Insurance Advocate August 15, 2018

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Inter Insurance Launches Universal Casualty, New York’s First Independent Automobile Dealers Association RRG PAGE 8

Volume 129 Number 13 | August 20, 2018

Premium Financing: The Small Business Savior


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The Small Business Savior

Volume 129 Number 13 | August 20, 2018

12 P remium Financing:

Contents

4 Foreword: Formulae For the Future Steve Acunto, Publisher 6 HR Update: Are Your I-9 Immigration Forms In Order? Alfred T. DeMaria 8 Feature: Inter Insurance Launches Universal Casualty 11 MSO: Student Food Safety Sue C. Quimby 14 Guest Article: The Courage to Trust Medical Care to Patients and Physicians Marilyn M. Singleton, M.D., J.D. 16 Legal Update: NJ Supreme Court Denies Insurance Industry Bid to Allocate Losses to Policyholders Robert D. Chesler 18 On the Level: The Changing Role of Being a Producer Jamie Deapo 20 In the Associations: Property/Casualty Net Income Doubles to $17.1B in Q1 2018

NYSIF Selects Mora-Amaya as 2018-2019 Recipient

22 In the News: Insurance Lenders Launch Websites with Enhanced Interfaces

OnRisk and AFL Insurance Brokers Form Insurtech Partnership

24 On My Radar: List Your Owned Auto on Policy or Be Self-Insured Barry Zalma 26

info@insurance-advocate.com www.insurance-advocate.com

Looking Back: September 7, 1968

28 Courtside: No-Fault DME Rental Rate is Same as General Public, if It has no Medicaid Fee Schedule Lawrence Rogak 30 In the News: SmarterSafer Welcomes Short Term Extension of National Flood Insurance Program INSURANCE ADVOCATE / August 20, 2018 3


[ FOREWORD ]

STEVE ACUNTO

Formulae For the Future uRepublican legislators in Washington have been floating the idea of using Social Security to provide paid family leave for the birth or adoption of a child. The proposal would allow a new parent to essentially borrow from their Social Security retirement to take leave for 12 weeks and 45 percent of their pay. While a federal solution for paid family leave may seem positive, we have our doubts as to the simple math. The Republican concept is for limited paid leave relying on individual social security funds that some have argued adversely affect low-wage workers who have a limited Social Security savings to begin with, due to pay disparity, and are more likely to need these funds for retirement. In New York, California, Connecticut and Washington, D.C. PFL programs use a broad payroll tax to provide a more generous leave. We favor PFL, but believe that the financing model needs work.… Next Insurance, a leading digital insurance company for small businesses, has raised $83 Million in a Series B Round. Led by Redpoint Ventures, this funding will enable Next Insurance to continue its protracted expansion throughout the US as a full service carrier, with new formats for handling claims, offering coverage to many more classes of business, and significantly growing internal operations in both the US and Israel. The Series B Round brings Next Insurance’s total funding to $131 Million in just two years. Other investors that participated in the round include Nationwide, “AS THE INDUSTRY MIGRATES TOWARD “SMART” Mu n i c h R e , A m e r i c a n Express Ventures, Ribbit OPERATING SYSTEMS THAT RELY ON SOPHISTICATED Capital, TLV Partners, SGVC AUTOMATION AND ENHANCED TECHNOLOGIES FOR and Zeev Ventures. Elliot PROJECT DESIGN, MODELING, SAFETY MANAGEMENT Geidt, Managing Director of Redpoint Ventures, will join AND PROJECT DELIVERY.” the board of Next Insurance. Next Insurance is currently a licensed carrier in Delaware, Oklahoma, Arizona, North Carolina, Texas, New Mexico, Maryland and Utah, and is rapidly expanding to all 50 states. As a carrier, Next Insurance is now writing policies independently, with more freedom over underwriting, setting prices, and configuring policies, providing entrepreneurs and small businesses insurance that is simple, affordable, and tailored to their specific needs, they report. Next Insurance “champions technological innovation never before seen by the small business insurance market, and these funds will enable the company to become the preeminent insurer for all small businesses, offering additional lines of insurance, claims paid within 48 hours, on-demand coverage, and more sophisticated uses of AI and machine learning to improve customer experience and streamline the insurance purchasing process.” Sounds like a tall order, but the Millions should help.… Willis Towers Watson has launched a tailored cyberinsurance coverage for construction industry that augurs the kind of menu agents and brokers will need to work from as the Cyber cover extends its reach into the various sectors of business. “As the industry migrates toward “smart” operating systems that rely on sophisticated automation and enhanced technologies for project design, modeling, safety management and project delivery.” The advanced formula coverage plays a key role. Additionally, many construction companies increasingly hold sensitive data and rely on digital connectivity with business partners and subcontractors to exchange information, including employee records and business plans.. The Willis solution includes a blend of first- and third-party coverages with specific enhancements tailored to the industry. Key features include: a. Contingent bodily CONTINUED ON PAGE 30 4 August 20, 2018 / INSURANCE ADVOCATE

S I N C E

1 8 8 9

VOLUME 129 NUMBER 13 AUGUST 20, 2018

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Jamie Deapo Alfred T. DeMaria Kelly Donahue-Piro Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Gina Marie Balog-Sartario 914-966-3180, x113 g@cinn.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x111 circulation@cinn.com PUBLISHED BY CINN Global Initiatives P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 613-1595 www.cinn.com | info@cinn.com President and CEO Steve Acunto

CINN MEDIA, INC.

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in January, July, August, and December by CINN ESR, Inc., P.O. Box 9001, Mt. Vernon, NY 10552. Periodical postage pending at Greenwich, CT and additional mailing offices. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $135.00. TO ORDER Call 914-966-3180, fax 914-613-1595, email: circulation@cinn. com or write: Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2018. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Office.

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[ HR UPDATE ]

Are Your I-9 Immigration Forms In Order? uThe insurance industry is in no way immune from the reach of scrutiny by the government with respect to its immigration practices. Homeland Security has recently issued a press release stating: “Employers need to understand that the integrity of their employment records is just as important to the federal government as the integrity of their tax files and banking records. All industries, regardless of size, location and type are expected to comply with the law.” Since all U.S. employers are subject to such an audit of workers’ employment eligibility, now more than ever, it is imperative to ensure I9 compliance at your company. Similarly, the current administration has instructed the Secretary of Labor to investigate the employment of foreign nationals admitted under nonimmigrants visas. As the Department of Labor (“DOL”) ramps up its audits, it is also crucial that employers sponsoring H1B workers for employment have their Public Access Files (“PAF”) in order. Employers need to be prepared to respond to the increased focus on worksite audits and investigations since failure to follow the law can result in both criminal and civil penalties. ICE penalties for I9 investigations have been substantially increased even for simple mistakes, like paperwork violations. These can cost companies between $216.00 and $2,126.00 per each improper Form I9. Monetary penalties for knowingly hiring and continuing to employ violations range from $375.00 to $16,000.00 per violation. Employers should prepare for increased audits by conducting internal I9 selfaudits to ensure compliance and making sure employees responsible for I9 and EVerify compliance are well-trained and knowledgeable about the company’s protocol in the event of an audit. Be sure to use the latest form dated January 22, 2017, as there are several prior versions available which will be noncompliant and will result in assessed deficiencies. 6 August 20, 2018 / INSURANCE ADVOCATE

Under federal law, employers are required to verify the identity and employment eligibility of all individuals they hire, even “obvious” U.S. born persons, and to document that information using the latest Employment Eligibility Verification Form I9. THE I9 FORMS

Under federal law, employers are required to verify the identity and employment eligibility of all individuals they hire, even “obvious” U.S. born persons, and to document that information using the latest Employment Eligibility Verification Form I9. ICE uses the inspection program as part of a comprehensive strategy to address and deter illegal employment. The new Form I9 Employment Eligibility Verification is in two versions a “smart” PDF version which can be printed and filled out manually. The PDF I9 has not become solely electronic or mandatory, so once the form is completed on the computer, it still must be printed out and manually signed and dated. Both the smart I9 PDF and the regular paper version I9 PDF can be found on USCIS’ website: https://www.uscis.gov/i-9. Three notable changes were made to Section 1 (Employee Information and Attestation): 1. “Other Names Used” was replaced with “Other Last Names Used”; 2. A liens authorized to work may now present an Alien Registration Number or USCIS Number (specifying which number), a Form I94 Admission Number, or a Foreign Passport Number; and, 3. E mployees must now indicate whether or not they used a preparer or translator to complete the form.

Alfred T. DeMaria is a Senior Partner at Clifton Budd & DeMaria, LLP and is recognized as one of the preeminent management labor attorneys in the field. He has extensive experience in all areas of employment law, including advice on avoiding liability under disability, race, gender, age and related anti-bias laws. Mr. DeMaria advises on compliance with all federal, state and local laws governing the employment relationship, including the defense of lawsuits brought by employees against the companies that employ them. Prior to his work at Clifton Budd & DeMaria, LLP, he served as a trial attorney with the National Labor Relations Board.

Two notable changes were made to Section 2 (Employer or Authorized Representative Review and Verification): 1. The employee’s citizenship/immigration status must be input at the top of the Section; and, 2. A box with blank space has been added for “Additional Information,” which may include employment authorization extension notations or notations concerning employee termination. New employees must still complete Section 1 no later than their first day of work for pay, and that an employer must complete Section 2 of the form no later than the third business day that the employee is working for pay. This is a strict timeline, and an employer’s failure to ensure timely completion of Form I9 will open it up to civil liability. CONTINUED ON PAGE 19



[ FEATURE ]

Inter Insurance Launches Universal Casualty, New York’s First Independent Automobile Dealers Association RRG

Donald A. Derham Scholarship Announcement by Tim Derham

uRecently, at the New York Athletic Club in New York City, Tim Derham and his professional team launched a new resource for the auto insuring market and it has begun to take off quickly. Derham, President of Inter Insurance Agency, Ltd., along with Paula Frendel, Executive Director, and Fred Donnelly, President of the New York Independent Automobile Dealers Association (NYIADA) have joined forces to form Universal Casualty Risk Retention Group, devoted to the insurance needs of its members. The move comes in response to a most difficult spell for the line of business. 2017 found auto dealers scrambling for insurance coverage as several large retail insurers stopped offering coverage. A shortage of capacity coupled with steadily increasing rates led the list of problems affecting the sector adversely. Highway accidents caused by distracted driving and related claims together with the advanced technology in cars and trucks that cost more to repair have resulted in a paucity of companies interested in the market. Making money in the transportation insurance business has become a challenge, one that the new enterprise hopes to address and solve in part. 8 August 20, 2018 / INSURANCE ADVOCATE

MAKING MONEY IN THE TRANSPORTATION INSURANCE BUSINESS HAS BECOME A CHALLENGE, ONE THAT THE NEW ENTERPRISE HOPES TO ADDRESS AND SOLVE IN PART.

Len Bellavia, founding Partner, Bellavia Blatt PC

HIGHWAY ACCIDENTS CAUSED BY DISTRACTED DRIVING AND RELATED CLAIMS TOGETHER WITH THE ADVANCED TECHNOLOGY IN CARS AND TRUCKS THAT COST MORE TO REPAIR HAVE RESULTED IN A PAUCITY OF COMPANIES INTERESTED IN THE MARKET.

The new entity will provide loss control services and write garage keepers liability, general liability, auto liability, and errors and omissions insurance for franchised and nonfranchised auto dealers and all other businesses engaged in the automotive services industry in New York. According to Tim Derham, to join Universal Casualty Risk Retention Group, dealers and other automotive servicers must become a member of the NYIADA, which currently represents over 6,000 auto dealers in New York State. Automotive servicers in other states may join as an affiliated member. The risk association was started because “We feel automotive services is an underserved part of the insurance market,” said Tim Derham of Inter Insurance which is acting as CONTINUED ON PAGE 10


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managing general agent for he new company. “We want to offer dealers and other auto services options and flexibility that they don’t have now. And, we want to be profitable so that we continue in business for many years.”

Tim Derham with Lifetime Acheivement Award Recipient Andy Barile

Ken Rosenfield, founder, Rosenfield and Company PLLC

The Executive Director of NYIADA Paula Frendel said, ”Dealers have expressed concerns about insurance companies offering insurance to independent dealers in New York. The insurance market is diminishing for independent dealers. They will now have another option.” In addition to strong customer service, the group will provide loss control services for many of the risks facing these businesses,” Derham said. ”We will also provide more streamlined claims process to make filing a claim easier

Key Note Speaker John Ellis

for members.” The risk association will partner with Inter Insurance to write other products, including dealer open lot, property and umbrella coverage. Highlights of the event included: futurist speaker John Ellis; nationally recognized automotive franchise lawyer Len Bellavia; and globally known automotive retail Certified Public Accountant Ken Rosenfield. All speakers provided opposing views about the future of the automobile and the vehicle franchise model. 10 August 20, 2018 / INSURANCE ADVOCATE

St. John’s School of Law Dean Michael Simons

Universal Casualty Team Susan Calabrese, Joe Chvasta, Tim Derham, John McLoughlin

The event also featured the establishment of the Donald A. Derham Scholarship Fund at St. John’s University of Law. The Derham family created the fund not only to help a student in need, but also to pay tribute to Tim’s late father, Don Derham, who ran a successful insurance agency for many years in Nassau County. Universal Casualty’s primary business address is in Jericho, NY. To reach the company, please visit their website at www.universalcasualty.com or call 1-877-215-0510. [IA]


ADVERTORIAL

Student Food Safety

By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE - Assistant Vice President/Media Editor DAYS ARE GETTING SHORTER and students are returning to school. Whether students are bringing their lunch to school each day, or preparing meals on their own for the first time in college, they must take care to ensure that the food they eat is safe (www.foodsafety.gov). The Centers for Disease Control (CDC) estimates 48 million people get sick from food-borne illness each year, with 48,000 requiring hospitalization. Sadly, 3000 die each year (www.cdc.gov). Helping clients understand how to keep their family safe during food preparation and consumption is another value-added service of the professional insurance agent. The Food and Drug Administration (FDA) outlines the four steps in basic food safety: Clean, Separate, Cook and Chill. Food should be washed carefully, including raw fruits and vegetables with skins or rinds that are not eaten. Wash hands, preparation and cooking surfaces and utensils frequently with hot soapy water. Raw meat, poultry and fish should be kept separate from other foods. Cook food to the proper temperature, using a food thermometer to ensure doneness. Food should be refrigerated within two hours of cooking or purchase – one hour if temperatures are 90 degrees or more. Use appliance thermometers to be sure the temperatures are 40 degrees or below, and 0 degrees or less for freezers (www.fda.gov). It is not necessary to let foods cool prior to refrigerating. Keep hot foods hot (140 degrees) and cold foods cold (40 degrees). Perishable food should never be left out at room temperature more than two hours. Bacteria grows quickly at temperatures between 40 and 140 degrees. In 90 degree temperatures, the limit is one hour. College students cooking on their own for the first time should be made aware of food safety procedures. Pizza or other perishable food that has been left out overnight is not safe to eat. Tasting food to see if it is still good is not recommended, as it is not possible to taste most bacteria. There are numerous resources available offering tips on safe food handling and preparation. For those tech savvy individuals who want information at their fingertips, the United States Department of Agriculture (USDA) recommends two food safety applications – Ask Karen and Foodkeeper. This information is also available online. Care should be taken when packing lunches for children since food may be at room temperature for extended periods. Using insulated bags with a cold pack or ice is preferable to a brown bag to keep perishable food safe. Freezing juice boxes or water bottles will help keep food safe. Sending food back to college with students must also be done carefully. The same guidelines apply—two hours at room temperature, one hour if it is 90 degrees or hotter. For hot foods, such as chili or soup, fill the thermos or container with boiling water for a few minutes prior to filling it with the food. Cold food should be refrigerated prior to travel when possible. Pack in a cooler with several layers of ice or freezer packs.

After school snacks are a welcome treat, but care is necessary to ensure safety, especially when heating them. Microwaves heat foods to high temperatures and heat unevenly. An average of 21 people per day are treated in emergency rooms for microwave-related injuries. Most injuries are to hands and fingers, but injuries to children more frequently involve the head and neck. Microwave safe containers must be used. Heating plastics can leach chemicals into the food. Aluminum foil should not be used in the microwave, as it can cause a fire. Covering food helps it cook more evenly, but plastic wrap should not touch the food itself. Stir food to ensure even cooking. Use potholders when removing food from the microwave. Steam can cause burns, so care must be used when removing covers from microwaved food. Microwave popcorn has long been a convenient go to snack for students. However, the prepackaged version contains chemicals that may be unsafe (https://food.ndtv.com). A healthier alternative is putting kernels in a brown paper bag or glass bowl that is covered with a plate. Tailgate parties are another frequent activity for the fall, and it is important to practice safe food handling and storage procedures. Store food in a cooler with plenty of ice. Bring water and other cleaning supplies. Throw away anything that has been out two hours or more, or that is no longer chilled. Use a thermometer to ensure food is fully cooked since food on grills can char on the outside and still be uncooked (www.foodsafety.gov). Safe food preparation is important to everyone. Foodborne illness is dangerous, especially for children away from home. Helping clients teach their children about keeping food safe is another value-added service of the true insurance professional.

R

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Premium Financing: The Small Business Savior

12 August 20, 2018 / INSURANCE ADVOCATE


There are more than 27.9 million small businesses in the United States, and each face a slew of financial responsibilities... uThere are more than 27.9 million small businesses in the United States, and each face a slew of financial responsibilities – anything from payroll and accounts receivable requirements to handling taxes. And stacked on top of these various financial responsibilities are the numerous insurance policies needed to keep a business’s property and people protected. On average, a small business needs seven different types of insurance including liability, property, and vehicle, to name just a few. With this many policies in the mix, coverage can quickly become too expensive for many small businesses to manage. In 2016 alone, $244.9 billion was spent on commercial insurance premiums—and this number has only continued to increas e. O wning a small business is no easy task, but there are ways to help ease the burden. Leveraging the expertise of a retail agent who works alongside a premium financing partner, small business owners can utilize more flexible budgeting options, especially when resources are limited. But before owners begin to explore the benefits of premium financing, they need to first understand the most common issues small businesses face.

THE DAILY STRUGGLES OF OWNING A SMALL BUSINESS

While small businesses account for more than 99.7 percent of businesses in the U.S., only one-third survive more than 10 years. These closures not only affect the individual business, but the workforce as a whole. When the doors close, jobs are lost and the entire industry suffers. There are many different factors that contribute to small business failures, but disorganized financial planning, and lack of recruitment and retention are the key culprits. With 77 percent of small businesses relying on personal savings for their initial funds,

owners can lose a lot more than just their storefront if their business fails. The most important facet of small business financial planning is a laser focus on monthly budgeting. With 50 percent of small business revenue coming through the door within a one or two month period, net expenses can quickly add up and become unaffordable. In fact, 82 percent of small businesses fail when payments—including insurance— don’t align properly with their budget. While failing to establish a solid financial foundation can have a huge impact on your monthly budget, it also has the power to affect those ever-important recruitment and retention efforts. The rising costs of benefits, expensive equipment needs, lack of training resources and, of course, general financial struggles are all contributors to the recruitment challenges of small businesses. Potential hires aren’t particularly attracted to a business that isn’t financially stable. They’re also not inclined to work for an organization who can’t afford proper insurance coverage. Employees seek out stability—and that includes expecting some form of protection from their business. Without proper coverage or a stable financial plan, small businesses will suffer from high turnover and an inability to replace these employees. While these issues seem grim, there is a solution owners can utilize to prevent their business from becoming another sinking ship.

PREMIUM FINANCING SAVES THE DAY

As mentioned, monthly budgeting is the most important aspect that small businesses need to consider when crafting a financial plan. Well, nothing makes budgeting easier than fewer payments. Leveraging the services of a retail agent who works with a premium financing partner presents the

Sean Jagroop is Director of Premium Financing at Fortegra where leads efforts to grow the company’s premium financing company, South Bay Acceptance Corp. A graduate of Baruch College with an MBA from Fordham’s Gabelli School of Business, Sean brings years of expertise to Fortegra having previously served in accounting, investment, and asset management roles for companies of distinction like Assurant and Prudential.

option of bundling multiple policies from different insurance providers into one monthly plan. With only one insurance payment to anticipate, owners can create a firm, stable financial foundation for their business. In preparation for such a variety of risks, premium financing can serve as a small business savior helping owners avoid financial issues due to poor budgeting down the road. Single payment, bundled coverage can provide small businesses with any amount of protection they may need at a much more affordable monthly rate—helping create a healthy bottom line, and most importantly, providing some much needed peace of mind while businesses are just getting on their feet.[IA] INSURANCE ADVOCATE / August 20, 2018 13


[ GUEST OPINION ]

MARILYN M. SINGLETON, M.D., J.D.

The Courage to Trust Medical Care to Patients and Physicians uThe days of trusting your legislators to have your best interests at heart are in the rear view mirror. Apparently, their main interest is parroting the buzzwords of the moment to get elected and then being too busy banking lobbying money to listen to the voters. Our legislators have become spectators who wait for the perfect moment to pounce on their political “enemy” and then go on cable news shows to boast about it. The “us against them” attitude, punctuated by hyperbolic, apocalyptic rhetoric closes the door to finding solutions. Our interests would be better served by having town hall meetings where voters could state their concerns, air their differences, and learn what legislators are doing about their issues. Caution: meetings at 9 a.m. on Wednesday when paid activists are guaranteed to outflank the working general public are prohibited. There are strong differences of opinion on how to attain a healthy citizenry. Educating potential patients about what drives up medical care expenditures can start the conversation. Well-informed patients would demand solutions based not on corporate interests or government or political agendas, but on a fair, competitive market that maximizes choices and achieves lower costs. Eight years of the Affordable Care Act have borne out Congressional Budget Office predictions that abandoning basic principles of insurance—which compensates only for events beyond the insured’s control and is priced according to the degree of risk—would lead to higher and higher premiums, fewer participating insurers, and unsustainable government expenditures to subsidize insurance premiums. The data in three recent Centers for Medicare and Medicaid reports on ACA exchanges show “individual market erosion and increasing taxpayer liability.” The average monthly premium for coverage purchased through the exchanges rose 27 14 August 20, 2018 / INSURANCE ADVOCATE

Similarly, a U.C. Berkeley School of Public Health study of consolidation of California’s hospital, physician, and insurance markets from 2010 to 2016 concluded “highly concentrated markets are associated with higher prices for a number of hospital and physician services and Affordable Care Act (ACA) premiums.”

percent in 2018, and federal premium subsidies increased 39 percent from 2017 to 2018. A less frequently discussed cost driver is the disturbing trend of private doctors’ offices being scooped up by hospitals, health insurance companies, and venture capital groups. Prices tend to rise when health systems merge, because of decreased competition. And not only do hospitals and health systems generally charge more than private physicians’ offices, the government compounds this problem by paying more to hospitals than independent offices for the same service. A review of 2015 Medicare payments showed that Medicare paid $1.6 billion more for basic visits at hospital outpatient clinics than for visits to private offices. Patients are the biggest losers: they paid $400 million more out of pocket and had their tax dollars wasted. The study also found hospital-employed physicians’ practice patterns in cardiology, orthopedic, and gastroenterology services led to a 27 percent increase in Medicare costs. This translated to a 21 percent increase in out-of-pocket costs for patients. Similarly, a U.C. Berkeley School of Public Health study of consolidation of

Dr. Singleton is a board-certified anesthesiologist. She is also a Boardof-Directors member and Presidentelect of the Association of American Physicians and Surgeons (AAPS). She graduated from Stanford and earned her MD at UCSF Medical School. Dr. Singleton completed 2 years of Surgery residency at UCSF, then her Anesthesia residency at Harvard’s Beth Israel Hospital. While still working in the operating room, she attended UC Berkeley Law School, focusing on constitutional law and administrative law. She interned at the National Health Law Project and practiced insurance and health law. She teaches classes in the recognition of elder abuse and constitutional law for non-lawyers.

California’s hospital, physician, and insurance markets from 2010 to 2016 concluded “highly concentrated markets are associated with higher prices for a number of hospital and physician services and Affordable Care Act (ACA) premiums.” In consolidated markets (defined by the Federal Trade Commission’s Horizontal Merger Guidelines), prices for inpatient procedures were 79 percent higher and outpatient physician prices ranged from 35 percent to 63 percent higher (depending on the physician specialty) than less concentrated markets. Big medicine and third-party financing are taking the cost curve in the wrong direction. This speaks to the urgency of encouraging cash friendly practices that bypass insurance and direct primary care (DPC) practices. CONTINUED ON PAGE 19


INSURANCE ADVOCATE / August 20, 2018 15


[ LEGAL UPDATE ]

ROBERT D. CHESLER

New Jersey Supreme Court Denies Insurance Industry Bid to Allocate Losses to Policyholders As appeared in Anderson Kill Policyholder, July 2018 u On June 27, the New Jersey Supreme Court rejected an insurance industry bid to burden policyholders with a portion of their covered asbestos losses, ruling on an issue of utmost importance to companies facing environmental, asbestos or other claims where the injury occurred over a number of years. In Continental Insurance Company v. Honeywell International, Inc.,1 the court applied the “continuous trigger” of insurance coverage, established in Owens-Illinois, Inc. v. United Insurance Co., 2 to extend insurance company liability into years when coverage was unavailable to Honeywell, applying the so-called unavailability rule. Here is how the issue of when insurance coverage is triggered intertwined with the issue of availability. Assume that a worker is first exposed to asbestos from a company’s product in 1970, and asbestos injury manifests itself in 2000. Under the law of New Jersey, and many other states, each insurance policy from 1970 to 2000 must pay a share of the company’s liability and attorneys’ fees, with the company responsible for years in which it does not have insurance. Next, assume that the insurance industry places an asbestos exclusion in the standard insurance policy in 1987, so that the company does not have insurance for asbestos from 1987 forward. The question arises: who is responsible for injury caused before 1987 but manifesting itself after 1987, the pre-1987 insurance companies or the policyholder? That is the so-called “unavailability” issue, as the policyholder could not obtain insurance for this liability after 1987. The New Jersey Supreme Court held that the insurance companies were liable in this situation.

That ruling turned out to be dispositive of the merits. Honeywell involved the Bendix Corporation, which manufactured brake and clutch pads that contained asbestos from 1963 to 2001, resulting in thousands of bodily injury claims. Prior to 2006, Bendix and its successors had already received about 147,000 claims. Bendix was headquartered in Michigan. In 1983, Bendix became part of Honeywell, which was headquartered in New Jersey. (See below for discussion of choice of law issue.) Continental sued Honeywell in New Jersey in 2000 over the Bendix asbestos liability. Honeywell brought third-party claims against dozens of other insurance companies. By 2018, all of the insurance companies had settled, except for excess insurance companies Travelers and St. Paul (now one company).

WHEN ASBESTOS COVERAGE WAS UNAVAILABLE...

Honeywell posed a variation on the typical issue of unavailability of insurance. While asbestos insurance became unavailable in 1987, Bendix continued to use asbestos in its products until 2001. Honeywell did not seek insurance coverage for its products manufactured after 1987. Rather, it sought the application of the unavailability rule for products manufactured prior to 1987 when manifestation occurred post-1987. Essentially, Honeywell asserted that it was not responsible for the allocation to the post-1987 years. Travelers and St. Paul basically argued for an exception on equitable grounds to the unavailabil-

Robert D. Chesler is a shareholder in Anderson Kill’s Newark office. Mr. Chesler represents policyholders in a broad variety of coverage claims against their insurers and advises companies with respect to their insurance programs. Mr. Chesler is also a member of Anderson Kill’s Cyber Insurance Recovery group. A leading participant in the birth of modern insurance law in the early 1980s, Mr. Chesler has earned the reputation as “The Insurance Guru” for exceptional insurance coverage knowledge, and has emerged as a leader in such new areas of insurance coverage as cyber-Insurance, D&O, IP, privacy and “green” insurance. rchesler@andersonkill.com

ity rule based on Honeywell’s continued manufacture of asbestos-containing products after 1987. An insurance industry group submitted an amicus brief contending that the court should abandon the unavailability rule altogether. The Supreme Court, relying on its prior decision in Owens-Illinois, mandated the application of the unavailability rule. The court relied on the basic policy objectives of OwensIllinois: “Maximizing insurance resources, encouraging the spreading of risk throughout the insurance industry, promoting the purchase of insurance when available, and of simple justice.” It held that asbestos insurance was unavailable to Honeywell after 1987, and the unavailability rule applied. The state Supreme Court ruled that New Jersey law applied to the Honeywell case before addressing the merits of the appeal. That ruling turned out to be dispositive of the merits. Bendix had been headquartered in Michigan, and all of the St. Paul and Travelers insurance polCONTINUED ON PAGE 19

16 August 20, 2018 / INSURANCE ADVOCATE

IA_A


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[ ON THE LEVEL ]

JAMIE DEAPO

The Changing Role of Being a Producer uBeing a producer has changed dramatically and I believe for the good. In years past when competition was limited the preferred method for getting clients was cold calling, either by phone or in person. The key was to find out when the prospect’s policy renewed and getting some agreement to review their protection for issues and offer an alternative based on protection and pricing. When I think back on making those calls I remember how presumptive, disruptive and overbearing those calls were. It was uncomfortable to make them as you knew the prospect wasn’t really thinking about reviewing their insurance. Truth be told that is why so many new producers back then (and even now) wanted to develop a reputation for helping people so they could rely on people contacting them and referring people and they could stop the cold calling. The key was getting when the prospect’ s insurance renewed so you could contact them 90 to 120 days out to review their coverage and show them how you could help with protection and pricing. Not a very positive experience for either party but the accepted process for the time. Today’s producer has much more competition and many new players (including their own companies) that offer low prices and easy automated access. The challenge is to get the prospect’ s attention, show your expertise and build a trusting relationship with them that creates the opportunity to show them the value you offer. The tools to do this now exist. Social media, websites, the internet, blogs and data analytics allow the producer to learn quite a bit about the prospect in advance of talking to them. It also offers the producer and their agency a great opportunity to get the prospect’s attention. Today’s prospect is researching insurance and looking for who is going to provide the best value. Unfortunately, many believe that value is based on 18 August 20, 2018 / INSURANCE ADVOCATE

price. The challenge for the producer is to help them understand how protection can vary and that low cost may come with inadequate protection. Using social media, their website and blog allows the producer the opportunity to bring useful information to the prospect about having adequate protection while showing their knowledge and commitment. Both producers and their agencies are going to have to understand that developing new business will take much more time up front however the

Jamie Deapo is AVP of Membership & Member Programs for Big I and is an approved CE instructor in New York. Prior to being with Big I, he was an independent agent in the Syracuse area for 15 years. Jamie started his career in 1972 working for insurance carriers, and he has held various underwriting and marketing positions with several national as well as regional companies. He is a past president of the Independent Insurance Agents of Central New York and served on the board of directors of Big I.

BEING A PRODUCER HAS CHANGED DRAMATICALLY AND I BELIEVE FOR THE GOOD.

end results should be a stronger client relationship. Successful producer’s in the current marketplace need to exhibit the following traits: • A willingness to use social media to educate and attract prospects without expecting anything in return. • Spending time researching prospects to start the process of better understanding their needs. • Listening and learning from prospects what their wants and needs are related to insurance protection. • Giving sound, professional advice on protection allowing the prospect to choose what fits their individual needs. • Developing a relationship of trust and commitment with prospects that you have their best interests at heart. • Following through on a commit-

ment to regularly provide important information and professional advice to the prospect that becomes a client, insuring their protection meets current and future needs. Being a producer currently elevates the process from huckster to professional. Having prospects want to talk with you is a much better start to the process. Being able to research the prospect in advance allows for meaningful dialogue when you first get together. It also provides the opportunity for determining what the client’s needs are for providing the proper protection. Although it may take more time and energy upfront, the opportunity producers have today to work with prospects as a professional is exceptional. They only need to rise up to the challenge and educate consumers on the value of a professional independent agent.[IA]


HR UPDATE

GUEST OPINION

LEGAL UPDATE

CONTINUED FROM PAGE 6

CONTINUED FROM PAGE 14

CONTINUED FROM PAGE 16

With DPC, all primary care services and access to low-priced commonly used medications are included in an affordable upfront price. Importantly, DPC’s time-intensive and individualized management of chronic diseases decreases hospital admissions, paring down Medicare’s $17 billion spent on avoidable readmissions. Why corporations want to marginalize private practice seems clear; the government’s motive is open to debate. Surveys consistently find that patients overwhelmingly want “personalized provider interactions.” Thus, herding patients into government-directed programs is not the solution. One core problem with government systems is their reliance on the goodwill of politicians. As President Ford said, “a government big enough to give you everything you want is a government big enough to take everything you have.” It’s time for Congress to scrutinize anti-competitive health system mergers. It’s time to bring to the floor over a dozen bills to expand and improve Health Savings Accounts (HSAs) to give patients more control over all facets of their medical care. Congress, the clock is ticking on this legislative session. Stand up for patients. Or did the dog eat your courage?[IA]

icies were negotiated and entered into in Michigan. Travelers and St. Paul asserted that Michigan law applied. Michigan law does not contain an unavailability rule.

WHAT CAN YOU DO NOW TO PREPARE?

Because employers now have a heightened risk of being audited by ICE/ HSI/DOL, it is increasingly important to make sure your organization’s immigration related documents (e.g., I9 forms, PAF files) are completed correctly. Employers should make sure to identify an individual within the organization that is responsible for compliance. Current procedures as well as processes for record keeping for the compliance period should be reviewed. With a steady uptick in I9 audits and wage and hour compliance investigations, it underscores how important it is for employers to act today to prevent liability tomorrow as well as develop and maintain the appropriate policies and mechanisms to ensure consistency and reduce the probability of legal liability.[IA]

www.insurance-advocate.com

4441 Sepulveda Blvd., Culver City, CA 90230-4847 www.zalma.com | zalma@zalma.com 310-390-4455 | fax: 310-391-5614 | http://zalma.com/blog

Mr. Zalma recently published on Amazon.com with links at the Zalma Books site, with the following: Non Fiction books: • “Insurance Fraud & Weapons to Defeat Insurance Fraud” In Two Volumes • “The Compact Book on Adjusting Liability Claims: A Handbook for the Liability Claims Adjuster” • “The Compact Book on Adjusting Property Claims” • “Ethics for the Insurance Professional” • “Rescission of Insurance” • “The Insurance Examination Under Oath”

• “Random Thoughts on Insurance Volumes IV and V: Digests from Barry Zalma’s Blog: ‘Zalma on Insurance’” Fiction: • “HEADS I WIN, TAILS YOU LOSE” • “Candy and Abel: Murder for Insurance Money” • “Murder And Insurance Fraud Don’t Mix” • “Murder & Old Lace”

WHICH FORUM WAS “AVAILABLE”?

The New Jersey Supreme Court held that New Jersey law applied, basing its decision on several factors. For one, it pointed to Honeywell’s residence and domicile in New Jersey since 1983, and stated that performance of the insurance policies occurred in New Jersey. The court also found that application of New Jersey law would advance the public policy of New Jersey, as set forth in Owens-Illinois. The court did not see a strong public policy interest on the part of Michigan. It may be that New Jersey courts will apply New Jersey law if possible in order to maximize insurance recovery. Honeywell underscores the importance of choice of forum. Despite choice of law rules, courts often will apply the law of their own jurisdiction. The policyholder that waits to be sued by its insurance company in an unfavorable jurisdiction can lose coverage simply because it did not choose to sue first in a favorable jurisdiction. Insurance companies are quick to fire first in order to gain forum advantage. Every policyholder must analyze forum as early as possible, and be ready to seize the best forum. That’s particularly true when New Jersey and its neighbor across the Hudson River are potential forums. Just months before the New Jersey Supreme Court’s decision in Honeywell, the New York Court of Appeals reached the exact opposite result. KeySpan Gas v. Munich Reinsurance, 96 N.E. 2d (N.Y. 2018). If a company has ties to both New York and New Jersey and faces an unavailability issue, choice of forum probably is dispositive. On several key issues, New Jersey remains a more favorable forum than New York and many other states for litigating long-term injury insurance claims. Policyholders should recognize that, and act on it.[IA] ENDNOTES 1 A-21-16 (078152) (N.J. Supreme Court June 27, 2018). 2 138 N.J. 437 (1994) INSURANCE ADVOCATE / August 20, 2018 19


[ IN THE ASSOCIATIONS ]

Property/Casualty Net Income Doubles to $17.1 Billion in Q1 2018 uPrivate U.S. property/casualty insurers saw their net income after taxes more than double to $17.1 billion in first-quarter 2018 from $7.9 billion in first-quarter 2017, helped by lower catastrophe losses and increased reserve releases, according to ISO, a Verisk (Nasdaq: VRSK) business, and the Property Casualty Insurers Association of America (PCI). Losses and loss adjustment expenses from catastrophes dropped to $5.0 billion in first-quarter 2018 from $7.7 billion a year earlier. Favorable reserve development totaled $7.4 billion, compared with $5.5 billion a year earlier. Overall, insurers saw their net underwriting results swing to a positive $4.2 billion in first-quarter 2018, after suffering underwriting losses for seven quarters in a row. Insurers also experienced a 15.7 percent increase in net written premiums, a significant acceleration from 4.0 percent a year earlier. Earned premium growth also accelerated, to 9.4 percent from 3.5 percent. The net premiums were affected by multiple insurers changing their use of offshore reinsurance and keeping more premiums within the United States. At the same time, there was an acceleration in direct premium growth, bolstered by the strengthening of U.S. economic activity. “The strong results of insurers reflect several developments affecting the industry. In the first quarter of 2018, insurers benefited from significantly lower catastrophe losses than a year ago, when three wind and thunderstorm events each resulted in more than $1 billion in damages. Insurers were also able to release $7.4 billion in reserves, nearly $2 billion more than a year earlier, as the cost of prior-years’ claims came in lower than previously estimated. Insurers also saw net written premiums grow 15.7 percent, due to both the continued strengthening of the economy and the changes made by multiple insurers to their reinsurance arrangements. As we move through the 20 August 20, 2018 / INSURANCE ADVOCATE

hurricane season, insurers remain well capitalized to help pay the catastrophe claims that may arise. But the question is whether they can offer coverages and pricing that respond to the newly emerging needs of customers. At ISO, we’re working hard to develop solutions that enable insurers to address market demands.” Neil Spector, President, ISO “This year, the industry’s first-quarter underwriting results were the best since the third quarter of 2013, with significant improvements in insurers’ combined ratios and net income after taxes. However,

the results were likely impacted by market shifts that are rippling through the industry caused by last December’s federal tax reform. Compared with the first quarter of 2017, net written premium grew 15.7 percent and net earned premium increased by 9.4 percent. This significant premium growth is partially attributed to insurers ceding less premiums than previously to foreign affiliates. Despite that growth, industry surplus actually fell by $3.2 billion from the end of last year. This was largely the consequence of a greater-than-normal payment of dividends to shareholders as well as a significant decrease in unrealized capital gains in insurers’ portfolios. Although surplus decreased, it does not affect the industry’s extremely strong capitalization that both protects and keeps costs lower for consumers.” Robert Gordon, PCI’s Senior Vice President for Policy, Research and International

NYISF Selects Mora-Amaya as 2018–2019 Recipient u ALBANY, N.Y.—The New York Insurance Scholarship Foundation, Inc. (NYISF) awarded its 2018–2019 scholarship to Jennifer Mora-Amaya, a junior at St. John’s University studying actuarial science from Paterson, N.J. “The New York Insurance Scholarship Foundation is pleased to recognize a student as passionate as Jennifer,” Ellen Melchionni, president of NYISF said. “Her untiring drive to succeed and academic accomplishments are laudable. Jennifer will undoubtedly make notable contributions to the insurance industry.” NYISF was founded to encourage scholastic achievement, community involvement and a commitment to advancing the insurance industry. “Jennifer exemplifies all of these qualities,” Melchionni said. “She carries a commendable grade point average and is devoted to giving back to her community

and to her university, including her roles as president of the Association of Latino Professionals for America and as director of internal relations and marketing of the Gamma Iota Sigma, Alpha Iota Chapter. The development of future leaders is essential to ensure the viability of the insurance and risk management industry. NYISF addresses the great need to attract young professionals. “The insurance industry has been and will remain a viable and imperative field of employment,” Melchionni said. “The cultivation of new talented leaders is critical to the future of the industry as technology and consumer needs are ever-evolving.” NYISF is a public charity initiated by the property and casualty insurance industry that supports students studying the business of insurance in New York. The foundation is affiliated with the New York Insurance Association, Inc. [IA]


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[ IN THE NEWS ]

Insurance Lenders Launch Websites with Enhanced Interfaces u Oak Street Funding and First Franchise Capital, First Financial Bank Companies, have launched six enhanced proprietary websites. “These sites are not only more visually appealing but they also deliver on the companies’ value proposition by providing information to clients that will help them to evolve their businesses”, the Companies argue. “We have seen strong growth in the number of industries we serve, so it was essential to further enhance and develop our websites in order to meet the needs of all of our clients,” explained Sharon Robbins, Chief Marketing Officer for Oak Street Funding and First Franchise Capital. The Oak Street Funding website (www.oakstreetfunding.com) provides information on a full array of loan products for Insurance Businesses, Registered Investment Advisors (RIAs), Certified Public Accountants (CPAs) and Indirect Auto Dealerships. The First Franchise Capital website (firstfranchisecapital. com) allows franchise restaurant owners to explore loan products for acquisitions, remodels, new store development and more. The Oak Street Servicing site (oakstreetservicing.com) provides information on third-party loan servicing for multinational bank portfolios and backup servicing to securitized portfolios. In addition to these sites, four enhanced “Exchange” sites will allow those interested in buying or selling Insurance Businesses, RIA firms, CPA practices or Franchise restaurants to search or list firms for sale at no cost. This complimentary service provides nationwide exposure for sellers as well as a free, no obligation resource for those looking to acquire. Buyers can participate in a Buyer Directory or simply search the site’s current listings. The Exchange sites are as follows – Insurance Businesses (osfagenc yexchange.com), RIA firms 22 August 20, 2018 / INSURANCE ADVOCATE

(RIAfirmexchange.com), CPA practices (Cpapracticeexchange.com) and franchise restaurants (SellBuyfranchise.com). “We are very excited about our new websites as they align with our focus on business segments,” expressed Rick Dennen, President and CEO of Oak Street Funding and First Franchise Capital who was very involved in the vision behind the design of the new sites. “I believe the new functionality will provide a simpler yet more robust experience for our current clients as well as those looking for a loan product to support acquisitions, successions, business debt restructure or provide working capital to enhance marketing, technology, expansion and more.”[IA]

OnRisk CEO Frank Sweeney commented on the strategic partnership: “We are delighted to have the opportunity to work with a true London Market innovator such as AFL. I am confident our collaborative efforts will help demonstrate the efficacy of a disciplined, CAD-based approach to risk transfer, and enable a market shift from a reliance on manual processes to a more dynamic risk structuring environment.” James Poole, AFL’s Director of Specialty and Head of AFL’s new Agile Risk Advisory (ARA) practice, said, “This platform is highly innovative and a really exciting step forward that will enable us to improve our presentation of risk transfer arrangements to our clients, to reinsurers and to ILS capital providers.“ OnRisk and AFL will be working on a number of advanced placement platform extensions that will model the transaction types most commonly used by brokers to shard high-value risk. These include inward/ outward coverages; follow-form placements; facilities and pools; master and local coverages; inuring/benefiting coverages; bundled

OnRisk and AFL Insurance Brokers Form Insurtech Partnership uAFL Insurance Brokers (AFL) and OnRisk, the US-based insurtech startup, have formed a strategic partnership to advance new technology for structuring and placing high value property & casualty (P&C) risk. Under the partnership, AFL Insurance Brokers will become an early adopter of the OnRisk structuring platform, which delivers a CAD-style, graphical software toolset enabling risk professionals to visualize and interact intuitively with each complex risk to facilitate the placement process and improve buyer outcomes. The high-value risk space comprises more than USD 350 billion of premium, and spans the most challenging global risks, such as natural catastrophes, cyberthreats, terrorism, product liability, financial risk and other large exposures.

coverages; terms & conditions; inner aggregates; time-based coverages; claim development and coverage erosion; and CAT modeling APIs. Sweeney added, “Our modeling and prototyping starts with established risk sharding methods, but we are hopeful our clients can adapt our structuring tools to explore new forms of risk transfer.” OnRisk is a US-based insurtech startup that provides a digital platform for structuring high-value property & casualty (P&C) risk. OnRisk’s cloud platform delivers a CAD-style, graphical, interactive toolkit designed to provide corporate risk managers, carrier ceded reinsurance specialists and their brokers with an intuitive, user-friendly view of these complex risks. Visit www.onrisk. com to learn more about OnRisk.[IA]


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[ ON MY RADAR ]

BARRY Z ALMA

List Your Owned Auto on Policy or Be Self-Insured Auto Must Be Identified on Policy to Provide Coverage uClassic automobiles often require a specialty insurer to insure the risks of loss to the classic automobile or caused by the operator of a classic auto. For that reason the basic auto insurer is not equipped to insure such a limited type of risk. When a family owned a classic and powerful Ford Shelby Cobra automobile they insured it separately from other autos owned by the family. In Melissa P. Silverman v. Robert H. Digiorgio and Robert V. Digiorgio v. New Jersey Manufacturers Insurance Company and America Modern Home Insurance Company, Docket NO. A-4542-16T2, Superior Court Of New Jersey Appellate Division (April 2, 2018) Plaintiff Melissa P. Silverman was a passenger in a specialty car, a 1967 Ford Shelby Cobra, driven by defendant Robert H. DiGiorgio. She was badly injured when the driver lost control of the car and it struck a utility pole. The car burst into flames and both plaintiff and the driver were extracted from the vehicle.

turn, brought third-party complaints against American and NJM seeking a declaration of coverage for the accident. Plaintiff settled with defendants for $1 million, memorializing that sum in a consent judgment. American paid an unspecified amount to plaintiff, and was dismissed from the case. NJM moved for summary judgment, arguing that the terms of its policy did not cover the son’s accident. Assignment Judge Yolanda Ciccone granted the motion, construing the NJM policy to exclude the son’s operation of the Shelby.

FACTS

THE POLICY

The Shelby was owned by the driver’s father, defendant Robert V. DiGiorgio. The father allowed the son, who lived with his parents, to have access to the car whenever he wanted to drive it so long as the father was not using it. As a specialty car, the Shelby had historic vehicle “QQ” license plates. The car was driven only a few hundred miles each year. The Shelby was insured on a $500,000 policy with American Modern Home Insurance Company (“American”), with an annual 3,000 mile usage restriction. In addition to the American policy, the son’s mother Jean had a $500,000 auto policy with New Jersey Manufacturers Insurance Company (“NJM”) listing four other vehicles of the household as “covered autos,” but did not list the Shelby. Paintiff sued the father and son for personal injuries. Those defendants, in 24 August 20, 2018 / INSURANCE ADVOCATE

An “insured” under the NJM policy is defined, in pertinent part, to include “You or any family member for the ownership, maintenance or use of any auto or trailer[,]” as well as “[a]ny person using your covered auto.”

The NJM policy affords liability and indemnity protection to policyholders for their “covered autos,” defined in pertinent part to encompass the vehicles listed in the policy’s Declarations page. The Shelby was not listed as such a covered auto on the Declarations page. An “insured” under the NJM policy is defined, in pertinent part, to include “You or any family member for the ownership, maintenance or use of any auto or trailer[,]” as well as “[a]ny person using your covered auto.” Thus, even though the Shelby was not listed by the DiGiorgios as a “covered auto,” the policy additionally supplies coverage for the use of a non-covered auto by “you” or by “any family member,” subject to the policy’s Exclusions. Nonetheless, the “Exclusions” section of the policy is important because it can

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www. nationalunderwriter.com/ZalmaLi brary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/ Store/ProductDetails.aspx?produc tId=214624, or 800-285-2221 which is presently available. Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.


[ ON MY RADAR ] negate any viable claim for coverage in this case and provides at Exclusion B.2(a) that disallows coverage for “[a] ny vehicle, other than your covered auto, which is . . . owned by you . . . .” Indisputably, the Shelby is owned by the father.

THE APPEAL

The interpretation of an insurance contract is an issue of law. As a starting point in the analysis of an insurance coverage issue, courts look to the plain and ordinary meaning of the words contained in the carrier’s policy. The purpose of a policy’s exclusionary clause is to allow an insurer to protect itself from covering all automobiles available to the insured’s use, even if the policy was bought for one automobile. The appellate court concluded that the “DiGiorgios would readily understand that NJM did not intend to cover their son with respect to an automobile which a reasonable person would know ought to be listed in the policy for a further premium allocated to it.” The Shelby was conspicuously omitted from the Declarations page listing the other four vehicles of the household. The DiGiorgios obtained the American policy to cover the Shelby because that specialty car was not on the NJM policy. Indeed, NJM derived no premium for that extra risk and probably would not have insured the Shelby if asked. Exclusion B.2(a) negates the claim of coverage. The trial court’s decision denying coverage was affirmed.

ZALMA OPINION

I once owned a classic car – it was a mistake – it was almost impossible to insure. I found that the insurer who had no trouble insuring my basic transportation cars refused to insure the classic. I assume the DiGiorgios had the same problem and that is why they did not list the Shelby on their NJM policy and purchased a limited cover from American. American paid the claim and NJM properly refused.[IA]

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[ COURTSIDE ]

LAWRENCE RO GAK

No-Fault DME Rental Rate is Same as General Public, If it Has No Medicaid Fee Schedule Matter of Global Liberty Ins. Co. v ISurply, LLC Edited by Lawrence N. Rogak A No-Fault arbitrator ruled that this auto insurer, Global Liberty, must reimburse a medical provider for rental of a CPM and a Cold Therapy Unit at the monthly rental charge to the general public. The Master Arbitrator affirmed. Global Liberty moved to vacate the award; Supreme Court confirmed the award, and the Appellate Division affirmed. Applying the “not irrational” standard for upholding arbitration awards, the Court held that because the CPM and CTU units do not have codes in the Medicaid fee schedule for DME, Medicaid’s “1/6 of the acquisition cost” rule for DME rentals did not apply, and that the Department of Health has not adopted the “one-sixth” standard as its policy, the arbitrator’s award was not irrational and therefore affirmed.—LNR u Order, Supreme Court, Bronx County (Fernando Tapia, J.), entered October 26, 2017, which denied Global Liberty Insurance Co.’s (Global) petition to vacate the master arbitrator’s award, dated July 24, 2017, dismissed the proceeding and confirmed the award, unanimously affirmed, with costs. The court properly confirmed the master arbitrator’s award. The master arbitrator’s affirmance of the lower arbitrator’s award was not irrational. The controlling law here, for reimbursement of rental costs for a Continuous Passive Motion device (CPM) and a Cold Therapy Unit (CTU), is 12 NYCRR § 442.2(b), which states: “The maximum permissible monthly rental charge for such equipment, supplies and services provided on a rental basis shall not exceed the lower of the monthly rental charge to the general 28 August 20, 2018 / INSURANCE ADVOCATE

Global failed to present sufficient evidence demonstrating that the Department of Health (DOH) had determined a price for these rentals. public or the price determined by the New York State Department of Health area office. The total accumulated monthly charges shall not exceed the fee amount allowed under the Medicaid fee schedule.” Global failed to present sufficient evidence demonstrating that the Department of Health (DOH) had determined a price for these rentals. The July 3, 2014 letter from Joanne Criscione, Senior Attorney for the Bureau of Health Insurance Programs Division of Legal Affairs for the DOH appeared to indicate that DOH had adopted “a medicaid reimbursement policy for durable medical equipment (DME) rental items that have not been assigned a Maximum Reimbursement Amount (MRA). For DME items that do not have a MRA, the rental fee is calculated at 1/6th of the equipment provider’s acquisition cost.” In her June 8, 2016 letter, however, she makes clear that her July 3, 2014 letter “was not a determination by the Department of Health area office establishing the reimbursement rate” and she “merely stated the Medicaid reimbursement as that policy is set forth in the Medical Provider Manual for DME.” None of Global’s other evidence establishes that DOH had adopted the “1/6th of the equipment provider’s acquisition cost” rate.

Lawrence N. (“Larry”) Rogak has been practicing insurance law since 1981. He has defended over 23,000 lawsuits and arbitrations and has represented over 75 different insurance companies and self-insured corporations. Lawrence N. Rogak LLC is listed in Best’s Recommended Insurance Attorneys, a distinction that requires written recommendations from at least 12 insurance carriers. A 1981 graduate of Brooklyn Law School, Mr. Rogak has published more books and articles on insurance law than any other New York attorney in the field.

It is true that the Medicaid DME fee schedule, which listed certain codes for DMEs, some of which had a MRA and some of which did not, established that for those that did not have a MRA, the monthly rate of 1/6th of the equipment provider’s acquisition cost would apply. And it is also true that, pursuant to 12 NYCRR § 442.2(b), “the total accumulated monthly charges shall not exceed the fee amount allowed under the Medicaid fee schedule.” However, it was not irrational for the arbitrator to conclude that this 1/6th rate applied only to items which had codes listed in the Medicaid fee schedule, which the CPM and CTU at issue here did not. Therefore, as Global neither demonstrated that DOH had adopted the 1/6th rental fee guideline, or that DOH had otherwise determined a rental fee, it was not irrational for the arbitrator to conclude that the reimbursement rate would be “the monthly rental charge to the general public” [(12 NYCRR 442.2(b)]. We have considered Global’s remaining contentions and find them unavailing.[IA] 2018 NY Slip Op 04961 Decided on July 3, 2018 Appellate Division, First Department


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SmarterSafer Welcomes Short Term Extension of National Flood Insurance Program Urges Congress to Advance Comprehensive Reforms to Save Taxpayers Billions WASHINGTON, D.C.—SmarterSafer, a national coalition of environmental groups, taxpayer advocates, insurance stakeholders, housing organizations and mitigation advocates, released the following statement in response to Congress enacting a critical short-term extension to the National Flood Insurance Program (NFIP) through November, preventing a lapse during peak hurricane season. Despite the program’s crushing $25 billion-dollar debt, the NFIP supplies more than 5.2 million vulnerable property owners with vital flood insurance coverage. “SmarterSafer welcomes Congressional action on a short-term extension of the NFIP before the July 31st deadline to ensure Americans are protected in the midst of hurricane season. However, Congress should use the next four months to finally reform the program that has cost taxpayers almost $40 billion dollars. Leaders in Congress should not continue to allow short-term extensions that reinforce the status quo, but should pass a comprehensive legislative package that addresses the NFIP’s financial insolvency and better protects the environment and people in harm’s way. “The critical overhaul of the nation’s broken flood insurance program must prioritize reforms that promote mitigation against the threat of flooding, update and improve antiquated floodrisk maps and ensure full communication of flood-risk data to communities and home-buyers. Congress must also empower consumer choice in the marketplace by clarifying that private flood insurance is an alternative to the onesize-fits-all NFIP. These reforms will re-establish solid financial footing for the NFIP and contribute to a smarter, safer and more robust system of flood 30 August 20, 2018 / INSURANCE ADVOCATE

Leaders in Congress should not continue to allow short-term extensions that reinforce the status quo, but should pass a comprehensive legislative package that addresses the NFIP’s financial insolvency and better protects the environment and people in harm’s way.

insurance to protect the people and property in the path of severe weather events.” SmarterSafer recently sent a letter to congressional leaders urging long-term reform to the National Flood Insurance Program. Click here to learn more.[IA] About SmarterSafer.org SmarterSafer.org is a national coalition that is made up of a diverse chorus of voices united in favor of environmentally responsible, fiscally sound approaches to natural catastrophe policy that promote public safety. The coalition believes that the Federal government has a role in encouraging and helping homeowners to undertake mitigation efforts to safeguard their homes against natural disasters. At the same time, the coalition opposes measures that put people’s lives at risk at the expense of taxpayers. Measures such as subsidizing artificially low rates for homeowners’ insurance policies help to encourage construction in environmentally sensitive and unsafe areas. The coalition is working to ensure that Congress does not incentivize people to live in harm’s way in places prone to hurricanes and floods.

FOREWORD CONTINUED FROM PAGE 4

injury, and first-and third-party property damage due to cyber events; b. Coverage for insureds’ loss of business income as a result of a breach or attack; also applies to an outage due to a cyber event at a third party on whom the company relies for operations; c. Coverage for extra expenses, including expenses associated with procuring products or services from alternate sources and overtime costs; d. Expansion of the “system failure” definition to include intentional shutdowns to mitigate a cyberattack; e. Coverage for expenses resulting from contractual penalties that an insured may be obligated to pay if a cyber event causes a job delay. Expansion of the privacy breach, and security and privacy wrongful act definitions to include the wrongful retention of private information; g. Expanded definitions of computer systems to include third-party hosted sites, building information modeling and design software; h. Coverage for privacy claims due to the use of drones in mapping and surveying projects. “CyCon is the latest Willis Towers Watson industry-specific cyber solution and was created as a result of close collaboration among our construction group, our cyberinsurance team and our partners at NAS,” said Joe DePaul, head of FINEX Cyber/E&O, North America, Willis Towers Watson.… Enjoy August.[IA]

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