December 06, 2013 by C Acunto

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VOLUME 124, NUMBER 21 / Year End 2013

A CINN Group, Inc. Publication

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Contents [COVER STO RY ] 20

Courtside: Cellar Stairs Accessed by Sidewalk Trap Door are Not Covered by Building Code Lawrence Rogak

Classiﬁeds

Looking Back: September 1988

In the Associations: Michael A. Zarcone to Chair LICONY

IFNY 99th Annual Free Enterprise Award Luncheon

[FEATURES] 4

Foreword: Reg. 79: Opinion Steve Acunto, Publisher

Insight: Resolutionary Wars Peter H. Bickford

December 21, 2013 | volume 124 number 21

Exposures and Coverages: Leaseholds Interest Insurance Court of Appeals: VMM & Sec. 240 Decisions Super Bowl & the Weather Outside is Frightful Jerome Trupin, CPCU

In the News: Demotech Co-Founder Named One of Twenty People to Know in Insurance

In the Associations: NYIA Wrap Up: Property and Casualty Industry Gears Up for 2014 as NYIA sets Priorities

In the Associations: Utica Mutual’s Bernard Turi to Chair NYIA

Regulatory Update: FIO Long Awaited Report Calls for “Hybrid” Regulatory System Mike Nelson and Susan Stead

Regulatory Update: Big “I” Responds to FIO Report

On My Radar: Sit on Your Rights - Lose Arbitration Award Afﬁrmed Barry Zalma

[ AD FEATURES] 33

Michael Fliegelman, CLU, CHFC, AEP, RFC: What is the sign of a good decision?®

The D.B.L. Center LTD: Holiday Greetings

LICONY: Business Obligation Uncovers Opportunity to Protect Personal Interests

20 Like us on Facebook… The Insurance Advocate Magazine INSURANCE ADVOCATE / Year End 2013 3

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[ FORE WORD ]

Steve Acunto

Reg. 79: Opinion

s we move into 2014, a number of things are still unresolved that deserve attention from regulators and legislators; a number of other issues and other news items have come across our desk as the old year waned that we would like to comment upon. First, the big news these past two weeks, other than the difficulties that Tower Insurance, AmTrust and a few other enterprises have had, is the report of the FIO calling for a hybrid form of Federal/State regulation. We include in this issue an astute analysis done by Mike Nelson and his staff at NDLH. Our view here is close to that of the IIABA and other agents’ groups. That is, the current system of state based regulation is worth retaining, albeit with some modifications. The purpose of the FIO from the outset was surely not to have caused itself to cease to exist by advocating state regulation or by simply reviewing and “okaying” the current system. Such is the nature of Federal organizations and offices. In this case, however, the report was comparatively fair minded toward the system itself. We understand that IFNY and other entities in New York are planning reviews of the matter with constituents and so we may confidently look forward to the coming debate on the usefulness of the report’s findings. We urge you to read the article carefully as this may be a blueprint for the future of insurance and to register your thoughts with us... A second, state level matter has come to the fore and has drawn strong opinion on both sides; this is the issue of Reg. 79. Recently, the Insurance Advocate presented both the opinion of columnist Steve Ruchman, reflecting the viewpoint of agents’ associations and a guest column by CARCO Chief Executive Jim Owens. In this column we have not commented on this matter. After considerable study and interviews, it is our view that Reg. 79 is a worthwhile regulation for its effect in combatting fraud and for its added layer of identiﬁcation of automobiles and owners. On the other hand, it is reportedly a burden on agents and drivers and should have some wiggle room for discretion in the law that might be realized in the creation of a voluntary use of the photo inspection process by carriers. We believe it should be voluntary and that several reﬁnements in the regulation itself, as have been suggested to the insurance department by CARCO, should be adopted. One side note is this: agents have justified for many years the service they render to insureds and to the industry, as trusted intermediaries. In an age of disintermediation, any services that are ceded by agents to other entities or left alone should be looked at carefully. The human touch, the added understanding that comes with interfacing with clients - even in fulfillment of Reg. 79 as an anti fraud measure and as an identifying mechanism, possesses some value in establishing the agent’s position in the marketplace with insureds. We call upon the Department to look at some of the suggestions CARCO has advanced and we urge every party in the process to proceed carefully toward a voluntary Reg. 79 use...Peter Bickford’s column this issue is a “must read”. Peter has sharpened his pencil and his wit for what amounts to a list of suggested New Year’s resolutions; be sure to read it...Our good friend Joe Petrelli, founder of Demotech Corporation has been elected one of 20 people to know in the insurance business. Joe’s JOE PETRELLI long time service to insurers in offering creditable claims paying ability ratings and serving as a powerhouse resource of financial intelligence for insurers has earned him the distinction. Since 1985 Demotech has served the industry and Joe Petrelli and his wife, Sharon, have created a national reputation for this enterprise. We are proud to be among the many hundreds of people who agree that Joe is one of the most important people to know in insurance. SA

4 Year End 2013 / INSURANCE ADVOCATE

VOLUME 124, NUMBER 21 DECEMBER 21, 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 Barry Zalma 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 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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[ INSIGHT ]

By Peter H. Bickford

Resolutionary Wars

he marking of a new year – whether it be January 1st, the Chinese New Year, the Jewish New Year, or any other iteration of a new beginning, is the only major holiday in most societies celebrating the passage of time. January 1st as

What I particularly like about Edwards’ resolutions are the hedges. He always seems to leave an out such as “in narrations” or “except” in the foregoing resolutions. So like most modern resolutions we need to take them with a grain of salt, and

So like most modern resolutions we need to take them with a grain of salt, and in that spirit I offer a sampling of 2014 resolutions “overheard” by “reliable sources” in the hallways of some of our favorite local, federal and international legislators, regulators and administrators responsible for setting and enforcing the rules for our industry: Peter H. Bickford

the beginning of a new year, of course, is quite arbitrary. The ancient Babylonians logically celebrated the beginning of a new year in March with the beginning of the growing season. The Romans are responsible for moving the beginning of the new year to January 1st with the adoption of the Julian calendar, naming the first month – January – after Janus, the two-faced god that could look forward as well as backward. The tradition of making promises at the beginning of a new year can also be traced back to ancient times with vows to the gods to do good things in their name, but the beginning of a new year was mostly a time of celebration. New year’s resolutions as an art form, and as a sobering alternative to ungodly New Year’s celebrations, can be attributed to the 18th Century Puritan Pastor Jonathan Edwards who, as a young man, wrote his famous resolutions that became a life coda for himself and his followers. Here, for example, are two of his 70 published resolutions that have become, in more modern language, common maxims: • Resolved, in narrations never to speak anything but the pure and simple verity. • Resolved, never to speak evil of any, except I have some particular good call for it.

in that spirit I offer a sampling of 2014 resolutions “overheard” by “reliable sources” in the hallways of some of our favorite local, federal and international legislators, regulators and administrators responsible for setting and enforcing the rules for our industry: Starting globally, the International Association of Insurance Supervisors (IAIS), which was established to provide the international financial regulatory community with criteria for the financial regulation of insurers, has RESOLVED: • To continue to use the international financial crisis as a means of forcing banking financial criteria on insurers; and • To use our bully pulpit in the name of international financial stability to get what we really want – an end to state regulation in the US for the competitive advantage of non-US companies. On the Federal scene, the US Treasury Department, charged with the enforcement of the 2010 Dodd-Frank Act, and which overseers of the Federal Insurance Office (FIO), has RESOLVED: • To confiscate and destroy all copies of “Insurance for Dummies” circulating among our staff and the staff of the FIO; and

• To direct the FIO to continue to use our standard-issue “Alice in Wonderland” calendars with random days and months and years so that all of its required reports on the insurance business will be considered timely. On a national (but not Federal) level, the stalwart for preserving state regulation of insurance, the National Association of Insurance Commissioners (NAIC), has RESOLVED: • To continue the fight to maintain to a strong, viable system of state based regulation of the business of insurance; and • To accomplish this goal by acceding to all “suggestions” by the US Congress or the Treasury Department for the regulation of the insurance business no matter how detrimental or counter-intuitive to a state based system. On the state legislative front, there is the National Conference of Insurance Legislators (NCOIL) and the legislative bodies of each state, which play a significant part in shaping the regulatory landscape for the insurance business, each of which have remarkably similar resolutions, to wit: • RESOLVED, to continue our strong support for state-based regulation of insurance through the adoption of legislation incompatible with the efforts of the NAIC or anyone else seeking consistent requirements from state to state. When it comes to state insurance regulators, each has its own agenda and there is not enough space to report each state’s separate and unique resolutions, so I have focused on just one — the New York Department of Financial Services (DFS), which has RESOLVED: • To continue our sterling efforts to meet our statutory raison d’etre (note the international flavor!) to “encourage, promote and assist banking, insurance and other financial services institutions to effectively and produccontinued on page 8

6 Year End 2013 / INSURANCE ADVOCATE

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[ INSIGHT ] significant events; - be far more open with the public about the importance of the insurance industry to the economy of our state; - restore the annual report of the DFS to the full glory of the old Insurance Department reports on the state of the insurance business in our state; and - learn the importance of capital from all legitimate sources to a

continued from page 6

tively locate, operate, employ, grow, remain, and expand in New York state;” and • To accomplish this statutory directive, DFS will - be far more effusive about the wonderful job the Insurance Industry has done in response to Superstorm Sandy and other

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healthy and successful insurance industry. The resolutions reported above have all been institutional rather than personal resolutions. There are some, however, that cannot be made institutionally, but only personally. For instance, New York’s Superintendent of Financial Services is individually responsible as receiver, rehabilitator or liquidator of financially troubled insurers in the state – not the DFS, any division of the DFS, or any agency of the state (or some other agency of unknown authority, such as the NY Liquidation Bureau), and therefore any meaningful resolution regarding the insolvency process in New York must come from him personally. The NY Receiver has not disappointed, of course, and has RESOLVED: • To bring the insolvency process in New York out from under the rock and into the sunlight unless, of course, such exposure proves to be too harsh, in which case it will be swept back under the rock; and • To finally explain to the shortfall annuitants of Executive Life Insurance Company of New York (ELNY) why I made no effort to hold those responsible for the gross mismanagement of ELNY accountable, and why I did everything in my power to prevent the shortfall annuitants from doing so. And for me? I have adopted Pastor Edwards’ second resolution: “Resolved, to be continually endeavoring to find out some new contrivance and invention to promote the aforementioned things.” Happy New Year, and much success formulating and achieving your own resolutions! [IA]

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[ EXPOSURES AND COVERAGES ]

By Jerome Trupin, CPCU

Leasehold Interest Insurance Court of Appeals: VMM & Sec 240 Decisions Super Bowl & the Weather Outside is Frightful

his month, I want to expand my previous discussion of two problems: leasehold interest insurance and the definition of vandalism and malicious mischief, plus take a look at another NY Court of Appeals case. I’ll wind up with an odd-ball insurance coverage.

Leasehold Interest Insurance As Rodney Dangerfield might have said, “Leasehold interest insurance don’t get no respect.” It’s misunderstood and overwhelmingly undersold. The definition on a leading insurancereference website exemplifies the fog surrounding this coverage. It reads: Leasehold Interest: Property insurance covering the loss suffered by a tenant due to termination of a favorable lease because of damage to the leased premises (emphasis added) by a covered cause. The principal coverage is the net leasehold interest, which is the present value of the difference between the total rent payable over the unexpired portion of the lease and the total estimated rental value of the property during the same period.1 That’s true, as far as it goes, but there are many more aspects to leasehold interest insurance and, most importantly, it’s not limited to damage to the leased premises. Cancellation of a lease by the property owner can be triggered by damage to the rest of the building even if there’s no damage to the premises leased by the insured.

The trigger is often damage exceeding 50% of the replacement cost of the entire building, but it can be as little as 25%. It’s sometimes tied to the time it will take to complete the repairs or other criteria. It should be obvious that in many multi-tenant buildings sufficient damage could occur to trigger cancellation of a tenant’s lease even though there’s no damage to the tenant’s premises. A tenant should check what the trigger is in its lease. They types of leasehold interest losses a tenant might sustain are illustrated by the areas of coverage under the ISO Leasehold Interest form CP 00 60 06 95:2 • Tenants’ Lease Interest, which is the difference between the: (1) rent the insured pays for its premises; and (2) rental value of the described premises. For example: the current rental value of many premises is much higher that the rent negotiated when the lease was originally negotiated. This may be due to changes in the area, changes in business conditions, general inflation, etc. To illustrate this, assume that the insured has 10 years to go on its lease at a rent of $10,000 a month and comparable space now rents for $15,000 a month. Should the landlord terminate the lease when the building is substantially damaged, it will cost the insured $5,000 a month more for the next ten years to rent similar space.3 • Bonus Payments, covers the

Jerome Trupin

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

continued on page 12

1 “Glossary of Insurance & Risk” Irmi.com . http://www.irmi.com/online/insurance-glossary/terms/l/leasehold-interest.aspx (accessed 11/24/13) 2 An indication of how little attention there is leasehold interest coverage is the date of the form edition, 06 95, that is June, 1995. The more frequently used property forms have been revised many times since then and now bear edition dates of October, 2012. 3 The policy will cover the present value of future rent loss. Present value calculations discount future expected payments to reflect the time lag. The promise to pay $1,000 a month from now is worth more than the promise to pay $1,000 ten years from now. The ISO commercial lines manual contains charts showing the discount for various time periods and rates of interest. This is discussed in more detail below.

10 Year End 2013 / INSURANCE ADVOCATE

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[ EXPOSURES AND COVERAGES ] continued from page 10

unamortized 4 portion of a cash bonus that will not be refunded to the tenant. A cash bonus is money the insured paid to acquire the lease. It does not include: (1) Rent, whether or not prepaid; or (2) Security. If the lease permites assignment, one firm may take over another tenant’s lease because the rent called for in the current tenant’s lessee is below market. The current tenant will generally receive a bonus payment in exchange for assigning the lease. • Improvements and Betterments The definition of I&B in the Leasehold Interest form is identical to that in the commercial property form that I discussed in the November 11, 2013 issue of the Insurance Advocate: Improvements and betterments are fixtures, alterations, installations or additions: (1) Made a part of the building or structure you occupy but do not own; and (2) You acquired or made at your expense but cannot legally remove However, there are some coverage differences. Because the tenant’s interest has ended when Leasehold Interest coverage is trig-

gered—the lease has been cancelled— there’s no need for the tri-partite discussion of what happens when the insured, someone else or no one replaces the I&B.. One troubling difference concerns the valuation of I&B. When the I&B are not replaced, the commercial property form calls for calculating the unamortized portion of the original cost of the I&B over the period of the lease including any lease extension options. The Leasehold Interest form is silent on whether or not to consider lease extension options in determining the length of the lease. When you write leasehold interest insurance, clarify this with the underwriter. Enter the agreed upon lease term in the Leasehold Interest Coverage Schedule (discussed below). • Prepaid Rent is the unamortized portion of any advance rent the insured has paid that will not be refunded in the event the property owner elects to terminate the lease due to damage to the building. Coverage for bonus payments, improvements and betterments and prepaid rent are tied to the insured’s monthly leasehold interest. For these three types of coverage, the monthly leasehold interest is calculated on a straight-line basis by dividing the original cost by the number of months left in the lease at the time of the expenditure. For example,

• Original expenditure for Bonus Payments, Improvements and Betterments, or Prepaid Rent was $240,000 • At the time of the expenditure, the lease had 24 months to run • Monthly leasehold interest is $10,000 The most the insurer will pay for a loss is the insured’s net leasehold interest. Net leasehold interest is the monthly leasehold interest multiplied by the number of months remaining on the lease. The net leasehold interest automatically decreases each month. Using the above example, if, at the time of the loss there are 10 months remaining on the lease, then the maximum the insured can collect for its loss is $100,000; one month later it will be $90,000, etc. For bonus payments, improvements and betterments, and prepaid rent the time value of money is not considered, however it is a factor for tenant’s lease interest. To reflect the time value of money, an amount to be received in the future is discounted at a chosen interest rate that reflects expected probable interest earnings and inflationary expectations.5 For example, if the chosen interest rate is 5%, then $1,050 due one year from now is equal to $1,000 today since $1,000 today would increase to $1,050 in one year at 5% interest. When we’re dealing with a lease with monthly payments over a long period of time it would be possible, but very timeconsuming, to calculate each month’s continued on page 14

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4 Amortization refers to the spreading of payments over a period of time. Thus if the insured paid $500,000 to take over a lease that has 50 months to go, straight-line amortization would be $10,000 a month. The unamortized portion would be the portion that has not yet been amortized. 5 The present value of money (also know as the time value) is based on the concept that a given amount of money today has a greater value than the same amount of money in the future. The difference reflects interest earnings and inflation expected during the period. In simple terms, most people would chose to receive $10,000 today rather than $10,000 five years from now. In fact, they might prefer payment today to payment of a larger sum five years from now. I don’t know why it isn’t considered in calculating bonus payments, improvements and betterments and prepaid rent coverage, perhaps it’s because for smaller amounts and short periods, the difference is not great.

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[ EXPOSURES AND COVERAGES ] continued from page 12

amount individually; fortunately a simple arithmetic formula enables solves the problem without complex calculations. It looks fearsome: , but it requires only addition, subtraction, multiplication and division. A computer or hand-held calculator can do the calculation in a fraction of a second. However, ISO doesn’t want to include a frightening looking formula or write “take out your calculator,” so the commercial lines manual includes charts showing the factors to use to calculate the present value at various interest rates. A chart with the factors for up to 400 months (33 1/3 years) is attached to the policy. For example, if the selected interest rate is 6% and the lease has 120 months to run, the chart shows a factor of 90.7243. The gross monthly leasehold interest is multiplied by this factor to find the insurer’s maximum liability at that time. The gross monthly leasehold interest is calculated for Tenants’ Lease Interest by subtracting the rent that the tenant pays under the lease from the monthly rent value at the time the calculation is done. Thus, if the current monthly rental value is $15,000 and the insured’s rent under its lease is $5,000; the gross monthly interest is $10,000. A calculation that ignores the time value of money would make the amount of the loss for the 120 months $1,200,000 (120 x $10,000). Multiplying $1,200,000 by the factor shown in the table, (90.7243), reduces the amount to $1,088,691.60, which would be the amount of insurance. That’s equitable for both the insurer and the insured, since $1,088,691.60 at 6% interest could produce a payment of $10,000 each month for 120 months. Leasehold Interest Coverage Schedule The leasehold interest coverage schedule is the “declaration” page that spells out the coverage. (ISO form CP DS 07 10 00) It calls for the following entries: • Inception and expiration dates of lease (As mentioned above, clarify with the underwriter whether the expiration date is to be based on the options to renew, if any, in the lease.)

If no amount is provided by the insured’s property policy or if the amount provided is inadequate, discuss leasehold insurance with clients. It can be a very large exposure that’s been overlooked. • Months Remaining at Inception • The form also contains space to enter interest rate to be used to value tenants’ leasehold interest and the premiums. • For bonus payments, improvements and betterments and prepaid rent: monthly leasehold interest amount and the net leasehold interest at inception. • For tenants’ lease interest coverage: the monthly leasehold interest amount and the gross leasehold interest amount. The net leasehold interest for tenants’ lease interest is the monthly leasehold interest amount times the factor shown for the selected interest rate. An insured might have coverage for bonus payments, improvements and betterments and prepaid rent as well as tenants’ leasehold interest. For example, an insured might pay a bonus to take over an advantageous lease, thus creating the need for tenants’ leasehold interest coverage and bonus coverage. If the insured then renovated the premises by installing expensive improvements and betterments, that would create the need for I&B coverage. The total amount of insurance would be the sum of all the net leasehold interests. The premium for leasehold interest coverage is determined as follows: 1. Determine the average amount of insurance over the policy period by adding the amount of insurance at inception and the amount at expiration and dividing by 2. 2. Multiply the average amount that’s

been calculated by the building (not the contents) property insurance rate to determine the premium. Sources of Coverage Some insurers include coverage for leasehold interest in their enhanced property coverages. The amount of insurance is often quite low, but some insurers include it in a basket of coverages with a maximum total payment for all the items in any one loss of as much as $500,000. If no amount is provided by the insured’s property policy or if the amount provided is inadequate, discuss leasehold insurance with clients. It can be a very large exposure that’s been overlooked. (Department of full disclosure: The only clients I’ve ever been able to convince to insure leasehold interest are those who purchased a valuable lease. They could see that the leasehold had value—they just paid for it. Others had exactly the same exposure even though they hadn’t paid out of pocket, but I couldn’t get them to see it!)

Two New Court Of Appeals Insurance Decisions The NY Court of Appeals has weighed on two insurance cases in its new term. One concerned vandalism and the other was a Section 240 Labor Law case. The vandalism case is Georgitsi Realty, LLC v. Penn-Star Ins. Co.6 The US Court of Appeals for the Second Circuit had certified two questions concerning vandalism to the NY Court of Appeals. The second circuit court asked whether an act performed on adjacent property that causes damage to the [insured’s] property may constitute “vandalism” under the [insured’s] property insurance policy and whether “malicious damage” can result from an act not directed specifically at the insured. The NY Court of Appeals has answered yes to both questions. Combining this decision with the broad definition New York courts have applied to determine what constitutes vandalism (intentional doing of a wrongful act without legal justification even if there is no malice or ill will involved7) may make continued on page 16

6 NY Court of Appeals Slip Op 6731 No. 156 October 17, 2013. I wrote about the original case in the September 9, 2013 issue of the Insurance Advocate 7 Georgitsi Realty, LLC v. Penn-Star Insurance Company U.S. Court of Appeals, 2nd Circuit. 11-4444-cv (12-21-12)

14 Year End 2013 / INSURANCE ADVOCATE

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vandalism coverage apply to many more acts that damage covered property. The second case, Jose A. Soto v. J. Crew Inc., et al.8, involves a cleaning contractor’s employee, Jose Soto, who was injured when he fell from a ladder while dusting a shelf. Falling from an elevated level is a classic example of a Labor Law Section 240 claim. Section 240 gives the injured employee broad rights to sue the store owner and the building owner for amounts in excess of workers compensation benefits as well as for pain and suffering even though neither the store nor building owner controlled the work. (The sole remedy nature of workers compensation coverage prevents the employee from suing the employer.) One basis for establishing Section 240 liability is that the injured worker was not provided with suitable safety equipment. Soto submitted an engineer’s affidavit stating that Soto was not provided with proper protection because the ladder was not secured, such as being held by another store employee. The insurance companies defending the claim pointed out that there is another leg to establishing such a claim. Section 240 only applies to “the erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure.9” The insurers argued that “cleaning” in that section refers to cleaning only in connection with construction or demolition work; it doesn’t apply to ordinary cleaning. The Supreme Court (a lower court in NY despite its title) and the Appellate Division of the Supreme Court both agreed with the insurance companies. Nevertheless, Soto took the case to the NY Court of Appeals. That court has now also agreed with the insurance companies. Labor Law cases are extremely fact continued on page 18

8 NY Court of Appeals Slip Op 06603 No. 162 October 10, 2013 9 N.Y. LABOR LAW § 240 : NY Code - Section 240: Scaffolding and other devices for use of employees - http://codes.lp.findlaw.com/ nycode/LAB/10/240#sthash.WGkowSRi.dpuf (accessed 10/31/13)

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[ EXPOSURES AND COVERAGES ]

continued from page 16

intensive. Jen Ehman, an attorney with Hurwitz & Fine in Buffalo, points out that there are four key issues with regard to Section 200, 240, and 241 cases:10 • Is this a statutory defendant? • Is the project “covered” by the statute? • Is the injured party “protected” by the statute? • Is the accident an “event” within the contemplation of the statute. • If any one of the four is missing, then it’s not a labor law case. Adding a Labor Law provision requiring that the injury be “grave”11 before the employee sue the owners and/or contractors was a partial fix to the onerous application of the law. When the owner or contractor is sued, they in turn sue the injured employee’s employer alleging failure to properly manage the work. This is the socalled “third-party over” lawsuit. In effect the employee is suing his or her employer, something that the exclusive remedy doctrine of workers compensation was supposed to prevent. These cases can be extremely expensive to defend and, when the defense is unsuccessful, the awards can be huge.

Originally enacted in 1885, these laws predate workers’ compensation, which didn’t gain traction in New York until the second decade of the 20th century. It made sense when workers had few legal protections; they cry out for further revision today.

Super Bowl May Require Super Insurance— And The Weather Outside (May Be) Frightful The next Super Bowl game will be played in a northern clime for the first time since 1976. The Farmers Almanac predicts copious wind, rain, and snow around the time of the game.12 Who knows? They may be right—the football powers-that-be obviously have a different expectation. If the weather breaks wrong, it’s not just the NFL and its teams that could incur a loss. Think of all the firms that expect profit from showing the game, selling to the fans, etc. Tell them about it. There’s insurance available. Houston Casualty has stepped into the breach. It is offering broad event cancellation insurance that would indemnify the insured for the loss of business income that might result from bad weather. Coverage can be purchased up to two weeks before the game.13 [IA]

Originally enacted in 1885, these laws predate workers’ compensation, which didn’t gain traction in New York until the second decade of the 20th century. 10 Jennifer Ehman “New York Labor Law Imposes Liability On Owners And Contractors For The Failure Of The Employer To Provide A Safe Place To Work” Presentation to Westchester-Fairfield CPCU Chapter seminar 11/20/13. 11 The law defines “grave” to mean: Death; permanent and total loss of use or amputation of an arm, leg, hand, or foot; loss of multiple fingers; loss of multiple toes; paraplegia or quadriplegia; total or permanent blindness; total and permanent deafness; loss of nose; loss of car; permanent and severe facial disfigurement; loss of an index finger or an acquired injury to the brain caused by an external physical force resulting in permanent total disability. 12 Ken Belson “Almanacs Foresee a Super Bowl to Test Fans’ Resolve, and Snow Gear” NY Times November 23, 2013 http://www.nytimes.com/2013/11/24/sports/f ootball/almanacs-foresee-a-super-bowl-totest-fans-resolve-and-snow-gear.html?_r=0 (accessed 11/30/13) 13 Anne Freedman “Dewitt Stern Protects Super Bowl Revenue” Risk & Insurance October 1, 2013 http://www.riskandinsurance. com/story.jsp?storyId=533354950 (accessed 11/30/13)

[ IN THE NEWS ]

Demotech Co-Founder Named One of Twenty People to Know in Insurance

he employees of Demotech are pleased to report that our President and co-founder, Joseph L. Petrelli, has been named one of twenty people to know in insurance by Columbus Business First. In a Central Ohio insurance community consisting of more than 50,000 insurance professionals including Nationwide, Grange, State Auto, Motorists, Ohio Indemnity Company, Century Insurance Group, United Commercial Travelers, SafeAuto, Amerishare, Assurex Global, Westfield, OHA Insurance Solutions, Ohio Bar Liability Insurance Company, Ohio Bar Title Insurance Company, the Ohio Department of Insurance and the State of Ohio Bureau of Workers’ Compensation, 18 Year End 2013 / INSURANCE ADVOCATE

thinking into practical solutions set him apart as one of twenty people to know.

About Demotech, Inc.

dozens of actuarial consultants and thousands of CPCUs and CLUs, Joe’s thought leadership and ability to translate creative

Demotech, Inc. is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Since 1985, Demotech has served the insurance industry by assigning accurate, reliable and proven Financial Stability Ratings® (FSRs) for Property & Casualty insurers and Title underwriters. FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer, regardless of financial size. Visit www.demotech.com for more information. [IA]

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[ COVER ]

Evan Greenberg Receives IFNY Free Enterprise Award 400 Leaders and Top Professionals Hear NAIC’s Nelson and Supt. Lawsky

L-R: IFNY FEATURED SPEAKER SEN. BEN NELSON, NAIC; IFNY FREE ENTERPRISE AWARD RECIPIENT EVAN GREENBERG, ACE LIMITED; IFNY PRESIDENT NICK PEARSON; IFNY IMMEDIATE PAST CHAIRWOMAN CECILIA NORAT; AND IFNY CHAIRMAN LANCE ALBRIGHT

he Insurance Federation of New York held its 99th Annual Luncheon to celebrate its 100th Centenial Year at Cipriani’s on Wall Street in November, attracting 400 insurance leaders and professionals for what amounted to a somewhat historic event. For one of the few, if any, times in insurance history, two major leaders and IFNY Free Enterprise Award recipients, a father and son, shared the stage at Cipriani’s: Evan Greenberg, recipient of the 2013 Free Enterprise Award was introduced by his father, insurance legend Maurice “Hank” Greenberg, Free Enterprise awardee from 1988. Other stars on the stage that day included former Senator Ben Nelson, Chief Executive Officer of the NAIC, and 20 Year End 2013 / INSURANCE ADVOCATE

Superintendent of the New York State Department of Financial Services, Hon. Benjamin Lawsky. All in all it was a stellar luncheon which found the Insurance Federation and its members applauding Mr. Greenberg’s remarks—reproduced elsewhere in the issue—and Senator Nelson’s outline of NAIC priorities. The Messrs. Greenberg each lauded the insurance industry itself, offering some criticism (the elder Greenberg) of the Martin Act and setting out the challenges that would face professionals in the future. According to one veteran observer, it was one of those rare occasions when an attendee felt that they were witnessing a bit of insurance history as the two Greenbergs, the younger, Chairman

and CEO of ACE Limited, the older, founder of AIG and now Chairman of STARR Group, shared the podium. One highlight of the event was IFNY President Pearson’s re-commitment of grant monies to an organization called Boys Hope Girls Hope who’s mission is to address the needs of children whose potential is threatened by shattered neighborhoods, distressed families, endemic poverty, and other factors beyond their control. The IFNY Intern program works closely with Mary Lanning of Yes!Solutions Inc. to arrange internships in participating insurance offices for these students. Each student expressed how important this was in short remarks. It was a high point of the luncheon. [IA]

INA 12-16-13_INA 12-16-13 1/8/14 11:22 AM Page 21

[ COVER ]

IFNY CELEBRATES 100 YEARS

IFNY VICE PRESIDENT DOUG HAYDEN (L) OF WRIGHT INSURANCE GROUP

L-R: JODY ROLLINS, CHUBB GROUP OF COMPANIES; HAROLD MOSKOWITZ WILSON ELSER; AND IFNY DIRETOR AMY FELLER

CAROLE BANFIELD OF ARGO GROUP WITH IFNY DIRECTOR ROGER MOAK, ESQ.

L-R: MARK CRAW, NYIA; PHIL GUSMAN, NATIONAL UNDERWRITER; AND ELLEN MELCHIONNI, NYIA

SUPT BEN LAWSKY (L) SPEAKS WITH IFNY FREE ENTERPRISE AWARDEE EVAN GREENBERG OF ACE GROUP

21 December 16, 2013 / INSURANCE ADVOCATE

INSURANCE ADVOCATE / Year End 2013 21

INA 12-16-13_INA 12-16-13 1/8/14 11:22 AM Page 22

[ COVER ]

L-R: IFNY PRESIDENT NICK PEARSON; PAST FREE ENTERPRISE AWARD WINNERS WILLIAM FISHLINGER, WRIGHT SOLUTIONS AND HANK GREENBERG; AND TAL PICCIONE OF U.S. RE

L-R: IFNY DIRECTOR JOHN HILL AND DAVID LAWLESS, MAGNA CARTA COMPANIES

IFNY CHAIRMAN LANCE ALBRIGHT, QBE NORTH AMERICA

IFNY VICE PRESIDENT/MANAGING DIRECTOR STEVE ACUNTO, CINN GROUP, INC.

HANK GREENBERG INTRODUCES HIS SON, IFNY FREE ENTERPRISE AWARD RECIPIENT EVAN GREENBERG

FATHER CONGRATULATES SON

22 Year End 2013 / INSURANCE ADVOCATE

INA 12-16-13_INA 12-16-13 1/8/14 11:22 AM Page 23

[ COVER ]

IFNY FREE ENTERPRISE AWARD RECIPIENT EVAN GREENBERG ADDRESSES AUDIENCE (SEE SPEECH IN THIS ISSUE)

FEATURED SPEAKER SUPT. BENJAMIN LAWSKY, NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES

IFNY DIRECTOR JAMES CORCORAN, ESQ., FORMER SUPT. OF INSURANCE, NEW YORK STATE

FEATURED SPEAKER SENATOR BEN NELSON, CEO, NAIC

L-R: IFNY DIRECTOR JIM CORCORAN; CAROLYN CORCORAN; IFNY DIRECTOR HON. HOWARD MILLS; IFNY DIRECTOR HON. SAL CURIALE; IFNY PRESIDENT NICK PEARSON; CAROLE ACUNTO, CINN GROUP, INC.; AND DAVID GREEN OF NIW GROUP

NEWLY ELECTED IFNY DIRECTOR HON. JONATHAN BING, WILSON ELSER

INSURANCE ADVOCATE / Year End 2013 23

INA 12-16-13_INA 12-16-13 1/8/14 11:23 AM Page 24

[ COVER ]

MARY LANNING, YES!SOLUTIONS,INC. INTRODUCES THE 2013 IFNY INTERNSHIP RECIPIENTS. EACH STUDENT OFFERED A BRIEF “THANK YOU” TO IFNY.

SUE HARNET, QBE NORTH AMERICA WITH IFNY DIRECTOR RICHARD HERSHMANN, FTI CONSULTING

COCKTAIL HOUR UPSTAIRS AT CIPRIANI

IFNY FEATURED SPEAKERS SUPT. BENJAMIN LAWSKY WITH SENATOR BEN NELSON

IFNY DIRECTOR HON. SAL CURIALE, FRM. SUPT. OF INSURANCE, NYS

MARTIN HABER, FTI CONSULTING

24 Year End 2013 / INSURANCE ADVOCATE

L-R: JOSEPH SANTRONE, MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN; JOSEPH SCOGNAMIGLIO, QUANTUM CONSULTING INC.; AND JOHN FELICE, U.S. SURETY

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[ COVER ]

REMARKS

Evan Greenberg Chairman & CEO, ACE Limited

99th Annual Free Enterprise Award Luncheon November 15, 2013 Cipriani - Wall Street, New York City Good afternoon. Thanks to my dad for those kind and personal words. What a great moment to have my dad give me an award, and one which he received 34 years ago. I am honored to be accepting this year’s Free Enterprise Award. I am touched and truly grateful, so thank you. I must tell you – I view this award as recognition not just for individual accomplishment but, importantly, for collective accomplishment. So many of my colleagues whom I witness day in and day out over the years are deserving of such recognition. And as such, I want to thank the Insurance Federation of NY on behalf of my company, ACE, and our nearly 20,000 employees around the globe. It is gratifying what my company has achieved over the last decade. What we have built and the financial results and industry contributions we have made speak to what can be accomplished in a competitive global market environment by a group of like-minded people. From the beginning, we have had a clear set of principles and strategies, as well as the discipline and firm belief to never compromise or waiver in our pursuit. Greatness is built over a long period, not simply a decade, and we strive to achieve that quality. So keep an eye on us – we are hardly finished. I would like to say a few words about our industry, which I think is generally misunderstood by the public. Many think of insurance as kind of bureaucratic, slow-moving, and not very dynamic. Nothing could be further from the truth. We are a reflection of society globally. Regardless of what you think about the world today, it is a fast-moving place and in a constant state of change driven by politics, culture, technology, science, law, social currents, and of course, globalization. And all of that means risk. As an industry, for us to remain relevant in an environment where risk is dynamic, we need to decisively assume relevant amounts of risk. We are expected to innovate in the areas where exposure is being created. Risks such as cyber, terrorism and flood all come to mind. Of course, we can only take risk to the extent that we understand it and we have the balance sheet wherewithal. With that said, we shouldn’t be so quick to expect and accept government involvement, which should be limited to extreme and systemic type events truly beyond industry capabilities, which by the way are evolving and will continue to do so. For example, in the future, we will likely be able to spread more risk more broadly through the capital markets. On a separate subject, our industry faces a difficult, politically-charged regulatory environment globally that is in a state of change following the financial crisis. It has never been more complex, demanding, and in my judgment, confused. It is one of the greatest challenges our industry faces today. In fact, it would be far more difficult to build ACE today in this environment. Many of the regulatory bodies we report to around the globe do a reasonably good job and have a reasonably clear sense of mission. On the other hand, some important regulators and policymaking bodies, particularly at the national and multilateral level, are confused about mission and the issues. INSURANCE ADVOCATE / Year End 2013 25

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[ COVER ] At the leadership levels, they are directed by those with banking experience and very little knowledge of or appreciation for our industry, and the important differences. This is deeply troubling, and to illustrate my concerns, I have three specific items I am just going to briefly mention. First is the designation of certain large global insurance companies as systemically important. This designation, to the extent it impacts their traditional insurance business, in my judgment, is wrong-headed and simply not relevant. The failure of an insurance company engaged in traditional life or non-life insurance, while potentially a major event, does not pose a systemic threat to the global financial system. The notion of requiring insurers designated as systemically important to hold more capital than other insurers, again for traditional insurance business, makes little sense. It would needlessly disadvantage them and for what benefit? And to go further, and consider also requiring companies designated as internationally active insurance groups to hold more capital than other insurers, would be needlessly counterproductive. It would restrict fair competition, damage availability and raise cost. Who benefits and for what purpose? The second concern is around fundamentals related to global industry capital standards. I am all in favor of minimum standards for capital that a company must hold to protect policyholder obligations in the event of an insurer failure. However, a number of proposals being discussed are more like Solvency II and require levels of statutory capital well beyond that singular purpose. In debating capital standards, regulator proposals consider adopting accounting standards that don’t make sense to me from a statutory point of view. For example, the fair valuing of an insurer’s balance sheet based on market conditions at a moment in time makes little sense when we insurers are clearly long-term buy-and-hold investors with limited to no “run-on-the-bank” exposures. Another example is fair valuing P&C loss reserves to require discounting as if P&C cash flows are predictable. This would needlessly weaken insurer balance sheets. My third concern is legislative or regulatory efforts we see around the globe aimed at balkanizing capital and cross-border risk transfer flows. Behind these efforts are essentially two motivations: One is the desire of regulators to force an insurer to retain more risk and capital in their country in order to fully control the capital backing the exposure the insurer is assuming for its own account. And the other is protectionist – the desire to protect their own domestic insurance market at the expense of competition from global companies capable of assuming large amounts of risk at competitive prices. This is a concern right here in our own country. I refer you to the Neal bill, which would thoughtlessly limit intercompany reinsurance to advantage a few domestic insurers. There are consequences to these misguided efforts. Requiring global insurers to hold greater levels of capital locally will drive up prices and restrict the availability of capacity. Ironically, this is occurring as business continues to globalize with insured values and demand for coverage growing. These proposals single out and discriminate against foreign insurers. They violate existing tax treaties and trade agreements because their real aim is to restrict competition. They essentially threaten the very principle we are here today celebrating – free enterprise. And this would be to the detriment of society. In summary, our future depends on preserving the entrepreneurial and free enterprise spirit that encourages innovation. Our regulators have a role to play in supporting the freedom to build businesses and to innovate for the benefit of society in a responsible manner. Again, on behalf of all my colleagues at ACE, I want to thank the Insurance Federation of NY for this recognition. Thank you. 26 Year End 2013 / INSURANCE ADVOCATE

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[ GUEST OPINION ]

By Janet M. Orient, M.D.

Washington has it Backward on Defunding ObamaCare

efunding ObamaCare does not really require an active decision by the U.S. House of Representatives. It is the default option— as in what happens if you don’t do something. Constitutionally, the people’s House holds the government’s purse strings. It does not need to pass a law requiring an agency to stop spending money. It can simply withhold authorization to spend it. That is, the House can Janet M. Orient, MD simply refuse to act. Suppose you have a child who is profligately spending your money on things that you disapprove of and that are very harmful—by charging them to your credit card. If the card is about to expire, you don’t have to use force to restrain the child, you could simply decline to renew it. The government would grind to a halt if the House did not appropriate any money. After passing a Continuing Resolution to continue all spending except for ObamaCare all the House has to do is stand firm. There are two men in our “democratic” government with the power to stop a law single-handedly: Senate Majority Leader Harry Reid, by refusing to bring it to a vote, and Barack Obama, who can veto it. But neither or both of them have the power to force 218 members of the House to vote for funding ObamaCare. Remember, it is funding that requires affirmative action, not defunding. Obama, Reid, and their allies in the government and in the press can remonstrate, argue, plead, bully, and threaten. But if 218 Representatives refuse to capitulate, ObamaCare does not get funding. That means that implementation of ObamaCare cannot continue to defund other government agencies, the taxpayers, and the future generations responsible for paying the debt—and of course businessmen and workers who are being hammered by the unworkable regime. 28 Year End 2013 / INSURANCE ADVOCATE

So what will the Obamacarians do? Will they refuse to spend money that has been appropriated, holding the military, air traffic control, firefighters, food stamp recipients, and millions of other federal workers and recipients of federal benefits hostage to their signature program? If HHS bureaucrats, navigators, and exchanges don’t get their checks, will everyone else have to suffer? If the ObamaCare zealots inflict this disaster on the nation to save their muchhated program, how do they imagine that people will blame the 218 for the refusal of the two to let the voice of the people, as expressed by the people’s House, prevail? With the complicity of the media, this could possibly occur, a testament to the power of indoctrination of masses who are dependent on government and bereft of any understanding of how it operates. But as their increasing shrillness suggests, the Obamacarians have cause to worry. They rammed the law through with parliamentary skullduggery and bribes, despite massive opposition in townhalls, marches, and jammed telephone lines. They apparently thought people would accept the law once passed. But now that people are learning what it really means to them, opposition is growing, not dying down. Some polls show that Americas who disapprove of the law outnumber those who approve by a margin of 2 to 1. In a Sept 18 press release, the Oregon Republican Party wrote: “Our nation, our people, our doctors, and our entire medical industry are seriously threatened by the misguided program known as Obamacare. With our political institutions divided by special interests, our nation’s last line of defense is the Constitutional authority granted to the House of Representatives to control our national expenditures. “We call upon all Republican Congressional Representatives and all Democrat Congressional Representatives, who are concerned about truly representing their constituents, to use their

authority to stop Obamacare by withholding funding of the program.” In petitions circulated by the Association of American Physicians and Surgeons, doctors state that the law “makes it impossible for me to fully fulfill my obligations.” Patients state that “I rely on the patient physician relationship to serve my best interests, but Obamacare, the Patient Protection and Affordable Care Act, forces the physician-government relationship to be placed ahead of me in the exam room. This debate shows how far we have come toward inverting the relationship between American citizens and their government, putting government on top of subservient subjects. [IA] Jane M. Orient, M.D., Executive Director of Association of American Physicians and Surgeons, has been in solo practice of general internal medicine since 1981 and is a clinical lecturer in medicine at the University Of Arizona College Of Medicine. She received her undergraduate degrees in chemistry and mathematics from the University of Arizona, and her M.D. from Columbia University College of Physicians and Surgeons. She is the author of Sapira’s Art and Science of Bedside Diagnosis; the fourth edition has just been published by Lippincott, Williams & Wilkins. She also authored YOUR Doctor Is Not In: Healthy Skepticism about National Health Care, published by Crown. She is the executive director of the Association of American Physicians and Surgeons, a voice for patients’ and physicians’ independence since 1943. Additional information on health-related issues: http://www.takeback medicine.com/. Dr. Orient’s position on Obama’s healthcare reform: “The Obama plan will increase individual health insurance costs, and if the federal government puts price controls on the premiums, the companies will simply have to go out of business. The plan will deliver higher costs, more hassles, fewer choices, less innovation, and less patient care.”

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thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank you thank As we enter 2014 and look back at 2013, you thank thank you thankforyou thank you thank you thank you NYIA thanks you all of our member companies thank thank you thank you thank you thank you thank you thank theiryou support of the association and all we have collectively to achieve. Whetheryou it wasthank holding you thank you thank you you thank been youstriving thank you thank the line on insurance taxes, assessments and fees, responding to policyholders, public policymakers and the media in the aftermath of Sandy or preserving underwriting freedom, NYIA members came together to create change.

Our members share the associationâ&#x20AC;&#x2122;s culture of hard work and epitomize the meaning of integrityâ&#x20AC;&#x201D;fundamentals that have served NYIA well for more than 130 years. The association is fortunate to have such dedicated members who truly represent the best aspects of the property and casualty insurance industry, an industry NYIA is proud to represent in New York.

INA 12-16-13_INA 12-16-13 1/8/14 11:23 AM Page 31

thank you. Allegany Insurance Group Allstate Insurance Company American Association of Insurance Services American European Insurance Group American International Group, Inc. American Transit Insurance Company 6543210/1.-3,0+* 6))(+'&%1-3$#%#&.3,0)#"&0+13!(( 1"&%' 1 2$ 3,0%1" 1-'&"'1) 3,0+* Brooks Insurance Group Broome Co-operative Insurance Company Buffamante, Whipple & Buttafaro, PC Callicoon Co-Op Insurance Company CARCO Group Inc. The Carlisle Group Central Co-Operative Insurance Company Chautauqua Patrons Insurance Company Claverack Cooperative Insurance Company !( #0'% 3$#%#&.3,0)#"&0+13!( &0 3&3 0'(03$#%#&.3& /.'&%1 Countryway Insurance Company !(#0%" '-13,0)#"&0+13!( &0 Demotech, Inc. " -103$#%#&.3,0)#"&0+13!( &0 #&013$(""')3 ECC Horizon ')01"6 1"3 0-#"&0+13 1'0)#"&0+13!(" ("&%'(03( 36 1"'+& "'13&0-34'& &"&3,0)#"&0+136))(+'&%'(0 Erie Insurance Group 1"1&- 3,0)#"&0+13!( &0 +1))3 '0136))(+'&%'(03( 341 3 ("

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INA 12-16-13_INA 12-16-13 1/8/14 11:23 AM Page 32

[ IN TH E ASSOCIATIONS ]

NYIA Wrap up: Property & Casualty Industry Gears Up for 2014 as NYIA sets Priorities

he New York Insurance Association (NYIA) held its 2013 Annual Meeting on November 14 in Latham, New York. The meeting included a Legislation and Regulation Committee Meeting, two informative presentations and a business meeting. The highlight of the event was the election of the 2014 officers and directors. NYIA’s Legislation and Regulation Committee meeting kicked off the day. The membership developed the association’s 2014 legislative and regulatory agenda. Priority issues for next year include holding the line on industry taxes, assessments and fees, introducing comparative negligence to scaffold cases, restricting lawsuit lending, auto insurance fraud reform, allowing for insurance company redomestication, and modifying the interest rate applied to judgments from 9 percent to the prevailing market rate. The committee meeting was followed by two presentations. Supervising Investigator Todd J. Putorti, facial recognition project manager, first provided an overview of the New York State Department of Motor Vehicle (DMV) facial recognition program. In his presentation, Identity Theft’s Foe: Facial recognition, he talked about the success DMV has had in combating identity theft. The Facial Recognition System (FRS) is part of DMV’s One Driver = One Record initiative. Since 2010, DMV has investigated more than 14,000 people with two or more licenses. These investigations have resulted in the arrest of more than 3,000 individuals and administrative action against more than 7,500 people. FRS allows for enhanced enforcement of attempted fraud against DMV and detects potential traffic safety risks. The presentation addressed the effects of the implementation of facial recognition on DMV records, why the detection and prevention of multiple driving records is important and the impact on the insurance industry. Deena Coffman, CEO of IDT911 32 Year End 2013 / INSURANCE ADVOCATE

Consulting, next presented on the ever important topic of Cyber Trends and Risk Management Strategies. You wouldn’t fight a war today with a musket, and you shouldn’t use yesterday’s strategy for dealing with today’s cyber threats. Deena made it clear why, more than ever, it’s critical that companies protect themselves from cyber risks, financial loss, regulatory sanctions and reputational damage. The session identified current threats, from simple to advanced, and discussed what companies are (or should be) doing to counter these new threats. NYIA’s 2014 officers and directors were elected by the membership at the conclusion of the Annual Meeting. The following officers were elected for a one-year term ending Dec. 31, 2014: • Chair: Bernard Turi, senior vice president, Utica Mutual Insurance Company • First vice chair: Steven Coffey, president and chief executive officer, Broome Co-operative Insurance Company • Second vice chair: Elizabeth Heck, president and chief operating officer, Greater New York Mutual Insurance Company • Treasurer: Marlene BentonSherwood, president, Fulmont Mutual Insurance Company 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 • Charles Makey, senior vice president, insurance operations, Merchants Insurance Group • Nicholas Masi, government and industry affairs manager, Farmers Group, Inc. • Norman Orlowski, president, Erie and Niagara Insurance Association continued on page 34

Utica Mutual’s Bernard Turi to Chair NYIA LATHAM, N.Y—Bernard Turi, senior vice president, director of risk and reinsurance of Utica Mutual Insurance Company (a member company of the Utica National Insurance Group) was elected chair of the New York Insurance Association (NYIA) at the association’s Annual BERNARD TURI Meeting. He will serve a one-year term beginning Jan. 1, 2014. Mr. Turi has served on the NYIA Board of Directors since 2007. He has served as an officer of the association since 2010, most recently as first vice chair. “I am confident that Bernie will prove to be a very effective chair of NYIA,” Ellen Melchionni, president of NYIA said. “He is an accomplished leader who is a true asset to the industry. The combination of his vast insurance knowledge, familiarity with the New York landscape and honest and open style is certain to serve the association well.” Mr Turi has more than 25 years of experience in the insurance industry. He joined Utica Mutual in 1987 as a senior claims specialist in the Errors and Omissions department. He was promoted to staff attorney in 1990 and associate claims attorney in 1995. He was named claims attorney/director of liability claims in 1999 and associate general counsel and claims attorney in 2004, the position he held prior to his most recent promotion to director of risk and reinsurance in 2011. Mr Turi is also an officer of Utica Mutual. He was first named as an officer as assistant vice president in continued on page 34

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[ IN THE ASSOCIATIONS ] continued from page 32

The following individuals were elected in previous years and will continue in their capacity as directors: • Mark Prechtl, executive vice president and chief executive officer, Chautauqua Patrons Insurance Company • Elizabeth Heck, president and chief operating officer, Greater New York Mutual Insurance Company

• Craig MacCormac, vice president, Hartford Steam Boiler Inspection and Insurance Company • Donald Tucker, regional assistant general counsel, Nationwide Insurance • Martin Doto, senior vice president, Preferred Mutual Insurance Company • Patrick O’Malley, product manager, Progressive Northern Insurance Company • Thomas Ruane, president, Security Mutual Insurance Company

• Bernard Turi, senior vice president, Utica Mutual Insurance Company • Jeffrey Rice, president and chief executive officer, Wayne Cooperative Insurance Company NYIA congratulates these officers and directors. With their guidance, the association is set to make a great impact in the New York insurance marketplace in 2014 and aim to improve the business environment in the state for the property and casualty insurance industry. [IA]

Utica Mutual’s Bernard Turi to Chair NYIA continued from page 32

NYIA’S 2014 OFFICERS: MARLENE BENTON-SHERWOOD, PRESIDENT, FULMONT MUTUAL INSURANCE COMPANY (TREASURER); BERNARD TURI, SENIOR VICE PRESIDENT, UTICA MUTUAL INSURANCE COMPANY (CHAIR); ELIZABETH HECK, PRESIDENT AND CHIEF OPERATING OFFICER, GREATER NEW YORK MUTUAL INSURANCE COMPANY (SECOND VICE CHAIR); AND STEVEN COFFEY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, BROOME CO-OPERATIVE INSURANCE COMPANY (FIRST VICE CHAIR).

2004, promoted to vice president in 2007, and named senior vice president in 2011. Before entering the insurance industry, Mr Turi worked as an associate in a litigation ﬁrm in upstate New York, handling a variety of matters including school liability defense, personal injury and malpractice cases. He is a cum laude graduate of Niagara University with a Bachelor of Arts in political science. Mr Turi earned a Juris Doctorate from the Syracuse University College of Law. He is a member of the ARIAS Reinsurance Society and is an ARIAS Certiﬁed Arbitrator. He is admitted to practice law before the courts of the State of New York as well as the United States District Court for the Northern District of New York and is a member of the New York State Bar Association. [IA]

Serving New York, New Jersey, Pennsylvania and Connecticut NYIA’S OUTGOING CHAIR, JEFFREY RICE, PRESIDENT AND CEO OF WAYNE COOPERATIVE INSURANCE COMPANY WITH PRESENTER DEENA COFFMAN, CEO, IDT911 CONSULTING; INCOMING CHAIR BERNARD TURI, SENIOR VICE PRESIDENT, UTICA MUTUAL INSURANCE COMPANY; AND PRESENTER TODD PUTORTI, FACIAL RECOGNITION PROJECT MANAGER, NEW YORK STATE DEPARTMENT OF MOTOR VEHICLES. 34 Year End 2013 / INSURANCE ADVOCATE

Since 1889 www.insurance-advocate.com

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AGOSTINO& ASSOCIATES Practice concentrating on federal and state tax controversies Frank Agostino fagostino@agostinolaw.com (201) 488-5400 x 107

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INSURANCE ADVOCATE / Year End 2013 35

INA 12-16-13_INA 12-16-13 1/8/14 11:23 AM Page 36

[ REGULATORY UPDATE ] By Mike Nelson and Susan Stead, Nelson Levin

FIO Long Awaited Report Calls for “Hybrid” Regulatory System Devoted to exploring the progress of the modernization of the insurance industry, FIO Focus provides information and insights about the organizations and issues that are driving change and inﬂuencing the future of the industry. The Federal Insurance Office (FIO) released its long-awaited report, “How to Modernize and Improve the System of Insurance Regulation in the United States” (Report) on December 12, 2013. In its Report, the FIO acknowledges the work of state regulators, both historically and on current regulatory reform efforts, but repeatedly notes the lack of uniformity and perceived limitations inherent in a state based system. The Report addresses high-level issues such as international regulatory coordination and subjects traditionally left to states, including rate regulation. It contains several specific recommendations for state regulators, many of which the FIO intends to monitor. With respect to some of those recommendations, the FIO cautions that federal standards and/or oversight may be warranted should states fail to act. In a couple of instances, the FIO appears to insert itself into a regulatory role. As the FIO examines various areas ripe for regulatory reform, it recognizes arguments generally asserted by those in favor of the current state based system and contrasts them with proponents of modernizing regulation through federal involvement. The Report is premised on the concept that the U.S. system of insurance regulation can be modernized and improved through a combination of reforms to the current regulatory system and actions by the federal government. There is no express recommendation for direct federal regulation.

Areas Identified for Direct Federal Involvement in Regulation In its Report, the FIO makes nine specific recommendations regarding areas for direct federal government involvement in the regulation of insurance. Perhaps most 36 Year End 2013 / INSURANCE ADVOCATE

The Report addresses high-level issues such as international regulatory coordination and subjects traditionally left to states, including rate regulation. controversially, the Report recommends: • Federal standards and oversight for mortgage insurers be developed and implemented. The Report contends that robust national solvency and business practice standards for mortgage insurers will help foster greater confidence in the solvency and performance of housing finance as the U.S. continues to recover from the financial crisis. • The U.S. Department of the Treasury and the United States Trade Representative (USTR) pursue a “covered agreement” for reinsurance collateral requirements based on the National Association of Insurance Commissioners (NAIC) Credit for Reinsurance Model Law and Regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) authorizes the FIO and USTR to negotiate and enter “covered agreements” where necessary to impose uniformity on a prudential insurance matter of national interest. The Report notes it is unlikely that the Model Law and Regulation will be applied uniformly. • The FIO engage in supervisory colleges to monitor financial stability and identify issues or gaps in the regulation of large national and internationally active insurers. The Report suggests that information made available to the FIO through involvement in supervisory colleges would be highly significant to its explicit statutory role to monitor the financial stability of the insurance industry. With respect to specific legislative

issues on the federal level, the Report recommends: • Adoption of the National Association of Registered Agents and Brokers Reform Act of 2013 (NARAB II) and that FIO monitor its implementation. This recommendation addresses the continuing lack of uniformity in producer licensing requirements despite the Gramm-Leach-Bliley Act and the widespread, but incomplete, adoption of the NAIC Producer Licensing Model Act. • The FIO continue to monitor state progress on implementation of the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) of Dodd-Frank, which requires states to simplify the collection of surplus lines taxes and determine whether federal action may be warranted in the near term. The Report notes that the NRRA “could be a model for insurance regulatory reform because it preserves state regulation but provides incentives for states to act in a manner consistent with federal guidelines... However, the states have not fulfilled this vision...” Two recommendations relate to personal lines products. The Report indicates that the FIO will: • Convene with state regulators to establish pilot programs for rate regulation that seek to maximize the number of insurers offering personal lines products. • Work with federal agencies, state regulators and other interested parties to develop personal auto insurance policies for U.S. military personnel enforceable across state lines. The FIO desires to act in this regard as active duty members are often required to transfer across state lines to different bases in the U.S., which may necessitate obtaining new auto policies following each transfer. In other areas for federal involvement in regulation, the Report states that the FIO will:

INA 12-16-13_INA 12-16-13 1/8/14 11:23 AM Page 37

[ REGULATORY UPDATE ] • Study and report on the manner in which personal information is used for insurance pricing and coverage purposes, and monitor state activity to improve oversight of insurance score vendors. The Report notes that “[r]isk classification factors may be an appropriate subject for binding, uniform federal standards, particularly to the extent that insurance scoring methodologies involve factors that implicate rights secured under federal law.” • Consult with Tribal leaders to identify alternatives to improve the accessibility and affordability of insurance on sovereign Native American and Tribal lands.

Areas of Near-Term Reform for States The FIO’s Report makes 18 short-term recommendations for actions by the states to modernize and improve the U.S. system of insurance regulation. These recommendations fall into three categories: (1) capital adequacy and safety/soundness; (2) reform of insurer resolution practices; and (3) marketplace regulation. Capital Adequacy and Safety/ Soundness • For marital solvency oversight decisions of a discretionary nature, states should develop and implement a process that obligates the appropriate state [domestic] regulator to first obtain the consent of regulators from other states in which the subject insurer operates. The Report states this would reduce the variations that result from discretionary regulatory practices and decisions. • To improve consistency of solvency oversight, states should establish an independent, third-party review mechanism for the NAIC Financial Regulation Standards Accreditation Program. The Report notes that state regulators often consult with the NAIC’s legal staff about adoption of model laws, the same staff that determines whether states have complied with requirements to adopt model laws. To improve the reliability and bolster the credibility of the Accreditation Program, the Report suggests an independent review and

audit that would provide a perspective on whether there is uniform adoption and implementation of capital rules and other accreditation standards. • States should develop a uniform and transparent solvency oversight regime for the transfer of risk to reinsurance captives. According to the Report, this should include transparency of the liabilities transferred to reinsurance captives and the nature of the assets that support a reinsurance captive’s financial status. Subject to limitations on the disclosure of legitimately proprietary information, these transactions should be disclosed in the financial statements of the ceding insurer. • State based solvency oversight and capital adequacy regimes should converge toward best practices and uniform standards. The Report recognizes states’ efforts to develop a risk assessment regime, including Own Risk Solvency Assessment (ORSA) requirements. However, the Report questions whether state regulators have sufficient resources and skills to review these complex self-assessments. Any solvency oversight and capital adequacy principles should be consistent with international developments, including best practices, standards and principles that are developed through international consensus. • States should move forward cautiously with the implementation of principles-based reserving (PBR) and condition it upon: (1) the establishment of consistent, binding guidelines to govern regulatory practices that determine whether a domestic insurer complies with accounting and solvency requirements; and (2) attracting and retaining supervisory resources and developing uniform guidelines to monitor supervisory review of PBR. The Report indicates that states should develop standards for overseeing the vendors upon whom regulators will rely for technical expertise and additional resources. • States should develop corporate governance principles that impose character and fitness expectations on continued on page 38

Big “I” Responds to FIO Report WASHINGTON, D.C.—The Independent Insurance Agents & Brokers of America (the Big “I”) commended the U.S. Department of Treasury’s Federal Insurance Office (FIO) for the release of the long-awaited report on “How To Modernize And Improve The System Of Insurance Regulation In The United States.” “The Big ’I’ has been eagerly awaiting the release of FIO’s modernization report for well over a year and we are actively reviewing the details,” says Charles Symington, Big “I” senior vice president of external and government affairs. “While we agree with the report’s conclusion that insurance regulation could be improved and modernized in certain areas, we strongly believe that any federal action should be targeted and limited with day-to-day regulation left in the in the hands of state officials. The state-based system of insurance regulation has served consumers and our economy well for decades. The Big ‘I’ strongly supports the continued preservation of this system and is ardently opposed to any direct infringement by the federal government.” The report also specifically calls on Congress to enact the National Association of Registered Agents and Brokers (NARAB II) Act. It correctly notes that “consumers are detrimentally affected by the absence of uniformity and reciprocity in producer licensing” and that “NARAB II must provide producers an efficient and streamlined multistate licensing mechanism.” The Big “I” strongly supports NARAB II and believes its approach of using narrow and targeted federal legislation to address a long-standing, persistent problem in the market is the correct approach for modernizing insurance regulation. “The Big ‘I’ commends FIO for its call on Congress to pass NARAB II. This bill is a perfect example of how to modernize insurance oversight without encroaching on state regulation,” continues Symington. “We welcome FIO’s support for NARAB II and look forward to working with Congress on this targeted approach.” INSURANCE ADVOCATE / Year End 2013 37

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[ REGULATORY UPDATE ] continued from page 37

directors and officers appropriate to the size and complexity of the insurer. The basis for this recommendation is that although state regulators conduct fitness reviews, there are variations in how they are conducted and there is no NAIC model law on corporate governance standards. • In the absence of direct federal authority over an insurance group holding company, states should continue to develop approaches to group supervision and address the shortcomings of solo entity supervision. The Report recognizes advances states have taken with respect to group supervision, but also points to the state based regulatory structure’s lack of consolidated supervision. • State regulators should build toward effective group supervision by continued attention to supervisory colleges. Noting the states’ “good faith efforts” with respect to the colleges, the Report provides that they are “an important means of addressing the conduct of group supervision in the intermediate term,” but are not a substitute for consolidated supervision. Reform of Insurer Resolution Practices • States should: (1) adopt a uniform approach to address the closing out and netting of qualified contracts with counterparties; and (2) develop requirements for transparent financial reporting regarding the administration of a receivership estate. • States should adopt and implement uniform policyholder recovery rules so that policyholders, irrespective of where they reside, receive the same maximum benefits from guaranty funds. Marketplace Regulation • States should assess whether or in what manner marital status is an appropriate underwriting or rating consideration. This recommendation was prompted by recent developments at the state and federal levels regarding the treatment of same-sex spouses, including the Supreme Court’s deci38 Year End 2013 / INSURANCE ADVOCATE

sion concerning the Defense of Marriage Act. • State based insurance product approval processes should be improved by securing the participation of every state in the Interstate Insurance Product Regulation Commission (IIPRC) and by expanding the products subject to approval by the IIPRC. State regulators should pursue the development of nationally standardized forms and terms, or an interstate compact, to further streamline and improve the regulation of commercial lines. The Report recommends that states with higher consumer protection standards than the IIPRC be permitted to keep them, but member states prohibit insurers from opting into less restrictive standards by filing products directly with states. • In order to fairly protect consumers in all parts of the U.S., every state should adopt and enforce the NAIC Suitability in Annuities Transactions Model Regulation. The Report reasons that the suitability of an annuity purchase should not depend upon the state in which the consumer resides. • States should reform market conduct examination and oversight practices and: (1) require state regulators to perform market conduct examinations consistent with the NAIC Market Regulation Handbook; (2) seek information from other regulators before issuing a request to an insurer; (3) develop standards and protocols for contract market conduct examiners; and (4) develop a list of approved contract examiners based on objective qualification standards. These recommendations arise from the industry’s criticism of state regulators for failing to adequately coordinate market conduct examinations, resulting in duplicative examinations of an insurer on a similar issue. The Report notes that coordination is “essential to modernization.” • States should monitor the impact of different rate regulation regimes (e.g., prior approval, use and file, file and use, open market) on various markets in order to identify rate-related regulatory practices that best foster competitive markets for personal lines

insurance consumers. The Report advocates for this plan of action because of empirical studies suggesting rate regulation, particularly in auto and homeowners insurance, may adversely impact market supply resulting in higher prices and an increase in the market share of the residual market. • States should develop standards for the appropriate use of data for the pricing of personal lines insurance. This recommendation corresponds with the FIO’s commitment to study and report on the manner in which personal information is used for pricing and coverage purposes. • States should extend regulatory oversight to vendors that provide insurance score products to insurers. The Report indicates it will monitor this activity and move for federal involvement if there is no reasonable progress. • States should identify, adopt and implement best practices to mitigate losses from natural catastrophes. The Report acknowledges that it may take time for best practices to be developed as states are engaged in evaluating a variety of new approaches. The FIO will provide more information on natural catastrophes in a report required by the Biggert-Waters Flood Insurance Reform Act of 2012. Visit www.nldhlaw.com to access previous issues of FIO Focus. To receive future editions of the newsletter, contact us at nldh publications@nldhlaw.com.[IA] Mike Nelson, chairman of law firm Nelson Levine, represents insurers and reinsurers in regulatory matters as well as in complex litigation in multiple jurisdictions throughout the country. He resides in the Battery Park, NY office and can be reached at mnelson@nldhlaw. com or 212-233-6251. Susan Stead, partner at Nelson Levine, counsels insurers on developing compliant business practices, holding company registration and transactions, product innovation, proposed legislative and regulatory changes, obtaining regulatory approvals, implementing electronic transactions and responding to regulators. She resides in the Columbus, Ohio office and can be reached at sstead@nldhlaw.com or 614-456-1628.

INA 12-16-13_INA 12-16-13 1/8/14 11:23 AM Page 39

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[ ON M Y RADA R ]

By Barry Zalma

Sit On Your Rights – Lose Arbitration Award Affirmed

laintiff, Excelsior Insurance Company (“Excelsior”), appealed from a trial court order confirming an arbitration award issued in favor of

Beacon provided liability coverage to Hovson’s from March 1999 through March 2001, while Excelsior provided similar coverage from March 2001 through March

The trial judge noted it was undisputed that Excelsior, inexplicably, never responded to the demand for arbitration with an answer or a contention sheet and that under AFI, the failure to do so operates as a waiver of defenses, including any jurisdictional defense. Barry Zalma

defendant, One Beacon Insurance Company (“Beacon”). Both Excelsior and Beacon are members of Arbitration Forum, Inc. (“AFI”), and signatories to its arbitration process. Special arbitration under AFI resolves disputes between multiple insurers to the extent, if any, of apportioning liability between the multiple insurers, each of whom has acknowledged a coverage obligation. Where, however, an insurer has denied coverage, AFI lacks jurisdiction to entertain the matter, and the denial of coverage is an affirmative defense under AFI provisions. In Excelsior Insurance Co. v. One Beacon Insurance Co., A-1439-12T1 (N.J.Super.App.Div. 09/03/2013) the New Jersey appellate court resolved the dispute based upon the wording of the arbitration agreement. Excelsior and Beacon provided coverage to Hovson’s, Inc., a developer who built homes in a development known as Holiday City in Monroe Township, New Jersey. The homes were built between 1996 and 2002.

2005. Homeowners sustained property damage resulting from water infiltration and sued Hovson’s. Excelsior denied coverage on the basis that New Jersey law applied to any interpretation of the claims and that under New Jersey law, coverage is determined by a “manifestation trigger, ” meaning that the water filtration did not manifest during the period of coverage by Excelsior. Beacon, however, agreed to defend Hovson’s under a reservation of rights and, once judgment was entered against Hovson’s, instituted a special arbitration against Excelsior. After Excelsior failed to answer the arbitration pleading and after the arbitrator denied Excelsior’s last-minute adjournment request, the matter proceeded to arbitration where an award was entered in favor of Beacon. Excelsior filed a verified complaint and order to show cause seeking to vacate the arbitration award. The trial judge noted it was undisputed that Excelsior, inexplicably, never responded to the demand for arbi-

tration with an answer or a contention sheet and that under AFI, the failure to do so operates as a waiver of defenses, including any jurisdictional defense. The judge found that Excelsior had “every opportunity to proceed and participate in the arbitration proceeding, but for reasons not articulated, failed to do so. [Excelsior] did not attempt to assert an affirmative defense of jurisdiction until a day before the arbitration hearing and several days after the materials were due.” Based upon Excelsior’s conduct, the trial court: “[T]he Arbitration Panel in this matter clearly acted within the scope of the powers afforded them in the Agreement between the parties. The Arbitrator found that [Excelsior] did not provide a sufficient cause for adjourning the arbitration hearing . . . . The Court finds that the Arbitrators acted within their scope of authority in denying [Excelsior’s] lastminute request for an adjournment. Affirmative defenses not raised in the contention sheet are waived.[] Adjournment requests may be granted provided the request is made a least three (3) days before the hearing date and the party requesting the adjournment has filed its “contention sheet” in a timely manner.[]”

Trial Court Decision The trial judge additionally found that Excelsior’s denial of coverage was based upon its conclusion that the damage sustained by the homeowners manifested itself two years before the inception date of its coverage and, as such, under New Jersey law, its duty to provide coverage had not been triggered. The judge concluded continued on page 42

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[ ON MY RADA R ] continued from page 40

that Excelsior’s denial of coverage for this reason “does not constitute ‘denial of coverage’ as defined in the Arbitration Agreement because it admitted coverage was in force but not for the claim. As a result AFI had jurisdiction to hear the dispute. Recognizing the narrow grounds upon which an arbitration award may be vacated, the court concluded Excelsior failed to meet any of those grounds. Beacon filed a motion to confirm the arbitration award. The trial court granted the motion. Excelsior’s counsel agreed that Excelsior’s primary argument against confirmation of the arbitration award was AFI’s lack of jurisdiction. Having previously rejected this argument, the judge granted the motion.

ANALYSIS The circumstances under which a court may vacate an arbitration award are limited. The scope of an arbitrator’s authority depends on the terms of the contract between the parties. Thus, an arbitrator may not disregard the terms of the parties’ agreement, nor may he rewrite the contract for the parties. Excelsior and Beacon, as signatories under AFI, were both bound by its terms and provisions set forth in the AFI Special Arbitration Forum Reference Guide (“Guide”). A company accepts and binds itself to all of the Articles by signing the Special Arbitration Agreement. In signing the Agreement, the company also agrees to comply with the Special Arbitration Rules and Regulations. Thus, the parties were bound by these Articles within the Guide as well as the Rules and Regulations. At no point does Excelsior explain the reasons for the delay or why it did not file in a timely manner in accordance with Arbitration Forum’s requirement. As a signatory to the Special Arbitration Agreement and Arbitration Forum’s, Inc., Excelsior is required to follow their rules and procedures. The Guide makes clear that an assertion of a “denial of coverage” should be based upon “the fact that the company’s policy does not cover the individual or entity seeking coverage for the claim or suit or that there was not a policy in effect at the time of the incident at issue.” The denial of cov42 Year End 2013 / INSURANCE ADVOCATE

An arbitration agreement binds the parties to the agreement just like the terms of an insurance contract bind the parties to the policy. When one party demands arbitration it bears the same weight as a suit in a court. Failure to respond to the demand, as failure to respond to a suit, allows the court or the arbitrators to enter an award as if the defendant had admitted everything in the charge against it.

erage here addressed neither of these circumstances. Rather, the denial addressed Excelsior’s determination that there was no coverage because of its interpretation of New Jersey law determining when the duty to provide coverage was triggered.

izing 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/ Getting-the-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.

ZALMA OPINION An arbitration agreement binds the parties to the agreement just like the terms of an insurance contract bind the parties to the policy. When one party demands arbitration it bears the same weight as a suit in a court. Failure to respond to the demand, as failure to respond to a suit, allows the court or the arbitrators to enter an award as if the defendant had admitted everything in the charge against it. Excelsior agreed to the terms of the Arbitration Agreement. It also admitted that it had coverage in effect, although it did not believe that it owed the insured a defense or indemnity. One Beacon disagreed and submitted the dispute to arbitration. Excelsior refused to participate in the arbitration and as a result defaulted. [IA] 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 special-

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Business Obligation Uncovers Opportunity to Protect Personal Interests

teven Tedesco, age 28, worked hard to secure a strong financial foundation for his family. Becoming a small business owner was his next step toward that goal. When Steven and his business partner began their blacktop paving service based in Corinth, NY, they needed financing from a bank to form their company. The bank required both partners to purchase life insurance to protect the institution’s interests in providing the loan. As Steven consulted with a financial advisor to fulfill his obligation, their conversation quickly turned to Steven’s personal interests – namely his family of five children with his wife Natira. Good health and Steven’s young age enabled him to purchase an affordable $1 million, 20-year personal term life insurance policy in addition to the insurance policy for the bank requirement.

Good health and Steven’s young age enabled him to purchase an affordable $1 million, 20-year personal term life insurance policy in addition to the insurance policy for the bank requirement.

Only a few months after securing Steven’s business and personal interests, he felt sick. His seemingly flu-like symptoms, however, proved to be far more serious … a leukemia diagnosis. After two years of fighting this disease, Steven lost his battle. At the time, his family with Natira had grown to six children – the youngest just four months old. The policy was paid as promised, and allowed a stay at home mother to continue to stay home and care for their children. “If it wasn’t for the insurance money, I’d be working three jobs,” Natira says. With the benefits of the insurance policy, she set up a retirement savings account for her, educational accounts for their children and purchased a home, rather than a rental property, for them to stay. Natira also secured a life insurance policy of her own.

A Childhood Life Lesson

he former quarterback and current television and radio broadcaster, Boomer Esiason, learned the value of securing life insurance at the age of seven. At that young age, Boomer and his two teenage sisters lost their mother to cancer. There was no life insurance policy. His father worked full time three hours away – a daily roundtrip commute from Long Island to Manhattan – as family and friends stepped in to help. The family lived paycheck to paycheck, with little money left at the end of each month. “It wasn’t the easiest life – my dad sacrificed a lot,” says Boomer of those times.

That life insurance coverage has grown as his career transitioned from the football field to television and radio studios. Despite their financial struggle, his father never missed Boomer’s football

games and was at most practices to support his son. Boomer’s hard work and determination, along with his father’s support, produced success on the football field. His talent earned Boomer a full scholarship at the University of Maryland and then a successful career with the Cincinnati Bengals. Getting life insurance, Boomer says, was a priority when he got drafted to professional football. Off the field, Boomer and his wife Cheryl have two children. That life insurance coverage has grown as his career transitioned from the football field to television and radio studios.

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[ COURTSI DE ]

By Lawrence Rogak

Cellar Stairs Accessed by Sidewalk Trap Door are Not Covered by Building Code Bautista v 85th Columbus Corp.

efendants move (1) for summary judgment pursuant to CPLR 3212 dismissing the first cause of action of the complaint against all defendants, and (2) to dismiss the second cause of action for failure to state a cause of action pursuant to CPLR 3211. Plaintiff submits written opposition. The defendants’ motion is granted in its entirety, and the complaint is dismissed. The instant motion presents an issue not squarely addressed in any reported case, i.e., whether a sidewalk basement stairway, accessed through trap doors set into the sidewalk, is an “interior stair” within the meaning of the 1968 Building Code of City of New York (Administrative Code of City of NY) § 27-375. Because the court finds in the negative, it grants the motion dismissing the complaint against the out-of-possession owners in its entirety pursuant to CPLR 3212 and 3211. Plaintiff commenced this action for personal injuries against the defendants, the owners and managers of premises located at 524 Columbus Avenue, in Manhattan. The plaintiff was allegedly injured on October 23, 2008, when, during the course of his employment, he slipped and fell on a stairway leading from sidewalk doors into the cellar of the premises. A conveyor belt had been installed on top of the stairway by the tenant, non-party KND Corp., which leased the ground level and basement area and operated a delicatessen. The conveyor belt was used to transport deliveries from the sidewalk-level to the basement of a KND Corp.’s store. Defendant 85th Columbus Corporation (Columbus) owned the premises; defendant Mary Schreiber, sued individually, was the president of defendant Columbus; defendant RCR Management LLC (RCR) was the managing agent; and defendant Ari Paul was an employee of RCR. 48 Year End 2013 / INSURANCE ADVOCATE

The instant motion presents an issue not squarely addressed in any reported case, i.e., whether a sidewalk basement stairway, accessed through trap doors set into the sidewalk, is an “interior stair” within the meaning of the 1968 Building Code of City of New York…

The basement area of the premises leased to KND Corp. was accessible by means of an interior stairway, as well as the stairway from the sidewalk area into the basement level on which the accident occurred. The stairway from the sidewalk, as is common in the City of New York, was enclosed within two trap doors set into the sidewalk. Past these trap doors, a metal stairway lead into the basement. On top of the metal stairs leading from the sidewalk doors into the basement, approximately thirty years ago, KND Corp. installed a mechanized conveyor belt, which obstructed most of the stairway, leaving only approximately 14 inches of step accessible. The plaintiff acknowledged at his deposition that he had, in the past, gained access to the basement by using the interior stairway located inside the Deli. The stairway leading to the sidewalk was used

for deliveries, not access to the basement. Generally, when deliveries were being received at the deli, one employee would stay at the street level to load merchandise onto the conveyor, and the other would remain at the base of the conveyor, in the basement, to unload the merchandise. According to the plaintiff, in order to turn on the conveyor belt, he was required to walk half way up the obstructed stairway to access the switch. In an affidavit annexed to the moving papers, Howard Shim, the principal of KND Corp., averred that, to the contrary, the switch was located on the wall to the right of the machine, and could be readily accessed by anyone standing in the basement to the right of the conveyor belt. Plaintiff ’s conduct in turning on the belt by climbing the obstructed stairway “was not the proper procedure to be used to turn on the conveyor belt, nor was it the procedure which I instructed my employees to use.” In any event, the plaintiff testified that on the day of the accident, he activated the machine by ascending half-way up the staircase. He stated that, when he turned around on the narrow step to begin his descent, due to the narrowness of the stairway, the absence of a handrail, and the alleged slippery condition of the stair tread, he fell forward, and his hand became entangled in the machine. While the lease permitted Columbus to access the premises and make repairs at its option, the responsibility for making all repairs remained on the tenant, non-party KND Corp. Moreover, the lease provided that the owner was not responsible for alterations and improvements made by the tenant. Defendants’ expert, Denise P. Bekeart, a licensed architect, stated in an affidavit annexed to the moving papers, that the

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[ COURTS IDE ] building was a commercial establishment, and thus not subject to the Multiple Dwelling Law. In addition, she stated that the building was subject to the 1968 Building Code, which was in effect from December 1968 to July 1, 2008. She examined the steps, finding them to be in good condition, with diamond plate treads, which are “not known to be slippery when not contaminated by debris.” The steps were of the kind commonly used for unloading and loading merchandise, and were not for egress, as the presence of pedestrians on the sidewalk would block emergency egress. As such, the stairs were not, she maintained, required for egress and not subject to the requirements of an exit or egress stair. According to the expert, the steps were not in violation of the 1968 Building Code of City of New York (Administrative Code of City of NY) § 27375, as that section applies only to “interior stairs” or “exit stairs,” and not the subject staircase. Lastly, she stated that the switch to activate the conveyor belt was readily accessible by a person standing in the basement. In opposition, plaintiff ’s expert, a licensed professional engineer, stated, based on an inspection performed at an unspecified date, that the stairs were maintained in a slippery and unsafe condition, in that the treads were “poorly maintained...shiny and worn,” and that, due to the presence of the conveyor belt, only 13” of usable step was available for passage. From a reading of his affidavit, it is clear he agreed with the defendants that this case is governed by the 1968 Administrative Code. He opined that the stairway was in violation of the following sections of the 1968 Administrative Code: §§ 27-127 and 27-128 (general duty to repair); § 27-375 (slip resistant tread). He also contended that the defendants violated New York State Building § §1009.1 (step width); 1009.2 (headroom); and 1009.11 (handrails). Although not dispositive of the main issue in this case, plaintiff ’s expert conceded in his report that plaintiff could have accessed the switch for the conveyor belt without climbing the steps. Defendants argue, generally, that the stairway itself was not defective, and that while the clearance for passage was blocked by the installation of the conveyor belt, they themselves cannot be liable for

the tenant’s installations. Defendants contend that they did not install or maintain the conveyor belt, nor were they responsible for maintaining the tenant’s alterations; that they had no notice of any defective condition; that the alleged slippery condition of the steps was not a structural defect; that the sole proximate cause of the accident was plaintiff ’s improper use of the stairway; that there is no evidence warranting individual liability for the defen-

dants individually sued; that the doctrine of res ipsa loquitur does not apply; and that the second cause of action does not state a cognizable claim.[FN1] Plaintiff contends that issues of fact exist, including whether defendants had actual or constructive notice of the condition of the steps and the conveyor belt; whether the presence of the conveyor belt continued on page 50

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violated the Building Code; whether the steps were in violation of custom and practice for stair construction and maintenance; and whether the alleged defects were the proximate cause of plaintiff ’s injury.

Out-of-Possession Landowner An out of possession landlord may be found liable for failure to repair a known dangerous condition on leased premises if the landlord both assumes a duty to make repairs and reserves the right to enter in order to inspect or to make such repairs. (Worth Distributors, Inc. v. Latham, 59 NY2d 231, 451 N.E.2d 193, 464 N.Y.S.2d 435 [1983]; Restatement [Second] of Torts § 357). In the absence of a duty to make repairs, the reservation of a right to enter and make repairs is insufficient to impose liability, unless a duty to repair is imposed by statute. (Alnashmi v. Certiﬁed Analytical Group, Inc., 89 AD3d 10, 929 N.Y.S2d 620 [2d Dept. 2011].) In addition, as established in the seminal case of Guzman v. Haven Plaza Hous. Dev. Fund Co. (69 NY2d 559, 566, 516 N.Y.S.2d 451, 509 N.E.2d 51 [1987]), liability may be imposed on an out-of-possession landlord when the landlord reserves a right under the terms of the lease to enter the premises for the purpose of inspection and maintenance or repair, and, in the City of New York, a specific violation of the building code exists. (Babich v R.G.T. Rest. Corp., 75 AD3d 439, 440, 906 N.Y.S.2d 528 [1st Dept. 2010] [liability may be imposed only when there exists “a significant structural or design defect that is contrary to a specific statutory safety provision² ]; Velazquez v. Tyler Graphics, 214 AD2d 489, 625 N.Y.S.2d 537; Rodriguez v. E & P Assoc., 20 Misc 3d 1129[A], 872 N.Y.S.2d 693, 2008 NY Slip Op 51664[U] [Sup. Ct. Bronx County 2008] [defect must violate a specific statute, and the violation itself constitutes constructive notice]; Nameny v. The East New York Saving Bank, 267 AD2d 108, 699 N.Y.S.2d 412 [1st Dept.1999] [out-of-possession owner may be held liable for negligence with respect to the condition of property even after the 50 Year End 2013 / INSURANCE ADVOCATE

In order for liability to attach, the “specific” violation of the building code must impose more than merely a general duty of repair. In this regard, a violation of former 1968 Building Code of City of New York…§§ 27-127 and 27128… standing alone, has been held to be insufficient to impose liability on an out-ofpossession owner.

transfer of possession and control to the tenant where the landlord has a contractual right to re-enter, inspect and make needed repairs at the tenant’s expense and liability is based on a significant structural or design defect that is contrary to a specific statutory safety provision]). In order for liability to attach, the “specific” violation of the building code must impose more than merely a general duty of repair. In this regard, a violation of former 1968 Building Code of City of New York (Administrative Code of City of NY) §§ 27-127 and 27-128 (both sections were repealed, effective July 1, 2008, and replaced by § 28301.1), standing alone, has been held to be insufficient to impose liability on an out-of-possession owner. (Hinton v. City of New York, 73A.D.3d 407, 408, 901 N.Y.S.2d 21 [1st Dept. 2010]; Mansﬁeld v. Dolcemascolo, 34 AD3d 763, 764, 826 N.Y.S.2d 115 [2d Dept. 2006] [sections imposing general obligation do not “offer an independent basis of liability”); Boateng v. Four Plus Corp., 22 AD3d 323, 324, 802 N.Y.S.2d 418 [1st Dept. 2005][plaintiffs

had failed to identify a structural or design defect that violated a specific statutory provision]); Ram v. 64th Street-Third Ave. Assocs., LLC, 61 AD3d 596, 597, 878 N.Y.S.2d 27 [1st Dept. 2009] [“Administrative Code §§ 27-127 and 27-128 are general safety provisions that cannot support a claim of liability against an out-of-possession landlord based on a significant structural defect.”]; Plung v Cohen, 250 AD2d 430, 431, 673 N.Y.S.2d 114 [1st Dept 1998] [former Administrative Code §§ 27-127 and 27-128 did not impose liability on a landlord unless there is also a breach of a specific safety provision]; O’Connell v. L. B. Realty Co., 50 AD3d 752, 856 N.Y.S.2d 165 [2d Dept. 2008] [“statutory provisions the plaintiff claims were violated, Administrative Code of City of NY §§ 27-127 and 27-128, are general safety provisions which do not constitute a sufficiently specific predicate for liability”]; Miki v 335 Madison Ave., LLC, 93 AD3d 407, 940 N.Y.S.2d 38 [1st Dept. 2012] [rejecting claim based on 1968 Building Code of City of New York (Administrative Code of City of NY) § 28-301.1]; see also, Ortiz v. RVC Realty Co., 253 AD2d 802, 677 N.Y.S.2d 598 [2d Dept. 1998] [violation of Village Code of Hempstead imposing only a general duty to maintain was not sufficient to impose liability on owner.)

Discussion The Court agrees with the defendants that an out-of-possession owner is not generally liable for accidents which occur solely due to the manner in which the premises are arranged, absent any structural defect. Thus, where an employee of a tenant reached for an object placed on a shelf adjacent to a stairway opening, and fell down the steps, the owner was not liable — the stairs were not defective, and the owner was not responsible for the placement of storage in proximity to the steps. (Wrubel v. Rose Boutique II, Inc., 13 AD3d 264, 787 N.Y.S.2d 263 [1st Dept. 2004].) Similarly, where a hatch was installed in the floor for basement access, pursuant to continued on page 52

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[ COURTSIDE ] continued from page 50

plans approved by the Building Department, and the tenant later installed a counter next to the hatch, thus requiring employees to squeeze past the hatch, the owner was not liable when the hatch was left open, and an employee fell into the opening while attempting to navigate the narrow passage. A properly functioning trapdoor that was left open by someone under the tenant’s control was not a structural defect. (Baez v. Barnard Coll., 71 AD3d 585, 898 N.Y.S.2d 29 [1st Dept. 2010].) On the other hand, if the stairway in question was a required exit, a permanent obstruction of the exit would constitute a statutory violation. It could hardly comport with the law that a required means of egress could be blocked off without violating the Building Code. (See Administrative Code § 27-361 [“All exits and access facilities shall be located so that they are clearly visible, or their locations clearly indicated, and they shall be kept readily accessible and unobstructed at all times.”]). Accordingly, permitting the tenant to install a conveyor belt, thus obstructing passage, and the lack of handrails, if required under the code, would constitute statutory violations for which the out-of-possession owner could be liable. Moreover, even though the parties discuss at length whether or not the owner or its agents had actual knowledge of the conditions, if statutory violations existed, the defendants as out-of-possession landlords with a right of reentry, would be charged with constructive notice of any significant structural or design defect in violation of a specific statutory safety provision. (Brignoni v. 601 W. 162 Assoc., L.P., 93 AD3d 417, 939 N.Y.S.2d 418 [1st Dept. 2012]; Heim v Trustees of Columbia Univ. in the City of NY, 81 AD3d 507, 917 N.Y.S.2d 159 [2011].) In the court’s opinion, then, the determinative issue is whether the stairway in question was a required exit under the 1968 Administrative Code.[FN3] Former Administrative Code § 27-375 states that “interior stairs” shall comply with certain requirements, including the requirement that interior stairs must have a handrail on one side. (1968 Building 52 Year End 2013 / INSURANCE ADVOCATE

On the other hand, if the stairway in question was a required exit, a permanent obstruction of the exit would constitute a statutory violation.

Code of City of New York (Administrative Code of City of NY) § 27375[f]).[FN4] “Interior stair” is defined in former Administrative Code § 27-232 as “[a] stair within a building, that serves as a required exit.” (Emphasis added.) An “access stair” is defined in the same section as “a stair between two floors in a building that does not serve as a required exit,” and an “exterior stair” is a “stair open to the outdoor air that does serve as a required exit.” “Exit” is defined in former Administrative Code § 27-232 as “[a] means of egress from the interior of a building to an open exterior space which is provided by the use of the following, either singly or in combination: exterior door openings, vertical exits, exit passageways, horizontal exits, interior stairs, exterior stairs, fire towers or fire escapes; but not including access stairs, aisles, corridor doors or corridors.” (Emphasis added.) “Required” is defined as “required by the provisions of this code.² Id. [*8] Although the experts herein dispute the nature and requirements in the Code which apply to the subject stairway, the issues as to the applicability and meaning of the building code are for the court to decide as a matter of law. (Gaston v. New York City Hous. Auth., 258 AD2d 220, 224, 695 N.Y.S.2d 83, 86 [“since there was no factual dispute regarding the configuration and location of the stairs, whether the Code required the subject staircase to have a center handrail presented a question of law, not fact”]; DeRosa v City of New York, 30 AD3d 323, 326, 817 N.Y.S.2d 282 [1st

Dept 2006] [issue of whether a stairway is an interior stairs is for the court to resolve]; Westra v Ten’s Cabaret, Inc., 2009 NY Misc. LEXIS 6020, *3; 2009 NY Slip Op 31521(U), **3 (“Because the configuration and location of the steps is not at issue, the applicability of the requirements of the Administrative Code for “interior stairs² is a question of law to be resolved by the Court.”]) In a recent case, the First Department considered a similar issue to the one presented here, albeit not decisive of the present issue. In Lopez v. Chan (102 AD3d 625, 959 N.Y.S.2d 67 [1st Dept. 2013]), plaintiff slipped and fell down a stairway while lowering a hand truck to deliver cases of beer to a storage cellar below a grocery store. In Chan, the stairway from the sidewalk was the only means of access to the cellar. According to plaintiff, the stairway violated former Administrative Code § 27-375 (e), (f) because it lacked handrails, and because the riser heights and tread widths of the flight of stairs were not uniform. The defendant in Chan - the out-of-possession owner - submitted an affidavit from a professional engineer who opined that the allegedly violated provisions only applied to “interior stairs” as defined in the former Building Code, and that the cellar stairway did not fit that definition. Instead, the expert stated, the stairway is an “access stairway” under the Building Code. The First Department reasoned that because the cellar was not accessible from the inside of the store, the stairway was not within the definition of “interior stairs” under the 1968 building code — the storage area was not a “building,” and thus the stairway did not serve as an exit from a “building.” Since the 1968 Building Code provisions requiring handrails and uniform riser heights and tread widths only applied to “interior stairs” under former Administrative Code § 27-375, the plaintiff ’s claim in Chan against the out-of-possession landlord was dismissed. Chan is factually distinguishable from the present case. As noted, in the case at hand, the basement area was accessible to continued on page 54

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other areas of the building by means of a second stairway leading to the first floor of the store. The issue thus remains whether the present stairway is an “interior” stairway, subject to the requirements that it have handrails, and meet other safety requirements, as required under the former Building Code. While certainly the stairway here was located within the basement, and connected the basement area with outside, it can hardly be conceived that a stairway leading to trap doors set in the sidewalk would constitute a “required exit.” (See, Rivera v. Nelson Realty, LLC, 7 NY3d 530, 825 N.Y.S.2d 422, 858 N.E.2d 1127 [2006] [radiator was not “piping,” as that term is used in the 1968 Building Code].) While admittedly an access stair is defined as “a stair between two ﬂoors in a building that does not serve as a required exit” (emphasis added), and this stairway did not join two floors in a building, nevertheless, it is

54 Year End 2013 / INSURANCE ADVOCATE

Cellar stairs into vaults have commonly been used, and were designed for, deliveries of merchandise into cellars and basements, and not the passage of persons seeking an exit to the outside of a building.

clear that this type of stairway, found throughout the City of New York, is more akin to an “access” stair than an “interior stair.” Cellar stairs into vaults have commonly been used, and were designed for, deliveries of merchandise into cellars and basements, and not the passage of persons

seeking an exit to the outside of a building. Such doors are often locked to protect against vandalism, and to avoid pedestrians falling into open vaults. (See, Cuevas v 73rd & Cent. Park W. Corp., 26 AD2d 239, 272 N.Y.S.2d 41 [1966], affd 21 NY2d 745, 234 N.E.2d 843, 287 N.Y.S.2d 889 [1968], [holding that there was no requirement that cellar doors be locked, although noting that this is often the case.]) It would not be logical to think that stairways leading from basements to locked doors in the sidewalk would serve as required exists from buildings. Nor did the plaintiff establish that the basement or cellar, used for commercial storage, required an exit to the outside for safety reasons. The requirements of the code, as to enclosures, handrails, and other particulars do not logically apply to the type of stairs at issue, which are used only for access for storage. This Court holds that the stairway at issue is not an “interior stair” within the meaning of the 1968 Administrative Code.

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[ COURTS I D E ] Because the stairway at issue was not a required exit, the stair could be converted — as it was essentially — from a staircase to a conveyor belt. In other words, the rearrangement of the premises did not create a structural defect. As set forth in the cases cited above, 1968 Building Code of City of New York (Administrative Code of City of NY) §§ 27-127 and 27-128 are general safety provisions which do not impose liability on the defendants. Moreover, it has not been shown that the placement of the switch to activate the conveyor belt required the use of the stair, and even if it did, that it created a structural defect in the stairway for which the out-of-possession owner would be liable. (Baez, 71 AD3d at 586, 898 N.Y.S.2d at 30.) With respect to the alleged “slippery” condition, the plaintiff did not identify whether the alleged slippery condition was due to a transient condition, such as debris for which the owner would not be responsible. The plaintiff’s expert examined the steps, but did not state when he made his inspection, nor give any particulars as any condition on the specific step from which plaintiff allegedly fell. The plaintiff ’s expert has not shown the applicability of Building Code § §1009.1 (step width), 1009.2 (headroom), and 1009.11 (handrails). In addition,”noncompliance with regulations that govern tread width and depth and lighting does not constitute a significant structural or design defect.” (Kittay v. Moskowitz, 95 AD3d 451, 944 N.Y.S.2d 497 [1st Dept. 2012].) Plaintiff has not opposed that part of the motion which was to dismiss the second cause of action under CPLR 3211. It appears that this cause of action, sounding in negligent supervision, was included in the complaint in error. Nor has plaintiff rebutted defendant’s prima facie showing that the individual defendants are not liable in their individual capacities. Those arguments not specifically addressed herein are found to be without merit, or unnecessary for disposition of this motion. The complaint herein sets forth only two causes of action. Accordingly, the defendants’ motion for summary judgment dismissing the first cause of action pursuant to CPLR 3212 and the second cause of action pursuant to CPLR 3211 is granted, and the complaint is dismissed in its entirety. It is hereby

ORDERED that the complaint is dismissed as to all defendants in its entirety. Footnotes Footnote 1: The second cause of action appears to relate to the use of an automobile, and was ostensibly included in error; plaintiff has not opposed this part of the motion. Footnote 2: There is no requirement that proof be submitted in the form of affidavit, as opposed to other acceptable forms, such as deposition testimony. Muniz v. Bacchus, 282 AD2d 387, 724 N.Y.S.2d 46 (1st Dept. 2001). Footnote 3: The case law indicates that the requirements for staircase construction depend on a careful reading of the code, and that stairways that do not constitute “interior stairs” do not need to meet the stringent requirements of the former 1968 Building Code of City of New York (Administrative Code of City of NY) § 27-375. In numerous cases, stairways connecting two floors have been held not to require handrails as per the code, or meet other criteria, because they were not “interior stairways” serving as “required exists.” (Cusumano v. City of New York, 15 NY3d 319, 322, 937 N.E.2d 74, 910 N.Y.S.2d 410 [2010] [“by all accounts, the stairs from where plaintiff fell did not serve as an “exit” as defined by the Administrative Code ..., but rather as a means of walking from the first floor to the basement.”]; Maksuti v. Best Italian Pizza, 27 AD3d 300, 811 N.Y.S.2d 375 [1st Dept 2006] [[rejecting plaintiff ’s argument that Administrative Code § 27375 applied to all stairs; stair located under a trap door that led from the basement to the first floor of a restaurant did not serve as a required exit, and was not an “interior stair” within the meaning of the code], appeal denied, 7 NY3d 715, 859 N.E.2d 920, 826 N.Y.S.2d 180 [2006]; Mansfield v Dolcemascolo, 34 AD3d 763, 826 N.Y.S.2d 115 [2d Dept 2006] [stairway which ran from an opening in the floor behind the bar to the basement was not an “interior stair” because it did not serve as a required exit]; Schwartz v Hersh, 50 AD3d 1011, 856 N.Y.S.2d 640 [2d Dept. 2008] [staircase did not qualify as an “interior stair” because it did not serve as a required exit from the building]; Walker v. 127 W. 22nd St. Assocs., 281 AD2d 539, 722 N.Y.S.2d 250 [2d Dept. 2001] [stairs providing access between the first floor and the basement levels of the building were not “interior stairs”].) Footnote 4: 1968 Building Code of City of New York (Administrative Code of City of NY) § 27375(f) more fully provides that: “Interior stairs shall comply with the following requirements: ... Guards and handrails. Stairs shall have walls, grilles, or guards at the sides and shall have handrails on both sides, except that stairs less than forty-four inches wide may have a handrail on one side only. Handrails shall provide a finger clearance of one and one-half inches, and shall project not more than three and one-half inches into the required stair width.²

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Michael A. Zarcone to Chair LICONY

t its Annual Meeting in early December the Life Insurance Council of New York, Inc., (“LICONY”), elected Michael A. Zarcone to serve as Chairman of the Board of Directors for 2014. Mr. Zarcone is Chief of Staff, Office of the Chief Executive Officer, and Head of Corporate Affairs for MetLife, Inc. “Mike is a strategic thinker with deep experience on legislative and regulatory matters affecting the life insurance industry,” said Thomas E. Workman, President of LICONY. “I look forward to working with him on the issues and challenges that will face our industry in 2014.” LICONY is the domestic trade association representing the life insurance industry in New York. Its member companies provide the vast majority of life, disability income, long-term care insurance and annuity benefits for New Yorkers. In 2014, LICONY’s membership will include 71 life insurance companies and 21 allied professional firms. Mr. Zarcone was named Senior Vice President in 2004 and served as the head of Government Relations from 2002 until his appointment in July 2013 as Chief of Staff to the CEO, head of the newly formed Corporate Affairs organization, and Chair of the MetLife Foundation. As the head of Corporate Affairs, Mr. Zarcone oversees Global Communications, Global Government Relations and Public Policy, and Corporate Contributions and Community Relations. In this role, he manages MetLife’s engagement with internal and external audiences in the 47 countries where the company does business. Mr. Zarcone joined MetLife in 1991 as a Government Relations Counsel covering New York State matters. He was appointed Assistant Vice President in 1994, Vice President in 1995, and Secretary to the Board in 1998. He returned to the department as the head of state government relations in 1999 and was promoted to head of Government Relations in September 2002. Prior to joining MetLife, Mr. Zarcone served as Associate Counsel to Minority

MICHAEL A. ZARCONE, CHIEF OF STAFF, OFFICE OF THE CEO & HEAD OF CORPORATE AFFAIRS OF METLIFE HAS BEEN ELECTED TO SERVE AS THE CHAIRMAN OF THE BOARD OF DIRECTORS OF THE LIFE INSURANCE COUNCIL OF NEW YORK, INC. (“LICONY”). THE DOMESTIC TRADE ASSOCIATION’S 71 MEMBER COMPANIES PROVIDE THE VAST MAJORITY OF LIFE, DISABILITY INCOME, LONG-TERM CARE INSURANCE AND ANNUITY BENEFITS TO NEW YORKERS. THE MEMBERSHIP ALSO INCLUDES 21 ALLIED PROFESSIONAL FIRMS.

Leader Clarence D. Rappleyea in the New York State Assembly. In this position, he was Counsel to the Assembly Committees on Insurance, Banks and Commerce. Mr. Zarcone holds a Juris Doctor degree from Catholic University of America School of Law. He received a Bachelor’s Degree in English from Siena College, where he is a member of the Associate Board of Trustees. He is a member of the New York State Bar Association, the Pennsylvania Bar and the Bar of the District of Columbia. Mr. Zarcone is active in several insurance industry and business groups: Member of the Board of the Life Insurance Council of New York; Chair of Deputies Executive Committee of American Council of Life Insurers; and Trustee of the Citizens Budget Commission. [IA]

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