the effects of an extreme winter and several outbreaks of severe spring weather. A discussion of the key drivers of this first-half performance follows: 14 October 26, 2015 / INSURANCE ADVOCATE

The U.S. economy added 1.69 million non-farm jobs in the first eight months of 2015; if that rate is sustained through the rest of the year, there will be 2.6 million more workers than at the end of 2014.

Premium Growth: Top Line Growth Continues As noted, net written premiums grew by 4.1 percent in the first half of 2015, the same growth rate as in the first half of 2014. In general, premiums grow for several reasons. One is because there is growth in the number and/or value of insurable interests (such as property and liability risks). Another reason is because there is an increase in the willingness of buyers who had little or no insurance to purchase or add to their insurance protection, net of those who reduce or drop it. A third reason is an increase in rates. Exposure growth is driven primarily by economic growth and development. The commonly used measure of economic growth is real (inflation-adjusted) GDP; in the first half of 2015 it rose at an estimated annual rate of 2.3 percent. But for insurance premium purposes, the better indicator of exposure growth is nominal—not inflation-adjusted—GDP growth, which was approximately 3.5 percent for the first half of 2015. So we can infer that although economic growth contributed to the 4.1 increase in net written premiums, that is not the whole story.

From the available data it is not easy to determine to what extent premium growth is coming from an increase in insurance buyers. Continued strong growth in the number of people employed—especially those employed full-time— suggests that some people who had previously been un- or underinsured might have bought more coverage lately. Also, those who financed new cars or homes had to purchase insurance coverage to satisfy the conditions of their loan, even if their prior vehicle or residence was not insured. Job growth benefits the entire economy, of course, but expanding payrolls benefit workers’ compensation insurers in particular. The U.S. economy added 1.69 million nonfarm jobs in the first eight months of 2015; if that rate is sustained through the rest of the year, there will be 2.6 million more workers than at the end of 2014. Combined with slightly above inflation-level increases in employees’ earnings (as has been the case for the past few years), payrolls are expected to continue growing, resulting in billions of dollars in new premiums written being earned by workers’ compensation insurers in 2015. How long this level of exposure growth in workers’ compensation can be sustained is hard to forecast; an increasing number of economists believe that the U.S. economy is approaching full employment status. Even at full employment payrolls will grow with an expanding economy and a growing population, but not as fast as in an economy rising toward full employment. The other important determinant in industry growth is rate activity. Rates tend to be driven by trends in claims costs, conditions in the reinsurance market, marketing and distribution costs, and investments in technology, among other factors. Although it is challenging to foresee the interplay of all of these and macroeconomic factors, it is certainly possible that overall industry growth in net written premicontinued on page 16

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Life Without the Life Insurance Industry? Critical Support Would Vanish for Families Across New York State

By Thomas E. Workman, President & CEO, Life Insurance Council of New York, Inc.

aving a family is one of the greatest reasons for having life insurance. There is so much we want for those we love—security, happiness, education… the list is endless. And, there are so many things we do not want for them — to worry, to suffer, or to otherwise hurt from financial burden. If we have not secured financial protection for our loved ones before our passing, we may leave behind a significant financial struggle — and not just for our immediate family. If more and more people were left uninsured, or if there were no life insurance industry to mitigate the loss from the death of our loved ones, there could be a significant financial strain on government assistance programs, and on our society as a whole.

When Tragedy Strikes Many of us know of a family struck by an untimely death. Steven Tedesco* from Corinth, New York, was 28 years old when he purchased life insurance coverage to protect his wife, Natira, and five young children. He worked hard to secure a strong financial foundation for his family. Becoming a small business owner was his next step towards that goal. It was at that time he consulted with a financial advisor. Good health and Steven’s young age enabled him to purchase an affordable $1 million, 20-year personal term life insurance policy. Only a few months later, he fell ill and was diagnosed with a life-threatening disease. After two years of fighting it, Steven lost his battle. At the time, his family had grown to six children, the youngest just four months old. The policy was paid as promised, and allowed a stay-at-home mother to continue to stay home and care for their children. With the benefits of the insurance policy, Natira set up a retirement savings ac-

count, educational accounts for their children and purchased a home, rather than remain in a rental property, and secured a life insurance policy for herself.

Millions are Covered For the Tedescos, they had the financial protection needed through life insurance. Life insurers provide protection to individuals so they can go on with their lives—continue covering their mortgages and car loans, continue paying for education, or allow a stay-at-home mom, like Natira, to continue to stay at home to take care of the children. The life insurance industry pays billions to New Yorkers annually—$28 billion was paid to New Yorkers in the form of death benefits, matured endowments, policy dividends, surrender values and other payments in 2013, according to the American Council of Life Insurers. Another $7 billion was paid in the form of annuity payments for a total of $35 billion. Those funds keep people in their homes, pay the car loans, continue paying for education, continue to operate the family business, and provide financial assistance for other needs. As a comparison, OASDI and SSI payouts totaled more than $56 billion, making insurers responsible for almost 40% of all benefits paid in New York. Imagine how much pressure would be placed on our society if that 40% were not funded by the insurance industry.

More New Yorkers Should Be Covered A major challenge for the life insurance industry is to reach the uninsured. According to LIMRA estimates for New York State, there are $2.1 trillion of life insurance in

force and an unmet need of $950 billion. Said another way, for every $2 of existing life insurance coverage in New York, there is approximately $1 of unmet need. Furthermore, according to LICONYsponsored research, the number of individual life insurance policies in force declined from nearly nine million in 2003 to eight million in 2013. The existing coverage gap, coupled with the reduction in the number of policies in force, suggest a growing challenge. The life insurance industry is well equipped to meet this challenge and has the capacity and capital to insure as many New Yorkers as would seek coverage, as well as to fulfill its obligations to those covered New Yorkers. New York State government efforts toward creating a regulatory environment that encourages people to get the insurance protection they need would be helpful in both solving this challenge and limiting the potential burden on government assistance programs and our society. Thomas E. Workman is the President & Chief Executive Officer of the Life Insurance Council of New York, Inc. LICONY is the voice of the life insurance industry in New York. LICONY works to create and maintain a legislative, regulatory, and judicial environment that encourages its members to conduct and grow their life insurance businesses here in New York State. For stories about New Yorkers who have benefitted greatly from purchasing the products of life insurers, go to www.licony.org, click on “Published Articles” in the NEWSROOM box on the homepage.[IA]

* This story is based on Real Life Stories from Life Happens.

O: (212) 986-6181 F: (212) 986-6549 551 Fifth Ave., 29th Floor, New York, NY 10176 website: www.licony.org INSURANCE ADVOCATE / October 26, 2015 15

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[ GUEST ARTICLE ] continued from page 14

ums could keep pace with overall economic growth in 2014. Growth in key areas of the economy such as new vehicle sales, multi-unit residential construction, and consistent employment and payroll growth are clearly benefiting the P/C insurance industry. For the remainder of 2015 and into 2016, the consensus forecasts call for nominal GDP growth to hold steady at about 3.5 percent. Different segments of the industry saw different premium flows. Net written premiums for insurers writing mainly personal lines (mostly auto and homeowners insurance) was 5.3 percent in 2015:1H, down 0.4 percentage points from the comparable period in 2014. In contrast, net written premiums for insurers writing mainly commercial lines, excluding mortgage and financial guaranty insurers, grew 2.2 percent in 2015:1H, down 0.5 percentage points. And insurers writing mainly balanced books of business saw net written premiums grow at 5.0 percent, up 0.7 percentage points. Catastrophe and Non-cat Losses In most years catastrophe-related claims are a small percent of total claims, but we focus on them because they can be quite volatile. In the first half of 2015, the industry’s experience with catastropherelated losses improved vs. 2014—from $13.0 billion a year ago down to $10.8 billion this year (down 16.9 percent). In contrast, non-cat losses rose to $160.5 billion from $155.2 billion (up 3.4 percent). As a result, total claims rose by 1.8 percent, to $171.3 billion. Clearly, the small rise in claims costs in relation to four percent premium growth contributed to increased profits. Profits would have risen even if catastrophe claims costs had been just as high as in the first half of 2014, but the fact that they fell in the first half of 2015 also contributed to profitability. Reserve Releases Reserve releases are generally associated with new estimates of expected costs for claims occurring in past accident years. Overall inflation continues to be remark16 October 26, 2015 / INSURANCE ADVOCATE

Profits would have risen even if catastrophe claims costs had been just as high as in the first half of 2014, but the fact that they fell in the first half of 2015 also contributed to profitability.

ably low, likely contributing to these lower estimates, although prices for some items that comprise claims payouts have been increasing at higher rates. For the first half of 2015, the industry reported releases of prior-year claims reserves totaling $8.1 billion, up slightly from $7.9 billion in the first half of last year. Combined Ratio and Underwriting Profits The industry’s overall underwriting profit of $3.39 billion on a combined ratio of 97.6 in the first half of 2015 far surpassed the $0.24 billion profit for the first half of 2014. However, the first-half numbers blur the experience of two very different calendar quarters in 2015. Net underwriting gains for the first quarter were $4.06 billion and for the second quarter were $0.67 billion in losses. From a long-term historical perspective, underwriting losses have been the norm over the past several decades. According to ISO, underwriting profits have occurred in only about one in every six calendar quarters since 1986, when ISO’s quarterly data began. Since the burst of the housing bubble in 2008, the Mortgage & Financial Guarantee sector of the P/C industry has disproportionately weighed down the overall industry’s results, and because this line of business is written by only a few companies—some of them monoline carriers— it became common to report commercial lines insurers’ results excluding M&FG data. This continues to be the case, even

though the line has returned to profitability. Different segments of the industry saw different underwriting experience. The combined ratio for insurers writing mainly personal lines (mostly auto and homeowners insurance) was unchanged (at 100.1) in 2015:1H vs. 2014:1H. In contrast, the combined ratio for insurers writing mainly commercial lines, excluding mortgage and financial guaranty insurers, dropped by 0.8 percentage points, to 94.3. And insurers writing mainly balanced books of business saw a combined ratio fall from 104.0 in 2014:1H to 99.4 in 2015:1H.

Investment Performance: Improvement but Interest Rates Remain Low For the first half of 2015, net investment gains—which include net investment income plus realized capital gains and losses—rose by $1.4 billion (+4.5 percent) to $31.6 billion, compared to $30.2 billion in the first half of 2014. In measuring insurance company net investment gains, accounting rules recognize two components: (i) net investment income, and (ii) realized capital gains or losses. Unrealized capital gains or losses are not considered income and affect only surplus on the balance sheet. Net Investment Income Net investment income itself has basically two elements—interest payments from bonds and dividends from stock. The industry’s net investment income for the first half of 2015 was $23.4 billion, compared to $23.0 billion in the first half of 2014 (up 1.6 percent). Most of this income comes from the industry’s bond investments, which are mainly high quality corporate and municipal bonds. Corporate bond market yields in the first half of 2015 were lower than in the first half of 2014. As an indicator of prevailing interest rate levels, yields in Moody’s AAA-rated seasoned bond index averaged 4.5 percent in the first quarter of 2014, then receded to 4.2 percent in 2014:Q2. In contrast, yields in 2015:Q1 averaged 3.6 percent, held at 3.5 percent in April, then “spiked” to 4.1 percent in

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[ GUEST ARTICLE ] May and June 2015. And although the U.S. economy is improving, the Fed has reiterated that it expects interest rates to stay low for a substantial amount time. The small increase in investment income mainly reflects the rise in the amount of invested assets net of the effect of reinvestment of longer-term maturing bonds at lower prevailing interest rates than the previous investments paid. The bond market is still beset by the same forces that have held interest rates down since the Great Recession ended (officially, in June 2009): unused capacity—in both capital resources and, by some measures, higher-than-normal unemployment, especially considering the low employment/population ratio and labor-force participation rate; cautious consumer and business spending; low near-term future expectations for the economy; and low inflation expectations (and thus, low nominal bond yields). The other significant source of net investment income (besides bond yields) is stock dividends. Seasonally adjusted, net dividends in 2015:Q1 rose by 2.5 percent (compared with 2014:Q1) and in 2015:Q2 rose by 2.6 percent vs. 2014:Q2. Stock holdings in general represent roughly only about one-sixth of the industry’s invested assets. Realized Capital Gains Realized capital gains in 2015:1H were $8.2 billion. This is a relatively strong result, at least by recent historical standards. Realized capital gains in the first half of 2012, 2013, and 2014 were $1.7 billion, $3.9 billion, and $7.2 billion, respectively.

Policyholders’ Surplus (Capital/Capacity): Sustained High Demonstrates Industry Strength and Resilience Policyholders’ surplus as of June 30, 2015 stood at $672.4 billion—up $0.35 billion (+0.5 percent) from the year-earlier period. Policyholders’ surplus has generally continued to increase in recent years as industry profits rose and as assets held in the industry’s investment portfolio increased in value in the wake of the financial crisis and Great Recession. It is worth

The bottom line is that the industry is, and will remain, extremely well capitalized and financially prepared to pay very large scale losses in 2015 and beyond.

noting that surplus increased despite very high catastrophe losses in 2011 and 2012. The fact that the industry was able to rapidly and fully recoup its losses to surplus even in the wake of disasters like Sandy (which produced $18.8 billion in insured losses in 2012) is continued evidence of the P/C insurance industry’s remarkable resilience in the face of extreme adversity. The bottom line is that the industry is, and will remain, extremely well capitalized and financially prepared to pay very large scale losses in 2015 and beyond. One commonly used measure of capital adequacy, the ratio of net premiums written to surplus,

currently stands at 0.75, close to its strongest level in modern history.

Summary The property/casualty insurance industry turned in a profitable performance in the first half of 2015. In addition, policyholders’ surplus reached a new all-time record high. Despite an unusually costly winter and a number of costly springtime catastrophes, rising non-cat losses, and persistently low interest rates, the industry posted another profitable quarter aided by capital gains and reserve releases. Premium growth, while still modest, is now experiencing its longest sustained period of gains in a decade. Fundamentally, the P/C insurance industry remains quite strong financially, with capital adequacy ratios remaining high relative to long-term historical averages. A detailed industry income statement for the first half of 2015 follows. To view the full report from ISO and PCI, go to http://www.verisk.com/ downloads/InsuranceResultsReport2015Q 2.pdf [IA]

FIRST HALF 2015 FINANCIAL RESULTS* ($ billions) Net Earned Premiums. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $247.50 Incurred Losses (Including loss adjustment expenses) . . . . . . . . . . . . . . 171.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.8 Policyholder Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 Net Underwriting Gain (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.4 Other Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7 Pre-Tax Operating Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.5 Realized Capital Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 Pre-Tax Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7 Net After-Tax Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30.97 Surplus (End of Period) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $672.44 Combined Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97.6** *Figures may not add to totals due to rounding. Calculations in text based on unrounded ﬁgures. **Includes mortgage and ﬁnancial guaranty insurers. INSURANCE ADVOCATE / October 26, 2015 17

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[ THE SOCI AL NOTEBOOK ]

By Chris Paradiso

Outside-In vs. Inside-Out Customer Experiences In the world of “customer experience,” formerly known as “customer service,” what’s the difference between outside-in and inside-out?

nside-out thinking for your agency means your focus is on the agency’s processes, systems, and insurance products that are designed and implemented based on internal thinking and intuition. You and your agency are focused on how you see the situation. The customer’s needs and perspectives do not play a part in this type of thinking; they aren’t taken into consideration. You make decisions because YOU think it’s what’s best for the business, or you think you know what’s best for customers. This is insideout thinking. Chris Paradiso Outside-in thinking means that you look at your business/agency from the customer’s perspective and subsequently design processes (for example, an email marketing system to survey your clients), tools (such as a mobile app), and products, and you make decisions based on what’s best for the customer and what meets the customer’s needs instead of focusing on your agency’s needs. You make decisions because you know it’s what’s best for your customers. Why? Simply put, because you listen to and understand them and their financial situation. Because of this, you can make the proper recommendations for them. It might be inside-out thinking when there’s a conscious decision to make people, process, policy or other changes that: 1. Don’t improve the customer experience at the same time, 2. Are about maximizing agency returns/commissions,

3. Improve internal efficiencies to the detriment of customer interactions, 4. Are cost-cutting measures that also negatively impact the customer experience. By contrast, outside-in thinking flips each of those points on its head and looks like this. There’s a conscious decision to make processes, policies, personnel, systems, or other changes that: 1. Improve the customer experience at the same time, 2. Are about maximizing benefits for the customer and their family, 3. Improve internal efficiencies known to be pain points when executing customer interactions – making insurance fun and easy, 4. Are cost-cutting measures that significantly improve the customer experience and makes it more convenient, 5. Having the right processes, policies, people, and tools in place, because you’ve listened to customer feedback and know how your customers are affected. It’s clear and there is no surprise that outside-in thinking is the way to go for every agency. It leads to a number of results, none of which you’ll get by making decisions that are not focused on customer satisfaction. The results you can find with outside-in thinking include: • reduced complaints, • increased satisfaction, and customer experience, • increased referrals, which only comes from a great customer experience, • increased policy case rate in each household,

• improved ease of doing business with your agency, customer convenience, • allowing customers to self service or the ability to have that option, • having the right attitude, • having a great first impression whether it’s on the phone or face-toface. These translate to reduced agency costs and increased revenue. How can we ensure that our insurance agency is operating in an outside-in manner? Here are some tips that our agency follows. • Set expectations for each and every client and on each and every phone call, such as how our agency has laid out a set of Paradiso Promises for each customer. • Ask the right questions. • Listen to our customers and what they are saying. • Use that understanding to develop products for the customer, products that solve their problems and help them accomplish their goals. • Listen to customers at all key touchpoints and ask them for feedback. We send out two surveys per year to each and every customer. • Act on what you hear from them. • Share the feedback and ensure it’s used throughout your agency to make decisions and to design the best experience for your customers. • Always do right by the customer; ask “Is this decision what’s best for the customer?” • Reduce the customer’s effort and continued on page 21

YOU WANT TRUSTED CHOICE

YOU NEED IIABNY. 18 October 26, 2015 / INSURANCE ADVOCATE

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

www.iiabny.org/join

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[ ON M Y RADAR ]

By Barry Zalma

Conviction of Murder Establishes Beyond a Reasonable Doubt that Killing Was Intentional

t seems that some judges believe that insurance is an entitlement rather than a contract that can be interpreted beyond reason to provide benefits to victims of persons insured even if that person intentionally causes injury. In so doing

against Conley for damages arising from their daughter’s death. At the time of the shooting, Keith E. Conley’s home was insured through a homeowner’s insurance policy issued by Kentucky Farm Bureau. Subject to a reser-

“The policy of insurance issued to Keith E. Conley clearly provides that the personal liability coverage under that policy is limited to coverage or damages because of a “bodily injury” or “property damage” caused by a “covered occurrence”. Excluded from coverage is “bodily injury” which is expected or intended by one of its insured’s [sic]. Barry Zalma

they forget that insurance is a contract that provides indemnity only for fortuitous actions and can never provide coverage for intentionally caused injury. In Kentucky Farm Bureau Mutual Insurance Company v. Conley, Not Reported in S.W.3d, 2015 WL 4040058 (Ky.App., 7/25/2015) the Kentucky Court of Appeal was faced with an appeal from a trial court decision that required coverage for defense and indemnity of an insured who was convicted of the crime of murder.

FACTS This appeal arises from a homeowner’s insurance coverage dispute between Kentucky Farm Bureau Mutual Insurance Company (Farm Bureau) and Keith Justin Conley (“Conley”), and coverage for any judgment that might be entered against Conley, resulting from a wrongful death action filed against him based upon his shooting and killing of Jessica Newsome. In 2006, Keith Justin Conley (“Conley”) was convicted of murdering his girlfriend, Jessica Newsome, who he fatally shot in the home of his father, Keith E. Conley. Conley and Jessica were living in Keith E. Conley’s home at the time of the shooting. Gregory and Loretta Newsome (“the Newsomes”) brought a wrongful death cause of action 20 October 26, 2015 / INSURANCE ADVOCATE

vation of rights, Kentucky Farm Bureau provided a defense to Conley for the Newsomes’ claims against him. Kentucky Farm Bureau also intervened in the action for the purpose of seeking a declaration that the homeowner’s insurance policy issued to Conley’s father did not provide coverage to Conley for the claims arising from Jessica Newsome’s murder. After Conley’s conviction became final in 2007, Kentucky Farm Bureau moved the trial court for a ruling on its petition for a declaratory judgment. On June 23, 2011, the trial court ruled that the homeowner’s insurance policy provided coverage for Conley’s acts, and ordered Kentucky Farm Bureau to satisfy the judgment or provide a defense in the claim against Conley. The trial court entered an order on August 30 denying Kentucky Farm Bureau’s motion.

THE ISSUE The overarching issue presented in this matter is the interpretation of an insurance policy. The argument that Farm Bureau raised before the circuit court regarding the insurance policy at issue accurately summarized the relevant provisions of the insurance policy. Its argument was, in pertinent part: “The policy of insurance issued to Keith E. Conley clearly provides that the

personal liability coverage under that policy is limited to coverage or damages because of a “bodily injury” or “property damage” caused by a “covered occurrence”. Excluded from coverage is “bodily injury” which is expected or intended by one of its insured’s [sic]. The policy, therefore, included an exclusion that recorded the fortuity doctrine.

ANALYSIS Keith Justin Conley has been found guilty of murder and as defined by Kentucky law murder is an intentional act and as such those actions are not covered under the homeowner’s policy of Keith E. Conley. However, Farm Bureau’s argument, noted above, clearly indicated and put the circuit court on notice that an “occurrence” was a defined term under the policy and that its definition does not include what Kentucky has statutorily defined as murder. In its review, the circuit court took notice of—and found dispositive to its review—an endorsement which it acknowledged was never a part of Keith E. Conley’s policy. Specifically, the circuit court determined that the endorsement contained an alternative definition of the word “intent”; and, based upon that alternative definition of intent (which the circuit court apparently believed conflicted with the ordinary meaning of the word “intent”) the circuit court determined that the policy’s use of the word “intent” was ambiguous. As such, it mandated coverage under the circumstances. The Kentucky Court of Appeal concluded that the circuit court manufactured an ambiguity by looking beyond the four corners of the contract. This was impermissible. The rules of contract interpretation dictate that the parties’ intentions are to be discerned only from the four corners of the contract itself. Absent ambiguity, extrinsic evidence should not be considered, and a court is required to interpret the contract terms by assigning language its ordinary meaning.

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[ ON MY RADAR ] Murder, by definition, is an intentional act. Insurance, by definition, only insures the liability of the insure against loss, damage, or liability arising from a contingent or unknown event.

With this in mind, “intent” or “intention” is not ambiguous as used in Keith E. Conley’s policy. The statute’s use of “intent” is consistent with the general definition of the word. As described elsewhere in the definitions section of Kentucky’s penal code, a person acts “intentionally” “with respect to a result or to conduct described by a statute defining an offense when his conscious objective is to cause that result or to engage in that conduct.” KRS 501.020(1). When read with the definition of “intentionally” in KRS 501.020, KRS 507.020(1)(a) designates as murder a homicide that results from conduct of a person whose conscious objective is to cause another’s death. Simply put, when the jury in Conley’s criminal trial found him guilty of murder it determined beyond a reasonable doubt that Jessica Newsome’s death resulted from Conley’s act of shooting her, and that Conley’s conscious objective in shooting her—his reason for acting in that way— was to cause her death. Therefore, under either the statute or the policy, Jessica Newsome’s death was the result of Conley’s intentional act. In light of the foregoing, the Court of Appeal reversed the trial court and directed the circuit court to enter judgment in favor of Farm Bureau finding that Keith E. Conley’s homeowner’s insurance policy does not obligate Farm Bureau to either provide a defense for Conley or satisfy any judgment that might be entered against him as a result of the Newsomes’ wrongful death action.

ZALMA OPINION Murder, by definition, is an intentional act. Insurance, by definition, only insures the liability of the insure against loss, dam-

age, or liability arising from a contingent or unknown event. Murder, being an intentional act is neither contingent nor is it unknown to the murderer. The appellate court slapped the trial court judge who tried to change the meaning of insurance and the insurance contract to provide benefits to the victim of the crime rather than limit the benefits in accordance with the terms of the contract. In simple language murder cannot be accidental. Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter. com/ ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Stor e/ProductDetails.aspx?productId=214 624, or 800-285-2221 which is presently available. Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

[ THE SOCIAL NOTEBOOK ] continued from page 18

energy rather than making the experience convoluted and confusing. Ease of doing business. • Have an email/digital marketing map to help the customer understand who and what your agency stands for; this also allows you and your agency to stay in front of your customers all year long. • Have an agency app that allows your customers to receive service 24 hours a day, 7 days a week. • Have Saturday and evening hours and please don’t close for lunch. Customers need us to work around their hours. The customer’s voice needs to be incorporated into all decisions your agency makes, along with their design and development. Each and every one of our agencies needs to incorporate the customer throughout our organization’s “DNA.” And we should always remember that we may have to go back and tweak things here and there; and that’s the sign of a great agency leader, knowing that there’s always room for improvement. Change will continue, and those that adapt quickly will come out ahead.[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 to not only survive, but compete in today’s complex online marketing world. Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

INSURANCE ADVOCATE / October 26, 2015 21

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[ COVER ]

By Frederick Wertz

of r P e nc theYe a r u s In of

22 October 26, 2015 / INSURANCE ADVOCATE

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[ COVER ]

INSURANCE PROFESSIONAL OF THE YEAR nal o i s s e f o ce Pr ear Y f the

BROAD VISION, CULTIVATED

APPRECIATION FOR RISK ITSELF

AND INCREDIBLY SOPHISTICATED

CLIENT SERVICE HAVE SPELLED

SUCCESS FOR AON’S

PAMELA J. NEWMAN

The Insurance Advocate® is proud to name Dr. Pamela J. Newman, President and CEO of the Newman Team at Aon Corporation, our 2015 Person of the Year. Dr. Newman has been a leading presence in the industry for years, as she has consistently proven that superior client service can make all the difference…and does.

r. Pamela J. Newman has cultivated a deep fascination with the evolving nature of risk and relishes the opportunity each day to study the businesses of her clients in order to help them navigate the increasing chaos of the modern world. Her team at Aon, which she has built from the ground up, has an industry-wide reputation for client service excellence, just as passionate about the people and their enterprises as their leader is. Dr. Newman's unique ability to serve her clients has vaulted her to the top of the ladder among producers in the insurance industry. Although Dr. Newman's ability to think critically, research exhaustively and paint analytical pictures of her clients’ businesses is instrumental to her success, what most often separates her from the pack of global insurance brokers is her deep affinity for people and relationships. Dr. Newman is perhaps most talented at conducting business at the intersection of her lifestyle and approach to living. For Pamela, her business life and personal life don't have much of a distinction – “it's simply life,” she will tell you – and Dr. Newman is passionate about it. Insurance Advocate readers will enjoy this exploration continued on page 24

INSURANCE ADVOCATE / October 26, 2015 23

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[ COVER ] "WE DON'T KNOW ALL 66,000

PEOPLE AT AON, BUT WE DO

KNOW HOW TO FIND THE RIGHT

PERSON AT THE RIGHT MOMENT

WITH THE INTELLECTUAL PROP-

ERTY IN THEIR HEAD FOR WHAT

THE CLIENT NEEDS." - PAMELA J. NEWMAN

continued from page 23

of Dr. Newman's approach to the business and her recipe for success. You can't even begin to understand Pamela J. Newman's success without exploring the makeup of The Newman Team at Aon. This 12-member team is tasked with harnessing the expertise of the 66,000 people at Aon in order to deliver the firm's full capabilities to their clients. Newman admits that "We don't know all 66,000 people at Aon, but we do know how to find the right person at the right moment with the intellectual property in their head for what the client needs." Acting as a central nervous system for Aon is a key capability of The Newman Team. Dr. Newman clearly insists upon continuous improvement in this area. In fact, The Newman Team includes Martha Blackman, an Account Specialist with Aon who is also earning a Master of Science in Information and Knowledge Strategy from Columbia University. Blackman has performed knowledge audits for the team and oversees organizing people and resources for their clients. The Newman Team prides itself on being able to find the perfect person at Aon to address a client's needs, and understanding those needs in the first place is another way The Newman Team excels. The Team strives to achieve a deep connection with each client and to delve into their specific enterprise and its business sector. This eagerness to be immersed in the world of their clients, combined with a knack for creativity, has consistently separated The Newman Team from competitors.

STANDING L-R: DAWN CRABB, SARI RUDMANN, MEGHAN MUCERINO, MIKE CILETTI, AND WILL LAWRENCE. SITTING L-R: PAMELA J. NEWMAN, EVE SHERBIN, ROBBIE BAUMBERGER, REGINA DEGNAN, AJI JUMENA AND PETER TALESNIK 24 October 26, 2015 / INSURANCE ADVOCATE

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[ COVER ] Shane Hogan, a recent addition to The Newman Team, remembers that he "had heard about the creativity of this Team with a lot of clients and the prospects that they were working with, and that's one of the things that attracted me to this group." Since joining the Team, he has been impressed with the out-of-the-box ideas the Team routinely produces, and noted that this kind of approach really resonates with clients. He continued, "When you're in front of a client and they see the energy and the creativity, that translates to success in this business." The Team's chemistry is evident even in a group interview session, held in what Dr. Newman refers to as "The War Room" – a corner office high above Water Street with a large, solid wooden table fit for serious battle planning. As one Team member answers a question, another chimes in with a recent example illustrating the concept. Dr. Newman then suggests a third member deliver their take on the example mentioned. This game of verbal volleyball happens so smoothly that it is obvious the Team is well practiced at this kind of collaboration and brainstorming. At a time when many in the insurance industry are struggling to find their value proposition, Newman has cultivated a team with an obvious one. Her expertise and team's creativity is intensely focused on fully understanding the business of each client, allowing a tailored approach that is difficult to match. Newman possesses a tenacious approach to knowledge acquisition: "When studying up on the client I will go out and read as much as I can about their business and industry – you have to be researching and understanding constantly." Thanks to her thorough analysis and Team's expertise, Dr. Newman routinely brings a value proposition of what an insurance broker does much higher than her competition. All too often members of the insurance industry rely on third parties to gather information and conduct inspections. By taking steps to become an expert in the needs of the individual and the organization, Newman and those who use her approach, leverage their deep knowledge to proactively provide solutions and point out risks that the client may not even be aware exist. "It's about figuring out the specific risks for each client – it varies widely, and that's why you need to get to know the business inside and out," says Dr. Newman. This immersive approach to client relationships also comes from a deep concern for the individual person. Dr. Newman acknowledges that a big part of her business is not just writing policies, but minimizing risk. To truly succeed in this area, one needs a high degree of empathy with each individual client. Executive Vice President of Aon Risk Solutions, James O'Neill, comments that things Newman routinely does for her clients – thank you notes, handwritten letters, premeeting agendas and post-meeting minutes – are becoming more rare in the industry. "People frankly don't have the time, but she makes it." And all her efforts have paid off. O'Neill comments that Newman "puts on blinders, and doesn't think so much about the consequences of her competition – more so about what value proposition we're going to add to the customer. The by-product is this great collateral damage – the battleship of The Newman Team leaves a big wake." This disruption is due to her singular focus on client relations and service. He adds that "She is just over the top on client service. If it's something to do with the customer, it has to be done now, and it has to be done right. Everything has to be validated – it can't be what we think is the best effort. She's relentless." A key aspect to Dr. Newman's devotion to her clients is her and the Team's readiness in the case of an emergency. Dr. Newman understands that she is needed most when something unexpected occurs, and takes extra steps to make sure her clients aren't left twisting in the wind. She aims to help her clients decide what needs to be done in the management of the issue at the moment it's occurring, and also know whose expertise will come in handy immediately. There is a clear attitude among her and her team that shows the human element plays no small role in this dedication. Dr. Newman relates the story of a client in New continued on page 26

Lifestyle… One common descriptor that you encounter of Dr. Newman is her high energy and thirst for knowledge. Because of the way she blends her passion and business, this is not just limited to her professional life, but is more of a statement on her lifestyle in general. Shirley Mah, an Account Executive at Aon Risk Solutions and member of The Newman Team speaks of Dr. Newman's unmatched energy and enthusiasm for her job: "If there are 24 hours in a day, she probaby dedicates 23 hours of it to business. There are many times where she and I have been on the phone on a Friday evening or over the weekend because of an issue with an account, or something happened." But this dedication to her business isn't like the sacriﬁces other people make in order to get ahead – she truly enjoys what she does, and seems not to view it as business at all. Dr. Newman admits that her lifestyle philosophy is that "You have to like the world. You have to like everything -- you have to like a discussion on China, you have to like manufacturing. I love site tours. You have to like it because either the person likes it and gets it or is excited by it, or you can't get them there. You can't make somebody really enjoy it." INSURANCE ADVOCATE / October 26, 2015 25

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[ COVER ] continued from page 25

L-R: JAMES O’NEILL,E.V.P. AON, PAMELA J. NEWMAN AND MAURICE R. “HANK” GREENBERG, CHAIRMAN & CEO, C.V. STARR & CO. INC.

Quotes from Pamela J. Newman’s Book Reflections "Searching out great thinking, keeping track of it, and adding it to our way of viewing the world can inspire and lead us to having a fruitful life. When there is a great thought, it deserves to be embroidered into our philosophy toward living." (page 14) "I need each interaction to be a communication masterpiece." (page 19) "We need to practice positive behaviors as often as possible, on all occasions, and particularly at times of great need... behavior determines attitude." (page 60) "A day without giving someone a compliment or positive acknowledgement is a day, and opportunity, wasted." (page 39) "My most important need right now is to have even more goals that are higher in purpose, harder to achieve, and more major in impact... I want to play golf in Scotland, play tennis in Mexico, and dance the tango in Argentina. I want to be a leader. I want to take the risk of defending a stand. I want to be known for a cause greater than myself." (page 5) "I continue to learn to provide my clients with strategic solutions to their business problems. I am more aware of the need to create an environment where important issues can easily be discussed and then to set about coming up with useful and constructive game plans to overcome the problems." (page 4) 26 October 26, 2015 / INSURANCE ADVOCATE

Orleans during Hurricane Katrina. After getting in touch with all clients in the danger zone, it became apparent that one general manager of a client company was having a particularly rough time. Worried about his mental state during this time of widespread death and destruction, Dr. Newman sent two Team members to Florida who then rented a car, stocked up on gas, and drove to New Orleans. They set up temporary headquarters in a trailer for several days in order to help him, and other clients, get back on their feet. The Newman Team has also remained dedicated to their clients in the face of tragedy and disaster of their own. Their current Manhattan office, located right next to South Street Seaport, experienced some of the most damaging flooding of Superstorm Sandy. But that didn't stop Martha Blackman from wading through a flooded lobby, up 34 flights of stairs in order to retrieve the Team's laptops. Once the computers were distributed back in Dr. Newman's apartment, the Team immediately compiled a list of their clients and began calling them one by one to find out how they could help. Prior to their office on Water Street, Aon was located at the World Trade Center. Dr. Newman was out of the state when the World Trade Center was attacked on September 11th, 2001, but Aon suffered tragic losses that day. Despite unimaginable grief, Dr. Newman made sure all of her clients were contacted the very next day: "We did what we had to do and focused outward, because that's the better thing to do." Perhaps the most central theme to Dr. Newman's success is her ability to blend with ease aspects of her professional and personal life. Dr. Newman maintains a smooth continuum between her professional life, her lifestyle and her enormous set of relations, gracefully blending all three. She admits there isn't much distinction along this continuum for her: "It's all very congruent for me in everything I do. There's no business life and personal life, it's just all my day." The gracefulness with which Dr. Newman interacts with her Team members, colleagues – and even a visiting high

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[ COVER ] school intern, Jeremy, who is present during the interview – reveals that she values the person first and the professional relationship second. As she answers one of my questions about time management, an idea pops into her head – she pauses to give Jeremy a useful exercise he can execute to help him establish goals and manage time. Sure, he is related to a client of hers, but at this moment that's irrelevant – Jeremy is here to learn, and Dr. Newman will not pass up the opportunity to teach. Her approach to living is clearly highly relationship based – after speaking with her for only a few minutes, it becomes obvious that Dr. Newman has cultivated an unfathomably huge network of relationships both inside and outside the insurance industry. She boasts an impressive resume of "extracurriculars" -- she is a member of the Council on Foreign Relations and serves on the boards of the Police Athletic League, Economic Club of NY and the Associate Committee of the Juilliard School, to name a few of the dozens of organizations she participates in. For the most part, she credits relationships and fortuitous timing with getting her involved in many of these organizations. Dr. Newman admittedly has business in mind in some cases – in her industry, maintaining an expertise in foreign relations, for instance, is key to understanding the dynamics of global risk. Others, such as the Stella Adler School of Acting, originate from personal passions of Dr. Newman. Undoubtedly, her ability to establish relationships has been central to her professional success. Being well-practiced at seamlessly integrating the personal with the professional is a key driver of success in today's insurance industry – the more subtle you can be in this area, the more you will succeed. Her interpersonal skills and business acumen clearly contribute to her enormous success, and although her academic background is foundational, it may not be obvious. In her doctoral dissertation, earned at the University of Michigan, she studied the campaigns of nine U.S. Senators running for re-election, correctly predicting a shift towards professionally-run campaigns. Dr. Newman is quick to recognize the impact her studies have had on her career: "I went to school and studied these things, and much more than people realize what I learned in school has really paid off. When Martha and I sit in this room, as we often do, and work through a strategy – we work off of the premise that research shows there's a primacy effect in the dynamic of every meeting – people will remember what is said at the beginning, and they'll remember what is said at the end. But all that stuff in the middle, you don't tend to remember. So if you're going to get a message to someone, you have to get it to them at the beginning and end." This kind of analysis seems to pervade much of Dr. Newman's thinking, and she has no shortage of academic knowledge. Having co-authored two textbooks (Organizational Communication and Behind Closed Doors: A Guide to Effective Meetings) Dr. Newman continues to write at least one book annually. Several years ago, she began authoring books to give out as a creative holiday present. Her writing in these books, usually aimed at sharing her wisdom, experience and enthusiasm for living with her readers, exhibits her deep desire to participate in the transfer of knowledge – not too unlike her role managing The Newman Team. One final area that Dr. Newman has succeeded in is her influence on others, particularly the members of The Newman Team. The effect she has on her team is clear in the way they listen intently whenever she speaks her mind, but the members of

"SHE HAS OPEN DOOR POLICIES --

YOU CAN JUST COME IN AND TALK

TO HER WHETHER IT'S WORK RE-

LATED OR WHETHER IT'S PER-

SONAL. SHE'S VERY FAMILY

ORIENTED AND SHE RESPECTS

THAT WE HAVE A LIFE OUTSIDE OF

WORK TOO. IN ALL MY 22 YEARS

OF WORKING IN THE INSURANCE

INDUSTRY, I'VE NEVER BEEN

SO HAPPY TO WORK WITH

SUCH A TEAM." - Nancy Montalvo, Assistant V.P. Aon Risk Solutions

L-R: PATRICK G. RYAN, CHAIRMAN & CEO, RYAN SPECIALTY GROUP, PAMELA J. NEWMAN AND GREG CASE, PRESIDENT & CEO OF AON INSURANCE ADVOCATE / October 26, 2015 27

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[ COVER ] THE QUALITY MOST CENTRAL TO HER SUCCESS … IS ILLUSTRATED IN EVERY SINGLE RELATIONSHIP SHE MAINTAINS, WHETHER IT'S WITH A FORTUNE 100 CEO OR A VISITING HIGH SCHOOL INTERN.

continued from page 27

The Newman Team won't be shy about their loyalty to Dr. Newman if you ask them. Nancy Montalvo, an Assistant Vice President at Aon Risk Solutions and member of The Newman Team relates that "She has open door policies – you can just come in and talk to her whether it's work related or whether it's personal. She's very family oriented and she respects that we have a life outside of work too. In all my 22 years of working in the insurance industry, I've never been so happy to work with such a team." Shane Hogan, who had identified The Newman Team as his ideal place to work seven years before actually joining, is particularly excited to finally be able to take advantage of Dr. Newman's tutelage: "I'm sure you've heard before that this is a people business and I believe that to be fundamentally important to success. I think that the whole idea of a team, and having a leader of a team who brings out the best in everyone – that really resonates with clients. When you're in front of a client and they see the energy and the creativity, that translates to success in this business. And I think that Dr. Newman is responsible for a lot of that. Bringing out the best quality in people so that when you're in front of a client or buyer, that resonates with them." The quality most central to her success – her ability to blend her personal, social and professional lives gracefully, avoiding the clumsy collision of these two spheres that plagues many inside and out of the insurance industry, is illustrated in every single relationship she maintains, whether it's with a Fortune 100 CEO or a visiting high school intern. It comes down to the simple fact that Pamela J. Newman loves people. Her deep consideration for those around her has allowed her to get the most out of her team and clients and has turned her into an executive very worthy of emulation … and of Insurance Advocate’s top citation for an insurance professional.[IA]

L-R: JAMES O’NEILL; PETER TALESNIK; SARI RUDMANN; ANTHONY RONGO; SHIRLEY MAH; TONY RAMPERSAUD; PAMELA J. NEWMAN; WILL LAWRENCE; MARTHA BLACKMAN; ROBBIE BAUMBERGER; NANCY MONTALVO; AJI JUMENA; AND REGINA DEGNAN 28 October 26, 2015 / INSURANCE ADVOCATE

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PROUD TO HONOR A TRUE ORIGINAL

Pamela Newman once said, “I need each interaction to be a communication masterpiece.” There are few as impactful, few as knowledgeable, few as gracious, as Pamela Newman. Aon is beyond fortunate that Pamela found her niche in insurance. ACE proudly congratulates Ms. Newman on the priceless work of art that is her insurance industry career.

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Our congratulations to Pamela J. Newman for Insurance Advocateâ&#x20AC;&#x2122;s recognition of her creative and inspiring leadership.

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Congratulations to Pamela Newman.

Every day you prove that productivity is never an accident.

Pamela Newman does more in a day than once was thought humanly possible. Your recognition as the Insurance Advocateâ&#x20AC;&#x2122;s 2015 Insurance Professional of the Year is well deserved.

ÂŽ

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Congratulations to

Pamela J. Newman on being named 2015 Insurance Professional of the Year. You continue to amaze with your remarkable dedication, professionalism and success. Wishing you and The Newman Team continued success. MARK I. ROZELL ATTORNEY AT LAW 950 Third Avenue, 20th Floor New York, NY 10022 212-832-4881 MROZELL@ROZELLESQ.COM

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Aon Risk Solutions

DATA BUSINESS is global

Your Aon is

BOTH

Risk. Reinsurance. Human Resources.

is local

10-28-15_INA 10-26-15 10/27/15 2:44 PM Page 34

[ COURTSI DE ]

By Lawrence Rogak

Without a Timely Denial, Prima Facie Case Requires Only Proof of Mailing Viviane Etienne Med. Care v Country-Wide Ins. Co. Note: The Court of Appeals here upholds the Viviane Etienne v Countrywide decision from the Appellate Division, which held in effect that a third-party billing company could establish a prima facie case despite the fact that the biller had no personal knowledge of the facts of the claim — but only where the bills were “overdue” because the lack of a timely denial. The Court of Appeals here affirms, holding that in the absence of a timely denial, the plaintiff need only prove that the bills and statutory forms were mailed by submitting a properly detailed affidavit regarding the mailing and attaching the verification forms. However, where bills have been timely denied, the insurer retains its right to challenge and force the plaintiff to prove the truth of the facts of the claim, i.e., that the treatment or services were actually rendered. This would require an affidavit from someone with personal knowledge of those facts. Finally, the Court notes that the amended regulations effective 04/01/2013, which in effect overruled Fair Price v. Travelers Ins. Co., do not apply to this decision because the dates of service here were earlier. Under the amended Regulations, an insurer never loses its right to challenge fraudulent claims. — LNR

his appeal requires us to determine what proof a plaintiff medical provider must advance to make a prima facie showing of entitlement to summary judgment in a no-fault insurance action. We hold that a plaintiff demonstrates prima facie entitlement to summary judgment by submitting evidence that payment of no-fault benefits are overdue, and proof of its claim, using the statutory

Proof evincing the mailing must be presented in admissible form, including where it is applicable, meeting the business records exception to the hearsay rule. billing form, was mailed to and received by the defendant insurer. Proof evincing the mailing must be presented in admissible form, including where it is applicable, meeting the business records exception to the hearsay rule. Applying this rule to the facts of this case, plaintiff demonstrated entitlement to summary judgment. Therefore, the order of the Appellate Division should be affirmed, insofar as appealed from, and the certified question answered in the affirmative.

I. Following an automobile accident in June 2004, Alem Cardenas received treatment for his injuries at the office of plaintiff Viviane Etienne Medical Care, P.C. Cardenas’s automobile liability insurance policy with defendant Country-Wide Insurance Company contained a New York State no-fault endorsement. Cardenas assigned his right to receive no-fault benefits to plaintiff. To receive reimbursement for the services it rendered to Cardenas, plaintiff submitted to defendant eight verification of treatment forms [FN1] demonstrating the services rendered or equipment provided, and the corresponding cost. Each form was signature stamped with “V Etienne MD.” Within 15 days from receipt of the verification of treatment

form, an insurer may seek further verification (see 11 NYCRR 65—3.5 [b]) and within 30 days after receiving the verification of treatment form, the insurer must pay or deny the claim (see Insurance Law § 5106 [a]; 11 NYCRR 65—3.8 [c]). Defendant denied payment on one claim in the amount of $139 dated November 17, 2004. Defendant did not respond to any of the other claims. Plaintiff commenced this action seeking to recover no-fault insurance benefits, asserting that it timely submitted bills and claims for payment to defendant in the amount of $6,130.70,[FN2] but defendant had yet to make any payments, deny the requests, or ask for verification of the claims. Plaintiff also requested interest and attorney’s fees under the Insurance Law. Defendant answered and asserted as an affirmative defense that payment for plaintiff ’s claims was not overdue because plaintiff failed to submit “proper proof of the fact and amount of the loss” as required by the Insurance Law. Plaintiff moved for summary judgment on its claims, arguing that it had met its prima facie burden of showing the fact and amount of loss sustained, and that the payment of the benefits was overdue. As support, plaintiff submitted the aforementioned eight verification of treatment forms as proof of claim, along with seven mailing ledgers stamped by the United States Postal Service indicating the date the forms were mailed, and the denial of claim form. Additionally, plaintiff submitted the affidavit of Roman Matatov, President of SUM Billing Corp. (SUM Billing), a third-party billing company hired by plaintiff. In the affidavit, Matatov explained the company’s billing procedures. The medical providers must submit an assignment of

Footnote 1: The forms used by the plaintiff are a standard form distributed by the New York State Department of Financial Services. Footnote 2: Due to an error in calculation, the reimbursement amount sought in plaintiff ’s complaint was wrong. The actual total amount billed to the insurer was $6,566.46. Plaintiff moved to amend its complaint to reflect the actual amount of damages.

34 October 26, 2015 / INSURANCE ADVOCATE

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[ COURTS ID E ] benefits form signed by the injured party along with the injured party’s identification prior to SUM Billing sending out the verification of treatment forms to the insurance companies for reimbursement. Matatov personally obtains the insurance cards and police reports pertaining to the accident. He incorporates all the above documents into SUM Billing’s records and relies upon them in the performance of his business. In generating the verification of treatment forms, Matatov requires the medical providers to submit to SUM Billing all information necessary to complete the forms and sees that any missing information is obtained from the providers. Matatov then enters all the information to be included in the verification of treatment form into a customdesigned software system that creates the completed forms. Matatov averred that after the forms are created, he logs the bills into a mailing ledger, and personally mails the bills to the insurance company. The mailing ledger is stamped by the United States Postal Service. Matatov stated that he “retains sole responsibility for the mailing of the documents created by SUM Billing, and he personally inspects and verifies the accuracy and completeness of every envelope set to leave the office.” The affidavit also described the eight proof of claim forms that plaintiff submitted with its motion for summary judgment. Matatov affirmed that consistent with the described procedures, he mailed the eight proof of claim forms to defendant. Defendant opposed the motion, arguing that plaintiff failed to meet its prima facie burden as it did not put forth evidence in admissible form, because all of plaintiff ’s exhibits were hearsay with no applicable exception. It asserted that Matatov’s affidavit did not provide sufficient foundation for the admission of the hearsay under the business records exception because the affidavit “merely stated the bills were mailed” but gave no other details required to meet the business records exception under CPLR 4518 (a). Civil Court denied plaintiff ’s motion

“We reaffirm the longstanding precedent that, in this context, the plaintiff makes a prima facie showing of entitlement to judgment as a matter of law by submitting evidence, in admissible form, that the prescribed statutory billing forms were mailed to and received by the defendant insurer, which failed to either pay or deny the claim within the prescribed 30-day period.”

for summary judgment “for failure to establish a prima facie case.” The Appellate Term, for the Second, Eleventh and Thirteenth Districts, affirmed (31 Misc 3d 21 [2011]). Relying on the Second Department’s decision in Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co. (55 AD3d 644 [2d Dept 2008]), the Appellate Term held that Matatov’s affidavit failed to lay a sufficient foundation for the business records hearsay exception. Specifically, the court stated that the “affidavit failed to demonstrate that Matatov had personal knowledge of plaintiff ’s practices and procedures and that he was competent to testify about those practices and procedures” and alternatively failed to demonstrate that SUM Billing “incorporated plaintiff ’s medical records into its own and relied upon them.” Insofar as relevant here, the Appellate Division, with two justices dissenting, granted plaintiff ’s motion for summary judgment with respect to all the claims that were not timely denied by the insurer (114 AD3d 33)[FN3]. The court declined to follow its decision in Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co. (55 AD3d

644 [2d Dept 2008]), wherein it held that the plaintiffs there “failed to establish their prima facie entitlement to judgment as a matter of law” because “the plaintiffs’ medical service providers failed to demonstrate the admissibility of their billing records under the business records exception to the hearsay rule.” The court concluded that “Art of Healing constitutes an anomaly, a jurisprudential drift from [the court’s] well-established precedent”(114 AD3d at 44, 45).[FN4] The court stated: “We reaffirm the longstanding precedent that, in this context, the plaintiff makes a prima facie showing of entitlement to judgment as a matter of law by submitting evidence, in admissible form, that the prescribed statutory billing forms were mailed to and received by the defendant insurer, which failed to either pay or deny the claim within the prescribed 30day period.” Applying that standard, the Appellate Division determined that, with the exception of the claim that was denied, plaintiff established prima facie entitlement to summary judgment as a matter of law “by demonstrating that its prescribed statutory billing forms used to establish proof of claim were mailed to and received by the defendant and that . . . defendant failed to either timely pay or deny the claims.” The court determined that defendant in opposition failed to raise a triable issue of fact because it was precluded from raising the defense that the proof of claim forms were inadmissible under the business records exception to hearsay as it did not deny the claim within the statutory time frame.[FN5] The Appellate Division remitted the case to Civil Court to determine whether plaintiff was entitled to statutory interest and attorney’s fees. Thereafter, the court granted defendant’s motion for leave to appeal to this Court, certifying the question of whether its determination was properly made.

continued on page 36

Footnote 3: All of the courts below denied plaintiff ’s motion for summary judgment on one of its claims dated November 17, 2004, in the amount of $139, as it was timely denied by the insurer. That propriety of that determination is not before this Court as plaintiff did not cross-appeal its denial. Footnote 4: The court noted that it had relied upon Art of Healing in the context of no-fault insurance in only one case, Matter of Carothers (79 AD3d 864, 864865 [2d Dept 2010]). Footnote 5: The dissenting justices concurred in part and dissented in part, voting to affirm the order of Appellate Term and uphold the decision in Art of Healing.

INSURANCE ADVOCATE / October 26, 2015 35

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[ COURTSIDE ] continued from page 35

II. The Comprehensive Motor Vehicle Insurance Reparations Act, commonly referred to as the “No—Fault Law” (see Insurance Law article 51) is aimed at ensuring “prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists” (Matter of Medical Socy. of State of NY v Serio, 100 NY2d 854, 860 [2003], citing Governor’s Mem approving L. 1973, ch. 13, 1973 McKinney’s Session Laws of N.Y. at 2335). This Court has recognized the complicated nature of the statutory and regulatory scheme of the no-fault law (Presbyterian Hosp. in City of NY v Maryland Cas. Co., 90 NY2d 274, 286 [1997] [describing the scheme as a “‘Rube— Goldberg—like maze’”]). In Fair Price Med. Supply Corp. v. Travelers Indem. Co., we described the no-fault regime as follows: “‘The regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident (see 11 NYCRR 65—1.1, 65—2.4 [b]). Next, the injured party or the assignee . . . must submit proof of claim for medical treatment no later than 45 days after services are rendered (see 11 NYCRR 65—1.1, 65—2.4 [c]). Upon receipt of one or more of the prescribed verification forms used to establish proof of claim, . . . an insurer has 15 business days within which to request “any additional verification required by the insurer to establish proof of claim” (11 NYCRR 65—3.5 [b]). An insurer may also request “the original assignment or authorization to pay benefits form to establish proof of claim” within this time frame (11 NYCRR 65—3.11 [c]). Significantly, an insurance company must pay or deny the claim within 30 calendar days after receipt of the proof of claim (see Insurance Law § 5106 [a]; 11 NYCRR 65—3.8 [c]). If an insurer seeks additional verification, however, the 30—day window is tolled until it receives the relevant information requested

Where an insurer fails to pay or deny a claim within the requisite 30 days under the statute and regulations following its receipt of the proof of claim, the insurer is subject to “substantial consequences,” namely, preclusion “from asserting a defense against payment of the claim…”

(see 11 NYCRR 65—3.8 [a] [1])’” (Fair Price Med. Supply Corp. v. Travelers Indem. Co., 10 NY3d 556, 562—563 [2008], quoting Hospital for Joint Diseases, 9 NY3d 321, 317 [2007]; see Insurance Law § 5106 [a]).[FN6] Where an insurer fails to pay or deny a claim within the requisite 30 days under the statute and regulations following its receipt of the proof of claim, the insurer is subject to “substantial consequences,” namely, preclusion “from asserting a defense against payment of the claim” (Fair Price, 10 NY3d at 563 [internal quotation marks omitted]). The only exception to preclusion recognized by this Court arises where an insurer raises lack of coverage as a defense (see id.; Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d at 318; Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]). This Court has recognized that preclusion may require an insurer to pay a no-fault claim it might not have had to honor if it had timely denied the claim (see Presbyterian Hosp., 90 NY2d at 285). Nonetheless, we emphasized that the great convenience of “prompt uncontested, first-party insurance benefits” is “part of the price paid to eliminate common-law contested lawsuits” (id.; see Fair Price, 10 NY3d at 565—566). Prior to Art of Healing and following its abandonment, the Second Department has held that “in an action to recover no-

fault benefits, a plaintiff makes a prima facie showing of entitlement to judgment as a matter of law by submitting evidentiary proof that the prescribed statutory billing forms were mailed to and received by the relevant insurer, and that payment of no-fault benefits was overdue” (Westchester Med. Ctr. v. Progressive Cas. Ins. Co., 89 AD3d 1081, 1082 [2d Dept 2011]; see New York Hosp. Medical Center of Queens v QBE Ins. Corp., 114 AD3d 648, 648 [2d Dept 2014]). Other Appellate Division Departments have adopted the Second Department’s approach and articulated the same standard (see e.g. Sunshine Imaging Assn./WNY MRI v Government Empls. Ins. Co., 66 AD3d 1419, 1420 [4th Dept 2009]; Countrywide Ins. Co. v 563 Grand Med., P.C., 50 AD3d 313, 314 [1st Dept 2008]; LMK Psychological Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727, 728 [3d Dept 2006]). We agree with the Appellate Division Departments that a summary judgment motion in a no-fault insurance case where the benefits are overdue, requires proof that the statutory claim forms were mailed to and received by the insurer. The legislative design of the no-fault insurance scheme demonstrates an interest in prompt resolution of reimbursement claims, a desire to avoid litigation, and statutory consequences on an insurer to incentivize it to seek verification of a claim, deny it, or pay. As this Court has stated: “No-fault reform was enacted to provide prompt uncontested, first-party insurance benefits. That is part of the price paid to eliminate common-law contested lawsuits. . . . The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices” (Presbyterian, 90 NY2d at 285; see Hospital for Joint Diseases, 9 NY3d at 320). Consistent with these interests, a medical provider seeking reimbursement from a no-fault insurer demonstrates its entitlement to reimbursement of overdue benefits when it proves that it submitted a com-

Footnote 6: Plaintiff commenced this action in September 2005, prior to adoption of the April 1, 2013 amendments to the no-fault insurance regulations, including the additions to 11 NYCRR 65-3.5 and 11 NYCRR 65-3.8. The amended regulations are not applicable to this case and, therefore, have no bearing on this decision.

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[ COURTS ID E ] pleted claim form to the insurer. A claim is overdue if it is not denied or paid within 30 days of the insurer’s receipt of proof of claim (see 11 NYCRR 65—3.8 [a] [1]; Insurance Law § 5106 [a]). Thus, it follows that a claim is not overdue when it is timely denied by the insurer. The requisite proof in a no-fault insurance case is “proof of the fact and amount of the loss sustained” (Insurance Law § 5106 [a]). To establish entitlement to summary judgment on overdue no-fault benefits, the medical provider is required to submit proof of mailing through evidence in admissible form. Such proof may include the verification of treatment form and/or an affidavit from a person or entity (1) with knowledge of the claim and how it was sent to the insurer or (2) who has relied upon the forms in the performance of their business [FN7]. Thus, even where an insurer is precluded from raising a defense to the proof of claim form because of its failure to timely deny the claim, the plaintiff medical provider must, as an initial matter, demonstrate its entitlement to summary judgment by submission of proof in admissible form. Admissible evidence may include “affidavits by persons having knowledge of the facts [and] reciting the material facts” (GTF Marketing v Colonial Aluminum Sales, 66 NY2d 965, 967 [1985]; CPLR 3212 [b]; see Zuckerman v City of New York, 49 NY2d 557, 562). Certain affidavits and documents submitted in support of a motion for summary judgment may be deemed admissible where those documents meet the requirements of the business records exception to the rule against hearsay under CPLR 4518 (see e.g. JPMorgan Chase Bank, N.A. v Clancy, 117 AD3d 472, 472 [1st Dept 2014]; Education Plus, Inc. v Glasser, 112 AD3d 1125, 11251126 [3d Dept 2013]; Melendez v 176 Hopkins Associates, LP, 28 AD3d 723, 723 [2d Dept 2006]). CPLR 4518 (a) provides: “Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that

act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter.”

IV. Applying these principles to the instant facts, the Appellate Division properly determined that plaintiff met its prima facie summary judgment burden. As relevant here, to support its motion, plaintiff submitted the eight verification of treatment forms and Matatov’s affidavit. The documents submitted by plaintiff meet the business records exception to the hearsay rule. Matatov’s affidavit states that based on his business agreement with plaintiff, SUM Billing created the verification of treatment forms in the regular course of its business and that the forms were created soon after the services were provided by plaintiff to Cardenas. Indeed, the tight timetable of the no-fault scheme requires prompt submission of proof of claim in order to receive reimbursement. Matatov’s affidavit outlines the office practices and procedures used by SUM Billing to mail claim forms to insurers and demonstrates that Matatov himself mails the forms. Matatov explained that SUM Billing relies on these forms in the performance of its business. Further, the affidavit states how and when the forms at issue here were created and that they were mailed to defendant within the statutory time frame. Thus, as plaintiff was able to demonstrate SUM Billing’s office mailing practices and procedures, “a presumption arises that those notices have been received by the insurers” (Nassau Ins. Co. v Murray, 46 NY2d 828, 829 [1978]). It is undisputed that defendant did not pay or deny seven out of the eight claims at issue. Consequently, those claims are overdue. Plaintiff, therefore, satisfied its burden on summary judgment by demonstrating the mailing of the proof of claim forms, and their receipt by the insurer. The Appellate Division also properly determined that defendant failed to raise

a triable issue of fact in opposition. In fact, defendant concedes that it is precluded from raising any defense due to its failure to timely deny the claims. Contrary to the dissent’s contention, the risk of an insurer paying out fraudulent claims has been recognized by this Court (see Presbyterian Hosp., 90 NY2d at 285); however, as we have stated that risk is part of the price paid for swift, uncontested resolution of no-fault claims. Where no-fault benefits are not overdue, because of timely denial, the insurer’s compliance with the statute and regulations allows it to retain its right to contest the claims and prevent payment of fraudulent claims. An insurer providing no-fault benefits, may not simply sit on its hands until litigation is commenced. Some action is required. Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs, and the certified question answered in the affirmative. STEIN , J.(dissenting): The majority holds that a plaintiff medical provider in a no-fault case establishes prima facie entitlement to summary judgment by demonstrating that the insurer was billed and failed to timely deny or pay the billed claim. In my view, neither the statutory and regulatory no-fault scheme, nor our cases concerning the preclusion doctrine, obviate a plaintiff ’s burden to demonstrate its prima facie entitlement to benefits sought, as compared to only proof of billing and non-payment. I, therefore, respectfully dissent. Pursuant to the statutory no-fault scheme, automobile insurance policies must provide for the payment of first party benefits to certain persons “for loss arising out of the use or operation in this state of [a] motor vehicle” (Insurance Law § 5103 [a] [1]; see 11 NYCRR 65-1.1). Stated simply, first party benefits are capped “payments to reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle” (Insurance Law § 5102 [a]; see Insurance continued on page 40

Footnote 7: While many of the Appellate Division decisions determining that a medical provider had submitted sufficient proof of mailing and overdue reimbursement do not describe the actual documents submitted to support the motion for summary judgment (see e.g. Westchester Med. Ctr. v. Progressive Cas. Ins. Co., 89 AD3d 1081, 1082 [2d Dept 2011]; LMK Psychological Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727, 728 [3d Dept 2006]), it appears that verification of treatment forms and/or affidavits describing the mailing are the types of documents typically considered.

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Law § 5102 [b]). Covered expenses include those incurred for “necessary” medical services (Insurance Law § 5102 [a] [1]). Thus, to establish entitlement to no-fault benefits for medical services, a party must demonstrate that the loss arose from an automobile accident and that the expenses incurred were medically necessary. Under the detailed no-fault regulations implementing the Insurance Law, a claimant must submit a notice of claim to the insurer as soon as reasonably practicable, but no later than 30 days after the accident (see 11 NYCRR 65-1.1, 65-2.4 [b]; Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 562-563 [2008]). If the claimant receives medical services, the claimant — or his or her assignee — must submit written proof of claim for that treatment to the insurer within 45 days of the provision of services (see 11 NYCRR 65-1.1, 65-2.4 [c]). This proof of claim must include “full particulars of the nature and extent of the injuries and treatment received and con-

templated” (11 NYCRR 65-1.1). Upon receipt of a prescribed verification form, the insurer has 15 days to request “any additional verification required . . . to establish proof of claim” (11 NYCRR 65-3.5 [b]; Fair Price, 10 NY3d at 563). As particularly relevant here, an insurer must pay or deny a claim, in whole or in part, within 30 calendar days of receipt of the proof of claim or any additional verification requested (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [a] [1]; [c]; Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007]). The majority accurately states that a failure to do so carries “substantial consequences” (Hospital for Joint Diseases, 9 NY3d at 317). Namely, pursuant to Insurance Law § 5106 (a), a failure to pay or deny benefits within 30 days of receipt of “proof of the fact and amount of loss sustained” renders benefits “overdue,” and all overdue payments bear interest at a rate of 2% per month (see 11 NYCRR 65-3.8 [a] [1]; Hospital for Joint Diseases, 9 NY3d at 317-318). Further, a claimant is entitled to recover attorney’s

fees for overdue payments (see Insurance Law § 5106 [a]). In addition to the statutory penalties, we have held that a failure to timely pay or deny a claim will result in an insurer being precluded from interposing a defense against payment of the claim, except where the defense raised is lack of coverage (see Fair Price, 10 NY3d at 563565; Hospital for Joint Diseases, 9 NY3d at 318-319; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 283 [1997]). Defendant Country-Wide Insurance Company readily concedes that, assuming that plaintiff Viviane Etienne Medical Care, P.C., has met its prima facie burden of showing entitlement to payment of its claims, the statutory penalties are applicable and defendant is precluded from raising a defense due to its failure to timely pay or deny the claims. The majority holds that, because these penalties are applicable to plaintiff’s claims, plaintiff is entitled to judgment based on its showing of proof of billing, receipt, and non-payment. I, however, find no basis to conclude that any of

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[ COURTS I D E ] the aforementioned penalties that may be imposed against defendant obviate plaintiff ’s burden to make a prima facie showing of entitlement to benefits — i.e., that the loss arose from an automobile accident and that the expenses incurred were medically necessary — a showing that defendant would then be precluded from challenging. As indicated by the lack of a direct citation to any statutory authority for the majority’s position, no language in the Insurance Law or the relevant regulations compels the conclusion that the Legislature intended to excuse a no-fault plaintiff from demonstrating entitlement to benefits as a penalty to the insurer. The Insurance Law does not provide that, because benefits are “overdue” and the insurer is therefore subject to certain enumerated repercussions, a plaintiff need not proffer admissible evidence establishing the basic elements of a no-fault claim. Rather, the rule now adopted by the majority — that only proof of billing and the absence of timely denial or payment are required to obtain reimbursement — was derived by the Appellate Division Departments from our cases creating and defining the preclusion rule (see e.g. Westchester Med. Ctr. v Progressive Cas. Ins. Co., 89 AD3d 1081, 1082 [2d Dept 2011], citing Presbyterian Hosp., 90 NY2d 274 [1997]; New York & Presbyt. Hosp. v Selective Ins. Co. of Am., 43 AD3d 1019, 1020 [2d Dept 2007], citing Presbyterian Hosp., 90 NY2d 274 [1997]). In my view, the extension of the preclusion doctrine established by the majority in this case is misguided because our preclusion cases did not effectuate a change to a plaintiff ’s burden on summary judgment. It is well established that “the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact” (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). In other words, “‘to obtain summary judgment it is necessary that the movant establish a cause of action . . . ‘sufficiently to warrant the court as a matter of law in directing judgment’ in the movant’s favor (CPLR 3212 subd [b]), and the movant must do so by tender of evidentiary proof in admissible form’” (Zuckerman v City of

New York, 49 NY2d 557, 562 [1980], quoting Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1067 [1979]; see Bush v St. Clare’s Hosp., 82 NY2d 738, 739 [1993]). “Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers” (Alvarez, 68 NY2d at 324). Applying these uncontroverted principles here, the preclusion rule, which prevents an insurer from raising most defenses to a no-fault claim, comes into play only after the plaintiff ’s prima facie case has been demonstrated. That is, the preclusion doctrine has no application to the facts before us because defendant seeks only to hold plaintiff to its initial summary judgment burden. While proof of billing and the absence of timely denial or payment may be required in order to invoke the preclusion rule, we have never held that such proof constitutes a prima facie showing of entitlement to judgment in a no-fault plaintiff ’s favor. In fact, the State Insurance Department has interpreted the interplay between summary judgment and the preclusion rule in exactly the manner I propose, taking the view that, “though an insurer’s defense to payment of claim may be precluded under the [preclusion] cases, . . . the claimant must still meet the statutory requisite and make out a prima facie case of entitlement to benefits,” which requires that “reimbursable expenses must arise out of a motor vehicle accident and be medically necessary to treat the injuries” (Ops. Gen Counsel NY Ins Dept No. 0001-02 [January 2000]). Likewise, while we held that the insurer in Hospital for Joint Diseases was precluded from contesting the validity of a signature on an assignment form, we separately addressed the insurer’s challenge insofar as it implicated the plaintiff ’s burden to demonstrate a prima facie case (see 9 NY3d at 319-320). Unlike our approach in that case, the majority now conflates the preclusion rule with the summary judgment burden, effectively eviscerating our long-settled summary judgment principles in the no-fault context despite the absence of any such direction from the legislature. The practical effect of the majority’s holding today is that courts lack authority continued on page 42

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to verify that a no-fault plaintiff has established the basic facts supporting a claim prior to awarding judgment, which is a result inconsistent with our summary judgment rules and, indeed, is not one endorsed even with respect to defaulting defendants (compare CPLR 3125 [f ]). These rules are designed, at least in part, to prevent the perpetration of fraud upon the court. Moreover, an insurer’s duty to pay or deny a claim within 30 days is not triggered until it receives “proof of the fact and amount of loss sustained” (Insurance Law § 5106 [a]; see 11 NYCRR 65-3.8 [a] [1]). Yet, the majority’s rule arguably eviscerates any avenue for insurers to contest even whether a verification of treatment form contains sufficient information to constitute “proof of the fact and amount of loss sustained” — or in other words, whether the payments were actually overdue — since proof of the mailing of the prescribed form, without any regard to its contents or its completeness, will now carry a plaintiff ’s burden on summary judgment. In a system that we have recognized as already plagued by wide-spread abuse (see generally Pommells v Perez, 4 NY3d 566, 571 [2005]; Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 861 [2003]), the majority’s rule unnecessarily increases the risk that insurers will be required to pay out fraudulent claims, which is detrimental, not only to the insurer, but also to claimants, whose entitlement to benefits (which is subject to a maximum amount) will consequently be reduced. This is a result that should not be countenanced by our judicial system, whose duty it is to fairly apply the law, and one which was not intended by either the legislature or our preclusion cases. It also bears noting that the rationale behind the preclusion doctrine, upon which the majority implicitly relies, does not support its application here. To be sure, a “core and essential objective” of the nofault structure “is to provide a tightly timed process of claim, disputation and payment” (Presbyterian Hosp., 90 NY2d at 281), and

the preclusion doctrine provides an incentive for insurers to comply with the regulatory time frame. However, where, as here, the objection is to the evidentiary admissibility of the NF-3 verification of treatment forms — not to the accuracy or validity of their contents — it would be impossible for the insurer to raise the objection before the plaintiff ’s summary judgment motion was brought, inasmuch as the insurer would have no way of knowing what evidentiary foundation would be offered.[FN1] Significantly, requiring a plaintiff to establish its prima facie entitlement to benefits, rather than mere proof of billing, would not place on no-fault claimants an onerous burden that would impede the timely resolution of valid claims or increase no-fault litigation. The statutory NF-3 verification of treatment form is a permissible proof of claim with respect to a non-hospital health care provider (see 11 NYCRR 65-3.11 [b]). This form contains, among other things: necessary information regarding the provider, insurer, and the insured; a space for the “diagnosis and concurrent conditions”; boxes to check, indicating when the symptoms appeared and whether they are solely a result of an automobile accident; a space for a “report of services rendered”; and an assignment of benefits section. As the Appellate Division dissenters aptly stated, plaintiff ’s prima facie case on the merits “would have been satisfied here if the plaintiff had simply submitted the proof of claim forms in admissible form” (114 AD3d at 49). However, the affidavit proffered by plaintiff to support admission of the NF-3 forms — which must be received for their truth to establish the “fact and amount of loss sustained” (Insurance Law § 5106 [a]), as should be required — falls short. Although the affidavit of Roman Matatov, the president of plaintiff ’s third-party billing service, stated that he had personal knowledge of the mailing of the NF-3 forms to defendant, he had no personal knowledge of plaintiff ’s record-keeping procedures or practices in creating the documents based on which he compiled

those forms. Thus, Matatov was unable to lay a sufficient foundation for the admissibility of the NF-3 forms under the business records exception to the hearsay rule (see CPLR 4518 [a]; People v Brown, 13 NY3d 332, 341 [2009]; People v Cratsley, 86 NY2d 81, 90 [1995]; Matter of Leon RR, 48 NY2d 117, 122-123 [1979]), and inadmissible hearsay is insufficient to establish a prima facie case entitling plaintiff to summary judgment (see generally Zuckerman, 49 NY2d at 562). I simply do not see why it would be unduly burdensome to require plaintiff to submit a proper affidavit, either from Matatov or a knowledgeable employee of the medical provider’s practice. In sum, in light of the absence of any explicit language in the no-fault statutes or regulations eliminating a plaintiff ’s burden to establish a prima facie case of entitlement to benefits or any indication of a legislative intent to eliminate such burden, and because the preclusion doctrine is not triggered until a prima facie showing has been made, I find no basis to diverge from our traditional rules pertaining to summary judgment motions. Thus, I would conclude that proof of billing, receipt, and non-payment is simply insufficient to carry plaintiff ’s prima facie case here. Rather, plaintiff should be obligated to proffer, in accordance with the basic rules of evidence, admissible NF-3 forms to demonstrate the merits of its claims, which defendant would then be precluded from contesting. Accordingly, I would reverse the Appellate Division order.[IA] ***************** Order, insofar as appealed from, affirmed, with costs, and certified question answered in the affirmative. Opinion by Judge Abdus-Salaam. Chief Judge Lippman and Judges Pigott, Rivera and Fahey concur. Judge Stein dissents in an opinion in which Judge Read concurs. 2015 NY Slip Op 04787 Decided on June 10, 2015 Court of Appeals Abdus-Salaam, J.

Footnote 1: To the extent the majority implies that an insurer should routinely issue timely denials of claims or verification requests in order to preserve its right to contest those claims, it seems to me, that this approach would directly conflict with the principles of fair practice set forth in the no-fault regulations. Such regulations provide that insurers should utilize fair claims processes and refrain from demanding verification “unless there are good reasons to do so” (11 NYCRR 65-3.2 [a], [c]).

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