Vol. 133 No. 6 | Summer 2022
HONORING MARY LANNING PAGE 20
US LIFE INSURANCE PREMIUMS EXCEED $200 BILLION PAGE 28
THE EFFECTS OF INFLATION ON INSURANCE COMPANIES PAGE 17
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Page 20 Mary Lanning Honored
Contents
Summer 2022
4 Foreword: Of Signatures and Branding ` S. Acunto 6
In the Associations: ELANY Holds 34th Annual Members’ Meeting; Panel Looks at Crypto and E&S Market; NCCI Announces 2021 Workers Compensation Performance Metrics
7
In the Companies: Hagerty launches Digital Labs initiative; Finseca and NAILBA have Officially Merged; Big ‘I’ Names Whitnee Dillard New Invest™ Executive Director
8
In the Associations: Slate Of Officers & Board Members Announced At Imua’s 91St Annual Meeting
9 MSO: The Benefits of Modern Building Codes Sue C. Quimby 10
In the Associations: HDI Global Leverages Verisk’s Mozart Form Composer® to Streamline Forms Management; Verisk Expands Weather Intelligence
12 Looking Back: 1972 14
Special Feature: American Transit Insurance Company Resolves Significant Lawsuit Against Health Care Providers
17
Report: The effects of inflation on insurance companies B. Musto
24
Guest Opinion: Who Defines Disinformation? Jane Orient, J.D., M.D.
27 MSO: Coverage for Special Events Sue C. Quimby 28
S&P Analysis: US life insurance premiums exceed $200B for 1st time ever in 2021
29 On My Radar: Estoppel Cannot Create Insurance Coverage; Lawyer Appointed by Insurer had a Duty of Zealous Representation Barry Zalma info@insurance-advocate.com www.insurance-advocate.com
[ FOREWORD ]
STEVE ACUNTO, EDITOR & PUBLISHER
Of Signatures and Branding
T
he New York State Senate passed Auto Insurance Consumer Relief Act, a bill to make CARCO inspections optional at the discretion of insurance carriers. Communications from agents, meetings with lawmakers and a spate of calls and e-mails and petitions did it. Employer associations across NY helped the Big I and the PIA and the other organizations participating.
Whereas many consumers were required to get a photo inspection of their ve-
hicle within 14 days of purchase, the new bill would allow insurance companies to choose if or when photo inspections need to be performed. College degree in Branding…Thanks to newly passed legislation, collegiate athletes in New York State will now be able to earn compensation from the use of their name, image, and likeness (NIL) without jeopardizing their own academic and athletic eligibility, an effort that has been years in the making and rights a wrong that, until now, had put opportunity out of range for some of our most promising young athletes. Collegiate players, many who come from traditionally marginalized communities, will now have the opportunity to afford basic quality of life expenses outside of tuition, and room and board thanks to a long-foughtfor bill that just passed in the final hours of the legislative session. In New York State, collegiate programs have historically reaped the benefits of their student athletes’ star power without passing on that financial gain to the athletes themselves. For many from low-income families, athletics has been a path to access higher education. Now, in New York, student-athletes can further use their athletic skill as a tool to further their family’s upward mobility, whether they make it to the professional level or not. Last June, the NCAA announced an interim policy allowing college athletes to benefit from their name, image and likeness. The policy provided guidance to college athletes, recruits, their families and member schools including allowing individuals to engage in NIL activities consistent with the law of the state where the school is located and the use of a professional
4 Summer 2022 | INSURANCE ADVOCATE
S I N C E
services provider for NIL activities. New York now joins other states in creating
1 8 8 9
VOLUME 133 NUMBER 7 SUMMER 2022
opportunities for collegiate athletes to thrive. The bill requires DI colleges to cre-
www.insurance-advocate.com
ate student-athlete support program such as a savings plan and health savings
Steve Acunto 914-966-3180, x110 sa@cinn.com
plan for in the case of injury, and allows collegiate athletes to regain control of their own NIL including, but not limited to, obtaining professional representation, entering into contracts, and being appropriately compensated while still enrolled at their college or university. The bill also states that an awarded scholarship shall not be revoked due to earning compensation as a result of the use of the student-athlete’s name, image, or likeness, or due to obtaining legal or athletic agent representation in relation to name, image, or likeness matters. The NCAA further sought to clarify rules around the role of boosters in May 2022, reported by ESPN, “publishing new guidelines that clarified that boosters – including recently created companies designed to provide athletes at a particular school with endorsement deals – should not have any contact with prospective college athletes, their family members or their representatives.” This clarification was driven from growing concerns that some boosters and NIL-focused companies were offering money as incentives to attend a particular school. This bill also prohibits compensation for prospective student-athletes. This opens up new vistas in the definition of professional. We are pondering its implications, as you should. SA
EDITOR & PUBLISHER
CONTRIBUTORS Barry Zalma DESIGN & WEB DIRECTOR Claudia Palmira cp@cinn.com ADVERTISING Marcia Erker merker@businessinsurance.com SUBSCRIPTIONS Ethel Caruso P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x113 circulation@cinn.com PUBLISHED BY CINN Global Initiatives, Inc. in affiliation with Beacon International Group, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | info@cinn.com www.cinn.com President , Steve Acunto
CINN STEVE ACUNTO Publisher
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.
[ IN THE ASSOCIATIONS ]
ELANY Holds 34th Annual Members’ Meeting; Panel Looks at Crypto and E&S Market u The Excess Line Association of New York (ELANY) held its 34th Annual Members’ Meeting on Wednesday, May 4, 2022. Executive Director Dan Maher opened the meeting by introducing ELANY’s 2021 Annual Report. New records were set in many areas of the Excess and Surplus Line (E&S) insurance market including mergers and acquisitions, premiums and transactions. A panel of experts discussed cutting-edge developments in the crypto space as they relate to the E&S market. The panelists included moderator Huhnsik Chung of Carlton Fields, Adam Hofmann of Nimble and Raymond Zenkick of Evertas, Inc. The of the Board of Directors election results followed. Immediate Past Chairman Lance Becker, Vice Chairman, Northeast Region of Arthur J. Gallagher & Co., was elected to serve a three-year term. John A. Buckley, Managing Director of Jencap Specialty Insurance Services and Joseph Caligiuri, Senior Property Consultant at National Coverage Corp., were both elected to new three-year terms. Lance Becker began his career with Aon in 1991 as AVPBroker/Account Manager and joined Aurthur J. Gallagher & Co. in 2005 as VP of the Northeast Region and serves as co-director of the company’s global risk management practice. Lance has served on several industry Boards including the Council on Litigation Management (CLM), Zurich’s advisory board. Lance has served on the Board of ELANY since 2011. He is a Past Chairman and currently serves as Chairman of the Nominations Committee and is a member of the Operations & Procedures Committee and the Information Resources and Security Committee. Lance’s full bio is available on ELANY’s website.
John Buckley has 40 years of experience in the insurance industry. He began his career in 1983 by joining Moore Excess, a surplus lines wholesaler and eventually acquired the firm in 1991. Moore Excess was purchased by NIF Group in 1995 and John was named Senior Vice President and part-owner in NIF Services of New York. In June of 2006, he was named President of NIF Services of New York which was rebranded in October 2021 to JenCap Specialty. John has served on the Board of ELANY since 1994 and currently is Treasurer, Chair of the Audit and Finance Committee, and a member of the Information Resources and Security and the Nominations Committees. John’s full bio is available on ELANY’s website. Joseph Caligiuri graduated from St. John’s University, The Peter J. Tobin College of Business, where he received his B.S. in P&C Insurance and Business Administration. In 2002, Joe opened the firm Cal E&S Brokers, Inc., which was later sold to RPS. In 2009, he struck out on his own operating as President of NCC (National Coverage Corp.). In January 2022, Joe sold his interest in NCC and maintains a limited position as a Senior Property Consultant. Joe has served on the Board of ELANY since 2007. He was appointed Chairman in 2012 and currently serves as Chairman of the Industry Liaison, Legislation & Regulation Committee. He is a member of the Nominations Committee. Joe’s full bio is available on ELANY’s website. The Board of Directors thanked Lance, John and Joe for generously volunteering their time and expertise for the benefit of ELANY and its members. [IA]
NCCI Announces 2021 Workers Compensation Performance Metrics uThe National Council on Compensation Insurance (NCCI) released its performance metrics for the US workers compensation system for 2021. Private carrier plus state fund net written premium increased about 1% to $43 billion in 2021 (private carrier premium alone was $38B). Private carriers again posted a profitable Calendar Year 2021 combined ratio of 87. It is the fifth consecutive year with a combined ratio below 90 for the workers compensation insurance market and the eighth consecutive year of underwriting profitability. “The strength and resilience of the workers compensation system is a point of pride for all stakeholders,” said Bill Donnell, President and CEO of NCCI. “As the workforce and workplaces are changing, the industry must step up again to fulfill its noble responsibility: helping injured workers.” 6 Summer 2022 | INSURANCE ADVOCATE
“Strong employment and significant wage growth are fueling workers compensation payroll increases,” NCCI Chief Actuary Donna Glenn added. “We have a remarkably strong and healthy system right now.” Additional key insights in NCCI’s State of the Line Report include: • Lost-time claim frequency data suggests the long-term decline has continued, despite a rise in frequency in 2021. Since 2019, frequency declined slightly. • The 2021 changes in indemnity and medical claim severity are expected to be flat. • The number of COVID-19 claims declined in 2021 relative to the prior year. • Workers compensation reserves grew to $16 billion redundant as of year-end 2021. [IA]
[ IN THE COMPANIES ]
Hagerty launches Digital Labs initiative for the automotive enthusiast industry uHagerty, Inc. (HGTY) has launched Digital Labs, a strategic initiative that allows the company to quickly pivot to new products and adopt new business models while fostering a mindset of innovation. “As a growth company focusing on many dimensions of the automotive world, innovation and digital product thinking are critical for our future,” said Hagerty CEO McKeel Hagerty. “Digital labs will allow us to innovate faster, attract more talented team members and do more for our members and partners.” Among the first products launched by Digital Labs is the insurance-cost-saving Mileage Verification App. The lab also reimagined the collector favorite Hagerty Valuation Tools®, which includes more than 15 years of pricing for 40,000 enthusiast cars, trucks, vans and motorcycles from the post-war era to present, and the enthusiast carsharing platform DriveShareTM. “Hagerty Digital Labs is about business acceleration,” said Kelly Smith, Chief Strategy Officer of Hagerty. “We are developing a one-stop shop focused on creating value from innovative ideas in the shortest possible time. We are car lovers and innovators who are intent on advancing the industry through revolutionary technology.” A key component of Digital Labs is a significant recruiting initiative to hire dozens of engineers, product managers and designers with product-thinking mindsets. To learn more, please visit www.HagertyLabs.com. “Digital Labs represents a turning point in our recruiting strategy,” said Shoba Menon, Senior Vice President of Talent at Hagerty. “Hagerty is already a culture- and people-first organization so the introduction of Digital Labs means doubling down on our search for creative, nimble change-makers and problem-solvers.” [IA]
Finseca and NAILBA have Officially Merged
Big ‘I’ Names Whitnee Dillard New Invest™ Executive Director
uPer the overwhelming support of the NAILBA members, Finseca and NAILBA have officially voted to merge and create: NAILBA, a Finseca Community. On January 4, 2022, Finseca and NAILBA announced an intent to explore a merger after significant due diligence conducted by a joint task force that included NAILBA and Finseca members, staff, and leadership. “We are thrilled to be making this announcement today,” said Dan LaBert, CEO of NAILBA. “Our profession needs a stronger collective voice. We have served the brokerage distribution community exceptionally well, and while we are proud of what we’ve accomplished, we welcome the opportunity to build on that for our members and the entire profession. We are excited to be joining forces with Finseca to further advance the mission of financial security for all.” “Finseca was created to reunify the profession to more effectively serve the profession,” said Marc Cadin, CEO of Finseca. “Integrating NAILBA, the unquestioned leader of the independent brokerage market, into Finseca will give us greater scale, greater unity of purpose and messaging, and it will help us better serve both the brokerage community and the broader profession.” [IA]
u The Big “I” has announced the appointment of Whitnee Dillard as the new executive director of Invest™ and diversity. Dillard succeeds Deborah Pickford, executive director of Invest, who will retire in May after six years of outstanding contributions to Invest, the insurance industry’s premier classroom-to-career education program administered by the Big “I.” In her new role, Dillard will direct Invest’s programs to improve the insurance literacy of students and attract diverse talent to the insurance industry, and she will also oversee diversity and young agents. This change gives the association the opportunity to combine three programs with similar goals under Invest. Prior to joining the insurance industry, Dillard managed multiple nonprofit initiatives focused on youth development and college preparation in partnership with middle and high schools, the foster care system and the juvenile justice system. Dillard has received the national Big “I” Chairman’s Citation, an Ohio Insurance Agents Citation and most recently the American Property Casualty Insurance Association (APCIA) Diversity, Equity and Inclusion Industry Partner Award. [IA] INSURANCE ADVOCATE | Summer 2022 7
[ IN THE ASSOCIATIONS ]
Slate Of Officers and Board Members Announced at IMUAs 91st Annual Meeting u More than 300 underwriters, brokers, claims personnel and key industry professionals gathered in-person for the first time in three years to participate in the 91st Inland Marine Underwriters Association (IMUA) Annual Meeting. IMUA’s premier education symposium was held April 24-27, 2022, at the Westin Savannah Harbor, Savannah, GA. The first order of business was the elated proclamation “We’re Back!” by IMUA’s Vice President & Secretary, Lillian Colson. She then began the meeting with the announcement of the approval of the election results for the 2022 slate of officers. Jessica Frankovich, CPCU, AMIM, ARM, ARe, Executive Vice President, Custom Property & Inland Marine Seneca Insurance Co., a Crum & Forster Company, was re-elected for a second term as the association’s chairperson as were Anthony Falcone, Intact, as Deputy Chair, and Arthur Sieder, Great American, Vice-Chair. Commenting on her acceptance, Jessica Frankovich praised the membership for their strong commitment to supporting the efforts of the association over the past two years. She said, “Regardless of the roadblocks presented by the pandemic, the work of the IMUA relentlessly continued its commitment to advancing the goals of the inland marine industry. I am extremely honored to serve this prestigious organization once again. But more importantly, I am proud to be a part of this group of dedicated professionals and I thank you, our members, for this unique opportunity. I look forward to building upon the incredible progress the IMUA has made over the past several years in developing the talents of so many young members of this association. Looking to my agenda going forward, I intend to build upon these successes and create an even stronger entity by furthering education and professional development to meet the challenges that face this industry in the foreseeable future. “I am also pleased to announce that the IMUA will now offer all-access, all-inclusive remote education for all its members.
8 Summer 2022 | INSURANCE ADVOCATE
This includes unlimited member access to IMUA webinars, seminars, courses, papers and more. It is another shining example of the benefits of membership.” Ms. Frankovich concluded by recognizing the hard work and dedication of the IMUA staff. She noted, “We are all deeply grateful for their dedication in moving the association forward, especially during the adversities we all witnessed over the past two years. They continue to push each of us to become a stronger organization.” Also announced was the election of the slate of the Board of Directors. They are:
CLASS OF 2022 Randy Schlosser, Munich Re America Jeff Vetter, Ascot Insurance Bradley Cameron, Sompo International Rich Soja, Allianz Global Corporate & Specialty Vicky Hartman, Ironshore
CLASS OF 2023 Anne Caliento, Gen Re Ben Tuttle, Tokio Marine Michelle Hoehn Wallace, Travelers Paul Orsi, Zurich NA Drew Cadelli, CNA
CLASS OF 2024 Bruce Jervis, Chubb Michelle Sipple, Everest Mike Perrotti, AXA XL Josh Jennings, Aspen Specialty Sharon Primerano, AIG Kevin O’Brien and Lillian Colson -- the Association’s President and CEO and Vice President and Secretary respectively -were also re-elected. 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. [IA]
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ADVERTORIAL
The Benefits of Modern Building Codes By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE - Vice President/Media Editor It has been 30 years since Hurricane Andrew devastated South Florida – destroying over 25,000 homes, killing 65 people, and resulting in more than $27 billion in damage. The magnitude of the devastation was due in large part to inadequate building codes, faulty construction and improper inspection. Helping clients understand the importance of following proper building codes to reduce and better yet prevent damage, is another value-added service of the professional insurance agent. In 2020, the Federal Emergency Management Association (FEMA) published a study that focuses on the benefits of updated building codes. The study was done only on buildings constructed since 2000, and addressed losses from earthquakes, flooding and wind. They estimated that, during the years from 2000 to 2040, adoption of modern building codes will result in $132 billion in reduced property damage. FEMA estimates that every $1 spent on mitigation leads to $11 in reduced disaster repair and recovery costs (fema.gov). Modern building codes applied to existing buildings, as well as the impact on codes targeting other causes of loss, such as fire, and life safety considerations, mean even greater potential savings. There are two model building codes developed by the International Code Council that serve as the basis for all other building codes in the United States. The International Residential Code applies to one to two family dwellings of three stories or less and the International Building Code which is used for all other structures. Modern building codes benefit individuals and businesses in a number of ways, including reduced operating costs and increased safety. Energy savings due to requirements such as increased insulation and wall thickness leads to reduced operating costs. According to Forbes. com, current building codes represent 30% greater energy efficiency than just a decade ago. NFPA 101 is the Life Safety Code. It addresses methods to improve occupants’ safety by reducing the impact
of fire and other hazards in both new and existing buildings. Requirements include emergency lighting, exit lighting, fire extinguishers, sprinklers and fire doors. There are indirect savings as well, such as reduced business interruption when businesses are able to reopen more quickly after a loss. In addition, insurance costs are reduced and coverage may be more readily available. Credits are available for smoke detectors, alarm and sprinkler systems, and appropriate wind damage mitigation practices such as roof attachment and underlay requirements, and tie downs for mobile and manufactured homes. Building code or ordinance and law coverage is designed to cover the increased costs necessary to rebuild and repair to comply with updated building codes. Compared to the potential reduction in damage, the cost of the improved construction features is low, averaging 1-2% of the total building construction cost (fema.gov). Disasters such as hurricanes, tornadoes and wildfires can strike anyone, anywhere. Rebuilding is a challenge after any loss. Dealing with the added difficulties that come with widespread destruction can be even more overwhelming. After a disaster, reputable contractors may be hard to find. Some home and business owners may decide to tackle repairs or rebuilding themselves. No matter who
does the work, building codes must be followed. In most cases a permit is required. Failure to comply with permitting and building codes can result in fines and may even mean the work has to be taken apart and redone. After Hurricane Andrew, Florida was inundated with unlicensed contractors. Studies showed that more than 60% of the rebuilt roofs did not pass inspection. There is always room for improvement. Building codes are designed to provide minimum standards to protect the health and safety of occupants. However, they are not universal. As of September 2021, 65% of cities, counties and towns in the United States had not adopted modern building codes. Fifteen states do not have state building codes (upgradedhome.com). Building damage due to fires and natural disasters can be significantly reduced, and life safety increased, when modern building codes are in use. Helping clients manage their exposure is another sign of the true insurance professional.
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[ IN THE ASSOCIATIONS ]
INSURANCE ADVO CATE
HDI Global Leverages Verisk’s Mozart Form Composer® to Streamline Forms Management u Industrial insurer HDI Global Insurance Company (HDI) will be leveraging the cloud-based technology and advanced analytics of Verisk (Nasdaq: VRSK), a leading global data analytics provider, to help increase efficiency and develop innovative insurance products. Using Verisk’s Mozart Form Composer®, Verisk’s InsurTech platform for forms management and product development, HDI will be able to easily find forms across hundreds of commercial and specialty lines of business, identify language that needs to be updated and make revisions with speed and precision. “Ensuring that all of our policy forms
are updated and easy to access can be a major challenge,” said Marco Hensel, senior vice president of North America underwriting services at HDI. “Verisk’s Mozart will provide a centralized library for all of our forms and enable us to quickly identify and prioritize revisions, manage review processes and offer coverages that meet the evolving needs of the marketplace.” Mozart contains a number of features to help insurers increase operational efficiencies and speed to market, including: • Workflow tools to help insurers research, collaborate on shared work and manage internal approvals • Form analytics that use natural lan-
guage processing to help insurers identify and evaluate similarities and differences in forms language with ease • Automation that enables insurers to update language in multiple forms simultaneously to enhance consistency “We are excited for HDI to join the Mozart community to help transform their forms management and development processes,” said Deborah Morris, senior vice president of commercial lines underwriting at Verisk. “Mozart makes it significantly easier for insurers to support consistent policy language across their forms portfolio and help minimize potentially unexpected claims or lost premium.” [IA]
Verisk Expands Weather Intelligence uInsurers, first responders and supply chain logistics operators can now analyze the impact of severe weather more effectively with Verisk’s newly enhanced web-based weather analytics data solution. Verisk (Nasdaq: VRSK) is a leading global data analytics provider. Verisk’s Respond® mapping and analytics platform, Respond MAP™, enables users to combine valuable weather data with locations of interest, such as policies-in-force, to quickly evaluate the impact of significant weather events. The solution provides critical insights for perils such as hail, wind, wildfire, tornado and hurricane. Respond MAP is included as part of the Respond weather data package. “Respond Map is a sharper, more specific solution that we believe will drive our mission to provide the critical weather information our customers need following a severe weather event,” said Mike Fulton, Verisk’s president of property estimating solutions. “We recognize the needs of the market and are dedicated to continually improving by adjusting, developing and combining solu10 Summer 2022 | INSURANCE ADVOCATE
tions to provide the best possible weather data and analytics in the industry.” With near real-time updates as frequent as every five minutes, Respond shapefiles delivered into Respond MAP can be a major asset to evaluate risk and help improve the overall performance of businesses dependent on understanding the impact of severe weather. Respond MAP also offers users the ability to view both pre-catastrophe and post-catastrophe imagery, as well as damage estimation analytics for major weather events such as hurricanes, significant tornadoes and wildfires. Among its many solutions, Verisk offers computer software solutions, such as Respond and Benchmark™, for insurance professionals responding to severe weather events. Respond’s insights can help insurers determine how books of business are impacted by severe weather and assist in critical decision making, such as setting reserves and allocating resources. With this enhanced capability, insurers can aim to shorten claims cycles and improve customer satisfaction. [IA]
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INSURANCE ADVOCATE | Summer 2022 11
[ LOOKING BACK ]
INSURANCE ADVO CATE
THE INSURANCE ADVOCATE HAS BEEN IN PUBLICATION SINCE 1889. EACH ISSUE, WE LOOK BACK TO A DIFFERENT TIME TO SEE WHAT INSURERS WERE READING ABOUT BACK THEN. HERE'S AN EXCERPT FROM
1972
12 Summer 2022 | INSURANCE ADVOCATE
INSURANCE ADVO CATE
[ LOOKING BACK ]
INSURANCE ADVOCATE | Summer 2022 13
[ COVER ]
INSURANCE ADVO CATE
AMERICAN TRANSIT INSURANCE COMPANY RESOLVES SIGNIFICANT LAWSUIT AGAINST HEALTH CARE PROVIDERS Suit Alleged Fraudulent and Other Improper Treatment and Billing Practices American Transit announced that it has resolved a lawsuit filed against certain health care providers for what it alleged was fraudulent and other wrongful conduct those providers had engaged in concerning treatment and billing in the no-fault insurance coverage program. American Transit filed its lawsuit in December 2018 in the Supreme Court, New York County, against multiple defendants including medical doctors, chiropractors, ambulatory surgery centers and related parties. At that time American Transit had received $28 million in billing which it alleged was improper. American Transit alleged a pattern of abusive billing under New York automobile no-fault coverage. The carrier later amended its complaint to add additional defendants and after the submission of additional claims and alleged that $37 million in improper claims had been received. American Transit sought in the suit a declaration the claims were unlawful and unenforceable, to enjoin the defendants from further wrong billing and to recover damages it sustained arising from defendants’ scheme. u
The carrier later amended its complaint to add additional defendants and after the submission of additional claims and alleged that $37 million in improper claims had been received
14 Summer 2022 | INSURANCE ADVOCATE
[ COVER ] American Transit also filed the action to protect its insureds, who, the complaint alleged, were being manipulated by defendants as part of the scheme. Ralph Bisceglia, the Chief Executive Officer and President of American Transit, stated that “American Transit insures many livery drivers. This is a demanding occupation and there are many challenges for the drivers. American Transit is committed to industry efforts to support the drivers. On top of the challenges the drivers face, they should not be pawns used by providers seeking to take advantage of the system and submit improper and/or exaggerated claims.” John Poklemba, the General Counsel of American Transit, added that “Abusive and exaggerated claims affect not only the insurer, they affect the public as well, and American Transit believes every effort should be made to combat and discourage such claims.” The Supreme Court sustained the complaint, determined the suit could go forward and rejected the motions of a number of the defendants who had sought to dismiss the action. In ruling in American Transit’s favor, the Court held that “With respect to each of the moving defendants, the complaint makes ample factual, not merely conclusory, allegations that they participated in the scheme described by submitting fraudulent bills, and/or referring patients to one another in order to profit from such referrals without regard for the interests of the patients involved.” American Transit also sought and obtained a preliminary injunction against the defendants, preventing
them from pursuing their claims by arbitrations or collection lawsuits while the case continued. In granting the preliminary injunction, the Court held that “The plaintiff ’s submissions ... establish a likelihood of success on at least some of its claims. The plaintiff provides comprehensive and detailed factual allegations describing the defendants’ fraudulent scheme, including, inter alia, regulatory violations, unnecessary medical services, and unlawful referrals.” The Court then enjoined the remaining defendants from “prosecuting further all pending arbitration proceedings or litigation to collect insurance proceeds against the plaintiff, pending a final determination in this action.” This was a critical ruling as it meant that all such claims would be addressed in the suit American Transit had filed, rather than piecemeal in multiple arbitration proceedings and suits. American Transit is pleased that it has completed settlements with each of the defendants in the case. While the specific terms are confidential, American Transit is permitted to say that it is satisfied with the terms on which the suits were resolved. Ralph Bisceglia, the Chief Executive Officer and President of American Transit, further stated that “ When livery drivers, passengers and pedestrians are injured in automobile accidents, American Transit believes that they should receive the most effective and affordable health care; and that this should happen in a manner that supports the commitment and efforts of those in the medical community dedicated to providing
quality services to all constituents of the greater metropolitan area. American Transit has in the past and will in the future take proactive steps to ensure that occurs. American Transit has worked on initiatives in this area and is happy to work with those providers who offer fair and good health care to its insureds. However, when necessary, American Transit is willing to take action to contest abusive, excessive and unsupportable claims. It is satisfied with the outcome of this matter.” [IA]
John Poklemba, the General Counsel of American Transit, added that “Abusive and exaggerated claims affect not only the insurer, they affect the public as well, and American Transit believes every effort should be made to combat and discourage
INSURANCE ADVOCATE | Summer 2022 15
B. MUSTO
[ REPORT ]
Report: The effects of inflation on insurance companies Moody’s has drawn-up a report detailing several scenarios that may very well accompany the prolonged rise in consumer prices denting profits and causing ill side-effects
uBesides the glitches in global supply chains, the post-pandemic world has been facing a surge in energy prices following the resumption of economic activities. Such a situation has been compounded by the geopolitical scenarios triggered by the war between Russia and Ukraine, which is fuelling inflationary pressure worldwide. Moody’s has produced an analysis detailing how the current situation may impact insurance companies within EMEA. US insurers would do well to take heed. ,The rating agency has remained neutral on the creditworthiness of the insurance companies operating in the Mediterranean and in the Middle East, and believes that, although inflation may increase damage claims, the insurance sector will be fully able to offset such a trend, by increasing premiums and benefiting from improved investment yields such as an increase in interest rates.
A HIKE IN PRICES In its report, Moody’s “considers a downward scenario of a high and prolonged inflation” as the main risk for insurance companies. “Such an event would increase credits more than usual, that would require prices to be raised. The insurance sector may not be able to sustain such pressure and profits may be curtailed”. Stubbornly high inflation might also slowdown economic growth and consequently the demand for insurance policies. According to Moody’s, if this leads to significant growth in the interest rates and a high market volatility, insurance companies may also experience a dent in capital and profit. Within the main scenario Moody’s has envisioned, “non-life insurers would be able to offset the majority of the increases in accident-related expenditures by increasing prices and limiting the decline in their insurance-related performance”. At the same time, the report states that “the increase in rates would support the returns on investments, providing further compensation”. There would be no immediate upturn in the returns on investments for life insurance companies, as their assets have longer expiry dates, but inflation,
In its report, Moody’s “considers a downward scenario of a high and prolonged inflation” as the main risk for insurance companies. according to the rating agency, does not have a significant impact on their credits. However, the increase in rates is beneficial to the economic capital of all insurance companies, especially life insurance firms, as the latter’s Solvency II assets requirements are affected by the variations in said rates.
A SHORTFALL IN DAMAGE-RELATED PROFITS Significant and long-lasting inflation may lead to further increases in the field of damage loss. Such a trend is shooting upward due to frequently extreme weather conditions. According to Moody’s, non-life insurers active in retail “may not be able to sustain price increases” to offset such trends, as the companies must usually contend with competition. On the other hand, Continued on next page INSURANCE ADVOCATE | Summer 2022 17
[ REPORT ]
According to Moody’s, life insurance companies may incur further risks, as a swift increase may have the clients forgo their savings policies in favour of more profitable alternatives.
those operating in the commercial milieu would have more opportunities to increase prices due to new business, but would also experience “more significant pressure to augment their reserves, in the face of outstanding accidents from the previous year, as inflation is fuelled by litigations and medical expenditure”. At any rate, although non-life insurers active in the commercial field can still benefit from increased premiums, the climb in the prices for commercial non-life insurers is slowing down. Therefore, writes Moody’s, “it is possible that significant and lasting inflation, connected with the cost of accidents, may put a dent in profits over time”. As a matter of fact, in the midst of a significant and enduring inflation, such insurance companies may be forced to amass further reserves, in order to deal with past accidents. In some sectors, as is the case with medical malpractice, many years may elapse between the submission of a claim and the moment the insurance companies must disburse payment or even prior to being informed of the loss. Therefore, according to Moody’s, such insurance companies should perform an estimate of possible accidents, while increasing their budget reserves. Since both medical and litigation expenditures are heavily affected by price hikes, even some incremental inflation can have an adverse effect on the damage reserves insurance companies can draw from. According to Moody’s, non-life insurers “currently hold prudent reserves, which have been developing favourably for over a decade. Therefore, most of them bank on reserves to absorb a certain inflationary impact. To conclude, in an extreme scenario, a marked and lasting inflation may have a negative impact on profits and possibly on equity”.
THE LIKELY FALLOUT During an inflationary period, economic downturn or recession, 18 Summer 2022 | INSURANCE ADVOCATE
many forms of insurance may experience a slump. “The risk of a sudden surge in interest rates may likewise go up”, another quote from Moody’s, together with the warning that “unlike more gradual climbs, such a development would be negative for insurance companies, as it would lead to a swift devaluation of their bond portfolios, affecting their capital and financial leverage metrics. A combination of slow economic growth, high inflation and rapidly climbing rates may also trigger a significant volatility within the financial markets, damaging both the return on investments and economic capital for insurance companies”. Although the rating agency has revised the initial growth estimates downwards, it forecasts “constant economic expansion for the EMEA region”. The report by Moody’s states that “We predict that the GDP of the Euro area will grow by 2.8% in 2022, slowing down to 2.2% in 2023, while remaining above the pre-pandemic levels”.
SUDDEN SURGES IN RATES MAY HAMPER CREDIT Within a scenario of a high and prolonged inflation, there is an increased risk that central banks may opt to raise interest rates rapidly. Regardless of its speed, the growth in interest rates is, on one hand, positive when return on investment is concerned, while increasing the economic capital of an insurance company on the other, thus reducing the current value of future liabilities. However, Moody’s report notes, “a sudden climb in interest rates, unlike a more gradual increase, may indirectly lead to a reduction in profits, to a worsening of “assets invested by insurance companies, even perhaps to an impact on their Solvency II coefficients”. Rising interest rates can gradually increase the return on investments for insurance companies, in line with the duration of their assets and liabilities. Furthermore, rising rates would entail an immediate reduction in the value of bonds, an important asset class for insurance companies.
A CAUTIONARY TALE According to Moody’s, life insurance companies may incur further risks, as a swift increase may have the clients forgo their savings policies in favour of more profitable alternatives. “Higher redemption rates would increase the liquidity needs for insurance companies and may leave some players with no other option but sell their bonds at their new, lower value, in order to give capital back to their clients”. Although a decrease in bond value does not affect assets, provided an insurance company holds onto them until their expiry date, selling them at a loss prior to such date may very well have a negative impact. Moody’s has highlighted that life insurance companies are most vulnerable to such scenarios “as a substantial share of their portfolios consists of savings. A part of such products features no redemption penalties or has very low ones, if any”. [IA]
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[ FEATURE ]
INSURANCE ADVO CATE
Mary Lanning Honored
A beautiful tribute to Mary Lanning was held and atteended by scores of friends and associates – too many to identify but not to many to show! IFNY, ELANY, BOYS’ HOPE/ GIRLS’ HOPE were the organizations. Funds were raised for the youngsters and a dedication to Mary, fittingly, proud and inspirational.
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[ FEATURE ]
Thank you, Mary!
INSURANCE ADVOCATE | Summer 2022 21
[ FEATURE ]
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[ FEATURE ]
Thank you, ELANY, IFNY, Boys’ Hope/ Girl’s Hope INSURANCE ADVOCATE | Summer 2022 23
[ GUEST OPINION ]
JANE M. ORIENT, M.D.
Who Defines Disinformation? uJust after Elon Musk bought Twitter, promising more freedom, the Biden administration announces a new government agency to “protect” Americans and the world from harmful disinformation, especially about the COVID pandemic. It is called the Disinformation Governance Board, although some would call it the Minitrue, short for Ministry of Truth, the ministry of propaganda in George Orwell’s novel 1984. The abbreviation differs from KGB by only one letter. There is the First Amendment, of course, but there is precedent for disregarding it, especially in war. Newspapers were shut down and editors arrested for expressing anti-war views, at the time of the Civil War by Abraham Lincoln and World War I by Woodrow Wilson. President Wilson even suppressed information about the raging 1918 influenza pandemic so as not to interfere with the war effort. The U.S. Supreme Court upheld Wilson’s Espionage Act and its 20year prison terms. Wilson even demanded that the Librarian of Congress report the names of those who ordered certain books! Today’s technology permits government to find out if you even looked at a book or article online. Today, “mainstream media” is mostly owned by a few conglomerates, who all seem to be on board with the current Narrative about this “war” on COVID. The First Amendment does not apply to private organizations. The internet and social media owned by Big Tech could threaten those who want to suppress certain truths. We can tell something about the Agenda from the accounts that Twitter has banned: views of election fraud that favors Democrats; evidence of corrupt dealings with foreign governments by certain highly placed officials, say from Hunter Biden’s laptop; and information contradicting the official narrative on COVID-19. With COVID, disinformation is defined by the Centers for Disease Control and Prevention (CDC), Food and Drug Administration (FDA), and National Institutes of Health (NIH). Skepticism 24 Summer 2022 | INSURANCE ADVOCATE
What would happen if Twitter allowed compare-and-contrast information for Paxlovid vs. ivermectin, which share a common mechanism of action?
about masks and lockdowns, information about early treatment with cheap, repurposed drugs, or anything that might lead to “vaccine hesitancy” are anathema. Who writes the message? According to Dr. Scott Atlas, who was briefly a member of President Trump’s COVID Task Force, in his book A Plague upon Our House, the nationwide message was dictated by Anthony Fauci, Deborah Birx, and Robert Redfield, even over the President’s objection. Was it “the Science”? Dr. Atlas immersed himself in the deluge of scientific articles and brought copies to meetings. They were ignored. Birx, he writes, relied on unreliable or outdated data to dictate “mitigation” measures. No one else was willing to confront her. The deadly results of useless lockdowns were not of interest. Who is Deborah Birx to have the power to destroy Americans’ livelihood and lives? Most of her work had concerned the human immunodeficiency virus (HIV). Both Birx and Redfield had been accused
of misrepresenting their results on an HIV vaccine. Birx like the others is an appointed bureaucrat, with no accountability to voters. But their agencies are honeycombed with conflicts of interest. So, accountable they are—to private interests. The Narrative—there is no early treatment (except possibly monoclonal antibodies), just get vaccinated and you will be safe—might change, now that double-masked and quadruple-vaccinated Vice-President Kamala Harris has tested positive for COVID. She is getting Pfizer’s new oral drug Paxlovid™. Pfizer has begun running animated 30-second spots focusing on how fast COVID-19 moves. It features a narrator saying you can move fast, too, by “asking your healthcare provider if a new oral treatment could be right for you.” The ad doesn’t mention the name of the drug, as it is not yet approved but only has an Emergency Use Authorization (EUA). A Pfizer logo pops up at the end of the spot along with a link to Pfizer’s COVID-19 website. Pfizer has so far spent $2.8 million on the commercial and expects to earn $22 billion from Paxlovid sales for 2022, paid for by taxpayers. What would happen if Twitter allowed compare-and-contrast information for Paxlovid vs. ivermectin, which share a common mechanism of action? Number of studies: 3 for Paxlovid, 82 for ivermectin; number of patients studied, about 5,000 vs. more than 129,000; duration of experience with use, months vs. decades (approved in 1987); number of patients who have taken drug, thousands vs. billions. This might be bad for Pfizer’s sales. Americans believe they have freedom, but freedom to seek knowledge is increasingly constrained. Combining government enforcement powers with private corporations’ wealth and immunity from Constitutional protections, the “public-private partnership” is a formula for medical tyranny. [IA]
JANE M. ORIENT, M.D.
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Coverage for Special Events By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE - Vice President/Media Editor The pandemic changed how people think about hosting and attending events. Many were cancelled. Some, such as weddings, were downsized or postponed. Others were impacted by government regulations. In such situations, special event coverage, in addition to a standard homeowners or businessowners policy, may be required to help in case of cancellation, or if there is injury to guests or damage to property of the venue or guests. Helping clients deal with the insurance exposures involved in hosting a special event is another value-added service of the professional insurance agent. Accidents can happen no matter how carefully the event is planned. A centerpiece candle could set the table on fire. A guest who has had too much to drink might start a fight, damage property or cause injuries or damage on their drive home. Nobody can predict the future, and the peace of mind gained from having the right coverage is invaluable. Standard homeowners policies provide some liability coverage for actions of unruly guests. Events that are held away from the homeowner’s residence may pose a need for additional coverage. Some venues require a certificate of insurance adding the venue as an additional insured. Special events coverage comes in a variety of forms. Host liability coverage can include damage to or theft of property belonging to the venue or other guests, or bodily injury to guests or staff. Coverage can be scheduled to include the days before and after for events that include set up and clean up exposures. Host liquor liability is needed if the event includes liquor that the attendees are paying for, such as a cash bar. Coverage for injuries or damage caused by those who have been served alcohol would fall under host liquor liability. Automobile liability insurance may be necessary if parking, either self or valet, or transportation is part of the event. Worker’s Compensation could cover injuries suffered by people hired by the host to staff the event. A certificate of insurance from caterers and others who provide staff for the event is
also essential. Event cancellation insurance has become more common due to the uncertainties brought on by the pandemic. It is not the same as host liability coverage, but they may be available in the same policy. Event cancellation coverage is designed to protect the investment in the event, including room rental fees, catering deposits, and other nonrefundable or transferable costs. The reason for cancellation is usually something outside of the host’s control, such as bad weather or deployment /of the bride or groom. There are even “change of heart” policies that protect parents or others who finance a wedding that is called off. According to The Knot’s Real Wedding Study, the average cost of a wedding in 2021 was $28,000, so the exposure is significant. It is important to note that not all policies will respond to cancellations due to communicable diseases such as COVID-19. This coverage may be available as an option. As with any insurance policy, it is essential to read and understand what is covered, and, perhaps more importantly, what is NOT covered. In addition, insurers may require more health and safety procedures be in place. Not all events or activities are eligible for special events coverage. Examples of excluded activities include trampolines, amusement devices, bungie jumping and fireworks. Sporting events may also have special exclusions or limitations. As with all policies, it is in the best interest of the insured to understand the exposures that are covered and excluded by their policy.
Additional steps to take: Review contracts to see what fees may be transferable or refundable. Maintain a contact list for all attendees/invited guests to facilitate communication in case of cancellation or postponement of the event. Follow required health and safety procedures. Weddings, events and parties should be times of happiness and excitement. Special events coverage can help ensure that they stay that way. Coverage is widely available and usually inexpensive. Helping clients understand how to protect their investments is another sign of the true insurance professional.
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[ ANALYSIS ]
US life insurance premiums exceed $200B for 1st time ever in 2021 U.S. life insurers saw their yearly direct life insurance premiums surpass $200 billion for the first time in history in 2021, according to an S&P Global Market Intelligence analysis of annual statutory statements.
u U.S. life insurers saw their yearly direct life insurance premiums surpass $200 billion for the first time in history in 2021, according to an S&P Global Market Intelligence analysis of annual statutory statements. In aggregate, the combined group and ordinary, or individual, direct life premiums climbed 9.9% year over year to $204.7 billion in 2021. Industrywide, individual life premiums rose 10.7% to $162.76 billion from $147.01 billion in 2020. Premiums by policy type are only available net of reinsurance within the regulatory statements. For net premiums within the major individual product types, universal life saw the largest year-over-year growth at nearly 60%, followed by variable universal life at 23.8%. Universal life with secondary guarantees, index and whole 28 Summer 2022 | INSURANCE ADVOCATE
life also recorded double-digit growth. Term life net premiums, on the other hand, fell by 5.8%. Group direct life premiums increased by 7.1% to $41.94 billion in 2021. Northwestern Mutual’s individual life premiums surge There was very little change in the marketshare rankings for the 15 largest writers of individual life insurance in 2021. The Northwestern Mutual Life Insurance Co., which remains the largest individual writer in the U.S., saw direct premiums rise about 20% year over year to $18.87 billion. New York Life Insurance Co. and Massachusetts Mutual Life Insurance Co., held steady at No. 2 and No.3, respectively. Both mutual insurers experienced double-digit growth in individual life premiums. New York Life’s grew to $12.05 billion, while MassMutual reported $11.62 billion in individual life premiums for 2021. Lincoln National Corp. and MetLife Inc. were the only insurers among the largest individual life writers to report lower year-over-year individual life premiums in 2021. Most of the largest underwriters of group life insurance experienced saw premiums rise in 2021, with four reporting double-digit growth during the period. MetLife retained the top spot within the rankings by a wide margin, and its group life premiums grew by 15.9% in 2021 to $12.51 billion. That figure is more than double its next-closest competitor, Prudential Financial Inc. Group life premiums for Nationwide Mutual Group surged 28.6% in 2021, the
largest percentage increase in this analysis. Lincoln National, Securian Financial Group Inc. and New York Life saw their group premiums fall in 2021. Individual life insurance refers to term insurance and all forms of permanent insurance (e.g., universal, variable, index universal, whole) and is reported as ordinary within NAIC statutory statements. Often offered through the workplace, group life insurance is typically term insurance and allows members of a group to purchase coverage up to a certain level without the need for underwriting.[IA]
S&P Global Market Intelligence uses statutory total life premiums to determine market share. Total premium is a preferred indicator of market share as it reflects not only new business but also the persistency of a company’s existing business in the form of renewal premiums. Additionally, many policyholder acquisition costs are not recovered within one year. As such, total premium can also be a better indicator of profitability for life insurers, whereas new sales do not necessarily equate with profitability.
BARRY Z ALMA
[ ON MY RADAR ]
Estoppel Cannot Create Insurance Coverage
Lack of Bodily Injury, Personal Injury or Occurrence Bars Coverage u Cambridge Mutual Fire Insurance Company (Cambridge) sued seeking a declaratory judgment that it did not owe Defendants Terry Gaca and Janet Waymen (collectively, “Defendants”) a duty to defend an underlying lawsuit under the terms of their insurance policy. Thomas J. Frederick sued in Illinois state court, alleging Defendants maintained a boarding house and a parking facility for large trucks on their property (the “Underlying Suit”). The Underlying Suit alleged public nuisance, conspiracy to create a public nuisance, and nine violations of City of Naperville (“Naperville”) zoning ordinances under the Adjoining Landowner Act, 65 ILCS 5/1113-15. In Cambridge Mutual Fire Insurance Company v. Terry L. Gaca, and Janet L. Wayman, individually and as trustee of The Janet L. Wayman Trust, No. 20 C 2447, United States District Court, N.D. Illinois, Eastern Division (May 17, 2022) Cambridge moved for summary judgment.
Defendants maintained a boarding house and a parking facility for large trucks on their property (the “Underlying Suit”). The Underlying Suit alleged public nuisance, conspiracy to create a public nuisance, and nine violations of City of Naperville zoning ordinances under the Adjoining Landowner Act, 65 ILCS 5/1113-15.
BACKGROUND Cambridge sued seeking a declaratory judgment that it did not owe Defendants Terry Gaca and Janet Waymen (collectively, “Defendants”) a duty to defend an underlying lawsuit under the terms of their insurance policy. Defendants’ policy with Cambridge includes Homeowner’s Liability Insurance and Personal Umbrella Liability Insurance (the “Policy”). The Policy provides: If a claim is made or a suit is brought against an “insured” for damages because of “bodily injury” or “property damage” caused by an “occurrence” or “personal injury” caused by an offense to which this policy applies, we: 1. Will provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. “‘Bodily injury’ means bodily harm, sickness or disease, including required care, loss of services and death that re-
sults.” “‘Property damage’ means physical injury to, destruction of, or loss of use of tangible property.” “‘Personal injury’ means injury arising out of . . . [t]he wrongful eviction from, wrongful entry into, or invasion of right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor . . .”. Finally, “‘[o] currence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results . . . in: ‘bodily injury’ or ‘property damage.’” The Policy also contains several exclusions. Coverage does not apply to: 1. “Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”; 2. is of a different kind, quality or degree than initially expected or intended; or
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 50 years in the insurance business. He is available at zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
3. is sustained by a different person, entity, real or personal property, than initially expected or intended…. 4. “Personal injury”: 5. caused by or at the direction of an “insured” with the knowledge that the act would violate the rights of another and would inflict “personal injury”…. Based on these events, Cambridge alleged the Underlying Suit does not involve “property damage, ” “personal injury, ” or an “occurrence” under the Policy and moved for summary judgment. Continued on next page INSURANCE ADVOCATE | Summer 2022 29
[ ON MY RADAR ]
BARRY Z ALMA
DISCUSSION The parties agree Illinois law applies. In Illinois, the construction of an insurance policy is a question of law. An insurance policy is to be construed as a whole and requires the court to ascertain and give effect to the true intentions of the contracting parties. If the underlying complaint alleges facts that fall “within or potentially within” the coverage of the policy, the insurer is obligated to defend its insured even if the allegations are “groundless, false, or fraudulent.” United States Fidelity & Guar. Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 73 (1991) (emphasis in original). FIRST: an “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Cambridge specifically argues there is no “accident.” Illinois courts have defined “accident” for the purpose of insurance coverage disputes as “an unforeseen occurrence, usually an undesigned sudden or unexpected event of an inflictive or unfortunate character.” [W. Am. Ins. Co. v. Mw. Open MRI, Inc., 2013 IL App (1st) 121034, ¶ 22] The relevant inquiry is “whether the injury is expected or intended by the insured, not whether the acts were performed intentionally.” The complaint in the Underlying Suit asserts public nuisance, conspiracy to create public nuisance, and violations of Naperville ordinances The complaint alleges Defendants intentionally conspired to violate the public’s rights and avoid enforcement of Naperville’s ordinances. Further, the complaint establishes Defendants knew their use of the property as a boarding house and truck lot violated Naperville ordinances, and even sued Naperville to challenge the legality of the ordinances. The complaint in the Underlying Suit establishes the injuries were intentional, not accidental. Therefore, there was no “occurrence” as that term is defined in the Policy. SECOND: Defendants must be the “owner, landlord, or lessor” of the “room, dwelling or premises” where the alleged invasion occurred. Because Frederick is the owner of the property that was “invaded,” there is no “personal injury” alleged in the Underlying Suit. 30 Summer 2022 | INSURANCE ADVOCATE
ESTOPPEL To establish equitable estoppel under Illinois law, Defendants must show: · [Cambridge] misrepresented or concealed material facts; · [Cambridge] knew at the time [it] made the representations that they were untrue; · [Defendants] did not know that the representations were untrue when they were made and when they were acted upon; · [Cambridge] intended or reasonably expected that [Defendants] would act upon the representations; · [Defendants] reasonably relied upon the representations in good faith to [their] detriment; and · [Defendants] would be prejudiced by [their] reliance on the representations if [Cambridge] is permitted to deny the truth thereof. Defendants failed to establish equitable estoppel. Defendants have not shown Cambridge misrepresented any material facts. The undisputed facts show Cambridge denied coverage at all times. Defendants do not show they detrimentally relied on any misrepresentation by Cambridge. Defendants say Cambridge is estopped from denying coverage because an insurance company cannot deny coverage and file a declaratory judgment suit. This argument is unsupported by the facts and applicable law. The estoppel doctrine cannot create coverage where none existed in the first place. Because Cambridge followed Illinois law and does not have a duty to defend under the Policy, Defendants’ estoppel arguments fail. THIRD: Defendants argue Cambridge is estopped from denying coverage because it waited too long to file this action. The Underlying Suit was filed in August 2019, while this action was filed in March 2020. But we need not determine if this delay was unreasonable because, as with Defendants’ second estoppel argument, the doctrine does not apply if the insurer did not breach its duty to defend. The Court granted Cambridge’s Motion for Summary Judgment.
ZALMA OPINION Liability insurance covers a large possibility of claims made against an insured
that could potentially be covered by the policy. However, no insurance policy covers every possible loss and never will cover intentional torts. Since the claims were all intentional the insured’s tried to claim that the actions of Cambridge estopped them from denying the request for defense and indemnity. They failed for lack of evidence. [IA]
Lawyer Appointed by Insurer had a Duty of Zealous Representation The Business Of Insurance Is Subject To The Law Of Unintended Consequences As If It Were On Steroids uThe law of unintended consequences is not statutory. No state or federal government has enacted it into law. No executive has signed the law. It is, rather, a law of the nature of people. It is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes. General observation requires the hypothesis that actions of people, especially of governments, will always have effects that are unanticipated or unintended, has been proved. Economists and other social scientists have heeded its power for centuries. Regardless, for just as long, politicians, insurers and popular opinion have largely ignored the law of unintended consequences to their detriment. There is no common-law duty for a court, especially in a heavily regulated sector of the economy like insurance to create new rules. Every court should be loathe to invent duties unmoored to any existing precedent. The law of unintended consequences counsels against it. To find a good illustration of the law of unintended consequences, one need look no further than the Supreme Court’s decision in Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). The Court’s actual
BARRY Z ALMA
holding was pedestrian: that Hamilton Bank’s takings claim was unripe because the bank had not exhausted its administrative remedies, specifically its right to ask the County for a variance to develop the property in the manner proposed. In dictum, however—dictum in the sense that the Court’s pronouncement was at that point unnecessary to its decision—the Court went on to say that the bank’s claim was “not yet ripe” for a “second reason. That reason too was couched in terms of exhaustion: that under state law “a property owner may bring an inverse condemnation action to obtain just compensation for an alleged taking of property”; and that, until the bank “has utilized that procedure, its takings claim is premature.” The Court’s implicit assurance, of course, was that once a plaintiff checks these boxes, it can bring its takings claim back to federal court. That assurance proved illusory. Statecourt judgments are things to which the federal courts owe full faith and credit. That obligation means that takings claims litigated in state court cannot be relitigated in federal. Thus—by all appearances inadvertently— Williamson County all but guarantees that claimants will be unable to utilize the federal courts to enforce the Fifth Amendment’s just compensation guarantee against state and local governments. [Lumbard v. City of Ann Arbor, 913 F.3d 585 (6th Cir. 2019)] The law of unintended consequences applies as much in jurisprudence as anywhere else; bending a rule to accommodate one litigant doesn’t always achieve better justice — sometimes it just sows confusion in anyone trying to figure out what a court might do in other cases in the future. A prudent court will take the lesson to leave rulemaking to the legislators and administrators, even when the outcome appears unjust. The orderly development of the law is not without rough patches, but it is better than living under the law of unintended consequences. [United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822 (6th Cir. 2018)] In addition, as one dissenter said that the majority’s desire to cure all wrongs by eviscerating the doctrine of governmental immunity, while well-intentioned, is fraught with the law of unintended consequences. Depriving governmental officials of governmental immunity when making
Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation, regulation and the decisions of appellate courts.
policy decisions, when making sentencing decisions, and when running the government would certainly cause most of us to rethink the traditional notion of public service. [Doe v. Dep’t of Corr., 323 Mich. App. 479, 917 N.W.2d 730 (Mich. App. 2018)] P h i l o s op h e r s , E c on om i s t s an d Politicians The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner,” Smith wrote, “but from regard to their own self-interest.” Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation, regulation and the decisions of appellate courts. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. The law of unintended consequences provides the basis for many criticisms of government programs. Unintended con-
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sequences can add so much to the costs of some programs that they make the programs unwise even if they achieve their stated goals. For instance, the U.S. government-imposed quotas on imports of steel in order to protect steel companies and steelworkers from lower-priced competition. The quotas do help steel companies. But they also make less of the cheap steel available to U.S. automakers. As a result, the automakers have to pay more for steel than their foreign competitors do. So, a policy that protects one industry from foreign competition makes it harder for another industry to compete with imports. Similarly, Social Security has helped alleviate poverty among senior citizens and the disabled. Many economists argue, however, that it has carried a cost that goes beyond the payroll taxes levied on workers and employers. Martin Feldstein, and others, maintain that today’s workers save less for their old age because they know they will receive Social Security checks when they retire. If Feldstein and the others are correct, it means that less savings are available, less investment takes place, and the economy and wages grow more slowly than they would without Social Security. The law of unintended consequences is at work always and everywhere. People outraged about high prices of plywood in areas devastated by hurricanes, for example, may advocate price controls to keep the prices closer to usual levels. An unintended consequence is that suppliers of plywood from outside the region, who would have been willing to supply plywood quickly at the higher market price, are less willing to do so at the government-controlled price. Thus, a shortage of a good resulted where it was badly needed. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive. In the United States alone, people pay insurers more than $1.2 trillion in premiums, and insurers pay out in claims and expenses as much or more than they take in. Profit margins are small because competition is fierce, and a year’s profits can be lost to a single firestorm, hurricane, or flood. [IA] INSURANCE ADVOCATE | Summer 2022 31