Vol. 130 No. 12 | July 1, 2019
PIANJ/PIANY Take Over Atlantic City 80’s Style!
Your New York DBL/PFL Partner
Learn more, please visit:
www.shelterpoint.com/AboutUs
Copyright © 2019. ShelterPoint Life Insurance Company | Mktg#18-206-1 | G1 01/19
Sheltering You.
Vol. 130 No. 12 | July 1, 2019
Contents
14 PIANJ/PIANY ANNUAL CONFERENCE 4 Foreword: And Now For the Good News... Steve Acunto, Publisher 6 HR Update: Are Credit Checks Illegal? Alfred T. DeMaria 8 In the Associations: Three Honored at IMUA 89th Annual Meeting 10 Guest Article: Judge Richard Brown: Insurance Crime Fighter Gregory V. Serio 11 MSO: The Sharing Economy’s Impact on the Hospitality Industry Sue C. Quimby 12 In the Associations: Robusto Honored by UJA 13 Guest Opinion: Money Can’t Buy You Health Jane M. Orient, M.D. 20 Courtside: Court of Appeals Holds that Control of Medical PC by Non-Physicians is Fraud in Itself Lawrence N. Rogak 24 On My Radar: No Damage, No Case or Controversy, No Right to Sue in Federal Court Barry Zalma info@insurance-advocate.com www.insurance-advocate.com
26
Looking Back: June 4, 1994 INSURANCE ADVOCATE / July 1, 2019 3
[ FOREWORD ]
STEVE ACUNTO, EDITOR & PUBLISHER
And Now For the Good News...
STATE
But first…a neat coincidence on June 27th, the morning between the two Democrat candidates’ debates. Newly ensconced Supt. of the Department of Financial Services, Linda Lacewell, spoke before members of the Insurance Federation of New York (IFNY), presenting her agenda in some key areas. She was well received. The new Superintendent was straight forward about her approach, mirroring, she said, the Governor’s approach. In particular, she stated that decision making would be undertaken as often as possible with as many people as possible around the table, i.e. openly and in conference with interested and relevant parties. She listed typical parties including many important constituencies. During the Q&A she was asked—and deftly answered—a question that was conspicuously absent from Property and Casualty Insurance Industry thePremium Democrats’ debate on either evening. Roger Moak, past Chairman 2018 Market Share Report - Total STATES AND U.S. TERRITORIES of IFNY, rose and asked the Superintendent: “Does your list include any 35 - Total All Lines Republicans?” She said her apDirect Direct Premiums Premiums Loss & Cost Cumulative proach did not run along party Group/ Group/ Market Loss Containment Market Written Earned Company Rank Code Company Name Share % Share % Ratio % Ratio % lines and never would. Good to (000) (000) 0.63 0.65 1 176 STATE FARM GRP 65,868,881 65,551,967 9.77 9.77 hear, in a nearly total Democrat0.68 0.72 2 31 BERKSHIRE HATHAWAY GRP 43,577,887 42,176,496 6.46 16.23 0.56 0.60 3 111 LIBERTY MUT GRP 34,057,797 33,699,929 5.05 21.28 0.61 0.63 4 155 PROGRESSIVE GRP 33,754,923 31,972,011 5.01 26.29 run state. Wish that one of the 0.59 0.62 5 8 ALLSTATE INS GRP 33,251,176 32,751,848 4.93 31.22 0.58 0.63 6 3548 TRAVELERS GRP 26,147,365 25,542,467 3.88 35.10 candidates that evening had in0.77 0.79 7 200 UNITED SERV AUTOMOBILE ASSN GRP 21,977,530 21,421,063 3.26 38.36 0.58 0.63 8 626 CHUBB LTD GRP 21,346,354 21,188,024 3.17 41.53 cluded working with Republicans 0.66 0.69 9 69 FARMERS INS GRP 20,309,974 20,151,425 3.01 44.54 0.65 0.69 10 140 NATIONWIDE CORP GRP 18,412,113 18,613,016 2.73 47.27 0.81 0.91 11 12 AMERICAN INTL GRP 14,170,492 14,677,702 2.10 49.37 as a desired characteristic during 0.64 0.71 12 212 ZURICH INS GRP 12,362,693 12,612,823 1.83 51.21 0.57 0.64 13 91 HARTFORD FIRE & CAS GRP 11,036,858 11,056,564 1.64 52.84 this time of discord and teeth bar0.59 0.65 14 218 CNA INS GRP 10,379,425 10,082,766 1.54 54.38 0.67 0.68 15 473 AMERICAN FAMILY INS GRP 8,939,812 8,642,091 1.33 55.71 ing division. Maybe Roger should 0.57 0.62 16 280 AUTO OWNERS GRP 7,918,031 7,560,713 1.17 56.88 0.61 0.68 17 3098 TOKIO MARINE HOLDINGS INC GRP 7,318,896 7,098,842 1.09 57.97 have been the TV interviewer 0.64 0.67 18 213 ERIE INS GRP 7,119,636 6,895,406 1.06 59.02 0.60 0.61 19 19 ASSURANT INC GRP 6,719,952 6,293,893 1.00 60.02 0.52 0.58 20 84 AMERICAN FINANCIAL GRP 5,910,165 5,808,033 0.88 60.90 instead of Chuck Todd….In any 0.63 0.71 21 2538 AMTRUST FINANCIAL SERV GRP 5,908,337 5,855,914 0.88 61.77 0.47 0.55 22 98 WR BERKLEY CORP GRP 5,743,768 5,686,855 0.85 62.63 case, IFNY again held its position 0.53 0.63 23 158 FAIRFAX FIN GRP 5,310,750 5,146,288 0.79 63.41 0.49 0.56 24 785 MARKEL CORP GRP 5,255,535 4,960,405 0.78 64.19 as the ideal, non lobbying, cross0.53 0.59 25 244 CINCINNATI FIN GRP 5,021,489 4,934,817 0.74 64.94 0.63 0.73 26 968 AXA INS GRP 4,931,563 4,621,110 0.73 65.67 0.53 0.59 27 88 THE HANOVER INS GRP 4,826,835 4,680,896 0.72 66.39 section-of-the-industry forum 0.65 0.68 28 4928 NATIONAL GEN GRP 4,776,934 4,518,299 0.71 67.09 0.57 0.63 29 796 QBE INS GRP 4,448,913 4,238,165 0.66 67.75 and Supt Lacewell measured up…. 0.58 0.66 30 150 OLD REPUBLIC GRP 4,286,995 4,180,406 0.64 68.39 0.61 0.64 31 1318 AUTO CLUB ENTERPRISES INS GRP 4,268,678 4,092,267 0.63 69.02 On the P&C front, the NAIC 2018 0.54 0.58 32 761 ALLIANZ INS GRP 4,103,351 3,824,358 0.61 69.63 0.87 0.90 33 1278 CSAA INS GRP 4,078,615 3,959,880 0.60 70.24 0.58 0.59 34 241 METROPOLITAN GRP 3,782,465 3,720,726 0.56 70.80 Market Share Report and sum0.63 0.64 35 215 KEMPER CORP GRP 3,697,364 3,560,753 0.55 71.35 0.38 0.42 36 1279 ARCH INS GRP 3,673,097 3,749,680 0.54 71.89 mary of industry progress – i.e. 0.71 0.76 37 660 MERCURY GEN GRP 3,515,240 3,377,598 0.52 72.41 0.91 0.92 38 65 FM GLOBAL GRP 3,225,430 3,037,460 0.48 72.89 growth – is encouraging. 0.70 0.78 39 3219 SOMPO GRP 2,921,248 2,777,254 0.43 73.32 0.53 0.58 40 242 SELECTIVE INS GRP 2,890,633 2,808,764 0.43 73.75 0.77 0.80 A few highlights: 41 55 AUTOMOBILE CLUB MI GRP 2,789,569 2,742,735 0.41 74.17 0.76 0.79 42 411 MAPFRE INS GRP 2,743,739 2,765,089 0.41 74.57 0.61 0.62 43 50 COUNTRY INS & FIN SERV GRP 2,506,391 2,463,050 0.37 74.95 • The top 10 groups made up 0.63 0.67 44 361 MUNICH RE GRP 2,484,864 2,472,977 0.37 75.31 0.65 0.70 45 169 SENTRY INS GRP 2,428,374 2,366,759 0.36 75.67 47% of the property and ca0.72 0.83 46 4670 STARR GRP 2,421,109 2,179,289 0.36 76.03 0.62 0.65 47 28 AMICA MUT GRP 2,418,742 2,371,433 0.36 76.39 sualty market in the United 0.63 0.63 48 36102 STATE INS FUND 2,256,138 2,226,409 0.33 76.73 0.95 1.06 49 WASHINGTON STATE FUND 2,096,622 2,096,622 0.31 77.04 0.50 0.57 50 1120 EVEREST REINS HOLDINGS GRP 1,993,955 1,903,185 0.30 77.33 States 0.61 0.67 51 708 NEW JERSEY MANUFACTURERS GRP 1,992,947 1,948,762 0.30 77.63 0.51 0.56 52 175 STATE AUTO MUT GRP 1,895,959 1,937,887 0.28 77.91 • Private passenger auto liabil0.56 0.60 53 228 WESTFIELD GRP 1,882,784 1,891,299 0.28 78.19 0.57 0.60 54 62 EMC INS CO GRP 1,808,266 1,771,278 0.27 78.46 ity is the top line of business 0.59 0.60 55 181 SWISS RE GRP 1,797,454 1,711,253 0.27 78.72 0.62 0.64 56 123 SHELTER INS GRP 1,733,785 1,706,923 0.26 78.98 0.51 0.63 57 457 ARGONAUT GRP 1,676,214 1,582,393 0.25 79.23 with the highest amount of 0.60 0.61 58 408 AMERICAN NATL FIN GRP 1,659,037 1,611,588 0.25 79.48 0.46 0.50 59 572 BCBS OF MI GRP 1,640,521 1,526,571 0.24 79.72 written premium 0.54 0.57 60 3416 AXIS CAPITAL GRP 1,609,349 1,574,113 0.24 79.96 0.54 0.58 61 14184 ACUITY A MUT INS CO 1,542,129 1,491,414 0.23 80.19 • There was a 5.37% increase in 0.53 0.53 62 513 IOWA FARM BUREAU GRP 1,529,175 1,511,045 0.23 80.41 0.47 0.55 63 501 ALLEGHANY GRP 1,510,163 1,445,287 0.22 80.64 0.77 0.79 written premiums in the U.S. 64 483 SOUTHERN FARM BUREAU CAS GRP 1,495,393 1,476,946 0.22 80.86 0.59 0.64 65 7 FEDERATED MUT GRP 1,420,068 1,347,235 0.21 81.07 0.61 0.63 66 694 TENNESSEE FARMERS GRP 1,352,935 1,326,966 0.20 81.27 market compared to 2017 © 2019 National Association of Insurance Commissioners 15
4 July 1, 2019 / INSURANCE ADVOCATE
• By line of business, commercial auto liability had the largest increase in written premium, 13.14%, compared to 2017 • There was a 109% increase in written premium for burglary and theft over the last 10 years, the largest of any line of business Property and Insurance A snapshot of the carriers toCasualty keep in focusIndustry are included herein. 2018 Market Share Report - Total Premium STATES AND U.S. TERRITORIES
STATE
67 68 69 70 71 72 73 74
5 35076 225 809 15350 267 4904
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125
4663 4830 324 11445 4 248 105 22945 109 766 201 510 291 311 3494 922 4698 250 4664 4861 783 256 10064 67 188 4851 586 124 474 2698 569 1227 4011 271 36 1309 309 831 3363 71 300 3484 96 4694 517 3478 542 153 4381 41190 11523
Group/ Company Name ALFA INS GRP STATE COMPENSATION INS FUND IAT REINS CO GRP TEXAS FARM BUREAU MUT GRP WEST BEND MUT INS CO GRANGE MUT CAS GRP INTACT FINANCIAL GRP OHIO BUREAU OF WORKERS' COMPENSATION UNIVERSAL INS HOLDING GRP UNITED INS HOLDINGS GRP NORTH CAROLINA FARM BUREAU GRP CGB INS CO AMERIPRISE FIN GRP UNITED FIRE & CAS GRP MGIC GRP TEXAS MUT INS CO KENTUCKY FARM BUREAU GRP RADIAN GRP UTICA GRP NAVIGATORS GRP MOTORISTS MUT GRP MAIN STREET AMER GRP JAMES RIVER GRP ICW GRP ASSETS INC GRP ASPEN INS HOLDING GRP DONEGAL GRP PURE COMPANIES GRP HERITAGE INS HOLDINGS GRP RLI INS GRP PROSIGHT GRP CITIZENS PROP INS CORP MICHIGAN FARM BUREAU GRP SAFETY GRP CHURCH MUT GRP ARBELLA INS GRP AMERISURE CO GRP FCCI MUT INS GRP PROASSURANCE CORP GRP FARMERS MUT HAIL INS GRP PALISADES GRP GENWORTH FIN GRP PENNSYLVANIA NATL INS GRP CENTRAL MUT INS CO GRP FRANKENMUTH GRP WESTERN NATL MUT GRP DOCTORS CO GRP EMPLOYERS HOLDINGS GRP UNIVERSAL INS CO GRP HORACE MANN GRP TOWER HILL INS GRP SECURA INS GRP ESSENT GRP HANNOVER GRP HALLMARK FIN SERV GRP INDIANA FARM BUREAU GRP PEKIN INS GRP HOUSTON INTL INS GRP PINNACOL ASSUR WRIGHT NATL FLOOD INS CO **INDUSTRY TOTAL**
1 8 8 9
VOLUME 130 NUMBER 12 JULY 1, 2019
www.insurance-advocate.com
35 - Total All Lines
Group/ Company Rank Code
S I N C E
Direct Premiums Written (000)
Direct Premiums Earned (000)
1,352,573 1,338,989 1,317,127 1,301,093 1,267,409 1,239,474 1,211,926 1,206,228
1,355,075 1,348,494 1,246,227 1,271,287 1,227,529 1,222,402 1,215,588 1,202,517
0.67 0.72 0.45 0.61 0.47 0.49 0.45 0.36
0.68 0.78 0.51 0.61 0.51 0.51 0.63 0.67
0.20 0.20 0.20 0.19 0.19 0.18 0.18 0.18
81.47 81.67 81.86 82.06 82.25 82.43 82.61 82.79
1,190,875 1,161,697 1,147,086 1,114,187 1,112,732 1,111,703 1,105,131 1,097,244 1,091,688 1,082,286 1,077,776 1,073,463 1,072,113 1,070,746 1,027,223 1,020,893 1,002,255 987,383 962,930 930,045 921,095 889,572 868,417 844,563 843,675 843,231 840,269 839,290 837,548 829,934 805,913 790,115 784,682 775,448 770,240 752,746 746,933 739,513 739,056 715,633 692,063 690,684 670,330 668,853 665,848 654,329 650,163 636,612 627,187 623,848 619,223 674,209,997
1,121,640 1,112,649 1,131,257 1,062,882 1,136,462 1,083,981 1,095,973 1,059,926 1,081,882 1,067,728 1,041,456 1,005,228 1,077,344 1,064,529 990,221 1,022,558 1,001,286 985,570 867,140 933,022 882,403 842,539 884,756 826,612 836,759 806,366 828,317 834,427 824,772 830,692 795,414 774,204 767,532 756,777 748,172 729,897 719,007 717,549 727,232 686,639 679,514 723,205 645,073 633,059 614,604 633,226 640,523 643,399 579,263 624,274 602,320 660,221,001
1.03 0.86 0.93 0.68 0.77 0.58 0.03 0.42 0.60 0.09 0.49 0.48 0.55 0.79 0.61 0.48 0.66 0.70 0.58 0.85 0.51 0.45 0.52 0.62 0.56 0.77 0.53 0.62 0.54 0.46 0.65 0.55 0.04 0.60 0.72 0.50 0.54 0.45 0.42 0.69 0.90 1.41 0.50 0.02 0.64 0.70 0.56 0.59 0.66 0.48 0.12 0.62
1.09 0.91 0.93 0.68 0.80 0.63 0.03 0.45 0.60 0.09 0.55 0.59 0.61 0.92 0.72 0.56 0.74 0.76 0.59 0.97 0.59 0.55 0.74 0.66 0.58 0.81 0.56 0.70 0.61 0.65 0.65 0.57 0.04 0.66 0.75 0.54 0.56 0.77 0.49 0.76 0.90 1.47 0.55 0.02 0.75 0.68 0.58 0.61 0.78 0.51 0.12 0.66
0.18 0.17 0.17 0.17 0.17 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.15 0.15 0.15 0.15 0.14 0.14 0.14 0.13 0.13 0.13 0.13 0.13 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.11 0.11 0.11 0.11 0.11 0.11 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.09 0.09 0.09 0.09 100.00
82.97 83.14 83.31 83.47 83.64 83.80 83.97 84.13 84.29 84.45 84.61 84.77 84.93 85.09 85.24 85.39 85.54 85.69 85.83 85.97 86.10 86.24 86.37 86.49 86.62 86.74 86.87 86.99 87.11 87.24 87.36 87.47 87.59 87.71 87.82 87.93 88.04 88.15 88.26 88.37 88.47 88.57 88.67 88.77 88.87 88.97 89.06 89.16 89.25 89.34 89.44 100.00
Loss & Cost Cumulative Market Loss Containment Market Share % Share % Ratio % Ratio %
© 2019 National Association of Insurance Commissioners 16
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 gmb@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
CINN GROUP
INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in January, July, August, and December by CINN ESR, Inc., P.O. Box 9001, Mt. Vernon, NY 10552. Periodical postage pending at Greenwich, CT and additional mailing offices. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $135.00. TO ORDER Call 914-966-3180, email: circulation@cinn.com or write: Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2019. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Office.
INSURANCE ADVOCATE / July 1, 2019 5
[ HR UPDATE ]
Are Credit Checks Illegal? uEven seemingly neutral hiring criteria may inadvertently have an adverse effect on a protected group of people. Using credit histories when evaluating applicants for employment has come under the watchful eye of government agencies, because, among other things, it may have a disparate impact on certain minority job applicants. Insurance industry human resources executives should be aware of these rules. The Equal Employment Opportunity Commission (“EEOC”), for example, recently filed suit against an employer alleging that the company engaged in a pattern or practice of unlawful discrimination by refusing to hire a class of black applicants nationwide based on their credit histories. The company has historically conducted background checks on all applicants, regardless of race, if applicants would be dealing with financial matters. According to the EEOC, however, this justification is insufficient. It maintains that the company’s practice is neither job related nor justified by business
ALTHOUGH IT IS LEGAL FOR EMPLOYERS TO
REVIEW
APPLICANTS’
CREDIT
HISTORIES, IF THEY ARE USED TO EVALUATE APPLICANTS, EMPLOYERS SHOULD DETERMINE WHETHER THERE IS A SOUND BUSINESS REASON TO OBTAIN SUCH INFORMATION.
necessity and thus violated Title VII of the Civil Rights Act of 1964. Denying jobs to applicants with imperfect credit histories was not directly relevant to the job, said the EEOC in its suit. Although it is legal for employers to review applicants’ credit histories, if they are used to evaluate applicants, employers should determine whether there is a sound business reason to obtain such information. Discrimination could be found if the credit background is not directly job related. Indeed, running credit reports on all applicants, regardless of the positions they seek, can have the effect of discriminating against protected classes, as alleged in the lawsuit.
4441 Sepulveda Blvd., Culver City, CA 90230-4847 www.zalma.com | zalma@zalma.com 310-390-4455 | fax: 310-391-5614 | http://zalma.com/blog
Mr. Zalma recently published on Amazon.com with links at the Zalma Books site, with the following: Non Fiction books: • “Insurance Fraud & Weapons to Defeat Insurance Fraud” In Two Volumes • “The Compact Book on Adjusting Liability Claims: A Handbook for the Liability Claims Adjuster” • “The Compact Book on Adjusting Property Claims” • “Ethics for the Insurance Professional” • “Rescission of Insurance” • “The Insurance Examination Under Oath” 6 July 1, 2019 / INSURANCE ADVOCATE
• “Random Thoughts on Insurance Volumes IV and V: Digests from Barry Zalma’s Blog: ‘Zalma on Insurance’” Fiction: • “HEADS I WIN, TAILS YOU LOSE” • “Candy and Abel: Murder for Insurance Money” • “Murder And Insurance Fraud Don’t Mix” • “Murder & Old Lace”
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.
Moreover, employers should be aware that credit checks are not necessarily accurate indicators of a person’s qualification for a particular job or a valid predictor of job performance. Responsibility on the job and whether or not someone is paying his or her bills are not the same thing, according to the EEOC. Several states, including New York, have restricted the use of credit checks in the hiring process. Bills seeking to limit such use are being introduced elsewhere and you need to check out the specific law in your state as these are more restrictive than federal laws. The Fair Credit Report Act also imposes certain consent and notice obligations on employers who request and/ or rely upon “consumer reports” within the meaning of the Act. In using credit history to make employment decisions, management should accordingly exercise caution and carefully evaluate whether the inquiry is job related and necessary for business in order to defend a claim that a practice has an unlawful discriminatory impact on minority groups.[IA]
Real Dividends! $232 Million Paid
2 New Bu 019 siness B on 5
0% of fe us es for n ew and first two Renewa ls
“The staff at Friedlander Group is a pleasure to work with. They are extremely knowledgeable with the New York State workers’ compensation world and have the ability to save my clients money. Who can argue with knowledge and savings! Their claims staff has also assisted Silverstone greatly to keep the claims expense to a minimum. Thank you Donna Nygard for your support!” Derek Smith Director - Home Care Program Silverstone Group Omaha, Nebraska
Up to 25% Advance Discount Retailers
Wholesalers
Restaurants
Hotels
Oil Dealers
Retail Group of NY, Workers’ Comp. Safety Group #544*
Wholesale Group of NY, Workers’ Comp. Safety Group #551*
Restaurant Group of NY, Workers’ Comp. Safety Group #556*
Hotel Group of NY, Workers’ Comp. Safety Group #578*
Oil Dealer Group of NY, Workers’ Comp. Safety Group #582*
2017-18 2016-17 2015-16
40%* 40%* 40%*
35% average dividend since inception in 1992
2017-18 2016-17 2015-16
30%* 30%* 40%*
31% average dividend since inception in 1993
2016-17 2015-16 2014-15
35%* 35%* 35%*
35% average dividend since inception in 1993
2017-18 2016-17 2015-16
30%* 30%* 20%*
18% average dividend since inception in 2006
2017-18 2016-17 2015-16
30%* 30%* 20%*
15% average dividend since inception in 2010
Social Services Residential Care Social and Health Services Group of NY, Workers’ Comp. Safety Group #585*
2017-18 2016-17 2015-16
25%* 25%* 20%*
15% average dividend since inception in 2011
Residential Care Group of NY, Workers’ Comp. Safety Group #586*
2017-18 2016-17 2015-16
15%* 10%* 10%
8% average dividend since inception in 2012
*5% applied to increase the renewal advance discount
Fees paid to 560 Brokers
Online Video: www.friedlandergroup.com/presentation.html
Retail
2003 Bakeries 7998 Hardware Store 8001 Florist Store 8006 Food/Fruit/Deli/Grocery 8008 Clothing/Shoe/Dry Goods 8013 Jewelry Store 8016 Quick Printing 8017 Retail (Not Classified) 8031 Meat/Fish/Poultry Store 8033 Supermarkets 8039 Department Store 8043 Retail (including Food) 8044 Furniture Store 8046 Auto Accessories 8072 Book/Music Store 8105 Leather Store 8382 Self serve gas w/conv. store Residential Care Facilities
8864 Developmental Organizations 8865 Residential Care Facility Hotel/Motel 9052 Hotels NOC 9058 Restaurants in Hotels
Wholesale
4310 Greeting Card Dealer 7390 Beer/Ale Dealer 7999 Hardware Store 8018 Wholesale Store/NOC 8021 Meat, Fish Dealer-Wholesale 8032 Dry Goods, Clothing, Shoe 8047 Drug Store 8048 Fruit & Vegetables 8111 Plumbers Supplies Dealer-Wholesale Restaurant 9061 Clubs 9071 Full Service Restaurants 9072 Fast Food Restaurants– Including Drivers 9074 Bars & Taverns Social and Health Services 8854 Home Health Care – Prof. Employees 9051 Home Health Care – Non Prof. Employees 8857 Counseling – Social Work – Traveling Oil and Gas Dealer 5193 Oil Burner Installation 8350 Fuel Oil & Gas Dealer 8353 Gas Dealers, LPG & Drivers
*Underwritten by the State Insurance Fund Ask about low DBL rates exclusive to safety group members, underwritten by ShelterPoint Life Insurance Company, Great Neck NY
The Workers’ Compensation Leader in NY Call Cosmo Preiato at (800)394-7004 ext. 203 Fax: (914)694-6004 e-mail: cosmop@friedlandergroup.com 2500 Westchester Avenue, Suite 400A Purchase, New York 10577 www.friedlandergroup.com Safety and Workers’ Compensation Strategies To Unleash Productivity and Profits Featuring insightful interviews with experts, including Paul O’Neill, the 72nd Secretary of the U.S. Treasury by Adam Friedlander, now on Amazon https://safetyandworkerscomp.com/ INSURANCE ADVOCATE / July 1, 2019 7
[ IN THE ASSOCIATIONS ]
Three Honored at IMUA 89th Annual Meeting John Tutera Receives IMUA Lifetime Achievement Award u New York, NY — James Tutera (pictured right), known as the Dean of Builders Risk Insurance, was presented with IMUA’s Lifetime Achievement Award at the Association’s 89th Annual Meeting. John was one of three individuals recognized by the IMUA at this year’s Annual Meeting. The others included Steve Silverman, Berkshire Hathaway Specialty Insurance – Excellence in Education; Vicky Hartman, Director Inland Marine Southeast, National Insurance Property, Liberty Mutual Insurance – Outstanding Committee Person. Commenting on John Tutera’s award, IMUA President & CEO Kevin O’Brien said, “John has carried the IMUA flag throughout his impressive insurance career…a true champion of the Association. He served on the IMUA Transportation Committee and was cochair of the Construction Committee for many years up until his retirement. John’s expertise in builders risk insurance is unsurpassed. He has contributed to many technical white papers and has presented at numerous IMUA events and Annual Meetings. In 2014, John was presented with the IMUA Excellence in Education Award. As the winner of the Excellence in Education Award, Steve Silverman (pictured right) was recognized as an influential force in advancing IMUA’s e ducat ion curriculum. He has developed technical inland marine courses and been a featured presenter/ instructor at countless IMUA education events. Steve was instrumental in develop8 July 1, 2019 / INSURANCE ADVOCATE
ing IMUA’s comprehensive course, Understanding Contractors Equipment, which he has presented in New York City and Toronto in the first half of 2019. Steve consistently receives high marks from his students for his strong technical expertise and engaging delivery style. Over the years he has been committed to “raising the bar” for IMUA education. Steve serves on the IMUA Transportation Committee and is cochair of the Construction Committee. He was a founding member of IMUA’s New England Regional Advisor y Committee and continues an active role with the group. Steve is a strong supporter of the Association and his contributions have made IMUA a stronger organization. Vicky Hartman (pictured right), Outstanding Committee Person Award winner, recently assumed her position as chair of the IMUA Southeast Regional Advisory Committee, leading the group that presents a very highly regarded, full day annual education seminar. Vicky is also an active member of the Annual Meeting Education Committee, a group that plans the agenda and format for IMUA’s national education conference. She developed the focus for one of this year’s Annual Meeting sessions on builders risk coverage and construction contracts for which she will be a co-presenter. “Vicky has demonstrated
IMUA is the national association for the commercial inland marine insurance industry. IMUA serves as the voice of its member companies representing over 90 percent of all commercial inland marine insurers. The association provides its members with comprehensive training and educational programs, including research papers and bulletins, industry analysis and seminars. IMUA was founded in 1930.
“John has carried the IMUA flag throughout his impressive insurance career…a true champion of the Association. He served on the IMUA Transportation Committee and was cochair of the Construction Committee for many years up until his retirement. ...”
a strong effort to support IMUA. She has been a key advisor to IMUA staff on several creative education initiatives. She is truly engaged in furthering the effectiveness of IMUA,” said O’Brien. Richard Pye was presented with the IMUA Leadership Award for his tenure as chairman of the IMUA Board of Directors. Rich was an influential force in expanding IMUA’s reach through its regional advisory groups including the international push into Canada. He also led the association into its eLearning course development scheduled to kick off in June 2019.[IA]
Personal Insurance
Commercial Insurance
The security you need. The name you trust. We work with a carefully selected network of independent agents and brokers to provide a comprehensive portfolio of Commercial and Personal insurance products. A+ rated by AM Best and backed by the financial strength of the Berkshire Hathaway Group, Berkshire Hathaway GUARD offers competitive pricing, an easy submission process, fast claims handling, and superior customer service. See what we can do for you. Interested agents visit www.guard.com/apply Businessowner's Policy | Commercial Auto Commercial Umbrella | Workers' Compensation Homeowners | Personal Umbrella See our complete product list & state availability at www.guard.com
Berkshire Hathaway
GUARD
Insurance Companies
AmGUARD AZGUARD EastGUARD NorGUARD WestGUARD
[ GUEST ARTICLE ]
GREGORY V. SERIO
Judge Richard Brown: Insurance Crime Fighter uWhen one thinks of a district attorney from New York City, the scene goes to any one of a number of celebrated crime stories from the City That Never Sleeps: murder, mayhem, and madness, it seems, trump virtually everything else. For anyone who ever tried to gain the attention of prosecutors for an insurance fraud case, even the most salacious of stories could barely hold a candle to the screaming headlines of the New York Post or other tabloids blaring the most recent heinous act. In Queens County, though, Judge Richard Brown was no ordinary district attorney, and his attention to insurance fraud cases was just one way he set himself apart from his peers. And rate payers, insurers and the public are all the better for it. Judge Brown, who liked to be addressed that way even after he entered the district attorney’s office, died on May 4, 2019 after a remarkable twenty-eight year run in that post. He left behind a legacy of showing up at crime scenes at all hours of the day and night, starting a school—at the district attorney’s office—for wayward youth, and for providing seemingly limitless attention and dedication to every insurance fraud case that crossed his desk. The insurance fraud stories that came out of the office over the early 2000s could have spun around on broadsheets the way the movies would reveal screaming headlines: “Car Insurance Scam Nets 30 in Queens Sting Operation.” “Multi-State Motorcycle Theft Ring Busted; 16 Charged with Stealing 81 Cycles.” 43 Indicted in N.Y. Auto ‘Fraud Factory.’” The list goes on… for a very long time. As he put it, insurance fraud was an issue in his crosshairs from the time he came into office in 1991 and it proved to be a constant focus throughout his long tenure. While workers compensation and health insurance had their due, Judge Brown really enjoyed the auto insurance fraud cases. Cars are more important in 10 July 1, 2019 / INSURANCE ADVOCATE
The insurance world in New York may not have known of the Queens District Attorney’s passion for fighting insurance fraud, or his remarkable success at it. It may now find out the hard way unless the next Queens district attorney is as singularly driven to the fight against insurance fraud as was Judge Richard Brown. To him we all say, thanks for a job well done. Queens than in any other borough save Staten Island, and for years New York held the ignominious honor of having among the highest car insurance rates in the country. Whether from his days on the bench, or his time in Albany shaping public policy as a senior legislative or gubernatorial staffer, Judge Brown understood the simple yet critical correlation between auto insurance fraud and the hit on the wallets of the hard-working, largely blue collar constituency that he served. Fraud rings, in particular, allowed Judge Brown to roll up his sleeves and dig into a crime that looked both as sophisticated as a Manhattan financial fraud and as gritty as any street crime of some of the tougher parts of his own county. From Far Rockaway on the south shore to Flushing on the north, and all the communities of Queens in between, the Queens district attorney’s office, together with the New York State Insurance Department/Department of Financial Services and the New York City Police Department cast a large blanket of intelligence gathering, undercover operations and stings to root out auto insurance fraud there. Judge Brown seemed to take particular delight in one operation that net-
Gregory V. Serio served as superintendent of insurance for the State of New York from 2001-2005 and collaborated on a number of insurance fraud cases with the Queens District Attorney Brown during that period.
ted multiple suspects from neighboring Nassau County. The companies favorably assisted by the singular commitment of the Queens district attorney to root out auto insurance fraud read like a who’s who of auto insurance writers: Clarendon, TriState Consumer, State farm and Allstate, among many others. But Judge Brown did not do it for the carriers, he did it for those insured by those carriers. And he did it because he understood the realities of insurance fraud as an insidious economic crime and very much a dangerous crime, including the likes of organized crime and street gangs on more than one occasion. As recently as 2017 Judge Brown was still at it, looking to bolster his office’s capabilities at fighting auto theft and auto insurance fraud. In announcing a grant received by his office of over $ 500,000, Judge Brown rightfully took a victory lap: the number of autos stolen in the borough had declined 96 percent from the time he entered office in 1991, according to the website Queens. com. And he was a major contributor to New York’s plummet on the list of states with the highest auto insurance rates. But that would hardly allow him to rest, as he intended to use the funds to add more assistant district attorneys and investigators to his Auto Crime CONTINUED ON PAGE 30
ADVERTORIAL
The Sharing Economy’s Impact on the Hospitality Industry By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE - Assistant Vice President/Media Editor uTHE SHARING ECONOMY has a significant impact on many industries, including traditional hotels. A Morgan Stanley report estimated that cannibalization of the hotel industry by such services as Airbnb was about 54% in 2018. Of particular concern is the popularity of these services with the younger generation. Helping clients understand the threats and possible ways to respond is another sign of the true insurance professional. What is the sharing economy? It usually means people sharing underutilized resources – such as cars, rooms and personal services – often for a fee. The process is most often facilitated via the internet. The concept of sharing is not new. Bartering and shared services have been an integral component of society for thousands of years. What has changed, however, is technology: the ease with which people can reach out to and negotiate with total strangers on a real time basis. When Airbnb started in 2008, the idea of sharing a stranger’s home, or sharing your home with strangers, was unthinkable to many. Airbnb now boasts over 300 million customers. What a difference a decade makes! Mobile apps allow people to share cars, homes, bicycles and even private planes. Some researchers estimate the sharing economy will exceed $40.2 billion in revenue by the year 2022 (www.cmo.com). Airbnb offers hosts two types of protection, free of charge. The Host Guarantee provides property insurance for the host’s home and possessions. Host Protection is for third party liability claims. In either cases, not all types of losses are covered. For traditional hotels branching out to offer new services, a comprehensive review of services offered is required to ensure that proper insurance coverage is maintained. Online travel sites are becoming involved in the sharing economy on a large scale. Expedia’s HomeAway platform had 370,000 properties listed at
An open dialogue between the insurance agent and their clients may avoid a serious gap in coverage. the end of 2018. HomeAway bookings increased 28% in 2018. (www.hotelmanagement.net). Sites like Airbnb seem to offer a hometown experience not found in a cookie cutter hotel. In response to this, some hotels may offer more local flavor in their menus and entertainment options. The increase in accommodations available through peer-to-peer networks does not necessarily mean the death of the traditional hospitality industry. There are a number of areas where partnerships may be possible. For example, Paris, France is a location that typically sees hotel occupancy rates averaging 6070%. Real estate values in and around the city are high, which serves as a barrier to hotel expansion and the purchase of new properties. However, hotels have
a trust advantage – travelers still may feel more comfortable renting from a known entity than an individual. Hotels could partner with homeowners and apartment owners by offering services such as booking, check-in, check-out, registration, maintenance and cleaning, most likely at a lower cost than outside parties would charge. The added exposures of providing services to third parties may be outside the traditional insurance carried by the hotel. The world as we know it continues to change rapidly. Companies need to adapt to these changes or face extinction. An open dialogue between the insurance agent and their clients may avoid a serious gap in coverage. Helping clients adjust to the changes and challenges imposed by the sharing economy 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 / July 1, 2019 11
[ IN THE ASSOCIATIONS ]
Robusto Honored by UJA uUJA-Federation of New York honored Dino E. Robusto, chairman and chief executive officer of CNA Financial Corporation, and John J. Haley, chief executive officer of Willis Towers Watson, at its General Insurance Annual Event on June 11, 2019 at The Pierre in New York City. Event chairs Carl Hess of Willis Towers Watson and Douglas M. Worman of CNA presented the honorees with their awards. The event drew nearly 700 attendees and raised over $1.5 million for UJA-Federation’s annual campaign to sustain its network of hundreds of nonprofits that touch the lives of millions of people each year.[IA]
Dino E. Robusto and John J. Haley
John J. Haley and Carl Hess
Steven Young of Wilson Elser Moskowitz Edelman & Dicker LLP; John J. Haley; Dino E. Robusto; and Amy Feller of Chubb 12 July 1, 2019 / INSURANCE ADVOCATE
For more than 100 years, UJAFederation has brought New Yorkers together to solve some of the most pressing problems facing our community. Through UJA, more than 50,000 donors impact the issues that matter most to them, pooling their resources to care for Jews everywhere and New Yorkers of all backgrounds, respond to crises close to home and far away, and shape our Jewish future. Working with a network of hundreds of nonprofits, UJA extends its reach from New York to Israel to nearly 70 other countries around the world, touching the lives of 4.5 million people each year. For more information on how to donate or volunteer, please visit our website at www.ujafedny.org.
Dino E. Robusto and James S. Tisch of Loews Corporation
Dino E. Robusto and Douglas M. Worman
JANE M. ORIENT, M.D.
[ GUEST OPINION ]
Money Can’t Buy You Health u“Healthcare” is supposed to be the big election issue, and politicians promise to give people universal and equal “healthcare,” or prevent the bad guys from taking it away. Everyone of course wants to be healthy, and a $3 trillion industry wants to keep the money flowing. So, I have a confession to make as a doctor: I don’t think I have ever kept anybody healthy. If someone comes to me asking for “health maintenance,” I don’t have a shot of “health” to give, or a prescription for “health” to be filled at your neighborhood Walgreens, CVS, or Rite-Aid. And as a patient, I can’t recall any ways in which doctors kept me healthy, although they did save my life by taking out my appendix, and they treated some illnesses and injuries. I am very grateful to them, and whatever I paid them seemed reasonable and well worth it. To my mind, a healthy person is one who does not have to see a “healthcare provider” regularly or take medicine every day, and who can go to work, take care of family, and generally lead an active life. We hear endless complaints about how we spend too much money treating sickness instead of preventing it. If only we had the government take all the money, plus trillions more, and “invest” it in health, we wouldn’t have to spend so much, and everyone would be healthier—so they say. This was the rationale for the National Health Service in Britain. Once the NHS took care of the backlog of untreated illnesses, much of the need for it would melt away. This did not happen. Expenditures kept rising and were never enough. The backlogs and waiting lists grew. Ambulances circle emergency departments, and patients are crammed into hallways and storage rooms. Suppose you go for your government-funded, “value-based” health maintenance visit. Details of your once-private life will be entered into
To my mind, a healthy person is one who does not have to see a “healthcare provider” regularly or take medicine every day, and who can go to work, take care of family, and generally lead an active life. a very expensive electronic health record. (For most people, it will be their own data, but occasionally someone else’s will be cut-and-pasted in, causing endless trouble.) You will be checked for diabetes or pre-diabetes, hypertension or pre-hypertension, tobacco use, cholesterol, in many cases gun ownership, body mass index, and other government-mandated items. You will get educated about the evils of tobacco (in case you have been on Mars and hadn’t heard). You’ll be lectured about obesity if your BMI is too high. You’ll very likely get a prescription to lower your blood pressure or cholesterol, and you may get vaccinated for something. Your provider will likely get a bonus for checking all the right boxes and for “keeping you healthy,” and will get penalized if your “numbers” don’t improve or you get sick. Since I don’t think others are any better than I am at creating health, there is a huge incentive to “manage the case mix” to discourage unhealthy or noncompliant patients from joining the practice. People on drugs for blood pressure or cholesterol may feel worse rather than better, but are supposed to be less likely to have a heart attack or stroke decades later. Studies with huge numbers of patients, who may be very different from you, have shown a decrease
Jane M. Orient, M.D. obtained her undergraduate degrees in chemistry and mathematics from the University of Arizona in Tucson, and her M.D. from Columbia University College of Physicians and Surgeons in 1974. She completed an internal medicine residency at Parkland Memorial Hospital and University of Arizona Affiliated Hospitals and then became an Instructor at the University of Arizona College of Medicine and a staff physician at the Tucson Veterans Administration Hospital. She has been in solo private practice since 1981 and has served as Executive Director of the Association of American Physicians and Surgeons (AAPS) since 1989. She is currently president of Doctors for Disaster Preparedness. Since 1988, she has been chairman of the Public Health Committee of the Pima County (Arizona) Medical Society. She is the author of YOUR Doctor Is Not In: Healthy Skepticism about National Healthcare, and the second through fourth editions of Sapira’s Art and Science of Bedside Diagnosis, published by Lippincott, Williams & Wilkins. She is the editor of AAPS News, the Doctors for Disaster Preparedness Newsletter, and Civil Defense Perspectives, and is the managing editor of the Journal of American Physicians and Surgeons.
in such events with treatment. So far, a decrease in expenditures has not been shown, in view of the cost of all the drugs and side effects. Of course, as an internist I treat high blood pressure and diabetes, but I consider this to be disease management. Would better diet prevent these things? Possibly, but what diet? I recCONTINUED ON PAGE 30 INSURANCE ADVOCATE / July 1, 2019 13
PIANJ/PIANY Take Over Atlantic City 80’s Style! 14 July 1, 2019 / INSURANCE ADVOCATE
Agents, insurance professionals, and industry experts from New Jersey and New York came together for the PIANJ/PIANY Annual Conference June 9-11, 2019, at Harrah’s Casino Resort in Atlantic City, N.J. The event—a jam-packed two days—brought networking opportunities, a premier trade show and education sessions providing continuing-education credits—as well as a lot of fun for attendees while celebrating PIANJ/PIANY’s 80th anniversary. The conference was the venue for PIANJ’s presentation of the Awards of Distinction and the installation of the 2019-20 PIANJ officers and directors.
TRADE SHOW
TRADE SHOW
TRADE SHOW AND NETWORKING
The biggest insurance exhibition in the Northeast kicked off with giveaways and a Welcome Cocktail Reception on the tradeshow floor. Hors d’ oeuvres and drinks were served while insurance professionals made valuable contacts and built relationships to help grow their businesses. The trade show continued through a second day, with hundreds of vendors eagerly meeting with insurance professionals and sharing the latest industry innovations. The event wrapped with a Wine and Cheese Reception on the final day. The event also brought VIP guests to the trade-show floor. PIA National President and PIANJ past President Keith A. Savino, CPIA, and PIA National Executive Vice President Mike Becker rubbed shoulders with agents and exhibitors alike, and shared what is happening on the national stage within our industry. Dan Maher, the executive director of the Excess Line Association of New York attended the event; as well as Herminia Bonillia, president of the Latin Agents & Brokers Association; and Wendy-Leigh Certo, president of the Surplus Lines Association of New Jersey.
The Luncheon
KEYNOTE LUNCHEON WITH AGT ENTERTAINMENT
The Networking Luncheon is always known to be a fun event, and this year it was no exception. PIANY President Jamie Ferris, CIC, AAI, CPIA, opened the luncheon, recognizing PIA past presidents, and the PIANY board of directors. PIANJ outgoing President Lloyd “Rip” Bush, CPIA, introduced the new PIANJ officers and newly inducted PIANJ President, Bruce Blum, CPIA. Blum had the
Mentalist Eric Dittelman wows the crowd with his mind-reading abilities.
CONTINUED ON PAGE 16 INSURANCE ADVOCATE / July 1, 2019 15
CONTINUED FROM PAGE 15
honor of recognizing the newly indicted NJYIP officers, and stressed the importance of growing the next generation of industry leaders. Finally, Eric Dittelman, a mentalist featured on “America’s Got Talent,” wowed the crowd with his mind-reading abilities. PIANY President-elect John Tomassi, CPCU, had the pleasure of duct-taping Dittelman’s face. And, participants from the crowd had Dittelman guessing (accurately) their marker drawings, childhood Christmas gifts, favorite Halloween costumes and even their first crushes. John Fear at one of his CE-approved education classes, The Business of Inn-surance.
PIANY President Jamie Ferris, CIC, AAI, CPIA, opens the luncheon.
EDUCATION SESSIONS
Two days’ worth of educations sessions were held during the conference. Emerging Technologies & New Insurance Exposures was offered by Steve Anderson, CIC. Good Stuff–Endorsements You Want on Your Policy, if Possible was presented by Steve Lyon, CPCU, CIC, CRM, AAI, AIS, CRIS. New Revenue with Bonds was offered by James Burger. The Business of Inn-surance and Errors & Omissions in Today’s Virtual Marketplace were presented by John Fear, CPIA, CISR. And finally, Workplace Violence Coverage–What You Need to Know was taught by Paul Cossentine, CIC. CE credits were approved for all of the education sessions—for New York, New Jersey and Steve Lyon teaches Good Stuff–Endorsements You Want on Your Policy, if Possible.
Pennsylvania licenses. As always, PIA is committed to providing quality education opportunities!
YIP NITECAP
Our young insurance friends know how to throw a great party! Harrah’s Eden Lounge was the center of the action Sunday night, with music, dancing and craft drinks. NJYIP members donned tie-dye t-shits with the reminder to “Keep Calm and Stay Young!” CONTINUED ON PAGE 18
16 July 1, 2019 / INSURANCE ADVOCATE
YEARS
Founded 1999
THE
SMARTEST COVERAGE for New York’s unique landscape.
From the coast to upstate, Interboro and UPC Insurance offer a variety of products designed for New York. Smart coverage means rather than a hurricane deductible, we offer a customizable windstorm deductible that can match your All Other Perils (AOP) deductible, potentially saving thousands of dollars. Count on us at the time of greatest need. Peter N. Resnick
Nelson N. Gochez
Interboro President of Insurance UPC NE Regional Sales Director presnick@upcinsurance.com 516-399-6000
New York Territory Sales Manager ngochez@upcinsurance.com 516-399-6001
upcinsurance.com
800-861-4370
HOMEOWNERS | FLOOD | CONDO/CO-OP | TENANTS
CONTINUED FROM PAGE 16
CELEBRATING 80 YEARS AT THE POOLSIDE PARTY
PIANJ and PIANY both are celebrating their 80th anniversary. In recognition of this momentous occurrence, the Poolside Party was ‘80s themed. Attendees wore ‘80s outfits, food from the ‘80s was served, and the band Legacy played our favorite tunes from the ‘80s. Big hair and jelly bracelets were everywhere!
FUN RUN FOR SPECIAL OLYMPICS RAISES OVER $100,000
The 35-year partnership between PIANJ, NJYIP and the Special Olympics New Jersey continued with the annual Fun Run for Special Olympics. Even a rainy morning on the Boardwalk couldn’t keep runners from skipping the 5K race. An award breakfast followed, where Special Olympics athletes, runners, and event supporters celebrated. The top male finishers included Frank Durkin in first place (19:25); Kyle Price in second place (19:26); and Noah Dallas in third place (20:25). The top female finishers included Victoria Thaler in first place (22:45); Tabatha Mackenzie in second place (26:50); and Claire Goble in third place (27:05).
PIANJ President Bruce Blum, CPIA, and NJYIP President Logan True, CRIS (right), present Special Olympics New Jersey President and CEO Heather Anderson with a check for $100,466.01.
AWARDS OF DISTINCTION
Sunday morning, PIANJ held its annual board meeting, at which PIANJ outgoing President Lloyd H. “Rip” Bush Jr., CPIA, presented the following awards: • Andrew Harris, Jr., CIC, AAI, of Liberty Insurance Associates, received the Professional Agent of the Year award. • Beth Frederickson, CPIA, of Voluntary Risk Managers, received the Director of the Year award.
18 July 1, 2019 / INSURANCE ADVOCATE
Outgoing PIANJ President Rip Bush, CPIA (right), presents Andrew Harris Jr., CIC, AAI, with the Professional Agent of the Year award.
Outgoing PIANJ President Rip Bush, CPIA (right), presents Beth Frederickson, CPIA, with the Director of the Year award.
NJYIP Director Lisa Glesias, CPIA, from Franklin Mutual Insurance Co., and PIANJ outgoing President Rip Bush, CPIA (right), present FMI’s Gary Capone, CPCU, ARM, with the Company Person of the Year award.
PIANJ past President Kacy Campion Renna, CIC (left), and the association’s outgoing President Rip Bush, CPIA, present the Company of the Year award to Selective Insurance, which was accepted on behalf of the company by Teresa Caro.
• Gary J. Capone, CPCU, ARM, of Franklin Mutual Insurance Co., received the Company Person of the Year award. • Selective Insurance received the Company of the Year award. Senior Vice President, New Jersey Regional Manager Teresa Caro accepted the award on Selective’s behalf. • Beth Starr of Special Olympics New Jersey received the Community Service award.
PIANJ ELECTS ITS 2019-20 BOARD OF DIRECTORS
At its annual board meeting, the association also named its 2019-20 board of directors and officers. • PIANJ 2019-20 officers: • President: Bruce Blum, CPIA • President-elect: Steven C. Radespiel • Vice President: Michael DeStasio Jr., TRIP • Vice President: Thomas Wilkens • Treasurer: Constance Mahoney • Secretary: Andrew Harris Jr., CIC, AAI • Immediate past President: Lloyd H. “Rip” Bush Jr., CPIA The association’s Young Insurance Professionals also named its officer and board of directors at the conference. • PIANJ-YIP 2019-20 officers • President: Logan True, CRIS • First Vice President: Alyssa Delaney • Second Vice President: Peter Leone • Treasurer: Michael S. DeStasio • Secretary: Corey Cousoulis • Immediate past President: Aaron Levine, CIC Next year’s conference is scheduled for June 7-9, 2020.[IA]
Incoming PIANJ Vice President, and co-chair of the PIANJ Special Olympics Golf Committee, Thomas Wilkens and outgoing President Rip Bush, CPIA (right), present Special Olympics New Jersey’s Beth Starr with the Community Service award.
PIANJ officers for 2019-20: (L-R) Thomas Wilkens; Steven C. Radespiel; Bruce Blum, CPIA; Rip Bush, CPIA; Michael DeStasio Jr., TRIP; Constance Mahoney; with PIA National Director Paul Monacelli, CIC, CPIA. Not pictured: Andrew Harris Jr., CIC, AAI.
(L-R) PIA National Director Paul Monacelli, CIC, CPIA; PIA National President Keith A. Savino, CPIA; newly elected PIANJ President Bruce Blum, CPIA; and outgoing PIANJ President Rip Bush, CPIA.
Some of the PIANJ-YIP board members for 2019-20: (L-R) Alyssa Delaney; Michael DeStasio; Peter Leone and Logan True. Not pictured: Corey Cousoulis. INSURANCE ADVOCATE / July 1, 2019 19
[ COURTSIDE ]
LAWRENCE N. RO GAK
Court of Appeals Holds that Control of Medical PC by Non-Physicians is Fraud in Itself Non-Party Witness Pleading the Fifth May Be Used Against PC in Civil Trial
Andrew Carothers, M.D., P.C. v Progressive Insurance Co. Edited by Lawrence N. Rogak In this appeal from a jury verdict holding that a physician’s professional corporation was controlled by non-physicians, the Court of Appeals holds that (1) a finding that non-physicians were the real controllers of the PC is enough to disqualify the PC from No-Fault benefits, without a showing of “traditional” elements of fraud; and (2) the fact that the PC’s managers “pleaded the Fifth” at their depositions can be used by a Civil jury as an adverse inference against the PC.—LNR u Only licensed physicians may practice medicine in New York. The unlicensed are not bound by the ethical rules that govern the quality of care delivered by a physician to a patient. By statute, regulation, and the common law, the corporate form cannot be used as a device to allow nonphysicians to control the practice of medicine. In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), we held that, pursuant to 11 NYCRR 65-3.16 (a) (12), an insurer may withhold payment for medical services provided by a professional corporation when there is «willful and material failure to abide by» licensing and incorporation statutes. Today we clarify that Mallela does not require a finding of fraud for the insurer to withhold payments to a medical service corporation improperly controlled by nonphysicians. The trial court did not err in declining to give a charge requiring the jury to find fraudulent intent or conduct “tantamount to fraud”, in order to reach a verdict in favor of the insurers.
Only licensed physicians may practice medicine in New York. I. The factual background is essential in understanding our legal conclusion. The plaintiff in this case, Andrew Carothers, M.D., P.C., a professional service corporation, was formed by Andrew Carothers, M.D., a radiologist, in 2004. The company provided magnetic resonance imaging (MRI) services. Plaintiff was incorporated after Carothers met Hillel Sher, a nonphysician who owned and controlled two companies that together held long-term leases for three, fully equipped, operational MRI facilities in New York City. They had been introduced by an MRI equipment repair technician who knew that Carothers was in financial distress and that Sher was “looking for a doctor.” In 2005-2006, plaintiff subleased the facilities and associated equipment from Sher’s companies. Specifically, plaintiff agreed in January 2005 to lease the premises and MRI equipment for a fee comprised of $547,000 per month for the equipment [FN1] and $30,000 per month for the three premises. Sher had the right to terminate each lease without cause, regardless of payment, on 30 days› notice. No similar provision allowed plaintiff to terminate the leases without cause. Indeed, the leases contained clauses whereby they automatically renewed unless terminated by Sher, giving plaintiff no exit.
FN 1: In this opinion, we use the figures given by the Appellate Division. 20 July 1, 2019 / INSURANCE ADVOCATE
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.
The rental fees charged to plaintiff for the MRI equipment were exorbitant. For example, a piece of equipment that one of Sher’s companies leased from a third party for a monthly payment of $5,950 was leased to plaintiff for $75,000 per month. Indeed, Sher’s companies charged plaintiff far more per year to rent the MRI machines, which were about 10 or 11 years old, than it would have cost to buy them outright. There was trial testimony that for two months’ rent charged by Sher in one of the equipment leases, a company could have owned a similar used MRI unit. As of December 2004, plaintiff could have bought used equipment to replace all the MRI equipment in the leases for less than $600,000. This amount is not significantly more than plaintiff paid each month to lease the equipment. All in all, the difference between the fair market value of six MRI scanners and what Sher charged plaintiff in one year to rent them was $4,680,000. Similarly, plaintiff paid $60,000 per year to lease nine used fax machines, even though the company could have purchased scores of new machines every year for that price. Carothers opened a bank account on behalf of plaintiff. It was at the bank
[ COURTSIDE ] that Sher introduced Carothers to Irina Vayman, another nonphysician, whom Carothers hired as plaintiff ’s executive secretary. Carothers never wrote a check from the bank account; Vayman would write the checks. At the MRI facilities, Carothers’s oversight of the provision of medical services was practically nonexistent. Prior to signing the leases, Carothers did not seek out the referring physicians who generated patient traffic to the practices, and it was Vayman, not Carothers, who subsequently had contact with those physicians. Patient care protocols had already been set up by Carothers’s predecessor. Carothers was not involved in evaluating or disciplining employees. Carothers rehired a second radiologist, who had worked for Carothers’s predecessor, to interpret scans, and Carothers himself reviewed at most 79 reports out of a total of some 38,000. At trial, an expert on radiology practice testified that “there was absolutely no quality control; there was no supervision; . . . the reports did not reflect the reality of what the films showed”, and “the quality of what was being produced . . . was abysmal.” The expert opined that “what was being done here was not being done with an eye towards producing any kind of a quality product. This was . . . being done to sort of get an image on the film. And those images are not the images that would lend themselves towards being highly diagnostic types of examinations. . . . A lot of the images are replete with a tremendous amount of artifacts that reflect . . . inadequate equipment performance.” Most of the scans performed at plaintiff ’s facilities were of patients allegedly injured in motor vehicle accidents. The patients assigned their rights to receive first-party no-fault insurance benefits to plaintiff, which billed insurance companies to recover payment on the assigned claims. Sher introduced Carothers to an entity named Medtrex, with which plaintiff entered into a loan and security agreement. Vayman, not Carothers, was the authorized borrower’s representative on the Medtrex agreement. Medtrex advanced loans to plaintiff on a weekly basis. Payments from the insur-
ance companies were then used to pay back Medtrex’s loans and pay its fees. Carothers’s salary, at $133,000 from January 2005 through December 2006, was lower than that of plaintiff ’s executive secretary, Vayman, who earned $120,000 a year. Throughout her employment, Vayman transferred large sums of money from plaintiff ’s bank account to her own personal bank account and used plaintiff ’s account to cover expenses such as lease payments on her car and water bills on a house in Las Vegas owned by Sher. Even larger sums were transferred from plaintiff ’s account to an account of Sher’s. Carothers eventually opened two more accounts in plaintiff ’s name to facilitate payments made by Vayman and Sher, including wire transfers to overseas accounts totaling $2,900,000. A certified public accountant who had conducted a “forensic investigation” of plaintiff testified at trial that some $12,200,000 was funneled through plaintiff to Sher and Vayman. Vayman introduced Carothers to a tax preparer, whom Carothers hired to file tax returns for plaintiff. Sher’s telephone number, not Carothers’s, was listed on plaintiff ’s tax return. The filed return contained egregious errors, such as a deduction taken for fictitious management fees in excess of $1,000,000. At trial, the accountant who had conducted the forensic investigation of plaintiff testified that it had “no books and records,” such as financial statements, ledgers, and invoices. Insurance companies stopped paying plaintiff ’s no-fault claims in 2006. Although Carothers had not personally guaranteed the leases, he did personally guarantee the Medtrex loans and he ended up owing that company over $7,000,000. Plaintiff closed in December 2006 after Medtrex refused to make any more advances. II. The procedural history begins with multiple collection actions filed by plaintiff against the insurance carriers, in the Civil Court of the City of New York, seeking to recover unpaid claims of assigned first-party no-fault insurance benefits. The carriers’ defense is that plaintiff was not eligible to seek re-
imbursement of the insurance benefits... because it was controlled by unlicensed nonphysicians. The defendants also relied on our decision in State Farm Mut. Auto. Ins. Co. v Mallela, which held, in light of the above-cited provisions, that insurance carriers may withhold payment for medical services provided by “fraudulently incorporated” enterprises to which patients have assigned their claims, regardless of the quality of care such entities have provided. The defendants contended that Carothers was merely a nominal owner of plaintiff, and that the professional corporation was actually owned and controlled by Sher and Vayman, who were not physicians. They also maintained that plaintiff was not entitled to payment because Carothers, the shareholder with a medical license, did not personally engage in the practice of medicine through the professional corporation. At their depositions, Sher and Vayman invoked their Fifth Amendment privileges against self-incrimination and refused to answer almost all the questions, numbering in the hundreds, posed to them by the defendants. Specifically, in response to each question (other than identifying themselves), Sher and Vayman answered, simply, “Fifth.” By way of examples, Sher and Vayman responded in that manner to the following questions: “Are you [Sher] the owner of [plaintiff]?”; “Did you [Sher] pay Dr. Carothers money in exchange for the use of his professional license in order to operate [plaintiff]?”; “Did you [Sher] ever charge [plaintiff] fair market value for the use of MRI machines at the facilities where [plaintiff] conducted its business?” “Mr. Sher, did you exercise any control over the entity known as [plaintiff]?”; “Are you [Vayman] a part owner of [plaintiff]?”; “Is Hillel Sher a part owner of [plaintiff]?” The cases, involving 54 insurance carriers, were consolidated and a joint trial was held in Civil Court. The parties stipulated that Sher and Vayman were not available to testify at trial within the meaning of CPLR 3117 (a) (3)[FN2]. CONTINUED ON PAGE 22
FN 2: CPLR 3117 (a) (3) states conditions under which «the deposition of any person may be used» at a trial due to the witness›s unavailability. INSURANCE ADVOCATE / July 1, 2019 21
[ COURTSIDE ] CONTINUED FROM PAGE 21
Plaintiff moved to preclude the insurance companies from reading into evidence the depositions of Sher and Vayman in which they had serially invoked their Fifth Amendment privileges, on the ground that the invocation of the Fifth Amendment by a nonparty could not be used against a party. Civil Court denied the motion. In opening remarks, the lead defense counsel told the jury that it would not hear from Sher and Vayman “because both of those witnesses chose to take the Fifth Amendment privilege against self-incrimination.” As the first piece of evidence presented, Sher’s entire deposition testimony was read to the jury, including his repeated invocations of the Fifth Amendment. The same approach was taken with Vayman’s deposition testimony. Plaintiff ’s counsel objected. During the trial, the jury heard from multiple witnesses whose testimony supported the defendants’ assertions that plaintiff ’s profits were funneled to Sher and Vayman, through grossly inflated equipment lease payments to Sher’s companies and through the transfer of plaintiff ’s funds to personal accounts. The accountant who had conducted a forensic investigation of plaintiff opined that “Dr. Carothers was not in control of [plaintiff] as a true business owner would be. . . . He was not actively involved in the operations or the financial aspects of the company. . . . The core business assets . . . were owned and controlled by Hillel Sher. . . . Hillel Sher not only controlled the company, but profited from the monies that were in [plaintiff] . . . . Dr. Carothers, based on everything that I read, did no due diligence that a true business owner would before he signed leases for millions of dollars. . . . Since a medical practice is the only way you can bill an insurance company, plaintiff was used as a vehicle to siphon money to Sher and Vayman . . .” In the expert’s view, the lease agreements between plaintiff and Sher’s companies were not made at arm’s length, because the terms of those agreements were not mutually beneficial to both parties.
Carothers himself testified, but he was not able to account for the transactions described by the other witnesses called by the insurance carriers. He suggested that the payments to Vayman’s personal account were for back wages and payment of corporate expenses and that the only payments for Sher’s benefit were to repay a $400,000 bridge loan, for which he presented no proof. Although he testified that a general ledger compiled by an accounting firm in 2007 accounted for all transactions, no such ledger was admitted into evidence. During summation, the insurance carriers’ counsel repeatedly mentioned that Sher and Vayman had invoked their Fifth Amendment privileges. Plaintiff ’s counsel requested that the court give a jury instruction on “the traditional elements of fraud,” including fraudulent intent, on the theory that Mallela allows insurers to withhold payments, under 11 NYCRR 65-3.16 (a) (12), only in situations where the professional corporation›s ostensible or real managers engaged in conduct «tantamount to fraud». The trial court denied the request and the jury charge contained no instruction on fraudulent intent or the elements of fraud. The court told the jury that it could «find that plaintiff was fraudulently incorporated» if it concluded «that reasonable people would say that Mr. Sher and/or Miss Vayman were de facto . . . owners of the corporation or that they exercised substantial control over the corporation.” The jury could “look beyond the certificate of incorporation.” The trial court further instructed the jury that “to find that Mr. Sher and or Miss Vayman were de facto owners of plaintiff, the jury must find that they exhibited the attributes of ownership particularly that they exercised dominion and control over the corporation and its assets and that they shared risks, expenses, and interest in the profits and losses of the corporation.” The jury was instructed that, in order to find that Sher and Vayman “exercised substantial control over the corporation,” it “must find that they had a significant role in the guidance, management and direction of the business of the corporation.” The trial
court then enumerated 13 factors that the jury might consider relevant in deciding whether Sher and Vayman were de facto owners of or exercised substantial control over plaintiff. The court also required the jury to decide whether Carothers was engaged in the practice of medicine through plaintiff, within the meaning of Business Corporation Law § 1507. In the course of its instructions, Civil Court charged the jury that it could, but was not obliged to, draw an adverse inference against plaintiff on the basis of the invocations by Sher and Vayman of their Fifth Amendment rights, but could not rely on such an adverse inference as the only basis for concluding that plaintiff was not solely owned or controlled by Carothers. The jury found that the defendants had proved that plaintiff was “fraudulently incorporated” and that Carothers did not engage in the practice of medicine through plaintiff in 2005-2006. Plaintiff moved under CPLR 4404 (a) to set aside the verdict and for judgment as a matter of law or in the alternative to set aside the verdict as against the weight of the evidence or in the interest of justice and for a new trial. Plaintiff contended that the trial court erred by failing to instruct the jury regarding the elements of fraud and in particular by failing to instruct the jury that the defendants must have established that there was a fraudulent intent at the time of plaintiff ’s incorporation. Plaintiff also argued that it was error for Civil Court to set forth the particular list of factors it gave to assist the jury in determining whether Sher and Vayman were de facto owners of or exercised substantial control over the plaintiff. Additionally, plaintiff contended that it was error to permit Sher’s and Vayman’s deposition testimony to be read to the jury, because any probative value of reading the depositions was outweighed by its prejudicial effect, and that this error was further compounded by the court’s instruction that the jury could draw an adverse inference against plaintiff based upon the invocations of Fifth Amendment privileges. Finally, plaintiff challenged the CONTINUED ON PAGE 28
FN 3: Plaintiff also maintained that a decision by the trial court to preclude evidence of some $18 million in accounts receivable allegedly owed to plaintiff by the insurance companies prejudiced plaintiff›s ability to respond to the fraudulent incorporation defense. That argument was properly rejected by the lower courts. 22 July 1, 2019 / INSURANCE ADVOCATE
BONDING FACILITY
CONTRACT CONSTRUCTION
ADMINISTRATION
COURT BONDS
LICENSES & PERMIT
CUSTOM BONDS
FIDELITY BONDS
All Types of Surety & Fidelity Bonds
CARRIER BONDS
JANITORIAL BONDS
STANDARD RATES | Treasury Listed Sureties | Immediate Binding Facilities
Call Our Highly Experienced Team For All Your Bonding And Surety Needs!
U.S. SURETY SERVICES AGENCY, INC. 65 Broadway, Suite 1104, New York, NY 10006 Phone: 212-968-9100 • Fax: 212-248-0380 WATS: 800-924-0398
[ ON MY RADAR ]
BARRY Z ALMA
No Damage, No Case or Controversy, No Right to Sue in Federal Court Assignee has no more Right to Sue than Assignor uNo fault insurance was designed to save insurers and insureds money by removing automobile accident damages from the tort law system. Like all seemingly good ideas the no fault insurance systems, like Florida’s PIP system, were victims of the law of unintended consequences. One of those unintended consequences was the proclivity of health care providers to take assignments of the claims of the patients and then litigating to seek benefits plus tort damages. Often they succeeded. In the case that follows they forgot to sue for a case or controversy. In A&M Gerber Chiropractic LLC, As Assignee Of Conor Carruthers, On Behalf Of Itself And All Others Similarly Situated v. GEICO General Insurance Company, No. 17-15606, United States Court of Appeals for the Eleventh Circuit (April 19, 2019) a chiropractor took an assignment from a patient, Conor Carruthers, who was involved in a car accident after which he sought medical services from A&M Gerber Chiropractic LLC. At the time, Carruthers was covered under an automobile insurance policy issued by GEICO General Insurance Company. Pursuant to Florida’s Motor Vehicle No-Fault Law, the policy provided him with $10,000 in personal injury protection (PIP) benefits. To be entitled to the full $10,000, however, the statute required that Carruthers— like all PIP beneficiaries—be diagnosed by an authorized health care provider with an “emergency medical condition” (EMC); without such a diagnosis, he was limited to $2,500 in benefits. Despite the lack of an EMC finding, GEICO paid Carruthers/Gerber $7,311 in PIP benefits pre-suit, well in excess of the $2,500 cap. Even though Carruthers received almost triple the 24 July 1, 2019 / INSURANCE ADVOCATE
THE PARTY WHO INVOKES A FEDERAL COURT’S AUTHORITY MUST SHOW, AT AN IRREDUCIBLE MINIMUM, THAT AT THE TIME THE COMPLAINT WAS FILED, HE HAS SUFFERED SOME ACTUAL OR THREATENED INJURY RESULTING FROM THE DEFENDANT’S CONDUCT, THAT THE INJURY FAIRLY CAN BE TRACED TO THE CHALLENGED ACTION, AND THAT THE INJURY IS LIKELY TO BE REDRESSED BY FAVORABLE COURT DISPOSITION.
amount in PIP benefits that he was entitled to, Gerber believed that GEICO had misinterpreted certain language in its automobile policies and that this misinterpretation resulted in GEICO consistently underpaying PIP benefits as a “general business practice.” Carruthers assigned his rights to his treating chiropractic clinic, Gerber, which later filed a declaratory judgment class action suit in Florida state court. The complaint sought certification of a class (with Gerber as the class representative) along with a declaration (a) that GEICO’s interpretation of its policy language was wrong, and (b) that the misinterpretation “constitutes a breach of the insurance Policy.” Although the complaint sought a declaration that GEICO had breached the policy, the complaint stated that “there is no claim for monetary relief ” in the case. GEICO removed the case to the United States District Court. The District Court appointed Gerber as class representative and it certified the class to include all health care providers that re-
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/
ceived an assignment of benefits from a claimant and thereafter, pursuant to that assignment, submitted claims for nofault benefits under GEICO PIP policies.
ANALYSIS
On cross motions for summary judgment, GEICO argued, inter alia, that Gerber lacked standing at the outset of the lawsuit because it was undisputed that GEICO had paid Gerber more than $2,500 before the case was filed, even though he had not been diagnosed with
[ ON MY RADAR ] an EMC at that time. GEICO appealed arguing that Gerber lacked standing to bring this case. If, as GEICO argued, there is no standing the court must end its analysis. Simply put, once a federal court determines that the plaintiff has no standing, the court is powerless to continue. The case-or-controversy requirement of the U.S. Constitution sets fundamental limits on federal judicial power. Standing cannot be waived or conceded by the parties, and it may be raised (even by the court sua sponte) at any stage of the case. The party who invokes a federal court’s authority must show, at an irreducible minimum, that at the time the complaint was filed, he has suffered some actual or threatened injury resulting from the defendant’s conduct, that the injury fairly can be traced to the challenged action, and that the injury is likely to be redressed by favorable court disposition. In order to demonstrate that there is a case or controversy the plaintiff must allege facts from which it appears that there is a substantial likelihood that he will suffer injury in the future. To obtain declaratory relief the plaintiffs must assert a reasonable expectation that the injury they have suffered will continue or will be repeated in the future. In this case, Gerber, as assignee, stands in Carruthers’ shoes. It necessarily follows, then, that if Carruthers had no standing to file this case against GEICO, Gerber has no standing either. Because GEICO paid much more than than it owed Carruthers/Gerber didn’t suffer harm as a result of GEICO’s alleged misapplication of its policy. When an insurance company has paid all benefits in full there is no case or controversy. The district court erred by treating insurance coverage issues under the Policy as standing issues. Gerber argued—directly contrary to what it previously argued—that there is a risk of future injury. Whether and to what extent Gerber might be injured is beside the point because the proper inquiry in this case must focus on the potential future injury to Carruthers, not to Gerber or other members of the class. In the absence of a claim for money damages or substantial likelihood that
QSR
59 Celebrating YEARS
of Service!
Quaker Special Risk
Exclusively Serving Retail Agents Since 1960
QUAKER SPECIAL RISK PROGRAM DIVISION Providing Broad Coverages for Contractors and High Value Personal Lines Risk
CONSTRUCTION
PERSONAL LINES
• Luxury Home Builders • Remodeling/Renovation GC’s • Specialty Trade Contractors • Construction Managers PL/GL • Contractors Pollution • Primary and Excess Available
• High Value & Coastal Homes • Builder Risk • Wind Only • Primary Flood • Excess Flood & Cobra Zones • Bahamas, Caribbean & Virgin Islands High Valued Homes
EXCLUSIVE PROGRAMS TO QSR SPECIALTY DIVISIONS IN ADDITION TO PROGRAMS • Binding Authorities • Construction • Environmental • Inland Marine • Products • Property • Umbrella • Life Sciences
A RATED ADMITTED/NON ADMITTED CARRIERS NATIONWIDE CAPABILITY
QSR
Quaker Special Risk
Contact Chris Reid at: t. 800-447-4180, x2286 e. creid@QSR-Insurance.com f. 732-292-7381 • www.QSR-insurance.com
EATONTOWN, NJ • BOSTON, MA • WORCESTER, MA • WEST PALM BEACH, FL • CHARLOTTE, NC
CONTINUED ON PAGE 30 INSURANCE ADVOCATE / July 1, 2019 25
[ LOOKING BACK ]
INSURANCE ADVO CATE - 25 YEARS AGO
139 Harristown Road, Glen Roc R 26 July 1, 2019 / INSURANCE ADVOCATE
See o
ck, NJ 07452
INSURANCE ADVO CATE - 25 YEARS AGO
[ LOOKING BACK ]
The custom property & casualty insurance products you want ... the personalized services you need. It couldn't be simpler. Give MSO a call today. (800) 935-6900
our informational ad on page 11 of this issue.
INSURANCE ADVOCATE / July 1, 2019 27
[ COURTSIDE ] CONTINUED FROM PAGE 22
verdict that Carothers had not practiced medicine through plaintiff, as contrary to the weight of the evidence.[FN3] The trial court denied plaintiff ’s motion. Civil Court entered a single judgment in favor of Progressive and against plaintiff, dismissing the complaint. The Appellate Term affirmed Civil Court’s judgment dismissing the complaint, insofar as appealed from. The appellate court set aside, as contrary to the weight of the evidence, so much of the verdict as determined that Carothers failed to practice medicine, but upheld so much of the verdict as found that the plaintiff was fraudulently incorporated, affirming the judgment on that basis. The Appellate Term held that Civil Court erred in permitting the defense to read the deposition transcripts of Sher and Vayman to the jury, in which those witnesses repeatedly invoked the Fifth Amendment. “The error was compounded by the repeated references to the nonparties’ depositions in the defense summation to the jury, and in the decision of the court to charge an adverse inference. While it is proper for the court to give such an instruction to the jury in a civil action when a party invokes his or her Fifth Amendment privilege, generally, the adverse inference is inappropriate when it is based on a nonparty’s decision to remain silent.” The Appellate Term reasoned, however, that the errors were harmless under CPLR 2002, on the basis that the outcome of the trial, on the question whether plaintiff was in violation of the requirement that it be owned and controlled solely by licensed professionals, “would have been the same notwithstanding the errors.” The Appellate Term upheld Civil Court’s jury charge. “Although both the United States Court of Appeals for the Second Circuit and New York’s Court of Appeals employed the term fraudulently incorporated’ in the Mallela case, which was the term used in the certified question, the essence of the defense in that case, as here, was the provider’s lack of eligibility,› which does not require a finding of fraud or fraudulent intent, but rather, addresses the actual operation and control of a medical professional corpora28 July 1, 2019 / INSURANCE ADVOCATE
tion by unlicensed individuals. “A reading of the Mallela case demonstrates that the case involved fraud in the corporate form,› rather than the more traditional forms of common-law fraud.” Plaintiff appealed to the Appellate Division, pursuant to permission granted by that court. Progressive did not appeal. The Appellate Division affirmed the Appellate Term’s order insofar as appealed from. The Appellate Division upheld the Appellate Term’s holding that Civil Court erred in permitting the defendants to read the transcripts into evidence and in instructing the jury that it could draw an adverse inference, and agreed with the Appellate Term majority that the error could not have affected the outcome of the trial and therefore was harmless. The Appellate Division reasoned that there was “overwhelming evidence” that “Carothers was merely the nominal owner of the plaintiff and that the plaintiff was actually owned and controlled by nonphysicians Sher and Vayman, who funneled the plaintiff ’s profits to themselves, and . . . the outcome of the trial would have been the same absent the error.” In addition, the Appellate Division held that Civil Court properly declined to give plaintiff ’s requested charges on common-law fraud and fraudulent intent. “Mallela involved fraud in the corporate form rather than the more traditional forms of common-law fraud. With respect to fraudulent intent at the time of incorporation, Mallela instructs that even if a professional corporation did not intend to yield control to unlicensed parties at the time of incorporation, it nonetheless would be ineligible for no-fault reimbursement if the nominal physician owner yielded control of the corporation at some later date. Good faith compliance with the requirements of a professional corporation at the time of incorporation does not end when the certificate of incorporation is filed and does not defeat a claim of fraudulent incorporation if the evidence demonstrates that at some point after the initial incorporation, the nominal physician owner turned over control of the business to nonphysicians in contravention of state regulations.”
Plaintiff moved at the Court of Appeals for leave to appeal. III. In New York, a professional service corporation may be owned and controlled only by licensed professionals (see Business Corporation Law § 1507). Moreover, licensed professionals are permitted to incorporate only if they are the sole organizers, owners, and operators of the professional corporation (see Business Corporation Law §§ 1503 [a], [b]; 1508). To incorporate, the licensed individual must obtain a “certificate . . . issued by the New York State Department of Education certifying that each of the proposed shareholders, directors and officers is authorized by law to practice a profession which the corporation is being organized to practice” (Business Corporation Law § 1503 [b]), and the Department of Education may not issue a certificate of authority to a professional service corporation unless it meets these qualifications (see Education Law § 6507 [4] [c] [i]). Once the professional corporation is formed, shareholders may not transfer their voting power to any person who is not a licensed professional in the field (see Business Corporation Law § 1507 [a]); only shareholders or licensed professionals engaged in the practice may be directors and officers (see Business Corporation Law § 1508 [a]). New York law prohibits unlicensed individuals from organizing a professional service corporation for profit or exercising control over such entities. In the medical context, the underlying policy concern is “that the so-called corporate practice of medicine’ could create ethical conflicts and undermine the quality of care afforded to patients” (State Farm Mut. Auto. Ins. Co. v Mallela, 372 F3d 500, 503 [2d Cir 2004]). Control of medical service corporations by unlicensed individuals leads to higher costs, less effective medical treatment, and mistrust of the no-fault insurance system. More generally, the common law in New York has long recognized the need to ensure that providers of professional services are not unduly influenced by unlicensed third parties who are free of professional responsibility requirements and may disregard patient care in operating a corporation organized simply to make money.
[ COURTSIDE ] In State Farm Mut. Auto. Ins. Co. v Mallela, this Court held that, under 11 NYCRR 65-3.16 (a), a regulation adopted by the Commissioner of Insurance pursuant to New York’s “no-fault” insurance laws, insurance carriers may withhold payment for medical services provided by a professional corporation that has been “fraudulently incorporated.” There, we considered a certified question from the United States Court of Appeals for the Second Circuit: whether “a medical corporation that was fraudulently incorporated under Business Corporation Law §§ 1507, 1508, and Education Law § 6507 (4) (c) [is] entitled to be reimbursed by insurers, under Insurance Law §§ 5101 et seq., and its implementing regulations, for medical services rendered by licensed medical practitioners.” We answered the question in the negative, determining that a provider that was not solely owned and controlled by physicians was not eligible for no-fault insurance reimbursements. The Mallela decision interpreted 11 NYCRR 65-3.16 (a) (12) to allow insurance carriers to withhold reimbursement for no-fault claims that are «provided by fraudulently incorporated enterprises to which patients have assigned their claims’. In Mallela, nonphysicians paid physicians to use their names on paperwork to establish medical service corporations, and the nonphysicians then operated the companies, while billing the physicians inflated rates so that profits were channeled to them. The nonphysicians contended that the professional corporations were “entitled to reimbursement even if fraudulently licensed.” The Mallela Court rejected the argument, reasoning that if this were so, reimbursement would go «to the medical service corporation that exists to receive payment only because of its willfully and materially false filings with state regulators.» In our holding, this Court clarified that insurers may «look beyond the face of licensing documents to identify willful and material failure to abide by state and local law,» such as actual ownership or operation of the practice by an unlicensed individual.
The Mallela Court warned insurance carriers, however, that insurers could not delay payments of reimbursement claims to pursue investigations unless they had “good cause” and that «in the licensing context, carriers will be unable to show good cause› unless they can demonstrate behavior tantamount to fraud.» The Court further cautioned that «technical violations will not do. For example, a failure to hold an annual meeting, pay corporate filing fees or submit otherwise acceptable paperwork on time will not rise to the level of fraud.” Plaintiff, citing our language in Mallela, contends that the trial court erred in denying its request to instruct the jury that it had to find fraudulent intent or, at least, conduct “tantamount to fraud.” We conclude that there was no error. Neither 11 NYCRR 65-3.16 (a) (12) nor our interpretation of that regulation in Mallela requires that an insurance carrier, seeking to demonstrate that a professional service corporation engaged in corporate practices that violate Business Corporation Law § 1507, Business Corporation Law § 1508, or Education Law § 6507 (4) (c), show that the professional service corporation or its managers engaged in common-law fraud. We drew the term «fraudulently incorporated» from the Second Circuit›s certified question, but the term may be misleading. A corporate practice that shows “willful and material failure to abide by” licensing and incorporation statutes (Mallela, 4 NY3d at 321) may support a finding that the provider is not an eligible recipient of reimbursement under 11 NYCRR 65-3.16 (a) (12) without meeting the traditional elements of common-law fraud. Nor is a jury required to evaluate the extent to which corporate misconduct approximates fraud. The no-fault insurance regulations make providers ineligible for reimbursement when their violations of the cited statutes are more than merely technical and “rise to the level of ” a grave violation such as fraud. Insurance carriers do not have good cause to delay or deny payments of reimbursement claims on the basis of a
provider›s slight divergence from licensing requirements. Here, the jury›s finding that plaintiff was in material breach of the foundational rule for professional corporation licensure — namely that it be controlled by licensed professionals—was enough to render plaintiff ineligible for reimbursement under 11 NYCRR 65-3.16 (a) (2). The trial court committed no error in refusing to issue a charge requiring a «tantamount to fraud» finding by the jury.[FN4] P l a i nt i f f a l s o s u g g e s t s t h at in Mallela the corporate misconduct was more egregious than here, in that Mallela›s company had pleaded guilty to billing fraud and Mallela had surrendered his license. We can discern no salient factual difference between Mallela and this appeal that would justify a distinct analysis. The allegations in Mallela were very similar to the evidence presented at trial here; both cases involve alleged funneling of profits to nonphysicians who owned companies that billed the professional corporation inflated rates. Our decision in Mallela was not based on fraudulent billing. In fact, we did not mention in our opinion that Mallela had pleaded guilty to that charge. Finally, plaintiff is incorrect to characterize the improper control of plaintiff by unlicensed persons as simply an instance of improper fee splitting of the professional corporation’s profits with a nonphysician in violation of 8 NYCRR 29.1 (b) (4). Although the Appellate Division held in Matter of Allstate Prop. & Cas. Ins. Co. v New Way Massage Therapy P.C. (134 AD3d 495, 495 [1st Dept 2015], lv denied 28 NY3d 909 [2016]) that a «fee-sharing arrangement . . . does not constitute a defense to a no-fault action,» the jury in this case determined that plaintiff was controlled by unlicensed persons, rather than merely splitting fees with them. Control of a professional corporation by nonprofessionals violates foundational New York licensing requirements and rendered plaintiff ineligible for insurer reimbursement, for exactly the same reason the medical service corCONTINUED ON PAGE 30
FN 4: We reject plaintiff›s argument that it was error for Civil Court to set forth the particular list of factors it gave to assist the jury in determining whether Sher and Vayman were de facto owners of or exercised substantial control over plaintiff. Although we do not endorse the trial court’s specific list of factors, in this case the trial court’s charge satisfactorily directed the jury to the ultimate inquiry of control over a professional corporation. INSURANCE ADVOCATE / July 1, 2019 29
COURTSIDE
ON MY RADAR
GUEST ARTICLE
CONTINUED FROM PAGE 29
CONTINUED FROM PAGE 25
CONTINUED FROM PAGE 10
poration in Mallela was ineligible for reimbursement.
Carruthers will suffer a future injury— both of which Gerber was careful to avoid alleging—Gerber has no standing to pursue this case. In the absence of standing, a federal court, like the Eleventh Circuit, is not free to opine in an advisory capacity about the merits of a plaintiff ’s claims. Standing is perhaps the most important jurisdictional doctrine, and, as with any jurisdictional requisite, the appellate court is powerless to hear a case when it is lacking the decision is reversed and the case is dismissed.
and Insurance Fraud Unit. The fact that such a unit even existed within the Queens district attorney’s office is a testimonial to Judge Brown’s unwavering commitment to the good fight. The insurance world in New York may not have known of the Queens District Attorney’s passion for fighting insurance fraud, or his remarkable success at it. It may now find out the hard way unless the next Queens district attorney is as singularly driven to the fight against insurance fraud as was Judge Richard Brown. To him we all say, thanks for a job well done.[IA]
IV. Plaintiff ’s other principal contention is that the trial court erred in admitting the deposition testimony in which Sher and Vayman repeatedly invoked the Fifth Amendment and in giving the jury an adverse inference instruction. While the Fifth Amendment accords an individual the privilege not to answer questions in a civil proceeding if the answers might incriminate the person in future criminal proceedings, a witness who asserts this Fifth Amendment privilege in a civil trial is not necessarily protected from consequences in the same manner as in a criminal trial. This Court has held that, in a civil case, failure to answer questions by a witness who is a party “may be considered by a jury in assessing the strength of evidence offered by the opposite party on the issue which the witness was in a position to controvert.” In a civil trial, “an unfavorable inference may be drawn against a party from the exercise of the privilege against self-incrimination” (Prince, Richardson on Evidence § 5-710). We have not previously decided whether a nonparty’s invocation of the Fifth Amendment may trigger an adverse inference instruction against a party in a civil case, and we have no occasion to do so here because any error by the trial court was harmless. There is no reasonable view of the evidence under which plaintiff could have prevailed. We agree with the Appellate Division that, based on the trial evidence, the jury could rationally infer only one conclusion: plaintiff was in violation of the requirement of Business Corporation Law § 1507 that a professional service corporation be owned and controlled solely by licensed professionals. Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question not answered as unnecessary.[IA] 2019 NY Slip Op 04643 Decided on June 11, 2019 Court of Appeals Fahey, J. 30 July 1, 2019 / INSURANCE ADVOCATE
ZALMA OPINION
Gerber picked the wrong patient to bring its class action. By so doing it, as the assignee, it had no standing because its assignor could not be damaged by the action of GEICO applying the terms and conditions of its policy. Class actions can be a major profit center for the law firm that brings it. This one failed because, regardless of a deep pocket defendant, it failed to establish standing and the U.S. Constitution prevented the court from deciding the issues raised.[IA]
Looking to buy, sell or hire, merge, sublease, or simply promote an agency or product? Post a classified ad the old-fashioned way and reach the audience you are looking for.
EFFECTIVE IN MORE WAYS THAN ONE!
GUEST OPINION CONTINUED FROM PAGE 13
ommended low-fat diets for years. This government-approved advice is now questioned. So how would government-funded primary care have prevented the diseases my patients have had? Heart failure? (Statin drugs probably make it worse.) Heart attacks? (When the patient has one, it is too late to prevent it.) Stroke? (Preventive aspirin is now criticized because of the bleeding it may cause.) Osteoarthritis? (We have great joint replacements but are much better at blocking access to surgery than at curing the arthritis.) Gall bladder disease, cancer, pneumonia, blood clots, thyroid disease, cataracts, arrhythmias such as atrial fibrillation, herniated disks, asthma, endocarditis from drug abuse, on and on. If we put all the doctors to work pretending to keep people healthy, who would treat disease and injury? Healing the sick is what medicine is about. The politicians who promise to “fix healthcare” can only destroy medicine— while bankrupting the country. [IA]
For more information, call 914.966.3180 insurance-advocate@cinn.com
www.insurance-advocate.com
80
Years
in the business says a lot about us
And one thing stands out:
Our consistency over the long term is unparalleled Lovell Safety Management continues its track record of providing affordable workers’ compensation insurance for the following industries: • Building Metal Trades • Cleaners • Construction • Electrical Manufacturers • Hospitals • Municipalities • Launderers and Cleaners
• Printers • Painters and Decorators • Paper Products Manufacturers • Retail Lumber • Roofers and Sheet Metal Workers • Truckers, Movers, and Warehouse people
Lovell Safety Management Co., LLC 110 William Street, New York, NY 10038-3935
212-709-8600 1-800-5-LOVELL www.lovellsafety.com
Expect big things in workers’ compensation. Most classes approved, nationwide. It pays to get a quote from Applied.® For information call (877) 234-4450 or visit auw.com/us. Follow us at bigdoghq.com. ©2019 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.