Vol. 129 No. 18 | November 12, 2018
RAP WRAP UP
PIANY Hudson Valley Conference Hails “Heroes”
NEW YORK
PAID FAMILY LEAVE
It’s here!
Bonding
Caring
Military Find out what you need to know:
www.newyorkpfl.com Copyright © 2018. ShelterPoint Life Insurance Company | Mktg#18-11 | G1 01/18
Vol. 129 No. 18 | November 12, 2018
16 PIANY RAP WRAP-UP
Contents
4 Foreword: Thanks, Steve Steve Acunto, Publisher 6
In the Associations: PCI Elects New Officers to the Board of Governors
8 HR Updated: When Employees Have to Be Paid For OfftheClock Cell Phone Use Alfred T. DeMaria 10 MSO: Holiday Loss Control Tips for Business Sue C. Quimby 12 Life: Why Are So Many Universal Life Insurance Policies Failing? Jordan Smith, J.D., LLM 14 Guest Opinion: Do Not Be Deceived! Medicare For All Will Crash the System Kristin S. Held, M.D. 20 In the News: TransUnion’s National Driving Record Solution
Provides More Comprehensive View of Policyholders 24
On My Radar: No “Occurrence” in Ohio for Contractor’s or Sub-Contractor’s Defective Work Barry Zalma
26
Looking Back: November 6, 1993
28 Courtside: Religious Abuse Liability Institutions - Child Sex Lawrence Rogak info@insurance-advocate.com www.insurance-advocate.com
30
Guest Article: Understanding the Difference Between Surety Bonds and Insurance Eric Weisbrot
[ FOREWORD ]
STEVE ACUNTO
Thanks, Steve
S I N C E
1 8 8 9
VOLUME 129 NUMBER 18 NOVEMBER 12, 2018
EDITOR & PUBLISHER
uBob Wallach, rumors have it, is in the process of reorganizing the Robert Plan 2.0 for a different market and under a different structure. The “wiz kid” as he was known told us to “watch and see”…and we will…just as we watched his legendary Dad, Bill Wallach, amaze and astound an entire industry.… Speaking of an entire industry, our next issue will have details of the remarkably successful IFNY Annual Luncheon held at New York’s historic Union League Club on November 9th. Full story in next issue, but meanwhile, we cannot help but mention how great it was to see Roosevelt Giles, Chairman of Atlanta Life Insurance Company, who just returned from Stockholm, where ALIC’s most famous client had memorabilia on display including his life insurance policy: Dr. Martin Luther King, Jr.… Meanwhile, New York Life, America’s largest mutual life insurer, announced that the company expects to pay eligible participating policy owners a record dividend payout of $1.8 billion in 2019. This milestone will mark the 165th consecutive year that New York Life has paid a dividend to policy owners, underscoring the company’s continued financial strength. New York Life is the only major U.S. mutual life insurance company to declare a record dividend payout in each of the last five years. According to CEO and Chairman Ted Mathas, “Paying dividends to our eligible policy owners for the 165th consecutive year is New York Life’s mutual structure in action. This unparalleled consistency in sharing our success reflects the disciplined execution of our diversified business strategy and superior financial strength. As a mutual company, our interests are aligned with those of our policy owners, not Wall Street or shareholders, meaning the value we create is carefully managed with their longterm interests in mind.” The dividend payout declared in 2018 follows an outstanding year of performance; NYL holds surplus and asset valuation reserve remain strong at a record $25.1 billion, bolstered by the company’s ability to strategically manage its $252.9 billion general account and successfully operate its portfolio of supporting businesses, which deliver diversified revenue streams to support New York Life’s financial strength.… Great pro business and free enterprise leader, Herb London, Ph.D., founder of the London Center for Policy Research, former dean of New York University’s Gallatin Division, and leading American conservative intellectual passed away last week after a coronary ailment. He was 79. Dr. London was born in Brooklyn in 1939. Reaching 6’5”, he led Jamaica High School to a citywide basketball championship. He played hoops at Columbia University and was drafted by the NBA’s Syracuse Nationals, although an injury kept him from playing professionally. He enjoyed a hit rock & roll record in 1959, and went on to a highly distinguished career as an academic and conservative activist. The author of 30 books on public affairs was a widely beloved fixture on the local, state, national, and global stages. Readers in New York will recall that he ran for mayor of New York City in 1989. He was the Conservative Party nominee for governor of New York in 1990 and finished just one percent behind GOP standard bearer Pierre Rinfret. RIP.… And last… as this column’s title has it, our long time (as opposed to “old”) friend Steve Ruchman has just retired from his regular contribution of articles to the Insurance Advocate over several years. His work was crisp and well received by readers (including me!) and offered insight into many of the issues facing agents. Steve has given the industry great service these many years and deserves our applause…and thanks. All good things to you and yours, Steve. SA 4 November 12, 2018 / INSURANCE ADVOCATE
Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Jamie Deapo Alfred T. DeMaria Sari Gabay Lawrence N. Rogak N. Stephen Ruchman Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Gina Marie Balog-Sartario 914-966-3180, x113 g@cinn.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, 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, fax 914-613-1595, email: circulation@cinn. com or write: Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2018. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Office.
For high-quality article reprints (minimum of 100), including digital rights, contact Gina Marie Balog at g@cinn.com or call 914-966-3180, x113
Big Wheels Need Big Coverage For more Information or an Immediate Price Quote Call
1-888-PARKPRICE w w w. p a r k i n s u r a n c e c o . c o m
Your Top Resource for… • Auto Liability • Physical Damage • General Liability • Split Limits on 100/300 and Single Limits up to $1M Park Insurance's Transportation Insurance Program provides trucking companies with comprehensive, high-quality coverage at affordable rates. From Competitive Rates to Comparable Commissions.
Large Enough to Service You... Small Enough To Care.
[ IN THE ASSOCIATIONS ]
PCI Elects New Officers to the Board of Governors u The Property Casualty Insurers Association of America (PCI) elected new officers to its Board of Governors today during the association’s annual meeting. Pete McPartland, chairman of the board, president, and CEO of Sentry Insurance Group was elected as PCI’s chair; Jim Brannen, CEO of FBL Financial Group was elected first vice chair, and Greg Crabb, president and CEO of Amerisure Companies was elected second vice chair. “We are pleased to welcome Pete as PCI’s board chair,” said David A. Sampson, president and CEO of PCI. “Property casualty insurers are operating in an era of unparalleled disruption and promise. Rapidly changing technology, demographics, and geopolitics will continue to present challenges and opportunities. PCI’s value proposition is to be an integral part of member companies’ enterprise risk management for legislative, regulatory, and political risk. The Board Leadership and PCI staff are committed to not only delivering upon, but expanding on our value proposition.”
“PROPERTY
CASUALTY
INSURERS
ARE OPERATING IN AN ERA OF UNPARALLELED DISRUPTION AND PROMISE.
RAPIDLY
TECHNOLOGY,
CHANGING
DEMOGRAPHICS,
AND GEOPOLITICS WILL CONTINUE TO
PRESENT
CHALLENGES
OPPORTUNITIES.
PCI’S
AND VALUE
PROPOSITION IS TO BE AN INTEGRAL PART
OF
ENTERPRISE FOR
MEMBER RISK
LEGISLATIVE,
COMPANIES’
MANAGEMENT REGULATORY,
AND POLITICAL RISK. THE BOARD LEADERSHIP
AND
PCI
STAFF
ARE COMMITTED TO NOT ONLY DELIVERING UPON, BUT EXPANDING ON OUR VALUE PROPOSITION.”
Greater Des Moines Partnership, Great Western Bank, and as a member of the Iowa Business Council and the Greater Des Moines Committee. Brannen is a graduate of the University of Iowa.
General Casualty, and Golden Eagle Insurance. He currently serves on the board of the Workers Compensation Research Institute. McPartland is a graduate of the University of Florida.
Pete McPartland – PCI’s Chair Chairman of the Board, President& CEO Sentry Insurance Group
Jim Brannen - PCI’s First Vice Chair CEO, FBL Financial Group
Pete McPartland is Chairman of the Board, President, and CEO of Sentry Insurance Group. He Joined Sentry in 2010 as president and chief operating officer. Prior to joining Sentry, McPartland served in a variety of executive positions with Fireman’s Fund,
Jim Brannen is CEO of FBL Financial Group. He Joined FBL in 1991 and has held various positions in finance and executive management. Prior to joining FBL, Brannen worked in public accounting. He currently serves on the board of directors and various committees of the
6 November 12, 2018 / INSURANCE ADVOCATE
PCI promotes and protects the viability of a competitive private insurance market for the benefit of consumers and insurers. PCI is composed of approximately 1,000 member companies and 340 insurance groups, representing the broadest cross section of home, auto, and business insurers of any national trade association. PCI members represent all sizes, structures, and regions, which protect families, communities, and businesses in the U.S. and across the globe. PCI members write $245 billion in annual premium, which is 38 percent of the nation’s property casualty insurance marketplace.
Greg Crabb – PCI’s Second Vice Chair President and CEO Amerisure Companies Greg Crabb is president and CEO of Amerisure Companies. He joined Amerisure in April, 2008 as chief administrative officer with accountability for claims, human resources, information technology, internal audit, and legal. Prior to joining Amerisure, he held various positions at The Hartford. He currently serves on the board of Business Leaders for Michigan and Boys & Girls Clubs of Southeastern Michigan. Crabb is a graduate of the University of Western Ontario. He also received a Juris Doctorate from Emory University.[IA]
Coverages You Need . . . from a Name You Can Trust! Protecting Your Clients’ Many Interests . . .
Berkshire Hathaway
GUARD
Insurance Companies
Nationwide operations • A+ A.M. Best Rating
We have agency appointments available. Go to www.guard.com/apply !
Workers’ Compensation • Businessowner’s Policy (Property and Liability) • Commercial Auto* • Commercial Umbrella/Excess • Professional Liability* • Homeowners and Personal Umbrella* • Disability* • and More (*Select States)
[ HR UPDATE ]
ALFRED T. DEMARIA
When Employees Have to Be Paid For OfftheClock Cell Phone Use uIt is almost universal that mobile device habits bleed into work, particularly in the insurance industry which does not run on a 9:00 to 5:00 basis More and more, answering a quick email, text or phone call outside of the workplace by nonexempt employees has blurred the lines of what is and what is not considered “compensable hours worked.” Many employers are reluctant to face this thorny issue of work performed on electronic devices outside of employees’ regularly scheduled shift hoping not to create a problem where one (seemingly) does not exist. However, a cottage industry has recently grown which focuses on suing employers on behalf of nonexempt employees in a class action for failure to compensate for more than isolated, infrequent, minor, offtheclock smart phone work.
WHEN CAN AN EMPLOYER BE FOUND LIABLE?
When an employer has actual or constructive knowledge (that is, may not have known but SHOULD have) that the work is performed, overtime compensation must be paid (assuming the employee has already worked forty hours in that payroll week). Basically, employers must pay for all, but trivial work that they know about, even if they did not ask for the work, even if they did not want the work done and even if they had a rule against doing the work! Knowledge is pinned on the employer where, through reasonable diligence, is “should have known” that work was being performed. In the case of emails and texts received by the employer, it would be extremely difficult to deny knowledge of offtheclock work. The issue of liability for work being done away from the office is not only not going to go away, but will certainly proliferate as an increasing number of
WHEN AN EMPLOYER HAS ACTUAL OR CONSTRUCTIVE KNOWLEDGE (THAT IS, MAY NOT HAVE KNOWN BUT SHOULD HAVE) THAT THE WORK IS PERFORMED, OVERTIME COMPENSATION MUST BE PAID (ASSUMING THE EMPLOYEE HAS ALREADY WORKED FORTY HOURS IN THAT PAYROLL WEEK).
nonexempt employees conduct work remotely on cell phones. As all employers can expect to see an increase in the number of these type of claims, here are some helpful tips.
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.
HELPFUL TIPS TO AVOID LIABILITY
• If practical for your company, allow smart phone use only for exempt employees (who are not entitled to overtime) and restrict the availability of mobile devices for nonexempt employees). • Establish time reporting policies by clearly promulgating a comprehensive, written policy regarding the use of smart phones including processes for employees to report any unpaid time. • H ave employees regularly review their daily and weekly hours worked to confirm that they’re reporting and, thus, compensated for all hours worked. • B e sure that managers did not develop an “unwritten policy” discouraging employees from reporting their offtheclock time. The presence of a process for reporting unpaid time will not shield the employer from liability if employees are discouraged from supervisors and managers from doing so.
CONCLUSION
Technology has changed American workplaces and lawsuits revolving around smart phone use and other offtheclock computer work will no doubt continue to proliferate. The best way to avoid or minimize these claims is to be proactive and address this thorny issue before you find yourself defending a wage and hour lawsuit.[IA]
Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com
8 November 12, 2018 / INSURANCE ADVOCATE
Cha
Real Dividends! $211 Million Paid
2 New Bu 018 siness B on 5
0% of fe us es for n ew and first two Renewa ls
“As an employee owned agency with over 200 employee owners in 12 ofces located in New York State, Connecticut and Rhode Island, Rose & Kiernan ranks as one of the top 50 largest regional insurance brokerage rms in the United States. I’ve known Adam Friedlander for over 25 years and can attest to the Friedlander Group’s integrity and commitment to providing effective workers’ compensation claims, risk management and premium cost containment services which has provided our rm a competitive edge in the marketplace. Donna Nygard, Friedlander’s VP of Brokerage Sales and Client Relations, has proven to be very effective in helping to establish new client relationships.” Charlie Daniels, CPCU Executive Vice President Rose and Kiernan, Inc
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*
2016-17 2015-16 2014-15
40%* 40%* 35%
35% average dividend since inception in 1992
2016-17 2015-16 2014-15
30%* 40%* 30%
31% average dividend since inception in 1993
2015-16 2014-15 2013-14
35%* 35%* 25%
35% average dividend since inception in 1993
2015-16 2014-15 2013-14
20%* 10% 0%
15% average dividend since inception in 2006
2015-16 2014-15 2013-14
20%* 15% 10%
10% average dividend since inception in 2010
Social Services Residential Care Social and Health Services Group of NY, Workers’ Comp. Safety Group #585*
2015-16 2014-15 2013-14
20%* 15% 10%
11% average dividend since inception in 2011
Residential Care Group of NY, Workers’ Comp. Safety Group #586*
2016-17 2015-16 2014-15
10%* 10% 5%
7% 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 Prots 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/
Charlie Daniels INS ADV-fix.indd 1
10/11/18 8:19 AM
ADVERTORIAL
Holiday Loss Control Tips for Business By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE - Assistant Vice President/Media Editor uWITH THE HUSTLE and bustle of the holiday season, loss control and risk management may be relegated to the back burner for small business owners. However, this is exactly the time when such practices are most needed. Helping clients understand and practice risk management and loss control, during the holidays as well as the rest of the year, is another value-added service of the professional insurance agent. A National Retail Federation study estimates that holiday shopping by Americans will be more than last year, exceeding $720 billion (www.investopedia.com). Advertising is a way to attract clients to a store or website. However, this is not a job to be taken lightly. Advance planning is key to a successful campaign. While it may be cheaper to use your college-aged nephew to create the website or plan a marketing campaign, it might not be cheaper in the long run. Choosing a professional who understands the legal requirements that apply to your local community and type of business will help avoid overstepping the boundaries and ensure compliance with truth in advertising regulations. Planning is key. Advertisements, deals and special promotions should be designed well in advance to avoid errors that come with a last minute rush. Brick and mortar stores are exposed to additional hazards not encountered by online merchants. Housekeeping must be a high priority. In addition to being more visually appealing, a clean business is a safe business. Foot traffic brings hazards of trip and fall claims, both inside the store and in the parking areas and access ways. More than one million people visit emergency rooms each year as a result of slip and fall claims, at a cost of more than $30,000 per visit. Snow and ice-related falls average $33,000 to $48,000 per visit (www.askadamskutner.com). Customers are not the only victims, as slip and falls are a leading cause of injuries to employees (https://nfsi.org). Add to this time
loss from work for the employee and anyone else who may have to take them to the hospital, plus the time to complete paperwork, and it is easy to see that such incidents should be avoided whenever possible. All areas should be kept clear of ice and snow. Spills inside the store should be cleaned promptly. Access to areas that pose a hazard should be blocked off using such measures as barricade tape, cones or safety signs. Avoid overcrowded aisles that may cause additional hazards. Local weather should be monitored so that proper planning for snow/ice removal can be done. Wet umbrella bags will reduce water accumulation on the floors. An alternative might be a check in station for umbrellas. Shoplifting is an all too common occurrence, averaging over $35 million per day ($13 billion per year). It is estimated that 1 in 11 people shoplifts during their lifetime (www.hg.org). This is especially true during the colder months when people have more layers of clothing in which to hide merchandise. Means of prevention include proper lighting, security tags, warnings and restricted access. While some store owners may want to enhance the “mood” with lower lighting, this may make it easier for customers to
hide items in their clothing or bags. In addition, dim stores may increase instances of people walking into displays or tripping. Warning signs that outline the consequences of shoplifting may deter someone from attempting to steal merchandise. Closed circuit surveillance is another component of a successful loss control program. Most items can now be tagged with chips that provide information on where and when the item was stolen. Expensive or easy to conceal items, such as jewelry, should be secured in a locked case whenever possible. Apple has even added theft detection technology to its phones. Maintaining an up-to-date inventory is also crucial. With today’s technology, this makes it easier to detect that something has gone missing. Controlling access to fitting rooms, and limiting the number of items that can be taken in at a time, also helps reduce shoplifting exposure. Interaction of employees with customers may help reduce theft, and also increase sales. Customers who feel they are being watched are less likely to steal, and if someone takes the time to help, this may prompt them to buy more. Keeping a clean and tidy store may also deter theft, since a messy store is an indication that management and employees are not paying attention to their surroundings. While the holiday season brings increased sales and increased exposure to loss, risk management and loss control should be an integral part of a business’ year round management system. Helping clients integrate these systems into their normal operations is another sign of the true insurance professional.
R
139 Harristown Road, Suite 100 Glen Rock, NJ 07452 (800) 935-6900 | www.msonet.com
10 November 12, 2018 / INSURANCE ADVOCATE
IA_A
WE BELIEVE
independent insurance agents serve customers best with trusted advice and the right coverage options to protect what matters most.
DO YOU BELIEVE THIS TOO? JOIN US. Contact Jamie Deapo jdeapo@biginy.org 800.962.7950 ext. 232 BigINY.org/join IA_Ad_MissionStatement_071318.indd 1
7/13/2018 11:20:27 AM
[ LIFE ]
JORDAN SMITH, J., LLM
Why Are So Many Universal Life Insurance Policies Failing? Neglect and Lack of Attention Deserve Most of the Blame uTraditional, non-guaranteed universal life insurance (often described in the insurance industry as “Current Assumption UL”) has been subjected to rather brutal criticism over the last few years, most recently in a September 2018 Wall Street Journal article1 that blamed the product for financial hardship being experienced late in life by many policy owners who purchased these policies back in the 1980s and 1990s. But how much of this condemnation is truly warranted, and how much of it reflects a fundamental misunderstanding of how these products are designed to work when properly tended to?
WHAT IS CURRENT ASSUMPTION UNIVERSAL LIFE?
Current Assumption UL is a flexible premium permanent life insurance product that contains both an insurance component and an investment component. Like other permanent life insurance products: Premiums are deposited in the policy’s cash account, which is reduced by policy charges and increased by a crediting methodology set forth under the terms of the policy. What differentiates a Current Assumption UL policy from other types of non-guaranteed permanent life insurance is that the growth of the policy’s cash value is based on a flat crediting rate that is established by the insurance carrier and adjusted from time to time – rather than based on a flat dividend rate that is established by the insurance carrier and adjusted from time to time (a product referred to as
“whole life”), based on the performance of an equity index that is collared by a cap and a floor (a product referred to as “indexed universal life”), or based on the actual investment returns of specific equity investments (a product referred to as “variable universal life”). As illustrated below, projections of Current Assumption UL policy performance are based on the forecasting of two variables: (i) annual policy charges; and (ii) the insurance company’s crediting rate. While many life insurance policies provide that the insurance carrier may increase policy charges under specified circumstances (generally defined broadly by reference to the company’s expectations regarding future mortality, expense and persistency experience), this discretion is very rarely exercised and annual policy charges rarely devi-
ate from schedule set forth at the time a policy issued2. In contrast: The crediting rate, which is tied to the interest rate that the insurance carrier is able to earn on its portfolio of fixed income investments (i.e., bonds), changes regularly. As inter-
Jordan Smith, JD, LLM is the Vice President of Advanced Design at Schechter in Birmingham, Michigan. He works with Schechter clients in the design and implementation of advanced strategies. Mr. Smith is an attorney that provides an important legal perspective to strategies that involve estate planning, taxation issues, trust design and the preservation and transfer of wealth. Schechter is a boutique third generation wealth advisory firm. For over 75 years, their multi-disciplined team consisting of one or more JDs, CPAs, LLMs, CLUs, PFSs, CAPs, MBAs and CFA charter holders has been quietly advising wealthy families on financial matters including: institutional quality investment advisory services, advanced life insurance planning, income and estate taxes, business succession and charitable planning.
est rates change (up or down), crediting rates on Current Assumption UL policies tend to follow suit. And for those whose Current Assumption UL policies have been dramatically underperforming, the primary source of the problem is that no-
Leslie Scism, Universal Life Insurance, a 1980s Sensation, Has Backfired, Wall Street Journal, September 20, 2018, https://www.wsj.com/articles/universal-life-insurance-a-1980s-sensation-has-backfired-1537368656. While there have been several instances in recent years where insurance carriers have increased policy charges in order to compensate for their own lower-than-expected investment returns, these increases have spawned a number of class action lawsuits that have largely been resolved or settled in favor of policyholders. Policy illustrations also include an alternate set of “worst case” projections, but these are generally of no value because they’re based on the unreasonable assumption that (immediately after the policy is issued and continuing indefinitely thereafter) the crediting rate is reduced to the minimum rate allowed under the terms of the policy, and at the same time, policy charges are increased to the maximum level allowed under the terms of the policy. Given how infrequently policy charges are ever changed at all, it is understandable why few people take these worst case scenarios seriously. 12 November 12, 2018 / INSURANCE ADVOCATE
[ LIFE ] body has been monitoring the crediting rate changes and adjusting their annual premiums accordingly.
THE THEORY BEHIND MINIMALLY
UNDERSTANDING POLICY ILLUSTRATIONS
DOLLAR THAT DOESN’T HAVE TO
When a Current Assumption UL policy is issued, an illustration is run to project how the policy will perform under the assumption that scheduled policy charges are not changed (a reasonable assumption, as noted above) and that the then current crediting rate remains constant (an unreasonable assumption, because crediting rates rarely do). It’s an imperfect system, but without the benefit of a crystal ball that can accurately predict future interest rate changes, it’s at least a good place to start.3 It’s also important to recognize that the amount that gets paid to the beneficiary at the death of the insured under most permanent life insurance products is a level death benefit that doesn’t vary based on the cash value of the policy. What that means is that as the policy builds cash value, the amount of pure life insurance protection that needs to be purchased to produce the policy’s death benefit gets smaller – reducing policy charges (which, after the first few years, are based largely on the difference between the policy’s death benefit and the policy’s cash value) and accelerating the buildup of policy cash value. As a ge n e r a l r u l e, Cu r rent Assumption UL illustrations are intentionally designed to calculate the minimum annual premium necessary in order to keep the policy in force indefinitely (typically age 100, although policies are sometimes run to age 121), this approach to policy design is a big part of what differentiates Universal Life insurance from the primary alternative in the permanent life insurance arena: Whole Life. Whereas Whole Life policies operate somewhat like a “sinking fund,” with noticeably higher premiums that result in greater cash value but also reduce the policy’s economic yield, Universal Life policies are typically structured to be cost-efficient and maximize the rate of return that is ultimately realized on each dollar of premium. The theory behind minimally funding Current Assumption UL policies is that every additional dollar that doesn’t have to be used to pay premi-
FUNDING CURRENT ASSUMPTION UL POLICIES IS THAT EVERY ADDITIONAL
BE USED TO PAY PREMIUMS IS A DOLLAR ...THAT THE INSURED’S HEIRS WILL RECEIVE IN ADDITION TO THE INSURANCE POLICY’S DEATH BENEFIT.
ums is a dollar (plus any future earnings on that dollar) that the insured’s heirs will receive in addition to the insurance policy’s death benefit. While this approach may seem risky given the uncertainty surrounding future crediting rate changes, it actually works quite well as long as policyholders and their insurance advisors actively monitor policy performance and adjust premium levels whenever there is a change in crediting rates. To illustrate this point: A 50-year old man in Preferred health can purchase a $1,000,000 Current Assumption UL policy for an annual premium of $8,808 per year, based on the insurance carrier’s current crediting rate of 3.90%. If the crediting rate were to stay level at 3.90%, with no changes in scheduled policy charges, the policy’s cash value would gradually rise up to a peak value of just under $79,000 at age 70, and then gradually diminish a little bit each year until falling to only $9 of cash value at age 100. The projected economics of this policy shown in the following chart:
As we can see, everything works out exactly as illustrated as long as the crediting rate stays at 3.90%. But what happens when the crediting rate ultimately
rises or falls? If the crediting rate falls, absent an adjustment of the premium, the policy cash value will build more slowly, peak sooner than age 70, and drop to zero before the insured reaches age 100 (at which point, the policy will lapse). If the crediting rate rises, then (again, absent an adjustment of premium) the policy cash value will build more rapidly, peak later than age 70, and (depending upon the magnitude of the rate increase) it’s possible that the cash value may never peak at all and could continue to gradually rise indefinitely. While this (having excess cash value) may seem like a great result (and certainly better than watching the policy run out of money and lapse), continuing to pay the same level premium into a policy that’s outperforming expectations is less economically efficient and will ultimately result in fewer total dollars passing to heirs (because those extra premium dollars will not increase the policy’s death benefit).
MANAGING POLICIES EFFICIENTLY AND EFFECTIVELY
The real lesson here is that Current Assumption UL policies require constant monitoring, and periodic adjustment, in order to enable them to perform as intended – which, as noted, is to provide a death benefit as cost-efficiently as possible in order to maxi-
mize one’s return on premium dollars. Modifying the premium (up or down, as applicable) whenever the crediting CONTINUED ON PAGE 29 INSURANCE ADVOCATE / November 12, 2018 13
[ GUEST OPINION ]
KRISTIN S. HELD, M.D.
Do Not Be Deceived! Medicare For All Will Crash the System uDeceptively, pollsters report that “Medicare For All” is popular with Americans, as the media proclaims healthcare a top concern on voters’ minds a mere two weeks before the midterm election. While many candidates are indeed running on a “Medicare For All” platform, few Americans realize that a Medicare for All bill actually exists, and that it already has 123 Democrat co-sponsors. H.R.676, “The Expanded and Improved Medicare For All Act,” was introduced January 24, 2017, by former Representative John Conyers, Jr. (D-MI). Representative Keith Ellison (D-MN) assumed sponsorship when Conyers resigned after 52 years in Congress, amidst multiple allegations of sexual harassment. If Americans actually knew what was in this bill, pollsters would find rare few supporting it. The following is a dissection of H.R.676, The Expanded & Improved Medicare For All Act, including much of the exact language as written, which is in bold print. Who is eligible to be registered in the Medicare For All program?
14 November 12, 2018 / INSURANCE ADVOCATE
ALL INDIVIDUALS RESIDING IN THE U.S., INCLUDING ANY TERRITORY OF THE US, ARE COVERED UNDER THE MEDICARE FOR ALL PROGRAM.... DO YOU BECOME A RESIDENT WHEN YOUR CARAVAN CROSSES THE BRIDGE AT THE U.S. BORDER? OR WILL THERE BE SOMETHING MORE TO SHOW, LIKE A WATER OR ELECTRICITY BILL?
101. ELIGIBILITY AND REGISTRATION. (a) IN GENERAL.—All individuals residing in the United States (including any territory of the United States) are covered under the Medicare For All Program entitling them to a universal, best quality standard of care. Each such individual shall receive a card with a unique number in the mail. An individual’s Social Security number shall not be used for purposes of registration under this section.
Dr. Held is a board certified ophthalmologist and ophthalmic surgeon. She is a Phi Beta Kappa Graduate from the Univ. of TX at Austin and received her medical degree from the Univ. of TX Medical School at San Antonio, where she was elected to AOA. Following her internship in internal medicine and residency in ophthalmology, Dr. Held joined the faculty at the Univ. of TX Health Science Center at San Antonio, where she taught residents and medical students and served as Director of the County Ophthalmology Clinic. She maintains an academic affiliation as an adjunct professor in the Department of Ophthalmology. For the past 20 years she has been in private practice in San Antonio. On October 1, 2015 her practice became completely third party free, including opting out of Medicare. Dr. Held is President-Elect of the Association of American Physicians and Surgeons, served on the healthcare advisory team for Dr. Ben Carson during his presidential campaign, cofounded AmericanDoctors4Truth.org, and served on the National Physicians Council for Healthcare Policy. Dr. Held has had numerous articles published, including in the Washington Times, The Hill, Journal of American Physicians and Surgeons and Dr. Carson’s AmericanCurrentsee and has spoken across the country regarding health policy and its effects on patients, physicians, and the practice of American medicine, advocating for the patient-physician relationship and against the government takeover of medicine. She has read and reported on the Affordable Care Act, MACRA, the MACRA rules and the proposed Medicare For All Bill. She is married and has four daughters, two of whom are physicians. Her father is a former chairman of neurosurgery and her mom a retired R.N.
[ GUEST OPINION ] All individuals residing in the U.S., including any territory of the US, are covered under the Medicare For All program. Notice, the bill covers residents, not just citizens. The HHS Secretary is given the power to define what constitutes residency. Clearly, the political ideology of the party in the White House will impact this definition. Do you become a resident when your caravan crosses the bridge at the U.S. border? Or will there be something more to show, like a water or electricity bill? And, each individual shall receive a card with a unique number in the mail. Congress has repeatedly refused to fund a previous law to assign another number to Americans. Given the government’s record on privacy breaches, what new possibilities for identity theft and other abuses would be unleashed! What entitlements will Medicare For All provide to all residents of the U.S. and U.S. territories (potentially everyone in the world)? As seen from the text of the bill below, everyone will be theoretically entitled to everything from inpatient care, outpatient care, and prescription drugs to nutritional therapy, long term care, and, of course, palliative care. Again, the presiding political philosophy will play a huge role in determining what care will be provided and for which patients (remember Ezekiel Emanuel’s Complete Lives System of rationing by age and return on society’s investment). Provision of such procedures as abortion and euthanasia may be prohibited, allowed, or even required, and will depend on political ideology in the Congress, White House, and Supreme Court. SE C . 1 0 2 . B E N E F I T S A N D PORTABILITY. (a) In General.—The health care benefits under this Act cover all medically necessary services, including at least the following: (1) Primary care and prevention (2) Approved dietary and nutritional therapies. (3) Inpatient care. (4) Outpatient care. (5) Emergency care. (6) Prescription drugs. (7) Durable medical equipment. (8) Long-term care. (9) Palliative care.
GOVERNMENT
COMPLETES
THE
TAKEOVER OF THE ENTIRE HEALTH INSURANCE
INDUSTRY
IN
ONE
SMALL PARAGRAPH. GOVERNMENT BECOMES THE SINGLE PAYER, AND THE
TRANSFORMATION
FREE-MARKET,
FROM
PATIENT-CENTERED
MEDICINE TO SOCIALIZED MEDICINE THAT SERVES THE COMMON GOOD OF THE STATE IS COMPLETE.
(10) Mental health services. 11) The full scope of dental services, services, including periodontics, oral surgery, and endodontics, but not including cosmetic dentistry. (12) Substance abuse treatment services. (13) Chiropractic services, not including electrical stimulation. (14) Basic vision care and vision correction (other than laser vision correction for cosmetic purposes). (15) Hearing services, including coverage of hearing aids. (16) Podiatric care. Who will provide all the care? The definition of “legally qualified” is unspecified and remains of concern. The government regulatory strings attached to legal qualification and licensure could be long, expensive, coercive, and destructive to physician and patient autonomy. (b) Portability.—Such benefits are available through any licensed health care clinician anywhere in the United States that is legally qualified to provide the benefits. What will each beneficiary pay? Reportedly nothing at the time of service; however, I could find no specific mention of premiums in the 18 pages of the bill. Currently, Medicare beneficiaries pay premiums, which are means tested. I suspect means-tested premiums will eventually become part of this as additional layers of compounded redistribution will be added in response to the reality that this Utopian scheme must be paid for. (c) No Cost-Sharing.—No deductibles, copayments, coinsurance, or other cost-sharing shall be imposed
with respect to covered benefits. Section 104 is huge and astounding. This section makes it illegal for health insurers to sell insurance that duplicates benefits of Medicare For All. Government completes the takeover of the entire health insurance industry in one small paragraph. Government becomes the single payer, and the transformation from free-market, patient-centered medicine to socialized medicine that serves the common good of the state is complete. SEC. 104. PROHIBITION A G A I N S T D U P L I C AT I N G COVERAGE. (a) In General.—It is unlawful for a private health insurer to sell health insurance coverage that duplicates the benefits provided under this Act. (b) Construction.—Nothing in this Act shall be construed as prohibiting the sale of health insurance coverage for any additional benefits not covered by this Act, such as for cosmetic surgery or other services and items that are not medically necessary. How on earth will all the elements of this monstrosity be funded? The federal government will dole out monthly lump sums to regions to cover all operating expenses. This is capitation on an unprecedented, mammoth, untested scale. Most of the government’s experience with capitation thus far has been a huge failure. 202. PAYMENT OF PROVIDERS AND HEALTH CARE CLINICIANS. (a) Establishing Global Budgets; Monthly Lump Sum.— (1) IN GENERAL.—The Medicare For All Program, through its regional offices, shall pay each institutional provider of care, including hospitals, nursing homes, community or migrant health centers, home care agencies, or other institutional providers or pre-paid group practices, a monthly lump sum to cover all operating expenses under a global budget. Who will be conscripted to provide all the free care to all “residents” of the U.S. and U.S. territories? Medicare For All commandeers all “Healthcare” Professionals to work for whatever the system deigns to pay. Medicare’s perverse scoring system (MACRA/MIPS) will likely apply. CONTINUED ON PAGE 22 INSURANCE ADVOCATE / November 12, 2018 15
RAP Wrap-Up
PIANY Hudson Valley Conference Hails “Heroes” PIANY’s HVRAP returns to Suffern; Event hones in on participation and communication uProfessional, independent insurance agents experienced déjà vu as they came back to Suffern at the Crowne Plaza for
the Professional Insurance Agents of New York State, Inc.’s 15th Hudson Valley Regional Awareness Program on Oct. 24. Continuing-education courses; a sold-out trade show; and an exciting keynote awards luncheon had hundreds of professional insurance agents roaming the venue. 16 November 12, 2018 / INSURANCE ADVOCATE
Jamie A. Ferris, CIC, AAI, CPIA, gives his first formal remarks as the newly elected PIANY president during the luncheon.
Presidential Address Jamie A. Ferris, CIC, AAI, CPIA, gave his first formal remarks as the newly elected president of PIANY during the Keynote Awards Luncheon. Ferris began his speech with a quote from the ‘80s sci-fi film The Adventures of Buckaroo Banzai Across the 8th Dimension, “No matter where you go, there you are.” Ferris said the quote exemplifies the insurance industry, as insurance agents are there for their clients, no matter the dire circumstances in which they find themselves. Buckaroo Banzai was described as a scientist, neurosurgeon, rockstar and racecar driver. In the movie, a character refers to Banzai as Einstein, James Bond and Batman all rolled into one—Ferris said that’s exactly the way he thinks about professional insurance agents. “The most impressive part about being in PIA is the other members who volunteer and serve on the committees,” Ferris said. “These are some of the greatest people I’ve met.” He then asked his audi-
ence to heed his advice and step further into PIA, like he did before he became president; whether it’s with the PIANYPAC, NY-YIP, serving on the Advisory Councils or any way to do more for the association. “Even though I’ve put a lot of time in, I’ve gotten so much more out of the organization than I’ve given,” he said. Lastly, Ferris encouraged everyone to extend the invitation to their fellow insurance agents who are not members of PIA. “We need to increase our ranks and continue to build our membership.” he said. “Extend the message to other agents in the area who may not be part of PIA. Reach across to another agent in town and say ‘Hey, have you heard of this organization? Do you know of this great work they’re doing for us? Your membership in it is extremely valuable.’”
Chiapperino presents the Service to the Industry award to Onofrio “Noff” Colabella, CIC. Colby accepts the award on Noff’s behalf.
Chiapperino also presented the Service to the Industry award to Onofrio “Noff ” Colabella, CIC, and founding partner of BNC Insurance Agency. Principal of BNC Insurance Agency, Brian Colby accepted the award on Noff ’s behalf.
Award Presentation During the Keynote Awards Luncheon, HVRAP Chair Donna Chiapperino, CIC, presented awards to two deserving individuals. The Distinguished Insurance Service award was presented to Richard A. Savino, CIC, CPIA, and managing partner of Broadfield Group. During his acceptance speech, Savino highlighted how proud he is to be a professional, independent insurance agent. He stated that no matter how much the industry changes, professional insurance agents always adapt and continue to protect people’s assets and serve their communities. “Our industry has seen many changes through the years,” he said. “We’ve gone from paper files to paperless; we’ve gone from cold calling to SEO and SEM; we’ve gone from the ruler and a rate sheet, for those people who remember that, to quote and bind online—however, we do continue to endure, change, and to grow.” Savino also echoed Ferris by encouraging everyone to support NY-YIP, PIANY PAC and to stay involved in PIA.
CONTINUED ON PAGE 18 INSURANCE ADVOCATE / November 12, 2018 17
Education Instructor Sheldon Hansen, CIC, CRM, CPIA, conducted two education sessions during HVRAP. First, The Growth in EPLI due to the #MeToo Movement focused on giving agents a broader understanding of the hashtag #MeToo, which turned one-year old on the day of the conference. Hansen stressed that most policies didn’t anticipate a movement like this, and to show how relevant this topic is, he brought a copy of the day’s New York Times, which front-page article focused on the #MeToo issue. The afternoon course, New Exposures in Errors and Omissions concentrated on ways agents can help their clients avoid exposures in the first place, using real-life claim examples to explore coverage concerns today.
CONTINUED FROM PAGE 18
Chiapperino presents the Distinguished Insurance Service award to Savino.
Communication Matters Renowned communication specialist Patricia Stark shared her expert knowledge as a corporate trainer. Stark has appeared in over 2,000 Fortune-500 corporate productions in nearly every industry. Stark focused on body language and how 93 percent of what we communicate to others comes from nonverbal cues. She showed the audience how to read different facial and body expressions to gain insight into what that person may be trying to convey. She also gave tips on how to avoid stress; ask questions; stop making assumptions; and present yourself with “calmfidence.”
Sheldon Hansen, CIC, CRM, CPIA, during the first education session
Networking, Trade Show What do you get when you mix together a sold out trade show and hundreds of insurance professionals? New business contacts and catching up with colleagues. NY-YIP HVRAP Welcome Reception NY-YIP started the party early with its Welcome Reception the night before HVRAP. It allowed members to come together before the event to spend quality time networking and reconvene over an open bar and appetizers.[IA]
Renowned communication specialist Patricia Stark 18 November 12, 2018 / INSURANCE ADVOCATE
At the NY-YIP HVRAP Welcome Reception
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
[ IN THE NEWS ]
TransUnion’s National Driving Record Solution Provides More Comprehensive View of Policyholders u TransUnion has announced the launch of its new National Driving Record solution for the personal, commercial and life insurance industries. This one-stop solution combines DriverRiskSM court records with state Motor Vehicle Reports (MVRs) for a more comprehensive view of a person’s driving record at a reduced cost. This is accomplished by bringing together TransUnion’s extensive collection of traffic-related court records with national state MVRs. “Carriers want a cost-effective way to analyze data about driver behavior to mitigate risk, while also maintaining profitable growth and providing accurate rates for applicants and policyholders,” said Mark McElroy, executive vice president and head of TransUnion’s insurance business unit. “DriverRisk flags insurance applicants with violations
20 November 12, 2018 / INSURANCE ADVOCATE
“Carriers want a cost-effective way to analyze data about driver behavior to mitigate risk, while also maintaining profitable growth and providing accurate rates for applicants and policyholders.” early in the underwriting process to determine when an MVR is needed, which directly leads to cost savings.” The need for such a solution is apparent. Even though approximately 75% of drivers have clean driving records, the insurance industry still spends more than $1 billion annually pulling MVRs on their driving customers, according to an internal TransUnion analysis.
Insurance applicants or policyholders are screened against TransUnion’s court record violation database. The database then rapidly identifies those who have prior driving/traffic violation activity, so that insurers can eliminate pulling MVRs on drivers with clean records. On average, insurance carriers report saving 30-50% on their total MVR expenses with their use of TransUnion’s current DriverRisk solution. State MVRs now complement the court record solution for a national solution. With advanced search logic, the TransUnion National Driving Record solution also enables insurance companies to capture valuable insight into: • C onvictions from a prior state (which may be associated with a previous Driver’s License Number), regardless of a change in name or address; • Convictions while driving outside of resident state; • Tickets that are still active (not yet adjudicated as guilty) There are approximately 6.1 million violations in the TransUnion database for drivers who received a ticket in a state other than where they lived. This expanded view of a person’s driving record means that insurers can receive state MVRs that are, in effect, enhanced with court records, where such data is available.[IA]
HELLO SUMMER
NEW LOW
RATES FOR THE
EMPIRE STATE SMART SAVINGS MEET
BCOVERAGE E T ANDT EMORER New coverage limits boost protection with up to $2 million for homeowners and up to $1.5 million for condo and co-op owners – no mandatory windstorm deductibles. And, we offer savings with paid-in-full discounts, companion policies and more.
Keep the Promise
Fast Facts on UPC Insurance • Publicly traded on NASDAQ (UIHC) • 20th largest writer of homeowners nationally • 19 years serving coastal states • Licensed in 18 states and writing in 12 states • 38th fastest-growing company globally — Fortune®
Peter N. Resnick
Nelson N. Gochez
Interboro President of Insurance UPC NE Regional Sales Director presnick@upcinsurance.com 678.222.0024
New York Territory Sales Manager ngochez@upcinsurance.com 678.222.0026
Explore more ways we Keep the Promise upcinsurance.com ®
HOMEOWNERS | FLOOD | CONDO/CO-OP | TENANTS
[ GUEST OPINION ] CONTINUED FROM PAGE 15
THESE MAY NOT BE THE BEST, MOST
(1) IN GENERAL.—The Program shall pay physicians, dentists, doctors of osteopathy, pharmacists, psychologists, chiropractors, doctors of optometry, nurse practitioners, nurse midwives, physicians’ assistants, and other advanced practice clinicians as licensed and regulated by the States by the following payment methods: (A) Fee for service payment under paragraph (2). (B) Salaried positions in institutions receiving global budgets under paragraph (3). (C) Salaried positions within group practices or non-profit health maintenance organizations receiving capitation payments under paragraph (4). Who will decide what medications are available to you? The government will establish the drug formulary. In other words, the government will decide the list of medications from which clinicians will be able to prescribe. These may not be the best, most effective, most innovative, safest, or even cost-effective drugs, but they will no doubt be the drugs that special interests have paid-off politicians or other players in order to gain favored status. Hundreds of billions of dollars will be squandered and laundered here annually, just as is happening now with the Pharmaceutical Benefits Managers (PBMs) and Group Purchasing Organizations (GPOs) via their racketeering scheme that siphons more than $200 billion annually from patients and taxpayers, inflates drug prices by 30-50%, and creates drug shortages. The government negotiations will continue to be influenced by countless special interest groups that pay to play. Conversely, if politicians refuse to play, the special interests may fund opposition candidates. The level of corruption in the swamp will mushroom. What is best for patients will be nothing but an annoying afterthought. 205. PAY M E N T FOR PRESCRIPTION MEDICATIONS, MEDICAL SUPPLIES, AND M E D I C A L LY N E C E S S A RY ASSISTIVE EQUIPMENT. (a) Negotiated Prices.—The prices to be paid each year under this Act for covered pharmaceuticals, medical supplies, and medically necessary as-
EFFECTIVE, MOST INNOVATIVE, SAFEST,
22 November 12, 2018 / INSURANCE ADVOCATE
OR EVEN COST-EFFECTIVE DRUGS, BUT THEY WILL NO DOUBT BE THE DRUGS THAT SPECIAL INTERESTS HAVE PAIDOFF POLITICIANS OR OTHER PLAYERS IN ORDER TO GAIN FAVORED STATUS.
sistive equipment shall be negotiated annually by the Program. (b) Prescription Drug Formulary.— (1) IN GENERAL.—The Program shall establish a prescription drug formulary system, which shall encourage best-practices in prescribing and discourage the use of ineffective, dangerous, or excessively costly medications when better alternatives are available. Where will the money to pay for this impracticable behemoth come from? There is not enough money for Medicare to cover its 60 million beneficiaries now. How will more than 300 million additional U.S. residents be covered? This part is shocking and maddening. The money does not exist, so the Medicare For All bill magically creates a new Medicare For All Trust Fund. It confiscates all money that previously went to Medicare, Medicaid, CHIP, and any other healthcare allocation and transfers it into the Trust Fund. It creates a multitude of new taxes on the American taxpayers—“small” and “modest” being undefined—and increases existing taxes. It then grants itself a blank check and empowers the HHS Secretary to estimate what might have been spent on all healthcare, take that amount from the U.S. Treasury, and deposit it in the Medicare For All Trust Fund. There is no limit on the amount that could be transferred. Subtitle B—Funding 211. OVERVIEW: FUNDING THE MEDICARE FOR ALL PROGRAM. (a) In General.—The Medicare For All Program is to be funded as provided in subsection (c)(1). (b) Medicare For All Trust Fund.— There shall be established a Medicare For All Trust Fund in which funds provided under this section are deposited and from which expenditures under this Act are made.
(1) IN GENERAL.—There are appropriated to the Medicare For All Trust Fund amounts sufficient to carry out this Act from the following sources: (A) Existing sources of Federal Government revenues for health care. (B) Increasing personal income taxes on the top 5 percent income earners. (C) Instituting a modest and progressive excise tax on payroll and self-employment income. (D) Instituting a modest tax on unearned income. (E) Instituting a small tax on stock and bond transactions. (3) ADDITIONAL ANNUAL APPROPRIATIONS TO MEDICARE FOR ALL PROGRAM.—Additional sums are authorized to be appropriated annually as needed to maintain maximum quality, efficiency, and access under the Program. 212. APPROPRIATIONS FOR EXISTING PROGRAMS. Notwithstanding any other provision of law, there are hereby transferred and appropriated to carry out this Act, amounts from the Treasury equivalent to the amounts the Secretary estimates would have been appropriated and expended for Federal public health care programs, including funds that would have been appropriated under the Medicare program under title XVIII of the Social Security Act, under the Medicaid program under title XIX of such Act, and under the Children’s Health Insurance Program under title XXI of such Act. The most frightening part of all is this: the Medicare For All Bill establishes the National Board of Universal Quality and Access, and not even one actual physician is guaranteed to be on it. The Board might include a dietician, a long-term care facility administrator, the head of Planned Parenthood, a labor union representative, and a patient advocate (perhaps an Antifa member), making all our medical decisions for us. They serve sixyear terms, but there are no term limits. 305. NATIONAL BOARD OF U N I V E R S A L Q UA L I T Y A N D ACCESS. (a) Establishment.— (1) IN GENERAL.—There is estab-
[ GUEST OPINION ] lished a National Board of Universal Quality and Access (in this section referred to as the “Board”) consisting of 15 members appointed by the President, by and with the advice and consent of the Senate. (2) QUALIFICATIONS.—The appointed members of the Board shall include at least one of each of the following: (A) Health care professionals. (B) Representatives of institutional providers of health care. (C) Representatives of health care advocacy groups. (D) Representatives of labor unions. (E) Citizen patient advocates. (3) TERMS.—Each member shall be appointed for a term of 6 years, except that the President shall stagger the terms of members initially appointed so that the term of no more than 3 members expires in any year. These unelected government appointees, like Senators and Judges wrapped into one, will decide everything from what equipment can be bought to how much a nurse will be paid and how many hours everyone can work. -The potential for foul play and the weaponization of medicine is breathtaking. (b) Duties.— (1) IN GENERAL.—The Board shall meet at least twice per year and shall advise the Secretary and the Director on a regular basis to ensure quality, access, and affordability. (2) SPECIFIC ISSUES.—The Board shall specifically address the following issues: (A) Access to care. (B) Quality improvement. (C) Efficiency of administration. (D) Adequacy of budget and funding. (E) Appropriateness of reimbursement levels of physicians and other providers. (F) Capital expenditure needs. (G) Long-term care. (H) Mental health and substance abuse services. (I) Staffing levels and working conditions in health care delivery facilities. The scope of power of these 15 government Appointed Arbiters of Americans’ lives is astounding. They lit-
AND WHEN THERE IS NO MONEY LEFT TO
IN DO
THE
U.S.
ANYTHING
TREASURY BUT
OFFER
“HEALTHCARE”—NOT CARE FOR THE SICK OR INJURED—THESE 15 WILL ALLOCATE THE SCARCE MEDICAL RESOURCES AS THEY SEE FIT.
erally have the power to make every single medical decision for every one of us. And when there is no money left in the U.S. Treasury to do anything but offer “healthcare”—not care for the sick or injured—these 15 will allocate the scarce medical resources as they see fit. In ultimate irony, our seniors, the very Americans Medicare was created to help, will likely be the first group to de denied care—other than “palliative” care. (3) ESTABLISHMENT OF UNIVERSAL, BEST QUALITY STANDARD OF CARE.—The Board shall specifically establish a universal, best quality of standard of care with respect to— (A) appropriate staffing levels; (B) appropriate medical technology; (C) design and scope of work in the health workplace; (D) best practices; and (E) salary level and working conditions of physicians, clinicians, nurses, other medical professionals, and appropriate support staff. The last remaining segments of the medical system would be absorbed soon: the VA in 10 years, the Indian Health Service Program in just five. T I T L E I V— A D D I T I O NA L PROVISIONS 401. TREATMENT OF VA AND IHS HEALTH PROGRAMS. (a) VA Health Programs.—This Act provides for health programs of the Department of Veterans’ Affairs to initially remain independent for the 10-year period that begins on the date of the establishment of the Medicare For All Program. After such 10-year period, the Congress shall reevaluate whether such programs shall remain independent or be integrated into the Medicare For All Program. ( b ) I n d i a n He a l t h S e r v i c e
Programs.—This Act provides for health programs of the Indian Health Service to initially remain independent for the 5-year period that begins on the date of the establishment of the Medicare For All Program, after which such programs shall be integrated into the Medicare For All Program. When will this insanity take effect? If Democrats win the House and Senate in 2 weeks, this bill could theoretically become law and take effect one year thereafter. With the Democrats’ fixation on impeachment and overt hatred of our duly elected President of the United States, the possibility is not all that far-fetched. TITLE V—EFFECTIVE DATE 501. EFFECTIVE DATE. Except as otherwise specifically provided, this Act shall take effect on the first day of the first year that begins more than 1 year after the date of the enactment of this Act, and shall apply to items and services furnished on or after such date. American voters must not be deceived. Medicare for All is not compassionate or sustainable. The estimated cost of Medicare For All is $40 TRILLION over 10 years, but this could be reduced to $32.6 trillion if all providers’ pay is cut 40%. This financial undertaking more than doubles current annual healthcare costs from inception, and we know from history that this will become exponentially more expensive as time goes on, as our highly trained workforce and world-class medical facilities are lost. Medicare For All will not solve all the problems that Medicare For Some created; it will make things tremendously worse. This Bill is an affront to the American people. No one can in good conscience cast a vote for a candidate that is running on such incompetency. Anyone running on this bill either has not read it or is a devout socialist intent on completing the fundamental transformation of the United States of America, destroying the U.S. economy, and shredding our Constitution once and for all. If we are to secure our blessings of liberty, we must identify and vote against any candidate that supports this Medicare For All bill.[IA] INSURANCE ADVOCATE / November 12, 2018 23
[ ON MY RADAR ]
BARRY Z ALMA
No “Occurrence” in Ohio for Contractor’s or Sub-Contractor’s Defective Work An “Occurrence” Must Be Fortuitous u Ohio, bucking the majority of court opinions, has interpreted the standard Commercial General Liability (CGL) policy to require for coverage to exist that a loss is fortuitous. An “occurrence” to Ohio courts require that the damage is accidental, fortuitous, and not a normal business risk of a person in the construction business. Policies are interpreted by Ohio to not insure an insured’s work itself; rather, the policies generally insure consequential risks that stem from the insured’s work. CGL policies are not intended to protect owners from ordinary “business risks” that are normal, frequent or predictable consequences of doing business that the insured can manage. In Ohio Northern University v. Charles Construction Services, Inc., Et Al.; Cincinnati Insurance Company, No. 20170514, 2018 OHIO 4057, Supreme Court Of Ohio, (October 9, 2018) the Ohio Supreme Court followed its 2012 decision that held that an insurance claim filed by a contractor under its commercial general liability (“CGL”) insurance policy for property damage caused by the contractor’s own faulty workmanship does not involve an “occurrence” such that the CGL policy would cover the loss. [Westfield Ins. Co. v. Custom Agri Sys., Inc., 133 Ohio St.3d 476, 2012-Ohio4712, 979 N.E.2d 269, syllabus.] That decision turned on the CGL policy’s definition of “occurrence” as an ” ‘accident, including continuous or repeated exposure to substantially the same general harmful conditions.’ ” quoting the policy. Because the CGL policy did not define “accident,” the Supreme Court looked to the word’s common meaning and concluded that an “accident” involves “fortuity. As a result the Supreme Court held that under the language of the CGL policy, prop24 November 12, 2018 / INSURANCE ADVOCATE
THE QUESTION IS WHETHER THE GENERAL POLICY
CONTRACTOR’S COVERS
CLAIMS
CGL FOR
PROPERTY DAMAGE CAUSED BY A SUBCONTRACTOR’S FAULTY WORK.
erty damage caused by a contractor’s own faulty work is not accidental and is therefore not covered. Here, the question is whether the general contractor’s CGL policy covers claims for property damage caused by a subcontractor’s faulty work.
FACTS
In 2008 Ohio Northern University (“ONU”) contracted with Charles Construction Services, Inc., to build The University Inn and Conference Center, a new luxury hotel and conference center on ONU’s campus. Charles Construction promised to perform all the work itself or through subcontractors. The contract required Charles Construction to maintain a CGL policy. Charles Construction obtained from appellant, Cincinnati Insurance Company (“CIC”), a CGL policy. The general liability maximum payout under the CGL policy was $2 million. The project’s estimated cost was $8 million. In September 2011, after work was completed, ONU discovered that the inn had suffered extensive water damage from hidden leaks that it believed were caused by the defective work of Charles Construction and its subcontractors. In the course of repairing the water damage, ONU discovered other serious structural defects. ONU estimated its repair costs at approximately $6 million. ONU sued Charles Construction for breach of contract and other claims related to the inn’s damage. Charles Construction answered and filed third-party com-
Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www. nationalunderwriter.com/ZalmaLi brary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/ Store/ProductDetails.aspx?produc tId=214624, or 800-285-2221 which is presently available. Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.
[ ON MY RADAR ] plaints against several of its subcontractors. Charles Construction submitted to CIC a CGL-policy claim and asked CIC to defend it in court and indemnify it against any damages. CIC intervened in order to pursue a declaratory judgment against Charles Construction and to submit jury interrogatories related to insurance coverage. CIC explained that it would defend Charles Construction while reserving its right to argue that the CGL policy did not cover ONU’s claim. After CIC intervened, it sought a declaratory judgment that it did not have to defend or indemnify Charles Construction under the CGL policy. In January 2015, CIC filed a motion for summary judgment relying on Custom Agri, which it characterized as holding that “claims for defective workmanship are not claims for ‘property damage’ caused by an ‘occurrence.’ ” The trial court issued judgments in favor of CIC, reasoning that this court’s decision in Custom Agri “constrained” it and that consequently, CIC could deny Charles Construction’s claim and had no duty to defend Charles Construction. Charles Construction and ONU appealed to the Third District Court of Appeals. The Third District read Custom Agri narrowly and noted that it did not address any subcontractor-specific CGLpolicy terms. It found the CGL policy language to be ambiguous as to whether it covers claims for property damage caused by subcontractors’ defective work, and because ambiguous language is construed against the insurer, it reversed the judgment of the trial court.
ANALYSIS
Custom Agri The Supreme Court noted that the general principle underlying CGL policies is that they are not intended to protect business owners from ordinary business risks. Courts generally conclude that the policies are intended to insure the risks of an insured causing damage to other persons and their property, but that the policies are not intended to insure the risks of an insured causing damage to the insured’s own work. The CGL policy is not intended to insure business risks that are the normal, frequent, or predictable consequences of doing business and which businesses
can control and manage. A CGL policy does not insure the insured’s work itself; rather, it insures consequential damages that stem from that work. As a result, a CGL policy may provide coverage for claims arising out of tort, breaches of contract, and statutory liabilities as long as the requisite accidental occurrence and property damage are present. Faulty workmanship claims generally are not covered, except for their consequential damages, because they are not fortuitous. In short, contractors’ “business risks” are not covered by insurance, but derivative damages are. The key issues are whether the contractor controlled the process leading to the damages and whether the damages were anticipated. The Supreme Court in Custom Agri concluded that “claims for faulty workmanship, such as the one in the present case, are not fortuitous in the context of a CGL policy like the one here.” Therefore, they are not claims for ‘property damage’ caused by an ‘occurrence’ under a CGL policy such as the one in the present case. The CGL policy As in Custom Agri, the decision depends on the specific terms of the CGL policy, including the PCOH and subcontractor-specific language. By its terms, the CGL policy emphasizes that only “an occurrence” can trigger coverage for property damage. But the damage must be due to an “occurrence,” which is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” There is no question that the damage to the inn was “property damage” that was discovered after work was completed. But without an “occurrence” as defined in the CGL policy, there is no coverage for any property damage. Under the CGL policy’s plain language, property damage caused by a subcontractor’s faulty work does not meet the definition of an “occurrence” because faulty work is not fortuitous The Ohio Supreme Court made a determination that the claims “are not claims for ‘property damage’ caused by an ‘occurrence’ under a [CGL] policy” because faulty work is not fortuitous in Custom Agri. Here, the Supreme Court similarly held that a subcontractor’s faulty work
does not meet the definition of an “occurrence” because it is not based in fortuity. There is no question that the water-related damage to the inn was “property damage” and was discovered after work had been completed. But unless there was an “occurrence,” the subcontractor language has no effect. The Supreme Court concluded that the subcontractors’ faulty work was not fortuitous. It acknowledged that its reasoning in this case contrasts with recent decisions of other courts. The language requiring that “property damage” be caused by an “occurrence” remains a constant in the policies. And under Ohio precedent, faulty workmanship is not an occurrence as defined in CGL polices like the one before it. Regardless of any trend in the law, the Ohio Supreme Court concluded it must look to the plain and ordinary meaning of the language used in the CGL policy before it. When the language of a written contract is clear, the Supreme Court may look no further than the writing itself to find the intent of the parties. Property damage caused by a subcontractor’s faulty work is not fortuitous and does meet the definition of an “occurrence” under a CGL policy. CIC was not required to defend Charles Construction against ONU’s lawsuit or indemnify Charles Construction against any damages. The Supreme Court concluded that property damage caused by a subcontractor’s faulty work is not an “occurrence” under a CGL policy because it cannot be deemed fortuitous.
ZALMA OPINION
Ohio courts do not feel a need to follow what they believe to be the errors of their brother courts in other states. They read the insurance contracts in light of their interpretation of the law regardless of the fact that they are in the minority. The Supreme Court noted, however, that the Supreme Court of Arkansas reached the same conclusion only to have its legislature pass a statute that states that a CGL policy offered for sale in Arkansas shall define “occurrence” to include “[p] roperty damage * * * resulting from faulty workmanship.” The Ohio Supreme Court made clear that if it were so inclined the Ohio General Assembly could take similar action in response to its opinion.[IA] INSURANCE ADVOCATE / November 12, 2018 25
[ LOOKING BACK ]
INSURANCE ADVO CATE - 25 YEARS AGO
139 Harristown Road, Glen Rock, N R 26 November 12, 2018 / INSURANCE ADVOCATE
See our in
INSURANCE ADVO CATE - 25 YEARS AGO
[ LOOKING BACK ]
insurance-advocate@cinn.com www.insurance-advocate.com
Rock, NJ 07452
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
See our informational ad on page 10 of this issue.
www.msonet.com
INSURANCE ADVOCATE / November 12, 2018 27
[ COURTSIDE ]
LAWRENCE RO GAK
Religious Abuse Liability Institutions - Child Sex Monaghan v Roman Catholic Diocese of Rockville Ctr. Edited by Lawrence N. Rogak This lawsuit arose out of the alleged sexual abuse of a child by a Catholic priest. The Diocese moved to dismiss some of the causes of action, and Supreme Court denied the motion. But the Appellate Division reversed, and held that there is no legal duty for a Church to publicly disclose the names of priests who have been accused, but not convicted, of sex offenses—LNR
“A PUBLIC NUISANCE EXISTS FOR
uIn her complaint, the plaintiff alleged that in 2003, when she was eight years old, the defendant Father Gregory Yacyshyn, a Roman Catholic priest employed and controlled by the defendants Roman Catholic Diocese of Rockville Centre (hereinafter the Diocese) and St. Francis of Assisi Parish (hereinafter the parish), “engaged in unpermitted and harmful sexual contact” with her. Shortly after the alleged conduct occurred, the Diocese and the parish reassigned Yacyshyn to another parish. The complaint alleged that the Diocese and the parish knew and/or should have known that Yacyshyn was a danger to children. The complaint further alleged that, following the issuance of a report by the Suffolk County Supreme Court Special Grand Jury in 2003, the Diocese in 2004 “publicly admitted that it knew there were 66 priests who worked in the Diocese who had been accused of sexually molesting minors.” The Diocese did not, however, release the names of those 66 priests. The complaint asserted five causes of action, alleging, among other things, negligence, negligent infliction of emotional distress, criminal nuisance under Penal Law § 240.45, public nuisance, and violation of General Business Law § 349. The Diocese and the parish (hereinafter together the moving defendants) moved pursuant to CPLR 3211(a)(3)
OR COMFORT OF A CONSIDERABLE
28 November 12, 2018 / INSURANCE ADVOCATE
CONDUCT
THAT
AMOUNTS
TO
A SUBSTANTIAL INTERFERENCE WITH THE EXERCISE OF A COMMON RIGHT OF THE PUBLIC, THEREBY OFFENDING PUBLIC MORALS, INTERFERING WITH THE USE BY THE PUBLIC OF A PUBLIC PLACE OR ENDANGERING OR INJURING THE
PROPERTY,
HEALTH,
SAFETY
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.
NUMBER OF PERSONS”
and/or (7) to dismiss, inter alia, the first cause of action alleging negligence, the second cause of action alleging criminal nuisance, and the third cause of action alleging public nuisance. In an order entered December 11, 2015, the Supreme Court, among other things, denied those branches of the motion. The moving defendants appeal from so much of the order as denied those branches of their motion which were to dismiss the second and third causes of action, alleging criminal nuisance under Penal Law § 240.45 and public nuisance, respectively. As to those causes of action, the complaint alleged that the Diocese engaged in a long-standing practice of (1) concealing the identities of sexually abusive priests, their sexual assaults, and their pedophilic tendencies; (2) attacking the credibility of victims; (3) protecting sexually abusive priests from criminal prosecution by, among other things, moving them to new parishes without notifying law enforcement or the new parishes of the prior abuse; and (4) falsely holding out those priests as safe
to be around children. The complaint alleged that such conduct creates a condition that offends the public morals and unreasonably endangers the safety and health of a considerable number of persons by allowing child molesters to avoid prosecution and remain living freely in unsuspecting communities, thereby impairing the safety of children in the neighborhoods where the Diocese conducts its business. It alleged that, as a result of the Diocese’s conduct, the plaintiff was sexually abused by a priest and suffered personal injuries, as well as pecuniary damages. The complaint sought damages and injunctive relief to abate the alleged nuisance by requiring the Diocese to publicly disclose certain information about abusive priests working in the Diocese. In considering a motion to dismiss pursuant to CPLR 3211, “the facts pleaded are presumed to be true, and the court must afford those allegations every favorable inference and determine only whether the facts as alleged fit within any cognizable legal theory” (Phillips v Trommel Constr., 101 AD3d
1097, 1098; see Leon v Martinez, 84 NY2d 83, 87-88). “The allegations of the pleading cannot be vague and conclusory, but must contain sufficiently particularized allegations from which a cognizable cause of action reasonably could be found” (V. Groppa Pools, Inc. v Massello, 106 AD3d 722, 723 [citation omitted]; see Phillips v Trommel Constr., 101 AD3d at 1098). Since Penal Law § 240.45 does not create a private right of action, the Supreme Court should have granted that branch of the motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging criminal nuisance. The Supreme Court also should have granted that branch of the motion which was pursuant to CPLR 3211(a)(7) to dismiss the third cause of action alleging public nuisance. “A public nuisance exists for conduct that amounts to a substantial interference with the exercise of a common right of the public, thereby offending public morals, interfering with the use by the public of a public place or endangering or injuring the property, health, safety or comfort of a considerable number of persons” (532 Madison Ave. Gourmet Foods v Finlandia Ctr., 96 NY2d 280, 292 [emphasis added]). “A public nuisance is a violation against the State and is subject to abatement or prosecution by the proper governmental authority.” See also Penal Law § 240.45[1]). A public nuisance is actionable by a private person only where the person suffered special injury beyond that suffered by the community at large. Here, the complaint failed to identify any cognizable right common to all members of the general public that the Diocese has interfered with by, among other things, failing to disclose the names of priests who had been accused of, but neither charged with nor convicted of, molesting children (see Haire v Bonelli, 57 AD3d at 1358; Andersen v University of Rochester, 91 AD2d at 851). Notwithstanding a moral or ethical duty to notify the public, or investigate and report instances of suspected child molestation, the complaint does not allege that the Diocese violated any laws recognizing the public’s right to information regarding accusations of child molestation, or that the Diocese
violated any legal duty to report such accusations to appropriate authorities. Indeed, the Sex Offender Registration Act (see Correction Law art 6-C), which is the statute that requires sex offenders to register with the State and that provides for public notification about sex offenders living in the community, defines a sex offender as «any person who is convicted” of certain sex offenses as set forth in the statute (Correction Law § 168-a[1] [emphasis added]). The statute provides for public notification of a sex offender’s risk classification only after a judicial hearing which comports with due process. Social Services Law § 413 contains a list of individuals or officials who are, in their official or professional capacities, considered to be mandated reporters of suspected child abuse or maltreatment. The list includes, among many others, teachers, social workers, mental health professionals, and physicians. The complaint does not allege that any member or employee of the Diocese is a mandated reporter, or that any such member or employee violated Social Services Law § 413 in failing to report to appropriate authorities allegations of suspected child abuse. This case is distinguishable from instances where a defendant is alleged to have violated federal or state laws so as to pose a danger to the general public and endanger the lives of a considerable number of persons. Furthermore, although parish and Diocese property may be open to the public, it still is private property, and the complaint does not allege any conduct occurring on public property. Given the totality of the allegations, the complaint failed to allege an interference with rights belonging to the general public, or an interest in public land. Accordingly, the Supreme Court should have granted those branches of the motion which were pursuant to CPLR 3211(a)(7) to dismiss the second and third causes of action.[IA] 2018 NY Slip Op 06527 Decided on October 3, 2018 Appellate Division, Second Department
www.insurance-advocate.com
LIFE CONTINUED FROM PAGE 13
rate changes will keep policies operating at peak efficiency while avoiding nightmare scenarios (like those described in the Wall Street Journal article) where policies are allowed to become so dramatically underfunded that policyowners can no longer afford to get them back on track when (many years later) they finally recognize there’s a problem. Insureds who purchased their policies back in the 1980s and 1990s were never promised that policy returns in the high single-digits and above would continue indefinitely. To the extent that some policyowners believed that they were promised such returns, it should reflect poorly not on the underlying insurance product, but rather on the insurance advisor who failed to properly explain the product and then subsequently failed to help ensure that the policy was adequately maintained. This also highlights the importance of conducting a thorough “suitability analysis” to ensure that policyholders will still have the financial ability to maintain their policies in adverse crediting rate environments, and one should never purchase a minimally-funded Current Assumption UL policy that already requires the maximum premium they’re able to afford.
POST-SALE SERVICE COMBATS NEGLECT
Is there a way to salvage a Current Assumption UL policy that is underperforming because it has been neglected for many years and multiple crediting rate reductions? Maybe, depending upon the degree of underfunding and how much additional cash the policyowner is willing and able to commit to reviving the policy. It’s also possible that reviving the policy no longer makes economic sense, even if the policyowner can afford to do so. For someone in this situation, the best approach is to have an experienced, independent insurance professional review the policy to determine what options are available. Paying additional premiums is one possible solution, but it may also make sense to consider alternatives such as reducing the death benefit, exchanging the policy for a different product, or selling the policy in a life settlement.[IA] INSURANCE ADVOCATE / November 12, 2018 29
[ GUEST ARTICLE ]
ERIC WEISBROT
Understanding the Difference Between Surety Bonds and Insurance u Businesses large and small have two main options for protection – surety bonds and insurance coverage. While some use the terms interchangeably, there are differences between the two that should be understood. Both insurance and surety bonds have unique features that fit specific protection needs, either for the business itself or for the customer. They also differ in terms of when they are needed, and how much coverage costs. Here are the ways surety bonds and insurance differ from one another.
HOW SURETY BONDS WORK
Many business owners may be aware of the concept of surety bonds, but understanding how they work in practice is not widely known. Surety bonds, offered by surety agencies or companies, provide protection to business customers through a unique framework. When a business owner purchases a surety bond, a contract is created. This contract includes three parties – the individual taking out the surety bond, the entity or individual requiring the surety bond, and the surety company backing the bond. When a bond is in place, the entity requiring a surety bond has the opportunity to make a claim against it should the business, or bondholder, not perform in-line with certain rules and regulations. If a claim is successful, the surety agency pays up to the limits of the bond on behalf of the bondholder. Then, the bondholder is required to repay the claim amount, either in full or over time. A surety bond is a form of credit to the bondholder, but it offers protection to the entity or individual requiring the bond should things not go as planned.
HOW INSURANCE WORKS
Insurance differs from a surety bond in that it offers protection against loss directly to the business owner. When insurance coverage is purchased through an 30 November 12, 2018 / INSURANCE ADVOCATE
insurance agency, the policyholder gains valuable coverage that can limit financial losses due to any number of events. For instance, life insurance pays out a benefit in the event of the business owner’s death, while disability insurance pays a portion of wages or income when an individual is sick or injured and cannot work for an extended period. Businesses may also secure liability insurance that protects them from claims of liability from customers or other businesses. Insurance is not a form of credit, but instead, a transfer of risk to an insurance provider. Should a claim be made and paid, there is no obligation for the policyholder to repay the benefit amount back to the insurance company. This is the most significant difference between surety bonds and insurance coverage.
PRICING OF SURETY BONDS AND INSURANCE
Another are of difference between surety bonds and insurance is the pricing structure of each. First, surety bonds, because they are a form of credit to the bondholder, are priced based on the financial track record and credit history of the individual requesting the bond. When personal credit is not strong, a bond will cost more than if a person’s credit history is free of negative marks. Surety bond agencies, however, only require a percentage of the total bond amount as payment for coverage, making getting a bond less of a financial burden for most. Insurance is priced based on the amount at risk. A larger policy that covers more financial loss will cost more than a smaller policy. The type of coverage also plays a role in the pricing of
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.
insurance coverage. Business owners who have a minimal claims history with other insurance policies will be viewed as a lower risk than those with several claims in the past. However, insurance coverage does not typically consider an individual’s credit history as part of the cost calculation.
WHEN THEY ARE NEEDED
Finally, business owners must be aware of when surety bonds and insurance are required. In many professions, a surety bond is a requirement as part of the licensing process. This requirement falls on the shoulders of licensed contractors, mortgage brokers, freight brokers, and many others. The state or the municipality in which a business operates dictates the amount of the bond, based on the work performed. Insurance is not always a requirement to operate a business legally. Instead, it is offered as additional protection against financial loss from common events or disasters. However, business owners may be required to have insurance in place when using certain equipment, having employees, or when signing a lease for office or commercial space. The differences between surety bonds and insurance may seem subtle, but understanding how each works is crucial to success as a business owner. Take time to recognize the parties involved in surety bonds and insurance coverage, and what factors dictate the cost of coverage. Then, be sure to understand when one or both are requirements for operating a business in line with the law. [IA]
EXCELLENCE An essentiall component to our continued d success at Hamond d is the experience and knowledge of our staff.
Averaging over 40 years in the field of Workers’ Compensation Insurance, we are able to provide our clients with the expertise they are looking for.
Providing Excellence in…
- Risk Assessment
- Claims Processing right through finalization
- Knowing Your Client’s Business and Exposure
- Prehearing Interview of Employer Witnesses
- Assistance with Underwriting Issues
- Hearing and Testimony Support
- Assistance with Payroll Audits
- Working for the Client, not the Carrier
- Assistance with OSHA Issues and Training
Group Members are not just another policyholder.
Group 534: Almost all construction classes eligible
Group 533: Woodworkers, Lumberyards and Building Material Dealers SUBSTANTIAL UP-FRONT DISCOUNT FOR QUALIFIED MEMBERS
50% of the Service Fee Paid to Brokers for the first three policy terms!*
Unbroken string of dividends since group inception! Direct quote requests to:
800.285.2258 | Fax 516.488.2167
w w w.h amo n d gro up.com
*Service fee on subsequent renewals and on returning members continues at our usual 20%. Underwritten by the New York State Insurance Fund
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. ©2018 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.