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VOLUME 126, NUMBER 19 / November 30, 2015
A CINN Group, Inc. Publication
Serving: New York, New Jersey, Connecticut, Eastern Pennsylvania and Washington D.C.
DON KRAMER 2015 IFNY Free Enterprise Awardee
IFNY President, Nick Pearson (r), presents the award
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Contents
November 30, 2015 | volume 126 number 19
[ COVER STORY ]
33
Classifieds
14
34
Guest Opinion: Danger: Interstate Compact Could “Fundamentally Transform” Medicine Jane M. Orient, M.D.
IFNY Annual Free Enterprise Award Luncheon Honors Donald Kramer
[FEATURES] 4
Foreword: The Figuration Clerk Steve Acunto, Publisher
6
Insight: Past is Prologue
10
Face to Face: Who’s Driving? Michael Loguercio
12
The Social Notebook: Seven-Step Process to Build Your Social Presence Chris Paradiso
22
In the Associations: Applied Systems Receives Highest Number of ACORD Awards at 2015 ACORD Forum
24
On the Level: N. Stephen Ruchman
26
In the Associations: Israel Bonds Insurance Division Luncheon Results in Record $44.6 Million in Bond Investments
[ AD FEATURES] 11
MSO: Golf Carts: Not Just Par for Course Anymore
14
PIANY to Focus on NYSIF’s 30-day Notice Requirement during the 2016 Legislative Session 28
Looking Back: November 1990
30
On My Radar: Is Breach of Contract Required for Bad Faith? Barry Zalma
32
Courtside: Venue for Suit Based on Breach of Policy Condition is Where “The Contract Exists” — Insurer’s Offices Lawrence N. Rogak
10
www.insurance-advocate.com INSURANCE ADVOCATE / November 30, 2015 3
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[ FORE WORD ]
Steve Acunto
The Figuration Clerk
S
I
FNY Free Enterprise Award honoree Don Kramer, easily one of the industry’s top exponents, recalled a bit of his history in the First National City Bank building that now houses Cipriani. He recalled the teller window just to the left of what is now the stage and the lines there, but most importantly, he traced his early progress in business and shared with the students present for the IFNY scholarship program, just how things can happen and where they can lead. We excerpt from his remarks: “Thank you so much for honoring me today.… I have to tell you that this is a very emotional moment for me…being in this building today brings me back to the very inception of my career. Exactly 58 years ago I opened my first checking account at First National City Bank in this very building…at the window at the back of this hall. In addition, when I was growing up I never knew where Wall Street was because the train I took from Brooklyn to Manhattan made its first stop at Canal Street, about half a mile uptown from here. But then when I finally did come to Wall Street from Brooklyn College, I was able to take the subway directly to the Broad Street station which is directly in front of the Treasury building and the New York Stock Exchange just about a block from here. I got my first job in Wall Street at Oppenheimer & Co. during my last year of college. Initially I was hired as a billing clerk typist. You know in 1957 all trades on the New York Stock Exchange were calculated by hand. We had no calculators — they didn’t exist.… I typed the handwritten calculations on an Elliot’s billing machine which would print the confirmation if the calculations were correct. The people who did the calculations were called Figuration Clerks. Every one of you sitting here today has a phone in your pocket or purse that can not only calculate complex formulas but also run 90 percent of your day-to-day life both in business and personally. But 57 years ago I was just a motivated employee looking to advance. I wanted to step up to the high level job of “Figuration Clerk,” so for three weeks I calculated trades. You know, you learn how to speed add and subtract the same way you learn speed reading. You just do it. So once I was error free for three weeks they let me go live. I did one-third of the firm’s trades…and proudly initialed my work with DK for Don Kramer. Unfortunately in Wall Street DK means “Don’t Know.” It’s like bouncing a check.… The result is that the New York Clearing House had the largest number of Fails it had ever experienced from one firm. I got calls from screaming parties saying “My man met your man on the floor of the Exchange.” I said we honored the trade, he said “You jerk, they bounced it.” Realizing my error they changed my initials to FK. I won’t tell you what it means but for sure it was humbling. I did this for a year and learned an amazing amount as I watched clients buy and sell stocks and bonds. I was paid $65 a week. In June of 1958, I graduated from University,… and so now I was looking to advance.… Oppenheimer & Company said Donald we like you.… How would you like to be a Margin Clerk for $100 per week. I said no, I want to be a Securities Analyst. They said we already have our analyst Leon Levy, we don’t need two. So I left and joined Moody’s as a municipal bond analyst for the same $65 salary per week. But 10 years later I returned to Oppenheimer as a senior partner. In those days only partnerships were permitted on the New York Stock Exchange,…so we had unlimited liability. Well by then they knew my specialty as an Insurance Analyst pretty well and I was fairly well known in the industry…so four years later, (like) most of us Oppenheimer partners (in) 1973 I joined Lloyd’s as a name.… We already had unlimited liability so the Lloyd’s risk was easy to take. Only recently however did I realize that in 1973 I pioneered the Hedge Fund Reinsurance company business, or more correctly the investment oriented reinsurance company. This was 39 years before the next group of hedge fund reinsurers actually entered the business. Boy continued on page 31
4 November 30, 2015 / INSURANCE ADVOCATE
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VOLUME 126, NUMBER 19 NOVEMBER 30, 2015
EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Kelly Donahue-Piro Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com PROOF READER Maria Vano mariavano9@gmail.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x111 circulation@cinn.com PUBLISHED BY CINN Group P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264 www.cinn.com | info@cinn.com President and CEO Steve Acunto
CINN G R O U P, I N C .
INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in July, August, September and December by CINN ESR, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing offices. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $110.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2015. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Office.
For high-quality article reprints (minimum of 100), including e-prints, contact Gina Balog at g@cinn.com or call 914-966-3180, x113
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[ INSIGHT ]
By Peter H. Bickford
Past is Prologue
T
he new Spielberg/Hanks movie “Bridge of Spies” is by all accounts a relatively factual telling of a 1950s Cold War drama played out on the front pages of the press with little public knowledge of the real drama occurring behind the scenes. The movie’s hero is an insurance
became aware of the connection recently. But upon learning of the connection, it made a lot of sense. Tom, who retired a number of years ago, was a hard-nosed negotiator and staunch defender of the security fund and its role in the long drawn out process of resolving the many financial
The security fund, on the other hand, worked with representatives of the financially troubled syndicates, their policyholders and other creditors and the courts to seek broad market solutions, including the first use of commutations to restore solvency (leading to the enactment of §1321 of the New York Insurance Law). Peter H. Bickford
lawyer from Brooklyn, James B. Donovan, who was asked to defend a Soviet spy living underground in New York, Colonel Rudolf Abel. Because of his independent negotiating skills, Donovan, played by Tom Hanks in the movie, was drawn into the highstakes behind-the-scenes negotiations for the exchange of Abel for two Americans, including the U-2 spy plane pilot, Francis Gary Powers. I never knew James B. Donovan, who died at age 53 in 1970, but recently learned of a connection to him that brought back memories of another, far less dramatic, story wrought with misinformation or misconceptions – the aftermath of the old New York Insurance Exchange. The connection is that James Donovan’s law partner, Tom Parry, was the lawyer for the exchange’s security fund. Although Tom was the only contemporary partner in the firm of Donovan Maloof Walsh & Kennedy (later Donovan Parry McDermott & Radzik) to have actually practiced law with James B. Donovan, Tom seldom discussed his former partner’s exploits and I only
issues facing exchange syndicates following the close of the Lloyd’s-style facility in the late 1980s. And like the Cold War events of the 50s and 60s, the factual story seems to elude common knowledge. Even today when I mention efforts to consider the establishment of a modern USbased syndicated market, eyes role with ingrained but incorrect perceptions about the old exchange. I have written about these misperceptions many times in the past, but for the moment – in honor of James B. Donovan and his partner Tom Parry – I am focused on the role of the exchange’s security fund. The security fund was created under the original exchange legislation as a separate entity from the exchange with its own board of directors and officers. Many observers, however, considered it to be nothing more than an arm of the big insurers that controlled the exchange, with a board made up of representatives of the same major insurers running the exchange’s board. In fact the security fund board was fiercely independent and took many actions
opposed by the exchange board – independence exemplified by its counsel, James B. Donovan’s partner Tom Parry. In the mid-1980s the exchange syndicates ran into the same underwriting and financial problems that also plagued and almost destroyed the Lloyd’s facility and bankrupted many of its individual investors. However, while the Lloyd’s market worked together to address its financial and market problems, the New York exchange leadership failed to take steps to protect its market, resulting in its closing after a short seven years. The exchange failed to use its unique self-regulatory authority to work with syndicate managers, the broker community and the security fund to find ways to address the syndicates’ financial problems to keep the market active and viable. Instead, eight of the exchange’s 35 active syndicates became financially over-extended and were turned over to the State for liquidation without any serious attempt to resolve these problems within the exchange framework. The security fund, on the other hand, worked with representatives of the financially troubled syndicates, their policyholders and other creditors and the courts to seek broad market solutions, including the first use of commutations to restore solvency (leading to the enactment of §1321 of the New York Insurance Law). Another proposed market solution was for the creation of a new syndicate that would be the reinsurer of or assuming entity for the old liabilities of the impaired or insolvent syndicate. Sound familiar? The proposal, which was presented long before Lloyd’s created Equitas as its own run-off facility, was supported by policyholders, syndicates, brokers, the security fund, and the liquidation courts, but flatly rejected by the exchange leadership. While the exchange leadership was washing its hands of the troubled syndicates and forcing the closure continued on page 8
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[ INSIGHT ] continued from page 6
of the market, the security fund was working with syndicates, their policyholders and creditors, regulators and the courts by supporting court-approved commutation plans and other efforts to resolve the financial problems short of liquidation. And when liquidation was a certainty, the security fund worked with policyholders and other creditors to push for resolution of the estates and payment of claims.
Even though the security fund actively worked to achieve market solutions and to maximize distributions to creditors, its legacy has been wrought with misconceptions about its role, including a perception by many today that the actions of the security fund were designed to and helped precipitate the closing of the exchange, and that it did little or nothing to help resolve the financial difficulties facing the exchange and its financially troubled syndicates.
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Why is it important today to address these misconceptions? Despite the eyerolling, knee-jerk reaction of some at the mention of a modern platform for syndication of capital in the US, many others see the growing value of such a facility to stem the flow of capital offshore and to provide a meaningful mid-market risk-spreading alternative. Although pushed to the background following the merger of banking and insurance in New York, the effort started by insurance superintendent Eric Dinallo in 2007 and expanded by his successor James Wrynn has never disappeared and continues to percolate. An exchange working group of industry, investor and regulatory representatives created by Superintendent Wrynn produced a significant and credible road map for the construction of a modern, effective facility. One of the central themes to that road map is the importance of a strong central financial control unit backed by a security fund providing sound security assurances to the marketplace. While the old exchange failed to provide the committed central management necessary for a successful market, the security fund – under the leadership of its board and counsel, Tom Parry - demonstrated the value of a strong but flexible security fund. Policyholders and other creditors of the financially strained syndicates of the old exchange – thrown under the bus by the exchange’s leadership – had their positions substantially enhanced by the active, creative roll of the security fund. It took nearly a half-century for the efforts of James B. Donovan to be fully appreciated. It is my hope that it will not take that long for the efforts of the leadership of the old exchange’s security fund – including Mr. Donovan’s partner Tom Parry - to be recognized and appreciated.[IA] Peter Bickford has over four decades of experience in the insurance and reinsurance business, with particular focus on regulatory, solvency, agency, alternative market and dispute resolution issues. In addition to his experience as a practicing attorney, he has been an executive officer of both a life insurance company and of a property/casualty insurance and reinsurance facility. A complete biography for Mr. Bickford may be accessed at www.pbnylaw.com.
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[ FACE TO FACE ]
By Michael Loguercio
Who’s Driving?
M
any folks nowadays look to leasing, not only for a more affordable payment, but also for the fact that they can drive a new vehicle every three years or so. This in and of itself is a huge benefit for multiple reasons, including the inherent benefit of being able
ogy (similar to those mentioned above) have led to fewer fatal accidents by more than a third over three years, when a late model car is involved. Nine of the vehicles studied had no fatal accidents per one million cars registered. However, the study also determined that the lower fatality rate may
…one of the most long awaited (and equally most controversial) is the “fully automated” or otherwise known as “autonomous vehicle,” that is a true driverless car, that has been promised by the auto industry to be available by 2020. Michael Loguercio
to take advantage of the latest technology that is released in each new car yearly upgrade. Recent enhancements have included features such as crash avoidance systems like blind spot monitoring, front and rear collision warnings, rear and side view cameras, calculated tire pressure monitoring, and more. However, one of the most long awaited (and equally most controversial) is the “fully automated” or otherwise known as “autonomous vehicle,” that is a true driverless car, that has been promised by the auto industry to be available by 2020. Although the insurance industry is expecting the number, frequency, and possibly the severity of motor vehicle accidents to be greatly reduced, the insurance industry is still extremely concerned that liability claims may increase both in number and potential defendants as it is widely assumed that drivers who would normally be considered at fault in these accidents will attempt to pass off the “at fault” and liability of the accident to the manufacturers of the vehicle and its components, blaming the accident on them, as opposed to driver error. According to a recent study by the Insurance Institute for Highway Safety (IIHS), it was discovered that recent improvements in design and safety technol10 November 30, 2015 / INSURANCE ADVOCATE
also have been helped by the fact that we have been in a weaker economy, which has caused less people to be driving, and therefore a lower number of cars on the road. The IIHS study also found when looking at 2011-year model cars there were on average 28 deaths of drivers per million cars through 2012. This number was down from 2008, when there were 48 deaths between 2008 and 2009. This lower death rate, according to the IIHS, was a direct result of electronic stability control, side airbags, and general structural changes. Now, with those figures in mind and the fact that automation and technology have been the cause of the lower fatality rate, how will automated driving vehicles contribute to this? According to General Motors, the company will begin to offer a “super cruise system with hands-free automated driving” in 2016. This system will be operable only on freeways that have proper lane markings that the vehicle will identify. This also means that until these markings are widespread, the driver will have to be ready to take control of the vehicle as soon as the markings disappear. These vehicles will also be equipped with a device that will alert the driver to be aware, and not let the car go on ‘auto-pilot.’ Toyota has announced that it will offer a crash avoidance system in their Toyota and
Lexus brands in 2017, and Daimler is currently offering a system that allows a car to brake, accelerate, and remain in its lane automatically, without the driver having to react when the vehicle is traveling at 16 mph or less. Even Google is getting into the act, as it has announced that it is building a vehicle that does not have a steering wheel or need for a driver. Reason that it is eliminating driver intervention totally is because at this time it has not developed a means to switch control interchangeably between the driver and the automated process, and does not expect to be able to do this anytime soon. The beta version of this car will have a maximum speed of 25 mph, and may be summoned by a smartphone…watch out Uber! Other manufacturers are claiming that they are developing technology that can safely make the switch from automated to driver control, and Volvo expects testing these vehicles by 2017. Industry experts have also said that before these vehicles may be put into production, the size and cost of the sensors must be reduced. A few states have also voiced federal agencies in 2014 approved vehicle-to-vehicle (V2V) communications systems that will allow cars to “talk” to each other so that they know where other vehicles are and can compensate for a driver’s inability to make the right crash avoidance decisions because of blind spots or fast moving vehicles. V2V communication uses a very short range radio network that, in effect, provides a 360-degree view of other vehicles in close proximity. The Department of Transportation estimates that safety systems using V2V communications will be able to prevent 76 percent of crashes on the roadway. However, according to an independent study, of all the obstacles facing this new technology, the top three roadblocks will be: legal liability, policymakers and consumer acceptance. In addition, some states have also voiced opinions. In 2013, Michigan, California, Florida, Nevada and Washington DC began allowing the testing continued on page 13
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ADVERTORIAL
Golf Carts: Not Just Par for the Course Anymore GOLF CARTS – THEY ARE NOT JUST FOR GOLF ANYMORE, but care must be taken in their registration and operation, as regulations vary by state and type of recreational vehicle. Failure to comply with the regulations can result in arrest. Helping clients understand the problems of improper recreational vehicle registration and operation, and the potential insurance requirements, is another value-added service of the professional insurance agent. In recent years, there has been increased interest in use of golf carts and Neighborhood Electric Vehicles (NEVs), also known as Low Speed Vehicles (LSV). Many adult communities have been designed so everything residents need to do can be done with a golf cart or NEV, from going to the grocery store to banking to getting a hair cut. It is estimated that by 2016, there will be more than 76,600 golf carts sold annually in the United States (www.pediatricsafety.net). An interesting note is that United States presidents typically drive golf carts, and the Secret Service does not allow the president to drive any other type of vehicle themselves, even after leaving office. Advantages of golf carts and NEVs include the fact that they are much less expensive to own and maintain than traditional automobiles. Since many of these vehicles are electric, they operate more quietly than their gas-powered counterparts. Disadvantages include lack of seat belts in most golf carts, and the ability of children as young as age 13 to operate them legally. With any motorized vehicle, safety is an additional concern, especially with the limited personal protection offered by golf carts and NEVs. Each year, there are about 13,000 golf cart accidents that result in emergency room visits. From 19902006, there were 147,696 injuries related to golf carts, and, disturbingly, more than one-thired of these involved children. The most serious injuries usually occur when the golf cart completely overturns, which happens in about 10% of the cases (www.lowmanlawfirm.com).
It is essential to read the policy to understand the limitations of the coverage. Golf carts typically can go 15-20 miles per hour, and carry a maximum of four passengers. Some states even allow golf carts to be driven on roads with posted speeds up to 45 miles per hour. In contrast to golf carts, NEVs are required to have such features as headlights, braking systems, turn signals, and windshields. NEVs are increasingly being treated as traditional automobiles, and in some states they must be registered, licensed and insured. NEVs may reach speeds of up to 25 miles per hour, can handle loads up to 3,000 pounds, and are classified by the U.S. Department of Transportation as “low speed vehicles” (www.gloverlawfirm.com). New York law prohibits golf carts or NEVs from being registered. Anyone operating such vehicles on public roads or any areas that allow public vehicle traffic is subject to arrest. If a motorcycle is designed for off-road use, it must be registered as an ATV. Go karts are not motor vehicles nor
ATVs. Other vehicles that cannot be registered include minibikes, motorized scooters, or motor-assisted bicycles. The NY DMV (www.dmv.ny.gov) requires that, “For a low speed vehicle to be registered in New York, it must meet federal motor vehicle safety standard 500 (49 CFR 571.500), its maximum performance speed must be certified by the manufacturer and it must appear on the list of approved limited use vehicles.” From an insurance perspective, a homeowners or dwelling liability policy may extend coverage for legal operation of a golf cart while inside the golf club or residential community. It is essential to read the policy to understand the limitations of the coverage. Physical damage coverage for the golf cart usually must be purchased separately. Golf carts and NEVs can be a convenient mode of transportation in a closed community. Helping clients understand the potential pitfalls of their recreational vehicles is another sign of the true insurance professional.
139 Harristown Road Glen Rock, NJ 07452, Suite 100 (800) 935-6900 www.msonet.com INSURANCE ADVOCATE / November 30, 2015 11
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[ THE SOCI AL NOTEBOOK ]
By Chris Paradiso
Seven-Step Process to Build Your Social Presence
S
ir Richard Branson has a famous quote, “If you’re an entrepreneur and you don’t have a social media presence, your company is at a competitive disadvantage.” While Sir Richard is speaking the absolute truth, many insurance agents and agency owners feel intimidated by social media. So let’s take it in steps; here are several tips I would highly recommend.
1. Make Sure Your Agency has a Brand Your brand is everything! Prior to joining the social world, you first Chris Paradiso need to understand your agency’s brand, and make sure it’s in order. If you don’t have a brand established, you should hire someone to help you with a brand guide (I’d be happy to recommend several people/companies to you). The reason why this is so important is that it will allow you to reach the right audience and earn their following. If you’re interested in seeing an example, take a look at Taco Bell’s social media marketing. Taco Bell is a fast food chain with a younger fan base that is active on social media platforms like Snapchat and Twitter, so that’s where Taco Bell hangs out because they want to reach their audience. The Taco Bell brand wouldn’t fit in the LinkedIn community, so that is why you don’t find them hanging out there. Alternatively, an insurance agency, law firm and/or marketing agency would definitely fit in within the LinkedIn world. Remember, just because your business is entering the social media world doesn’t mean you have to lose your personal feel or look. Yes, it is B2B, but your personal touch is the main ingredient to your social media success. Your insurance agency’s brand should have a website and a complete LinkedIn profile (I can’t stress ‘complete profile’ enough – be an all star). If you’re in the professional world, you want social media visitors (prospects/clients) to head there to learn more about your brand, and verify your authenticity. One major piece of 12 November 30, 2015 / INSURANCE ADVOCATE
advice I have for you is to please make sure your brand (agency or personal) is in proper alignment across all social channels, as well as with your traditional marketing materials. If your brand uses red as its predominant color and has a corresponding logo, then that color and logo should be the same on your website, LinkedIn page, Twitter, Instagram and Facebook pages. Keeping your branding consistent is very important to your social success. 2. Be Curious You have to listen. Listen to what others are saying in the social world about you or your insurance agency’s brand. This is one of the most important components of being active on social media. By monitoring and listening to what’s being said about you and/or your agency, and even your competitors, you’ll be able to make more informed decisions and understand what’s going on in the social world (use Google Alerts for your personal name and your agency name). Curiosity isn’t just about listening to your audience, it’s also about exploring social media channels and techniques and tools you may not be familiar with. I’m not recommending you just jump in blindfolded, but it wouldn’t hurt to do a little investigating to see if a particular platform, technique, or tool could work for you and your agency. 3. Don’t Fear Making A Mistake Yes, pinch yourself, you’re not dreaming. You’re human, and you are going to make a mistake or two. You can’t run from your mistakes; you need to face them headon. A great example of a mistake and how they handled it was Amy’s Baking Company. Amy’s Baking Company was a featured episode of Kitchen Nightmares, a show where Gordon Ramsay, world renowned chef, takes the time to help out smaller local restaurants. During this episode, the owner’s thoughts and opinions conflicted with Ramsay’s, and the restaurant didn’t improve. The social media responses that followed were awful. But, after a year or so, Ramsay revisited their restaurant after they owned up to their mistakes, and the
whole situation brought them more visibility, traction, and overall sales. So, when you make a mistake, own it, and handle it professionally by admitting your mistake and apologizing. The key takeaway from mistakes are that they are learning opportunities, so take advantage and grow. 4. Be Authentic. Be You. Prospects and customers in today’s world can see right through the promotional messages or sales pitches. If you want success then you will have to throw away the sales pitch, and build your audience through a relationship. It’s no different than building a relationship in person; it all comes down to trust. Remember, your audience wants to deal with an actual person who cares about them (social media is all about them), not just a faceless insurance agency looking to grab their money. Be real. 5. Interaction Social media is a communication tool that you need to be practicing in today’s business world, but the key is to look at social media as the new form of communication. Your agency shouldn’t be using it as a blow horn for broadcasting your sales pitch. Your audience is looking for content that they’ll find useful, interesting and/or entertaining. You and your agency should not just sit back and wait for your audience to come to you, because the social world just doesn’t work that way. You need to get aggressive and be active, and strike up conversations with them when they leave a comment or ask you a question. Engaging and interacting with your audience is a simple yet powerful way to build relationships, which leads to you earning their trust. 6. Use the Right Social Tools When you find an awesome social media tool, you have the power to do everything from discovering influencers, automating and scheduling content, managing all of your agency’s accounts from one location, and creating calls-to-action. Without a call-to-action, you and your agency will never have a positive ROI. Tools like Hootsuite and Sprout Social are
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[ THE SOCIAL NOTEBOOK ] great places to start for managing your social media platforms, but there are an endless amount of tools you can use to give your networks a little something extra. Our agency just changed from Buffer to Hootsuite because Hootsuite released some new options for scheduling posts that have been proven to help build more interaction. Automation is great, but let’s not forget that you need to post live and in real time too. If you only use automation, you will show your audience that you are lazy and it’s all about you and your time, not about being real. 7. Have a Social Calendar What do you want to get out of social media marketing efforts? Do you want more followers on Instagram or Facebook? Do you want more visitors to go to your agency’s landing page? Do you want to increase your brand’s awareness, or is it simply to get more sales opportunities? Having a social game plan will keep your efforts focused. Being focused will help you create and share consistent written and visual content with your audience. And please don’t forget to measure your efforts by establishing agency metrics by using analytics tools. If your agency can’t measure it, then you may want to think about why you’re doing it in the first place. Now it’s time to take these tips and get to learning. Please don’t just read this and do nothing; get started, because independent insurance agents can’t afford not to start NOW! Happy Marketing![IA] Christopher Paradiso, CPIA, is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center. In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies to not only survive, but compete in today’s complex online marketing world. Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.
[ FAC E TO FACE ] continued from page 10
of autonomous vehicles on public roads. Michigan law states that drivers must remain in the driver’s seat at all times while the vehicle is on the road. According to Property and Casualty Insurer’s Association of America, the Association of California Insurance Companies is advocating that the manufacturers of these types of vehicles retain all liability for damage, losses, or injuries caused by the operation of these vehicles as required by the enabling law (SB 1298). Other states are also considering such legislation as well. The US Department of Transportation allows states to permit limited testing of autonomous vehicles, but not the sale of these vehicles, and a 2014 study by the RAND Corporation includes a discussion on the liability options; suggesting that the concept behind no-fault auto insurance laws might become an attractive alternative to tort-based laws as the use of automated vehicles becomes more widespread. I am certain that we will be hearing so much more about these types of vehicles, along with the laws that will govern their testing and sale, and I will be covering this topic and bringing it to you in living color in this very column as it progresses…so don’t touch that dial and stay tuned for coming attractions! Well, so many times over the past 7-½ years that I have been writing this column, I have talked about the successes and accomplishments of so many folks within this thing of ours. Today, I am going to brag a little, and toot my own horn, as I am very excited to announce that I have accepted a position as Regional Director with Advantage Partners, Inc., in New York. Advantage Partners, Inc. is the #1 preferred agent network, dedicated to working exclusively with select independent insurance agents who need access to top insurance carrier markets. Representing the most competitive major insurance companies, Advantage Partners, Inc. offers no fee, no up-front costs or long term contracts, and provides agents with the opportunity to earn carrier profit sharing, along with incentives and bonuses, while the agent owns and retains 100% of the business. For more information, please contact me at 631345-9359 or michaell@apagents.com Additionally, I want to thank EZLynx
and their staff for the many years that I have enjoyed being a part of their team. EZLynx has done, and will continue to do, so much for the insurance industry and I wish them all the best in their continued effort to serve our industry for many years to come! Well, next time we chat we will be discussing some exciting events such as the Council of Insurance Brokers and Agents annual event held in “the garden spot of the world,” good ol’ Brooklyn, NY! So until then, “Ciao for now!” and from my family to yours, a very happy and safe Thanksgiving holiday![IA] Michael Loguercio is the Regional Director for Advantage Partners Inc.; and has been active in the insurance industry since 1978 as a licensed insurance broker and an insurance technology professional. He is an active Past President of the Young Insurance Professionals of New York State, current ACT/AUGIE, Professional Insurance Agents of New York State, Independent Insurance Agents and Brokers of New York State, and Council of Insurance Brokers of Greater New York committee member. NY-YIP/PIA has honored Michael with a “Distinguished Service” award in 2001; “Insurance Professional of The Year” award in 2009; “Lifetime Achievement” award in 2012; and “Special Service” awards in 2013, 2014 and 2015. In his community, Michael is the Immediate Past President and current member of the Longwood Central School District Board of Education on Long Island, NY since 2004; is a Director on the board of REFIT NY (Reform Educational Financing Inequities) and is a member of The Middle Island, NY, Rotary Club; Central Brookhaven Lion’s Club; and Ridge, NY, Volunteer Fire and EMS Department. He also served two terms on his Church’s vestry, and in 2013 he was awarded the SCOPE “Community Service” award for his dedication to the public. Michael is a regular Contributor to the Insurance Advocate since 2008, and may be contacted at 631-345-9359 or MichaelL@apagents.com. You may also follow him on Twitter @MLoguercioJr; and on Facebook @ Michael Anthony Loguercio Jr. INSURANCE ADVOCATE / November 30, 2015 13
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[ COVER ]
IFNY Annual Luncheon: More than 300 Join in Tribute to Donald Kramer M
ore than 250 insurance leaders joined in the Insurance Federation of New York’s (IFNY) 101st Annual Free Enterprise Award Luncheon to honor Donald Kramer, Chairman, Chief Executive Officer, and Chairman of Investment Committee, ILS Capital Management, Ltd., as he received the Federation’s 2015 Free Enterprise Award. IFNY President Nick Pearson presented the Federation’s top honor to Mr. Kramer at Cipriani, Wall Street. The Free Enterprise Award’s distinguished recipients are business leaders who have advanced their industry, espousing the principles of free enterprise for which IFNY has stood since 1913. Recent past recipients of this prestigious award include J. Hyatt Brown, Chairman and CEO of Brown & Brown Insurance, Robert Benmosche, former President and CEO of AIG, and Evan Greenberg, Chairman and CEO of ACE Limited. In presenting the award, Mr. Pearson noted that “Mr. Kramer exemplifies the spirit of entrepreneurship that has advanced American business and the insurance sector in particular. IFNY congratulates him upon his receipt of our highest award.” In accepting the award, Mr. Kramer recounted opening up his first checking account over 50 years ago with National City Bank which was headquartered in Cipriani’s Wall Street location at a teller window just a few feet away from the stage. The event’s featured 14 November 30, 2015 / INSURANCE ADVOCATE
speaker was Mr. Troy Oechsner, Deputy Superintendent for Health at New York State Insurance Department. The Luncheon was also an opportunity for the 2015 IFNY Intern program participants to be recognized for their achievements and share their experience with the attendees. The IFNY Intern Program reaches out into the community and gives highly motivated teens, from challenging backgrounds, an in-depth opportunity to learn about the insurance industry in all its facets and to consider a career in insurance. The Program has been generously supported by IFNY members for the past four summers.
Donald Kramer This year’s awardee, Mr. Don Kramer, was elected by IFNY to receive the award based upon his accomplishments and service. Mr. Kramer established ILS Capital Management, Ltd., in 2011. He is Chairman of the Management Committee, Chairman of the Investment Strategy Committee and Chairman of the Board of the 1609 Fund Ltd. Prior to founding ILS Capital Management, Ltd., Mr. Kramer held numerous senior executive positions in insurance, banking and investments, as Chief Executive Officer, president, chairman or general partner. In 2005, he founded Ariel Holdings Ltd. and its subsidiary, Ariel Reinsurance Company, a property catastrophe reinsurance company in Bermuda. He
was Chairman and Chief Executive Officer of Ariel until 2010. In 1993, Mr. Kramer founded and served as Chief Executive Officer of Tempest Re, a property catastrophe reinsurance company organized in Bermuda. Upon the sale of Tempest Re to ACE Ltd. in 1996, he served as Vice Chairman of ACE and additionally as NonExecutive Chairman of Assured Guaranty Ltd. until 2005. In 1986, seven years prior to the creation of Tempest Re he acquired NAC Re, a shell company that he recapitalized and helped build into a major U.S. reinsurance company. The purchase of NAC Re was funded with private equity financing and subsequently taken public and ultimately acquired by XL Re. Mr. Kramer served as Chairman of NAC Re until 1993 when he retired and subsequently founded Tempest Re with private equity sponsors. Mr. Kramer is Director of the National Benefit Life Insurance Company of New York. His not-for-profit activities include serving as Co-Chairman of Bermuda First, a think tank focused on issues facing the island of Bermuda. Mr. Kramer is a member of the Chatham House, a global think tank in the UK. He is also Chairman of The American Ballet Theatre, the official national ballet company of the U.S., of the National Dance Foundation of Bermuda, and is a trustee of Brooklyn College where he earned a B.A. and an honorary Doctorate. In 2011, Mr. Kramer received the Queen’s Certificate and Badge of Honor of the British Empire for both his work and philanthropy in Bermuda. Mr. Kramer holds an MBA in Economics and Investments from New York University and is a long-standing CFA (Chartered Financial Analyst) Charterholder. Mr. Kramer is a frequent speaker on insurance industry topics and has received numerous awards.
The Insurance Federation of New York Since 1913, IFNY has been a force for communicating ideas among all sectors of the insurance industry, bringing public and private interests together for the benefit of all. The Insurance Federation of New York’s prestigious Free Enterprise Award—presented to some of history’s legendary entrepreneurs—continues to salute risk takers and leaders whose creativity and initiative
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[ COVER ]
L-R: STEVE ACUNTO, VICE PRESIDENT AND MANAGING DIRECTOR, IFNY; CECILIA NORAT, IFNY IMMEDIATE PAST CHAIRWOMAN; DONALD KRAMER, IFNY FREE ENTERPRISE AWARD RECIPIENT; NICK PEARSON, IFNY PRESIDENT; AND LANCE ALBRIGHT, IFNY CHAIRMAN
has enabled the expansion of business throughout New York, across the country and around the world. In the insurance industry, it is the commitment and vision of these leaders that has created and refined the risk transfer mechanism to spur economic growth and contribute to personal financial security for countless millions. Today, the Insurance Federation of New York’s annual calendar of events brings together the “best and brightest” to ensure that industry intelligence is shared and that support for best practices in insurance business, law and regulation earns the understanding of leaders across the spectrum. This shared goal draws business executives, legislators and regulators to our Annual Luncheon, our “Breakfast with...” programs, professional seminars, and other events. We also note the establishment of the IFNY Intern Summer Program. Federation members have given most generously of their time and finances to support this program that reaches out into the community and gives highly motivated teens, from challenging backgrounds, an indepth opportunity to learn about the insur-
ance industry in all its facets and to consider a career in insurance. The IFNY Board of Directors includes the following distinguished professionals: Immediate Past Chairman, Cecilia Norat, Cecilia Norat Consulting LLC; Chairman, Lance Albright, Senior Vice President, QBE; President, Nick Pearson, Insurance Consultant; Vice Presidents, Michael Fusco, SVP & Chief Actuary, Argo Group; Douglas Hayden, EVP Wright Insurance Group; Financial VP, Stephen Boon, Jr., President, Harold L. Lee & Sons, Inc.; VP and Managing Director, Steve Acunto, CEO, CINN Group, Inc. Directors also include: Kermitt Brooks, Managing Director & Associate General Counsel, AXA US; Roger Moak, Arbitrator; Jonathan Bing, partner, Wilson, Elser, LLP; James March, Vice President and Senior Assistant General Counsel, Zurich North America; Howard Mills, Chief Advisor, Insurance Industry Group, Deloitte LLP; Kevin Rampe, General Counsel, ACE North America; Francine L. Semaya, Esq., Legal and Insurance Regulatory
Consultant; Senator Manfred Ohrenstein, Senior Partner, Ohrenstein & Brown, LLP; Elizabeth Heck, President, GNY Companies; Amy Feller, Chubb Group of Insurance Companies; Raul Rivera, Chairman, President and CEO, National Benefit Life Insurance Company; Maura Clancy, Clancy & Clancy Brokerage; David Walsh, CEO Amalgamated Life Insurance Company; James Corcoran, James P. Corcoran, Esq.; Salvatore Curiale; Donald Gabay, Stroock, Stroock & Lavan LLP; William Savino, Partner, Rivkin Radler LLP; Wendy Shapss, FTI Consulting, Inc.; and John Hill, II, President & COO, Magna Carta Companies.[IA] INSURANCE ADVOCATE / November 30, 2015 15
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[ COVER ]
DONALD KRAMER ADDRESSES THE AUDIENCE
L-R: MARTY SCHWARTZMAN; ELLEN MELCHIONNI; AND PETER BICKFORD
L-R: DAVID WALSH, IFNY DIRECTOR; STEVE ACUNTO; AND RICHARD WHITE
L-R: LEE ORABONA; AMY FELLER, IFNY DIRECTOR; AND GUY MIGLIACCIO
L-R: KELLY NICKERSON-MINTO; WENDY SHAPSS, IFNY DIRECTOR; STEVE DOODY, NYDFS; AND RICHARD HERSHMAN, FTI CONSULTING 16 November 30, 2015 / INSURANCE ADVOCATE
L-R: JUSTIN FOA AND JIM WRYNN
CECILIA NORAT (L) WITH MARY LANNING, ML&G ASSOCIATES AND YES!SOLUTIONS, INC.
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[ COVER ]
L-R: STANLEY GOLDSTEIN; HON. MANFRED OHRENSTEIN, IFNY DIRECTOR; AND ROSARIO DEVITO
L-R: DONALD KRAMER; NICK PEARSON; AND JOHN MILLIGAN-WHYTE
L-R: ANDREW ALBERTI; JOHN MILLIGAN-WHYTE; AND PETER BICKFORD
L-R: DAN MAHER AND FRANCINE SEMAYA, IFNY DIRECTOR
L-R: DOUGLAS HAYDEN, IFNY DIRECTOR WITH ROD COYNE AND TOM MARONEY
L-R: LENA PICCIONE; TAL PICCIONE; JERRY DE ST. PAER; SIMON HUDSON; AND ANYA KUTSINA INSURANCE ADVOCATE / November 30, 2015 17
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[ COVER ]
L-R: JERRY DE ST. PAER; CAROLE HAARMANN LANCE ALBRIGHT GREETS THE AUDIENCE ACUNTO AND DONALD KRAMER
STEVE ACUNTO MAKES THE INTRODUCTIONS
NICK PEARSON INTRODUCES THE HONOREE
2015 IFNY INTERNS, L-R: TAMIKA ANDRE; SAMANTHA METELLUS; ALAN RODRIGUEZ; CHRISTIAN TORRES; AND JEREMY DIAZ
FEATURED SPEAKER, TROY OECHSNER, DEPUTY SUPT. FOR HEALTH, NYDFS
LANCE ALBRIGHT WELCOMES FEATURED SPEAKER TROY OECHSNER, DEPUTY SUPERINTENDENT FOR HEALTH, NYDFS AS NICK PEARSON LOOKS ON
20 November 30, 2015 / INSURANCE ADVOCATE
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In nssu urranc nce Advocate
ÂŽ
Contactt Information
Investment Banking for the Insurance Sector Agency and Brokerage Valuation Mergers & Acquisition Advisory Capital Raising Business Process Consulting Shareholder Advisory
CINNMEDIAInc. 914.966.3180 Ext. 110 aquilan@cinn.com STEVE ACUNTO _______ TAG Financial Institutions Group, LLC Empire State Building 350 Fifth Ave, Suite 5310 New York, New York 10118 212.993.7430 www.tagfingroup.com Steven H. Nigro Managing Partner snigro@tagfingroup.com Kieran D. Pinney Principal kpinney@tagfingroup.com
TAG Financial Institutions Group, LLC An affiliate of The Alberleen Group and in association with Cuttone & Company, Inc. | Broker/Dealer Partner | Member NYSE/FINRA/SIPC | www.cuttone.com
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[ IN THE ASSOCIATIONS ]
Applied Systems Receives Highest Number of ACORD Awards at 2015 ACORD Forum Company recognized as global leader in delivering innovative solutions to the insurance marketplace
U
niversity Park, Ill.– Applied Systems announced that ACORD (Association for Cooperative Operations Research and Development), a global provider of insurance data standards, business and technology leadership, recently honored Applied Systems with the highest number of 2015 ACORD Awards, including the prestigious Leadership Award, Global Citizen Award and Case Study Award, at the 2015 ACORD Forum. ACORD facilitates the development of open consensus data standards and standard forms and works with its members and partner organizations to drive implementation of those standards across the global insurance industry. ACORD Awards are presented to those organizations and individuals who have demonstrated outstanding achievement in ACORD implementations in the past year. ACORD Award categories recognize business process improvement, individual and organizational leadership, global outreach and industry community excellence. ACORD Awards presented to Applied Systems and its partners include: • 2015 ACORD Leadership Award for Applied Rating for the set of tools and processes provided by Applied Rater, the market-leading comparative rating technology, by which Applied can rapidly create extremely rich and valuable carrierspecific ACORD XML messages, including carrier-specific data validation and translation, field editing, complex relational editing and data augmentation. • 2015 ACORD Leadership Award for Applied Systems for effectively leveraging ACORD standards to enhance Claims download for agents using Applied TAM 2015. • 2015 ACORD Leadership Award for IVANS Insurance Solutions for the IVANS Connections Project, which has driven connectivity and 22 November 30, 2015 / INSURANCE ADVOCATE
“ACORD is the global leader in defining data standards and forms across the insurance industry, and we are honored to continue to work in collaboration with this fine organization to increase implementation and adoption of these standards worldwide.” - Reid French, CEO Applied Systems.
data exchange between agencies and carriers through the increased adoption of available download service capabilities. IVANS is a division of Applied Systems. • 2015 ACORD Global Citizen Award for Applied Systems for enabling download certification of the first Puerto Rican insurance company, thereby extending the use of ACORD standards into a new country/region. • 2015 ACORD Case Study Award: IVANS Insurance Solutions and Columbia Insurance Group for IVANS’ work in automating Columbia Insurance Group’s commercial lines quoting process using ACORD XML to increase data exchange between Columbia Insurance Group’s agent partners’ management systems and their rating and underwriting systems. • 2015 ACORD Case Study Award: IVANS Insurance Solutions and Utica National submissions for IVANS’ service to increase accuracy and streamline the creation of ACORD Forms through the integra-
tion of eForms into Utica National’s commercial lines agent portal quoting and policy issuance process. “ACORD is the global leader in defining data standards and forms across the insurance industry, and we are honored to continue to work in collaboration with this fine organization to increase implementation and adoption of these standards worldwide,” said Reid French, chief executive officer, Applied Systems. “As the global insurance industry’s trusted technology partner, Applied is committed to driving connectivity and data exchange between carriers, agents and the insured, and these awards further underscore and recognize our commitment to software innovation, leadership and customer success for greater growth and profitability.” About Applied Systems Applied Systems is the leading global provider of cloud-based software that powers the business of insurance. Recognized as a pioneer in insurance automation and data exchange between brokerages, insurers and their clients, Applied is the world’s largest provider of agency and brokerage management systems, serving customers throughout the United States, Canada and the United Kingdom. By automating the insurance lifecycle, Applied enables millions of people around the world to safeguard and protect what matters most.[IA]
Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com
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[ ON TH E LEVEL ]
By N. Stephen Ruchman, CPIA
Protecting Your Business in the New Year
W
e are coming to the time of year when we take stock of all we’ve just endured and look forward to the year to come. Much has taken place in 2015; certainly more than I could write about in a single article. So, as we reflect, let’s consider what I think is the most overlooked and neglected of the year. Last month, a year after the now infamous Home Depot data breach, the New York Times reported that “estimates of the fraudulent charges (related to the Home Depot breach) total well into the billions of dollars.” The story was coupled with another about how the banking industry has N. Stephen Ruchman taken steps to protect itself with credit cards that “dip” now, rather than “swipe.” The headline read: “Banks Look to Retailers for Losses in Data Theft.” I’d phrase that another way: “Big pockets push risk responsibilities to smaller businesses.” I know I keep talking about cyberliability, but it’s one of the most pressing threats we agents face. Our agencies are not necessarily the biggest or richest targets, but we are subject to the same threats, which could cause even greater havoc on our businesses and livelihood than the big financial powerhouses. What’s more, there’s evidence to suggest that the smaller our business, the more likely we will be hit. The big events make the news, but trust me: After the banks, big health insurers and major retailers, the wealth management groups will be targeted, and small businesses will be on the list. The news may not make the New York Times (and in these cases, a lack of publicity is a blessing); but small agencies are easy pickings and they are hacked. There are examples of cybercrime every day: In fact, according to Philadelphia Insurance Companies, PIA’s largest cyberliability carrier, the average cost of a data breach is $204 per lost record, lost customers and public relations expenses to rebuild an agency’s brand accounting for half of that. I, personally, know of a few examples, and the fact that I know them personally demonstrates that this type of risk is real 24 November 30, 2015 / INSURANCE ADVOCATE
and happening more than we imagine. More than one industry acquaintance of mine has been extorted online. Hackers actually invaded the businesses’ files, encrypted them and held the data for ransom. In scenarios like this, the data kidnapper threatens to destroy, or worse—make public—your electronic files unless you pay up. But, it’s not always some unknown hacker. I’ve heard in CE classes about disgruntled employees installing worms, viruses and other malicious code. These are just the situations in which proactive malicious thieves attack; more often than not, our agencies are placed in peril because of human error. Mistakes happen: Computers with client data on them are lost or stolen. Well-intentioned staff have been known to distribute private information via email and even traditional mail to the wrong recipients. Some agencies I know have neglected to properly dispose of client records, including names, addresses, credit card numbers and other sensitive information—even putting them out on the street for unscrupulous credit thieves to take as they want. An agency that does this puts itself at risk of hundreds of thousands of dollars in fines and penalties including customer recompense for credit monitoring for the client-victims. The tragedy is that while agents understand and even sell coverage to our commercial lines clients, for some reason many of us neglect to protect ourselves and our clients. A recent study report by the Council of Insurance Agents and Brokers said that agencies may be slow to purchase or sell cyberliability insurance because the coverage is not standardized and they find it difficult to understand, let alone sell. “Sixty percent of respondents do not ‘feel there is adequate clarity from both the specialist cybersecurity insurance market and traditional property casualty insurers as to what is covered and what is excluded.’” It’s true. This is new territory and coverages vary. I suggest turning to our associations for information, education, and of course coverage. I know PIA offers both an endorsement and a stand-alone cyberliability policy from Philadelphia Insurance Cos., with limits up to $20 million in addition to add-on coverage. The Philadelphia policy covers first- and third-party protection; covered cause of loss (including administra-
tive or operational mistakes); breach of privacy coverage (for violations of HIPAA, state, federal and foreign privacy protection rules); and customer breach notice expense. What’s most important is that agents keep up with the times. As we look forward to the New Year and the future of our business, we have to remember the risks we face are evolving. The good news is that our industry is starting to get it: As Steve Acunto reported in the Oct. 26 edition of the Advocate, the rate at which businesses are purchasing cyberliability insurance is on the rise. We see new surveys and reports everyday on the risks and coverages available. Even the National Association of Insurance Commissioners has acknowledged the need for protection with a cybersecurity bill of rights, which sets expectations for insurance companies, agents and other businesses regarding how they handle client information. But, this evolution is taking place too slowly. Perhaps the best evidence of this is advertisements I’ve recently received promoting a New York City conference for businesses on cyber-risk management. The event is sponsored by a “who’s-who” of the major law firms, and it includes speakers from the legal field. I see the handwriting on the wall: The legal industry is ramping up and I think we have just begun to see the tip of the cyberliability iceberg. The world is turning faster and faster. It’s time to protect your biggest financial asset before the sharks attack and you have no protection. Make sure you are offering your clients cyberliability insurance—and if you haven’t done it for your own business, do it now![IA] N. Stephen Ruchman, CPIA, is a retired independent agent and founder of Ruchman Associates, Inc., the agency he started in 1961. A past president of the Professional Insurance Agents of New York State, Inc., he is an active supporter of PIANY, and he has sat on or chaired nearly every committee including the Executive Committee and the Long Island Advisory Council and PIANY’s Political Action Committee. He can be reached via email at: nsruchman@gmail.com.
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KNOW K KNO N NO OW BETT BE BETTER E T TER TER TE R NEW NE E W YORK YORK CONNECTIONS CONNEC NEC TIONS TIO TI ONS NS S www.nyia.org w w w.nyia.or yi .org yia.o
INSURANCE ADVOCATE / November 30, 2015 25
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[ IN THE ASSOCIATIONS ]
Israel Bonds Insurance Division Luncheon Results in Record $44.6 Million in Bond Investments
PIANY to focus on NYSIF’s 30day requirement
N
GLENMONT, N.Y.—During a recent survey, members of the Professional Insurance Agents of New York State Inc. told their association to focus on removing the requirement for policyholders to provide 30-days’ notice to withdraw from the New York State Insurance Fund during the 2016 legislative session, which will begin in January. Each year, PIANY surveys its members to determine its legislative priorities for the year. According to the survey, professional, independent insurance agents also are concerned about New York’s unique Labor Law/tort reform; the competitive disadvantages inherent in the operation of the NYSIF; and payment of commissions to licensed brokers on NYSIF policies. NYSIF is the largest single carrier of workers’ compensation insurance in the state (40 percent of the market). According to PIANY, a bill the association introduced in 2015 would provide a more even playing field between the NYSIF and the admitted marketplace for workers’ compensation insurance, saving businesses money on their workers’ compensation insurance, without penalizing them with retaliatory actions when they find another insurance policy with another provider. PIANY introduced legislation (S.5250— sponsored by Sen. James L. Seward, R-51— and A.7742—sponsored by Assemblyman Kenneth P. Zebrowski, D-96) last year to remove the requirement for policyholders to provide 30-days’ notice to withdraw from the NYSIF. The bill would afford New York state businesses the flexibility to move their insurance policies to more competitive products without bearing excessive shortrate penalties. “PIANY’s survey on legislative priorities has met with success in the past,” said PIANY President Gene Sandy, CIC. “Last year the problems associated with certificates of insurance dominated the survey results. PIANY worked to draft legislation to regulate the improper use of certificates of insurance, which was signed into law by Gov. Andrew Cuomo in January.”[IA]
EW YORK—On Tuesday, November 10th, 250 industry professionals and Israel Bonds supporters gathered for the annual Israel Bonds Insurance Division luncheon at the Pierre Hotel in New York City. This year’s luncheon honored Ronald Joelson, Executive Vice President and Chief Investment Officer of Northwestern Mutual, and Stephen Ungar, Senior Vice President, Secretary and General Counsel of Amtrust Financial Services, Inc. The event resulted in $44.6 million in Israel bond investments, a new record for the annual luncheon. The luncheon, which was co-chaired by Nat Perlmutter and Martin Minkowitz, was also addressed by New York City Comptroller Scott Stringer. Stringer noted the support that the insurance industry has given to Israel through Israel bonds investments, and the fact that the city of New York has been a consistent investor in Israel bonds. Current New York City Israel bonds holdings are $50 million.
More on Israel Bonds Israel bonds are debt securities issued by the government of Israel. Israel Bonds is also the commonly known name of the Development Corporation for Israel (DCI), which underwrites the bonds in the United States. DCI is a Financial Industry Regulatory Authority (FINRA) member broker-dealer. The bonds can help preserve capital, diversify personal or corporate investment portfolios, and provide protection from market fluctuations. Israel bonds are versatile securities that currently pay strong rates. Capital provided through the sale of Israel bonds has helped strengthen every aspect of Israel’s economy, enabling the development of key national infrastructure. Today, expanded ports and transportation networks help facilitate the shipment of “Made in Israel” technology around the world, enhancing national export growth. Capital accrued through the sale of Israel bonds has enabled cutting-edge innovation that saves lives and changes the world on a daily basis.[IA]
(L-R): NAT PERLMUTTER, INSURANCE DIVISION CO-CHAIR; RONALD JOELSON, HONOREE; STEPHEN UNGAR, HONOREE; MARTIN MINKOWITZ, INSURANCE DIVISION COCHAIR. (PHOTO: SHAHAR AZRAN) 26 November 30, 2015 / INSURANCE ADVOCATE
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[ ON M Y RADAR ]
By Barry Zalma
Is Breach of Contract Required for Bad Faith? Payment of Appraisal Award Fulfills Policy Promises
A
n insurance company and its insured disagreed on the scope of damage due to hail. Eventually appraisal was demanded and an award was rendered and paid, including interest. Regardless, the insureds, unhappy, sued
summary judgment record indicate that he made detailed inspections of the Property, and included detailed measurements of the surface areas of the roof, their total perimeter lengths, the numbers of squares, and the total ridge lengths. Eason
The tort of bad faith is an anomaly allowing tort damages for breach of the terms of a contract of insurance. Because of the availability of punitive and other tort damages plaintiffs and their lawyers attempt to stretch the tort to cases, even where the insurer fulfills the terms and conditions of the policy. Barry Zalma
the insurer. In Burks v. Metropolitan Lloyds Ins. Co. of Texas, Slip Copy, 2015 WL 4126654 (S.D.Tex., 7/8/2015), the U.S. District Court for the Southern District of Texas resolved the dispute and tendered an opinion regarding the ability to sue for bad faith even when the insurer fulfills its obligations under the policy of insurance.
BACKGROUND This suit arises from a dispute between Plaintiffs Michael Burks and Cynthia Burks (“Plaintiffs”) and their homeowners insurance provider, Defendant Metropolitan Lloyds Insurance Company of Texas (“Defendant”), which at all relevant times insured Plaintiffs’ home in Magnolia, Texas (the “Property”). Approximately three months after an April 27, 2013 hailstorm caused damage to the Property, Plaintiffs filed a claim with Defendant on their Homeowners Insurance Policy (the “Policy”). Defendant engaged Tailored Adjustment Services (“Tailored”) to perform an inspection of the Property, and Michael Eason (“Eason”), a licensed adjuster with Tailored, promptly inspected the Property within two weeks of when Metropolitan received Plaintiffs’ claim. Excerpts of Eason’s appraisal in the 30 November 30, 2015 / INSURANCE ADVOCATE
noted in his report that the Property’s main roof and garage roof had been replaced due to storm damage in 2009, and did not find any storm-related damage to the shingles of the main roof or garage roof. Eason did note hail damage to three HVAC caps and a window bead, and recommended full replacement of a metal roof and a fiberglass roof on lean-tos attached to the garage, four metal panels on a separate carport, and a metal gazebo roof. Eason estimated a total replacement cost of $5,080.68. Plaintiffs state that during his inspection, “Eason informed [a local roofing contractor present at the Property] and Mr. Burks that he was instructed by Metropolitan not to pay for the roof because Metropolitan paid to replace the roof in 2009 and was not going to pay for it again.” Three days after Eason’s inspection, Defendant notified Plaintiffs of the estimate and, after applying their $3,900 deductible, issued payment of $1,180.68. Plaintiff Michael Burks called Defendant to complain that the amount was “totally insufficient,” that “we would be probably taking other action,” and asked what he should do with the check. He was told just to void it and Metropolitan would cancel
it. Defendant, apparently misinterpreting Plaintiffs’ intent, sent to Plaintiffs a letter stating in relevant part: “This letter will confirm our conversation of 8/12/13, in which you stated you were no longer interested in pursuing this claim. Since you are voluntarily withdrawing your claim for 4/27/13, we will not be investigating this loss any further. Our file will be considered closed.” Six months after the foregoing exchange, Plaintiffs filed this suit alleging breach of contract, fraud, breach of the covenant of good faith and fair dealing, and violations of Sections 541 and 542 of the Texas Insurance Code. Defendant removed the case to the federal District Court and shortly thereafter Defendant’s counsel wrote to Plaintiffs’ counsel that Defendant “would like to reissue the check for $1,180.68,” which was not accepted. Thereafter an appraisal was conducted and the two party-appointed appraisers and their chosen umpire made an appraisal award finding that the replacement cost value was $28,912.02, and the actual cash value was $23,648.07. Defendant then paid to Plaintiffs $20,088.93, representing the actual cash value of the appraised loss less the $3,900 deductible, plus $340.86 in penalty interest. Plaintiffs accepted the payment from Defendants, but argue the appraisal award is inadequate “because Metropolitan’s proposed settlement did not include for elements of damages such as attorneys’ fees and statutory penalties.”
ANALYSIS Plaintiffs allege that Defendant’s “failure and/or refusal … to pay adequate compensation,” constitutes a breach of Defendant’s insurance contract with Plaintiffs. Defendant argues that Defendant’s prompt payment of the appraisal award to Plaintiffs fulfills Defendant’s contractual obligations under the Policy and precludes Plaintiffs’ claim for breach of contract. “Under Texas law, when an insurer makes timely payment of a binding and enforceable appraisal award, and the insured accepts the payment, the
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[ ON MY RADAR ] insured is ‘estopped by the appraisal award from maintaining a breach of contract claim against [the insurer].’” Blum’s Furniture Co. v. Certain Underwriters at Lloyds London, 459 F. App’x 366, 368 (5th Cir.2012) Plaintiffs do not dispute that the parties engaged in the binding appraisal process established by the Policy, but argue that their dispute with Defendant is “not about the valuation of damage to the roof,” but rather “whether the roof damage would be covered at all,” such that the appraisal process did not fully resolve their dispute. Plaintiffs’ theory seems to be that if the insured claims storm damages to a half dozen structures on the insured property, but the insurer finds storm damages to only four of the structures, that the insurer has breached the contract if the appraisal process results in a finding of damage to either or both of the other two structures, even though the insured accepts the insurer’s payment of the full appraisal award. Defendant argues that Plaintiffs’ remaining claims must be dismissed because there was no breach of the insurance contract and bad faith claims require such a breach. Under Texas law, “in most circumstances, an insured may not prevail on a bad faith claim without first showing that the insurer breached the contract.” Liberty Nat. Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex.1996). Plaintiffs argue that the Akin rule generally prohibiting bad faith claims without a breach of contract should be limited to cases where in fact there is no insurance coverage. Such a distinction has not been found in the Texas cases and appears entirely unwarranted. Defendant Metropolitan Lloyds Insurance Company of Texas’ Motion for Summary Judgment is granted and Plaintiffs Michael Burks and Cynthia Burks’ claims are dismissed with prejudice.
ZALMA OPINION The tort of bad faith is an anomaly allowing tort damages for breach of the terms of a contract of insurance. Because of the availability of punitive and other tort damages plaintiffs and their lawyers attempt to stretch the tort to cases, even where the insurer fulfills the terms and conditions of the policy. In this case the insurer fulfilled the terms of the contract
and paid everything it owed. There should never be a right to a tort of bad faith if the insurer fulfills the terms of the contract and there is no evidence of breach.[IA] Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunder writer.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Stor e/ProductDetails.aspx?productId=214 624, or 800-285-2221 which is presently available. Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.
www.insurance-advocate.com
[ FORE WORD ] continued from page 4
was I ahead of my time. But in those days, 1973, Dreyfus and Oppenheimer were the number one and two performing mutual funds. They were generating 15% annual returns. To take advantage of this performance, I went to Bermuda and formed Opco Re. I figured that if we would write two dollars of premium for every dollar of surplus we would have three dollars of invested assets to manage. If we could earn 15% on invested assets we would generate a 45% return on equity. So all we had to do was break even on underwriting. So easy. So we gave our pen to Alexander & Alexander who put us in 200 treaties,…half in the US and half in Lloyd’s. Shortly after we placed those treaties we received a very nice letter that said “Kindly favor us with your remittance.” I said “What’s this?” The manager at Alexander & Alexander said “A claim.” “Yes I know it’s a claim but on what,” for which they said “We don’t get the policy language til next year.” I said “But they haven’t paid the premium,” they said “Oh that’s all right just net it against the claim.” My partner Robert Rosenkranz and I looked at each other and said we are getting screwed. Well after a flood of these letters, … we decided to shut the firm down. At the end of 1974 we put the company in liquidation. Believe it or not…in the year 2000…23 years later David Ezekial, a specialist in Bermuda, called me to say that we finally liquidated your company. The result is that I have said many times that Opco Re earned me a “Doctorate In Failure.” And I have to tell you,…you learn more from your failures than you ever do from your successes. Because since then I have started numerous companies,…Nac Re, Tempest Re, subsequently acquired by ACE, and then Ariel Re and now ILS Capital.… Clearly I owe those favorable outcomes to my mistakes rather than my successes. And so I am standing here today as a former Figuration Clerk with a Doctorate in Failure to express my utmost gratitude for this wonderful recognition. Thank you all for participating in this magnificent luncheon. From the bottom of my heart I am truly grateful for today’s award. Thank You, Thank You, Thank You.[IA] INSURANCE ADVOCATE / November 30, 2015 31
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[ COURTSI DE ]
By Lawrence N. Rogak
Venue for Suit Based on Breach of Policy Condition is Where "The Contract Exists" — Insurer's Offices Country-Wide Ins. Co. v Blenman
P
Corporation Kings County Hospital Center, and that Blenman assigned the right to collect no-fault insurance benefits to those providers. Plaintiff claims that Plaintiff has no obligation to pay no-fault claims to Blenman or to any of the Medical Provider Defendants because Blenman failed to comply with a condition precedent to coverage under the Policy. In addition, Plaintiff seeks to permanently stay all No-Fault lawsuits and arbitrations arising from the No-Fault claims submitted to Plaintiff in connection with the Accident. Plaintiff commenced this action on November 19, 2014, by Summons and Complaint. The City Defendant now moves for an Order, pursuant to CPLR §§ 510, 511, 504(3), and New York City Health and Hospitals Corporations Act ("NYCHHA") §
laintiff, Country-Wide Insurance Company, brings this action for a declaration that Plaintiff is not obligated to pay claims for no- fault benefits submitted to Plaintiff in connection with an alleged motor vehicle accident in which defendant, !genie F. Blenman, allegedly sustained personal injuries. The Accident took place on May 1, 2014. Plaintiff alleges that, in connection with the Accident, Blenman made claims to Plaintiff as Plaintiffs eligible injured under the personal auto policy of insurance issued to Blenman under New York policy of insurance number DS 352782813 (the "Policy"). Plaintiff also alleges that Blenman received medical treatment from the Medical Provider Defendants, including New York City Health and Hospitals
C O M I N G
S O O N -
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T H I R D
20(3), § 7401 (3) of McKinney's Unconsolidated Laws of New York State; § 7405 of McKinney's Unconsolidated Laws of New York State, changing the venue of this action from the New York County to King's County; and, pursuant to CPLR § 8106, awarding costs for this motion. Plaintiff opposes. Plaintiff cross-moves for an Order, pursuant to CPLR §§ 510 and 511, denying the City Defendant's motion and retaining venue in New York County. CPLR § 510( 1) permits a court, upon motion, to change the place of trial of an action where "the county designated for that purpose is not a proper county." (CPLR § 51O[1 ]). Pursuant to CPLR § 511, a defendant seeking to change the place of trial upon the ground of improper venue, "shall serve a written demand that the action be tried
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[ COURTS I D E ] in a county he specifies as proper." (CPLR § 511 [b]). This statute further provides: 2 ·Thereafter the defendant may move to change the place of trial within fifteen days after service of the demand, unless within five days after such service plaintiff serves a written consent to change the place of trial to tha~ specified by the defendant. Defendant may notice such motion to be heard as if the action were pending in· the county he specified, unless plaintiff within five days after service of the demand serves an affidavit showing either that the county specified by the defendant is not proper or that the county designated by him is proper. Various provisions establish what is "a proper county" for purposes of a motion to change venue under CPLR § 510( 1 ). Where venue is based on residence of a party, CPLR § 503(a) provides, in relevant part, "[e]xcept where otherwise prescribed by law, the place of trial shall be in the county in which one of the parties resided when it was commenced." (CPLR § 503[a]). For actions against the City of New York, CPLR § 504(3) directs that the "place of trial of all actions against counties, cities, towns, villages, school districts and district corporations or any of their officers, boards or departments shall be, for: ... the city of New York, in the county within the city in which the cause of action arose". (CPLR § 504[3]). Additionally, the New York City Health and Hospitals Corporation Act requires all actions against the New York City Health and Hospitals Corporation to be brought, "in the city of New York, in the county within the city in which the cause of action arose". (CLS Uncons Laws of NY ch 214A § 20 [New York City Health and Hospitals Corporations (the "HHC") § 20 [3], as added by L 1969, ch 1016, as amended]). This act further provides: "Insofar as the provisions of this act are inconsistent with the provisions of any other law, general, special or local, the provisions of this act shall be controlling." (HHC § 24). As an initial matter, although the City Defendant's demand to change venue does not appear one-filing, Plaintiff does not dispute that such a demand was timely made pursuant to CPLR § 511. Nor does there appear to be any dispute as to whether the City Defendant timely filed the instant motion within fifteen days of
the City Defendant's demand to change venue, as required under CPLR § 511. Turning now to the merits of the City Defendant's motion to change venue, the City Defendant argues that New York County is not a proper county for Plaintiffs action under CPLR § 504(3) and HHC § 20(3) because these statutes require Plaintiffs action to be venued in the county within the city in which Plaintiffs cause of action against the City Defendant arose. The City Defendant argues that Plaintiff 's complaint against the City Defendant arose in Kings County, as the services for which Plaintiff now seeks a declaration of noncoverage were provided at Kings County Hospital, which is located in Kings County. The City Defendant argues that CPLR § 504(3) and HHC § 20(3) therefore require Plaintiffs action to be venued in Kings County, where the incidents forming the basis of Plaintiffs complaint against the City Defendant took place. Plaintiff, on the other hand, argues that CPLR § 504(3) and HHC § 20(3) establish thatPlaintiff s action is properly venued in New York County. Plaintiff argues that Plaintiffs declaratory judgment action arises from Blenman's failure to comply with a condition precedent to coverage under the Policy, and that Blenman's breach of the Policy took place in New York County, where Plaintiff is headquartered and where the insurance contract between Plaintiff and Blenman exists. Here, Plaintiff 's complaint seeks a declaration of non-coverage based on Blenman's alleged failure to comply with a contractual condition precedent to coverage under the Policy. Plaintiffs complaint therefore arises out of Blenman's alleged breach of the Policy. Accordingly, the City Defendant fails to demonstrate that Plaintiffs action is not properly venued in New York County for purposes of CPLR §§ 510(1), 504(3), and HHC § 20(3). Wherefore, it is hereby, ORDERED that the City Defendants' motion for a change of venue is denied; and it is further ,ORDERED that Plaintiff 's cross motion is granted only to the extent that venue is retained in New York County.[IA] 2015 NY Slip Op 31781(U) Supreme Court, New York County, Index Number: 161529/2014 Judge: Eileen A. Rakower
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[ GUEST OPINION ]
By Jane M. Orient, M.D.
Danger: Interstate Compact Could “Fundamentally Transform” Medicine
W
hile Americans are preoccupied with the political theater of the Presidential race, special interest groups toil to pass legislation that could radically transform your medical care. One example is the Interstate Medical Licensure Compact, which has passed in 11 states. Pennsylvania has joined a number of others in proposing it. The proposal promises to provide “remote communities Jane M. Orient, MD with access to highquality care through telemedicine” and “address a shortage of medical personnel in underserved rural and urban regions,” according to an article in the Pennsylvania Business Daily. Americans need to remember three things about proposed legislation: • Its real purpose is likely to be very different from the stated one, and the result may be the opposite of the one that is promised. • Especially when the same law is surfacing simultaneously in a number of states, some vested interest wants to make money from it. A lot of money—getting laws passed can be very expensive. • There may be no way back, as the law empowers and funds interest groups that will oppose repeal. So what does the Compact do to bring telemedicine to underserved areas? By itself, nothing. It’s about a bypass to state control of licensure, not about providing care. If telemedicine were the real object, the way to expedite it would be to define the location of medical care as the location of the doctor, not the patient. The doctor would need a license in only one state. Compact proponents oppose a telemedicine bill in Congress that would do just that. Some physicians already hold a license in several states—they just apply to each state. Under the Compact, they would apply 34 November 30, 2015 / INSURANCE ADVOCATE
to a private interstate commission, which would have its own rules, possibly overriding rules of the states, and which would have no public accountability. This would add costs, not eliminate them. It could also allow doctors to evade state laws meant to protect patients. For example, a carpetbagger abortionist could fly in to do late-term abortions forbidden by the state, under his Compact license. Only “eligible” physicians need apply. The organization spearheading the push for the Compact is the Federation of State Medical Boards (FSMB). Contrary to the implications of its name, FSMB is a private corporation, which, despite being taxexempt, brings in tens of millions of dollars in revenue by selling forms and physician data. The Compact re-defines “physician” to mean someone who is participating in proprietary “Maintenance of Certification” (MOC). There is no evidence that MOC improves patient care. The vast majority of physicians find it to be costly, timedevouring busywork. It also tends to indoctrinate physicians into the treatment preferences of elitist, monopolistic, selfcertified “experts.” But a Compact-licensed physician instantly becomes ineligible— and even becomes a non-physician, if he misses one too many questions on an exam or fails to pay up. So, who’s for the Compact? Purveyors of MOC. Also, hospital associations. Apparently, they want to tap into revenues from telemedicine, using compliant doctors tied into an interstate system that makes its own rules and will be heavily influenced by the big players. For them, telemedicine could be a bonanza that requires little up-front investment in facilities or personnel. Telemedicine can order tests and referrals to entities owned or controlled by the telemed physician’s employer (the hospital). It can prescribe medicines—including the “pain pill” to nonprofitable patients. It cannot establish a personal patient-physician relationship. The news article shows three street
signs: “come,” “practice,” and “here,” with arrows going in three directions. Your “provider” could be in cyberspace with a better connection to computer protocols than to you, directing patients as dictated by the System. Your rural doctor could be out of business or even delicensed, and your local premier institution could be busy with out-of-state cyberpatients. The Compact is about control of medicine by a centralized private entity. Once in, a state may not be able to extricate itself. The proponents aren’t waiting for the “laboratories of democracy” to come up with negative results. Hence the nationwide push to get “everybody in, nobody out” as quickly as possible. A good rule for responsible legislators: If you don’t fully understand the implications of a bill, vote no. Wait and see how it works out elsewhere. [IA] Jane M. Orient, M.D. obtained her undergraduate degrees in chemistry and mathematics from the University of Arizona in Tucson, and her M.D. from Columbia University College of Physicians and Surgeons in 1974. She completed an internal medicine residency at Parkland Memorial Hospital and University of Arizona Affiliated Hospitals. She has been in solo private practice since 1981 and has served as Executive Director of the Association of American Physicians and Surgeons (AAPS) since 1989. She is currently president of Doctors for Disaster Preparedness. Since 1988, she has been chairman of the Public Health Committee of the Pima County (Arizona) Medical Society. She is the author of several books including more than 100 papers on a variety of subjects including risk assessment, natural and technological hazards and nonhazards, and medical economics and ethics. She is the editor of AAPS News, the Doctors for Disaster Preparedness Newsletter, and Civil Defense Perspectives, and is the managing editor of the Journal of American Physicians and Surgeons.
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