Insurance Advocate February 11, 2019

Vol. 130 No. 3 | February 11, 2019

Regula on Accelera on Deloi e Report Hits Key Areas of Concentra on for Insurers

NYDFS Issues Numerous Disciplinary Actions

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14 Regulation Acceleration Foreword: At the Intersection Steve Acunto, Publisher

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HR Update: New Year Update on New York State and New York City Employment Laws Alfred T. DeMaria

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On the Level: The Human Touch Jamie Deapo

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In the Associations: NAIC Names 2019 Leadership

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MSO: Ready for Spring?

Sue C. Quimby

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In the News:

Contents

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SterlingRisk Hires Guthart as President, CMO PIANJ Supports Producer Duty-of-Care Bill In the News: Physicians Ask Senate Finance to Address Kickback, Other Factors Driving up Drug Costs Chris Wallace to Host Big “I” Legislative Conference

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In the Associations: Insurance Professionals Honored with

PIANY Scholarships 24

On My Radar: If You Do the Crime You Must Do the Time Barry Zalma

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Looking Back: December 18, 1993

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Courtside: Claimant Must Apply to Liquidation Bureau

Before Going to MVAIC Lawrence N. Rogak

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

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In the News: Cannabis and Insurance

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Legal Update: NYDFS Issues Numerous Disciplinary Actions Sari Gabay, Esq. INSURANCE ADVOCATE / February 11, 2019 3

[ FOREWORD ]

STEVE ACUNTO, EDITOR & PUBLISHER

At the Intersection

Congratulations to ELANY at

50!

4 February 11, 2019 / INSURANCE ADVOCATE

annot resist using this space, in which insurance and its intersection with social trends comes to you fortnightly, to note that social civility and successful insuring are related, even interdependent on so many levels. When I read of an utter disgrace – such as the bills providing for late term, I mean late, late term abortions – I am compelled to descry the encroaching sense of existential meaninglessness that such a law augurs. Human life is now something of a matter of convenience.

At the same time a bill to allow assisted suicide was introduced. I awakened expecting to hear that a new bill was introduced allowing abortions for kids in first grade who cannot pass a spelling test and thus burden their mothers’ competing right to comfort. It is a runaway social train and it will affect all of us in one form or another, as conscientious, sentient citizens and God fearing people. As professionals in insurance, our social fabric matters. We must insist that it is stable and worth something. Please share your thoughts.… A liberal (in the sense of legal interpretation) New York appellate court issued a significant decision for New York policyholders, making clear—for the first time—just what is the minimal standard needed to plead a bad faith claim. This is a real beauty.

Reversing the Supreme Court’s decision in D.K Property, Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., which had dismissed D.K. Property’s claim for consequential damages for breach of the implied covenant of good faith and fair dealing, the First Department rejected AIG’s attempt to impose a heightened standard of pleading of bad faith claims—an argument often made by insurance companies and accepted by courts. Additionally, in what stands to be another significant and unheard of move by a New York court, the First Department rejected AIG’s attempt to dismiss D.K. Property’s claim for affirmative attorney fees through a backdoor “duplicative” argument on the grounds that AIG did not appeal that portion of the Supreme Court’s decision. Not such great news for insurers in the abortion capital of America.… Someone is rational, however. Michael Bloomberg called efforts to legalize marijuana “perhaps the stupidest thing anybody has ever done.” Speaking at the U.S. Naval Academy in Annapolis, Maryland recently, Bloomberg said on WBNG-TV: “We have a different kind of problem in America, for example. Last year, in 2017, 72,000 Americans [overdosed] on drugs. In 2018, more people than that are ODing on drugs, have OD’d on drugs. And today, incidentally, we are trying to legalize another addictive narcotic, which is perhaps the stupidest thing anybody has ever done. We’ve got to fight that, and that’s another thing that Bloomberg Philanthropies will work on it in public health.” The position from the billionaire politician would seem to be out of step with Democratic leaders in his state and liberal voters nationwide. Newly re-elected New York Governor Andrew Cuomo, for instance, has made legalization a priority in a December speech outlining the goals for his first 100 days of his new term. Ten states have already legalized the recreational use of marijuana, including Michigan, which became the latest state to do so with an initiative on the ballot in the 2018 midterm election. Estimated to be worth tens of billions of dollars, Bloomberg is one of the richest people in the world and has long hinted at the possibility of presidential run. A close adviser last month hinted the former mayor would be willing to spend whatever was required should he run in 2020. Let’s see if he will and bring some sanity to the left wing.… Almost one-in-three New Yorkers

would face higher costs under a proposed single-payer health plan, and half of the worse-off group would be low- or middle-income, according to a new report from the Empire Center. The report highlights little-noticed data from the RAND Corporation’s analysis of the New York Health Act, which estimated 31 percent of New Yorkers would pay more for health care under single-payer. Among those paying more would be almost half of the working poor – people below 200 percent of the poverty level – who already qualify for free or near-free coverage through Medicaid, Child Health Plus and the Essential Plan. Many beneficiaries of those programs have jobs, and if they pay even a small amount of payroll tax, they would see a net loss. For New Yorkers with employer-sponsored insurance, the report estimates the income “tipping points” at which single-payer taxes would exceed current premium costs. For single workers with no children, the tipping point would be income of about $78,000; above that amount, they would typically face higher costs than they do now. These are among the findings in “Do No Harm: The case against single-payer in New York,” an issue brief by Bill Hammond, the Empire Center’s director of health policy. The report summarizes how the New York Health Act would work and explores its likely consequences for the health-care system, the state budget, the broader economy and ordinary citizens.… And finally some good news – a real mandate for thirty years has proved successful. The Excess Line Association of New York (ELANY) has kicked off its year-long Thirty Years Serving New York celebration. Created by an Act of the New York State legislature in 1988 and commencing operations in 1989, ELANY is a nonprofit industry advisory association charged with assisting excess line brokers comply with the laws, rules and regulations of New York State with regard to excess line insurance. ELANY plays a key role in protecting consumers, facilitating the smooth operation of the excess line market in New York, ensuring that unauthorized insurers writing excess line business in New York are financially strong, and advocating with both policymakers and regulators to continuously improve the ability of the excess line marketplace to meet the emerging needs of consumers, brokers and insurers. “ELANY has been serving New York’s excess line community with distinction for three decades, benefiting consumers as well as excess lines brokers and insurers,” said ELANY Chairman Lance Becker. “We want to celebrate with the entire excess line community while looking forward to the next thirty years of leadership, service and innovation.”

Dan Maher, ELANY Executive Director, is a positive voice and a sharp presence on the insurance scene in New York for many years and had this perspective to offer: “Members and friends of ELANY should look for announcements throughout the year on how they can be part of what is truly a celebration of our joint success. We strive every day to help our members serve New Yorkers and our anniversary celebration would mean little without the people who make the New York excess line market such a vital part of the state’s economy.

We are gratified that New York policymakers recognized ELANY’s value by recently enacting legislation, as they have done numerous times before, that extends ELANY’s mission, this time through 2024. CONGRATS to DAN, LANCE and the good people over at ELANY.

S I N C E

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VOLUME 130 NUMBER 3 FEBRUARY 11, 2019

www.insurance-advocate.com EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Jamie Deapo Alfred T. DeMaria Sari Gabay Lawrence N. Rogak 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, x113 circulation@cinn.com PUBLISHED BY CINN Global Initiatives P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | info@cinn.com www.cinn.com President and CEO Steve Acunto

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[ HR UPDATE ]

ALFRED T. DEMARIA

New Year Update on New York State and New York City Employment Laws u Recently, both New York State (“NYS”) and New York City (“NYC”) have enacted a significant number of new employment and labor laws. The update summarizes the key laws insurance industry employers should be following and the penalties for violations. While NY is a leader in this area of progressive employment practices, neighboring states have similar laws and copycat legislation is sure to follow.

NYS Minimum Wage Law The statewide minimum wage has increased depending on employer location, size and industry.

What if you fail to comply? Liability for wage underpayments and liquidated damages, plus interest, civil and criminal penalties.

NYS Salary Threshold Increased for Exempt Employees What if you fail you comply?

Administrative and executive em-

Employers should revise their Handbooks and company policies to list these new categories protected from discrimination and also make sure to insulate any information relating to employees’ reproductive health from any employment decisions concerning that individual. ployees who are not paid these salary minimums must be paid overtime for any work hours over forty in a workweek and liable for a one-hundred percent penalty on any unpaid overtime amount, plus interest and may be held personally responsible for unpaid wages.

BARRY ZALMA, INC. 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: • “Random Thoughts on Insurance • “Insurance Fraud & Weapons to Defeat Volumes IV and V: Digests from Barry Insurance Fraud” In Two Volumes Zalma’s Blog: ‘Zalma on Insurance’” • “The Compact Book on Adjusting Fiction: Liability Claims: A Handbook for the • “HEADS I WIN, TAILS YOU LOSE” Liability Claims Adjuster” • “Candy and Abel: Murder for • “The Compact Book on Adjusting Insurance Money” Property Claims” • “Ethics for the Insurance Professional” • “Murder And Insurance Fraud Don’t Mix” • “Rescission of Insurance” • “Murder & Old Lace” • “The Insurance Examination Under Oath”

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.

NYC Earned Sick Time Act (“ESTA”)/Earned Safe and Sick Time Act (“ESSTA”) What if you fail you comply? Civil penalties of $500 per employee for each first-time violation. Subsequent violations may result in fines up to $1,000.

Further damages include paying three times the wages that should have been paid for each time an employee took sick leave but was not paid.

NYS Paid Family Leave Law What if you fail you comply? May be criminally liable for a misdemeanor and civilly liable for a fine up to $500, or imprisonment of up to one year, or both. Subsequent violations may result in fines up to $2,500.

NYC and NYS Anti-sexual Harassment Laws What if you fail you comply? May be criminally liable for a misdemeanor CONTINUED ON PAGE 8

6 February 11, 2019 / INSURANCE ADVOCATE

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[ HR UPDATE ] CONTINUED FROM PAGE 6

and civilly liable for a fine up to $500, or imprisonment of up to one year, or both, as well as held liable for compensatory, emotional injury and punitive damages. Also, may be civilly liable for a fine up to $125,000 if it’s a willful violation. Employers are liable for compensatory, emotional injury and punitive damages for sexual harassment.

NYS Corrections Law 23A and NYC Fair Chance Act What if you fail you comply?

Employers who violate Article 23A, regarding the failure to hire employees with a prior criminal record, may be held criminally liable for a misdemeanor and civilly liable for a fine up to $500, or imprisonment of up to one year, or both. Also, liability for lost wages and other damages to the employees affected and subject to civil penalties of up to $125,000. A willful violation may be subject to a civil penalty of up to $250,000.

NYC Stop Credit Discrimination in Employment Act What if you fail you comply?

Liability for lost wages and other damages and may be subject to civil penalties of up to $125,000 for employment decisions made on the basis of an applicant’s credit history. A willful violation may be subject to a civil penalty of up to $250,000.

NYC Salary History Ban What if you fail you comply?

Liability for lost wages and other damages for improper prior salary questions to the employees affected and subject to civil penalties of up to $125,000. A willful violation may be subject to a civil penalty of up to $250,000.

NYC Temporary Schedule Change Law What if you fail you comply?

Liability for compensatory damages or other relief to the employee and a $500 civil penalty for each violation per employee. Additional penalties for retaliation, including a $2,500 fine for terminating an employee, plus reinstatement and back pay..

8 February 11, 2019 / INSURANCE ADVOCATE

In this day and age of increasing legislation on both the state and local level, it is incumbent on insurance industry executives, and, in particular, Human Resources officials, to be uptodate on these employment law regulations.

NYC Fair Work Week Laws What if you fail you comply?

Liability for compensatory damages or other relief to the employee and a $500 civil penalty for an improper scheduling violation per employee.

NYC Freelance Isn’t Free ACT (“FIFA”) What if you fail you comply?

Penalties including statutory damages, double damages, injunctive relief and attorney’s fees for misclassifying employees as independent contractors.

NYC Cooperative Dialogue Law What if you fail you comply?

Liability for lost wages and other damages to the employees affected and may be subject to civil penalties of up to $125,000. A willful violation for failure to accommodate disabled employees may be subject to a civil penalty of up to $250,000.

NYS Wage Theft Prevention Act (“WTPA”) What if you fail you comply?

Employers who fail to provide employees with a written notice at the time of hiring and/or accurate wage statements may be fined up to $5,000 per employee per violation. Discriminating against employees is subject to injunctive and equitable relief, liquidated damages (not more than $20,000), lost compensation, reinstatement or front pay, costs and attorney’s fees.

Sexual and Other Reproductive Decisions On December 20, 2018, the NYC Council added to the list of protected classes. The new categories include arrangements relating to reproductive health included, but not limited to, fer-

tility-related medical procedures, STDs testing and treatment, family planning services, birth control drugs and supplies, emergency contraception, sterilization procedures, pregnancy testing and abortion. The bill is intended to protect women and men from ever fearing whether their personal health and reproductive choices will risk their jobs.

What if you fail to comply?

Standard penalties will be provided in the new law which will go into effect 120 days after the mayor signs the bill. Employers should revise their Handbooks and company policies to list these new categories protected from discrimination and also make sure to insulate any information relating to employees’ reproductive health from any employment decisions concerning that individual. A policy should also be added to reflect the latest lactation rules passed by the Council.

Compliance Is Important What if you fail you comply? In view of the stiff penalties for violations of everyday employment decisions, knowledge of these laws and compliance is an indispensable prerequisite for every NYC, NYS employer.

In this day and age of increasing legislation on both the state and local level, it is incumbent on insurance industry executives, and, in particular, Human Resources officials, to be up-to-date on these employment law regulations.[IA]

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[ ON THE LEVEL ]

JAMIE DEAPO

The Human Touch uThere are plenty of people ready to write off the independent agent as a dinosaur headed for extinction but nothing can be further from the truth.

If forced to admit it all these naysayers know that independent agents have one overpowering secret and that is the human touch they provide.

It’s no secret that the majority of people buy things emotionally and not logically. They buy from people they like and trust. Once that bond has been created, if nurtured properly it is very hard to break.

In order to create that emotional connection, building and maintaining trust takes some serious knowledge about the client or prospect. Who are they? What kind of lifestyle do they lead? What is their tolerance for risk?

What do they value? What are their dreams and goals? How do they prefer to do business?

The more answers you have to these questions the more likely you can create and build a trusting relationship that will last for a long time. That’s why there is so much interest in collecting data. Data can provide information that allows you to segment your customers and prospects making your efforts more effective. It helps you in directing the

10 February 11, 2019 / INSURANCE ADVOCATE

appropriate information to those customers and prospects who might benefit from it without sending it to everyone.

It’s a very important time for all independent agents to review the information they gather from clients. If you’re not asking and maintaining certain information you are putting yourself at a distinct competitive disadvantage.

Are their children and/or other household members in the home? Are they pet owners and do you know what pets they have? Do they operate any businesses out of the home? Are they involved in any work other than their main occupation(s)? What are their hobbies? Do they own jewelry, firearms or collect any items of value? Do they lead an active lifestyle including significant travel? Are they active in the community including serving on non-profit boards? This is all important information related to potential risk they should discuss how they want to handle. It also gives you a very good picture of the client and their lifestyle. An important factor in providing the human touch we are discussing.

One other important area is the communication you have with your clients and prospects. You should focus it primarily on information and education

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.

that is helpful in properly protecting them. That said, all your communication doesn’t need to be risk based as long as it has the potential to be of interest. Some light hearted or fun communications occasionally are also important when developing a strong relationship. Monitoring readership will help you create the proper balance.

Most people relate to stories so try to fashion your communications in that manner. Use your website, blog and social media to post general communications and information. Direct emails or texts should be focused on the segment of your customers that would see value in the information. If you have the opportunity to write or speak about insurance in your community it can be a great tool for developing your agency’s reputation and further solidifying your expertise and professionalism.

Insurance can be boring and is perceived by many as a “necessary evil”.

When you provide the human touch in working with customers you help them see the benefits insurance provides in protecting their lifestyle. You are elevated from their insurance provider to an important player in their family’s well-being and future. That’s a relationship that when nurtured properly is very hard to break.[IA]

ADVERTORIAL

Ready for Spring?

By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE - Assistant Vice President/Media Editor uWHETHER THE GROUNDHOG D OE S OR D OE SN’ T SE E H I S SHADOW, spring will arrive before long. With warming temperatures come potential hazards to your insureds.

Helping clients navigate and prepare for the issues that come with the spring thaw is another sign of the true insurance professional.

Most of the United States is subject to freezing temperatures. Freezing and thawing take their toll on roads – as demonstrated by the huge potholes that seem to be everywhere. Hitting a pothole can mean serious damage to the car, including causing the driver to lose control and hit another car or pedestrian. Spring thaw and rains means that the potholes are often filled with water and hard to see.

The American Automobile Association estimates that pothole damage costs vehicle owners $3 billion per year at about $300 per vehicle (https://www.oregon.aaa. com/2016/02/pothole-damage-costs-u-sdrivers-3-billion-annually/). Over a five year period,16 million cars were damaged by potholes. Damage to the car is covered if the owner carries collision coverage.

However, this would not include wear and tear damage to the tires caused by driving on pothole covered roads. Liability for damage to another car or injury to a pedestrian would fall under liability coverage.

In addition to potholes, spring driving has other hazards. Melting snow makes roads wet and sometimes slippery. Black ice may be lurking. This is especially true when warm days transition to nighttime temperatures that dip below freezing.

Animals, motorcyclists and pedestrians are out in greater numbers. Check tires for proper pressure and tread. Tire pressure may be low as cold temperatures cause them to be underinflated. Proper tread helps move water away from the tire, meaning safer driving.

Building foundations are susceptible to damage from changes in both temperature and moisture content of the surrounding soil. Concrete is porous, which means moisture gets inside. Over

time, the freezing and thawing can cause cracks. Excess moisture in the soil can create similar problems, as soil expands when it freezes and may lead to uneven settling of the foundation or other damage. After the snow melts is the ideal time to inspect for cracks, gaps, holes or displacement.

Salt left on vehicles, including snow blowers, tractors or other equipment can cause rust damage to undercarriage, exhaust, muffler and brakes. Such damage can be avoided by washing the vehicles thoroughly, especially the undercarriage.

Homeowners or businessowners policies may exclude damage, such as that caused by adding salt to the driveway, parking lot or walkways, as normal wear and tear. Trees that are damaged by heavy snow or driveway cracks resulting from freezing and thawing are normally excluded from coverage. However, damage caused by others, such as neighbors, contractors or municipal and state workers, may be reimbursable. Damage done by snow plows may be covered by the municipality. If a neighbor damages your driveway, landscaping or lawn through salt application or snow plowing, there may be recourse through their homeowners coverage.

Check the roof for damage that may

have been caused by snow, ice, wind, rain and falling tree limbs during the winter. This includes damage caused by ice dams or damage to gutters from ice and snow. If tree limbs have fallen, check to see if the tree has died and needs to be removed so it does not fall on anything or anyone and cause damage or injury. Check dryer vents for lint buildup– especially if the outlet has been blocked by snow. Water lines may not have been properly drained prior to the cold weather, and should be checked for leaks. Winter damage can be especially devastating to businesses that rely on grass and landscaping, such as golf courses.

Spring brings warmer weather and renewal, but there are still issues to be aware of. Helping clients prepare for and deal with damage from the winter is another value-added service of the professional insurance agent.

R

139 Harristown Road, Suite 100 Glen Rock, NJ 07452 (800) 935-6900 | www.msonet.com INSURANCE ADVOCATE / February 11, 2019 11

[ IN THE NEWS ]

SterlingRisk Hires Guthart as President, CMO u Woodbury, NY—Sterling-Risk Insurance, one of the nation’s top independently owned insurance brokerages, has hired Steven Guthart (pictured right) as President and Chief Marketing Officer. Guthart brings more than 30 years of industry experience and technical expertise to SterlingRisk, having built robust senior carrier relationships during his tenure as President, Brooklyn Operations, with HUB International Northeast Limited. SterlingRisk CEO David Sterling announced Guthart’s hiring.

“Steven will be a member of our Executive Cabinet, responsible for overseeing marketing and assisting with mergers and acquisitions,” observed Sterling. “His experience includes managerial leadership roles in international

underwriting operations and multinational accounts. We welcome Steven to SterlingRisk and look forward to his many contributions as he enriches our culture and expands our capabilities.”

At HUB Northeast, Guthart was most recently responsible for general commercial business as well as one of the largest senior care practices insuring nursing homes and assisted living facilities throughout the United States. Additional responsibilities included managing all business planning, budgeting, marketing, new business development, client services, staffing, and cross-sell initiatives. Previous responsibilities at HUB Northeast included serving as the wrap-up practice leader and a member of Hub International Limited’s National Claims Team. He

PIANJ Supports Producer Duty-of-Care Bill uTRENTON, N.J.—The Professional Insurance Agents of New Jersey submitted written testimony to support S-2475, which would prohibit application of a fiduciary standard to insurance producers, before the state Senate Commerce Committee on Jan. 17. The bill is sponsored by Senate President Stephen M. Sweeney, D-3, and Senate Commerce Committee Chair Nellie Pou, D-35. The bill was passed out of the committee unanimously and now goes to the full Senate for a vote.

Only a handful of states, including New Jersey, have unclear laws regarding insurance producers’ duty of care, which causes many questions to be resolved by case law.

“PIANJ supports legislation to clarify that insurance producers are expected to exercise ordinary and reasonable care and skill in renewing, procuring, binding or placing insurance, and are fully 12 February 11, 2019 / INSURANCE ADVOCATE

liable for negligent actions, but that they are not subject to civil liability under standards governing the conduct of a fiduciary or a fiduciary relationship,” said PIANJ in its testimony.

According to PIANJ’s testimony, the errors and omissions insurance, which protects agencies and their clients in the event of, or allegation of, professional errors, is more costly in New Jersey— compared to peer states—because of the Garden State’s extension of liability beyond the normal duty-of-care. The bill’s provisions also include strengthening the existing “affidavit of merit” statute that, in theory, makes sure that lawsuits must have some merit before proceeding, but which, in practice, often falls short of that goal.

According to PIANJ, this legislation protects consumers—both individuals and the many small businesses that turn

also served as a technical resource for the Northeast and was part of HUB Northeast’s Mergers & Acquisitions team.

Prior to joining HUB Northeast in 2005, Guthart served as Vice President and Partner of a regional brokerage based on Long Island, where he was responsible for the commercial lines operations. He has held various management positions with major insurance carriers, including American International Group, Tokio Marine, and Aetna Casualty & Surety, as well as other regional brokerage firms, including Corak & Guthart Financial Services, where he was Principal/President of the company.

Guthart graduated cum laude from New York’s St. John’s University, School of Risk Management, Insurance and Actuarial Science (formerly known as The College of Insurance), where he became one of the youngest members of their adjunct faculty at the age of 23. He frequently hosts educational seminars for staff members and previously led lecture discussions while holding positions with carriers and brokers.[IA]

to insurance agents for their business coverage. It ensures that they will continue to have the access to the expertise and personal attention of an insurance agent whom they know and who, in turn, is familiar with their individual needs.

PIANJ representatives who attended the committee meeting in support of the bill included: President Rip Bush Jr., CPIA; Vice President Michael DeStasio Jr.; past President Anthony F. Bavaro, CIC, CRM; past President and PIA National Director Paul Monacelli, CIC, CPIA; Director Andrew Harris Jr., CIC, AAI; Government & Industry Affairs Committee Member Christopher J. Powell; and PIANJ Director of Government & Industry Affairs Bradford J. Lachut, Esq. Clarifying and standardizing the level of care insurance producers are expected to exercise is one of PIANJ’s top legislative priorities that the association is working toward this legislative session. It also is addressing the importance of accurate quoting of automobile policies and combating personal auto “step down” provisions in personal automobile policies.[IA]

Your New York DBL/PFL Partner

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Regulation Acceleration Deloitte Report Hits Key Areas of Concentration For Insurers

With the 2018 mid-term elections over, the Democratic Party leadership has indicated that the House Financial Services Committee will broadly focus its legislative agenda toward protecting consumers and investors, preserving financial sector stability, and encouraging responsible innovation in financial technology. Meanwhile, we expect that the Republicancontrolled Senate will continue to focus its legislative agenda on remaining refinements not already addressed in the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) passed in 2018. Beyond the divided Congress, we note that the regulatory agencies are now all led by President Trump appointees who have discretion, subject to Congressional oversight, to calibrate their supervisory policies and programs.

Regardless of what definitive changes lawmakers and regulators might make, such as the Financial Stability and Oversight Council’s recent de-designation of individual insurers as Systemically Important Financial Institutions, insurance organizations should continue to drive effectiveness and efficiencies across their risk and compliance programs so they can meet applicable laws, regulations, and supervisory expectations.

14 February 11, 2019 / INSURANCE ADVOCATE

...insurance organizations should continue to drive effectiveness and efficiencies across their risk and compliance programs so they can meet applicable laws, regulations, and supervisory expectations.

CYBERSECURITY AND DATA PRIVACY

Cybersecurity and privacy are critical issues receiving regulatory attention from every direction.

In an age when hacking and data breaches have become so commonplace that they are almost expected, cybersecurity continues to dominate both the headlines and the regulatory agenda. This includes reporting on the cost of cybercrime (and on the investments organizations are making to enhance their cyber risk management programs), as well as a heightened focus on cybersecurity regulation and compliance.

For insurers to remain competitive, they need the ability to acquire and manage vast quantities of data to provide more relevant coverage for consumers. While marketplace innovations such as wearable computers and Internet of Things provide the ability to collect such data, having access to large volumes of contextual data introduces its own risk, related to unintended processing, loss, and theft. The risk is compounded because of changes in business models, such as adoption of cloud-based storage and computing, use of large-scale process automation, and increased adoption of data processors, to name a few.

US policymakers are keeping pace by introducing unprecedented privacy and cybersecurity laws. Governments outside the US are also focusing on cloud and data residency requirements, limiting the movement of data across borders.

A selection of key legislative and regulatory developments is presented below to provide insights into the nature of issues that lawmakers are asking organizations to address.

EU General Data Protection Regulation This year saw the European Union (EU) General Data Protection Regulation (GDPR) take effect in May 2018. The GDPR regulates the processing by an individual, a company or an organization of personal data relating to individuals in the EU. Among numerous protections offered by GDPR, consumers need to be informed if their data is moved outside the EU; have the right to be “forgotten”; and must be given a chance to contest the use of automated algorithms. Other rights include the right to object to the use of one’s data for marketing purposes, as well as the right to data portability (i.e., the ability to receive one’s data in a machine-readable format and send it elsewhere, perhaps to another insurer competing for that consumer’s business).

Insurers operating in the EU have numerous obligations under the GDPR—many of which are consistent with other data security regulations—including the obligation to appoint a data protection officer. Data transfers from the EU to the US are covered by the EU-US privacy shield framework.

California Consumer Privacy Act In the United States, the State of California enacted the California Consumer Privacy Act of 2018 (CCPA), that greatly expands data subject rights and introduces provisions for civil class action lawsuits based on statutory or actual damages. The law takes effect in July 2020.

Although there may still be amendments before the law takes effect, for now it provides California citizens with some similar protections to the GDPR. These include the right to access personal information (and to know how a company uses that information), as well as the right to have information removed in some circumstances.

Among other rights, the CCPA “authorizes a consumer to opt out of the sale of personal information by a business and prohibits the business from discriminating against the consumer for exercising this right, including by charging the consumer who opts out a different price or providing the consumer a different quality of goods or services, except if the difference is reasonably related to value provided by the consumer’s data.”

Consumers have a right to private action in response to uncorrected CCPA violations, and the state Attorney General is also empowered to pursue civil penalties. There are certain exemptions that are granted within the law for data that are subject to Health Insurance Portability and Accountability Act (HIPAA) and Gramm-Leach-Bliley Act (GLBA).

New York Department of Financial Services cybersecurity regulation For US insurers, the New York State Department of Financial Services (NYDFS) regulation was the first of its kind–and the first to directly affect a significant number of insurers. It took effect on March 1, 2017, with a phase-in period concluding on March 1, 2019. The regulation requires nearly 2,000 insurers registered with the state to establish and maintain a risk-based cybersecurity program and supporting capabilities.

The two-year phase-in was intended to provide insurers a glide path toward compliance. Companies subject to the regulation should by now have satisfied most of its requirements, which include: creation of a written cyber security policy; designation of a Chief Information Security Officer (CISO); periodic penetration testing and vulnerability assessment; data preservation that enables accurate reconstruction of all financial transactions; and necessary accounting to respond to a cybersecurity event for at least three years.

To achieve compliance, a company’s board of directors must be involved in the creation of standards and must receive regular reports on cybersecurity. In addition, companies are required to file a risk and safeguards assessment in their annual report to regulators.

The next and final phase of the NYDFS regulation—to be completed by March 1, 2019—is the requirement that financial services organizations establish cyber security controls and protocols for third-party risk management (TPRM). This includes requirements related to developing and implementing a TPRM program, maintaining a third-party inventory for CONTINUED ON PAGE 16 INSURANCE ADVOCATE / February 11, 2019 15

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service providers that access nonpublic information (NPI) or information systems, and performing due diligence and ongoing monitoring.

It is important to note that the NYDFS regulation expands the scope of covered third parties beyond typical vendors to include all third parties with access to NPI. Given this broad purview, programmatic essentials such as governance, reporting, and broader end-to-end life cycle management are key for the sustainable management of an effective TPRM program.

In the US, the National Association of Insurance Commissioner’s (NAIC) Insurance Data Security Model Law “requires insurers to implement an information security program and investigate and notify the state insurance commissioner of cybersecurity events.” The specified model bears many functional similarities to the New York regulation. As such, compliance with the New York regulation is considered sufficient to establish compliance with the NAIC model.

Third-Party Risk Management [Call out box by the NYDFS section] TPRM may now be viewed as a basic regulatory expectation. Examples of leading industry practices for an effective TPRM program related to cybersecurity and data risk include: • Adequate reporting and governance, along with training to facilitate accountability and oversight • Streamlined processes for third-party management, including stakeholders from sourcing, legal, etc.

• Appropriate third-party termination practices that address retention and destruction of records In addition, a comprehensive TPRM program should address broader risk and control management practices, including service level agreement (SLA) performance; exit strategy; financial viability; resiliency; reputational review; and regulatory compliance.

Organizations today should consider investments in revisiting and validating their TPRM programs to formalize the program scope, enhance inventory processes, and optimize due diligence and assessment procedures—and to integrate contract management of their third-party landscape.

All of these components should be managed as part of a broader risk management and information governance effort that stretches beyond the CISO and IT. All data users— whether internal or external—are responsible for data security.

However, it is the responsibility of the board and executive leadership to provide the required resources, authority, and accountability to ensure adequate data security across the enterprise. Also, it is critical for the board to lead by example, providing the necessary tone-at-the-top to convey the importance of properly managing this prime operational risk.

NAIC Big Data Working Group Even as the privacy debate pushes other data-related issues from the headlines, regulators in the US continue their work.

The NAIC created the Big Data Working Group to, among other things, “review current regulatory frameworks used to oversee insurers’ use of consumer and non-insurance data” 16 February 11, 2019 / INSURANCE ADVOCATE

The outlook for cybersecurity and data privacy continues to indicate strong regulatory developments, with several countries either implementing or enhancing existing regulatory requirements. and “assess data needs and required tools for state insurance regulators to appropriately monitor the marketplace and evaluate underwriting, rating, claims and marketing practices.”

Big data concerns cited by the NAIC include the following: • Complexity and volume of data, which may present hurdles for smaller insurers • Insurance regulatory resources for reviewing complex rate filings • Lack of transparency and the potential for bias in algorithms used to synthesize big data • Highly individualized rates that lose the benefit of risk pooling • Collection of information that is sensitive to consumers’ privacy (or potentially discriminatory) • Cyber threats to stored data The outlook for cybersecurity and data privacy continues to indicate strong regulatory developments, with several countries either implementing or enhancing existing regulatory requirements. Within the United States, organizations can also expect to see continued attempts toward simplification of regulatory compliance requirements, such as those noted within the Core Principles report from the Treasury, as well as continued efforts toward harmonization of data privacy and cybersecurity laws and regulations.

“BEST STANDARD”

How will Regulation 187’s “best interest” standard affect the life insurance business?

As customer protection regulations for the financial services industry zigzag from the vacating of the Department of Labor’s fiduciary rule to proposed new rules by the SEC in its Regulation Best Interest, the NYDFS has published its final version of Insurance Regulation 187.

Regulation 187 applies a “best interest” standard to annuity and life insurance product recommendations that becomes effective on August 1, 2019 for annuities, and on February 1, 2020 for life insurance products.

This regulation will have far-reaching impacts on insurers for a number of reasons, including (1) its scope of applicability and (2) its interconnected effects on agents/producers and insurers—particularly the obligation for insurers to supervise, monitor, and take corrective action for any consumer or other third party harmed by an agent/producer. In essence, insurers may potentially be responsible for paying when a consumer is affected by agents and producers failing to act in the consumer’s best interest.

Scope of applicability:

• Includes insurers, producers, life insurance, annuities, and in-force policies/contracts • Applies to policies and contracts delivered—or issued for delivery—in New York • Applies to recommendations relating to entering into a policy, or to refraining from entering into any transaction • Includes transactions for which recommendations are made at the point of sale for an insurance product, and post-sale during the servicing of the product for the consumer (e.g., election of a contractual provision) Integrated end-to-end requirements: • Agents/producers. Recommendations for the purchase, replacement, or retention of life and annuity products must meet a best interest standard of care or suitability obligation, must cover many disclosures, and must appropriately address consumer insurance needs and their financial objectives.

• Supervision by insurers. Insurers must establish and maintain a system of supervision—along with standards and procedures—reasonably designed to achieve insurer and producer compliance.

• Oversight by insurers. Insurers must establish a system of audit that is reasonably designed to achieve compliance with the insurer’s and producer’s responsibility.

• Books and records. Insurers must maintain all records, including appropriate information about a customer’s financial situation and the complexity of the transaction, as well as documentation to support the agent/producer recommendation.

Regulation 187 may present significant challenges The requirements of Regulation 187 come at a time when the life insurance industry is already facing difficult challenges to drive revenue and manage costs. For example, there is increased competition to grow and differentiate its products, increase agent retention, and expand margins. Digitization is expected to accelerate the ability for life insurance carriers and agents/distributors to provide consumers with a more interactive and informative discussion of product alternatives. Regulation 187 in New York is added complexity in an already-difficult business environment. Regulation 187 will require insurers to adapt their sales process, producer training, and home office supervisory and compliance operations.

Aside from annuities, there is the added complexity of life insurance for which there are fewer solutions presently available.

The confluence of these factors, along with uncertainty about whether other states might follow New York’s lead, will present significant potential challenges in 2019 and into 2020.

CONDUCT RISK

Key trends related to conduct risk and its link to corporate culture We continue to see global interest across jurisdictions in advancing a conduct and culture agenda. This suggests that conduct risk is an issue that is here to stay. Outside the US there has been a general shift from approaches that are pragmatic and principles-based to approaches that are more rulesbased (such as Market Abuse Regulation [MAR] and Markets

in Financial Instruments Directive [MiFID II]).

Within the US, the Federal Reserve Bank (FRB) is most active around conduct in the capital markets space. The FRB Board of Governors is executing horizontal exams via its Large Institution Supervision Coordinating Committee (LISCC), with a focus on how firms are addressing business conduct and compliance risk, and on firms’ capabilities related to detection and prevention of misconduct.

As a concept, conduct risk has taken on greater meaning since the financial crisis. Ten years ago, “business practices” and “conduct” started becoming a more prominent topic. Five years ago, firms began establishing frameworks to identify, manage, and monitor conduct as a new dimension of risk.

Today, numerous industries are coming to terms with how to proactively prevent employee misconduct and manage company culture.

Key trends Enterprise view of conduct risk. Large US institutions are expected to have an enterprise-wide conduct risk management program and an enterprise-wide conduct risk function. The regulatory focus is on (1) continuous monitoring of conduct and improvement and (2) detection and prevention mechanisms to influence how strategic objectives are being achieved.

The traditional focus on employee conduct is converging with a newer focus on market conduct, business practices, and impact on clients and markets. Also, there is significant focus on development of internal controls, creating a need to rationalize activities in order to efficiently manage the program.

This may lead to some realignment of supervisory/ surveillance activities.

Analytics and predictive intelligence applied to conduct and culture. Firms are looking to generate meaningful insights on employee conduct for the board, senior management, and regulators. The ability to predict and prevent employee misconduct is a business imperative across institutional, retail, and wealth management sectors. Firms are looking to identify employees with poor conduct sooner; proactively identify the next population of at-risk employees and activities; and develop improved approaches for heightened supervision and targeted surveillance/monitoring.

Challenges and opportunities from emerging technologies.

Technology continues to disrupt how firms engage, deliver, monitor, and interact with customers. As a disruptor, technology gives rise to new business practices that can lead to new or increased conduct risks and challenges (e.g., digital banking, robo-advisers, electronic/algorithmic trading, new products such as cryptocurrency). However, it also creates opportunities to implement and refine controls that support sound conduct risk management (e.g., harnessing the increased availability of data to better predict—or more quickly detect— employee misconduct).

Compensation and remuneration focus. This continues to be a significant area of attention for regulators. The FSB is planning to release recommendations on how firms can enhance their capacity to consider and monitor the effectiveness of CONTINUED ON PAGE 18 INSURANCE ADVOCATE / February 11, 2019 17

CONTINUED FROM PAGE 17

compensation tools. The FSB’s recommendations are also expected to highlight mechanisms for promoting good conduct and addressing misconduct risk. In Australia, the Banking Royal Commission reviewed a number of financial services institutions and identified remuneration as one of the root causes of misconduct.

MARKET CONDUCT

Insurers can expect increased regulatory scrutiny of market conduct.

Market conduct has become a hot topic in insurance regulation recently, and its importance will likely continue to grow.

The financial crisis forced insurance supervisors worldwide to reexamine their approaches to regulation, and to evaluate the industry’s potential systemic risk. In 2015, the International Association of Insurance Supervisors (IAIS) released an issues paper noting, “In the aftermath of the financial crisis, supervisors’ immediate priorities were to focus on prudential regulatory issues, including strengthening capital.

As the concept of conduct of business risk now gathers momentum globally, it is timely that the IAIS considers this form of risk in more detail within the context of supervision of the insurance sector.”

Today, efforts that incorporate new or changed approaches to solvency regulation are nearing completion, or have been completed. These include: the Solvency Modernization Initiative in the US; Solvency II in Europe; and Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame), and the International Capital Standard at the global level. Regulators are now freer to focus on other aspects of insurance supervision, particularly market conduct regulation. This increased focus on market conduct may be aided by the increased availability of analytical and technological tools for regulators; insurers would do well to proactively review their own practices to help achieve compliance.

What are companies doing to mitigate insurance fraud?

Despite the barriers reported by the NAIC survey, a number of companies have taken steps to identify and reduce insurance fraud, waste, and abuse—with varying degrees of success. A recent study by the Coalition Against Insurance Fraud found that a growing number of insurers are embracing and expanding their use of technology to improve their anti-fraud capabilities. Companies typically use automated red flags and/or business rules to identify insurance fraud; however, while such capabilities do add value, they are not sufficient to combat the more sophisticated fraud rings, or to detect many types of soft fraud.

More advanced analytics techniques include: • Data exploration. Identifying trends, outliers, and circumstantial anomalies through exploratory data analysis.

• Geospatial analysis. Using geographic coordinates to identify spatial patterns and anomalies.

• Social networking. Visualizing and analyzing relation18 February 11, 2019 / INSURANCE ADVOCATE

InsurTechs are harnessing the power of the latest technologies, including mobile and apps, AI, algorithms and robo-advice, smart contracts, the Internet of Things (IoT), and blockchain/distributed ledger technology (DLT). ships to identify key players and uncover hidden patterns.

• Machine learning. Leveraging advanced modeling techniques such as neural networks, random forests, and regression to uncover subtle fraud patterns.

Advanced analytics techniques go beyond the traditional red flags and business rules, enabling companies to identify hidden fraud patterns that were previously undetectable. For example, with machine learning, companies can quickly and efficiently uncover situations where a person is fraudulently filing multiple claims with different insurance companies using slight modifications of their name (e.g., John Smith, J Smith, John Smyth). Another example might be where machine learning detects that subtle circumstances or data signals for a claim fall outside the boundaries of data normalcy across a broad population of past and current claims. Advanced capabilities such as these are rapidly improving, giving insurance companies new and powerful weapons to fight back against the fraud epidemic.

CAPITAL STANDARDS

Ongoing efforts to develop international and US capital standards for insurers are making progress.

A decade ago, the survival of the world’s financial system seemed at risk, prompting governments and regulators to undertake various actions to ensure the system’s survival. In the aftermath of the crisis, legislators and regulators began work to minimize the possible systemic risk posed by various sectors of the financial services industry.

A five-year confidential reporting and monitoring period will begin in 2020, during which the IAIS and group-wide supervisors will monitor the results. This could lead to further changes to the ICS; however, stability is generally expected, in contrast to the significant changes that typically occurred in the field-testing period. During the monitoring period, the ICS will not be considered a prescribed capital requirement (PCR), and thus will not in and of itself trigger supervisory action.

In the US, the NAIC has been engaged in a similar effort to develop a group capital calculation (GCC) for US insurance groups.

At the IAIS, work on ComFrame—including the adoption of ICS 2.0—is in its final stages. The next field testing is scheduled to begin in April 2019. One more consultation on

ComFrame is then expected in mid-June 2019. Subsequently, in November 2019, the requirements are scheduled for adoption during the IAIS Annual General Meeting.

US state insurance regulators at the NAIC have charged the Group Capital Calculation (E) Working Group with constructing “a US group capital calculation using a riskbased capital (RBC) aggregation methodology; liais(ing) as necessary with the ComFrame Development and Analysis (G) Working Group on international capital developments and consider(ing) group capital developments by the Federal Reserve Board, both of which may help inform the construction of a US group capital calculation.”

It is important to note that while the ICS is ultimately intended to be a prescribed capital requirement, the NAIC has insisted its GCC is just that—a calculated metric designed to help regulators assess the solvency of insurance groups; not a standard. The NAIC’s working group has issued a number of drafts, each time revising its proposed calculation in response to stakeholder feedback. Field testing is expected to further inform development of the GCC.

INSURTECH

Technology innovation is shifting the regulatory paradigm.

InsurTech is the next wave of technology innovation in insurance, pushing the entire industry to be more customer-centric, data-driven, and platform-based. This trend is being fueled by the exponential growth of data, computation power, and connected devices—and by data democratization. It is also being fueled by an influx of capital, with more than $10 billion invested in InsurTech companies over the past five years.

InsurTechs are harnessing the power of the latest technologies, including mobile and apps, AI, algorithms and robo-advice, smart contracts, the Internet of Things (IoT), and blockchain/distributed ledger technology (DLT). All of these technology innovations have significant potential benefits for consumers; however, they also pose challenges that may trigger regulatory scrutiny.

So far, InsurTechs have primarily affected the insurance industry by supporting and serving legacy insurers, as opposed to disrupting the established market. In many cases, legacy insurers have acquired technology from InsurTechs and incorporated it into their own ecosystems, or partnered with InsurTechs that provide software-as-a-service (SaaS) or licensing solutions.

Regulators may find it challenging to develop a comfort level with InsurTech innovations and their proposed uses.

Also, they may have trouble monitoring and assessing the effect of InsurTech use. For example, while robo-advisers could enable insurance consumers to receive advice at lower price points, regulators need to make sure the provided advice essentially conforms to the same general principles that guide humans when offering similar advice.

Wearables and other biometric devices could potentially enable insurers to gather large amounts of data to perform nolab underwriting. Also, the ability to track policyholder behaviors could enable insurers to offer health advice (both physical and mental), effectively merging the roles of life insurer and health insurer. Smart devices in homes, vehicles, industrial

facilities, and elsewhere could enable insurers to better select, price, and prevent risks. However, for all these innovations, regulators need to be concerned about outcomes—including any possible discriminatory impacts.

Recognizing this need, the NAIC established an Innovation and Technology (EX) Task Force to monitor new InsurTech developments and help regulators stay informed. In a release issued after numerous regulators attended the InsurTech Connect conference in late 2018, NAIC CEO Mike Consedine said, “We’re going to see more insurance innovation in the next 10 years than we’ve seen in the last 150. Regulators and innovators must work together to educate each other about the new technology, its impact on the marketplace and consumers in order to effectively regulate it.”

For regulators, significant concerns are likely to include privacy and transparency, and the level of consumer education in using new products and platforms. For insurers, a significant concern might be how well regulators understand the emerging technologies. Thus, as insurance companies employ more InsurTech, Consedine’s call for regulators and innovators to educate each other might be of prime importance.

For now, the biggest issue may be that regulators will simply say “no” if they do not have sufficient information or expertise to analyze and understand InsurTech innovations.

To address this issue, a key goal of the NAIC’s State Ahead strategic initiative—scheduled for completion in 2020—is to provide the resources for state regulators to effectively analyze and regulate new technologies and technology uses.

In the meantime, the best available option for insurers might be to inform and involve regulators early in the process of InsurTech adoption. InsurTech has the potential to transform the relationship between regulators and regulated by emphasizing the importance of working together from the beginning in order to get to “yes.” This could help bring relevant, innovative products to market more quickly, which is something all stakeholders should find appealing.

TAKING THE LEAD IN TIMES OF CHANGE

Today’s regulatory environment is in the midst of significant and unpredictable change, driven by a variety of forces including political shifts, new social norms and behaviors, and technological innovation. To succeed in this challenging environment, companies need to actively look for ways to improve the effectiveness and efficiency of their compliance strategies and operations. Technology is likely to play an increasingly important role in this pursuit. Robotic process automation, for example, is being widely adopted by compliance-related functions to help them do more with less. At the same time, emerging technologies such as artificial intelligence and advanced analytics are making it possible to do things that have never been done before. Innovations like these can create business value no matter which way the regulatory winds might shift -- enabling leaders to take action confidently and decisively in times of significant and ongoing change.

Special Thanks to: Leadership CONTINUED ON PAGE 20 INSURANCE ADVOCATE / February 11, 2019 19

CONTINUED FROM PAGE 19

Monica O’Reilly Regulatory & Operational Risk Leader Managing Director | Deloitte Risk and Financial Advisory Deloitte & Touche LLP monoreilly@deloitte.com Chris Spoth Executive Director, Center for Regulatory Strategy, Americas Managing Director | Deloitte Risk and Financial Advisory Deloitte & Touche LLP cspoth@deloitte.com Rich Godfrey National Advisory Insurance Leader Principal | Deloitte Risk and Financial Advisory Deloitte & Touche LLP rgodfrey@deloitte.com Authors Elia Alonso Global Conduct Risk Leader Principal | Deloitte Risk and Financial Advisory Deloitte & Touche LLP elalonso@deloitte.com George Hanley Managing Director | Deloitte Risk and Financial Advisory Deloitte & Touche LLP ghanley@deloitte.com Jordan Kuperschmid Insurance Regulatory & Operational Risk Leader Principal | Deloitte Risk and Financial Advisory Deloitte & Touche LLP jkuperschmid@deloitte.com John Lucker Global Advanced Analytics Market Leader Principal | Deloitte Risk and Financial Advisory Deloitte & Touche LLP jlucker@deloitte.com Howard Mills Global Insurance Regulatory Leader Managing Director | Deloitte Risk and Financial Advisory Deloitte & Touche LLP howmills@deloitte.com Jeff Schaeffer SOC for Cybersecurity Solution Leader Managing Director | Deloitte Risk and Financial Advisory Deloitte & Touche LLP jschaeffer@deloitte.com Julie Bernard Principal | Deloitte Risk and Financial Advisory Deloitte & Touche LLP juliebernard@deloitte.com 20 February 11, 2019 / INSURANCE ADVOCATE

David Sherwood Managing Director | Deloitte Risk and Financial Advisory Deloitte & Touche LLP dsherwood@deloitte.com Bryan Berkowitz Senior Manager | Deloitte Risk and Financial Advisory Deloitte & Touche LLP bberkowitz@deloitte.com Andrew Mais Senior Manager | Deloitte Services LLP amais@deloitte.com Nitin Pandey Senior Manager | Deloitte Risk and Financial Advisory Deloitte & Touche LLP npandey@deloitte.com About the Center The Deloitte Center for Regulatory Strategy provides valuable insight to help organizations in the financial services, health care, life sciences, and energy industries keep abreast of emerging regulatory and compliance requirements, regulatory implementation leading practices, and other regulatory trends.

Home to a team of experienced executives, former regulators, and Deloitte professionals with extensive experience solving complex regulatory issues, the Center exists to bring relevant information and specialized perspectives to our clients through a range of media including thought leadership, research, forums, webcasts, and events.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

Copyright © 2018 Deloitte Development LLC. All rights reserved.

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[ IN THE NEWS ]

Physicians Ask Senate Finance to Address Kickbacks, Other Factors Driving Up Drug Costs uCiting unaffordable costs of common, essential drugs such as insulin, the Association of American Physicians and Surgeons (AAPS) provided testimony for the Jan 29 Senate Finance Committee hearing on high drug prices.

The answer is not a government-run pharmaceutical industry, but rather unleashing the “competitive market forces that provide abundant options and push prices down in almost every other sector of the American economy.”

Specific solutions recommended by AAPS include: • End the safe harbor to the Medicare Anti-Kickback Statute. A safe harbor created for Group Purchasing Organizations (GPOs), which was supposed to lower prices, was extended to Pharmacy Benefit Managers (PBMs). Diabetes patients are one group particularly hard hit by the collusion between these middlemen and manufacturers. For example, lower cost generic insulin drugs are excluded from plan formularies, when brand name manufacturers agree to pay larger “rebates” to PBMs. • Address anti-competitive manufacturer tactics that delay introduction of generics. The FDA under the leadership of Scott Gottlieb, M.D., has made welcome progress in increasing the number of lower cost generic drugs available to American patients.

In 2018, the agency approved 971 generics, more than in any other year. AAPS urges reintroduction of the “Creating and Restoring Equal Access to Equivalent Samples Act of 2018” (CREATES Act, which aims to promote drug price competition by making it easier for medicines whose patents have expired to be sold as less expensive generic versions.)

• Cut the red tape impeding innova22 February 11, 2019 / INSURANCE ADVOCATE

tive care models. Independent physicians are providing tremendous savings to patients with in-office dispensing of prescriptions that cut out the cost increases caused by middlemen like PBMs. For example, a 72-year-old female patient with multiple chronic conditions purchases all nine of her medications through a Direct Primary Care office for $14.63/month.

Through her Medicare “coverage” her cost would be $294.25 per month. Reintroduction and passage of the Direct Primary Care Enhancement Act would increase patient access to this promising delivery model by simply clarifying that Health Savings Accounts can be used for these arrangements.

AAPS thanks the Committee for considering this subject despite intense pressure to preserve the status quo from special interests that benefit from high prices.[IA]

issues important to independent agents and brokers. Wallace has a decades-long journalism career. He reported from the ABC News desk as a senior correspondent for Primetime and 20/20 and as an anchor on the longest running show on television, NBC News’ Meet the Press.

Wallace has won every major broadcast news award, including three Emmys, the Peabody Award and the DupontColumbia Silver Baton Award.

With divided government now that Democrats control the House of Representatives, combined with one of history’s most unique administrations, Chris Wallace will be able to offer insights on the inner workings of Washington,” says Bob Rusbuldt, Big I” president & CEO. Chris deals with all of the decision makers and power players. I look forward to talking with him about issues such as trade policy, the economy, immigration policy, taxes, investigations, the 2020 presidential race, Medicare for all and the future of health insurance, and many more political issues of the day.”

The Big I” Legislative Conference is the insurance industry’s best-attended, most effective legislative meeting. This year’s event will take place May 8-10 at the Renaissance Washington DC Downtown Hotel.

The Legislative Conference is an opportunity for Big I” members to discuss important issues with their congressional representatives. Top issues this year

Chris Wallace to Host Big “I” Legislative Conference u WASHINGTON, D.C. —The Independent Insurance Agents & Brokers of America (IIABA or the Big I”) announced that FOX News Sunday host Chris Wallace will be a featured speaker at the annual Big I” Legislative Conference.

On Friday, May 10, Big I” President & CEO Bob Rusbuldt will sit down with FOX Wallace during the General Session Breakfast to discuss the current political landscape and how it affects

[ IN THE NEWS ] include the NFIP, TRIA, data security/ privacy, crop insurance, health care and insurance regulatory reform.

Journalists interested in attending can register online or contact Katie Butler for media registration.[IA]

The Big I” Legislative Conference is the insurance industry’s best-attended, most effective legislative meeting.

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

insurance-advocate@cinn.com www.insurance-advocate.com

Insurance Professionals Honored with PIANY Scholarships u G L E N M O N T, N . Y. — T h e Professional Insurance Agents of New York announced Kevin O’Neil and Timothy McGrath each received the prestigious Bernard I. Kozel Memorial Scholarship, Jan. 31, 2019, at the Metropolitan Regional Awareness Program at the Roosevelt Hotel in New York. O’Neil is an account executive and McGrath is a producer for Marian Farese Insurance in West Sayville, N.Y. PIANY presents this award in memory of Bernard I. Kozel, a long-time member of the insurance profession, to members who are full-time insurance professionals with less than five years of experience in the industry.

They each will receive full tuition to

two seminars conducted by PIANY toward the Certified Insurance Service Representative designation.

“Both Kevin and Timothy’s extraordinary work for their customers is a positive reflection of the independent insurance agent field,” said Jamie Ferris, CIC, CPIA, AAI, PIANY president. “We are pleased to present them with this scholarship.”

PIANY’s MetroRAP also included an expansive trade show, and timely education sessions featuring Cathy Trischan, CPCU, CIC, CRM, AU, ARM, AAI, CRIS. MLIS, TRIP, on Insuring Today’s EPLI Exposures in the morning and E&O: Tackling Today’s Issues in the afternoon session.[IA]

BERKLEY LUXURY GROUP offers luxury Real Estate and Fine Dining Restaurants Offering: • Tailored, all-inclusive insurance solutions for luxury condo, co-op, rental properties, Class A office buildings and fine dining restaurants.

• Writing luxury real estate in District of Columbia, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania and Virginia.

• Writing fine dining business in Arizona, California, Connecticut, District of Columbia, Georgia, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New Jersey, New York, Pennsylvania, North and South Carolina, Tennessee and Virginia.

Berkley Luxury Group has the underwriting and claims expertise and responsiveness to deliver exceptional service to these two very specialized luxury markets, plus access to the strength and stability of a large, well known and highly regarded corporation.

To learn more about Berkley Luxury Group and its insurance and risk management services and products, visit www.berkleyluxurygroup.com.

Products and services are provided by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. Certain coverages may be provided through surplus lines insurance company subsidiaries of W. R. Berkley Corporation through licensed surplus lines brokers.

Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.

INSURANCE ADVOCATE / February 11, 2019 23

[ ON MY RADAR ]

BARRY Z ALMA

If You Do the Crime You Must Do the Time Guilty Of Disability Fraud uInsurance criminals today define the Yiddish word “Chutzpah!” Their unmitigated gall to challenge a conviction for fraud is without bound. They appeal and waste the time of courts of appeal.

More often than not the attempt fails, even in the very liberal Ninth Circuit Court of Appeal.

In United States Of America v. Jasvir Kaur, United States Of America, v. Harjit Johal, No. 17-10306, No. 17-10307, United States Court Of Appeals For The Ninth Circuit (October 17, 2018) Harjit Kaur Johal and Jasvir Kaur challenge their convictions under 18 U.S.C. § 1623 for making false declarations to a grand jury during its investigation of a large-scale unemployment and disability insurance fraud scheme orchestrated

by Mohammad Riaz “Ray” Khan and Mohammad Shabaz Khan.

DISCUSSION

The defendants argued that the joinder where they were both tried together was improper. The Ninth Circuit concluded that joinder was proper under Fed. R. Crim. P. 8(b) because, although

The Sentencing Guidelines permit a three-level increase for substantial interference with the administration of justice if the defendant’s perjury caused the unnecessary expenditure of substantial governmental or court resources.

Kaur and Johal were charged with separate counts of offering false testimony to the grand jury, the indictment stemmed from the same larger investigation and the false testimony related to the same aspects of the alleged fraudulent scheme.

The charges against each defendant arose out of the same series of acts or transactions and a substantial number of the facts the Government needed to prove at trial were overlapping.

Moreover, even if they were improperly joined, reversal is not required because improper joinder is subject to harmless

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant 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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 51 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Mr. Zalma’s books are available as Kindle books or paperbacks at Amazon. com and can be reached at http:// zalma.com/zalma-books/ Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/ bzalma on Facebook at https://www. facebook.com/barry.zalma and you can follow him on Twitter at https:// twitter.com/bzalma.

His blog, Zalma on Insurance is available at http://zalma.com/blog and his videoblog, Zalma’s Insurance 101 is available at http://www.zalma.com/ videoblog/

error review. Kaur and Johal have failed to show any possible prejudice.

Kaur and Johal argued that the district court improperly admitted evidence under Federal Rule of Evidence 404(b) that Johal participated in earlier fraud schemes organized by the Khan brothers. Even assuming the Government is incorrect that these prior acts fall outside the parameters of Rule 404(b) because they are inextricably intertwined with the charged offense, the evidence was properly admitted under Rule 404(b)(2) for the purpose of show24 February 11, 2019 / INSURANCE ADVOCATE

[ ON MY RADAR ] ing lack of mistake and a common plan or scheme. The court did not plainly err in failing to exclude the evidence under Federal Rule of Evidence 403. Moreover, even without the challenged evidence, the evidence against Kaur and Johal was overwhelming, so any error in the admission was harmless.

Whether Kaur and Johal actually picked peaches and whether they purchased pay stubs from Ray Khan were questions capable of influencing the grand jury investigation and therefore were material. And the questions posed to Kaur and Johal were not so ambiguous that their answers could be considered “literally true.”

Finally, the Government presented sufficient evidence to support a jury finding that Kaur purchased pay stubs, even if the testimony of certain trial witnesses identifying her could be called into question. Because there was overwhelming independent evidence against the defendants any error in admitting the in-court identification testimony was harmless beyond a reasonable doubt.

The Sentencing Guidelines permit a three-level increase for substantial interference with the administration of justice if the defendant’s perjury caused the unnecessary expenditure of substantial governmental or court resources.

Although the underlying expenses associated with prosecuting Kaur for perjury cannot be included in this calculation the district court found that the Government expended other resources as a result of Kaur’s perjury.

In light of the Government’s representation that it called additional witnesses before the grand jury as a result of Kaur’s perjury, and in light of evidence that it called Kaur to testify again after she was offered immunity, this determination was not clearly erroneous.

ZALMA OPINION

When people lie to a grand jury and are caught in the lie the government has no choice but to charge and convict them of perjury. The opinion made it clear that the crime was obvious and proved beyond a reasonable doubt. If there was any justice the two would have accepted the sentence and served their time. Rather, exercising unmitigated gall, they appealed.[IA]

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INSURANCE ADVOCATE / February 11, 2019 27

[ COURTSIDE ]

LAWRENCE N. RO GAK

Claimant Must Apply to Liquidation Bureau Before Going to MVAIC A & S Med. Supply, Inc. v MVAIC Ins. Co. Edited by Lawrence N. Rogak Claimant was insured by Long Island Insurance Co., which went into liquidation. Claimant’s medical provider sent bills to MVAIC, which denied the claims on the grounds that there was potential coverage through the Liquidation Bureau. The Appellate Term held that the Liquidation Bureau’s records from Long Island Ins. Co. should have been admitted by the trial judge. The records established that there was “potential coverage,” which is sufficient to dismiss the suit against MVAIC, which only provides coverage after a claimant has exhausted all other remedies. .—LNR u Appeal from a judgment of the Civil Court of the City of New York, Kings County (Ingrid Joseph, J.). The judgment awarded plaintiff the principal sum of $1,751.43. ORDERED that the judgment is reversed, with $30 costs, and the matter is remitted to the Civil Court for the entry of a judgment in favor of defendant dismissing the complaint.

At the commencement of a nonjury trial in this action by a provider to recover assigned first-party no-fault benefits from MVAIC, the parties stipulated that since the sole issue was whether plaintiff had exhausted its remedies, “if [MVAIC] can prove . . . that there was potential coverage through the assignor’s son who . . . lived with him on the date of the loss, then MVAIC has no burden to pay . . . these claims.”

The only witness at trial was an employee of the New York Liquidation Bureau (NYLB), who testified pursuant to a subpoena served by MVAIC. He stated that, after the Supreme Court had entered an order placing Long Island Insurance Company (LIIC) into liquidation, NYLB had seized all of LIIC’s 28 February 11, 2019 / INSURANCE ADVOCATE

Since the pretrial stipulation simply required MVAIC to prove “that there was potential coverage,” MVAIC was not required to prove that “there was an insurance policy or coverage at the time of the accident.”

In light of the foregoing,

books and records, and administered LIIC’s claims, and that LIIC was closed.

In response to the subpoena, he reviewed documents in a file seized from LIIC regarding a particular date of loss, a named person and a claim number.

Among the documents he reviewed was an insurance policy from LIIC which was apparently issued to a person living at the same address as plaintiff ’s assignor and whose name was the same as the assignor’s son with the exception of one letter.

The Civil Court held that the documents were not admissible because the NYLB witness was unable to establish that the documents were admissible as business records pursuant to CPLR 4518.

Although the court stated that the witness was credible, the court held that the issue to be resolved “was whether or not there was an insurance policy or coverage at the time of the accident” and that MVAIC had failed to sustain its burden.

The record establishes that NYLB seized records of LIIC after an order of liquidation of LIIC had been entered by the Supreme Court. Moreover, claims examiners employed by NYLB utilize the records to administer outstanding no-fault claims which have been submitted to LIIC. As NYLB incorporates and relies upon the records of LIIC, the records are admis-

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.

sible (see People v DiSalvo, 284 AD2d 547 [2001]; Plymouth Rock Fuel Corp. v Leucadia, Inc., 117 AD2d 727 [1986]; cf.

West Val. Fire. Dist. No. 1 v Village of Springville, 294 AD2d 949 [2002]).

Since the pretrial stipulation simply required MVAIC to prove “that there was potential coverage,” MVAIC was not required to prove that “there was an insurance policy or coverage at the time of the accident.” In light of the foregoing, MVAIC sustained its burden of proving “that there was potential coverage.”

Plaintiff, as assignee, was required to exhaust its remedies against all potential insurance carriers before seeking relief from defendant (see Hauswirth v American Home Assur. Co., 244 AD2d 528 [1997]; Orlin & Cohen Orthopedic Assoc. v Motor Veh. Acc. Indem. Corp., 58 Misc 3d 132[A], 2017 NY Slip Op 51778[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2017]). Here, plaintiff did not demonstrate that it had exhausted its remedies.

Accordingly, the judgment is reversed and the matter is remitted to the Civil Court for the entry of a judgment in favor of defendant dismissing the complaint.[IA] 2019 NY Slip Op 29019 Decided on January 11, 2019 Appellate Term, Second Department

[ IN THE NEWS ]

NAIC on...

Cannabis and Insurance

NAIC - The Center for Insurance Policy and Research uDemand for cannabis is increasing dramatically. More than half of U.S. states have legalized some form of medical or recreational marijuana, and the demand for cannabis is increasing dramatically. The division between state and federal status makes it difficult for businesses to receive inclusive, affordable coverage and often leaves policyholders with restrictive plans.

Conflicting state and federal laws, emerging standardization of business practices and rapidly evolving regulations have largely discouraged insurers from participating in this market.

Cannabis is an illegal substance under the Controlled Substances Act (CSA), which classifies it as a Schedule I drug and is stated “to have no currently accepted medical use in treatment in the United States”. A provision in the 2018 Farm Bill removed hemp from the list of Schedule 1 controlled substances.

As such, the U.S. Drug Enforcement Administration (DEA) will not consider hemp-derived cannabinoid (CBD) a controlled substance subject to the CSA. However, cannabis and CBD (regard-

A provision in the 2018 Farm Bill removed hemp from the list of Schedule 1 controlled substances. As such, the U.S. Drug Enforcement Administration (DEA) will not consider hemp-derived cannabinoid (CBD) a controlled substance subject to the CSA.

less of whether its sourced from cannabis or hemp) is subject to Federal Drug Administration (FDA) approval under the Federal Food, Drug, and Cosmetic Act. The FDA has not approved a cannabis drug. It has, however, approved three CBD medicines for the treatment of epilepsy.

Cannabis-related businesses (CRBs) face many risks and obstacles. Some of the biggest risks involve theft, general liability and product liability. Companies functioning within state legality face severe banking restrictions due to federal regulations. CRBs may be forced to han-

dle large sums of cash, subjecting them to a higher risk of theft. CRBs share the same general liability and other risks agricultural and manufacturing businesses face. This includes workplace accidents, damage to property and crop failure.

CRBs are especially prone to fires from both wild and internal sources.

The popularity of cannabis-infused products, such as edibles, increases the risk of product liability and safety recalls. The psychoactive effects of cannabis raise the risk products may be deemed mislabeled, misrepresented or harmful.

Standard general liability plans account for these claims in non-CRB businesses, but most insurers hesitate to provide such coverage for CRBs due to the legal uncertainties. Policy language specifically tailored to the cannabis industry is crucial in providing adequate coverage.

Individuals using cannabis also face insurance challenges ranging from legality issues to coverage deficiencies.

Users may be faulted in workers’ compensation claims or subject to employment-disqualifying drug screening.

In addition, insurers offering medical treatment options may have policies preventing the use of cannabis in treating a patient’s condition.

Auto insurance rates may be influenced by elevated risks associated with drivers under the influence.

Complicating the situation is the lack of standardized methods for roadside detection of drug-impaired driving.

Additionally, the variability of side effects and physiological reactions in each user increase the risk of misidentifying a driver’s status at the time of the incident.

There are many legal uncertainties, unique hazards and emerging risks involved in legal cannabis-related activities. The CIPR’s May 16, 2018 Weeding through the Unique Insurance Needs of the Cannabis Industry examined many of these issues. Additionally, the NAIC Cannabis Insurance (C) Working Group was formed in 2018 to better understand the cannabis industry’s insurance coverage gaps and regulatory issues. Members will develop best practices for state insurance regulators to help them address these insurance needs. As part of this process, the Working Group anticipates releasing a white paper in 2019.[IA] INSURANCE ADVOCATE / February 11, 2019 29

[ LEGAL UPDATE ]

SARI GABAY, ESQ.

NYDFS Issues Numerous Disciplinary Actions Crackdown on Health Plans’ Non-Compliance with Contraceptive Coverage uThe New York State Department of Financial Services (“DFS”) closed out the last quarter of 2018 issuing numerous disciplinary actions, with failing to disclose information on an original or renewal application, as the most common violation, with nominal fines. DFS issued heftier fines, however, where licenses expired or lapsed and the individual or entity transacted insurance business during these periods of lapse.

Such fines in this period ranged from $10,000 to $29,250, presumably based on the volume of business conducted.

Most recently, in the January 4, 2019 list of disciplinary actions, fines continued in this area for, among other violations, failing to disclose a criminal conviction, failing to disclose another state agency’s revocation, and failing to disclose within 30 days of a pretrial hearing that respondent was the subject of a criminal prosecution. Most notably, however, the majority of the fines issued thus far in 2019 appear to be the result of DFS’ investigation into and crack down on various health insurers, health service plans, and health maintenance organizations (collectively referred to here as “health plans”), in connection with failing to comply with contraceptive coverage requirements under New York law.

The focus of the investigation appears to have been in 2016, with respect to denying coverage of required FDA approved contraceptives (or their equivalents) and/or for failing to appropriately pay claims and/or provide accurate information to consumers.

By way of background, New York Insurance Law requires insurers that provide coverage for prescription drugs to include coverage for contraceptive drugs and devices approved by the FDA or generic equivalents. In addition, as a general matter, New York insur30 February 11, 2019 / INSURANCE ADVOCATE

The fines imposed...against at least eight companies ranged with the most significant amounts at $85,000, $118,000 and $228,822. DFS’s investigation in this area and crackdown demonstrates its concern on ensuring health plans properly provide contraceptive drugs and devices to consumers. ance law also requires such insurers and health plans to include coverage for preventative care and screenings, including contraceptive drugs and devices, at no cost-sharing. There are at least 18 contraceptive methods for women approved by the FDA. New York law requires that health plans provide coverage for all contraceptive drugs and devices and must provide coverage with no cost-sharing for at least one form of contraception within each of the methods identified for women by the FDA. Further, health plans must provide complete and accurate information regarding contraceptive coverage to consumers. These requirements and additional guidelines are summarized in a January 21, 2017 Supplement No. 1 to Insurance Circular Letter No. 1 (2003).

Following its Circular Letter, DFS published a February 2017 report summarizing the results of its investigation into approximately 15 health plans contacted and issues with respect to inaccurate or inconsistent information and failures to adhere to New York law with respect to contraceptive drugs and devices. The investigation presumably led to the numerous disciplinary actions, published by DFS on January 4,

Sari Gabay is a go-to insurance regulatory lawyer representing insurance agents, brokers and public adjusters in Department of Financial Services’ investigations, complaints, and hearings and in relicensing applications.

She represents sellers and purchasers of insurance agencies and other businesses. Sari also reviews and interprets insurance policies and advises homeowners, venues, and other policyholders in insurance coverage disputes, in addition to her general law practice. Sari is a frequent speaker and author on issues in the insurance industry, and most recently spoke on October 3, 2018 on DFS’ Regulation 208 and the ensuing Article 78 proceeding. Sari is also among PIA’s Circle of Consultants.

2019, against various health plans. As penalties, DFS’s consent orders require, among other things, that restitution be made to all affected policyholders, and that claims examiners be re-trained on the appropriate procedures for the adjudication of claims for contraception coverage and that the health plans at issue provide proof of corrective action implemented. The fines imposed in this area, against at least eight companies ranged with the most significant amounts at $85,000, $118,000 and $228,822. DFS’s investigation in this area and crackdown demonstrates its concern on ensuring health plans properly provide contraceptive drugs and devices to consumers.[IA]

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