2021 November PIA New Jersey by PIA Northeast

November 2021 • New Jersey

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The changing ADA landscape Seek insurance, assurance, or simply clarity

THE LEGAL ISSUE 9 9

Restrictive covenants Restrictive covenants

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Certificates of of insurance insurance Certificates

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DEPARTMENTS 4 November 2021 • New Jersey

In brief

9 Legal 15 Sales 31 E&O 35

Ask PIA

37 Officers and directors directory 38

Readers’ service and advertising index

COVER STORY 20 The changing ADA landscape Seek insurance, assurance, or simply clarity

FEATURE 25 Certificates of insurance An agent’s legal actions and recourse

Statements of fact and opinion in PIA Magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents. Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services. President and CEO Jeff Parmenter, CPCU, ARM; Executive Director Kelly K. Norris, CAE; Communications Director Katherine Morra; Senior Magazine Designer Sue Jacobsen; Editor-In-Chief Jaye Czupryna; Advertising Sales Executive Susan Heath; Communications Department contributors: Athena Cancio, David Cayole, Alexandra Chouinard, Patricia Corlett, Darel Cramer, Roberta Lawrence, Crystal Ringler and Calley Rupp. Postmaster: Send address changes to: Professional Insurance Agents Magazine, 25 Chamberlain St., Glenmont, NY 12077-0997. “Professional Insurance Agents” (USPS 913-400) is published monthly by PIA Management Services Inc., except for a combined July/August issue. Subscription rate for members is $13 per year, which is included in the dues; subscription rate for nonmembers is $25 per year. Professional Insurance Agents, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 12077-0997; (518) 434-3111 or toll-free (800) 424-4244; email pia@pia.org; World Wide Web address: pia.org. Periodical postage paid at Glenmont, N.Y., and additional mailing offices. ©2021 Professional Insurance Agents. All rights reserved. No material within this publication may be reproduced—in whole or in part—without the express written consent of the publisher.

COVER DESIGN David Cayole Vol. 65, No. 10 November 2021

IN BRIEF

NEWS TO USE

Additional insureds want coverage—is it there? Austin S. Brown, Esq., and Thomas S. Tripodianos, Welby, Brady & Greenblatt LLP

The law on who can avail themselves to insurance coverage as an additional insured can be problematic. Unlike your standard insurance contract between the insurer and insured, the nature of an additional insured clause often involves third parties seeking defense and indemnification for loss. This is especially true for construction or real-estate development projects, when there are layers of contracts separating the parties from one another. Importantly, unlike your standard insurance policy in which the insured is explicitly named, the same cannot always be said of an additional insured, and even when named there still are contractual limitations. The implications of this dynamic almost always depend on the insurance policy itself. Having different parties and different contracts inherently create several thorny issues, the purpose of this article is to analyze the following: 1. insurance contracts; and 2. what contractual requirements must be present to establish who constitutes an additional insured. The case The New York Court of Appeals reached a landmark decision in the case of Gilbane Bldg. Co./TDX Constr. Corp. v. St. Paul Fire & Marine Ins. Co., regarding the interpretation of additional insured clauses under New York law. Notably, decisions such as this are important for surrounding states. Often, New York serves as a potential bellwether for the rest of the country—many states are likely to follow suit. The facts In 2002, the Dormitory Authority of the State of New York (“owner”) contracted with Samson Construction Co. (“general contractor”) for construction of a new forensic laboratory for New York City. The owner also contracted with a joint venture between Gilbane Building Co., and TDX Construction Corp. (collectively “construction manager”). The owner’s contract with the general contractor provided that it would obtain general liability insurance for the project, with an endorsement naming as additional insureds: “Owner, the Construction Manager and other entities specified on the sample certificate of insurance provided by Owner.” Importantly, the owner’s contract is with the general contractor and, separately, the construction manager—there is no written contract between general contractor and construction manager identifying construction manager as an additional insured. Think of a pyramid as opposed to linear.

In 2006, the owner sued the general contractor and the project’s architect alleging that they damaged the excavation support system on the project. Then, the project’s architect commenced a third-party action against the construction manager, who subsequently provided notice to the additional insurer to seek defense and indemnity under its policy as an additional insured. Upon review, the additional insurer denied the construction manager’s demand for defense and indemnification claiming that the construction manager was not an additional insured as set forth in the additional insurer’s policy. The construction manager commenced a lawsuit against the additional insurer arguing that it qualified for coverage under the policy as the additional insured and asking that the court declare as such. The additional insurer’s policy With any insurance dispute, the court first looks to the language contained in the policy. The relevant portion of the additional insurer’s policy stated as follows: “WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract but only with respect to liability arising out of your operations or premises owned by or rented to you.” [emphasis added] Under the terms of the additional insurer’s policy, the additional insured must be in a written contract with the insured. Herein lies the problem, even though the construction manager was listed as the additional insured in the contract between owner and general contractor, the construction manager did not enter into a written contract with the general contractor listing it as an additional insured. One would think that with the construction manager believing it was an additional insured as explicitly listed in the contract between the owner and general contractor that the court would find in favor of the construction manager. However, as is true with much of American law, looks can be deceiving. Just because the construction manager wanted to be an additional insured, and was explicitly told as such, does not make it so. Insurance contract interpretation The court found against the construction manager— based on interpretation of the language within the additional insurer’s policy, which taken in conjunction with a legal principle known as “privity of contract,” caused the (continued on page 6.)

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NEWS TO USE (continued from page 4.) construction manager to lose coverage as an additional insured. The reason why the Gilbane holding is important is that what happened to the construction manager here was not fair, it was told in writing that it would be an additional insured under the contract between the owner and general contractor, yet the court found otherwise. As to insurance contracts, the courts routinely enforce the agreement as written determining the rights or obligations of parties under the policy based on the specific language used within. Unambiguous provisions of an insurance contract are given their plain and ordinary meaning. Here, that means that regardless of the contract between the owner and general contractor, extrinsic communications or otherwise, the additional insurer’s policy required that the construction manager be in a written contract with the insured (general contractor) to be an additional insured. In essence, the additional insurer’s policy required “privity of contract” for a party to avail itself to coverage as an additional insured.

While the construction manager may have relied upon an official contract in writing between the owner and general contractor for coverage as an additional insured, the law afforded no leeway. Under the additional insurer’s policy with the general contractor, privity of contract was required, so despite the construction manager’s reliance on the representations in the contract between owner and general contractor, the construction manager was not considered an additional insured under the additional insurer’s policy. While a strong fairness argument can be made in favor of the construction manager against this holding, the same fairness argument can be made for the additional insurer; for example: How is the court to impose obligations under the contract between the owner and general contractor on the additional insurer when its contract is with the general contractor?

Privity of contract, construction industry Privity of contract is a legal principle providing that a contract cannot confer contractual rights or impose obligations upon any person who is not a party to the contract and, generally, only parties to contracts should be able to sue under the respective contract. Understanding privity of contract is vital for all insurance professionals—this is especially true if they are dealing with construction or real estate development. Due to the nature of the construction industry, owners, design professionals, general contractors and subcontractors generally lack collective privity of contract, money flows from the owner to the general contractor and then to the subcontractor, but generally not directly from the owner to a subcontractor. As it relates to Gilbane, remember that:

As is true with most landmark cases, the answer to these questions is anything but simple, the court summarizes its main holding in Gilbane as follows:

1. The owner and general contractor entered into a written construction contract; they are in privity of contract.

Understanding who is contracted with whom and for what is important. This requires a basic understanding of the respective contract, how it is enforced and the dynamic between the relationship of the parties.

2. The owner and the construction manager entered into a written construction contract; they are in privity of contract.

5. Moreover, the additional insurer and the construction manager did not enter into a written insurance contract, so once again they lack privity of contract.

Additional insured endorsement in commercial general liability (CGL) policy issued by insurer to general contractor did not obligate insurer to defend and indemnify construction managers at job site, even though sample certificate of insurance listed managers as additional insureds; policy unambiguously provided that an additional insured was ‘any person or organization with whom [insured has] agreed to add as an additional insured by written contract,’ and there was no written contract between general contractor and managers denominating managers as additional insureds.1

3. The general contractor and the additional insurer entered into a written insurance contract; they are in privity of contract.

Any insurance professional in the casualty industry needs to understand additional insured clauses. For best practices, see the full article Just because you want it, doesn’t make it so: Who is an additional insured? on PIA Northeast News & Media (www.blog.pia.org).

4. However, the general contractor and the construction manager did not enter into a written construction contract, so they lack privity of contract.

Gilbane Bldg. Co./TDX Constr. Corp. v. St. Paul Fire & Marine Ins. Co. [31 N.Y.3d 131, 97 N.E.3d 711 (2018)] 1

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What is a restrictive covenant; why do I care? In my completely biased opinion, the legal field has one of the best lexicons of any profession. Usurious, champerty, tortfeasor, and restrictive covenants are just a few of the myriad legal terms that all sound exceptionally legal and are almost completely opaque. For many people, setting eyes on a term like restrictive covenants has the same effect as gazing into the eyes of Medusa. It doesn’t have to be that way—terms can’t really turn you to stone. However, they can be quite scary if not understood properly. With that in mind, let’s try to chip away at some of that overly legalistic language and cut to the heart of what a restrictive covenant is in hopes of more fully understanding what it is.

The jargon Let’s first discuss some of the jargon. A restrictive employment covenant is an umbrella term that applies to any agreement between an employer, and a current or prospective employee.1 It restricts the latter’s ability to engage in certain competitive activities during, and importantly, for a certain period, after employment.

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The term restrictive covenant tells us some sort of activity is being curtailed; but to know which activity is being restricted, you need to know with which type of restrictive covenant you are dealing. There are three basic types of restrictive covenants: noncompetition, nonsolicitation of employees and customers, and nondisclosure/confidentiality. A single restrictive covenant could contain all three of these types of agreements, or it may only contain one or two types.

Nondisclosure A nondisclosure/confidentiality agreement—colloquially an NDA—is a type of restrictive covenant that limits an employee’s ability to disclose certain information about a business. NDAs are used in many different business transac-

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tions such as mergers, acquisitions and the sale or licensing of products. In the employment contexts, they most often are used when employees have access to confidential and proprietary information of a business, such as an agency’s client list. If that confidential and proprietary information was released, it would impact the business adversely. As such, an NDA would prohibit that employee from taking the information and selling it to the highest bidder; and if he or she did, the NDA would require the employee to pay damages to the employer. Unlike the other restrictive covenants we will discuss, an NDA does not need to be limited in duration.

Nonsolicitation An NDA prevents an employee from disclosing information to a thirdparty, but what would prevent the employee from just using that information? A nonsolicitation agreement would do this. This type of a restrictive covenant limits an employee’s/prospective employee’s ability to solicit a business’s clients and/or employees. Some nonsolicitation agreements only address solicitation of clients and some only employees, and others address both clients and employees. Unlike with nondisclosure agreements, nonsolicitation agreements must be limited in duration and scope. This means that the agreement only should encompass the information that a business has a legitimate interest and need to protect. Adding everything and the kitchen sink could get the agreement nullified in court. Similarly, the duration of the nonsolicitation agreement should be reasonable.

Whether a nonsoliciation agreement is reasonable usually is decided in a court of law. A court’s determination of the reasonableness of the duration and scope of a nonsolicitation is fact specific. The shorter the duration and the more specific the scope of the agreement, the more enforceable it will be.

Noncompete A noncompetition agreement—most often referred to as a noncompete agreement—is the most notable and complicated of the restrictive covenants. Related, noncompete agreements tend to be the most restrictive2 of the restrictive covenants. Unlike the other agreements discussed in this article, which prevent an employee from taking or sharing information, a noncompete agreement restricts an employee’s ability to work and compete against his or

her former employer for a specific period of time, and in a specific geographic area. Due to their restrictive nature, there are several legal elements that a noncompete agreement must possess to be valid. A noncompete agreement must be reasonably necessary to protect a legitimate business interest of the employer. The business interest that the agreement is needed to protect must be something along the lines of confidential customer lists, trade secrets, special processes or other information that gives its holder a business opportunity over others not privy to the information. Courts will not uphold agreements protecting interests that are easily discoverable or generally known. Basically, if you can find the information through a Google search, the protection will not apply. A noncompete agreement also must be reasonable in time, geographic scope and scope of activity. Stop me if you have heard this one before, but a court’s determination of the reasonableness of the duration of a noncompete agreement is fact specific. Generally, the shorter the agreement, the more likely it will be enforceable. Over the years, case law has shrunk what is considered a reasonable duration for a noncompete agreement. While in the past, two years was considered a reasonable amount of time, today many courts are refusing to enforce noncompete agreements with durations longer than one year, and in some cases, six months. A court’s determination of the reasonableness of the geographic scope of a noncompete agreement also is fact specific. In fact, there is often a correlation between the duration and geographic area. Frequently, courts refuse to limit

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an employee’s future employment outside of the immediate geographic area of his or her prior employment. However, in some cases a broader geographic restriction will be enforced if the duration of the agreement is shorter.

use of noncompete agreements for any employee who makes less than $75,000 a year.

Finally, a noncompete agreement must be consistent with public policy. In practice, this means that an employer cannot restrict an employee’s ability to work if it would impact the public adversely. The best example of this is in the medical field. A handful of states have either prohibited or severely limited the use of noncompete agreements for doctors. The view is that this is against public policy because it limits consumers from going to the physicians they want. No offense, but this usually is not an issue in the insurance world, so there’s no more to be said about that.

Another fun addition that legislation has added to the restrictivecovenant discussion is the concept of garden leave. Garden leave has been in use in Europe for years, but it is beginning to gain popularity in the halls of state Legislatures in the United States. It acts as a modified noncompete agreement. Instead of limiting where and when an employee can work, garden-leave provisions prevent an employee from working for anyone, anywhere but in exchange, the employer is required to pay the employee his or her normal salary and benefits for the duration of the garden-leave period. The term arose from the idea that employees are literally being paid to tend their gardens instead of working for their employer’s competitors. Sounds fun.

New laws? Traditionally, restrictive covenants and their elements have been created through the case law, referred to as the common law. However, legislation that would limit restrictive covenants recently has been introduced in a few state Legislatures around the country, including New Jersey and New York within the PIA Northeast footprint. If passed, the legislation would add several more restrictions on noncompete agreements. A common element in many of the restrictive covenant legislations is the inclusion of a salary floor. If an employee makes below a certain figure, an employer would be prohibited from executing a noncompete agreement with him or her. For example, in 2021, Illinois passed a law that prohibits the

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With a better understanding of what restrictive covenants are—and the limitations that exist for both employers and employees—you can pick the agreement that is not only best suited for your agency, but it is a good fit for the risk and employee as well. Now, let’s talk about champerty3 … Lachut is PIA Northeast’s director of government & industry affairs. Here on out, collectively referred to as employee.

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The restrictivest?

Another fun legal term. It is an illegal agreement in which a person with no previous interest in a lawsuit finances it with a view to sharing the disputed property if the suit succeeds.

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Two key character traits of successful producers Producers who possess two primary character traits will move Heaven and Earth to reach success. If they have these traits, and the right people skills, they’ll have most of the qualities you want in top producers. In addition, you won’t have to babysit them to make sure they’re doing what they should be doing. They’ll do what they should be doing automatically, provided you’ve given them proper direction on what their most important activities are and the support to do them. So, what are these two traits? They are responsibility and accountability. They are the traits that make overall great human beings, great companies, and great countries. In fact, people, companies, and countries that lack these two traits will never achieve long-term success. While short-term financial success may be possible without these, the long-term effect will be failure.

Responsible and accountable producers see themselves as selfemployed even though they technically are employees of the agency. They treat the agency as if it were their own. They understand that they are responsible and accountable to Me Inc., and not only do they put in the necessary effort and make the necessary sales, they go above-and-

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beyond, making more calls and more sales. They also go above-and-beyond and deliver more for their clients.

Professional development The responsible and accountable producers realize that their professional and personal development ultimately is up to them. Hopefully, the agency provides these producers with the tools, resources, sales and product training, and support necessary to do the job, but if the agency falls short, the responsible and accountable producers pick up the slack. If they don’t know something, they take it upon themselves to find out. If they feel they are lacking in any area, they take it upon themselves to fill in the gaps and acquire the necessary skills. They don’t blame their managers or the agency for not giving them what they need to succeed. Even if the level of training and support is the highest possible, they still look for additional sales training and professional development outside of what the agency provides.

Personal development In addition to professional growth, the responsible and accountable producers also make sure they are growing personally. They take care of their physical and mental health, and work on personal relationships and all other aspects of a well-rounded life. Overall, they realize that the best investment is the one they make in themselves and they are willing to make the time and financial investments to become the best they can be.

Promises kept The producers who are responsible and accountable realizes they are responsible and accountable to themselves first and foremost. They realize that they made a promise and commitment when they took the job, and it is on them to do what they said they would do and to perform the job at the highest level possible.

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They are also responsible and accountable to their boss and other people in the organization, but they realize that the buck stops with them. As the basketball player Julius Erving, aka: Dr. J, once said, “I push myself harder than anyone else can possibly push me.” Ultimately, this comment highlights the fact that no one can hold you accountable and be responsible for you like you can. You are with yourself 24 hours a day, so only you truly know your commitment level. So, if you’re a producer, take 100% responsibility and accountability for success. Own it completely. Have you ever noticed that the most successful producers are always the most successful? It doesn’t matter what happens with the market, the economy, competition, governments regulations—they always find a way to succeed. That’s because they are accountable and responsible, they realize that nothing outside of them determines their success or failure, it’s completely up to them.

Hire the right people for the job If you’re in sales management and/ or you hire producers, keep in mind that like work ethic and good people skills, people either come to you with accountability and responsibility, or they don’t. You want to test for these traits during the hiring process. During the hiring process, give potential new-hires assignments, and then pay attention to their follow-up and follow through. These could be people to call, items to read and report on, and other similar activities. Do they do what they’re supposed to do on a timely basis? Are they thorough? Do they need to be micromanaged or reminded? How do they follow directions? How

would you grade them on a scale of one to 10? Also, ask questions in the interview to determine whether the person you’re interviewing has these traits. When you ask people about their past failings, challenges they’ve had with other people, and other difficult situations they’ve encountered in life, you’re looking for people who take responsibility, not those who blame other people, situations, and outside circumstances for what happened. I think it’s interesting that seemingly upstanding, honest, people of integrity are willing to make all sorts of promises and agree to certain standards during the interview process then, once on board, they have no problem taking your money while not coming close to living up to those promises and standards. You want to find out who these people are before you hire them.

When you give to NJPIAPAC your donation dollars go to candidates who support our industry! Make Your Donation Go Further There is strength in numbers. Join the growing list of New Jersey insurance agents who support NJPIAPAC. A donation of any amount can have a substantial impact in Trenton.

Chapin is a motivational sales speaker, coach and trainer. For his free eBook: 30 Ideas to Double Sales and his monthly articles, or to have him speak at your next event, go to www.completeselling.com. He has over 33 years of sales experience as a No. 1 sales representative and he is the author of the 2010 sales book of the year Sales Encyclopedia (Axiom Book Awards). Reach him at johnchapin@completeselling.com.

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By the way, the biggest issues I see with sales teams revolve around responsibility and accountability. Usually, it shows up in producers who don’t take personal responsibility for their success and a management team that fails to hold them accountable to high standards. If your agency has producers who personally take responsibility and hold themselves accountable, you will eliminate the biggest problems found in sales teams.

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CLARE IRVINE, ESQ. Government affairs counsel, PIA Northeast

The changing ADA landscape Seek insurance, assurance, or simply clarity he Americans with Disabilities Act has had a transformative effect on American life in the last 30 years. The legislation prohibits employment discrimination against any individuals based on their disability and requires buildings to ensure access to everyone. As a result, the workforce has become more diverse, ramps have become much more prevalent, and businesses, such as hotels, theaters and shopping malls have offered more accessible accommodations.

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Part of the rapid change came from the emergence of ADA lawsuits that helped shape the law, and put entire industries on notice of their compliance obligations. Early lawsuits focused on more obvious businesses, such as restaurants and rental car companies. As businesses got ahead of potential lawsuits, they also shifted their own business strategies to reflect new technology. More sales and advertising moved online, changing how businesses interact with customers. Accessibility requirements followed, creating an unsolvable puzzle of how to comply with the ADA when doing business online. And for insurance agents, the natural question is how to insure the risk of ADA lawsuits in an everchanging landscape?

The basics Unlike other federal legislation aimed at improving access and equality, no federal agency formally administers and enforces the ADA. Instead, enforcement of the ADA falls to the disabled, lawyers and judges. While the Department of Justice has taken a role in defining accessible architecture and issued guidance for the benefit of businesses trying to comply, ADA complaints must go through the court system. The DOJ will intervene in certain cases; however it does not oversee the ADA in the way the Equal Employment Opportunity Commission oversees workplace discrimination. Plaintiffs have limited options for ADA damages. However, the defendants must pay their legal fees. This creates a system in which it may not be profitable for the individual plaintiffs, but can build a business for lawyers. Even though many businesses could get ahead of a lengthy legal process by fixing any potential infractions, they likely will need to pay the plaintiff’s legal fees. This also has led to the ADA being shaped as much by case law as regulation. While the DOJ has stepped in with regulations, effectively providing a national minimum for accessibility, other aspects have been shaped by litigation. This creates more uncertainty and allows for plaintiff-driven changes to the legal standards, especially as business practices change.

Existing coverage Usually, the first response to a legal filing is finding what insurance policy includes coverage for any potential liability for damages. While it’s always good to double check policies for coverage following an ADA lawsuit, most insurers exclude coverage both in the definition for damages and in explicit exclusions. With contracts, broader definitions offer more room for coverage. Unfortunately, insurers counterbalance definitions with exclusions to restrict potential coverage and reduce their risks. The first policy many businesses likely turn to in an attempt to find coverage for an ADA lawsuit is their commercial general liability policy. Although the name suggests broad coverage, CGL policies usually do not cover the costs of an ADA lawsuit. The standard ISO commercial general liability forms use language to restrict damages to bodily injuries to third parties. If an ADA violation resulted in actual injuries to the plaintiff, then the CGL policy would likely cover the damages and, depending on the policy, legal fees. At least, it may cover legal fees. Frequently, insurers add many exclusions to restrict coverage for effectively unpredictable losses (such as businesses forced 22

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to close during a viral pandemic). Discrimination exclusions often ensure the insurer does not cover any damages when the plaintiff cites the ADA as the basis for the injury and complaint. Discrimination lawsuits, including those related to the ADA, usually fall under the scope of an EPL policy as part of the third-party defense coverage. This would cover the legal costs of the lawsuit, but not the actual compliance with the ADA. Should an EPL policy not include third-party defense coverage, it may be available through an additional endorsement. Even with limitations to the coverage, the cost of the EPL premium quickly becomes a bargain compared to potential legal fees.

Compliance Since limited insurance options are available, the best way to avoid an ADA claim may seem obvious— comply with the ADA requirements for places of public accommodation (legalese for most businesses). Making an agency or other office more accessible to the public also makes business sense. For a physical business location, this is both straightforward and complex. The ADA Standards for Accessible Design exist and give building operators a clear map to ensuring building accessibility. Published by the DOJ and most recently updated in 2010, the regulatory standards set a minimum for what constitutes accessible design. Businesses can rely on the guidelines to design a space as accessible. However, the full guidelines top out at 279 pages—a length that makes total compliance a challenge for small businesses. Specific details, such as exact counter height and size of walkways, may make a

huge difference for someone with a disability. These types of infractions then get cited in legal complaints, and the design standards also make violations clear for plaintiff’s purposes. Although lengthy and detailed, the ADA Standards for Accessible Design at least create clear regulations for what a business must do to comply and makes remedying any potential violations a bit easier, at least when compared to online accommodations.

The World Wide Web Where the DOJ has adopted standards for physical spaces that make compliance with the ADA straightforward, the internet proves a bit different. The DOJ has issued guidance that the ADA requires businesses make their websites accessible, and effectively left it at that. An independent organization, the World Wide Web Consortium, has issued the Web Content Accessibility Guidelines that give businesses specific tools and points to consider when building an accessible website. The DOJ has declined to adopt the WCAG officially, although it previously referenced WCAG 2.0 Level II as a standard for business compliance.1 It’s the legal equivalent of telling a kid to find something in the refrigerator for dinner complete with a shrug emoji. This creates a brilliant conundrum or confusingly complicated situation depending on your viewpoint. For plaintiffs’ attorneys, it has become a treasure chest as businesses struggle to comply. Of course, this struggle to comply has created a nightmare for business owners. The solution of staying offline altogether no longer works for many businesses, even

those that have a website for the sole purpose of listing the agency’s phone number and physical address. The natural next turn has been a slew of letters from attorneys going to businesses alleging their websites do not comply with the ADA. Many businesses attempt to comply with the ADA and other legal requirements, particularly when compliance also allows them to reach more customers. Yet, even good-faith efforts to make their website accessible can leave them exposed to lawsuits. For example, the website may not work with the plaintiff’s screenreading software or icons posted to Facebook may not be readable. In place of DOJ regulations and official guidelines, the WCAG has become the industry standard. The publicly available WCAG 2.1, published in 2018, has three compliance levels. The middle level, Level AA, generally is looked toward as acceptable, while the highest level, Level AAA, is perceived as optimal compliance. When party to ADA lawsuits related to websites in the past, the DOJ has settled with major corporations adhering to Level AA. While adhering to these requirements does not ensure a business never faces a legal compliant regarding ADA compliance for lawsuit purposes, it does greatly reduce the likelihood. It also may help improve your overall website for all users and allows your agency to reach a greater number of consumers.

What to do next? Effectively, businesses—that is your agency and your client’s businesses—find themselves on the new frontier of ADA legal development—what will be the legal standard for website compliance? Of course, most business owners would rather improve their websites and never receive letters from lawyers asserting noncompliance with a law. And ideally, they would have insurance policies in place that would cover all the associated costs. Beyond reading policies closely, particularly the employment practices liability policy and potential coverage for third-party wrongful acts, little can be done to insure one’s business or agency to protect against the risk of an ADA compliance lawsuit. The challenges facing business owners also make it difficult for insurers to assess the financial risk of offering such coverage accurately, making exclusions far more common than endorsements in this area. Demand for such coverage may have some effect on the market, making it a space to track in years to come as it becomes more of a concern for businesses. At a certain point, it becomes a risk an agency owner or business owner must face whether he or she wants to or not. The positive side of complaints regarding website accessibility is that the time and cost to remedy any issues tends to be much more affordable than architectural changes. Website developers usually can add tools and widgets to websites to make them more accessible. Social-media companies have reduced the obstacles on their own sites, making it easy to add subtitles to videos in addition to technical adaptability features. As large of a threat as ADA website compliance lawsuits may be in the years ahead, the actual costs of responding to the legal complaints by fixing the problem may be the way to cost-effectively respond to such cases. Irvine is PIA Northeast’s government affairs counsel. 1

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Certificates of insurance

An agent’s legal actions and recourse

Consider the following scenario: A client—most likely a contractor—asks for a certificate of insurance. She wants to provide it to her client to demonstrate she has the needed insurance for a job. You provide your client with the certificate, which includes the policy number, the policyholder, the insurance company, the policy period, the type of insurance, the policy’s liability limits, and the identity of additional insureds, if any.1 Upon receiving the certificate of insurance, your client realizes she does not have the liability limits required for the job she has taken, so she changes the liability limit on the certificate. So, what’s the problem with that? While a certificate of insurance is only a guarantee that coverage exists at a certain moment in time—when the certificate is issued— it is illegal to alter a certificate or to list information on the certificate that is not reflected in the policy, such as higher limits or additional insureds who have not actually

been added to the policy. By changing the liability limits on the COI, your client has violated state insurance and forgery laws because the limits in her policy are lower. The situation described at the beginning of this article is all too common. Every year, we hear from many PIA Northeast members who tell us they found out a client altered a certificate of insurance or even created a fraudulent certificate and signed the agent’s name. Clients even ask our members to put information on a certificate that state law forbids. Most states also prohibit the request altogether and consider it a form of insurance fraud. We are going to explore the various laws of our Northeast states, including what can and cannot be include on a certificate, what steps you need to take should you discover a certificate has been fraudulently created or altered, and the fines you or a client could face if the law is violated.

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The laws Connecticut, New Jersey and New Hampshire. The laws regarding certificates of insurance for these three states are all quite similar. They all prohibit issuance of a certificate of insurance if it is: • misleading; • contains false information; or • alters coverage as set forth in the insurance policy. These states also prohibit someone from asking for a COI that is misleading or contains false information. Under New Hampshire law, each certificate also must contain the following statement, or language substantially similar, in sufficient font and size and located on the certificate to be readily identifiable: This certificate of insurance is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend, or alter the coverage, terms, exclusions, and conditions afforded by the policy or policies referenced herein. New York. This state’s law requires the use of standard forms or those approved by the New York State Department of Financial Services superintendent of insurance; other forms are not allowed. The state’s law also prohibits the altering or modifying of a COI form and considers this insurance fraud. A COI cannot contain information that is not found in the insurance policy, nor can someone request that such information be included, and the certificate cannot amend, extend, or alter such coverage. The law also prohibits an insurance agent or company from issuing an opinion letter or similar document certifying the information on the COI. Vermont. The Green Mountain State does not have a specific COI law, but it does have fraud rules that would apply to certificates of insurance. The state laws prohibit someone from presenting or asking for claims to be submitted that contain false information of any facts or that omit pertinent facts for the claim. The law also prohibits the act of misrepresenting or concealing information related to an insurance policy.

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All these state laws apply not only to insurance agents, but any human being as well as business entities. Thus, if your client alters a certificate of insurance, or asks you to include information on a certificate that is prohibited or misleading, he or she is in violation of the law and the person can be investigated and fined by the state’s insurance department. Additionally, in some states (including the ones in our readership) should you or your agency issue a COI that is fraudulent or misleading, or you know of and do not report such activity, you can be investigated and could lose your license and/or be fined.

What to do about COI fraud While only New Hampshire,2 New Jersey,3 and New York4 laws state specifically that an insurance agent is required to report insurance fraud— including related to COIs—it is advised that any agent who knows of any insurance fraud in any state report it. Even though Connecticut and Vermont do not specifically require agents to report insurance fraud by law, the insurance departments in those states could suspend or revoke an agent’s license if they found such lack of action made the agent complicit in the fraud.

Fines and suspension of license In each state discussed in this article,5 the head of the insurance department is granted the authority to suspend, revoke, or refuse to issue or renew an insurance license if a licensee engages

in any one of a myriad of actions. In this long list is violating insurance law or regulation, and engaging in insurance fraud. The head of the departments is likewise authorized to impose fines—though the amount is not defined—as punishment for violating insurance law or regulation, engaging in fraud, and many other actions. Thus, engaging in COI fraud or any of the other prohibited activities surrounding certificates (e.g., requesting inaccurate information be included) could lead an agent to lose his or her license and/or face hefty fines.

fraud in good faith and without malice shall not be subject to civil liability or libel or violation of privacy.7 New York. Insurance fraud can be reported online (on.ny.gov/3nu4y4f), by calling the Insurance Fraud Hotline: (888) FRAUDNY, (888) 372-8369, or by mailing in this form (on.ny.gov/3C7nXMf). Vermont. Insurance fraud should be reported to the Department of Financial Regulation Insurance Division’s consumer services section by phone at (800) 964-1784, email at dfr.insuranceinfo@vermont.gov, or online (bit.ly/3A9AyxY).8

How to report fraud Should you need to report insurance fraud, including COI fraud, each state has its own forms and phone numbers to call. If you are aware of any insurance fraud, use the contact information below for your state. Connecticut. The Connecticut Insurance Department has an online form (bit.ly/2XlJIt4) for filing a complaint. However, if you do not want to report a violation yourself, you can complete the form through PIACT’s Certificates Info Central tool kit (www.pia.org/IRC/certificates/ct/violations.php), and your association will report the appropriate violations to the CID on your behalf.6 New Hampshire. To report fraud to the New Hampshire Insurance Department Fraud Unit, you can use the Fraud Referral Form (bit.ly/3z7YVuD), or you can call (800) 852-3416. New Jersey. As an agent, you should report any insurance fraud to the state Department of Law & Public Safety (bit.ly/2YUaNEb). Any person who files a report or other information related to insurance

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Stop fraud before it’s too late While fraud relating to certificates of insurance might be infrequent, it is important that professional, independent insurance agents know what such fraud is and their responsibilities should it occur. Certificate of insurance fraud could lead to an agent having to pay large fines or losing his or her license. It also could spark errors-and-omissions issues for the agency. And, even if a case eventually is dismissed by a court, it can take up a lot of the agent’s time. For more information about certificates of insurance in your state, PIA Northeast members can visit PIA Certificates Info Central tool kit (www.pia.org/ IRC/certificates/). Slye-Hernandez is PIA Northeast’s PAC coordinator & public policy analyst.

producer licensing; and Vt.: Vermont licensing and continuing-education requirements, PIA QuickSource library (www.pia.org, QS06036, QS28016 (under “Denial of license; disciplinary actions”), QS29184 (under “Penalties”), QS31271 (under “Violations, penalties”) and QS44016, respectively) Connecticut law forbids certain certificate of insurance requests, PIA QuickSource library (www.pia.org, QS06128)

New Jersey Fraud Prevention Act (bit.ly/3AaGeI7)

A look at certificates of insurance, PIA QuickSource library (www.pia.org, QS90885)

New Hampshire Revised Statues Annotated Section 417:28 (bit.ly/3EhJfZm)

N.J.S.A. 52:14B-1

Department of Financial Regulation, Avoid scams and fraud (bit. ly/3k83HUM) 8

N.Y. Insurance Law Section 405 and DFS Office of General Counsel, Nov. 20, 2003

Conn.: Connecticut insurance licensing; N.H.: New Hampshire producer licensing rules; N.J.: New Jersey licensing requirements; N.Y.: New York

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Protect your agency in the face of statutory reform Periodically, state legislators will make changes to existing laws that impact the availability and limits of various insurance coverages. When changes from outside of your agency take effect, it is essential that your customer service representatives, producers, and agents adhere to best practices when handling customer accounts.

Best practices include, but are not limited to:

When faced with a change in the availability or limits of coverage—for instance, a change in personal injury protection coverage from mandatory unlimited PIP limits to a variety of limits—it is imperative that your producers present all of the available options to your customers. In addition, they must have the customers select the appropriate coverage for their distinct risk appetite. It also is imperative that you have the customer (i.e., the named insured), sign-off to acknowledge his or her selection of coverages and limits.

• understanding your customer’s risk profile;

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• being knowledgeable on the changes in available coverages and limits;

• presenting your customer with the available options for coverages and limits;

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• having your customers select the coverages and limits that they desire; and • documenting your customer’s coverage and limits selections, with your customer’s signature.

Being informed

Email>

Reach PIA electronically General pia@pia.org

There is no shortcut, or substitute, for being informed on legislative changes. This will require diligence on the part of your agency staff and knowing where the resources are for this information, such as the website for the department of insurance in your state. [EDITOR’S NOTE: PIA Northeast members also can watch their PIA publications for updates. Or, you can join the board of directors in your PIA-state affiliate and be on the frontline of what is happening in the insurance industry.] One way to accomplish the remaining bulleted items listed in this article is with a Declined Coverage Form. This form helps your producers to:

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Review the risk. This will help to ensure that they have covered all the relevant coverages for the customers in a convenient proposal form.

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Keep up with the market coverages and limits. Informing the customers, in writing, about what market coverage and limits are available forces them to consider the available coverages and limits, and sign-off to acknowledge their selection.

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Document for E&O prevention purposes. By holding customers accountable for their coverage elections, and listing all of the available coverage and limit options in one document, the customers will need to review the document. This will address your notice responsibilities—provided it is done in accordance with any time requirements set forth in the legislation. Having your customers sign-off to acknowledge their selections also will provide a crucial piece of documentary evidence, should a customer make a claim later alleging that either the coverage, the limit, or both, were insufficient.

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A Declined Coverage Form can be in paper or electronic form, which is convenient for situations when you are not able to meet face-to-face with your customers.

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Just because there are changes in the market—legislative or otherwise—does not necessarily mean you need to alter the best practices for your industry. In fact, it is adherence to the established best practices that will protect your agency from errors and omissions, and it will provide you with a sound defense should an allegation of an error or omission arise. Utica National Insurance Group and Utica National are trade names for Utica Mutual Insurance Company, its affiliates and subsidiaries. Home Office: New Hartford, NY 13413. This information is provided solely as an insurance risk management tool. Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice, or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues. © 2021 Utica Mutual Insurance Company

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Contested claims, Zipcars, fraud and more Verbal threshold Q. How does the verbal threshold work? Does it apply to economic loss or just noneconomic loss? A. It applies to noneconomic losses, which includes general damages—such as scaring or pain and suffering. Economic loss refers to special damages that have intrinsic monetary value such as medical bills and lost income. The verbal threshold establishes a level of serious injuries that must be incurred before the claimant can sue the person who caused those injuries for noneconomic loss. Nevertheless, the injured person retains the right to sue for economic damages not covered by personal injury protection benefits, even though the verbal threshold has not been crossed. Here’s how the statute [N.J.S.A. 39:6A-8(a)] is worded: Every owner, registrant, operator or occupant of an automobile to which [New Jersey’s no-fault law] applies, and every person or organization legally responsible for his acts or omissions, is hereby exempted from tort liability for noneconomic loss to a person who is subject to [the verbal threshold] and who is either a person who is required to maintain [no-fault coverage], or is a person who has a right to receive [no-fault benefits] as a result of bodily injury, arising out of the ownership, operation, maintenance or use of such automobile in this state, unless that person has sustained a personal injury which results in ... From there, the law goes on to itemize the conditions that constitute a serious injury.—Dan Corbin, CPCU, CIC, LUTC

Contested claims Q. Where does it say that if a workers’ compensation claim is contested, the state’s disability benefits will apply, subject to a lien against the workers’ compensation benefits? A. The provision is found in Section 43:21-30 of the state’s Temporary Disability Benefits Law, covering nonduplication of benefits. This section states (in part): Where a claimant’s claim for compensation for temporary disability, under the provisions of subsection a. of R.S.34:15-12 (Workers’ Compensation Law), is contested, and thereby delayed, and such claimant is otherwise eligible for benefits under this chapter, said claimant shall be paid the

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benefits provided by this chapter (Temporary Disability Benefits Law) until and unless said claimant receives compensation under the provisions of subsection a. of R.S.34:15-12 (Workers’ Compensation Law).

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Ultimately, if benefits are awarded under the Workers’ Compensation Law, the State Fund or private insurer will be reimbursed for temporary disability benefits paid to the claimant.—Dan Corbin, CPCU, CIC, LUTC

Customer’s auto Q. Our client has a business that installs car radios. The business has a garage policy that includes garagekeepers coverage. One night, the client gave an employee permission to leave his car in the garage overnight. The garage was broken into, and the employee’s car was stolen. Is there coverage for the car under the garage policy? A. Under these circumstances, the employee’s loss will not be covered on the employer’s garagekeepers coverage. Coverage is limited to a “customer’s auto,” which is defined as follows: “Customer’s auto” means a land motor vehicle, “trailer” or semitrailer lawfully within your possession for service, repair, storage or safekeeping, with or 35

without the vehicle owner’s knowledge or consent. A “customer’s auto” also includes any such vehicle left in your care by your “employees” and members of their households who pay for services performed. An employee’s car is considered a “customer’s auto” if it was left at the garage for service, repair, storage or safekeeping, and if the employee paid for the services performed. That does not appear to be the case in your inquiry.—Dan Corbin, CPCU, CIC, LUTC

Zipcars and employees Q. My client’s law firm directs its employees to use Zipcars when attending meetings. How is this covered on the commercial automobile policy? A. Every Zipcar member in good standing who complies with the membership contract is covered while driving a Zipcar (see bit.ly/3CAMTvP). If excess coverage is needed, Symbol 8 Hired Auto Liability Coverage (or Symbol 1) and Symbol 8 Hired Auto Physical Damage Coverage will cover the named insured and employee while using the Zipcar under the named insured’s membership. However, if the intent is to cover the employee who is using a Zipcar under the employee’s membership, then the best option is to add the Employee Hired Autos CA 20 54 endorsement to insure both liability coverage and physical damage coverage (provided the policy includes Hired Auto Physical Damage Coverage).—Dan Corbin, CPCU, CIC, LUTC

Credit card fraud Q. I have a client who is a business owner who accepts credit card payments (usually over the phone or the internet). When the charge initially clears, the business owner ships the product in good faith. Sometimes, the credit card company will inform the business owner of a fraudulent use of the card, which will either void or reverse the charge. Is there some way to insure the business owner, so that if a stolen credit card is used to make a purchase, he will be recouped for his loss? A. The standard crime policy has several exclusions applicable to this scenario that will preclude coverage. Unfortunately, PIA Northeast is not aware of any coverage available for this business risk. There are, however, loss-control measures that can be taken with little or no cost. Below are a few links to information on how to fight credit card fraud: • Fraud Labs Pro: bit.ly/3Ayj7aA • Authorize.Net: bit.ly/3CAFIDR • Merchant Services: bit.ly/2XJlidk • The Balance: bit.ly/3hW4YN7 • Wells Fargo: bit.ly/3EJ2kUM Remember, your client also should keep updated on the latest fraud-detection technologies, which can be obtained to perform highly automated and sophisticated screenings of incoming transactions and flag suspicious transactions.—Dan Corbin, CPCU, CIC, LUTC 36

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Audit time frames Q. According to the company, the wrong rates were used to rate workers’ compensation coverage for a construction business back in 2011-12. In 2014, after a third audit, the company discovered the rate discrepancy. It is now suing the business for the difference. Can it do this? A. According to the workers’ compensation policy terms, the company is within its rights. The policy [Part Five–Premium, E. Final Premium] states that, “the final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered by this policy.” Lawful rates are those that have been approved by the insurance department and are printed in the company’s manual of rules, rates, rating plans and classifications. Further, the company may conduct audits during the policy period and within three years after the policy period ends [Part Five–Premium, G. Audit]. These contractual provisions of the workers’ compensation policy will prevail unless a court finds sufficient fault with the company’s actions in handling the determination of final premium.—Dan Corbin, CPCU, CIC, LUTC