The Anchor THE INDEPENDENT INSURANCE AGENTS OF RHODE ISLAND MAGAZINE
The Coronavirus and Other Epidemics and Its Effect on the Workersâ€™ Compensation Insurance Industry Thanks to our 2019 PAC contributors
On the Road in RI with Driverless Cars
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WINTER 2020 Independent Insurance Agents of Rhode Island President Perspective ............................................. 7 Executive Vice President Perspective ...................... 9 The 2019 PAC Donations List ...................................
Case Law Notes.......................................................
Legal Briefs ............................................................
E&O Corner ............................................................
Human Resources Corner ........................................
Government Affairs Update ......................................
14 On the Road in RI with Driverless Cars
220 The Coronavirus and Other Epidemics on Workers’ Comp.
Disclosure of Insured’s Information
Independent Insurance Agents of Rhode Island Winter 2020 3
IIARI 2020 Diamond Sponsor
Denise T. Smith, CIC
Kenneth Thompson, Jr.
State National Director
William J. Hunt, CPCU
Immediate Past President
John Kaull, AAI
DIRECTORS Terms Expire 2020
INDEX Trusted Choice ................................................ 2
Terms Expire 2021 Terms Expire 2022
Thomas. J. DiSanto, JD, LLM, CIC Joseph R. Kosinski, CPIA
Anthony Bucci, Jr., CPCU, AIS Sean P. Daly, CPCU
Arlington Roe Cyber.......................................... 8
Margaret Longolucco, CIC Joseph Paiva
STAFF Marcia L. Berthiaume, AAI, ACSR, AIS, CPIA State Account Manager, Emerging Leaders Liaison Helen Collins, AAI, AIS, CPIA Director of Professional Liability
InsureConRI .................................................. 15 EO/Penn . ..................................................
Servpro®......................................................... 23 JH Communications
PS&H ............................................................ back
Sean R. Donaghey, CPCU Senior Vice President, State Account Executive Toni Drowne Communications & Marketing Manager Jack Hutson, CAE Senior Vice President, Business Development Lori Kaufman Executive Assistant, Membership Services Coordinator Maureen McNamara, AIS, ACSR Assistant Treasurer, Director of Finance Mark A. Male, MLIS Executive Vice President, Secretary/Treasurer Jean E. Nagle, AAI, ACSR, AIS Assistant Vice President, Director of Education Sarah Ribera Assistant Director of Education & Membership The Anchor is published by the Independent Insurance Agents of Rhode Island (IIARI). Statement of fact and opinion is made based on the responsibility of the authors alone and does not imply an opinion on the part of IIARI, it’s officers, directors or members. Subscription rate for members is $15, which is included in dues. Subscription rates for non-members is $75 per year. (single copies $10). Reprint requests should be referred to IIARI. Copyright © 2020 Independent Insurance Agents of Rhode Island. Independent Insurance Agents of Rhode Island Winter 2020 5
Insurance Agents Errors and Omissions Coverage That’s Right for Your Business
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Rated A+ by A.M. Best State-of-the-art coverage form exclusive to Big “I” members Claims-made coverage with full prior acts available Coverage for the sale of both Property/Casualty and Life/Health insurance products Limits of liability up to $25 million Broad deﬁni�on of covered professional services and ac�vi�es Comprehensive deﬁni�on of insured Aggregate deduc�bles available Defense cost outside the limit $25,000 1st Party Personal Data Breach $1,000,000 3rd Party Personal Data Breach sublimit available 60/40 consent to se�le clause Crisis Management coverage; up to $20,000 per policy period for fees, costs, and expenses incurred within 6 months of a crisis event Deduc�ble reduc�on up to $25,000 per claim with proper documenta�on, no limita�on on the number of claims Catastrophe Expense $25,000 per incident, $50,000 per policy period Regulatory defense $100,000 per policy period in addi�on to the limit of liability True worldwide protec�on Up to 20% premium credit for up to two years for proper comple�on of an approved loss control program 10% premium credit for ﬁve years for having an approved, voluntary in-house E&O audit
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The informa�on provided is for general informa�onal purposes only and you should review the policy form and any applicable endorsements for complete policy language. Please note that all applica�ons are subject to review, underwri�ng and approval by Westport Insurance Corpora�on, a member of Swiss Re Corporate Solu�ons.
Tell Our Story It has been four months since I was installed as President
of IIARI. Just as many past Presidents had warned me, time really does “fly by so quickly”.
Your board continues to find new and innovative ways to be of value to you, no matter the size of your agency. Our latest focus is on a new market channel called IMS (Insurance Market Solutions). Our Association, along with about a dozen other states will be joining this group that allows members to access additional markets through a sub-producer arrangement. Look for more information in the coming months outlining this new market opportunity. We have also been working on changing up this year’s convention with a new name and a new schedule. Insurecon RI will be Monday and Tuesday, June 15 and 16. This year’s theme is Play to Win and we’ll have competitive events and two separate lines of learning - the Educational and Leadership Tracks. Our Executive Vice President Mark Male, National Director Bill Hunt Sr., and I just returned from the Big “I” Level Up Agent Summit – a diversity and inclusion summit that encompassed numerous resources to help the independent agency distribution force serve insurance consumers today and in the future. The event was designed to provide us with information and resources to build and maintain a diverse and inclusive workforce and clientele. The culture of this country changes constantly and it is imperative that we adapt to the changes, develop leaders, and encourage employee engagement. The value of knowing and understanding the demographic and social changes of our country is crucial to thriving in the future. I am a testament on how the workforce and our industry is changing. Our board now has three women which is significant given how the demographics of our industry keeps changing.
I may be one of a kind, but I placed all my faith and reputation on younger talent -- new to the insurance industry. My team now has 1½, 3, and 10 years of experience and are growing and developing each and every day, using their expanding knowledge and creativity to attract a diverse group of clients. These three young women are ambitious, hardworking, and motivated to work as a team. Not only does IIARI have tools to help train the next generation but the carriers do as well. Make sure you take advantage of all the tools available! Insurance Agents need to “tell our story” to the younger generation because they are the future.
One of the speakers at the summit focused on engagement and the use of empathy: whether it be with each other, employees, or clients. “See” the other person and let them know they are “Seen” by you! Think about this and use it in your daily life. The one key differentiator for independent agents is that we have names, faces and to a great extent, know our customers better than anyone. If we fail to connect with our customer base and allow technology to dictate our “connections” we are doomed. We must see our customers as they are seen by each of us. That’s what makes us unique in the insurance distribution marketplace. Denise Smith, CIC IIARI President 7
Managing General Agents | Wholesale Insurance Brokers
Protect Your Agency with the Big “I” Cyber Secure Program You’re in the business of protecting others, but who’s watching out for you? We are. Responding to a breach is a complicated process requiring the assistance of many different professionals. Failing to notify your clients "without unreasonable delay" could cost your agency hefty fines plus additional costs to comply with notification laws, legal liability and reputational harm caused by the breach. If handled improperly, this exposure could be devastating to your agency.
Cyber Secure 2019 Program Enhancements: • Increased Fraudulent Instruction from $100k to $250k • Increased Funds Transfer Fraud from $100k to $250k • Increased Telephone Fraud from $100k to $250k • Increased Criminal Reward from $25k to $50k • Increased Consequential Reputational Loss sublimit to Match Elected Limit. $2M aggregate limit will only have $1M max • Amended the Definition of Data- removes the requirement for regular back up. • Added Other Insurance Clause Endorsement - Primary With Respect to First Party Loss • Added Contingent Bodily Injury with Sublimit Endorsement
• Removed Amend Continuity Date - implemented use of no known loss letter • Updated Post Breach Remedial Services Endorsement- better explains the services • Removed PCI verbiage under Risk Controls section; PCI will be added for every risk • Updated Endorsement: Voluntary Shutdown Coverage – updated version to remove the requirement for the underwriter’s prior written consent • NEW Endorsement: CryptoJacking Endorsement (sub-limit: $100k) This endorsement covers financial loss incurred by the insured organization for additional utility costs as a result of crypto jacking
• NEW Endorsement: Computer Hardware Replacement Cost (aka bricking). Sublimit: $100k • NEW Endorsement: Invoice Manipulation Coverage (Sublimit: $50k) indemnifies the Insured Organization for Direct Net Loss resulting directly from the Insured Organization’s inability to collect payment for any goods, products or services after such goods, products or services have been transferred to a third party as a result of Invoice Manipulation that the Insured first discovers during the policy period.
Program Takeaways • Exclusive Membership Program • Notification on record count • 3 Aggregate limits
• Coverage for accidental release of PII • Coverage for dependent business interruption • Coverage for fraudulent instruction
For more information, contact:
Helen L. Collins, AAI, CPIA, AIS Director of Professional Liability Programs p: 401-732-2400 | e: firstname.lastname@example.org
• Cryptojacking coverage • Invoice manipulation • Extortion payment for eCards
EXECUTIVE VICE PRESIDENT PERSPECTIVE
House of Cards The ongoing and escalating rate of
mergers and acquisitions in our industry is staggering. Over the years we’ve seen other industries constrict as competitors swallow each other. Insurance companies went through a significant phase of merging and consolidating as I’ve been around long enough to remember USF&G, St. Paul, Aetna, General Accident, and Commercial Union to name a few. What accompanied that contraction was the replacement of the traditional CEO – someone who rose through the ranks within the company working in underwriting or claims, rising to the top and assuming leadership – with financial people whose business acumen was on the numbers. Relationships that once defined how business was conducted was replaced with metrics and ROI. It has changed the way business would be done for ever. Now we see this unavoidable and surprising constriction in the insurance distribution space. Add a measure of disrupters who are attempting to undermine relationships and you have an incredibly powerful mix of change that makes us step up our game. Unthinkable sums of money are being offered to purchase independent agencies
and it is being done without discrimination. The biggest agencies seem to get bigger and the smaller agencies are either looking to sell or locate another agency to merge with in order to provide some level of insulation from being a target for acquisition. Reports from other IIABA member states note similiar mergers and acquistions. Watching from the sideline it’s hard not to be reminded of the 2007 banking crisis and subsequent financial crisis of 2008. Back then it was amassing subprime mortgages to be packaged and sold as an investment. The bundled mortgages were treated as securities but the underlying and undeniable fact was these second mortgages, made to individuals who would in many cases end up under water on their homes, was destined for failure. That’s when the bottom fell out. Today private equity firms gobble up and cobble together aggregated books of agency business for the opportunity to sell it for a nice return on their investment. For the record, it’s not just Rhode Island, it is rampant throughout the insurance agency universe. But how will they achieve a return? At some point someone in the private equity space has to take a look at the true intrinsic value of the acquisition and have the revelation that there isn’t enough profit to warrant a long term hold. If that happens, what happens next? As an association, we are a mission-based organization, not profit-based. That’s an important distinction. The difference equates to never losing focus of, “our mission to enhance the competitive position and satisfy the business, professional, education and political needs of member agents.” So while we sit on the sideline observing the latest trend and the impact on our membership, we remain committed supporting the American Agency System in whatever manner necessary. Whether we’re an association with a large or small agency count, we are still resolved to never lose focus on our role and the importance of providing solutions to the entrepreneurial independent agency owners.
“Our mission to enhance the competitive position and satisfy the business, professional, education and political needs of member agents.” Robert J. Pettinicchi, Mark Chief Male Lending officer, Executive Vice President Independent Insurance Agents of Rhode Island Winter 2020 9 Insurbanc
To our 2019 PAC Contributors! Thanks to the generosity of the PAC contributors listed below, we can continue our advocacy efforts in Washington, DC and the state house in Providence..
IIARI PAC CONTRIBUTORS 2019 GOLD Mark A. Male, MLIS Ind. Ins. Agents of Rhode Island
SILVER Allen H. Chatterton, III Chatterton Insurance, Inc. William Combies Bentsen-Combies Insurance, Inc. John T. Edge, Jr., CIC A.N. Nunes Agency, Inc. David Gates Gates Insurance Agency, Inc Cristie A. Hanaway, CIC, CPIA The Hilb Group of New England, LLC David Hanuschak Hanuschak Insurance Agency, Inc. Mark Matrone, CIC John Andrade Insurance Agency, Inc. Doug Mayhew, CIC OceanPoint Insurance Agency, Inc. 10
Nancy Mendizabal, CIC Apple Valley Agency, Inc.
Matthew F. Clarke, AAI, CIC OceanPoint Insurance Agency, Inc.
Roger L. Messier, CPCU Butler & Messier, Inc.
Brian M. Hunter, CPCU, CIC Hunter Insurance, Inc.
Richard Padula, CIC The Hilb Group of New England, LLC
John Kaull, AIA, ACSR OceanPoint Insurance Agency, Inc.
Joseph Paiva The Agency Paiva, LLC.
Barbara Kirby Esten & Richard Agency, Inc.
Frank Richard Esten & Richard Agency, Inc.
Robert B. Loiselle, CIC Loiselle Insurance Agency
Barry Sutcliffe Bradford-Sutcliffe Ins. Assoc., Inc.
Garry Mansfield, CIC Mansfield Insurance Agency, Inc.
Howard Thorp, AAI, CIC Thorp & Trainer, Inc.
Terrance S. Martiesian, Esq. Martiesian & Associates
Bruce Messier, AAI Butler & Messier, Inc.
Richard Blackman, CPCU, API Blackman Insurance Agency, Inc. Edward L. Blais, JD, CIC Blais Insurance
Marc Nadeau, CPIA Blais Insurance A. Alan Oliver Oliver Insurance Agency, Inc.
Michele Calabrese Farmington Insurance Agency, Inc.
Gregory A. Oliver Oliver Insurance Agency, Inc.
Kenneth Thompson, Jr. Lezola Thompson Insurance, Inc.
Richard B. Paquin,CRIS Paquin Insurance Agency, Inc.
Donna Towers Lemos, CPCU Russ Towers Insurance Agency, Inc
Richard Rheinberger Affiliated Insurance Managers, Inc.
William R. Warburton, Jr. The Hilb Group of New England, LLC
CONTRIBUTOR Chad Bjorklund, CIC The Hilb Group of New England, LLC
Denise T. Smith Smith Insurance Group, Inc.
INSUREPAC CONTRIBUTORS 2019 GOLD CLUB
Mark A. Male, MLIS Ind. Ins. Agents of Rhode Island
David Gates Gates Insurance Agency, Inc.
Richard Padula, CIC The Hilb Group of New England, LLC
Steve Jacobs Arabella Insurance Group Margaret Longolucco, CIC Mansfield Insurance Agency, Inc. Timothy Mailloux, CPIA. CRIS Gardiner Whiteley Boardman Insurance Agency, LLC
John T. Edge, Jr., CIC A.N. Nunes Agency, Inc.
William J. Hunt Sr. , CPCU Shove Insurance, Inc.
Charles Balfour, Inc Bud Balfour Insurance, Inc.
Brian M. Hunter, CPCU, CIC, AAI Hunter Insurance, Inc.
Maurice Bessette, Jr. Bessette Insurance
John Kaull, AAI, ACSR OceanPoint Insurance Agency, Inc.
Sean P. Daly, INS, CPCU, ACSR, PGI Affiliated Insurance Managers, Inc.
Melanie Loiselle-Mongeon, CIC, AAI, AIS Loiselle Insurance Agency
Meghan Downing A.N. Nunes Agency, Inc.
Kelly Townsend, AAI, AIS, PGI, AINS, CPIA Paolino Insurance Agency, Inc.
Robert B. Loiselle, CIC Loiselle Insurance Agency
Trevor Edge A.N. Nunes Agency, Inc.
Kenneth Thompson, Jr. Lezaola Thompson Insurance, Inc.
Mark Matrone, CIC John Andrade Insurance Agency, Inc.
William Hunt Jr., AINS, CPIA Shove Insurance, Inc.
Ralph Woodmansee Woodmansee Insurance, Inc.
Bruce Messier, AAI Butler & Messier, Inc. Laura Pires, CISR Smith Insurance Group, Inc. Nicholas San Martino, CPIA E. A. Kelley Company, RI, Inc.
Roger L. Messier, CPCU Butler & Messier, Inc. Frank Richard Esten & Richard Agency, Inc. Ernest Shaghalian Jr. Ernest Shaghalian Alpine Insurance Howard Thorp, AAI, CIC Thorp & Trainer, Inc.
Independent Insurance Agents of Rhode Island Winter 2020 11
When you give to our PACs, we all win Ensure the independent agentâ€™s voice is heard in the halls of Providence and D.C.
CASE LAW NOTES R.I. Supreme Court tackles question of jurisdiction for suit in Rhode Island The Rhode Island Supreme Court recently issued a decision addressing the scope of the jurisdiction of the Rhode Island courts, specifically whether an out-of-state institution (a Texas incorporated bank) is subject to that jurisdiction. The decision, Edward F. St. Onge v. USAA Federal Savings Bank, 219 A.3d 1278, was issued in November of 2019, and held that the Superior Court decision dismissing the suit for lack of “personal jurisdiction” over USAA was correct under Rhode Island law.
Business entities are treated differently. A corporation’s home state is its state of incorporation and the state of its “principal place of business” if they are different, as well as any state where the corporation is “essentially at home”. A company incorporated in Delaware, with a headquarters in Vermont, is likely subject to general jurisdiction in both states. Other business entities and organizations are subject to similar rules. Partnerships and LLCs are typically subject to general jurisdiction in states where a partner or member lives.
First, a basic primer. Personal jurisdiction refers to a court’s power over a party. It is distinct from a court’s power to hear a certain type of case, which is referred to as “subject matter jurisdiction.” As an example, if Plaintiff Paul sues Defendant Daniel in Massachusetts, there are two questions: (1) is this case within the Massachusetts court’s subject matter jurisdiction and (2) does the Massachusetts court have the authority to require Daniel to appear, and to enter judgment against him? Just because the court can hear a certain type of case tells us nothing about whether that court has power over a particular party. If Daniel is from another state and has no connections with Massachusetts, the court likely does not have jurisdiction over him. Paul would have to sue Daniel in a different state where the courts do have “personal jurisdiction” over him.
In the St. Onge case, a Rhode Island resident plaintiff brought suit against a Florida resident and USAA Federal Savings Bank, a Texas-incorporated bank also headquartered in Texas, seeking funds he claimed to be owed for services rendered. USAA moved to dismiss on the grounds that it was not subject to the general jurisdiction of Rhode Island’s courts.
U.S. courts typically distinguish between two flavors of personal jurisdiction: general and specific. Specific jurisdiction is based on a defendant’s contacts with a state. To continue the example above, if Daniel committed a tortious act in Massachusetts and injured Paul, Paul could sue Daniel in Massachusetts for that injury, and expect that Daniel is subject to suit there, even though he lives in another state.
The Rhode Island Supreme Court disagreed, declining a make a rule that mere advertising and online banking “rise to the level of being ‘essentially at home’ here …” In fact, the court turned the argument on its head, holding that … “[t]o say that USAA is ‘at home’ in every state indicates to us that a Rhode Island court does not have general jurisdiction over USAA, because USAA’s affiliations with the State of Rhode Island are the same as its affiliations with ‘every state in the country.’ This clearly does not rise to the level of USAA being ‘at home’ in Rhode Island.”
The Plaintiff in St. Onge claimed that “USAA is ‘at home’ in Rhode Island, and that the Superior Court has general jurisdiction over [it] because of ‘sweeping changes’ … in the banking industry.” Specifically, the plaintiff pointed to “directdeposit and online banking services, as well as advertising by USAA in Rhode Island” to support his contention, and he argued that “‘USAA is at least as much ‘at home’ in Rhode Island as it is in any other [s]tate, excepting Texas.’”
General jurisdiction is substantially different. Being subject to general personal jurisdiction in a state means a person or entity can be sued for any claim, regardless of where the actions underlying the claim occurred, or whether the claim has anything to do with the state in which suit is brought. This is typically only in a defendant’s “home” state. The rules for individuals and business entities are different when it comes to determining a “home” state. An individual is home in his or her state of permanent residence. If a person resides in a state and intends to stay there, that state has general personal jurisdiction over him. Individuals therefore have one, single state of permanent residence.
With its St. Onge decision, the Rhode Island Supreme Court showed that it will continue to minimize subjecting corporations to its general jurisdiction, following the lead of the U.S. Supreme Court’s Daimler AG v. Bauman decision (571 U.S. 117 (2014)) (noting that “[a] corporation that operates in many places can scarcely be deemed at home in all of them. Otherwise, ‘at home’ would be synonymous with ‘doing business’”).
This feature of The Anchor reviews recent case law involving the insurance industry. Please contact the author for more information: Travis J. McDermott Partner., Partridge Snow & Hahn LLP, (401) 861-8200, email@example.com 13
On the Road in RI with Driverless Cars Driverless Cars Are Already in Rhode Island. They Are Never Drunk or Distracted. But Are we Safer on the Roads With Them? Each new generation of cars is equipped with features and technology that try to make drivers and passengers safer and accidents less likely. From seat belts and the third brake light to blind-spot monitoring and forward-collision warnings, our vehicles get safer year after year. And since most car accidents are caused by human error, the more control that is taken away from the fallible, occasionally absentminded human operator, the safer they become … right? The Society of Automotive Engineers International (SAE) has developed a classification system for automation of vehicles, encompassing six levels from “no automation” to “partial automation” to “full automation.” Many cars on the road today are already at level 2 (“driver assistance”). Data from the Insurance Institute for Highway Safety (IIHS) already show a reduction in property damage liability and collision claims for cars equipped with forward-collision warning system, especially those with automatic braking. While no one can be sure when or even if the transition to “full automation” will occur in most American passenger vehicles, some prognosticators expect that within little more than a decade, driverless cars will outnumber traditional vehicles on the road. The Institute for Highway Safety expects that in five years there will be more than 3.5 million self-driving vehicles on American roads, though where those future vehicles fall
on the SAE automation spectrum remains unclear. This is no surprise: many vehicles already come today packed with features that just a few years ago would have been all but unfathomable: automatic parallel parking, drowsiness detection, and automatic emergency braking, just to name a few. You may not have noticed, but Rhode Island is at the very forefront of the latest technological shift in automating vehicles. In May of 2019, Michigan-based May Mobility and the Rhode Island Department of Transportation unveiled the “Little Roady Autonomous Vehicle Pilot Project.” The Pilot Project consists of a fleet of driverless electric vehicles that offer free rides along a fixed, 5.3-mile route between Providence Station and Olneyville Square, making twelve stops, and operating from 6:30 a.m. to 6:30 p.m. seven days a week. (You can check out a live map of where the Little Roady vehicles currently are by going to http://dot. ri.gov/projects/trip/LittleRoady.php). The Pilot Project did not get off to an auspicious start: on its first day carrying passengers, a Little Roady vehicle was pulled over by the Providence Police when dropping off at Olneyville Square. But it’s been operating for nearly nine months now with nary a driver involved. It’s been called the longest free public transportation route in the country, and it loops through public roads in both commercial and residential areas, some of which have heavy traffic at rush hours. But are we safer taking the driver out of the equation? And what impact will this have on auto insurance? One would think that taking the fallible human operator out of the equation would mean fewer accidents and lower levels of claims (and possibly significantly lower premiums). But that remains to be seen, as these technologies become more widespread and with specific use cases, political entities
Travis J. McDermott Partner, Partridge Snow & Hahn
Travis is a partner at Partridge Snow & Hahn LLP, a business and litigation law firm based in Providence, Rhode Island, with offices in Boston and New Bedford, Massachusetts.
can enact rules to govern them and insurers can factor the new technologies into their pricing. Some impact on insurance is inevitable as autonomous vehicles increase in number. Product liability laws might be amended to reflect a cost-benefit analysis to mitigate the cost to manufacturers for the claims. Lower accident frequency can be expected, but so can potentially higher costs to replace damaged vehicles that contain expensive sophisticated technology. Itâ€™s entirely possible that the 50-different-state environment may change to become more uniform to reflect a larger federal role in regulating auto insurance if manufacturers take on a larger share of responsibility for damage and injuries. These are all possible. Some likely changes we should expect to see discussed in the next handful of years include a shift from insuring drivers to insuring vehicles, an increased focus in pricing insurance on software-and-features over an individualâ€™s
driving history, and one significant game-changing possibility: vehicle manufacturers potentially offering insurance as part of the sticker price. Tesla has suggested that it would like to offer a single price for a car, including all maintenance and insurance. There are certainly changes coming, but the precise contours of them remain fuzzy. For now, I recommend a free ride to Olneyville to check out the future for yourself.
RHODE ISLAND 2020
play to win
SAVE THE DATE
JUNE 15-16 | WYNDHAM ATLANTIC
15 Independent Insurance Agents of Rhode Island Winter 2020
Disclosure of Insured’s Information How to Handle Requests for the Disclosure of Information or Documentation Contained in an Insured’s File a request made by an insurance company to One of the more common questions that we receive from insurance agencies and brokerages is how to handle requests for the disclosure of information that is contained in their insured’s file. If such a request is received and handled properly, an agency or brokerage can help reduce the likelihood of becoming involved in an E&O claim or lawsuit. In this issue of The E&O Corner, we will review some of the procedures that an agency or brokerage should follow if it receives a request from an insurance company, an insured, an attorney, or anyone else, to disclose information that is contained in an insured’s file.
When an agency or brokerage receives any type of request to provide information or documents regarding an insured, the agency or brokerage should be sure to handle that situation with care. Such a request may potentially constitute a claim against the agency or brokerage, or possibly contain facts which give rise to a potential claim; both of which would in most cases require that notice be given to the E&O insurer for the agency or brokerage pursuant to the terms of its insurance policy. E&O insurance policies, like other types of insurance policies, require that insureds provide prompt notice of not only actual claims, but also notice of any circumstances that may give rise to a potential claim. For this reason, we advise agencies or brokerages that when they receive a request for any information to be disclosed concerning an insured, they should consider whether they need to report that situation to their E&O insurer. Providing prompt notice to the E&O insurer will ensure that if the situation eventually develops into an E&O claim or lawsuit the E&O insurer cannot take the position that it was not timely notified of the situation. It is very difficult for an insurance agency or brokerage, faced with a late notice situation under its own insurance policy, to claim that it was not familiar with, or did not understand, the claims reporting requirements contained in its professional liability insurance policy. Also, E&O insurers will often appoint counsel to assist the agency or brokerage in dealing with the request for the disclosure of information, since having counsel involved helps reduce the chance of the situation developing into and E&O claim or lawsuit. One of the more common requests we see in our practice is where an insurance agency or brokerage is asked by an insurance company to provide either information or documents concerning an insured. One thing to keep in mind is that if an agency or brokerage is faced with 16
disclose information regarding an insured, it is usually in connection with the insurer’s investigation or denial of a claim. Insurance companies will often contact the agency or brokerage during the course of its claims investigation and request that the agency or brokerage provide either a written or recorded statement or copies of its file materials. If the insurance company conducting the investigation is one that the agency or brokerage has an agency agreement or an ongoing relationship with, the insurance company may take the position that the agency or brokerage is obligated to provide the requested information. Any agency or brokerage faced with this situation must remember that, under most circumstances, it does not have a legal obligation to provide this information. However, there are some state statutes or provisions in the agency agreement which could legally require that production. Also keep in mind that if this information is provided by the agency or brokerage to the insurance company, and then that information is subsequently used as a basis for the denial of an insured’s claim, it is quite possible that the agency or brokerage will then become involved in any litigation arising out of the insurer’s denial of the claim. Agencies and brokerages are also often asked by their insureds themselves to provide information or documents from the files that are maintained by the agency or brokerage. If this should occur, remember that an insured is not entitled to obtain copies of file materials maintained by the agency or brokerage that relate to his or her insurance. The documentation that is created and maintained by the agency or brokerage, constitute its business records; as such, that documentation is the property of the agency or brokerage. We understand that sometimes when an insured requests information or documentation from its files that the agency or brokerage may be inclined to provide that information in order to foster good will and maintain the relationship, even though there is no legal obligation to do so. Accordingly, if an agency or brokerage is faced with such a
situation and would like to comply with the request, it should do so on a limited basis and provide the insured with only those documents that the insured would have received in the ordinary course of the relationship. For example, the agency or brokerage may provide the insured with copies of insurance policies, endorsements, certificates of insurance, letters and other communications that they may have received in connection with their insurance. However, the agency or brokerage should not disclose to the insured such items as notes, records from the agency management system, or any internal communications within the agency or brokerage. In our experience, an insured will often request copies of this type of information if they contemplating a potential claim or lawsuit against the insurance company and/or the insurance agency or brokerage. Similarly, if the agency or brokerage receives a request for information or file materials from an attorney for an insured, this should likewise be reported to the E&O insurer. Our experience has shown that when an insured goes so far as to enlist the services of an attorney to inquire into the practices of an insurance company, or the agency or brokerage, an E&O claim or lawsuit is likely to follow. As you could imagine, an agency or brokerage should proceed most cautiously when it is served with a subpoena seeking information or documents. Although the agency or brokerage is may be nonparty to the legal proceeding in which the subpoena was served, a legal proceeding is, in fact, pending and it is very easy for the agency or brokerage to be added as a party to that proceeding. Often
agencies and brokerages served with subpoenas simply comply with the subpoena served and provide the requested testimony or documents without the assistance of an attorney. While it is true that an agency or brokerage that is properly served with a valid subpoena has an obligation to comply or risk being held in contempt of court, we recommend that an attorney always be involved to assist in responding. Many times a subpoena is defective in some manner because the attorney who served it either failed to comply with the strict legal requirements governing the manner in which service may be made or the scope or type of information that may be requested. If an agency or brokerage simply complies with a subpoena without the assistance of an attorney, they may be providing information that they are not legally required to disclose and put itself at risk of becoming involved in an E&O claim or lawsuit. Our final recommendation on this topic is that every agency and brokerage should make certain that all employees are aware of the procedures to be followed within the agency or brokerage if it receives a request to disclose information concerning an insured. We suggest that all such inquiries be directed to one person at the agency or brokerage so that the requests are handled properly and consistently. The prudent insurance agency or brokerage that follows the procedures that we have outlined above will help reduce the likelihood that the request for information will develop into something much more serious, such as an E&O claim or lawsuit.
Keidel, Weldon & Cunningham, LLP
concentrates its practice in the defense of insurance agentsâ€™ and brokersâ€™ errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation, and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq., Christopher B. Weldon or Robert Walker Lewis either by mail at the firmâ€™s Rhode Island office located at 303 Jefferson Boulevard, Warwick, Rhode Island 02888, by email at firstname.lastname@example.org or cweldon@ kwcllp.com, or by telephone at 401-773-7730.
James C. Keidel, Esq. Partner, Keidel, Weldon & Cunningham, LLP
Christopher B. Weldon, Esq. Partner, Keidel, Weldon & Cunningham, LLP
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Are you Having Fun? This is a continuing article in the series of human resource articles for the “Independent Agent”. My goal is to bring value to your organization in the accomplishment of the Essentials of Human Resources.
As we go into a new year 2020, we need to look at what are the critical topics for 2020. The challenges we faced in 2019 in keeping business leaders up at night will continue in 2020. Employee compensation was one of those issues. There is a new federal overtime rule that takes effect January 1, 2020. Employees who make less than $35,568 are now eligible for overtime pay. Employers need to review details under the Fair Labor Standards Act to assure compliance. Next issue is the Legalization of Marijuana. Marijuana use is up among workers while Opioid use has fallen. Rapidly changing state laws have created a haze of confusion for concerned employers. Key legal concepts may influence how employers approach their policies and practices.
FMLA mistake by firing a worker after he took a vacation in Mexico while recovering from knee surgery. Don’t make knee-jerk decisions about what initially seems to be FMLA abuse. For example, Federal regulators added to a laundry list that parents may take FMLA Leave for special education meetings. It is important to stay up with the FMLA details that are constantly changing. Another example, what should Employers do when Workers exhaust FMLA Leave? Tip is to manage the return-to-work process and decide if providing more leave is appropriate. Ensure that you are aware of State Laws that are changing as well for 2020: •
Next issue is hiring and finding the right candidate. The United States is pretty much at full employment. Employers need to find a creative strategic approach with a competitive edge to attract the right candidates.
Post new 2020 Legal Federal and State Posters
Simultaneously, to have a good succession plan in place is important as part of your plan.
If you have a question or need clarification, please contact Dave Nichols or a Human Resource or legal professional.
Once you have made the “right hire” do you have a quality Onboarding Process in place? How employers handle the first few days and months of a new employee’s experience is critical to ensuring high retention and keeping turnover low. Employee discipline is still a serious issue in the workplace. Many U.S workers worry they’ll be fired, especially America’s younger workers are concerned. It is necessary to have a proactive Onboarding and Performance Management System in place. You want the new hire or current employee to fully understand their job description, their role and expectations proactively. The Employer should be performing as a coach and not a manager. Daily checks and balances (not micro-managing) is critical to success. A final issue for some Employers is ensuring compliance to the Family and Medical Leave Act (50 or more Employees). For example, in 2019 a Massachusetts Employer made a $1.3 Million Dave Nichols is the principal of a human resource management business, Quality Transitions, Inc. located in Charlestown RI. He has 25 years of experience in the field and also retired from the U.S. Army as a Lieutenant Colonel. If you are interested in learning more, please visit his website at www.qualitytransitions.net. 19
Dave Nichols Quality Transitions, Inc.
Worker’s Compensation Corner
Emerging Issues The Coronavirus and Other Epidemics and Its Effect on the Workers’ Compensation Insurance Industry With the rapid spread of the Coronavirus, the workers’ compensation insurance industry may face a new challenge; the compensability of claims arising out of injuries suffered by health care or other employees from exposure to and falling victim to the virus. Unlike past epidemics of flu and smallpox, the Coronavirus has no vaccination or shot designed to limit its contraction so the consequences of preventive measures should not be an issue. So for workers’ compensation purposes, the only question for employers, their agents and their carrier is whether the employee contracted the Coronavirus in the course and scope of his or her employment? Preliminarily, the Rhode Island Department of Health and the Centers for Disease Control and Prevention is monitoring the virus closely. Unlike the anthrax and small pox issue that arose in 2001 and 2003 respectively, there is no federal directive ordering the implementation of an emergency program that provides for the treatment of the few Coronavirus patients in the United States (as of this writing). This may change. But it is worth looking at prior epidemics to understand the compensability issues that may arise. An integral component of the smallpox epidemic plan was the designation of hospital personnel who, as volunteers, formed an emergency response staff. In order to care for and provide treatment to patients who may be infected with smallpox, each staff member had to receive the smallpox vaccination to prevent against contracting the virus themselves. The vaccination of these workers raised questions for workers’ compensation insurance providers, i.e. who pays for the vaccination and who pays benefits in the event of either an adverse reaction to the vaccination or the contraction of smallpox. Likewise, in 2009, a swine flu epidemic was deemed imminent and the federal government ordered immediate vaccinations. The flu never developed but litigation did arise and some case law developed as addressed below. With Coronavirus, there are only suggested methods by which people can help stop the virus, i.e. sound hygiene practices and quarantine. The Centers for Disease Control has only issued one directive as of February 1, 2020. It provides, in pertinent part, as follows: 20
Infection control procedures including administrative rules and engineering controls, environmental hygiene, correct work practices, and appropriate use of personal protective equipment (PPE) are all necessary to prevent infections from spreading during healthcare delivery. Prompt detection and effective triage and isolation of potentially infectious patients are essential to prevent unnecessary exposures among patients, healthcare personnel, and visitors at the facility. All healthcare facilities must ensure that their personnel are correctly trained and capable of implementing infection control procedures; individual healthcare personnel should ensure they understand and can adhere to infection control requirements.
The adverse potential effect of the prevention through quarantine and treatment of Coronavirus patients is likely to have an impact on all sorts of employees in addition to hospital emergency staff members and other health care personnel. For example, unions representing airline pilots have sought a federal court restraining order on the travel to China to evacuate United State citizens. There will be others. The cost of the treatment for the virus will certainly be the subject of inquiry by insureds and their employees and could result in an increase in workers’ compensation claims. The question is whether or not such claims are compensable under the Rhode Island Workers’ Compensation Act. Rhode Island law provides compensation benefits to those employees who suffer injuries that arise out of and occur in the course of their employment. Although there are many variations and exceptions to this provision, the Rhode Island courts have never adjudicated the compensability of injuries related to flu shots or the compensability of the flu itself. Other states have considered the issue, and have followed the time worn test of requiring the employee to demonstrate causality. Across the country, courts have recognized
that while employees’ infections were the cause of death, the courts have denied liability on the basis that the employees were unable to establish a causal relationship between their life-threatening infections and employment. Where an employer directs its workers to undergo immunization as a condition of their employment, any subsequent injuries resulting from complications of the vaccine are compensable. For instance, in Neudeck v. Ford Motor Co., 1 Ford employees were ordered to undergo immunization to be administered by the employer’s physician at a request from the Detroit Board of Health. After receiving the vaccine an employee died of streptococcus poisoning. As for the cause of the poisoning, the court held that the “only cause, time and place indicated in the record” was that “the infection was an effect of the vaccination.” The court held the vaccination was “suffered by the employee under direct order of defendant” and therefore, to have occurred within the course and scope of employment.2 On this basis, the claim for workers’ compensation benefits was granted.3
The above cases offer some insight into a court’s willingness to grant compensation benefits for vaccine related injuries. While smallpox is distinct from the Coronavirus, the directives from public health authorities and the individual employer will certainly impact the compensability determination. The analysis will be the same: do the facts demonstrate that the employee suffered an injury (Coronavirus) and incapacity that arose out of or occurred in the course of employment? The vaccine cases are easy in the sense that an identifiable event clearly caused the resulting injury and incapacity. In the case of Coronavirus, the employee will have to prove the contraction of the virus arose out of and in the scope of employment and not from general exposure no different from the general population. In conclusion, there is no simple answer to the question of compensability for Coronavirus illness. A thorough investigation of the facts and circumstances of the job and exposure will be required to determine causation. Regardless, every prudent agent will encourage their customers to heed all the public health directives with the understanding that workers’ compensation implications are very real in this Global Health Emergency.
In Texas Employers’ Insurance Association v. Mitchell, 4 an employer presented to its employees an ultimatum; comply with its special order of undergoing vaccination or refuse to do so and be found in default of duty resulting in ultimate suspension.5 In compliance with her employer’s order, the employee received the smallpox vaccine. Subsequently, the employee developed an infection in her arm that led to bodily injury. The employee filed a claim for benefits that was granted on the basis that the employee was vaccinated upon the order of her employer for purposes of furthering its business.6 1. 229 N.W. 438 2. Id. at 439
4. 27 S.W.2d 600. 5. Id. at 603-604.
6. Id. at 604.
Mike Lynch has more than 30 years of experience in workers’ compensation law. Prior to Beacon, Mike was a partner at Higgins, Cavanagh & Cooney where he practiced primarily in the area of workers’ compensation defense. 21
Michael Lynch, Vice-President, Legal, Beacon Mutual
GOVERNMENT AFFAIRS CORNER
Protect Your Industry! The theme at the 2019 Legislative
Conference of the Independent Insurance Agents & Brokers of America was “PROTECT YOUR INDUSTRY”. This is very important at the national and the state levels because we practice in such a highly regulated business. We are constantly under attack by various groups seeking legislative or regulatory changes that would be harmful to agency customers, raise premiums, be detrimental to the insurers or be overly burdensome to agency operations. I’m urging all agency principals to make a $250 contribution (Silver level) to IIARI PAC today. If you’ve made a contribution in the last 12 months please consider adding to it. If you haven’t contributed in the last two years please do so. Even $100 (Bronze level) from every agency owner would be extremly helpful, any amount is better than not helping us protect you. The competition for the attention of legislators at the State House is intense. All you need to do to monitor the situation is to Google RI body shop political contributions, and you’ll read articles in the Providence Journal describing how individuals associated with local body shops contribute tens of thousands of dollars to legislative leaders in a single year. The body shops have been able to get over a dozen bills passed the past ten years, overriding insurance companies. These bills require insurers to use OEM parts on vehicles less than five years old, ban the use of photos for damage appraisals and much more. These provisions make Rhode Island an outlier compared to other
states which shows how powerful a well-funded message can be. The trial lawyers currently pay a lobbyist about $75,000 a year to work the halls of the state house. We need to compete otherwise we are going to getrun over like road kill. The trial lawyers attempted to pass legislation that passed one chamber of the legislature the last two years that would ban insurers from using credit, age, gender, marital status or vehicle usage in the rating of auto insurance. If this bill were enacted the auto insurance market would effectively collapse in Rhode Island. The trial lawyers were the same political group that got mandatory liquor liability passed in 2017. The original version of the bill required liability limits in an odd amount not available in the marketplace ($500,000 bodily injury and $150,000 property damage). The original language of this bill required 30 days advance notice of policy termination (impossible to do when a policy is canceled for non-payment). Agencies that issued certificates of insurance would have been responsible for issuing the 30-day advance notice of termination. Luckily, we were able to get the bill amended. Attorney General Peter Neronha submitted legislation last year which would have subjected the insurance industry to an additional layer of statutory sanctions. This bill would have wiped out the statutory designation of the DBR being the sole enforcer of insurance laws and deceptive acts for the insurance industry. The attorney general would have also had jurisdiction. The attorney general’s office has no detailed knowledge of insurance industry practices and no knowledge of NAIC’s national standards. The insurance industry (including IIARI) was able to get the DBR’s sole designation restored in the final version of the bill. The bill ultimately did not pass but we would have been protected had it passed. Being able to attend political fund raisers allows us to get our message out. State Agencies will be on the front lines this year with a multitude of bills that will be introduced concerning data privacy. Agents are in a precarious situation because it’s required that we obtain personal information from customers to do our job. We are required to pass this data to insurers and often must use third party service providers
Robert J. Pettinicchi, Chief Ernest Lending Shaghalian, officer, Jr., CPCU, AAI Insurbanc Affairs Committee Chairman Government
(agency management vendors and rating vendors) to transmit the data. We only use the data for the intended purpose however we have no control over the sale of the data by insurers or the security provided by third party service providers. Just think of a “CLUE” report. A consumer has a claim and the whole world knows about it and many times the information is incorrect to the detriment of the consumer. On January 1 2020, the onerous California Consumer Privacy Act took effect. A version of the bill was introduced in Rhode Island in 2019 and I’m sure it will be back this year. This law will require consumers be granted access to all their data, be allowed to opt out of the sale of their data, and be allowed to delete certain data. This law would allow consumers to sue a business for a violation even if there were no damages. I’m wondering how an agency could comply with these provisions when the insurers don’t tell us what they do with the data? The Department of Business Regulation is expected to reintroduce their NAIC generated Insurance Data Security Act which would require agencies to
institute very expensive and ambiguous technology measures. The bill would require agencies to ensure third party service providers met the technology/ security standards even though the third parties are not bound by the law to comply. There is a House Legislative Commission that has been meeting for two years, the Online Data Transparency and Privacy Commission which will be expecting to get legislation passed this session which will be aimed at data brokers. Agencies are not data brokers but we might be responsible for the provisions because we provide data to insurers and we don’t have any control over what happens to the data after we do what’s required of us, to do our job. We are constantly battling legislative grenades tossed our way by various factions. A vibrant, wellfunded PAC allows us to get our message out, to confirm we are treated fairly as small businesses so we don’t get out gunned and bombed out of existence. Please make a contribution to IIARI PAC (Only personal checks can be accepted).
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Marketing & the 2020 Elections “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” This old adage from marketing pioneer Jon Wanamaker, a
successful merchant who built what would become Macy’s, still has merit today. None of us know the secret formula of what works, but we can make informed decisions based on data, proven strategies, and just good old fashioned follow through. But, If you’re the 10th richest person in the world who started his business from scratch, then you know a little something about business. I’ve often found it hard to contradict very successful billionaires on their marketing strategy, and I take notice of their tactics. So, we’re going to take a page right out of Michael Bloomberg’s playbook. Whether you like him or not, or think he will win or lose, that does not matter for this discussion.
2. Spend the majority of your budget on TV. That’s right, that old advertising medium is still number one, and it’s not going down, but up. At the beginning of January 2020, an estimated $540 million has already been spent on political ads in this presidential cycle. 3. It’s TV, Google, then Facebook (in that order).
If you could spend $1 billion dollars to either elect yourself or promote your cause, how would you spend it? And if you had the very best consultants and marketers that money could buy, what would they do?
To date, Bloomberg has spent $193 million on TV. He’s also spent $16.1 million on Google ads and $6.8 million on Facebook. According to the billionaire’s playbook, you should allocate 90% to TV, 7% for Google, and 3% for Facebook. For smaller budgets, I’d probably scale it back to 75% TV, 15% Google, and 10% Facebook.
1. Announce yourself in a video. The days of the big rally to announce someone’s candidacy has been distilled into a 2-3 minute video. So, if you’ve ever thought about doing a video to tell your story, you can see it’s a proven method.
The reality is that we don’t always know which of your advertising methods will work. We just know that overall it all works together. However, your best course is to apply proven and well thought out strategies. The best marketing today is targeted and tailored, but generally speaking here’s what I think you should do. 1. Update your website, not just your design but take a look at your SEO. Your website should have a new look about every 3 years. It doesn’t need to be a complete rebuild or redesign, but it needs to be freshened up.
John Houle JH Communications
John Houle is the president of JH Communications, a marketing-communications agency in Providence RI specializing in the insurance industry. He can be reached at 401.831.6123 or at firstname.lastname@example.org. Winter 2020
2. Produce videos. Make a video about your agency and additional videos about specific coverages. You can create profile videos about your staff and you can inform your clients about specific policies you provide. Video production doesn’t have to be expensive if you plan out your shoots. 3. Read your reviews and ask your friends for help. You will inevitably get some bad reviews so prepare for the hit by loading up with positive reviews. And return the favor to your friends who ask you to do the same. 4. Email out your message. Give people what they’re looking for about your agency. Don’t sell them
but inform them. You first need to invest in the time upfront to build good marketing lists and segment those lists into different categories. 5. Go all in on social media or get out. You should be in social media if you’re a business but if you haven’t updated your account in 6-months or a year then get out. Prospects will judge you based on how engaged you are, and you don’t want to be perceived as only doing something part of the time. Perception is reality. 6. Air your message. If you have the budget, go on your local broadcast affiliate - CBS, NBC, ABC, Fox. You will still receive the biggest value for your advertising dollars, reaching the largest audience. If you are in a specific geographic area, Cable TV is a good option. Plus, live sports, news and select cable programming will keep you top of mind. Following the Bloomberg model, make sure you also put your message out on Google and Facebook. 7. Have a plan. Whether you’ve hit the ground running this year or you’re still deciding how to allocate your marketing dollars, have a plan that takes a reasonable percentage of your adjusted gross income to market your business. Plan your message and tactics, and stay flexible with your budget and marketing activities to boost what’s working and cut what’s sputtering.
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RHODE ISLAND EMERGING LEADERS
2020 Notes As the calendar turned from 2019 to 2020 I was left pondering what does it mean to be an An EventLeader” Horizon “Emerging within our industry and what effect can
we have on our industry and communities as a whole. Being born in 1980 I am too young to be Generation X, but also too old to be considered a millennial so I fall somewhere in the middle as a member of Generation Y . Like most people of my generation when we need to find something I look to the internet for the answer. The definition of “Emerging Leader” according to my favorite search engine is: “Emerging leaders are smart and talented high-achievers in their current roles. They consistently produce more and better work than their peers, are considered subject-matter experts, and know how to attain results by their own accord and through others. They are driven to accomplish great things.” That definition has come to describe many people I have met in my 15+ years in the industry but the line that stood out to me most was the last line “they are driven to accomplish great things”. So my challenge to everyone this upcoming year is to do just that, DRIVE TO ACCOMPLISH GREAT THINGS! Looking ahead in 2020 we have many great events and networking opportunities to look forward to. The first event will be our Kick Off & Winter Social Event, which I hope everyone can attend. We also have other events in the planning stages that will support our mission as emerging leaders and will support our charitable endeavors. So I will repeat my line from last issue which was get involved, be involved, and stay involved. 2020 is shaping up to be a great year I am looking forward to accomplishing great things.
2000–Today: New Silent Generation or Generation Z
1980 to 2000: Millennials or Generation Y
1965 to 1979: Generation X
1946 to 1964: Baby Boomers
1925 to 1945: The Silent Generation
1900 to 1924: The G.I. Generation
Timothy Mailloux Emerging Leaders Chair
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