November 25, 2013 by C Acunto

VOLUME 124, NUMBER 20 / November 25,2013

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Contents [FEATURES] 4

Foreword: One Secret of Real Success Steve Acunto, Publisher

Insight: User Friendly Peter H. Bickford

Harold Lee & Sons Celebrates 125th Year Museum of Chinese in America (MOCA) Marks Lee Agency’s and Family’s History The Lee Family of New York Chinatown Since 1888

CPCU Conferment GNY’s Heck Reﬂects Upon Sandy and the Industry’s Role

Guest View: CARCO Exec. Responds to Insurance Advocate Columnist Re: Reg 79

On the Level: When Will Agents Be Represented Fairly as “Good Guys?” N. Stephen Ruchman, CPCU

In the Associations: Patrick Woods Receives Rodermund Service Award from CAS

In the Associations: PIANY Hudson Valley RAP Celebrates 10 Years

In the Associations: NYIA Elects 2014 Ofﬁcers and Board of Directors Rubin, Kobrick Elected Chairman and President of ARIAS•U.S. for 2014

On My Radar: No Opposition Fatal Barry Zalma

Courtside: Back Seat Passenger Unites Driver’s Bikini Top, Causing Her to Lose Control; No Liability Per Emergency Doctrine Lawrence Rogak

November 25, 2013 | volume 124 number 20 43

Classiﬁeds

Looking Back: September 17, 1988

[ AD FEATURES] 22

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www.insurance-advocate.com Like us on Facebook… The Insurance Advocate Magazine INSURANCE ADVOCATE / November 25, 2013 3

[ FORE WORD ]

Steve Acunto

One Secret of Real Success

is the season for taking a long view of our work and our goals. Lancer’s Dave Delaney offered a nice approach to his and his Company’s success: “We are now approaching thirty years since we bound our first policy. To survive on the underwriting side of this business, you have to be very disciplined…and focus every day on getting very good at something. For us, that “something” has been small commercial auto and package business. Our financial results have been gratifying, but for me, the journey has always been more about building a reputation everyone at Lancer can be proud of. Making money just wouldn’t mean much to me if we made that money without acting responsibly and honorably.” Beautiful sentiment in a beautiful season. Thanks, Dave……. Kevin Ryan writes kindly: “Thanks so much for the kind note and recent copy of the Advocate. I appreciate the recognition by my peers and I’m am very humbled. Kevin”…. Blockbuster Federation Luncheon with Greenberg father and son on stage for the son’s receipt of the IFNY 2014 Free Enterprise Award – the senior Greenberg received it in the early 80’s. We’ll have the whole story and some great photos in our next issue, as well as some really well focused remarks. [IA]

VOLUME 124, NUMBER 20 NOVEMBER 25, 2013

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Sari Gabay-Raﬁ Michael Loguercio Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x126 circulation@cinn.com

L-R: IFNY VICE PRESIDENT STEVE ACUNTO; IFNY FEATURED SPEAKER SENATOR BEN NELSON; IFNY 2013 FREE ENTERPRISE AWARDEE EVAN GREENBERG, ACE GROUP; IFNY PRESIDENT NICK PEARSON, IFNY IMMEDIATE PAST CHAIRWOMAN CECILIA NORAT; IFNY CHAIRMAN LANCE ALBRIGHT

PUBLISHED BY CINN Group, Inc. 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

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L-R: NICK PEARSON, IFNY PRESIDENT, EDWARDS WILDMAN PALMER LLP; IFNY 2013 FREE ENTERPRISE AWARDEE EVAN GREENBERG, ACE GROUP; MAURICE “HANK” GREENBERG, FORMER FREE ENTERPRISE AWARDEE RECIPIENT, STARR COMPANIES, PRESENTED THE AWARD TO HIS SON, EVAN 4 November 25, 2013 / INSURANCE ADVOCATE

INSURANCE ADVOCATE® is a registered trademark of CINN Worldwide, Inc. and is copyrighted 2013. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Ofﬁce.

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[ INSIGHT ]

By Peter H. Bickford

User Unfriendly

e all complain about regulations. Grousing about excessive, intrusive, costly, ineffective, unnecessary, time-consuming, and annoying regulations is an apparent birthright given the amount of time and energy we often spend

Peter H. Bickford

that has the most direct and complete access to current industry information. With that access goes responsibility, including the responsibility to fully analyze and disseminate the information collected — a responsibility, it seems, that is largely ignored or

It is the regulator and not the licensees, their trade groups or the public that has the most direct and complete access to current industry information. With that access goes responsibility, including the responsibility to fully analyze and disseminate the information collected — a responsibility, it seems, that is largely ignored or marginalized.

on the subject. We who work in the insurance industry have the added joy of participating in a “regulated” industry, which means that we have subject-specific agencies adding additional layers of regulation to our work-related woes. No matter the extent of our grousing most of us recognize the necessity for a broad regulatory landscape in our business if not the degree. But aside from the perceived excesses wrought upon us by overzealous legislators and regulators intent on protecting the public from our evil industry, there is another, less obvious but equally important role of the regulator to collect, assess and disseminate information about the industry to the public in fulfillment of its statutory obligations. Insurance regulators regularly gather (at the industry’s time and expense) a broad array of valuable information about the business of insurance from licensed entities – companies, brokers and others — through compulsory compliance with statutory and regulatory reporting requirements. Without the ability to compel companies to provide information, and because of antitrust considerations, the insurance industry does not have the same means to collect, analyze or disseminate industry-wide information. It is the regulator and not the licensees, their trade groups or the public 6 November 25, 2013 / INSURANCE ADVOCATE

marginalized. Nowhere is the failure to fulfill this obligation more evident than in New York since the merger of the banking and insurance departments into the Department of Financial Services back in 2011! The first stated purpose of the new Financial Services Law is to “encourage, promote and assist banking, insurance and other financial services institutions to effectively and productively locate, operate, employ, grow, remain, and expand in New York state.” In its failure to regularly and effectively assess and disseminate information about the industry, the new Department of Financial Services (DFS) minimizes this stated responsibility almost to the point of irrelevance. The most significant example is the Incredible Shrinking Annual Report that, under the former insurance department, used to be a detailed review of the state of the industry and its participants. As reported in this column, the first report of the DFS was a mere shadow of the former insurance department reports (IA, June 18, 2012), and the second report was a mere shadow of the first, making it close to farcical in terms of meeting the statutory purpose (IA, July 22, 2013). Another example is the failure of New York to make available any information on

the usage of the Free Zone by class of risk: i.e., large risks meeting a minimum premium threshold; hard to place risks listed by regulation; and a new class of large commercial insureds as defined in the Non-Admitted and Reinsurance Reform Act (NRRA), a part of the 2010 Federal Dodd-Frank legislation. The DFS’s patronizing response to a Freedom of Information Law request for this breakdown was to suggest that the requesting party access the annual statement of each Free Zone licensee (of which there are over 200) for each year and do the math yourself (see Insight, IA, June 3, 2013). There is, however, a recent example of how to make collected information available for the benefit of the industry and the public, but it does not come from the DFS; rather it comes from the Excess Line Association of New York (ELANY), New York’s industry-run excess and surplus lines stamping office. Under the law, an excess lines broker is “required to use due care in selecting the unauthorized insurer from whom policies are procured under his license.” Although this responsibility falls on each licensed excess line broker, ELANY has regularly collected and made available financial information about authorized excess line carriers as a service to its member excess line brokers. Now it has gone a step further! Recently ELANY unveiled a new service: financial summaries for each foreign excess line insurer eligible to write business in New York. These summaries are not just available to member excess line brokers, but are publicly accessible on ELANY’s website at http://www.elany. org/es.aspx?m=elf . The ELANY Bulletin announcing the new service states that the summaries “provide a snapshot of critical data for each eligible foreign insurer over the prior three years.” In addition to the basics, such as compilations of assets, liabilities, policyholder surplus and loss reserves, each financial summary also provides RBC ratios, investment portfolio allocations, premium, income, and combined ratio trends, financial strength ratcontinued on page 8

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[ INSIGHT ] the DFS! The DFS website would seem to be a logical independent resource for a member of the public to research the viability of particular carriers. Even with all its bells and whistles, however, the DFS website is far from helpful as a public resource. Although there is a “Consumer” menu, there is no site for financial information. There is a tab for “Insurance Products” that has a link to a page headed “Insurance Company Ratings and Stability.” This page in turn refers you to

continued from page 6

ings, company histories (including ultimate holding company information), and reinsurance information. In other words, these thumbnail summaries provide a great starting point for anyone interested in the financial strength and viability of a particular foreign excess line insurer. Good luck trying to find anything comparable about licensed insurers from

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The DFS website would seem to be a logical independent resource for a member of the public to research the viability of particular carriers. Even with all its bells and whistles, however, the DFS website is far from helpful as a public resource.

the four principal rating firms (A.M. Best, Fitch, Moody’s and S&P) who charge for most of their services. Also, under the “Insurance Industry” menu there is an “Insurance Company Search” tab that provides for a search of licensed companies by name. Unfortunately, that link only provides information about the lines of business the insurer is licensed to write in NY, complete with a disclaimer that the material might not be current. These are but a couple of examples of the “unfriendly” DFS website. Regulators, because of their broad access to information, are in the best position to compile, assess and disseminate information about the state of the industry and its individual players. This information is invaluable to the understanding and promotion of the business – an essential function of the regulators that is often forgotten. State insurance regulators need to take their obligation to provide current, accurate and timely information about the industry and its participants as seriously as they take their enforcement role. In other words, they need to become far more “user friendly” for the benefit of the industry and the public. [IA]

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[ FEATURE ]

Harold Lee & Sons Celebrates 125th Year Museum of Chinese in America (MOCA) Marks Lee Agency’s and Family’s History The Lee Family of New York Chinatown Since 1888

t is rare that an independent insurance agency makes it into a Museum, but Harold Lee and Sons is itself a rarity. To mark its 125th Anniversary and to establish its place as a cornerstone in the enabling of Chinese American commerce, The Museum of Chinese in America mounted a new exhibition exploring the legacy of the agency’s founding family The Lee Family of New York Chinatown since 1888, on view from October 23, 2013 through April 13, 2014. Today, Harold L. Lee and Sons, Inc., under the direction of Lee family members Steve Boon and Sandra Lee Kawano, serves Chinatown and New York City at an enviable level, bringing major insurers to serve the growing community in lower Manhattan and elsewhere in the City. The estimated Chinese population in NYC is better than 800,000 and in Chinatown better than 100,000. It is a major tourist center and is comprised of hundreds of businesses of all types. From its modest origins as a grocery store on 31 Pell Street in 1888, the Lee family business rose to prominence through the decades to become one of the most influential agencies in New York. Its leaders have played important roles in insurance associations, enterprises and in the very delivery of insurance to what started as an immigrant market, across generations of progress. The exhibition offers a unique glimpse of Chinatown’s cultural and economic landscape over the decades, through the historical lens of a multi-generational family business. From film distribution, retail, insurance brokerage, to foreign currency exchange, the Lee family’s businesses responded to the needs of the Chinese community. Herb Tam, curator and MOCA’s Director of Exhibitions said, “What’s remarkable about the Lee family story, is how timely their various businesses were, in helping to shape and sustain the Chinatown community during some very challenging times.”

STEVE BOON, SANDRA K. LEE AND CLINTON BLUME, PRESIDENT OF THE 100 YEAR ASSOCIATION OF N.Y.

The exhibition is presented in an authentic recreated space of an original Chinese business storefront, complete with exquisite tin ceilings. The Lee family has been instrumental in providing artifacts, photographs, and even a rare kinescope of an early CBS television broadcast from 1956. “In the course of providing the historical research and documentation for the exhibition, we came to have a much deeper appreciation of our family’s history, which is strongly interwoven into Chinatown’s development over 125 years. It has been a fascinating journey of discovery for us and we hope others will find it interesting as well,” said Sandra Lee Kawano, granddaughter of Harold L. Lee. In the 1940s, Harold L. Lee and Sons, Inc. were the first to offer cinematic screenings of Chinese films in Chinatown in their family-owned Silver Star movie theatre. Other stories in the exhibition relate back to the Chinese immigrant story. The Immigrant and Nationality Act of

1965 eased restrictions for Asian immigration into America and the Lee family set up the one of the first travel agencies to help connect and reunite Chinese families. But it would be the insurance business that would prove to be a most profitable, natural fit for the Lee’s. Harold Lee had begun offering insurance to his Foreign Exchange customers as the need arose due to the community’s economic growth. His son Andrew had obtained his own insurance license and begun writing policies for the Foreign Exchange clientele. The business had thrived so much that when he enlisted in the U.S. Army, his sister Catherine got her insurance license to ensure continuity in the business. The firm became one of the first Chinese-American agencies in the United States to write directly with insurers. After the war, Andrew started actively selling life insurance, at a spare desk in the Foreign Exchange. Eventually, he offered continued on page 12

10 November 25, 2013 / INSURANCE ADVOCATE

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Sen. John Sherman 21 Cong. Rec. 2456 (1890)

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[ FEATURE ] continued from page 10

property and casualty insurance. Soon the loyal clients of the Foreign Exchange became Andrew’s customers, seeking life insurance or insurance for their restaurants, laundries, homes, and automobiles. In the late 1940s, Andrew was offered a sales agent position at Manhattan Life Insurance and Union Mutual Insurance. He started his own agency for life insurance, the Andrew P. Lee Agency, and pioneered the concept of insurance in Chinatown. By the late 1940s and early 1950s, he had gained major appointments with prominent national insurance companies such as the Home Insurance company, St. Paul, Maryland Casualty, and the Hartford, which recognized that Andrew and Harold had a great connection to a growing prosperous Chinese community. They soon started a new insurance brokerage and named it Harold L. Lee & Son Insurance. Andrew worked six days a week, including Sunday, and was quickly becoming an American success story – a top insurance executive, gaining a stellar reputation in his community and the industry at large. He qualified as a member of the prestigious Million Dollar Round Table for over forty consecutive years. At the same time, he was gaining volume for his insurance brokerage in property and

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casualty. Insurance carriers sought out relationships with the agency for its growing production and professionalism, as well as for its reputation in the community. The loyalty of the Chinese community clientele promised great retention and profitability. By the 1950s, with growing post-war prosperity, it was a sign of the times that

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the Lees had become leaders in the insurance and travel industries. By the late 1960s, Andrew had modernized the insurance agency office to accommodate the increasing growth of the business. The Foreign Exchange was streamlined and eventually closed in the early 1970s. The Lees were early members of the New York Chinese Chamber of Commerce: Harold, Andrew and Andrew’s daughter Sandra all have served on the board. Andrew was also active in the Chinatown Lions Club and the True Light Lutheran Church, and I n 1962 he became the first Chinese board member of the New York City hospital – Beekman Downtown Hospital. A true community leader, Andrew led twenty years of successful fund raising campaigns for the hospital, raising hundreds of thousands of dollars from the local Chinese community. In 1997, the hospital then known as New York Downtown Hospital posthumously named their critical-care facility Andrew P. Lee Critical Care Unit in honor of Andrew’s longstanding and dedicated role on the hospital board. In 1976, while Andrew served on the board of the Chinese Chamber of Commerce, it sponsored the construction of Confucius Plaza, the largest middlecontinued on page 14

12 November 25, 2013 / INSURANCE ADVOCATE

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income housing complex ever built in Chinatown. Andrew’s success as an outstanding business and civic leader was unprecedented: he represented a new generation who commanded respect from the mainstream insurance industry and the Chinese community. As Andrew first started contemplating a succession plan for the insurance agency, his son Douglas graduated from the University of California at Berkeley with a degree in Journalism. Although Andrew might have wanted his children to work in the family business, he never pressured any of them to do so. He always urged his son to follow his own path. Doug decided to forge a career in media, starting at HBO after graduating from Georgetown Law School. Doug eventually joined the Lee Insurance board and, like older sister Linda Lee Hsiao, is still involved in the growth and direction of the firm. Meanwhile, Andrew’s nephew Stephen Boon Jr., the son of Rose Lee Boon and Stephen Boon, had pursued a successful career as a buyer at the old Alexander’s department store. He loved buying and selling in the fashion industry and made frequent trips to Asia and Latin America. After his marriage to Barbara McGuire, also a colleague and buyer, the extensive traveling was less attractive. Stephen wanted to spend time with his growing family and son, Chris Jonathan, and Tim. Steve’s idea of changing careers came at an opportune time, just as Andrew was contemplat-

ing retirement and a succession plan. Andrew’s daughter, Sandra, was a close cousin and like a sister to Stephen. At her recommendation, Andrew asked Steve to join the family business in 1978. As a youngster, Steve had grown up around the family business, unlike the rest of the eleven Lee first cousins. Both of his parents worked in the Foreign Exchange and insurance agency, as did his STEPHEN BOON, JR. AND SANRA K. LEE: THE FIRST COUSINS EMERGE AS THE NEXT HERNATION TO LEAD grandfather, aunts, HAROLD L. LEE & SON INSURANCE, INC. ca. 1990 and uncles. He grew up with his grandparents, Harold and Sue Sang, living in the Uncle Andy on client calls and soon was adjoining apartment on 14th Street, and promoted to vice president, reassuring next door to his grandmother at Chatham Andrew that the agency was in good Green in 1962. Steve had studied business hands. When Andrew retired in the early at C.W. Post College, so he had a solid 1980s, Steve became president of the insurbackground in business. He easily transi- ance agency. tioned to the insurance agency starting Meanwhile, Andrew’s daughter Sandra from the ground level, typing invoices and had become a registered nurse after graddouble-checking policies before they were uating from the University of Rochester, finally sent out to clients. where she was a history major. Andrew He spoke Cantonese and quickly was proud of her accomplishments in the became licensed, so he was able to sell health field and even encouraged her to insurance products and explain the cover- continue to pursue medicine as a career. age to the agency’s Chinese-and English- However, over the years, Sandra had speaking clients. He accompanied his become more interested in the family business. During college, she worked summers in Chinatown at the insurance agency, at the nearby Manhattan Savings Bank on the Bowery, and at various sales jobs around New York City. As a nurse, she had worked at the Chinese Hospital in San Francisco and at Bellevue Hospital in New York City. In the 19790s, Sandra co-founded the Chinatown Health Clinic in New York, which became an important health care center in the community. She also continued Andrew’s legacy on the board of New York Downtown Hospital, serving as a trustee for close to twenty years. As Andrew began to cut back his hours at the agency, Sandra was learning the bookkeeping and accounting from her

STAFF OF LEE INSURANCE NEW YORK, 2013 continued on page 16

14 Novemeber 25, 2013 / INSURANCE ADVOCATE

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Aunt Rose and mother Marie, who were planning to retire. Her business acumen, nursing background, and community involvement helped prepare her for the family business. She married Arnold Kawano, a Columbia Law School graduate and corporate attorney, and they had two sons, Tom and Mark. Arn currently serves as general counsel at Lee Insurance and has helped guide the company both strategically and operationally. The family’s entrepreneurship has certainly extended to Arn. As a sideline, he operates a boutique wine distribution business out of 31 Pell. In the 1990s, Sandra became the Chair and CEO of Lee Insurance. Today, Stephen and Sandra continue as third-generation Lee family members, running the insurance business. Stephen is prominent and active in the insurance industry, serving as a board officer of the Insurance Federation of New York, as well as a board member of the Chinese American Insurance Association, founded in 1990. His knowledge of complex commercial insurance helped him develop and retain mid-to large size accounts, as well as start the banking and financial institution portfolio of the agency. Under Steve and Sandra’s leadership, the agency has continued long-term relationships with Arated companies such as Chubb, CNA, Travelers, Hartford, Starr, AIG and MetLife. Sandra’s background in health care and small business led her to start a new division in the agency that focused on Group Health and Benefits. Like her father before her, Sandra also focused much of her time and energies on community service. If anyone in her generation embodies the entrepreneurial spirit of her forefathers, it is Sandy, who is a natural-born saleswoman with exceptional interpersonal and networking skills. President Clinton appointed her to the U.S. Small Business Administration Fairness Board, where she served for three administrations. She was also named a David Rockefeller Fellow, whose members are a group of senior-level executives with a strong civic commitment to New York City. At 125, the agency is growing with a new generation of family members joining its ranks. [IA]

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GNY’s Heck Reflects Upon Sandy and the Industry’s Role at New York’s CPCU Conferment Mr. Warren Heck, Chairman of the Greater New York Insurance Group, addressed the New York Chapter of CPCU at its Annual Conferment on November 15th, 2013. He reflected on the industry’s response following hurricane Sandy and on TRIA. Mr. Heck, who, as President and then Chairman, has headed the 99-year old Company for more than three decades, documented the outstanding performance of the property-casualty insurance industry following Sandy, particularly given the enormity of the storm and the extensive damage caused in its wake. While acknowledging the customary reservation about governmental involvement in the business of insurance, Mr. Heck noted that terrorism represents an “existential” and largely uninsurable threat to our nation. Without the backup provided by TRIA terrorism capacity would be limited, and, along with it, the availability and affordability of terrorism insurance. For the health of the economy and of the nation, Mr. Heck called on Congress to reauthorize TRIA for an indefinite term. Here are his remarks as presented. For most of my career, I have worked in one way or another in underwriting, and for me, underwriting has been the most exciting and satisfying job I have had at my Company. Nevertheless, I must confess that being a CEO in the insurance industry today is a much less hazardous job than being a chief underwriter. Over the years the nature of risk has changed, and of the many threats and challenges facing our industry today, I would like to speak about what I consider to be the two most pressing challenges. One is the emerging and growing exposure to catastrophic weather events, and specifically the ongoing issues with Superstorm Sandy, and the other is terrorism and the looming expiration of TRIA in December of next year. The storm did give insurance carriers the opportunity to demonstrate what a valuable and essential service they provide. While there will always be some policyholder dissatisfaction with their claim recoveries, and there were ample coverage disputes with private carriers and the National Flood Program, but even critics of the industry pointed out that many complaints about insurance coverage were rooted in policyholder’s misunderstanding of their coverage because they simply don’t read their policies. We all witnessed the massive destruction by Sandy across New York and New Jersey as well as in about 13 states, causing flooding and wind damage to homes and businesses; about 180 people were killed; hundreds and thousands of homes and businesses were damaged or destroyed; our subway and rail transportation were knocked out; more than 9 million people in the thirteen states lost power, in some cases for weeks; the industry sustained an estimated $20 billion of losses, and our economic loss was about $65 billion. Sandy was the second most destructive hurricane in US History after Katrina, as well as one of the worst catastrophic events ever to hit the New York Metropolitan area. The New York Department of Financial Services created a Response Report which was implemented days after the storm struck the East Coast, and the data confirmed the excellent performance by the industry in paying claims. In the first 90 days following the storm, private insurance companies paid more than 76% of the many hundreds of thousands of claims reported, and last month on its first anniversary more than 95% of all claims 18 Novemeber 25, 2013 / INSURANCE ADVOCATE

The promise to pay covered losses is essentially what an insured purchases when buying insurance. Therefore, the test of any carrier should be how quickly and fairly it pays its claims. had been closed. Based upon that report card, only about ½ of 1% of the Sandy-related claims had resulted in formal insurance department complaints. So it’s clear that insurers met their responsibility to consumers and the business community, and played a key role in the rebuilding process. The promise to pay covered losses is essentially what an insured purchases when buying insurance. Therefore, the test of any carrier should be how quickly and fairly it pays its claims. We can be proud that our industry responded promptly and honorably to the more than 700,000 claims in New York, and 500,000 claims in New Jersey, reported in the aftermath of the storm. Our industry deployed more than 5,000 claim adjusters in New York State alone, and paid the claims on average within 20 days of the first report of damage. That timeframe was very good given the number of claims and the tremendous devastation that made it difficult for insurers to locate consumers, arrange appointments with public adjusters, and access disaster sites. The superb performance by the industry makes it difficult to understand the actions by some regulators and state legislators. For example, in the aftermath of Sandy, in a number of states, regulators mandated that Hurricane wind deductibles and in some cases policy exclusions could not be applied. In another example, some regulators and legislators sought to undermine the sanctity continued on page 20

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of insurance contracts by pressuring insurers into not asserting anti-concurrent clauses that excluded damage caused by flood, even though some courts have addressed these clauses and have found them unambiguous and enforceable. Some regulators and legislators even sought to restrict underwriting tools that enable underwriters to fulfill their primary function, which is to assume, manage, and price risk. Shackling underwriters in that fashion exposes the insurance industry to more serious losses than contemplated from catastrophic events, and places the financial strength of the industry in jeopardy. It also inhibits underwriting business in high risk areas, which can create availability issues, including much higher pricing. After all, the insurance industry, as would any industry, requires the confidence in knowing that binding contractual provisions will be enforceable. The one thing that was very clear from the results of the storm was how woefully unprepared our region is to withstand a storm the ferocity of Sandy. At the height of the storm, many homes on the coast were damaged or destroyed by high winds and a massive storm surge, which rose to a record height of 14 feet, causing a huge amount of the damage, while more than 75% of the flood losses had no insurance from either private carriers or the National flood program. Many homeowners didn’t even realize they had no flood coverage. These 14 foot storm surges are of great concern since the rising sea levels foretell even higher storm surges in the future. “Some coastal areas might be too flood-prone to be safe for homes and people, or too risky to justify insuring them. To help reduce the exposure over the long term, voluntary programs for home buyouts” are being made available in New York and New Jersey.1 Both of these states have received federal funds from FEMA for the purchase of the homes in communities that sustained extensive flooding as part of the buyout program. This is a good first step in the right direction; people who voluntarily reside in flood plains should be required to purchase insurance coverage including flood at risk-based un-subsidized pricing. Low income residents, on the other hand, should be eligible for state government subsidies in the form of insurance, supplemented by funds to mitigate their exposures, or for relocation to non-cat prone areas. Insurance companies should tie underwriting acceptability and provide premium credits for risks that are cat-exposed to encourage mitigation and to help the policyholders amortize their mitigation expenses. “A recent study commissioned by FEMA shows that high-risk flood areas along the US Coasts could increase by 55% by the end of the century.”2 Better flood maps and risk based insurance premiums would go a long way in communicating the seriousness of the flood exposure in coastal communities. Unfortunately a lack of funding from Congress has meant that FEMA could not update, on a regular basis, the flood maps that are decades old. Fortunately, after the storm, there has been a drive to update and identify all of the flood zones, and insurance rates for flood coverage have been rising since Sandy as a result of the new flood maps and the new information about flood exposures. The rate increases reflect the fact that many coastal residents have been paying inadequate rates that in some cases were determined by outdated flood maps, and even more often by unrestrained polit20 Novemeber 25, 2013 / INSURANCE ADVOCATE

Last June Mayor Bloomberg released a $20 billion plan with over 250 recommendations for preparing the city for future storms. However, the big question is how the city will pay for it. I believe that we all need to recognize these new realities, and to be part of the movement to do everything possible to address these issues. ical influence. The National Flood Program has been increasing its rates, but there has been push back by consumers and members of Congress to delay or roll back the reforms. There is little doubt that this would be a serious mistake. With the high concentration of homes and people on the coast it will not be possible to remediate the flood exposure quickly. But coastal communities need assistance and financial help to prepare for the future threats from rising seas and worsening storm surge. Mayor Bloomberg commissioned a study from the Rand Corporation to protect the city in the future from severe storms. The study includes architectural changes to the waterways, such as jetties and buffer-zone wetlands, as well as improvements in the management of telecommunications. Last June Mayor Bloomberg released a $20 billion plan with over 250 recommendations for preparing the city for future storms. However, the big question is how the city will pay for it. I believe that we all need to recognize these new realities, and to be part of the movement to do everything possible to address these issues. “While insurance can be a powerful tool to help manage risk from coastal flooding, our current system of taxpayersubsidized flood coverage under the National Flood Program is not helping us manage the problem effectively.”3 Finally, with respect to the National Flood program, it is disappointing that the Biggert-Waters Act, passed in 2012 with the objective of making the National Flood Program solvent after paying out more than it had been taking in after Hurricanes Katrina and Rita, is now getting a massive pushback from a group of bipartisan members of Congress. Congress wants to delay the implementation of actuarial rates which reflect the true cost of providing flood insurance coverage. Instead of delaying the implementation of this much needed legislation, there should be means testing for those who cannot afford the new flood rates. Returning to premium subsidies that encourage development in the flood plains is a great big mistake. continued on page 22

[ FEATURE ] continued from page 20

On another subject, I would like to briefly comment about the expiration of TRIA at the end of next year. I’m opposed in principle to federal government involvement in the business of insurance. However, in the case of terrorism, the public and business community needs protection, which I believe is the responsibility of the federal government, since terrorism is an existential threat to, and a hostile act against, the people and the government of the United States. Therefore, it’s imperative that Congress reauthorize an indefinite extension of the TRIA well before its expiration on December 31, 2014. There appears to be bipartisan support in Congress for reauthorization of the backstop, as well as support from every area in the private sector and from the NAIC. The stumbling block seems to be a belief by a small contingent of influential members of Congress that insuring against terrorism is solely the responsibility of the private sector insurance industry. But contrary to the thinking of these Congressional representatives, the private sector is not able to handle the terrorism exposure alone. Unlike the case of flood insurance, for which there is ample worldwide reinsurance available, they just don’t seem to understand that without TRIA there will not be enough terrorism capacity, which will impact the availability and affordability of the coverage. TRIA actually benefits the Federal government, the economy, and the country as a whole. The availability of terrorism insurance for the business community at affordable rates is first and foremost an economic issue, and we have all learned firsthand after 9/11

WARREN W. HECK

22 Novemeber 25, 2013 / INSURANCE ADVOCATE

that TRIA, by making terrorism coverage available, played a major role in preventing an economic catastrophe. The involvement by the insurance industry in TRIA also provides the government with an orderly process of claims handling and payments by the many thousands of claims examiners and adjusters in our industry. In the event of an attack, a continuation of the TRIA program will enable a speedier economic recovery for both the area attacked and for the economy as a whole. It is encouraging that in recent weeks the House Financial Services and the Senate Banking Committees held hearings on a terrorism backstop extension. Of course, as expected, the industry and business leaders that testified at the hearings, persuasively made the case for a renewal of the program. It was also gratifying that none of the senators participating in the hearing called for letting the program lapse next year. In fact Sen. Jack Reed of RI said that the program is “absolutely essential.” So, next year we will spend a lot of time and effort in hearings before Congress and in lobbying, which will likely result in a reauthorization in the final hours before TRIA expires. The greater concern is that Congress, in an effort to negotiate renewal, might adversely modify TRIA’s terms, which may have the same impact as a non-authorization. In closing I would again like to congratulate our new designees who have joined the ranks of insurance professionals dedicated to maintaining the high standards needed in our industry. [IA] 1 Rachel Cleetus, “Sandy exposed flood insurance failure,” October 27, 2013. 2 Ibid. 3 Ibid.

Warren W. Heck is Chairman and Chief Executive Officer of Greater New York Mutual Insurance Company, a 99 year old regional commercial lines insurer rated A+ by A.M. Best. He joined GNY in January of 1962 as an Underwriter, subsequently became the company’s Chief Underwriting Officer and Executive Vice President, and served as President and Chief Operating Officer for 18 years before becoming Chairman and Chief Executive Officer in March, 2001. For most of his 51-year career at GNY, he has managed the underwriting activities of the Company. Mr. Heck earned his B.B.A. Degree from the City College of New York in 1958, a CPCU designation in 1975, and a Workers Compensation Professional designation (WCP) in 2006. Since 911 he has actively worked with The National Association of Mutual Insurance Companies (NAMIC) in lobbying Congress to make the case for the passage of the Terrorism Risk Insurance Act (TRIA), and has testified numerous times before the House Financial Services subcommittee of the House of Representatives as well as the National Association of Insurance Commissioners (NAIC) in that effort. His social responsibility has been recognized in recent years by receiving the Israel Bond Neil D. Levin Memorial Award and the National Conference for Community and Justice (NCCJ) Humanitarian Award. He has also received numerous professional awards, the Chairman’s Distinguished Service Award from the New York Insurance Association, the NAMIC Chairman’s Award for leadership and outstanding service to NAMIC, the 2008 Man of the Year award from the Council of Insurance Brokers of Greater New York, the Don DeCarlo Legends Award from the American Society of Workers Comp Professionals (AMCOMP) for leadership and commitment in the field of workers’ compensation, the Free Enterprise Award from the Insurance Federation of New York, and the Eugene A. Toale Memorial Award from CPCU in 2012 for promoting professional development and education in the insurance industry.

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INA 11-25-13_INA 11-25-13 12/17/13 5:44 PM Page 24

[ GUEST VIEW ]

By Jim Owen, President, CARCO

CARCO Exec. Responds to Insurance Advocate Columnist Re: Reg 79

24 Novemeber 25, 2013 / INSURANCE ADVOCATE

Another argument is that the physical inspections are unnecessary because other databases contain similar information. The facts show otherwise. Insurance companies routinely use other databases during the underwriting process, and yet CARCO finds hundreds of stolen cars per year that have been insured. CARCO examines each and every “EPA sticker” and routinely detects abnormalities that indicate a stolen car, and that cannot be detected any other way. Most of these thefts are due to car rings. A review of commercially available information in databases such as CARFAX or AutoCheck shows that they have a very poor detection rate for stolen cars. Part of the problem is that the stolen cars often have the VIN changed, and so when the CARFAX or AutoCheck report is run, it is actually run on the wrong VIN. The clear answer is that the database, which contains over 20 million inspections and 50 million photographs is, in fact, very necessary and is a critical tool to help stop vehicle theft and fraud. CARCO has not “moved on.” CARCO has been doing inspecFor the period 1978 – 1979 immediately foltions since 1977, and background screening and HR services since lowing the Implementation of Regulation 79 1978. Both are risk mitigation servNew York New Jersey Connecticut Pennsylvania ices and both are very important to us. CARCO pioneered centralized electronic inspection storage and reporting. Today, when it comes to Automobile technology and the modernization Theft Rate of Regulation 79, CARCO has worked closely with the New York State Department of Financial Services to make it more consumer friendly. CARCO has suggested [Testimony of Deputy Superintendent Richard Hsia, NY State a number of improvements, including increasing the current period Insurance Dept., March 1990] from 5 to at least 7 days. When it comes to technology, earlier this Regulation 79 forced the criminals to move out of New York. year CARCO rolled out iPhone and android apps that enable the It keeps them out of New York! Criminal activity is highly fluid inspection process to be more efficient, and which eliminate the 3 and, absent proper safeguards, will just as easily move back into day time lag for mailed in inspection forms. In addition, at no additional cost to the insurance companies, we are now including in all New York if Regulation 79 is killed or made optional. Since the inception of the program, theft rates have consis- inspections a report provided by the United States Department of tently declined. This is due to the inspection program acting in Justice National Motor Vehicle Title Information System (NMVTIS) concert with other fraud fighting programs, such as improved that provides the most timely information of a vehicle’s “brand”; theft deterrent devices and better policing. Theft rates nationally that is, its title, and whether or not is has been junked, salvaged or have decreased by more than a factor of 10 since the peak in the subject to an insurance company total loss situation. The author extolls the virtues of technology but what he fails late 1970’s and currently stand at 230.0 automobile thefts per 100,000 people per year in 2011. New York enjoys one of the low- to realize is that with more and more insurance being transacted est theft rates in the country at 99.2. California, which has highly on-line without an agent, the probability of agents being cut out concentrated urban regions like NY, does not have a physical of the transaction increases as they are removed further and furdamage inspection program, and has one of the highest theft rates ther from client contact. Conversely, the more enlightened agents recognize that the inspection process is a way to connect with at 389.6. The author also contends that the inspection process is unnec- their insureds and develop a relationship. With the new iPhone essary. Law enforcement and insurance carriers demonstrate oth- and Android apps the process of performing an inspection is easy erwise: In 2012 the CARCO inspection database was accessed 9,382 and the transmission to CARCO is in real time. The smart brokers times by law enforcement researching 148,709 vehicles and 835,844 and agents see the inspections as a means to grow and solidify times by all others including insurance companies SIU, claims and their client relations. That’s a primary driver why they support the Regulation. [IA] underwriting departments, researching 3,351,807 vehicles.

recent article in the “Advocate” proposing repeal of the New York vehicle photo inspection regulation (“Regulation 79”) should be welcomed by those that steal cars, sell cars that were damaged by Superstorm Sandy, and prey upon unsuspecting consumers. Contrary to popular belief, Regulation 79 only applies to 8% of the vehicle population in New York. This small subset of the vehicles underwritten in New York is essentially comprised of used automobiles where the insured has been with the carrier for less than 4 years and where physical damage coverage is desired. This subset was carefully selected based on the likelihood of fraud. The article claims that the photo inspection Regulation was “not as successful as we had hoped,” yet provides no citations. What actually happened after implementation of Regulation 79 proves otherwise:

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INSURANCE ADVOCATE / November 25, 2013 25

[ ON THE LEVEL ]

By N. Stephen Ruchman, CPA

When Will Agents Be Represented Fairly as “Good Guys?”

erhaps it’s the time of year, but over the last month or so, I’ve been particularly sensitive to the constant image challenge agents face as scapegoats and fall guys. Agents take false and undeserved hits from all directions all the time:

were among the first responders during the storm, putting our customers’ needs ahead of our own businesses and families ... and they are still there working on their customers’ behalf. It’s offensive and unethical to capitalize on the pain our area has

…Professional, independent agents do have characteristics that make us exactly the opposite of the stereotypes we are constantly fighting. We are honest, trustworthy and truly concerned for our clients. And, the intense competition and regulation under which our field operates forces us to be efficient and productive. N. Stephen Ruchman

primarily from ubiquitous direct-writer ads, but also in insensitive jokes and comparisons made by trial lawyers, media and the general public alike—and during the election time of October and November, I find it particularly ironic when agents are targeted. The most blatant instance I saw this month was in a political flier sent to residents in my neighboring county of Suffolk, in which the candidate attacked his opponent in the race because he was “an insurance salesman.” The flier went on to suggest that agents “were nowhere to be found when Superstorm Sandy hit.” I know several of my fellow agents, their staff and families were as outraged by this as I was and I was proud to be part of PIANY, when President Alan Plafker, CPIA, took issue with the flier and sent letters to the editors in Suffolk County correcting the cheap shots that were taken. Plafker pulled no punches, writing: “While out-of-town FEMA representatives and adjusters came and went, professional, independent insurance agents were there all along. In fact, professional agents played a critical role in helping our fellow residents file claims, get back on their feet and return to as much normalcy as possible—as quickly as possible. They 26 Novemeber 25, 2013 / INSURANCE ADVOCATE

suffered from Hurricane Sandy. Further, this campaign piece made the outrageous inference that because Mr. Musumeci’s rival sells insurance, he is untrustworthy. To the contrary, the characteristics that make professional, independent agents successful are exactly the ones we should seek in our representatives.” Plafker made a great point: Professional, independent agents do have characteristics that make us exactly the opposite of the stereotypes we are constantly fighting. We are honest, trustworthy and truly concerned for our clients. And, the intense competition and regulation under which our field operates forces us to be efficient and productive. That brings me to another instance: Watching politics during the week of Halloween was frustrating I’m sure, for everyone in our country, regardless of where they stand on the political spectrum. After watching politicians who had us in “shutdown” for nearly three weeks, I myself witnessed at least three major-league apologies on TV about the problems that have plagued HealthCare.gov, the website set up to administer the federal health exchange of the Patient Protection and Affordable Care Act. Health and Human Services Secretary Kathleen Sebelius was

grilled by Congress and apologized there and during media interviews. I even saw Joe Biden and the President voice their regret and dismay over how it’s gone. During congressional hearings over the fiasco, Marilyn Tavenner, administrator for The Centers for Medicare & Medicaid Services, which oversaw the website project, told the House Ways and Means Committee, “We know that consumers are eager to purchase this coverage, and to the millions of Americans who’ve attempted to use HealthCare.gov to shop and enroll in health care coverage, I want to apologize to you that the website has not worked as well as it should.” The degree to which individuals feel frustration over the website no doubt is higher for states which, unlike New York and others that set up state-run exchanges, opted to deal with the federal program directly, but I know everyone is fed up. I am particularly tired of listening to how everyone was going to save extensively by eliminating the agent or reducing commission, to the point that agents have no reason to participate. I can remember a time when 20 percent of my business always came from the life and health business. But, times changed. For some time we simply didn’t have markets to sell health coverage. But, now we do—the exchange: Mr. President, Ms. Sebelis, your solution stands in front of you—the independent agents who have provided services for clients without issue for all these years can sign them into the exchanges. And, as PIA said in a release it issued this month, “Consumers should be aware of an option they may not know they have: Consulting their local, professional independent insurance agent or broker for help in enrolling … Unlike the short-timed navigators,” PIA said, “professional insurance agents are able to offer a much higher level of assistance and consumers don’t pay for this service.” I applaud PIA, which also pointed out that, while in most states navigators are not continued on page 28

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required to be licensed or to comply with state-mandated CE, nor maintain professional liability coverage, professional agents do, and they must comply with strict and complicated consumer protection laws and regulations. “Choosing a health insurance plan is a serious matter,” PIA National President John G. Lee said in the release. “It is a complex process that cannot be compared to purchasing a book from a website. Insurance is not a commodity. The implications of making a poor choice due to inadequate knowledge include paying too much or getting inadequate coverage for yourself or your family.” I can recall when my daughter was born. The hospital bill from Marcy’s birth was $250 for the entire pregnancy, labor and delivery. My, how the cost of health insurance has changed!

Unlike the streamlined efficiency with which professional agents have become accustomed to running their businesses, the cost of unnecessary tests and procedures, waste in our system and other inefficiencies have increased health care costs a thousand times over. I recently had a simple procedure for which the cost of just the pre-operative tests exceeded $1,200! Yet agents are facing an image problem? There’s something wrong here. I’m not sure why agents are so often the butt of jokes, particularly with the standards to which we are held, even by those who often are the ones taking the cheap shots. I’m glad this November election season is over, though I doubt the shots will stop coming … next year is the big election year, with the race for governor and state and federal representatives. [IA]

N. Stephen Ruchman, CPIA, is a retired partner of B&B Coverage LLC. 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.

[ IN THE ASSOCIATIONS ]

Patrick Woods Receives Rodermund Service Award from CAS

ERSEY CITY, N.J., Patrick Woods, assistant vice president and actuary at ISO Insurance Programs and Analytic Services, has been awarded the 2013 Matthew Rodermund Service Award by the Casualty Actuarial Society (CAS). ISO is a member of the Verisk Insurance Solutions group at Verisk Analytics (Nasdaq:VRSK). Woods received the award at the CAS annual meeting in Minneapolis for his significant volunteer contributions to the actuarial profession throughout his career. The award was established in 1990 in honor of Matt Rodermund’s years of volunteer service to the CAS. Each Rodermund Award winner exemplifies a lifetime of service helping to accomplish a variety of CAS initiatives. Woods is a Fellow of the Casualty Actuarial Society (FCAS) and a Member of the American Academy of Actuaries (MAAA). His service to the CAS includes an extended record of volunteering that includes roles essential for everyday CAS functions. As a part of his volunteer effort, 28 Novemeber 25, 2013 / INSURANCE ADVOCATE

The award was established in 1990 in honor of Matt Rodermund’s years of volunteer service to the CAS. Each Rodermund Award winner exemplifies a lifetime of service helping to accomplish a variety of CAS initiatives. he has served as chairman and member of numerous CAS committees, including the Program Planning Committee, the Editorial Committee, and the Committee on Volunteer Resources. He has also represented the property/casualty profession outside the CAS, serving on and chairing the Casualty Committee of the Actuarial Standards Board. For the American Academy of Actuaries, he has served on the Casualty Practice Council and the Committee on Membership.

At ISO, his responsibilities include managing and overseeing the operations of ISO’s Personal Automobile Actuarial Division. He has been significantly involved in the development of the ISO Risk Analyzer Personal Auto solutions. Woods has worked for ISO for more than 35 years. Woods holds a bachelor of science degree and a master of arts degree in mathematics from St. John’s University. The Casualty Actuarial Society (CAS) fulfills its mission to advance actuarial science through a focus on research and education. Among its 6,000 members are experts in property/casualty insurance, reinsurance, finance, risk management, and enterprise risk management. For more information, visit www.casact.org.[IA]

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[ IN THE ASSOCIATIONS ]

PIANY Hudson Valley RAP Celebrates 10 Years

arking a year since Storm Sandy traveled up the East Coast, some 250 insurance producers converged on the Professional Insurance Agents of New York State Inc.’s 10th Hudson Valley Regional Awareness Program. This milestone event, which was delayed a year because of Sandy, was held Oct. 30, 2013, at the Doubletree Hotel, Tarrytown, N.Y. “It’s hard to believe that a year ago today, this event, which was about to celebrate its 10th anniversary in this very location, was canceled because of what we now know became the storm of the century,” said PIANY President Alan Plafker, CPIA. The daylong event featured an award presentation; education sessions; a trade show featuring some 60 exhibitors; an inaugural address by PIANY President Alan Plafker, CPIA, of Member Brokerage Services LLC in Briarwood, N.Y.; and more.

Keynote address During his keynote address, Plafker highlighted the actions PIANY and its members took before, during and after Sandy. PIANY updated its Storm Info Central, an online tool kit that includes consumer materials, preparedness suggestions, emergency contact information, news and FAQs. The day of the storm, PIANY also went to the Department of Financial Services to ask it to rule on terminations and other issues. PIA continued to meet with policymakers to address subsequent issues raised by the extension of the resulting moratoriums after the storm as well as supporting efforts to relax mortgages and banking rules to get claims money in the hands of policyholders faster. The association also reached out to its sisteraffiliate in Louisiana to learn from its experiences after Katrina. Plafker also talked about PIANY members’ resilience during the storm. “I’m really proud and awestruck at our members,” he said. “Despite taking their own beating from the storm, countless stories came in, not just about cooperation among competitors, but how our members led their neighborhoods through dire times. We’ve heard countless stories of selflessness and heroism.” 30 Novemeber 25, 2013 / INSURANCE ADVOCATE

“I urge carriers that support their business partners to continue to do so, and implore those that are looking to share the burden to look closely at the financial health of their sole distribution system.”

Plafker then turned his attention to another storm agents are facing—the combination of falling rates, sustained economic depression, exposure and searing competition. Plafker discussed the importance of maintaining a strong relationship between agents and their carriers. “I urge carriers that support their business partners to continue to do so, and implore those that are looking to share the burden to look closely at the financial health of their sole distribution system,” said Plafker. “A weak sales force will yield weak results, just when our distribution channel needs to grow most.” Plafker also talked about how professional, independent insurance agents are focused on “smart growth” and noted that PIANY helps agents adjust to the changing times, citing the Patient Protection and Affordable Care Act as an example. In August, PIANY conducted a survey of its members in which they said—by a 2/3 ratio—that they expect the implementation of health insurance exchanges to alter the way health insurance is procured for their existing clients. To help members prepare, PIANY hosted a free seminar with the director at the New York State of Health. “Immediately, this association was the first to offer classes to enable agents to sell through the SHOP and individual exchanges,” said Plafker. “This association provides members with tools and resources to reach out to their current and prospective customers to make sure that if they are thinking about purchasing coverage in the exchange, they can stay with

their current producer.” Plafker said that as PIANY enters its 75th year, the association’s committed to continue to learn from Sandy and each challenge professional agents overcome. “We will identify and provide tools and information; and will work with legislators and policymakers to ensure we will be in a better position to do our jobs, should we ever face such a horrible crisis again.” Concluding his remarks, Plafker encouraged PIANY members to be active in their association, citing volunteer opportunities, including participating in Advisory Councils and PIANYPAC. “Take action, don’t leave this work to someone else,” he said.

Distinguished service Prior to Plafker’s address, Donna Chiapperino, chair of Hudson Valley RAP, presented the Hudson Valley RAP Distinguished Insurance Service award to Kevin Ryan, CIC, CPIA, president and CEO of The Valley Group Inc. in Kingston, N.Y. In presenting the award to Ryan, Chiapperino noted his determined efforts on behalf of professional, independent insurance agents and the agency management system. “He worked tirelessly to represent the New York producer community in meetings and discussions with the [then] New York State Insurance Department; fighting in opposition of—and then, seeking clarification of, the state’s compensation disclosure regulation,” said Chiapperino. “The work he did on our behalf helped to change what started first as an attack on agents’ and brokers’ compensation to a much water-down version, requiring unnecessary disclosure for which our clients find no use; but thankfully, not the elimination of our contingent commissions.”

E&O and risk management Insurance professionals who needed continuing-education credits had the option of attending two courses taught by Cathy Trischan, CPCU, CIC, CRM, AU, AAI, ARM, CRIS, MLIS: Natural Disasters—The Errors and Omissions Perspective, in the morning and

[ IN THE ASSOCIATIONS ] Commercial Time Element—Lessons from Superstorm Sandy, in the afternoon. Both classes looked at the lessons the insurance industry has learned from Sandy. A common theme throughout Trischan’s presentations was the importance of educating insureds about the different insurance products available to them and to use multiple forums (e.g., conversations, the agency’s website, newsletters and webinars, etc.) to make sure insureds receive the information. But, equally important, agents need to document that they have educated their insureds.

Trischan also suggested that agents supply recommendations when they offer an insured a quote. “Some people might say they thought a certain coverage would be too expensive, but if you give them an idea they can make a better educated decision,” said Trischan.

Meet and greet

innovations, products and markets. The coffee and dessert reception, held in the trade-show area, offered them the chance to network with each other. The PIANY-Young Insurance Professionals’ networking reception ended this year’s Hudson Valley RAP and allowed attendees another chance to catch up with their colleagues. [IA]

Hudson Valley RAP provided a number of opportunities for participants to meet and greet with each other. The sprawling trade show offered those in attendance the chance to see the newest

CATHY TRISCHAN, CPCU, CIC, CRM, AU, AAI, ARM, CRIS, MLIS, TAUGHT NATURAL DISASTERS—THE ERRORS AND OMISSIONS PERSPECTIVE, IN THE MORNING AND COMMERCIAL TIME ELEMENT— LESSONS FROM SUPERSTORM SANDY, IN THE AFTERNOON AT HUDSON VALLEY RAP.

DONNA CHIAPPERINO, CHAIR OF HUDSON VALLEY RAP, PRESENTED THE HUDSON VALLEY RAP DISTINGUISHED INSURANCE SERVICE AWARD TO KEVIN RYAN, CIC, CPIA.

HUDSON VALLEY RAP PARTICIPANTS MEET-AND-GREET DURING THE TRADE SHOW.

PIANY PRESIDENT ALAN PLAFKER, CPIA, DELIVERED THE KEYNOTE ADDRESS AT THE 10TH HUDSON VALLEY RAP INSURANCE ADVOCATE / November 25, 2013 31

[ IN THE ASSOCIATIONS ]

New York Insurance Association Elects 2014 Officers and Board of Directors

ATHAM, N.Y.—The New York Insurance Association (NYIA) elected its 2014 officers and board of directors at the association’s Annual Meeting in November. The following officers were elected for a one-year term ending Dec. 31, 2014: Chair: Bernard Turi, senior vice president, Utica National Insurance Group, Utica, N.Y. First vice chair: Steven Coffey, president and chief executive officer, Broome Co-operative Insurance Company, Vestal, N.Y.

Second vice chair: Elizabeth Heck, president and chief operating officer, Greater New York Mutual Insurance Company, New York, N.Y. Treasurer: Marlene BentonSherwood, president, Fulmont Mutual Insurance Company, Johnstown, N.Y. The following directors were elected for a three-year term ending Dec. 31, 2016: Steven Coffey, president and chief executive officer, Broome Co-operative Insurance Company, Vestal, N.Y. Charles Makey, senior vice president,

insurance operations, Merchants Insurance Group, Buffalo, N.Y. Nicholas Masi, government and industry affairs manager, Farmers Group, Inc., Saratoga Springs, N.Y. Norman Orlowski, president, Erie and Niagara Insurance Association, Williamsville, N.Y. The New York Insurance Association (NYIA®) is a state trade association that has represented the property and casualty insurance industry for more than 130 years. For more information about NYIA, visit www.nyia.org. [IA]

Jeffrey M. Rubin and Eric S. Kobrick Chosen as ARIAS•U.S. Chairman and President for 2014

ew York, N.Y.—Jeffrey M. Rubin, Senior Vice President, Director Global Claims of Odyssey Reinsurance Company, was elected Chairman of ARIAS•U.S., the AIDA Reinsurance and Insurance Arbitration Society, at its 2013 Annual Conference in New York City. He succeeds Mary Kay Vyskocil, a Litigation Partner at Simpson Thacher & Bartlett LLP, who has retired from the Board. JEFFREY M. RUBIN Eric S. Kobrick, Vice President, Deputy General Counsel, and Chief Reinsurance Legal Officer at American International Group, Inc., was elected President succeeding Mr. Rubin. Also at the conference, Elizabeth A. Mullins, Managing Director and head of Global Dispute Resolution & Litigation of Swiss Re America Holding Corporation, was elected Vice President and designated as President Elect. James I. Rubin, head of the reinsurance litigation and arbitration practice at Butler Rubin Saltarelli & Boyd LLP in Chicago, was elected Vice President. In addition, ARIAS•U.S. members re-elected one Board member and elected one new member. Eric S. Kobrick was re-elected to a second term. Deirdre G. Johnson, a partner in the Washington, DC office of Crowell & Moring LLP, was elected to a first term. Ms. Johnson replaced Ms. Vyskocil as a law firm representative. ARIAS•U.S. is a not-for-profit corporation that seeks to improve the insurance and reinsurance arbitration process by providing training and education in the skills necessary to serve effectively on an insurance/reinsurance arbitration panel. ARIAS•U.S. is the leading 32 Novemeber 25, 2013 / INSURANCE ADVOCATE

trade association for the insurance and reinsurance arbitration industry. It has nearly 1000 members, including professional arbitrators and representatives of insurance and reinsurance companies and law firms with substantial interest and involvement in the arbitration process. Through conferences, seminars and publications, ARIAS seeks to strengthen the arbitration process to meet the needs of today’s insurance/reinsurance marketplace. [IA]

ERIC S. KOBRICK

DEIRDRE G. JOHNSON

ELIZABETH A. MULLINS

JAMES I. RUBIN

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tercraft 27 feet or more in length, often differs from coverage for boats, which are typically under 27 feet in length. Protection and Indemnity coverage addresses maritime law exposures yacht operators are subject to. Yacht insurance deductibles may be a percentage of the hull value, where boat insurance often carries a flat deductible. Another important consideration when discussing coverage with clients is the navigation limits, and layup requirements. Many policies limit where the watercraft may be operated, as well as the times during the year. There may also be exclusions based on its usage, such as racing, for example. Unlike homeowners policies, there is no standard watercraft policy, so it is important to understand the terms and conditions that apply. Watercraft, even the small ones, are prized by their owners. Educating insureds on their unique needs and providing proper coverage is another valueadded service of the true insurance professional.

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[ ON M Y RADA R ]

By Barry Zalma

No Opposition Fatal No Insurance Policy Covers Every Possible Risk of Loss

lark and Nancy Sadler appealed a summary judgment granted in favor of Texas Farm Bureau Mutual Insurance Companies (“Farm Bureau”) on the Sadlers’ Deceptive Trade PracticesConsumer Protection Act (DTPA) claim. The Sadlers sued Farm Bureau for breach of contract and violations of the Texas DTPA. Their suit failed when a “no evidence” summary judgment was granted by the trial court. In Sadler v. Texas Farm Bureau Mutual Insurance Texas Farm Bureau Mutual Insurance Companies, 0412-00789-CV (Tex.App. Dist.4 09/04/2013) a Texas appellate court was asked to resolve the dispute.

FACTS Nancy attempted to move her vehicle into her home’s garage. She lost control of the vehicle after starting it and crashed through the garage, damaging the vehicle and the home. Before this incident, the Sadlers purchased an insurance policy from Farm Bureau. Farm Bureau filed a motion for summary judgment on the Sadlers’ breach of contract and DTPA claims. The Sadlers filed affidavits in response to the motion, in which they stated that the Farm Bureau agent who sold them the policy represented that the policy would give them “full coverage” on their home, property, and “anything that happened on [their] property or to [their] home.” The trial court granted the second motion which the Sandlers did not oppose. In their sole issue on appeal, the Sadlers assert that the trial court erred in granting Farm Bureau’s motion for summary judgment for two reasons.

SUMMARY JUDGMENT MOTIONS In Texas a party may move for a no evidence summary judgment that must be granted if, after an adequate time for discovery, the moving party asserts that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of 36 Novemeber 25, 2013 / INSURANCE ADVOCATE

A proper no-evidence motion must state there is no evidence of one or more elements of a claim or defense on which the nonmovant would have the burden of proof at trial. The purpose of this specificity requirement is to provide the nonmovant with adequate information for opposing the motion and to define the issues for the purpose of summary judgment.

proof at trial, and the nonmovant fails to produce more than a scintilla of summary judgment evidence raising a genuine issue of material fact on those elements.

DISCUSSION A proper no-evidence motion must state there is no evidence of one or more elements of a claim or defense on which the nonmovant would have the burden of proof at trial. The purpose of this specificity requirement is to provide the nonmovant with adequate information for opposing the motion and to define the issues for the purpose of summary judgment. The Sadlers brought their DTPA action under a Texas statute that states in relevant part: (a) A consumer may maintain an action where any of the following constitute a producing cause of economic damages or damages for mental anguish: (1) the use or employment by any person of a false, misleading, or deceptive act or practice that is: (A) speciﬁcally enumerated in a subdivision of Subsection (b) of Section

17.46 of this subchapter; and (B) relied on by a consumer to the consumer’s detriment; [or]… (3) any unconscionable action or course of action by any person[.] Thus, to prevail on their DTPA claim, the Sadlers were required to show: (1) they are consumers; (2) Farm Bureau used or employed at least one of the laundry list items of false, misleading, or deceptive acts or practices that the Sadlers relied on to their detriment, or Farm Bureau engaged in an unconscionable action or course of action; and (3) these acts constituted a producing cause of the Sadlers’ damages. In its no-evidence motion, Farm Bureau adequately set forth the elements to which it claimed there was no evidence. In its first and third assertions, Farm Bureau challenged the second element of the Sadlers’ claim because the motion stated the Sadlers have no proof that Farm Bureau engaged in false, misleading, or deceptive acts or that the Sadlers justifiably relied on those acts to their detriment. In its fourth and fifth assertions, Farm Bureau challenged the third element of the Sadlers’ claim because the motion stated the Sadlers have no proof that the acts caused the Sadlers’ damages or that they even suffered damages. Farm Bureau’s no-evidence summary judgment motion was found to be sufficient because it challenged at least one element of the Sadlers’ DTPA claim on which they would have the burden of proof at trial, and, as a result, the burden shifted to the Sadlers to produce more than a scintilla of evidence raising a genuine issue of material fact on the challenged elements. If a nonmovant wishes to defeat a noevidence summary judgment motion, it must timely file a response to the motion. Except on leave of court, the nonmoving party must file a response not later than seven days before the day of the hearing. A court may grant no-evidence summary judgment if the nonmovant does not file a response and the motion is sufficient, but may not necessarily grant traditional summary judgment, for the same reasons. Mere existence in the court’s file of

[ ON MY RADAR ] a response to an earlier summary judgment motion is not enough. A party properly places evidence before the trial court by requesting in a motion that the trial court take judicial notice of evidence already in the record or by incorporating the document or evidence in the party’s motion. Nothing in the record suggests the Sadlers filed a response to the no-evidence motion. Nor does the record indicate they requested that the trial court take judicial notice of the affidavits attached to the response to Farm Bureau’s traditional summary judgment motion. For these reasons, we must conclude the Sadlers did not respond. Therefore, they did not meet their burden of producing more than a scintilla of evidence raising a genuine issue of material fact. The Sadlers’ second claim is that the trial court should not have granted Farm Bureau’s no-evidence summary judgment motion because “the allegations in Farm Bureau’s No-Evidence Motions for Summary Judgment are sufficient in and of themselves to raise a fact issue sufficient to preclude the summary judgment requested by Farm Bureau.” The allegations contained in Farm Bureau’s no-evidence motion are not admissions. Farm Bureau was merely describing the Sadlers’ pleadings in order to provide background for its no-evidence motion. Accordingly, Farm Bureau did not defeat its no-evidence motion by summarizing the Sadlers’ pleadings.

cannot change the wording of an insurance policy. No policy covers everything. Every policy of insurance contains exclusions like an exclusion for damages caused by the insured to their own property or caused intentionally. The appellate record did not deal with the specific reasons why the insurer denied the Sadlers’ claim. It is obvious that they had no defense to the motion because the presented no evidence. If they had evidence they are not without a remedy, they can always sue their attorney. The original motion for summary judgment should have been granted because a statement from an insured that the agent told her that the policy would cover everything was less than credible. The Sadlers’ proved the lack of defense by filing no opposition. Barry Zalma, Esq., CFE, has practiced law in California for more than 40 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. Specialty Technical Publishers recently published Mr. Zalma’s new E-Book, “Getting the Whole Truth” which is available at http://www.stpub.com/Gettingthe-Whole-Truth_p_254.html. Mr. Zalma recently published the ebooks, “Zalma on California Claims Regulations – 2013 ; “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 can also be seen on World Risk and Insurance News’ web based television programing, http://wrin.tv.

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Conclusion Farm Bureau’s no-evidence motion for summary judgment was sufficient to shift the burden to the Sadlers to produce more than a scintilla of evidence raising a genuine issue of material fact on the challenged elements. By failing to respond to the motion, the Sadlers failed to meet their burden, and the trial court did not err in granting no-evidence summary judgment in favor of Farm Bureau on the Sadlers’ DTPA claim. Therefore, the Sadlers’ sole issue is overruled, and the judgment of the trial court is affirmed.

ZALMA OPINION The key to the Sadlers’ suit was the representation made by the agent believing that his words extolling the coverages available override the wording of the policy. An agent by his sales representations

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INSURANCE ADVOCATE / November 25, 2013 37

[ AFTER SANDY: 35 POINTS ]

Lessons Learned After Sandy and Possible Ways to Strengthen New York

ew York is not known as an epicenter for natural catastrophes. In 2011, tropical storms Irene and Lee caused widespread flooding in upstate New York. Entire communities were washed away. New Yorkers had not seen such dire circumstances in years. Then, just over a year later Sandy hit. Sandy was more than a tropical storm—commonly referred to as either a hurricane or a superstorm, depending on the circumstances— and hit densely populated Long Island, New York City, areas of Westchester County and other downstate areas. A disaster resulting in tens of thousands of claims is considered serious. Sandy resulted in nearly 500,000 claims in New York alone. It was an absolutely unprecedented number in the state. Sandy (as well as Irene and Lee) were flooding events. Flood insurance is not part of a standard homeowners or business policy and is predominantly available as a separate policy through the National Flood Insurance Program, which is administered by the federal government. Only 10 percent of individuals have purchased flood insurance in the Northeast. Many hit by Sandy, Irene and Lee had little or no coverage. All those involved in responding worked tirelessly to help those in need. There was truly a reservoir of goodwill. In the case of the insurance industry, 35,000 adjusters were deployed responding to the unprecedented number of claims paying billions of dollars to New Yorkers with the number of complaints standing at less than 1 percent. Despite everyone’s tremendous efforts there are issues that exist. NYIA is looking to further the dialogue around disaster preparedness, response and recovery to make improvements for future times of crisis. The New York Insurance Association hosted a Strengthen New York Disaster Preparedness and Flood Readiness Summit to engage the many stakeholders involved with assisting New Yorkers during emergencies in a dialogue. The purpose was to develop solutions to current issues 38 Novemeber 25, 2013 / INSURANCE ADVOCATE

and provide recommendations on how the state can be better prepared for disaster situations. The summit was held in two parts. First, on September 16 in Syracuse and then on September 18 in New York City. Four general topics were discussed: flooding and flood insurance, rebuilding for brighter tomorrows, education and preparation and better coordination and utilization of resources. The roundtable discussions at the summits provided great insights into both the challenges presented by disasters and opportunities for improvement. The participants at each roundtable represented a broad cross-section of many diverse organizations and government officials, all of whom play an important role in providing assistance to New Yorkers impacted by disasters. Disasters by their very nature are extremely difficult situations. It is not always easy to find solutions to the challenges presented. Our goal is to help New York best deal with crisis situations and improve coordination among the various organizations involved from both the public and private sector. NYIA drafted a white paper to advance 35 potential action items that were developed as a result of the summit. These action items are borne from ideas proposed by participants at the summit and are offered for consideration.

Prepare 1. All those involved in disaster response should participate in tabletop exercises simulating a disaster

event. 2. Encourage New Yorkers to engage in a thorough evaluation of their risks and make certain they have the proper insurance for their homes, automobiles and businesses. 3. Educate people about the importance of discussing insurance coverage, including flood insurance, with their insurance agents. 4. Conduct public relations campaigns to reinforce and emphasize to New Yorkers the differences between various types of insurance, including what is and is not covered by each type. 5. Coordinate with the Federal Emergency Management Agency/National Flood Insurance Program (FEMA/NFIP) to encourage more New Yorkers to obtain flood insurance, particularly in flood prone areas. 6. Study the possibility of requiring homeowners in high-risk flood areas to obtain flood insurance as a condition of obtaining a homeowners policy. 7. Support federal efforts to create a “mitigation savings account” for individuals. 8. Consider replicating the Terrorism Risk Insurance Act (TRIA) government backstop mechanism for flood insurance. 9. Encourage the New York State Department of Financial Services (DFS) to examine its own disaster

[ AFTER SANDY: 35 POINTS ] preparedness in the same manner it examines insurance companies’ disaster preparedness on a yearly basis. 10. Urge DFS to establish required emergency measures well in advance of future disasters. 11. Conduct annual meetings between DFS and insurance companies regarding actions that will be taken when a catastrophe occurs. 12. Include an insurance expert in the state’s Division of Homeland Security and Emergency Services’ process of working with counties to improve their disaster response efforts. 13. Encourage New York communities to maximize their ability to reduce the impact of flood insurance rates on its citizens through improvement of the locality’s community rating system (CRS). 14. Use the state’s floodplain management program to better train local code enforcement officers on flood requirements and obtain funding (perhaps state or federal) so it is more affordable for local officials to attend training sessions. 15. Homebuyers should access a flood insurance rate quote on a home as early in the process as possible. This information can be obtained by asking the seller for an elevation certificate and consulting with an agent.

Respond 16. Establish a communication relay system from the Division of Homeland Security and Emergency Services to DFS and then to insurance companies during disasters. 17. Streamline access to affected areas for those responding to a disaster once an area is secure. 18. Implement procedures to ensure insurance adjusters can travel on highways and parkways—waiving any standard restrictions for commercial vehicles or non high occupancy vehicles. 19. Develop a process to ensure those providing assistance after a disaster are granted priority access to fuel. 20. Create a mechanism so all those in need of overnight accommodations are able to secure housing within a

reasonable distance. 21. Establish a means for responders/insurance adjusters to access phone and data connections. 22. Provide insurance companies with an appropriate and adequate amount of time to adjust claims during a crisis. 23. Develop a registry of preapproved temporary company and independent adjusters, so these adjusters can be activated and utilized more quickly. 24. Explore methods for greater collaboration between adjusters for private insurers and NFIP. 25. FEMA/NFIP should create a means for insurance companies to electronically transmit the required denial of coverage to expedite a person’s eligibility for financial aid. 26. Municipalities should utilize the Web and social media to publicize the process for obtaining building permits and elevation certificates. 27. Amend the New York Highway Law to authorize municipalities to act quickly to eliminate a source of flooding that is on private property as well as make other statutory changes to ensure municipalities can most effectively and expediently respond to disasters.

Rebuild 28. Establish a process to examine New York’s building codes (with an emphasis on New York City’s codes) with an eye toward proposals for rendering properties more resistant to flood. 29. Amend the state’s building codes to incorporate standards for 500 year flood events. 30. Discourage development in high risk areas of the state where flooding is most prevalent and damage would be especially severe. 31. Encourage New York homeowners to utilize the hazard mitigation grant program. This would enable homeowners to raise their house— better protecting it and saving money on flood insurance rates. 32. Urge NFIP to recognize flood proofing of multi-family housing as qualified mitigation.

33. Attempt to identify and secure funding for hardening inlets. 34. Obtain insurance industry involvement in community reconstruction zones (CRZs) by both agents and insurance companies. 35. Recommend greater collaboration between the New York Bankers Association and DFS to identify who holds mortgages on abandoned property and then expedite the process of getting these properties ready for sale. There are differing opinions on where personal responsibility ends and societal responsibility begins. In an ideal, balanced world there would be shared responsibility. Individuals cannot assume that someone else will come to their aid, but as a society we should assist those in need. As was said at the outset: there are no easy solutions when it comes to catastrophes. The intent of the action items and other materials included is simply to further the conversation. The sources of the suggestions greatly varied and while NYIA may not specifically endorse certain concepts, we do think all ideas should be put forward in an effort to have an open, honest dialogue about how the state can better prepare, respond and recover from future disasters. We caution against isolating individual recommendations without examining the full context around the issue. The key is that all parties are dedicated to working together for the betterment of the state and its residents as a whole. It serves no one to advance the agenda of one single entity. The stakes are simply too great when it comes to helping those in the midst of a crisis situation. While we sincerely hope that a storm of the magnitude of Sandy never reaches our state’s borders again, we would be naive to think it’s unlikely. Unfortunately, it’s not a matter of if disaster will strike again, but when. What we do have control over is that we are adequately prepared and have a coordinated plan in place. A full copy of NYIA’s white paper is available at www.nyia.org. [IA]

INSURANCE ADVOCATE / November 25, 2013 39

[ COURTSI DE ]

By Lawrence Rogak

Back Seat Passenger Unties Driver’s Bikini Top, Causing Her to Lose Control; No Liability Per Emergency Doctrine Pelletier v Lahm

fter a defense verdict from a Rockland County jury, plaintiff moved to set aside the verdict, which was denied, and plaintiff appealed. The Appellate Division affirmed. The Supreme Court properly denied the plaintiff’s motion pursuant to CPLR 4404(a) to set aside the verdict on the issue of liability and for judgment as a matter of law or, in the alternative, to set aside the verdict as contrary to the weight of the evidence and for a new trial. Pursuant to CPLR 4404(a), a trial court “may set aside a verdict . . . and direct that judgment be entered in favor of a party entitled to judgment as a matter of law.” Here, however, a valid line of reasoning and permissible inferences could lead a rational person to the conclusion reached by the jury on the basis of the evidence presented at trial (see Cohen v Hallmark Cards, 45 NY2d 493, 499; Lalanne v Nyack Hosp., 45 AD3d 645, 646). Further, a verdict should not be set aside as contrary to the weight of the evidence unless it could not have been reached upon any fair interpretation of the evidence (see Lolik v Big V Supermarkets, 86 NY2d 744, 746; Dunnaville v Metropolitan Tr. Auth. of City of N.Y., 68 AD3d 1047; Artusa v Costco Wholesale, 27 AD3d 499, 500; Nicastro v Park, 113 AD2d 129, 132137). Whether a verdict should be set aside as contrary to the weight of the evidence is not a question of law, but instead requires the discretionary balancing of various factors (see Cohen v Hallmark Cards, 45 NY2d at 499; Alatzas v National R.R. Passenger Corp., 67 AD3d 832, 833). It is within the province of the jury to determine issues of credibility, and great deference is accorded to the jury given its opportunity to see and hear the witnesses (see DeToia v Yellow Transp., Inc., 68 AD3d 804, 805; Fowler v Jamaica Bus, 62 AD3d 943).

Brittany’s general awareness that Brandon Berman, a passenger in her vehicle, had engaged in certain distracting conduct while in the car would not preclude a jury from deciding that Brittany did not anticipate that he would suddenly pull the strings on her bikini top, thereby causing the top to fall and her breasts to be exposed.

40 Novemeber 25, 2013 / INSURANCE ADVOCATE

A fair interpretation of the evidence supported the jury’s determination that the defendant Brittany Lahm (hereinafter Brittany) was not negligent in the operation of her vehicle (see Nicastro v Park, 113 AD2d at 134-135). Contrary to the plaintiff ’s contention and our colleague’s dissent, under the particular circumstances of this case, the trial court properly charged the jury on the emergency doctrine. In assessing the propriety of whether to instruct a jury on the emergency doctrine, the trial court must “make the threshold determination that there is some reasonable view of the evidence supporting the occurrence of a qualifying emergency’” (Caristo v Sanzone, 96

NY2d 172, 175, quoting Rivera v New York City Tr. Auth., 77 NY2d 322, 327; see Lifson v City of Syracuse, 17 NY3d 492, 497). “Only then is a jury instructed to consider whether a defendant was faced with a sudden and unforeseen emergency not of the actor’s own making and, if so, whether [the] defendant’s response to the situation was that of a reasonably prudent person” (Caristo v Sanzone, 96 NY2d at 175). “The emergency instruction is, therefore, properly charged where the evidence supports a finding that the party requesting the charge was confronted by a sudden and unexpected circumstance which leaves little or no time for thought, deliberation or consideration’” (id., quoting Rivera v New York City Tr. Auth., 77 NY2d at 327). Here, “viewing the evidence in the light most favorably toward giving the requested emergency doctrine instruction to the jury” (Kuci v Manhattan & Bronx Surface Tr. Operating Auth., 88 NY2d 923, 924), based upon Brittany’s testimony, there is a reasonable view of the evidence that her conduct was the product of a “sudden and unexpected circumstance’” (Lifson v City of Syracuse, 17 NY3d at 497, quoting Caristo v Sanzone, 96 NY2d at 174). Contrary to our dissenting colleague’s determination, Brittany’s general awareness that Brandon Berman, a passenger in her vehicle, had engaged in certain distracting conduct while in the car would not preclude a jury from deciding that Brittany did not anticipate that he would suddenly pull the strings on her bikini top, thereby causing the top to fall and her breasts to be exposed (see Kuci v Manhattan & Bronx Surface Tr. Operating Auth., 88 NY2d at 924). It was for the jury to find whether Brittany was continued on page 42

[ COURTSIDE ] continued from page 40

faced with a sudden and unforeseen emergency not of her own making and, if so, whether her response to the situation was that of a reasonably prudent person (see Caristo v Sanzone, 96 NY2d at 174-175). ROMAN, J., dissents, and votes to reverse the judgment, on the law, and remit the matter to the Supreme Court, Rockland County, for a new trial in accordance with the following memorandum: I respectfully disagree with the majority’s conclusion that the trial court properly instructed the jury on the emergency doctrine. As will be discussed, prior to the accident at issue, the driver of the subject vehicle, the defendant Brittany Lahm (hereinafter Brittany), was not faced with a sudden and unexpected circumstance leaving little or no time for thought, deliberation, or consideration. As such, there is no reasonable view of the evidence that Brittany was confronted with a qualifying emergency. On July 12, 2008, Brittany was operat-

During the drive on the New York State Thruway, Brandon playfully pulled the strings of Brittany’s bikini top.

ing a vehicle owned by her father, the defendant Phillip Lahm. There were four passengers in the vehicle, including the plaintiff, Jason Pelletier, and Brandon Berman (hereinafter Brandon), who was seated in the rear passenger seat behind the front-seat passenger. Brittany and her four passengers, all 19 years of age, were traveling home following a day at the New Jersey Shore. They had left the beach at

3:30 p.m., and were traveling northbound on the New York State Thruway at the time of the accident. Brittany testified that she had dinner plans scheduled at 7:30 p.m. that evening and “didn’t feel like being late.” During the drive on the New York State Thruway, Brandon playfully pulled the strings of Brittany’s bikini top. Brittany reacted by taking her hands off the steering wheel for a split second to cover herself. The vehicle began to veer to the right. Brittany grabbed the steering wheel to steer the vehicle back into the lane, but she lost control of the car. The vehicle struck the center guardrail, vaulted over the guardrail, and overturned, coming to rest upside down in the southbound lanes. Brittany estimated that she had been driving on the Thruway for approximately 15-20 minutes before the accident occurred. As a result of the accident, the plaintiff sustained personal injuries and Brandon died. The plaintiff subsequently commenced this action against the defendants to recov-

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[ COURTS I D E ] er damages for personal injuries. At trial, the court charged the jury on the emergency doctrine. The jury ultimately returned a verdict finding that Brittany was not negligent in the happening of the accident. Following the trial, the court denied the plaintiff ’s motion pursuant to CPLR 4404(a) to set aside the verdict and for judgment as a matter of law on the issue of liability, or, in the alternative, to set aside the verdict as contrary to the weight of the evidence and for a new trial. This appeal by the plaintiff ensued. The emergency doctrine “recognizes that when an actor is faced with a sudden and unexpected circumstance which leaves little or no time for thought, deliberation or consideration, or causes the actor to be reasonably so disturbed that the actor must make a speedy decision without weighing alternative courses of conduct, the actor may not be negligent if the actions taken are reasonable and prudent in the emergency context” (Rivera v New York City Tr. Auth., 77 NY2d 322, 327; see Amaro v City of New York, 40 NY2d 30, 36). “A person in such an emergency situation cannot reasonably be held to the same accuracy of judgment or conduct as one who has had full opportunity to reflect, even though it later appears that the actor made the wrong decision’” (Rivera v New York City Tr. Auth., 77 NY2d at 327, quoting Prosser & Keeton, Torts § 33 at 196 [5th ed]). Prior to issuing an emergency instruction to the jury, the court is required “to make the threshold determination that there is some reasonable view of the evidence supporting the occurrence of a qualifying emergency’” (Caristo v Sanzone, 96 NY2d 172, 175, quoting Rivera v New York City Tr. Auth., 77 NY2d at 327). “If, under some reasonable view of the evidence, an actor was confronted by a sudden and unforeseen occurrence not of the actor’s own making, then the reasonableness of the conduct in the face of the emergency is for the jury, which should be appropriately instructed” (Rivera v New York City Tr. Auth., 77 NY2d at 327). However, “an emergency instruction is not proper where the situation is neither sudden nor unexpected or could have been reasonably anticipated in light of the surrounding circumstances” (Smith v Perfectaire Co., 270 AD2d 410, 410; see Moore v Bame, 257 AD2d 716; Hardy v Sicuranza, 133 AD2d 138).

The “classic emergency situation” implicating the emergency doctrine involves a vehicle traveling in the opposite direction crossing over into oncoming traffic (Gajjar v Shah, 31 AD3d 377, 377; see e.g. Ferebee v Amaya, 83 AD3d 997; Palma v Garcia, 52 AD3d 795, 796). By contrast, the charge has been found inappropriate in cases where the subject accident resulted from an occurrence which the parties had reason to anticipate (see e.g. Lifson v City of Syracuse, 17 NY3d 492, 495 [sun glare at sunset while traveling west]; Caristo v Sanzone, 96 NY2d at 175 [deteriorating weather conditions existing for at least two hours, resulting in icy roadway]). In the present case, the evidence at trial established that, prior to the accident, Brandon engaged in a course of distracting conduct, including spitting chewing tobacco out the window, opening an umbrella inside the vehicle, leaning halfway out of the window, and using the umbrella to clean the tobacco off the exterior of the vehicle. Brandon, who had been laughing about his actions, then proceeded, from the backseat, to stick his feet over the center console into Brittany’s face. While the source of Brandon’s merriment was unknown, Brittany noted it was Brandon’s birthday and assumed that he was “on something” that day. Despite Brandon’s conduct, Brittany never attempted to pull the vehicle over, or to slow the vehicle down and, instead, continued to travel on the Thruway at a speed of 65 miles per hour. Brandon then pulled the bikini string tied around Brittany’s neck. As a result, Brittany released the steering wheel with her right hand to hold up her top and yelled at Brandon. Holding onto the steering wheel with her left hand and her bikini top with her right hand, Brittany leaned forward so the front-seat passenger could re-tie the string. As Brittany leaned forward, Brandon pulled the second bikini string on her back. It was at that moment Brittany testified she took both hands off the steering wheel for “a split second” to grab her bikini top. As a result, she lost control of the vehicle. Viewing Brandon’s conduct in totality, the situation was neither sudden nor unexpected, and, in fact, could have been reasonably anticipated in light of the surroundcontinued on page 46

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Although the culminating act of pulling the second bikini string perhaps caused Brittany to instinctively remove her hands from the steering wheel to cover her breasts, nonetheless, the conduct was preceded by a series of incidents perpetrated by Brandon, of which Brittany was aware…

ing circumstances. Brittany was aware of Brandon’s inappropriate, distracting, and dangerous behavior, yet chose to maintain her speed at 65 miles per hour rather than take appropriate measures to ensure the safe operation of the vehicle. The foregoing does not present a situation envisioned by the emergency doctrine. Moreover, it cannot be said that Brittany did not have time for “thought, deliberation or consideration,” in the face of Brandon’s behavior (Caristo v Sanzone, 96 NY2d at 174 [internal quotation marks omitted]). To the contrary, the record reveals that Brittany had a full opportunity to reflect on the ongoing situation, which occurred over a span of approximately 15-20 minutes (cf. Williams v Econ, 221 AD2d 429, 430 [applying the emergency doctrine where the defendant faced “an instantaneous cross-over emergency,” and “had only a fraction of a second to react”]). That Brittany had an opportunity to weigh alternative courses of conduct over that period of time was demonstrated by the fact that she took corrective measures in response to Brandon’s actions, including yelling at him to get back inside the vehicle, using her electronic controls to roll up Brandon’s window, and admonishing him to stop acting like an “idiot” and to stop sticking his feet in her face (cf. Roman v Vargas, 182 AD2d 543, 544 [emergency doctrine applicable where “there were no alternatives available” to the Stephens defendants to avoid the subject automobile accident, and the entire event involved “ a question of seconds’”]). Although the culminating act of pulling the second bikini string perhaps caused Brittany to instinctively remove her hands from the steering wheel to cover her breasts, nonetheless, the conduct was preceded by a series of incidents perpetrated by Brandon, of which Brittany was aware, which similarly interfered with Brittany’s ability to safely operate the vehicle (see Carson v De Lorenzo, 238 AD2d 790, 791 [“the chain of events leading up to the col-

lision was set in motion by defendant’s operation of her vehicle at a speed that was excessive for the prevailing weather and road conditions”]). That Brandon would ultimately commit an act which would cause Brittany to lose control of the vehicle, under the circumstances of this case, cannot be deemed sudden or unexpected (see Lifson v City of Syracuse, 17 NY3d at 495; Caristo v Sanzone, 96 NY2d at 175 [“Given (the defendant’s) admitted knowledge of the worsening weather conditions, the presence of ice on the hill cannot be deemed a sudden and unexpected emergency”]; Smith v Perfectaire Co., 270 AD2d at 410 [no qualifying emergency where the defendant driver, whose van struck the plaintiff ’s car from behind, knew there was ice on the roadways in the area, and therefore, had taken precautions to avoid skidding]). Therefore, contrary to the Supreme Court’s determination, there was no qualifying event justifying the issuance of an instruction on the emergency doctrine. Accordingly, I would reverse the judgment, on the law, and remit the matter to the Supreme Court, Rockland County, for a new trial (see Smith v Perfectaire Co., 270 AD2d at 410).[IA]

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