November 17, 2014 by C Acunto

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VOLUME 125, NUMBER 19 / November 22, 2014

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Contents

November 22, 2014 | volume 125 number 19

[COVER STORY ]

On My Radar: Rescission Attempt Fails Barry Zalma

Looking Back: November 1989

Courtside: Whether Batting Screens Were “Open and Obvious Condition” is a Jury Question Lawrence Rogak

Courtside: No Meritorious Defense Required When Moving for Extension of Time to Answer Lawrence Rogak

Classiﬁeds

Guest Opinion: Republicans Can No Longer Blame Harry Reid for Failing to Repeal ObamaCare Jane M. Orient, M.D.

GNY Marks 100th Anniversary Three hundred gather to celebrate venerable New York Company’s ﬁrst century IFNY Annual Luncheon Draws 350 J. Hyatt Brown Honored

[FEATURES] 4

Foreword: TRIAGE Steve Acunto, Publisher

Insight: Forecast: Cloudy with a Lack of Clariﬁcation Peter H. Bickford

Exposures and Coverages: Cyber/Data Breaches Jerome Trupin, CPCU

The Social Notebook: Time it Right The Value of Timing When Using Social Media for Your Business Chris Paradiso

In the Associations: Hudson Valley Rap

On the Level: Something to be Thankful for N. Stephen Ruchman, CPIA

On the Level: Natural Selection or Apathy Jamie Deapo

In the News: Park Shifts into Drive

Guest Opinion: The Deadly Politicization of Ebola Richard Amerling, M.D.

[ AD FEATURES] 11

NYIA: Thank you

PIA: Agency Procedural Manual

MSO: Battery Hazzards

Like us on Facebook… The Insurance Advocate Magazine INSURANCE ADVOCATE / November 22, 2014 3

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[ FORE WORD ]

Steve Acunto

TRIAGE

n this season of high notes and well wishes, we applaud the new officers and directors of the New York Insurance Association (NYIA) for 2015. Chair is Bernard Turi, senior vice president, general counsel, general auditor and chief risk officer, Utica National Insurance Group, Utica; First vice chair: Steven Coffey, president and chief executive officer, Broome Co-operative Insurance Company, Vestal; Second vice chair: Elizabeth Heck, president and chief operating officer, Greater New York Mutual Insurance Company, New York; Treasurer: Marlene Benton-Sherwood, president, Fulmont Mutual Insurance Company, Johnstown; Directors: Martin Doto, senior vice president of government affairs and claims, Preferred Mutual Insurance Company, New Berlin, Stephen Harris, president and chief executive officer, Sterling Insurance Company, Cobleskill; Floyd Holloway, counsel, State Farm Mutual Automobile Insurance Company, Chadds Ford, Pa.; Mark Prechtl, executive vice president and chief executive officer, Chautauqua Patrons Insurance Company, Jamestown. … Long time friend John R. DiForte (pictured right) was recently presented with The Eugene Toale Award by The NY Chapter of The Society of Property Casualty Underwriters at the annual conferment luncheon held at B.B. Kings in Manhattan. The Award is granted to CPCU credentialed executives who excel at promoting professional development and education in the insurance industry. John is the former president of the DiForte Agency, an independent insurance agency founded by his father in 1951, now led by his son John, Jr. John, Sr. retired on 1/16/2014 after 40 years of service. He was past president of the NY Chapter of CPCU, a member of the Ethics Committee and Director of the Europe Chapter. We came to know John when he played a key role in getting PROJECT INVEST in the NYC Public School; this involves a work-study program for high school students seeking careers in the insurance industry. A Wagner College grad with an MBA from The College of Insurance, he has been a member of the Society of Property Casualty Underwriters since 1979. John has completed the NYC Marathon seven times. Congrats, John. … Drivers who own homes file far fewer auto insurance claims than those who rent or live with parents, according to an analysis from Insurance.com, an insurance quote-comparison site. Among 700,000 drivers aged 18 and older who disclosed past auto insurance claims as part of their online car insurance comparison-shopping: 14.3 percent of homeowners (single-family, condo and multi-family dwellings) had filed at least one car insurance claim in the past three years.16.8 percent of renters had filed a claim. 22.2 percent of drivers who live with their parents had filed a claim. The data include claims of all kinds: collision, comprehensive, liability and uninsured motorist. Discounts for bundling home and auto insurance average about eight percent nationwide, according to data gathered for Insurance.com by Quadrant Information Services. … As we go to press, the Coalition to Insure Against Terrorism (CIAT) returns to Capitol Hill to urge Congress to approve a long-term reauthorization of the Terrorism Risk Insurance Act (TRIA), placing particular focus on House and Senate leadership and members of the Financial Services, Banking, and Homeland Security committees. Enacted in the wake of 9/11, TRIA has provided stability to the economy since 2002. Following the attacks, reinsurers and primary insurers – after paying out more than $30 billion in claims – withdrew from the terrorism risk insurance marketplace. The absence of coverage contributed to massive job losses and billions of dollars in damage to industries dependent upon the availability of terrorism risk coverage. TRIA allowed businesses to once again purchase insurance while protecting the economy against highly unpredictable, catastrophic terrorist attacks. The law has twice been reauthorized with bipartisan congressional support, and is set to expire at the end of the year unless renewed. Seems like a no brainer, but then again, we are talking about Washington. SA 4 November 22, 2014 / INSURANCE ADVOCATE

VOLUME 125, NUMBER 19 NOVEMBER 22, 2014

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

CINN G R O U P, I N C .

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[ INSIGHT ]

By Peter H. Bickford

Forecast: Cloudy With Lack of Clarification

hame on AIG! It has now joined the growing list of insurance companies in NY that have agreed to pay substantial fines for their sins. These are not the fines of our predecessor administrations, where the largest fines were in the hundreds of thousands. No, now we are talking about fines in the tens of millions

to an important industry issue in this era of expanding cyber communication capabilities. In the press release announcing the fine, Superintendent Lawsky states: “No company has a right to ignore the laws that every other insurer has to follow. This type of misconduct is unfair to its competitors

But there is one fact that is glaringly missing from these consent orders: whether or not the companies solicited the sale of insurance to New York residents.

Peter H. Bickford

or more: in this latest case $35 million for allegedly conducting an unlicensed insurance business in the state. Back in March NY’s Department of Financial Services fined Met Life and a couple of non-New York life insurance affiliates that had been acquired from AIG $50 million for illegally soliciting insurance business in New York without a license. Although prominently “featured” in the consent order with Met Life, AIG did not participate in that settlement and even filed a lawsuit against the regulators for, among other things, denying it due process. (See my Insight column, “Motivational Misdirection,” IA, April 28, 2014). Now AIG has apparently abandoned its arguments and has entered into a consent order that includes findings that it violated the insurance law. The consent order and the accompanying DFS press release emphasize AIG’s misrepresentations and omissions in its responses to and filings with the regulators regarding its activities soliciting business for non-NY licensed companies from NY locations. Plain and simple, AIG lied about its activities and got caught in the lies. This is a shame because it is yet another lost opportunity to provide clarity

and puts consumers at risk.” It would be hard to argue against this seeming truism. The problem, however, is that a central underlying issue, raised by AIG in its lawsuit opposing the regulator’s action, has been clouded by the consent orders and AIG’s own actions. The consent orders agreed to by Met Life and now AIG recite facts at length to support a conclusion that the companies violated the laws prohibiting “doing an insurance business” in the state without a license. But there is one fact that is glaringly missing from these consent orders: whether or not the companies solicited the sale of insurance to New York residents. New York law – like the laws of most if not all other states – focuses on protecting its own residents from improper solicitation and sale of insurance products. You cannot do so without a NY license, and you cannot aid and abet a non-licensed entity from doing so: protect our own from insurance companies that are not beholden to our laws! There has always been a somewhat fuzzy line regarding aiding and abetting, particularly where members of a group share “back office” facilities in one state regardless of where the group members are

licensed. Over the years, as computer and electronic communication portability and capabilities have expanded and blurred borders, there has been a progression of regulatory opinions addressing the extent of permissible supporting activities. These rulings, however, are hard pressed to keep pace with an ever changing and expanding cyber world, and fining companies tens of millions of dollars is not the way to clarify or catch up. In its abandoned lawsuit AIG argued, among other things, that the activity alleged by the regulators to be illegal did not involve New York insureds and therefore were outside the scope of the law and the New York regulators’ jurisdiction. In its extensive recitation of facts, the AIG consent order is replete with phrases like “multinational companies,” “sales meetings,” group insurance products,” “multinational clients,” “deliveries of multinational pooling reports,” “providing entertainment” and “Road Shows.” What’s missing, however, are operative words like “New York residents,” “New York individuals,” “New York companies” or “New York insureds.” These absences are most conspicuous because of their importance to the issue of doing an insurance business in the state without a license. If in fact the activities of AIG, Met Life and their affiliates actually involved soliciting New York individuals or entities, it would have been so easy – and conclusive – to include those references. But there are no such references and their absence is deafening. If the complained-of activities did not target any New York individuals or entities, then there is a legitimate, unaddressed issue of the propriety of the activities within the scope of the law. By failing to address this argument in the consent order, both AIG and the NY regulators have passed on an opportunity to clarify an important issue, particularly in this era of cyber-communications. This failure also has the potential for unintended consequences such as chasing businesses and jobs out of the state. So long as NY resicontinued on page 8

6 November 22, 2014 / INSURANCE ADVOCATE

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[ INSIGHT ] sions regarding its actual conduct. On the other side, the DFS seems to have gone out of its way to ignore these issues. This result further underscores the reality that NY’s DFS no longer issues opinion letters even though authorized to do so by statute. As a consequence, there is no mechanism short of litigation for companies, agencies, other licensees, insurance consumers, or their providers and advisors to formally seek answers to ambiguous or unclear questions. Was the old system of routinely

continued from page 6

dents are protected, NY’s regulators should be encouraging and not discouraging legitimate cyber businesses providing all kinds of promotional support to entities worldwide. But why should these businesses locate in NY and risk the wrath of NY’s long arm of the regulator? It is likely that AIG abandoned its arguments in light of having been caught in significant misrepresentations and omis-

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Penalties and fines should not be the insurance regulators’ equivalent to speed traps for the unwary. They should also not be the only mechanism for a regulated company to learn the parameters of a regulator’s interpretation of the rules.

issuing opinions overused and abused? Possibly. But even if a cutback was warranted, to shut down the statutorily authorized process altogether is an overreaction that fosters uncertainty and could encourage licensees (i.e., AIG?) to provide misleading or incomplete information to the regulators in fear of crossing some undefined line. Let me be clear: it is never a good idea (not to mention being contrary to law) to lie to or mislead your regulator. But it is also inappropriate for regulators to impose penalties on licensees without a clear line between acceptable and unacceptable conduct. Penalties and fines should not be the insurance regulators’ equivalent to speed traps for the unwary. They should also not be the only mechanism for a regulated company to learn the parameters of a regulator’s interpretation of the rules. AIG was wrong to mislead the regulators. The regulators are equally wrong in not using or providing for an opportunity to clarify the rules.[IA]

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[ EXPOSURES AND COVERAGES ]

By Jerome Trupin, CPCU

Cyber/Data Breaches “There are only two types of companies: those that have been hacked, and those that will be. Even that is merging into one category: those that have been hacked and will be again.” Robert Mueller, former director of the FBI.1 Cyber/data breaches2 are big news. And it’s not just the Targets and Home Depots of the world. Firms large and small are targets. Some authorities say that smaller firms are desirable targets because they have less sophisticated (or non-existent) protection. In 2013, the New York Attorney General’s office recorded more than 900 data security breaches. (The total number of breaches was undoubtedly greater. Nine hundred is the total of breaches that were reported to the AG’s office. There were many breaches for which reporting wasn’t required as New York law requires reporting only when 5,000 New York residents’ information has been lost or stolen. And there were undoubtedly some that were required to be reported, but weren’t.) Particularly interesting was that hacking was not the only data security breach category to reach record highs; 2013 was also a record year for insider wrongdoing and inadvertent data disclosure events. Entities experiencing a data breach covered the entire spectrum of New York business. The list included firms in the retail services, financial services, health care, banking, insurance, professional services, educational, government agency, loan services, hospitality, technology, telecommunications, credit reporting, credit card, nonprofit, and public utility sectors.3

Particularly interesting was that hacking was not the only data security breach category to reach record highs, 2013 was also a record year for insider wrongdoing and inadvertent data disclosure events.

Westchester-Fairfield-Hudson CPCU chapter presented a panel discussion of cyber and data risks on November 21st that was chock full of interesting information. A key point was that the inevitability of being hacked doesn’t mean you shouldn’t lock the door and put bars on the windows. Loss control is always the first place to start. Requiring that all data be encrypted, including that stored on laptops, has jumped to the top of the loss prevention list. Laptops get lost or misplaced and are often stolen for the value of the hardware, not for the information stored on them. State laws require notice to those whose unencrypted PII (personally identifiable information)4 was stored on a misplaced or stolen computer as well as when it’s stolen by hacking. The theft of a laptop belonging to a South Carolina college staff member concontinued on page 12

1 Robert S. Mueller, III, RSA Cyber Security Conference, San Francisco, CA March 01, 2012 http://www.fbi.gov/news/speeches/combating-threats-in-the-cyber-world-outsmarting-terroristshackers-and-spies (accessed 11/22/14) 2 There is no standard nomenclature for cyber and data breach insurance. Insurers use various names for their products, e.g. Cyber Edge, Privacy/Data Breach, and Data Compromise Coverage. Because most policies cover loss of data by physical means (for example, theft or loss of records) as well as cyber breach, I’ll generally refer to these policies as data breach insurance. 3 Office of New York State Attorney General Eric T. Schneiderman “Data Breaches are an Increasing Menace,” pages 5 and 6. http://www.ag.ny.gov/pdfs/data_breach_report071414.pdf (accessed 11/24/14 4 In New York, PII (personally identifiable information) includes name, Social Security number, biometric records, date and place of birth, mother’s maiden name, driver’s license number, or financial account information. Potential access to two of these items triggers the requirement to notify when a sufficient number of individual records have been breached.

10 November 22, 2014 / INSURANCE ADVOCATE

Jerome Trupin

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

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As we enter 2015 and look back at 2014, the N New ew Y York or o k IInsurance nsurance Association Association (NYIA) would like to thank all of our memb members ers for o supporting the association. ork Member companies partnering to improve the business climate in New Yo de a diff ffe erence. Whether it was holding the line on insurance taxes, has made assessments and fees e , providing companies with greater financial latitude when undergoing technological upgrades, or diversifying and simplifying board of director req quirements, NYIA NYIA members members came came together together to to create create change change..

thank you Allegany Insurance Group Allstate Insurance Company American European Insurance Group American International Groupp, Inc. American Transit Insurance Company Associated Mutual Insurance Cooperative Broome Co-operative Insurance Company Callicoon Co-Op Insurance Company Central Co-Operative Insurance Company Chautauqua Patrons Insurance Company Claverack Cooperative Insurance Company Community Mutual Insurance Company, a Union Mutual Affiliate Country-Wide Insurance Company Countryway Insurance Company Dryden Mutual Insurance Company Erie and Niagara Insurance Association Erie Insurance Group Eveready Insurance Company Farmers Group, Inc. Farmers Mutual Insurance Company Finger Lakes Fire and Casualty Company Fire Districts of NY Mutual Insurance Compan p y, Inc.

Franklin Fire Insurance Company Fulmont Mutual Insurance Company Genesee Patrons Cooperative Insurance Company Greater New York Mutual Insurance Company GUARD Insurance Group Hartffor o d Steam Boiler Inspection & Insurance Co. Hereffor o d Insurance Company Interboro Insurance Company Kingstone Insurance Company Leatherstocking Cooperative Insurance Company Livingston Mutual Insurance Company Madison Mutual Insurance Company Magna Carta Companies MAPFRE Insurance Company of New Yoork Maya Assurance Company Medical Liability Mutual Insurance Company Merchants Insurance Group Mercury Insurance Company Meredith Insurance Company Michigan Millers Mutual Insurance Company Mid-Hudson Co-Operative Insurance Company Midrox Insurance Company Midstate Mutual Insurance Compan p y

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

Our members share a culture of hard work and they epitomize the meaning of integrityâ&#x20AC;&#x201D;fundamentals that have served NYIA well for o more than 130 years. The association is for o tunate to have such dedicated members who represent the best aspects of the property and casualty insurance industry. N NYIA YIA is proud proud to to rrepresent epresent each of y you. ou.

Millville Insurance Company of New Yoork Nationwide Insurance Norfoolk & Dedham Group North Country Insurance Company Ontario Insurance Company Oswego County Mutual Insurance Company Otsego County Patrons Co-Op Pittstown Co-Operative Fire Insurance Company Prefferr e ed Mutual Insurance Company Progressive Northern Insurance Company Sauquoit Valley Insurance Company Security Mutual Insurance Company State Farm Mutual Automobile Insurance Company Sterling Insurance Company Tower Group, Inc. Union Mutual of Vermont Companies United Frontier Mutual Insurance Company Utica First Insurance Company Utica National Insurance Group Walton Cooperative Fire Insurance Company Washington County Co-Op Insurance Company Wayne Cooperative Insurance Company

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[ EXPOSURES AND COVERAGES ] continued from page 10

tained the PII of 20,000 former and current students. Because the information was not encrypted, the college was required to notify all 20,000 even though there was no evidence that the thief had ever done anything with the files; the laptop was probably stolen for its value as hardware, not because it contained marketable data.5 Encryption creates a safe-harbor exemption from the notice requirement in most states. Assembling the names and addresses of 20,000 students and sending letters to them is no small job, but it’s only the small part of the potential damages from a cyber/data breach. Some of the other possible costs include: • Finding and hiring a “breach coach” (someone, usually an attorney, who has experience in the steps to take to cope with a cyber/data breach). • Finding and hiring an expert to test the system and determine the extent and cause of the breach. • Providing credit monitoring to assuage affected individuals. Notification expense can be costly, especially if the firm decides to offer credit monitoring services to its affected customers. (An argument in favor of offering credit monitoring is that, on average, only 10 percent of those who receive the offer will accept, but everyone seems to appreciate the gesture even if they don’t accept.) • Setting up and staffing a call center to handle questions from those whose data has been lost. • Retaining a public relations/crisis management firm to lessen the damage to the firm’s reputation. • Responding to the credit card issuers’ demands for reimbursement of their cost to replace the cards, which can be as much as $8 per card. (When credit card numbers and pins are stolen, credit card issuers frequently distribute new cards.)

Forty seven states, the District of Columbia, Puerto Rico, Guam and the Virgin Islands have laws requiring businesses to notify those whose information may have been breached. The law applies to any firm doing business in the state, not just business domiciled in the state. Most of these items can be covered by insurance. The first two alone are good reasons for small firms to purchase the insurance. Insurance companies that specialize in cyber/data breach insurance can immediately recommend qualified sources for these services. Forty seven states, the District of Columbia, Puerto Rico, Guam and the Virgin Islands have laws requiring businesses to notify those whose information may have been breached.6 The law applies to any firm doing business in the state, not just business domiciled in the state. The loss of information pertaining to state residents also triggers a requirement to notify authorities, generally the state attorney general, if the number of records exceeds a certain figure, frequently 500. In New York, the number is 5,000 and in New Jersey it is 1,000, but Connecticut seems to require notice even if only one resident’s information is compromised. To add to the tasks faced a firm whose records have been breached, New York requires that the breach be reported to three agencies: the NYS Attorney General, the NYS Office of Information Technology Services’ Enterprise Information Security Office, and the Department of State’s Division of Consumer Protection. Experienced cyber/breach professionals

recommend notifying attorneys general in the affected states as soon as possible when required by law. Delayed notice leads officials to think you have something to hide. In addition to state cyber/data breach regulations, Federal rules apply in certain situations. HIPAA covered entities and their business associates must provide notification of the breach to affected individuals, the Secretary of the Department of Health and Human Services, and, in certain circumstances, to the media. HHS issued regulations called for by the Health Information Technology for Economic and Clinical Health (HITECH) Act requiring health care providers, health plans, and other entities covered by the Health Insurance Portability and Accountability Act (HIPAA) to notify individuals that their health information records are breached.7 What’s more, the Federal Trade Commission is getting active in the cyber/data breach area. In April 2014, a Federal court held that the FTC could take action against Wyndham hotels for failure to protect customers’ PII.8 In addition to encrypting all data, firms that accept credit cards should become PCI (Payment Card Industry) compliant; most already are. Other recommended loss prevention steps are: • Install and maintain firewalls • Use anti-virus software • Don’t use vendor-supplied system for passwords or other security measures • Restrict access to data on a “need to know” basis • Assign unique user IDs to everyone with system access • Restrict physical access to servers • Track and monitor who is accessing data • Regularly test security systems and processes Let your clients know that these are important protections. It’s a good way to open a discussion of cyber/data breach insurance.

5 Megan Goldschmidt, “College Laptop Theft Affects 20,000” Data Breach Today July 14, 2014 http://www.databreachtoday.com/college-laptop-theft-affects20000-a-7055 (accessed 11/24/14) 6 The three states that don’t are Alabama, South Dakota & New Mexico 7 “HITECH Breach Notification Interim Final Rule” Department of Health & Human Services. http://www.hhs.gov/ocr/privacy/hipaa/understanding/ coveredentities/breachnotificationifr.html (accessed 11/24/14) 8 Brent Kendall “Judge Backs FTC’s Authority in Data-Breach Case” Wall Street Journal April 7, 2014 http://online.wsj.com/articles/SB10001424052702304819004579487832665956494 (accessed 11/24/14)

12 November 22, 2014 / INSURANCE ADVOCATE

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[ EXPOSURES AND COVERAGES ] What does Cyber/Data Breach Insurance Cover? Data breach insurance is similar in many ways to standard insurance coverages like homeowners or BOP policies; it combines first and third party coverages. The usual first-party coverages include: • Repair or replace damaged or corrupted equipment and records • Customer notification expenses and credit protection services • Business income and extra expenses due to damage to intangible property Business income loss due to destruction of tangible property is handled by standard property coverage. However, those coverages exclude or severely limit coverage for business income and extra expense resulting from loss or damage of intangible property like cyber and data. Most cyber/data breach policies can provide business income coverage. The coverage mirrors standard business income coverage. For example, if hackers corrupt an on-line retailer’s computer system, the business income loss will be similar to one that might occur if a fire damaged its premises. The insurance will also provide extra expense coverage to get the insured up and running again. • Cyber Extortion Payments While they don’t send a message with words cut out of a magazine demanding a ransom payment to restore your files, cyber extortion is a booming industry! In the past month both a consultant I work with and a client were victims. In both cases the story was the same: booting their computers brought up a message that all files were locked and demanding a ransom to unlock them. Payment was demanded in bitcoins—bitcoin is a software-based online payment system which the US Treasury has called a decentralized virtual currency. It’s attractive for legitimate uses as the transaction costs are much less than the 2-3% charged by credit card companies. It’s even more attractive for criminal use because there’s no central authority, making the transactions very difficult to trace.9

Cyber/data coverage insurance premiums are on track to exceed $2 billion for 2014; twice the premium volume written just last year. This is an area that calls for your involvement.

The outcome was different in the two cases. Our client’s IT people were able to restore all vital files. My consultant associate was not as fortunate. He was unable to get his files restored. He’s struggling to recreate vital records (and no, he didn’t have insurance). Cyber extortion coverage, like kidnap and ransom insurance, will pay for a skilled negotiator to deal with the “kidnappers” and will reimburse the insured for any ransom paid with the insurer’s consent. Incidentally, in both cases that I heard about, the victims were advised not to pay the ransom. IT people generally feel that making a payment will not generate any response other than, possibly, a demand for more payments. Responding to someone who has already been hacked increases the chance that the hacker will be identified. Third Party exposures include: • Claims based on acts, errors, or omissions that result in or follow a cyber/data breach • Fines or penalties assessed in a data privacy regulatory proceeding • Invasion of the right to privacy • Breach of contract and violation of consumer fraud act • Regulatory actions including fines and penalties In addition, the policies usually provide coverage for claims based on transmitting viruses, denial of service attacks, etc. that corrupt the recipient’s computer system. There’s no standard cyber/data policy form. Not every insurer offers every cov-

erage and not every insured needs all of them. One insurer offers the following coverages: • Multimedia liability • Security and Privacy liability • Privacy Regulatory Defense and Penalties • Privacy Breach Response Costs, Notification Expenses, Breach Support and Credit Monitoring • Reputation repair assistance • Network Asset Protection • Cyber Extortion • Cyber Terrorism You have to compare the policy forms to find one that’s cost-effective. Some authorities recommend working with an intermediary who specializes in cyber/data insurance. Policies can sometimes be tweaked to broaden cover. Some areas to check suggested by the panelists at the CPCU seminar include: • Be sure that the virus definition is broad enough to provide broad coverage for hacking. • If possible, broaden the definition of customer information to include confidential information and trade secrets. • Look for coverage for regulatory matters (e.g., FTC). • Be sure that the liability section provides coverage for fines and penalties including penalties called for under PCI compliance agreements. Cyber/data coverage insurance premiums are on track to exceed $2 billion for 2014; twice the premium volume written just last year. This is an area that calls for your involvement.[IA]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889

9 The Payment Card Industry association (PCI) sets standards that those who accept and process credit card payments should follow and evaluates firms for compliance. 10 “Bitcoin” Wikipedia entry http://en.wikipedia.org/wiki/Bitcoin (accessed 11/22/14)

INSURANCE ADVOCATE / November 22, 2014 13

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[ THE SOCI AL NOTEBOOK ]

By Chris Paradiso

Time it Right—The Value of Timing When Using Social Media for Your Business

ow more than ever, social media is a critical aspect of business. Many different platforms are used to ensure you are reaching your target audience, and getting your message across clearly. Every day we pin, tweet, and post about our business to maintain our social media presence and reach out to our audience. It is certain that what you are posting, and who you are reaching out to is important. However, another factor that has been found to be just as important is timing, when you are using social media to better reach your viewers. This topic has been thoroughly evaluated, and has shown that there are indeed ideal times to be posting to ensure your content is getting the most attention Chris Paradiso possible. Every social media platform holds its own unique “best post time” for its own reasons, so pay close attention! Let’s begin with Facebook, a brilliant way to interact with your audience through posts, pictures, advertisements, contests, and more! So, when is posting to Facebook proving to be most beneficial? Time-wise, 1pm-4pm is the time window that results in the highest average click-through. Furthermore, Wednesdays at 3pm have been determined as a peak time. Another great time to post is 6-8am, when your viewers are scrolling through Facebook to awaken their tired eyes. Engagement rates are 18% higher on Thursdays and Fridays, and 32% higher on weekends. Also, posts published on Sundays have the greatest interaction per post. So what do all these days and numbers tell us about your audience’s engagement on Facebook? They tell us that Facebook is the “go to” for winding down the workday and workweek, and is most definitely what users are doing when they are not working. Also, keep your camera handy — when using Facebook photos generate higher engagement which result in 53% more likes and 104% more com14 November 22, 2014 / INSURANCE ADVOCATE

The nature of Instagram makes it a perfect “go to” app for anytime posting. ments. Pages that post between 1.5-2 new posts per day engage (on average) twice as many users as pages that post once or twice per week. Furthermore, you should never post more than one time per day if you can’t provide any value to your followers. So choose quality over quantity! Another big weekend “go to” is Pinterest, where you can discover, create, share, and collect visual bookmarks. The best day and time to be engaging with Pinterest is Saturday morning. The best time in general falls between 8-11pm, and peak time is Fridays at 3pm. As you can see, the least beneficial time to be using Pinterest is during normal work hours. Of course this doesn’t mean to ditch Pinterest during work hours altogether, but be more mindful of using it when you can get the most of your audience’s attention. Tweet Tweet! What’s that sound? Twitter of course, a little bird that might just be sitting on the shoulders of many during their workday. Research shows that the best time to be posting to Twitter is MondaysThursdays 1pm-3pm, and the peak time being Mondays-Thursdays 9am-3pm. Although these peak times fall more into the workday than the statistics for Facebook and Pinterest, it is important to keep in mind that Twitter engagement goes up 30% on the weekends. Also, the chances of retweets are better in the afternoon. Tweets with images result in: 36% increase in clicks, 31% increase in visits, 41% increase in retweets, 48% increase in favorites, 55% increase in leads, and 33% increase in visitor-to-lead conversion rate. Google Plus is Google’s shot at social networking. Their services function and serve very similarly to those of Facebook. The best time to be using Google Plus is 9am-10am, with peak time being Wednesdays at 9am. It may also be beneficial to know that Google Plus’ fastest growing demographic is 45-54-year-olds. Always

remember to know your audience! Instagram seems to be a unique and most loved social media platform among users. There are more beneficial times to post, however any time is also a great time. The nature of Instagram makes it a perfect “go to” app for anytime posting. Peak days for posting on Instagram are Thursdays; however Sundays are deemed most effective. The most effective posting times fall after work from 5pm-6pm. Keep in mind though, Instagram is helpful anytime, so post whenever you’d like! Blogging is also a very effective way to communicate with your audience and keep them up to date with what’s going on in your businesses. There is a significant separation between when blogs are published and when viewers have time to read them. Blog posts are more effective on Weekends and blogs posted on Saturdays have the greatest share of social media interactions. Blogs posted between 10-11pm see the most interactions. Keeping your target audience, message, and ideal posting times in mind is a formula for success when using social media in your business. Be consistent, stay engaged, and fuel your content with all of these aspects so social media can better serve you, and you can better serve your audience. [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.

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[ IN THE ASSOCIATIONS ] HUDSON VALLEY RAP

Hundreds Gather to Discuss Insurance-Related Issues at Tappan Zee Bridge Site

nsurance professionals from both sides of the Tappan Zee Bridge and across the Hudson Valley convened recently at the Professional Insurance Agents of New York State Inc.’s Hudson Valley Regional Awareness Program at the Doubletree Hotel in Tarrytown. “Hudson Valley RAP has become an institution over the past decade, almost as much as the Tappan Zee Bridge itself,” said PIANY President Anthony A. Kubera, CIC. “It’s not a coincidence that today’s event has a thematic thread that involves the Tappan Zee. It is a concrete and symbolic representation of two issues that PIA has put on the top of its efforts: certificates of insurance and New York’s unique Labor Law, 240/241(a).” During his inaugural address, Kubera encouraged PIANY members to get involved in PIA’s legislative efforts, including their local District Office visits, going on now, as well as their area Advisory Council meetings. “Come see what happens at PIA—hear what we are doing, and share what you, as a professional, are experiencing. Tell us what you need. We want to hear from you; we need your input and your participation because PIA’s ability to move quickly when change occurs, to recognize and respond to our members, relies on the input you give us.” Certificates of insurance, and the impact of the improper use of them, was one of the featured topics of this year’s Hudson Valley RAP, in addition to New York State’s Scaffold Law and the Tappan Zee Bridge construction project. The daylong event featured an award presentation; education sessions; a trade show featuring some 50 exhibitors; an address by newly elected PIANY President Kubera, CIC, of Russell Bond & Co.; and more.

Keynote address Keynote speaker Rockland County Executive Ed Day, discussed how insurance rules and policies—including New 16 November 22, 2014 / INSURANCE ADVOCATE

Certificates of insurance, and the impact of the improper use of them, was one of the featured topics of this year’s Hudson Valley RAP, in addition to New York State’s Scaffold Law and the Tappan Zee Bridge construction project.

York’s Scaffold Law—are taking a part in the Hudson Valley’s biggest reconstruction project of the century—the replacement of the Tappan Zee Bridge, the largest construction project in New York state history ($3.9 billion). According to Day, the Scaffold Law costs New York taxpayers about $785 million annually. Local governments pay higher costs for capital projects—such as the Tappan Zee Bridge—whether the work is done directly or through private contractors. In fact, it’s estimated that $2 to $4 million of the cost of the Tappan Zee Bridge is because of the Scaffold Law. “Liability costs for one joint New YorkNew Jersey bridge project are more than double on the New York side than on the New Jersey side—approximately $22 million, compared to $10 million,” said Day. “More than half of the top-30 settlements resulted from Scaffold Law claims and of those settlements 25 percent were against public entities. As taxpayers, we bear that cost.” Day said that Scaffold Law-related cases are up 500 percent in New York State since 1990, even though the rate of workplace injury has decreased in the same time. “The Scaffold Law has driven insurance costs through the roof, resulting in higher premiums, more coverage exemptions and fewer carriers in the market,” he stated. In short, New York’s unique Scaffold Law has

a tremendous impact on every aspect of the Tappan Zee Bridge project and is critically important for insurance professionals to understand its unique legal and financial implications.” He encouraged everyone in the room to reach out to their state representatives to advocate for changes to the Scaffold Law. In preparing for his speech, Day said he talked to someone who is knowledgeable about it. “It was eye-opening to me as an elected official, so I think it’s important that you advocate with your state representatives to get this law changed.” During the luncheon, Frances A. Scott, chair of the Hudson Valley RAP Committee, presented Cal Durland, CPCU, with the Industry Professional of the Year award. Durland is director of industry relations for ACORD. This award recognizes an individual from an insurance company, general agency, managing general agency or other insurance industry profession, who has demonstrated qualities that foster a strong working relationship with agents and brokers, and who has exemplified a commitment to professionalism and service. As she introduced Durland, Scott said, “She was a leader in developing the ACORD 855 form; the product of an industry-wide effort to help insurance agents and their construction clients deal with the requests of third-parties for certificates that may misrepresent that coverages exist in insurance policies.” “As I led the ACORD User Group Information Exchange, which is an agentled community of ACORD, I’ve found out all the opportunities where we can help the agents to grow their business and service their clients,” said Durland, as she accepted her award. “So ultimately ACORD is forms and standards, but it’s about helping you with work coefficiency.”

Education RAP participants, who needed valuable continuing-education credits, were able to

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[ IN THE ASSOCIATIONS ] choose from two classes. In the mornIf an agent disagrees with a coning session, PIANY past President tract’s provisions, the agent should Richard A. Savino, CIC, CPIA, and tell the company, in writing, before Tom Tripodianos, Esq., led The signing the contract and try to negoImpact of New York Labor Law on tiate a resolution. “This practice often Construction Insurance. results in agency agreements that are During their discussion, Savino more beneficial to independent and Tripodianos presented different agents and insurance companies. scenarios in which agents need to send Insurance companies will realize that their clients to other experts (e.g., docto secure superior agents, they should tors and lawyers), rather than do draft their agency agreements to things (e.g., send sample language of address the concerns of both the contracts), that could get them in trouagent and the company,” said ble later. Guilbault. “We are not attorneys,” said Savino. “As insurance folks, we need Networking to stay out of it. You can’t rely on your Hudson Valley RAP provided E&O coverage to protect you later.” To participants with ample time to help agents protect themselves, Savino catch up with old friends and make said that once an agent agrees to new business contacts. The trade review a contract for a client, the agent show gave people the chance to see should send the contractor a disthe latest innovations, products and claimer that states that the agent can markets. only review the contract’s insurance The PIANY-Young Insurance PIANY PRESIDENT ANTHONY A. KUBERA, CIC, ADDRESSES THE requirements, not the contract itself. Professionals’ networking reception CROWD AT HUDSON VALLEY RAP’S LUNCHEON. In the afternoon, Cathy Trischan, ended this year’s event and gave CPCU, CIC, CRM, AU, AAI, ARM, attendees one last chance to meet up CRIS, MLIS, discussed Insuring New York with colleagues. Contractors–The E&O Perspective. For more information on this year’s “Hudson Valley RAP has From an errors-and-omissions perspecevent—and to see videos and photos—log become an institution over tive, Trischan said it is important for agents on to the PIANY website (pia.org). the past decade, almost as to have detailed conversations with their Plans are already under way for next year’s Hudson Valley RAP, watch your PIA contractor clients to better assess their much as the Tappan Zee publications for details. [IA] insurance needs and protect themselves Bridge itself.” from E&O claims. According to Trischan, agents need to - PIANY President look beyond what their clients are doing Anthony A. Kubera, CIC. now and review the projects they’ve done in the past—to make sure they have the necessary completed operations coverage. She said agents should also check to make sure Industry Resource Center at resourcecenthey are using the same definitions (e.g., ter@pia.org. how does the client define a story?). “It is crucial that agents know what Offering advice about how to handle a advantages and disadvantages to look for client who doesn’t seem to care about his or when reading agency agreements,” said her insurance coverage, Trischan said, “It all Guilbault. “By knowing what to look for, comes down to disclosure. Coverage check- agents are able to choose the best opportulists are a good idea and can help you defend nities available at the present and look for your agency when a claim comes along.” better opportunities in the future.” At the morning’s PIA benefits discusDuring the presentation, Guilbault sion, Kubera and PIANY Director of reviewed the basic parts of every Government & Industry Affairs Matthew agency/company contract—definitions, F. Guilbault, Esq., discussed how PIA pro- ownership of the book of business, forfeivides members with an expert legal review ture of ownership, commission, terminaof members’ agency/company contracts. tion, successor clause, contingency agree- KEYNOTE SPEAKER ROCKLAND COUNTY Agents interested in taking advantage of this ment, etc.—and the importance of having EXECUTIVE ED DAY, DISCUSSED NEW YORK’S PIA-member benefit should email PIA’s everything in writing. SCAFFOLD LAW. INSURANCE ADVOCATE / November 22, 2014 17

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[ IN THE ASSOCIATIONS ]

(L TO R) PIANY PAST PRESIDENT RICHARD A. SAVINO, CIC, CPIA, AND TOM TRIPODIANOS, ESQ., IN THE MORNING EDUCATION CLASS ON NEW YORK STATE’S LABOR LAW AT PIANY’S HUDSON VALLEY RAP.

TRADESHOW

CATHY TRISCHAN, CPCU, CIC, CRM, AU, AAI, ARM, CRIS, MLIS, DISCUSSES INSURING NEW YORK CONTRACTORS–THE E&O PERSPECTIVE

(L TO R) TOM TRIPODIANOS, ESQ., AND PIANY PAST PRESIDENT RICHARD A. SAVINO, CIC, CPIA HUDSON VALLEY RAP COMMITTEE CHAIR

FRANCES A. SCOTT PRESENTS CAL DURLAND, CPCU, WITH THE INDUSTRY PROFESSIONAL OF THE YEAR AWARD 18 November 22, 2014 / INSURANCE ADVOCATE

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[ ON TH E LEVEL ]

By N. Stephen Ruchman, CPIA

Something to be Thankful for

wo weeks before Thanksgiving, I drove to Glenmont PIA headquarters for our committee and board days. On the way up, I crossed the Tappan Zee Bridge. For anyone who hasn’t driven over the bridge recently, it’s amazing to see the cranes, the pilings going in and the amount of progress being made on this construction

pensation expense. Employers’ liability and general liability premiums can expect to absorb $200-$400 million in extra costs due to Labor 240/241(a) claims. That’s a really scary thought. I’ve heard reports that the current toll to cross the bride, which is now $5, will be raised to $15. And, who knows how many

While we’re considering the Tappan Zee Bridge and all the contractors and tradesmen who are, or will be, working on it shortly, take a moment to imagine all the certificates of insurance that are associated with this project.

project: I could see the caissons being placed and the big cement barges out on the Hudson River and it’s apparent that we’ll see a new structure soon. My insurance background immediately drew my attention to the huge worker injury exposure for the Tappan Zee project. Considering the significant barge work, there will be maritime law exposures in addition to the regular workers’ com-

N. Stephen Ruchman

tax dollars will go into overruns for this project? We do know who pays those taxes: you and me. My second thoughts were about Governor Cuomo and the $5 billion windfall to the State of New York. He certainly has lived up to his promise to turn New York State’s deficit around. Where once our state faced an enormous fiscal shortfall, this year we will see a $5 billion profit, due largely to settlements with banks and insurance

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companies. There are a lot of state agencies that will scramble for a piece of that pie and I’m sure the New York State Thruway Authority will get a slice to pay for the cost of the bridge. However, the construction of the Tappan Zee serves as yet another reminder: That New York is the only state in the union to have a law like 240/241(a). The labor law must be revised. It’s costing our state’s businesses and taxpayers untold millions of dollars in unnecessary fees and premiums. Most of us recognize this unique rule stands thanks to the trial bar and members of the Assembly, which are supported with trial bar contributions. The trial bar lobby is so strong that last year, the top 127 donors gave $16.8 million to their PAC. And, that’s just a drop in the bucket. When you look at the amount raised by the major agents’ associations, the total combined PAC is under $150K. It’s easy to see what an uphill battle we face in this case. We all know the reasons the labor law must be changed, but this is an issue where money talks and common sense is thrown out the window. While we’re considering the Tappan Zee Bridge and all the contractors and tradesmen who are, or will be, working on it shortly, take a moment to imagine all the certificates of insurance that are associated with this project. We have seen certificates that list coverages, endorsements and forms that are not actually on their insureds’ policies. We’ve heard nightmare stories, like the well-publicized crane collapse that took place in New York City a few years ago. When an accident and associated claim occurs, everybody suddenly starts running around wondering why proper coverage was not in place. The certificates of insurance issue has dogged agents and contractors for years. PIA has been working hard to address this issue for years. I’ve written before about the ACORD 855 addendum form, and the association’s numerous meetings with the Department of Financial Services to see whether enforcement measures against inappropriate use of certificates can be enacted and strengthened. I’m happy to say that both—the New York State Assembly and the Senate—passed bills that

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[ ON T HE LEVEL ] regulate certificates. In 2013, similar legislation was vetoed by the governor. This year, the association and lawmakers again passed a bill, which addressed concerns the governor cited in his last veto. As I write this column, the week before Thanksgiving, the bill has not yet been sent to the governor’s desk for signature. We hope Governor Cuomo will do the right thing and sign the law. I commend all the PIA members who have sent letters to our governor in support of this bill. We need a strong push for him to see how important addressing the certificates issue is to so many people. If you have not yet sent a letter, I urge you, regardless if you are a member or not, to go to the PIA Website, see the sample letter and send yours in. For years, I have heard about abuses caused by certificates. Now is our chance to correct the situation. I’m asking everyone now to step up to the plate. There is no reason remaining for the governor to not sign it. The issues of New York’s labor law and certificates of insurance have played a central role in PIA’s legislative efforts for too long. As the association met and discussed the issues on which we plan to work for the upcoming year, we all voiced a desire to get these priorities done, and move on. It certainly would be something to be thankful for. N. Stephen Ruchman, CPIA, is a retired partner of B&B Coverage LLC, and founder of Ruchman Associates Inc., the agency he started in 1961. A past president of the Professional Insurance Agents of New York State Inc., he is an active supporter of PIANY, and has sat on, or chaired, nearly every committee including the Executive Committee and the Long Island Advisory Council and PIANY’s Political Action Committee. A graduate of Michigan State University, with a major in insurance, Ruchman is past president of the Peninsula Counseling Center and a member and past president of the Rockville Centre Chamber of Commerce board of directors. He is division chair for the Insurance Division of the United Jewish Appeal and has served on the business advisory board of The First National Bank of Long Island. He can be reached via email at nsruchman@ gmail.com.

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[ FEATURE ]

GNY Marks 100 Year Anniversary Three hundred gather to celebrate venerable New York Company’s first century G

reater New York Insurance Companies, nationally recognized specialists in insuring commercial and habitational real estate as well as other commercial classes of business celebrated its 100th anniversary on Thursday evening, November 6th, 2014 with a Gala Anniversary Dinner including elected and regulatory officials, brokers, company executives and industry leaders. The celebration, held at New York’s historic Union League Club, featured the unveiling of a three dimensional art retrospective with the theme, “Since 1914. Standing Strong.” During the program, Senator James L. Seward, Chairman of the New York State Senate Insurance Committee, welcomed guests and presented a proclamation by the New York State Senate commemorating the 100th anniversary of the company, and recognizing its achievements in serving the economic well-being and interest of the people of the State of New York. New York Executive Deputy Superintendent of Insurance, Honorable Robert Easton, offered the congratulations of the Department of Financial Services on achieving the landmark centenary year. Mr. Henry Miller, a Member of the Board of Directors recounted some interesting moments in GNY’s history. MC was Insurance Advocate publisher, Steve Acunto. Ms. Elizabeth Heck, President and COO of the Company told attendees that the Company’s early beginnings set the stage for careful underwriting, prudent loss control, and superior claims handling:

22 November 22, 2014 / INSURANCE ADVOCATE

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[ FEATURE ] “While the Company has evolved over the decades, Greater New York Mutual Insurance Company stayed true to its core beliefs.…” “While the Company has evolved over the decades, Greater New York Mutual Insurance Company stayed true to its core beliefs. Those same core competencies provide a strong foundation for moving the Company forward into the next century.” Ms. Heck, who will succeed Warren Heck as CEO, pledged to sustain the high standards that have characterized the Company’s progress to date: “The GNY community thrives on high standards of excellence, efficient service, and, most important, on the expectation of business conducted with honesty and integrity. These characteristics marked our progress since 1914 and will mark it as we advance over the years ahead.” Mr. Warren Heck, Chairman of GNY, who preceded Ms. Heck as President from March 1983 to March 2001 was honored by the Company and its guests during the evening, as he passed the 52-year mark of service to GNY and its community. Mr. Heck, who is the fourth Chairman and CEO of GNY Companies and is a recipient of the prestigious IFNY Free Enterprise Award, offered a history and perspective on the founding and development of GNY from its startup days on New York’s lower east side to today’s growing enterprise with 360 employees, 12,000 policyholders and a presence in 15 states. In speaking about his three predecessor CEOs from the formation of the Company, Mr. Heck said, “All were people with high ethical standards completely committed to the future of the Company and its employees; they understood the importance of being disciplined in underwriting, that liability claims and suits had to be skillfully investigated and defended, and that claims had to be paid promptly and fairly, which became the basic foundation of the culture of the Company.” Mr. Heck observed: “If ever there were a company dedicated to New York City, to the well-being of its residents and policycontinued on page 24

ELIZABETH HECK AND WARREN HECK STAND IN FRONT OF THE COMPANIES’ 100TH ANNIVERSARY COMMEMORATIVE ART THEY HAD CREATED FOR THIS EVENT

WARREN HECK AND JOHN ZACK OF ALLIANCE BROKERAGE GROUP

ARTHUR SCHWARTZ, MASTERS COVERAGE AND SUSAN D’ONOFRIO, GNY

L-R: ALAN GEISENHEIMER, GIA INSURANCE AGENCY AND DORON GOLDSCHMIDT, MAX FLUSS

NEIL DAVIDOWITZ, ORSID WITH ELIZABETH HECK INSURANCE ADVOCATE / November 22, 2014 23

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[ FEATURE ] continued from page 23

holders, we feel it is GNY Companies. As underwriters of New York Real Estate these many years we have protected our brokers and insureds with great dedication and have been rewarded handsomely with the loyalty of so many customers. GNY Companies’ celebration is, in a sense, a celebration of the success of New York insuring in the sectors in which we specialize.” Mr. Heck concluded: “GNY Companies has had only four chairmen in the space of its 100 years, a rather unique characteristic for any business, and has arranged for succession that will, we believe, continue the tradition established by our predecessors. Our predecessors have set the groundwork for a great company that is destined to have a successful future.” GNY Companies, founded in 1914 has been continuously located in Manhattan since that time and today serves a growing number of agents and brokers whose clientele include commercial and habitational real estate risks in the fifteen states in which it operates. The Company has enjoyed a rating of A+ from A.M. Best Company for many successive years. GNY Companies is headquartered at 200 Madison Avenue in New York. For further information, please contact Gina Balog with CINN Group, Inc. by phone at 914-966-3180 x113 or by email at g@cinn.com.

L-R: JIM PILLA, TOA REINSURANCE AND FRANK CHIAPPETTA, GNY 24 November 22, 2014 / INSURANCE ADVOCATE

PHIL BILELLO, TOTAL INSURANCE, ELIZABETH HECK AND ROB GROTSKY, SA GENATT

SARA AFRIDONIDZE, GNY

L-R: GLENN DEKHAYSER, VSI; JIM O’BRIEN, VSI;KATHY ZARZYKI, GNY, AND CHRISTINE KASSON, INSURITY

STEPHEN SMITH, JR., SMITH INSURANCE ASSOCIATES; HERB SEGAL, ENDLAR INSURANCE; STEPHEN SMITH, SR., SMITH INSURANCE ASSOCIATES; AND WARREN HECK

INA 11-17-14_INA 11-17-14 12/4/14 1:08 PM Page 25

[ FEATURE ]

SUSAN SHARP AND DORIS SALIK, GNY

ELIZABETH HECK IS PRESENTED WITH A PROCLAMATION FROM SENATOR SEWARD

HENRY MILLER

STEVE ACUNTO, PUBLISHER, INSURANCE ADVOCATE, WAS GUEST MC

ROBERT EASTON, EXECUTIVE DEPUTY SUPERINTENDENT, INSURANCE DIVISION DEPARTMENT OF FINANCIAL SERVICES

SENATOR JAMES L. SEWARD

WARREN HECK WAS FETED

L-R (TOP ROW): DAVID KLECKNER; DONALD DECARLO, ESQ., HENRY MILLER, ELIZABETH HECK; HAYDN BRILL (BOTTOM ROW): ARLENE HECK; NAT HANAN; WARREN HECK, SENATOR JAMES L. SEWARD; ROBERT EASTON, NYDFS

INSURANCE ADVOCATE / November 22, 2014 25

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[ FEATURE ]

IFNY Annual Luncheon Draws 350; J. Hyatt Brown Honored

ore than 350 insurance leaders joined in the Insurance Federation of New York’s (IFNY) 100th Annual Free Enterprise Award Luncheon to honor J. Hyatt Brown, Chairman, Brown & Brown, as he received the Federation’s 2014 Free Enterprise Award. The honoree’s son, J. Powell Brown, President and CEO of Brown & Brown, IFNY President Nick Pearson and IFNY Director Doug Hayden, presented the Federation’s top honor to Mr. Brown at Cipriani, Wall Street. The Free Enterprise Award’s distinguished recipients are business leaders who have advanced their industry, espousing the principles of free enterprise for which IFNY has stood for since 1913. Recent past recipients of this prestigious award include Robert Benmosche, former President and CEO of AIG, and Evan Greenberg, Chairman and CEO of ACE Limited. In presenting the award, Mr. Pearson noted that “Mr. Brown exemplifies the spirit of entrepreneurship that has advanced American business and the insurance sector in particular. The Insurance Federation of New York congratulates him upon his receipt of our highest award.” In accepting the award, Mr. Brown recounted the simple beginnings of the company and its growth into one of the largest global insurance producers in the world in the space of 30 years. The event’s featured speaker was Benjamin Lawsky, Superintendent of the New York Department of Financial Services. The Luncheon was also an opportunity for the 2014 IFNY Intern Program participants to be recognized for their achievement and share their experience with the attendees. The IFNY Intern Program reaches out into the community and gives highly motivated teens, from challenging backgrounds, an indepth opportunity to learn about the insurance industry in all its facets and to consider a career in insurance. The Program has been generously supported by IFNY members for the past three summers. 26 November 22, 2014 / INSURANCE ADVOCATE

PICTURED L-R: J. POWELL BROWN, PRESIDENT AND CEO, BROWN & BROWN; J. HYATT BROWN, CHAIRMAN, BROWN & BROWN; NICK PEARSON, IFNY PRESIDENT, PARTNER, EDWARDS WILDMAN PALMER LLP; AND DOUGLAS HAYDEN, IFNY V.P., E.V.P. WRIGHT INSURANCE GROUP

Background of Hyatt Brown This year’s awardee, Mr. Brown, was elected by the IFNY to receive the award based upon his accomplishment and service. He is currently Chairman of the Board of Brown & Brown. The company is a publicly owned corporation with its stock traded on the New York Stock Exchange under the symbol BRO (NYSE:BRO). From 1961 to 2007, Hyatt served as Chief Executive Officer and President. In that capacity he was the driving force behind the expansion of Brown & Brown that grew the once modest, local insurance company into a national business that has become the sixth largest insurance intermediary/brokerage in the country and the world. Today, under the leadership of Hyatt’s son Powell Brown, who became CEO in 2007, the company now has over 7,000 employees and over 200 offices in 41 states and three foreign offices including London. In New York alone Brown & Brown has opened 18 offices throughout the state since 2001. In January of this year, Brown & Brown made its largest acquisition to date by acquiring both The Wright Insurance Group headquartered in

Uniondale, New York and Wright Flood headquartered in St. Petersburg, Florida. Mr. Brown is a graduate of the University of Florida, 1959 B.S.B.A. At the University, he was named a Florida Blue Key Leadership Honorary and is a member of the University Hall of Fame. After his formal education, Mr. Brown received both Chartered Property Casualty Underwriter (CPCU) and Chartered Life Underwriter (CLU) designations. Mr. Brown is currently serving on the board for International Speedway Corporation in Daytona and Verisk Analytics, Inc. in Jersey City. He is a retired director of Suntrust, Bell South Corporation and NextEra Energy. In the insurance industry, he has served as Vice Chairman of Florida Residential Property and Casualty Joint Underwriting Association and Chairman of The Council of Insurance Agents & Brokers in Washington. He is a Trustee of Stetson University. Mr. Brown has been active in legislative services as well as civic and educationcontinued on page 28

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[ FEATURE ] continued from page 26

al activities. He was elected to the Florida House of Representatives in 1972 and served as Speaker of the House from 1978 to 1980. In the educational arena, Mr. Brown was on the Board of Regents for the State of Florida from 1982-1989, and served as Chairman of the Board of Trustees at Stetson University. During his active involvement with civic organizations, he served on the Salvation Army Advisory Council, the YMCA Advisory Board, and the Civic League of the Halifax Area. He is a Member of The Florida Council of 100, Past Chairman of Community Action Agency, Past President of Daytona Beach Area Chamber of Commerce, Past President of Futures, Inc., and Past Trustee of Florida Chamber Foundation. In August 1979, Time Magazine named Mr. Brown as one of the Nation's 50 young leaders. In 1977 and 1978, he received the Most Effective Member of the House Allen Morris Award and the Most Valuable Member of the House - St. Petersburg Times Award. In 1998, he was awarded Humanitarian of the Year – Memorial Health Systems. In 2000, he was awarded the Distinguished Alumnus Award from the University of Florida. Investor’s Business Daily named him as one of their “Top 10 Leaders & Success CEOs for 2001” and A.M. Best named him to their list of “People to Watch in 2002” as one of the people likely to affect the course of the insurance industry in the years ahead. He was inducted into the Junior Achievement Mid-Florida Business Hall of Fame on November 18, 2004 in recognition of his outstanding accomplishments in the insurance industry. From a modest family-owned local insurance company, the vision and work ethic established by Hyatt Brown has seen this publicly-owned company, Brown & Brown, with a customer first business strategy and strong financial controls, achieve fourteen consecutive years of double digit bottom line growth.

The Insurance Federation of New York Since 1913, the Insurance Federation of New York has been a force for communicating ideas among all sectors of the insur28 November 22, 2014 / INSURANCE ADVOCATE

L-R: FORMER SUPERINTENDENT, NYSID (2011-2012), JAMES J. WRYNN, GOLDBERG SEGAL; SUPERINTENDENT, NYDFS (2011-PRESENT), BENJAMIN LAWSKY; FORMER SUPERTINENDENT, NYSID (1990-1995), SALVATORE R. CURIALE; AND FORMER SUPERINTENDENT, NYSID (1983-1990), JAMES P. CORCORAN

ance industry, bringing public and private interests together for the benefit of all. The Insurance Federation of New York’s prestigious Free Enterprise Award—presented to some of history’s legendary entrepreneurs— continues to salute risk takers and leaders whose creativity and initiative has enabled the expansion of business throughout New York, across the country and around the world. In the insurance industry, it is the commitment and vision of these leaders that has created and refined the risk transfer mechanism to spur economic growth and contribute to personal financial security for countless millions. Today, the Insurance Federation of New York’s annual calendar of events brings together the “best and brightest” to ensure that industry intelligence is shared and that support for best practices in insurance business, law and regulation earns the understanding of leaders across the spectrum. This shared goal draws business executives, legislators and regulators to our Annual Luncheon, our “Breakfast with...” programs, professional seminars, and other events. We also note the establishment of the IFNY Intern Summer Program. Federation members have given most generously of their time and finances to support this program that reaches out into the community and gives highly motivated teens, from challenging backgrounds, an in-depth opportunity

to learn about the insurance industry in all its facets and to consider a career in insurance. The Insurance Federation of New York is a not-for-profit New York corporation that does not engage in lobbying activities and is open to all. The IFNY Board of Directors includes the following distinguished professionals: Immediate Past Chairman, Cecilia Norat, Cecilia Norat Consulting LLC; Chairman, Lance Albright, Senior Vice President, QBE; President, Nick Pearson, Partner, Edwards Wildman Palmer LLP; Vice Presidents, Michael Fusco, SVP & Chief Actuary, Argo Group; Douglas Hayden, EVP Wright Insurance Group; Financial VP, Stephen Boon, Jr., President, Harold L. Lee & Sons, Inc.; VP and Managing Director, Steve Acunto, CEO, CINN Group, Inc. Directors also include: Kermitt Brooks, Managing Director & Associate General Counsel, AXA US; Roger Moak, Arbitrator; Jonathan Bing, partner Wilson, Elser, LLP; James March, Vice President and Senior Assistant General Counsel, Zurich North America; Howard Mills, Chief Advisor, Insurance Industry Group, Deloitte LLP; Kevin Rampe, General Counsel, ACE North America; Francine L. Semaya, Esq., Legal and Insurance Regulatory Consultant; Edward Notarpole, Vice President Liberty Mutual Insurance

INA 11-17-14_INA 11-17-14 12/4/14 1:08 PM Page 29

[ FEATURE ] Group; Senator Manfred Ohrenstein, Senior Partner, Ohrenstein & Brown, LLP; Elizabeth Heck, President, GNY Companies; Amy Feller, Chubb Group of Insurance Companies; Raul Rivera, Chairman, President and CEO, National Benefit Life Insurance Company; Maura Clancy, Clancy & Clancy Brokerage; David Walsh, CEO Amalgamated Life Insurance Company; James Corcoran, James P. Corcoran, Esq.; Salvatore Curiale; Donald Gabay, Stroock, Stroock & Lavan LLP; William Savino, Partner, Rivkin Radler LLP; Richard Hershman, Senior Managing Director, FTI Consulting, Inc.; and John Hill, II, President & COO, Magna Carta Companies.[IA]

JEANNE BLUM, WESTCHESTER COALITION FOR THE HUNGRY & HOMELESS, INC., AND JIM SUTTON, IIABNY CHAIR

L-R: ELLEN MELCHIONNI, PRESIDENT, NYIA; MARC CRAW, VICE PRESIDENT, NYIA; AND CASSANDRA ANDERSON, CAE, ASSOCIATE VICE PRESIDENT, NYIA

JOSEPH SCOGNAMIGLIO, QUANTUM CONSULTING, INC. AND RON GREENFIELD, AMERICAN TRANSIT INSURANCE CO.

MARK ROLLINS OF THE ROLLINS AGENCY, A DIVISION OF BROWN & BROWN; UNA HAYDEN; TONY GRIPPA, BROWN & BROWN.

IFNY DIRECTOR, ROGER MOAK AND J. HYATT BROWN, IFNY HONOREE

HON. SALVATORE CURIALE, IFNY DIRECTOR; AUDREY SAMERS, ACE GROUP; PETER BICKFORD, ESQ. INSURANCE ADVOCATE / November 22, 2014 29

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[ FEATURE ]

CICI BROWN AND KELIM BROWN

IFNY DIRECTOR DONALD GABAY

IFNY DIRECTOR, KERMITT BROOKS, AXA; IRA SHUMAN, AXA; PAUL BOUCHER, AXA

IFNY DIRECTOR FRANCINE SEMAYA AND SENATOR JAMES L. SEWARD

HON. ROBERT EASTON, NYDFS AND MARTHA LEES, NYDFS 30 November 22, 2014 / INSURANCE ADVOCATE

RICHARD POPPA, CAE, AAI AND STEPHEN ACUNTO, JR.

IFNY IMMEDIATE PAST CHAIRWOMAN CECILIA NORAT AND ROBERT DIUBALDO, ACE

SENATOR JAMES L. SEWARD WITH THOMAS WORKMAN, LICONY PRESIDENT AND JOHN KISSOON, LICONY VICE PRESIDENT & DIRECTOR

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[ FEATURE ]

IFNY CHAIRMAN, LANCE ALBRIGHT OF QBE NORTH AMERICA WELCOMES THE GUESTS

IFNY VICE PRESIDENT AND MANAGING DIRECTOR STEVE ACUNTO, INTRODUCES SPECIAL GUESTS

MARY LANNING OF YES!SOLUTIONS, INC. INTRODUCES THE 2014 IFNY INTERNS. EACH STUDENT SPOKE BRIEFLY ABOUT THEIR EXPERIENCE AND WHAT IT MEANT TO THEM TO BE CHOSEN AS ONE OF THE INTERNS

J. POWELL BROWN 32 November 22, 2014 / INSURANCE ADVOCATE

IFNY HONOREE J. HYATT BROWN

IFNY PRESIDENT NICK PEARSON OF EDWARDS WILDMAN PALMER

IFNY VICE PRESIDENT, DOUGLAS HAYDEN, INTRODUCES POWELL BROWN WHO SPOKE BRIEFLY ABOUT HIS FATHER, THE IFNY HONOREE, J. HYATT BROWN

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[ ON TH E LEVEL ]

By Jamie Deapo

Natural Selection or Apathy?

here is an unhealthy trend occurring in our business caused by inaccurate perceptions and apathy on the part of some independent agents and brokers. They believe they can no longer successfully write and retain personal auto insurance! Some have started to give up on per-

run, independent agency or brokerage. I also believe that it is possible to turn this market around and return market share back to independent agents and brokers. But that turnaround isn’t going to happen without commitment, change and hard work. The answers lie in technology, train-

Your best asset is the knowledge and expertise of your staff. Invest time and money in improving their skill level and it will pay off big. Provide your staff with important marketing and sales skills that allows them to better compete in the marketplace.

Jamie Deapo

sonal insurance all together. They have conceded that market to the direct response carriers who use technology and low cost, commodity marketing. I never thought I would see the day when so many independent agents and brokers have given up and resigned their agency to not being able to effectively grow organically in personal lines. When retired Progressive CEO Peter Lewis mentioned in an article that he predicted 45 years ago the end of the independent agent business, there was a huge uproar amongst agents and brokers. Now it looks like many have accepted what he said and are going to make him into some kind of prophet. Darwin outlined natural selection in his Theory of Evolution. That meant certain members of a species will develop functional advantages that will allow them to rise to the top and the rest of the species would ultimately die out. Is that what’s happening in our industry? Are independent agents and broker destined to be replaced by direct response carriers in writing personal insurance? I contend it’s not natural selection; agents and brokers have been out-marketed and many have conceded without a fight. I still believe that the best way to buy insurance is through a professional, well 34 November 22, 2014 / INSURANCE ADVOCATE

ing, branding and consumer education. You have to use today’s technology to speed up your processes, make you more efficient and allow you more time to spend with clients and prospects. You need to become consumer centric, making your business conform to the needs and wants of today’s insurance consumer. Consumers are much better informed and also want to do business with an agency that understands and meets their needs. Your best asset is the knowledge and expertise of your staff. Invest time and money in improving their skill level and it will pay off big. Provide your staff with important marketing and sales skills that allows them to better compete in the marketplace. Remember they are working with many consumers who have been trained to view insurance as a commodity to be purchased solely on price. Your staff has to be comfortable educating consumers on the fallacy of that approach and getting them to see the value of what you offer. Who is an independent agent or broker and why should a consumer buy from you? You need to educate consumers on the benefit of doing business with an independent agent or broker and specifically with your agency. You already have a brand that is easily integrated with your agency

brand. It highlights the benefits of having a professional who can review their coverage, make recommendations, place them with the best company for their needs at a competitive price and then be there to advocate when they have a claim. That brand is Trusted Choice® and it is slowly gaining momentum. You can speed up that process by getting behind the brand and promoting it in everything you do. You may never have the marketing budget of the national direct response carriers but as a group you can get your message out. You and your staff are real people living in your community, raising families, employing people and supporting local charities and the community. The Gecko and Flo don’t live there. You don’t see them in the grocery store or around town. They are fictional characters meant to humanize doing business with a large corporation. Many millennials and young consumers don’t care for large corporations and prefer not to do business with them. Remind consumers to look beyond the marketing and the hype and make sure they are adequately protecting themselves and their families. A mistake might not just mean a financial loss -- it could also mean painful and permanent long term injuries that go untreated. Consumers need to be reminded that they are buying protection for themselves and their families and having the right protection at a competitive price is the ultimate goal, not the cheapest price for unknown protection with no assistance when a claim occurs. Matter of fact, when you have a claim with a direct response company there is no one to make sure you are properly covered and that you receive all the benefits that you are entitled to. If insurance wasn’t complicated and risky there wouldn’t be so many personal injury lawyers earning a good living filing lawsuit after lawsuit. Buying cheap coverage that ultimately doesn’t protect you properly can affect you for the rest of your life. Many times when I write these columns I have this feeling that readers believe I am naïve or don’t understand continued on page 36

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[ ON T H E LEVEL ]

[ IN THE NEWS ]

continued from page 34

Park Shifts into Drive

ark Insurance has changed gears pretty neatly, moving from its formative stages up to a speed level fit for a promising road ahead. President Tom Polsinelli is at the controls daily, even hourly, measuring and navigating admirably to keep his growing enterprise on the straight and narrow, from personnel decisions to court appearances. It’s the kind of hands on management that delivers better and better results. His pedal skill shows its power in the company’s aggressive approach to claims. He told the Insurance Advocate: “Showing up, taking a ‘no settlement’ approach and having superior market and claims knowledge and excellent files working for us, we have vastly improved our claims results and have given Park a bit of a reputation as willing to fight it out with winning results.” Polsinelli, who grew up in the construction heavy trucking business, has begun to expand further into commercial auto emphasizing often difficult lines: tow trucks, car haulers, tractor trailers, construction and cement trucks and ambulettes. “We are not afraid of wheels,” he stated, “since we know there is a right and profitable way to be creative and to grow in this marketplace – it just takes some courage, a willingness to work claims really hard and a commitment to serve agents’ clients well, all at the same time,” he stated. Park’s expanded staff in Manhattan and Queens is geared up to offer premium financing and is mulling other structural

THOMAS POLSINELLI

“We have streamlined and refined operations to be able to deal with fewer, better risks and with agents and brokers seeking a better level of relationship, as we grow.”

changes and refinements: “We have streamlined and refined operations to be able to deal with fewer, better risks and with agents and brokers seeking a better level of relationship, as we grow,” he stated. “Our engine is running efficiently and powerfully; watch us in 2015 and beyond,” he concluded.[IA]

FOR ADVERTISING OR SUBSCRIPTION INFORMATION Call 914-966-3180

insurance-advocate@cinn.com Serving New York and New Jersey’s Agents and Brokers for 125 years. Like us on Facebook… www.facebook.com/InsuranceAdvocate 36 November 22, 2014 / INSURANCE ADVOCATE

what it is really like to compete in today’s marketplace. That couldn’t be further from the truth. I realize that what I write are just words in an electronic document, however I truly believe what I say. I realize that to make these things happen will take dedication and hard work but the alternative is to give up and lose what you have worked so hard to build. Maybe you’re nearing retirement and you just want to ride out these last few years. Doing that could cause you to erode a significant amount of your agency’s value and make you less attractive to a buyer. I would assume you became an independent agent or broker because you wanted a business that would help protect people and let you earn a good living. You chose the independent path because you wanted to make your own decisions and do what is best for you and your clients. You weren’t afraid of hard work and enjoyed the financial rewards that came from it. The world is changing and you need to change with it. You are still the best way for consumers to protect themselves and their families and you believe that you need to do whatever it takes to get your message out. We all know that many consumers are being misled and are putting themselves at risk. If you care about your clients both current and future, your business, and your staff you will make the commitment to do what is necessary to move consumers back to understanding the benefit of buying protection from an independent agent or broker. I wish you luck in this important endeavor and I am always ready to discuss and offer assistance with anything related to the ideas outlined in this article.[IA]

The world is changing and you need to change with it. You are still the best way for consumers to protect themselves and their families and you believe that you need to do whatever it takes to get your message out.

INA 11-17-14_INA 11-17-14 12/4/14 1:09 PM Page 37

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[ GUEST OPINION ]

By Richard Amerling, M.D.

The Deadly Politicization of Ebola

he Ebola story gets stranger every day as administration officials, the CDC, and President Obama himself stretch logic and reason to the breaking point and beyond in an attempt to explain away their opposition to the basic epidemiological method of containment and quarantine. There is simply no dispute that Ebola

in not allowing Africans into the country just before the midterm elections. Perhaps he wants to be seen as a savior in Africa, where he has roots. Or perhaps a serious travel ban would draw attention to our porous southern border and the massive recent influx of future Democrat voters. It gets worse. Instead of travel restric-

Early aggressive public health measures might have stopped the AIDS epidemic. For lack of them, millions have paid or will pay with their lives.

Richard Amerling, M.D.

needs to be contained in West Africa. This clearly means limiting travel from this region to the United States, and requiring adequate quarantines when U.S. citizens return. Nigeria has done this and has successfully contained their outbreak. Australia became the first of the so-called developed nations to impose a travel ban. Instead, all the relevant officials are out reciting the party line of no travel bans or quarantines. Ron Klain, a political operative rather than a respected medical leader, is appointed “Ebola Czar” in response to public uproar over the lackadaisical containment strategy of the administration. This is politics, no matter how many times it is called “the science.” The President just held a staged event with doctors and other volunteers returned from West Africa arranged behind him. He spoke as if some Americans might hold an animus towards these brave volunteers. When the governors of New York and New Jersey imposed their own quarantine requirements for returning medical workers, the White House and the CDC immediately censured them. What is the political agenda here? Holman Jenkins, writing in the Wall Street Journal, suggests the President doesn’t want to be attacked from his left as racist 38 November 22, 2014 / INSURANCE ADVOCATE

tions, foreign health workers afflicted by Ebola may be airlifted into the U.S. for treatment. This is the opposite of containment. When political considerations trump basic medical strategies, proven effective over centuries, the danger can be grave. Tom Frieden, head of the CDC, initially compared Ebola to AIDS. Though there are many important differences, in one respect they are similar—both diseases have been politicized. As a medical intern in 1981-1982, I cared for some patients with multiple opportunistic infections during a rotation at Bellevue Hospital. These were the first AIDS patients, years before the term was coined and the offending virus identified. It was immediately obvious that this was a sexually transmitted disease, affecting mostly gay men and intravenous drug users. Because of the stigma attached to the disease, traditional infection control measures such as mandatory reporting, contact tracing, and quarantine were not pursued aggressively. In 1985 a blood test for HIV antibodies was approved. Rather than testing any and all comers, including all patients admitted to the hospital (as was routinely done for syphilis), barriers were erected. Patients had to give consent and

undergo counseling before a test could be ordered. This greatly limited the number of tests performed and allowed the epidemic to spread further. By 1991 there were an estimated 1 million HIV-positive Americans. By 1993, annual deaths from AIDS approached 45,000. Early aggressive public health measures might have stopped the AIDS epidemic. For lack of them, millions have paid or will pay with their lives. It is beyond insane to knowingly import Ebola into this country. Treating even one Ebola patient requires a hospital to reorganize, displace existing patients, and train and rehearse staff. And it places the frontline doctors and nurses at risk. Yes, we can and should do more to stop the spread of the disease in West Africa. We should use what we have learned. The two infected Dallas nurses had a fairly benign course. Both reportedly received plasma infusions from Dr. Kent Brantly, who survived Ebola. Since Ebola attacks key immune cells and prevents an adequate antibody response, the prompt administration of plasma from an Ebola survivor should be first-line therapy. There are thousands of Ebola survivors in West Africa. We should be sending plasmapheresis equipment and technicians to collect, bank and freeze plasma from them, and use this to fight the disease locally. Let’s not let politics get in the way. [IA] Richard Amerling, MD (New York City) is an Associate Professor of Clinical Medicine and an academic nephrologist at Mount Sinai Beth Israel in New York. Dr. Amerling received an MD from the Catholic University of Louvain in 1981. He completed a medical residency at the New York Hospital Queens and a nephrology fellowship at the Hospital of the University of Pennsylvania. He has written and lectured extensively on health care issues and is President-elect of the Association of American Physicians and Surgeons. Dr. Amerling is the author of the Physicians' Declaration of Independence and is a seasoned speaker and on-air contributor.

INA 11-17-14_INA 11-17-14 12/4/14 1:09 PM Page 39

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[ ON M Y RADAR ]

By Barry Zalma

Rescission Attempt Fails You Can Lie to an Insurer in Illinois and Still Keep Coverage

hen a person, directly or through a broker, lies in an application for insurance it usually results in voidance of the insurance policy either by the equitable remedy of rescission or by the language of the policy.

DAI received an application for automobile insurance from Northwest Insurance Network, Inc. (NIN), an insurance broker. The application listed Elia as the applicant. The application lists Elia’s gender as “M,” despite Elia being a woman.

When a person, directly or through a broker, lies in an application for insurance it usually results in voidance of the insurance policy either by the equitable remedy of rescission or by the language of the policy.

Barry Zalma

Illinois, at least in the case that I describe below, reasoned that regardless of the admitted lies the insurer was not deceived and must pay the subrogation claim of another insurer.

FACTS Plaintiff Direct Auto Insurance Co. (DAI) filed an action seeking a declaratory judgment, arguing that: (1) an insurance policy it issued to defendant Elia Beltran was rescinded and null and void, ab initio; (2) that DAI owed no duties under the policy to any of the defendants; and (3) that defendants were not entitled to any recovery under the policy. DAI and defendant Acuity Insurance Company (Acuity), as subrogee of Alice Obermann, George Obermann, and Mark Obermann, filed cross-motions for summary judgment. The trial court granted Acuity’s motion and denied DAI’s motion, finding coverage. DAI appeals, and the appellate court in Direct Auto Insurance Co. v. Beltran, 1-121128 (Ill.App. Dist.1 09/27/2013) was called upon to resolve the dispute. DAI is an insurance company. Elia Beltran (Elia), Mario Beltran (Mario), and Araceli Beltran (Araceli) are Illinois residents. Elia speaks limited English and her Spanish literacy is limited by the fact that she cannot write in Spanish. 40 November 22, 2014 / INSURANCE ADVOCATE

The application states that Elia has an international driver’s license. Elia testified in her deposition that she does not know how to drive an automobile. Elia owns a 2006 Ford Freestyle SE motor vehicle (the Elia vehicle). Elia intended that Mario, her brother, would use the Elia vehicle to drive her to and from work. Elia did not sign the application, and instead, the applicant signature lines bear the notation “T/O” (over the telephone). After receiving the application, DAI issued a policy of insurance to Elia (the DAI policy). The DAI policy covered bodily injury, property damage, medical payments, uninsured motorist, and physical damage. Acuity is licensed to write insurance in the State of Illinois. Alice Obermann (Alice), George Obermann (George), and Mark Obermann (Mark) are Illinois residents. Acuity, as subrogee of Alice, George, and Mark filed a two-count complaint in the circuit court of Cook County, alleging negligence against Mario and negligent entrustment against Elia. While Mario was operating it, the Elia vehicle caused property damages to Mark’s vehicle and injuries to Mark requiring medical treatment. The complaint alleged that Elia was negligent. DAI filed a declaratory judgment action, alleging that Elia made material

misrepresentations in her application for insurance, and as a result, there was no coverage. The application listed Elia as a driver and she warranted that there are no other drivers. The application contains a paragraph stating that the applicant acknowledges that she has read and attests that all answers provided are true. The trial court denied DAI’s motion for summary judgment. Acuity, as subrogee of Alice, George, and Mark, filed a motion for summary judgment seeking a favorable disposition of its counterclaim for a declaratory judgment. Acuity also attached Elia’s deposition, at which she testified to the following: • Upon purchasing the vehicle, someone at the dealership informed Elia that the vehicle came with insurance. • Elia does not know how to drive. • She purchased the vehicle with the intent that Mario would operate it. • Someone at the dealership asked Elia about whether other people in her household would drive the vehicle — she told the broker at the dealership that she didn’t know how to drive and that her brother is going to drive the Elia vehicle and they said, “It’s okay.”

ANALYSIS The Illinois Insurance Code establishes a two-prong test to be used in situations where insurance policies may be voided: 1) The statement must be false, and 2) The false statement must have been made with an intent to deceive or must materially affect the acceptance of the risk or hazard assumed by the insurer. First, DAI asserts, without argument, that the first prong of the rescission test has been satisfied because Elia made a false statement. Elia herself indicated that the information in the application was false because she failed to disclose a licensed driver at her residence in addition to herself. The appellate court, ignoring the facts as proved, concluded that the number of drivers covered under the policy is the same as the number of drivers disclosed by Elia: one. In effect, by conflating her

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[ ON M Y RADAR ] testimony, the appellate court concluded Elia was given coverage for Mario for a non-owned automobile. It found that the discrepancy lies in the name of the insured driver. The application states that a male named Elia Beltran is the insured driver, when in fact (1) a male named Mario Beltran was the intended insured driver and (2) Elia is a female. DAI argued, unsuccessfully, that Elia’s misrepresentations were material because the status, number and character of the persons who are likely to be driving the vehicle with the owner’s permission are, by definition, relevant to the risk. However, Elia’s deposition repeatedly states that Elia cannot and does not drive, and that she purchased the Elia vehicle with the intention that Mario would drive it. Therefore, Elia’s deposition indicates that there was only one driver in her residence. As a result, there was no misrepresentation that substantially increased the chances of the events insured against. The number of drivers likely to be driving the Elia vehicle was one. Since the number of drivers disclosed on the application matches the number of drivers who actually drove the Elia vehicle, any misrepresentation by Elia was found to be not material because she did not misstate the number of regular drivers of the Elia vehicle. DAI also argued that, although the factual allegations of the complaint have not been admitted against Acuity and the Obermanns, the factual allegations have been admitted against Elia and Mario. The appellate court refused to treat the factual allegations of a complaint as “evidence” which under DAI’s reasoning would be to place an improper burden upon nondefaulting defendants. Nondefaulting defendants would be subjected to a higher burden as a result of the conduct of the defaulting defendants, which is out of the control of nondefaulting defendants. The trial court further found that if the application had included Mario’s name instead of Elia’s, Mario would not have been required to disclose that Elia lived in the residence with him because she was not a licensed driver, according to the application form questions. The trial court found no evidence of any indicators that insuring Mario would have negatively affected DAI’s risk, such as a bad driving record. There was no such evidence in the record.

The court did justice. Whether it applied the law is a question I cannot answer because I have never been appointed as an appellate justice. The decision seems to allow a person who intentionally or negligently defrauded DAI to profit from the lie and obtain the liability coverage that was never requested.

ZALMA OPINION DAI was deceived. It insured Elia based on her application that falsely stated she was the only driver and had an International driver’s license. There was no question that Elia could not drive nor did she read, write or speak English nor did she read or write Spanish, her native language. DAI failed to show that Mario, her brother, who actually drove the Elia vehicle, was not a person they would have insured. This is a rescission that should have been granted. It was not granted because of a judicial need for “fairness” and because of the failure of DAI to present sufficient evidence to prove that it was deceived and that had she told the truth the policy would never have been written to cover Elia for the ownership of the Elia vehicle nor the liability of Mario when he was operating the vehicle. The court did justice. Whether it applied the law is a question I cannot answer because I have never been appointed as an appellate justice. The decision seems to allow a person who intentionally or negligently defrauded DAI to profit from the lie and obtain the liability coverage that was never requested.[IA] Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in

insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ ZalmaLibrary. The new books are 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=2146 24, or 800-285-2221 which is presently available. Mr. Zalma’s e-book, “Zalma on California Claims Regulations – 2013 explains in detail the reasons for the Regulations and how they are to be enforced; “Rescission of Insurance in California – 2013;” “Random Thoughts on Insurance” a collection of posts on this blog; “Zalma on Diminution in Value Damages – 2013,”“Zalma on Insurance,” “Heads I Win, Tails You Lose,” “Arson for Profit” and others that are available at www.zalma.com/zalmabooks.htm. Mr. Zalma reports on World Risk and Insurance News’ web-based television programing, http://wrin.tv or at the bottom of the home page of his website at http://www.zalma.com.

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 INSURANCE ADVOCATE / November 22, 2014 41

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[ LOOKING BACK… Insurance Advocate, 25 years ago]

42 November 22, 2014 / INSURANCE ADVOCATE

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[ LOOKING BACK… Insurance Advocate, 25 years ago]

INSURANCE ADVOCATE / November 22, 2014 43

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[ COURTSI DE ]

By Lawrence Rogak

Whether Batting Screens Were “Open and Obvious Condition” is a Jury Question Francis v New York Yankees Partnership

rder, Supreme Court, Bronx County (Howard H. Sherman, J.), entered April 16, 2013, which granted defendant’s motion for summary judgment dismissing the complaint, unanimously reversed, on the law, without costs, and the motion denied. Plaintiff allegedly sustained personal injuries when, to avoid a golf cart coming toward her in the basement concourse of defendant’s baseball stadium, she stepped to the left and tripped over a handlebar protruding from the bottom of one of defendant’s batting screens. She contends, among other things, that the handlebar constituted a hidden trap, as it was not readily visible. Defendant failed to make a prima facie showing that it neither created nor had

Defendant failed to make a prima facie showing that it neither created nor had actual notice of the alleged hazardous condition…

actual notice of the alleged hazardous condition — namely, the placement of the batting screens in the basement concourse (see Westbrook v WR Activities-Cabrera Mkts., 5 AD3d 69, 75 [1st Dept 2004]). Although defendant argues that the batting screens were not inherently dangerous, that is not a relevant inquiry. The salient

issue is whether the handlebars at the bottom of the screens were readily visible and protruded into the concourse so as to constitute a reasonably foreseeable tripping hazard (see id. at 75-76; Mauriello v Port Auth. of N.Y. & N.J., 8 AD3d 200[1st Dept 2004]; compare Figueroa v New York City Bd. of Educ., 104 AD3d 544 [1st Dept 2013]). Plaintiff has raised a triable issue of fact as to whether that was the case. Whether the golf cart coming toward plaintiff constitutes an intervening act that breaks the causal nexus should await jury resolution (see Derdiarian v Felix Contr. Corp., 51 NY2d 308, 315 [1980]).[IA] 2014 NY Slip Op 06282 Decided on September 23, 2014 Appellate Division, First Department

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[ COURTS I D E ]

No Meritorious Defense Required When Moving for Extension of Time to Answer Metropolitan Prop. & Cas. Ins. Co. v Braun

rder, Supreme Court, New York County (Saliann Scarpulla, J.), entered on or about May 8, 2013, which denied plaintiffs’ motion for a default judgment and granted defendants’ cross motion for an extension of time to interpose an answer, unanimously affirmed, without costs. The motion court providently exercised its discretion in granting defendants’ cross motion for an extension of time to interpose an answer. Under the circumstances, although defendants’ assertion of law office failure “is not particularly compelling, it constitutes good cause for the delay” (Lamar v City of New York, 68 AD3d 449, 449 [1st Dept 2009] [internal quotation marks omitted]). There is no evidence that plaintiffs have been prejudiced, and the record shows that plaintiffs had previously agreed to an extension of time for defendants to answer. Contrary to plaintiffs’ contentions, a meritorious defense was not required for defendants to be granted an extension of time to answer

There is no evidence that plaintiffs have been prejudiced, and the record shows that plaintiffs had previously agreed to an extension of time for defendants to answer.

(see Interboro Ins. Co. v Perez, 112 AD3d 483 [1st Dept 2013]; Cirillo v Macy’s, Inc., 61 AD3d 538, 540 [1st Dept 2009]). Comment: Note that this was a motion seeking a default judgment, not a motion seeking to vacate a default judgment that was previously granted. When seeking to vacate a default, a meritorious defense must be shown.[IA] 2014 NY Slip Op 06283 Decided on September 23, 2014 Appellate Division, First Department

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[ GUEST OPINION ]

By Jane M. Orient, M.D.

Republicans Can No Longer Blame Harry Reid for Failing to Repeal ObamaCare

he time for Republican self-congratulation is over, and the work needs to begin. It appears that the majority of the voting population recognizes that our country is in dire condition. Time is running out to fix it. Are Republicans going to work for our country, or just shift money around to different special interests? It is not reassuring that some Republican Party strategists think they won because they Jane M. Orient, MD purged controversial candidates who might make a campaign gaffe—and who might upset the ruling elite’s agenda if they got elected. Or that Democrats seem confident that Republicans will “work together” with them to continue the Progressive agenda—or else Obama will do it all by himself. Republicans can no longer blame Harry Reid for their failure to repeal or defund ObamaCare. They can’t just take symbolic votes and complain (not too loudly) when bills get bottled up in the Senate. It’s on them now. ObamaCare is deeply unpopular. Millions have already been hurt by it, and the real pain will begin now that the election is over. Millions of insurance cancellations, IRS penalties, and sticker shock for renewal premiums are about to hit. And that’s just the financial pain. Loss of access to physicians and hospitals, and the diversion of physicians’ attention to rule compliance instead of patient needs are harder to measure. It’s also harder to blame the government instead of doctors. Not all of these problems are from ObamaCare alone, but can be traced to previous laws such as the HITECH Act and other “incentives” for physicians to buy expensive, error-ridden computer systems and follow protocols—or else be punished. Every mandate, and every dollar taken from taxpayers, is income to somebody: managed-care cartels, information technol46 November 22, 2014 / INSURANCE ADVOCATE

ogy vendors, government bureaucracies, etc. With every day that passes, ObamaCare thus becomes more deeply rooted, like kudzu, and harder to extirpate. And then there’s the reckless disregard for the law that has characterized implementation: selective waivers, politically motivated delays, and blatantly rewriting the law to provide taxpayer subsidies explicitly forbidden in Exchanges not created by States. Congress needs to start now, and not allow the lame-duck session to wreak havoc. Reid needs to be faced with well-publicized bills to mitigate damages, pending repeal. Measures should include: • Grandfather all existing health insurance policies indefinitely. • Suspend all federal coverage mandates for new and renewing policies. • Provide that insurers may price policies fairly, based on actuarial risk. • Eliminate restrictions on health savings accounts and self-insured plans, especially re-insurance. • Make the individual mandate/tax “shared responsibility” payment truly voluntary, like the contribution for elections. • Delay the employer mandate indefinitely. • Suspend the medical device tax and other ObamaCare taxes until and unless they are specifically re-enacted. • Clarify that the law really means what it says about subsidies being available only through State Exchanges. • Abolish the Independent Advisory Board (IPAB) and deny any agency the power to constrain prices or spending in the private marketplace. What these provisions have in common is six features that Republicans should demand of all legislation: 1. They return control of medical spending and decisions to individual Americans, instead of forcing them to subsidize insurance companies and social engineering schemes. They stop the extortion of money from all Americans to funnel through devious pathways to people behind the curtain

who do nothing to provide care. 2. They remove barriers to private enterprises instead of erecting new ones. 3. They impose no selective stealth taxes. If Congress is to tax people, it must do so through transparent, constitutional means. 4. They do not expand the reach of government into areas in which it has no constitutional authority. 5. They create no new agencies through which Congress can further abdicate its authority to the Executive. 6. They reduce the governmental footprint on the necks of Americans. It’s a long way to constitutionally limited government, fiscal solvency, and an atmosphere of freedom in which all Americans can thrive and prosper. But we need to take these small steps to begin the journey now. Jane M. Orient obtained her undergraduate degrees in chemistry and mathematics from the University of Arizona in Tucson, and her M.D. from Columbia University College of Physicians and Surgeons in 1974. She completed an internal medicine residency at Parkland Memorial Hospital and University of Arizona Affiliated Hospitals and then became an Instructor at the University of Arizona College of Medicine and a staff physician at the Tucson Veterans Administration Hospital. She has been in solo private practice since 1981 and has served as Executive Director of the Association of American Physicians and Surgeons (AAPS) since 1989. She is currently president of Doctors for Disaster Preparedness. Since 1988, she has been chairman of the Public Health Committee of the Pima County (Arizona) Medical Society. She is the author of YOUR Doctor Is Not In: Healthy Skepticism about National Healthcare, Sutton's Law; and the second through fourth editions of Sapira's Art and Science of Bedside Diagnosis. She authored books for schoolchildren, and coauthored two novels published as Kindle books.

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