April 10, 2017 by C Acunto

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Contents

April 10, 2017 | Volume 128 Number 7

In the Associations: PIANY to Present LIRAP Distinguished Insurance Service Award to Keep ISO Launches Market Landscape

In the News: MSO Announces Promotion of Townley

Guest Opinion: ObamaCare Subsidies Rob the Middle Class Alieta Eck, M.D.

Guest Article Top 10 Causes of Liability Losses Include Bedbugs, Crashes and Defective Products

16 Up in Smoke…Legalized Marijuana Costs

On My Radar: Pay Before Accident to Reinstate Cancelled Policy Barry Zalma

[FEATURES]

Looking Back: April, 1992

Courtside: Insurer Waits Until After Traverse Hearing to Issue Disclaimer Based on Failure to Cooperate; Too Late, Court Holds Lawrence Rogak

Classiﬁeds

Homeowners

Foreword: Five Regulations That Need to Change Steve Acunto, Publisher

On the Level: Coming To You From… Jamie Deapo

Life: The Time is Now for New York to Join the Interstate Insurance Product Regulation Compact Mary A. Grifﬁn

[A D F E ATUR E S ] 13

IIABNY: Why IIABNY?

Guest Opinion: ObamaCare Repeal vs. Reality Jane M. Orient, M.D.

MSO: Get the Lead Out

NAIFA-NYS: Why Carriers Need NAIFA

The Social Notebook: Instantly Grow Your Instagram Chris Paradiso

info@insurance-advocate.com www.insurance-advocate.com INSURANCE ADVOCATE / April 10, 2017 3

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[ FOREWORD ]

STEVE ACUNTO

Five Regulations That Need to Change uThe administration is undoing regulations at a good clip. The clip and the clipping need to move quickly while the momentum is there. Rob Wilson, President of Employco USA and an employment trends expert has communicated some valid points along these very lines: recent employment numbers have cheered Americans with 235,000 new jobs added in February in sectors which have been paltry in the past, such as jobs in the private sector, construction and manufacturing. Wilson has five suggestions that we endorse for strengthening the economy: 1. Remove President Obama’s overtime law. This rule puts a huge financial burden on many small businesses, according to Wilson. 2. Replace Obamacare. “President Trump needs to remove the mandate on individuals and employers, as well as reduce the amount of governmental oversight (including the elimination of Forms 1094 and 1095),” says Wilson. “He should also allow employers to change employee eligibility back to 40 hours per week. And this is crucial: He needs to open up interstate insurance sales, as well as cancel the Cadillac tax.” 3. Establish six weeks of paid family leave benefit (maternity and paternity). “This will set a simple standard for all companies to follow.” 4. Lower the business income tax to a target 15%. “Doing so will help promote job growth and business stability.” 5. Stagger the federal minimum wage increase, reaching $10.00/hr in January 2021. “This will narrow the gap between cities/counties bordering municipalities with higher minimum wage, which will help prevent company moves and give consumers more money to spend.”

Stagger the federal minimum wage increase, reaching $10.00/hr in January 2021. “This will narrow the gap between cities/counties bordering municipalities with higher minimum wage, which will help prevent company moves and give consumers more money to spend.” MSO, Inc. (The Mutual Service Office, Inc.) continues to grow and to promote from within—generally a healthy characteristic in an organization with a niche concentration, such as MSO. Megan Townley has been advanced to the position of Director of Operations and Project Management of the 73-year-old insurance services powerhouse. Megan joined MSO in 1998 as Network Administrator and has held various positions including IT Manager and Manager of Marketing and Operations. She led the development efforts for the MSO Forms and Manuals Database. In addition, she led the development and implementation of the MSO cloud environment which provides staff anywhere/anytime access to information and tools to do their jobs. Ms. Townley has a Bachelor of Science Degree in Biomedical Sciences from Texas A&M University. According to MSO CEO Jan Scites, “Megan has been instrumental in helping MSO build its national footprint in the P&C industry. She is a very valuable member of the team.” Good luck, Megan….and same to John Mina, new President of Risk Strategies Company, a privately held, rapidly growing national insurance brokerage and risk management firm with an ambitious agenda for expanding. John joins Risk Strategies after over two decades with Willis Towers Watson, where he most recently served as Head of Corporate Risk & Broking, Atlantic South Region. He began his brokerage career in 1989, working with Marsh McLennan in the New York City office.[IA] 4 April 10, 2017 / INSURANCE ADVOCATE

VOLUME 128 NUMBER 7 APRIL 10, 2017

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Kelly Donahue-Piro Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Director of Operations and Creative Services Gina Marie Balog 914-966-3180, x113 g@cinn.com EDITORIAL ASSISTANT COPYEDITOR & PROOFREADER Maria Vano mariavano9@gmail.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x111 circulation@cinn.com PUBLISHED BY CINN Media, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 613-1595 www.cinn.com | info@cinn.com President and CEO Steve Acunto

CINN MEDIA, INC.

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in July, August, September and December by CINN ESR, Inc., 22 Bedford Road, Greenwich, CT 06831. Periodical postage paid at Greenwich, CT and additional mailing ofﬁces. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $135.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2017. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Ofﬁce.

For high-quality article reprints (minimum of 100), including digital rights, contact Gina Marie Balog at g@cinn.com or call 914-966-3180, x113

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[ON THE LEVEL]

JAMIE DEAPO

Coming To You From…. uDo you know where I am writing this article from? I could be writing it from my office at IIABNY. Maybe I’m doing it from my home office. I like to spend time at Starbucks drinking coffee and writing, so maybe it was written there. I love visiting Vermont, so for all you know I’m writing it in my hotel room late at night after a day of visiting my favorite places and doing a little shopping. Do you really care where it was written? Would it be any better or more important to you if I had written it in my office? The important thing is it’s written and you can read it and hopefully get something out of reading it. So what’s the point? The point is the same thing applies to work you do for your insurance clients. They don’t care where it’s done and when. They just want what they need, when they need it and they don’t care where it was done and by whom. Independent agents currently have a significant need for qualified staff to handle their work. Unfortunately you are finding it harder than ever to find interested and qualified candidates. The current incoming workforce that everyone likes to identify as millennials really doesn’t show much interest in working in an insurance agency. Even when you do find someone, you are looking at 18 months of training before they can be a fully functional employee. This shortage is everywhere but even more pronounced in small towns and rural areas where the labor pool is limited. A recent article cautioned the workforce crisis will be even more pronounced in smaller agencies with aging staff in their 50s. Agencies that haven’t embraced technology and social media will find themselves struggling to compete for talent. I don’t really think how big you are or where you are located matters—everyone is struggling to find quality help. The solution to the problem is experienced remote staffing. That’s right— remote staffing. Remember what we said previously. Clients don’t care where their work is done and by whom. They just want what they need, when they need it and done correctly. 6 April 10, 2017 / INSURANCE ADVOCATE

The current incoming workforce that everyone likes to identify as millennials really doesn’t show much interest in working in an insurance agency. Even when you do find someone, you are looking at 18 months of training before they can be a fully functional employee.

Jamie Deapo is AVP of Membership & Member Programs for IIABNY and is an approved CE instructor in New York. Prior to being with IIABNY, he was an independent agent in the Syracuse area for 15 years. Jamie started his career in 1972 working for insurance carriers, and he has held various underwriting and marketing positions with several national as well as regional companies. He is a past president of the Independent Insurance Agents of Central New York and served on the board of directors of IIABNY.

If you need experienced full or part time staff to handle back office tasks, processes or customer service, Work At Home Vintage Experts (WAHVE) has the answer. They can provide experts with decades of experience ready to fill your needs. Their candidates go through a thorough interviewing and skills assessment process ensuring they possess the right skills and knowledge to meet the needs of the job. Being presented with a qualified candidate is great, but there’s more. You only pay a fixed hourly rate based on your full time or part time staffing needs. No need to deal with taxes, employee benefits and other payroll issues. The benefits are even sweeter if you’re an IIABNY member. Your membership entitles you to have the $2500 setup fee waived. Although the industry is working on bringing more candidates in, the solution is down the road. Even if you are lucky enough to hire an entry level employee, they need to be trained. The person training them will need support for their workload, which is going to just make your problem larger. The independent agency business is evolving rapidly. Finding, hiring and training new staff is going to be an issue for some time into the future. Technology has made it possible to fill your staffing needs using remote staffing. WAHVE has the qualified candidates to meet your imme-

diate workflow and service needs. Don’t wait! Give me a call and I’ll help you get the ball rolling.[IA]

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4310 Greeting Card Dealer 7390 Beer/Ale Dealer 7999 Hardware Store 8018 Wholesale Store/NOC 8021 Meat, Fish Dealer-Wholesale 8032 Dry Goods, Clothing, Shoe 8047 Drug Store 8048 Fruit & Vegetables 8111 Plumbers Supplies Dealer-Wholesale Restaurant

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9061 Clubs 9071 Full Service Restaurants 9072 Fast Food Restaurants– Including Drivers 9074 Bars & Taverns Social and Health Services 8854 Home Health Care – Prof. Employees 9051 Home Health Care – Non Prof. Employees 8857 Counseling – Social Work – Traveling Oil and Gas Dealer 5193 Oil Burner Installation 8350 Fuel Oil & Gas Dealer 8353 Gas Dealers, LPG & Drivers

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[ LI F E ]

M A RY A . G R I F F I N

The Time is Now for New York to Join the Interstate Insurance Product Regulation Compact uLife insurers offer a wide array of products, including many designed to provide financial security to people who are planning for retirement. In today’s rapidly evolving world, life companies are continuously working to bring new products to the marketplace. To do so, each new product needs regulatory approval. Insurance companies can get these products approved and into the market in 44 states and Puerto Rico through a single point of contact called the Interstate Insurance Product Regulation Compact (Compact). The Commission operates a streamlined system of product form filing that allows insurers to have a single point of filing for approval of insurance policy forms. It was created several years ago by the National Association of Insurance Commissioners (NAIC), the national organization that establishes standards and best practices for the insurance industry. Unfortunately, New York is not one of the states that participates in the compact. That means that for an insurance company to sell a new product in New York, companies must go through an entirely separate approval process. Simply put, it means companies need to invest more time, more money and more effort to get the same product that is offered in other states, to New Yorkers. To make matters more pressing, these long-term, investment-oriented insurance products compete directly with other retirement and estate planning instruments that are sold by banks and security firms that already use a more streamlined product approval process. Thus, an unlevel playing field has been created in the financial products market place. By joining the Compact, New York consumers would clearly benefit, however, they would also remain protected. States that enact the Compact appoint a member to the Commission, which has, and con8 April 10, 2017 / INSURANCE ADVOCATE

To make matters more pressing, these long-term, investment-oriented insurance products compete directly with other retirement and estate planning instruments that are sold by banks and security firms that already use a more streamlined product approval process. Thus, an unlevel playing field has been created in the financial products market place. tinues to, develop standards to review life insurance products. States with large premium volume, like New York, also become part of the Management Committee of the Commission, ensuring New York has a strong voice on the Commission. In addition, the system allows a state to opt-out of authorizing the sale of any product in NY that they might not fully endorse. Joining the Compact is one of LICONY’s top legislative priorities for 2017 and legislation has been introduced in both houses of the State Legislature to make it a reality. Senator James Seward is sponsoring a bill in the Senate (S.426) and Assembly member Aravella Simotas is carrying the same bill in the Assembly (A.4973). The bill has passed the Senate for seven consecutive sessions, under both Republican and Democratic leadership. LICONY will advocate for passage of both bills because this bill is a win for consumers, insurers and regulators.[IA]

Mary A. Griffin is the President and Chief Executive Officer of the Life Insurance Council of New York, Inc. LICONY is the principal voice of the life insurance industry in New York. LICONY works to create and maintain a legislative, regulatory, and judicial environment that encourages its members to conduct and grow their life insurance businesses here in New York State. For stories about New Yorkers who have benefitted greatly from purchasing the products of life insurers, go to www.licony.org, and click on “Published Articles” in the NEWSROOM box on the homepage.

Looking to buy, sell or hire, merge, sublesse, or simply promote an agency or product?

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EFFECTIVE IN MORE WAYS THAN ONE! For more information, call Gina Marie Balog at 914.966.3180, x113

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This material is for producer (agent and broker) use only. It is not intended for the general public. ShelterPoint is a registered Service Mark. All images licensed through iStockphoto.

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[ G UEST OP I N I O N ]

J A N E M . O R I E N T, M . D .

ObamaCare Repeal vs. Reality uThe attempt by House Speaker Paul Ryan and other powerful Republicans to “repeal and replace” the Affordable Care Act (ACA or “ObamaCare”) has run into a buzz saw of opposition from both sides. Most proponents of the American Health Care Act (AHCA) concede that the Act is “not perfect.” But there is “political reality” to consider—what can make it through the congressional sausage-making machine? Already Congress is telling us the most important consideration for them: staying in power. The 2018 election will be a “bloodbath” for Republicans if AHCA is not passed—or else if it is passed. The outcome of the midterms supposedly depends on how unhappy the American people are. But the political reality is that the happiness of the donor class is far more important. Most of the donor class resides in the Swamp. Perhaps the best thing to say about AHCA is that it has the right enemies: the AMA, big hospitals, and some big insurers (who all favor ACA). Leaving aside political reality and looking at actual reality, these are some facts: It is very difficult to take away an entitlement, and ObamaCare entitlements have had seven years to take root and spread. And while the media will be focusing on sad stories, the real losers with clout are not sick and dying individuals but the hospital/Pharma/managed-care cartels. Coverage is not the same thing as care. Denizens of the Healthcare Swamp adroitly confuse the two. Coverage often blocks care, as with narrow networks, and inevitably drives up the cost. Government cannot provide care. Increasingly, it cannot even finance care, as governments at all levels are mired in deficit spending. Its programs forcibly redistribute a decreasing pool of assets. Guaranteed issue (no “discrimination” against people with preexisting conditions) is not insurance. It destroys insurance; low-risk individuals will not buy it unless forced to do so. Ohio Governor John Kasich said, “We cannot turn our backs on the most vulnerable. We can give them the coverage,… and make sure that we live in a country where people are going to say, ‘At least somebody is looking out for me.’” In fact, Gov. Kasich, your congressman, 10 April 10, 2017 / INSURANCE ADVOCATE

the CEO of UnitedHeath Group, CareSource in Ohio (probably the chief beneficiary of Ohio’s Medicaid expansion), or the AMA are not looking out for you— but don’t mind using you to promote their own interests. The Medicaid expansion brought in far more new enrollees than the 5.5 million predicted, including 11.5 million able-bodied adults. Since resources for providing care were not expanded, funds are being diverted from the disabled and needy. AHCA does not get rid of the basic flawed premises of ACA. Arguably, it cements them further. But is it a step in the right direction? The answer to that question ultimately depends on whether it permits a free market to develop outside the comprehensive managed third-party pre-payment NON-insurance model. If it has competition, that model will fail, and vast resources now diverted to the rapacious Healthcare Swamp will be freed up for actual care. The question is not whether people will “lose coverage.” According to the Congressional Budget Office (CBO) analysis, most of the increase in the number of uninsured “would stem from repealing the penalties associated with the individual mandate. Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.” In other words, millions of Americans see ACA insurance as such a bad deal you have to force them to buy it. They would choose to reject it. There are a few good features and many bad ones in AHCA. Tax “credits” are subsidies if people don’t owe taxes. But if credits refund payroll taxes, ending discrimination against people who buy their own coverage, that’s a step toward fairness and freedom. So is the liberalization of health savings accounts—especially if people have savings because they are freed from requirements to buy expensive comprehensive coverage, and to pay for people who decline to purchase insurance as long as they are healthy. The AHCA penalties for failure to maintain continuous coverage—like those in Medicare Part B—would help to discourage

Jane M. Orient, M.D. obtained her undergraduate degrees in chemistry and mathematics from the University of Arizona in Tucson, and her M.D. from Columbia University College of Physicians and Surgeons in 1974. She completed an internal medicine residency at Parkland Memorial Hospital and University of Arizona Affiliated Hospitals and then became an Instructor at the University of Arizona College of Medicine and a staff physician at the Tucson Veterans Administration Hospital. She has been in solo private practice since 1981 and has served as Executive Director of the Association of American Physicians and Surgeons (AAPS) since 1989. She is currently president of Doctors for Disaster Preparedness. Since 1988, she has been chairman of the Public Health Committee of the Pima County (Arizona) Medical Society. She is the editor of AAPS News, the Doctors for Disaster Preparedness Newsletter, and Civil Defense Perspectives, and is the managing editor of the Journal of American Physicians and Surgeons.

system gaming. However, any credits must go to patients, not third parties. And the government needs to stop dictating the terms of voluntary insurance contracts, including premiums. Freedom is possible only if people are responsible. The worst feature of AHCA is perpetuating the myth that “non-discriminatory” coverage for pre-existings is insurance rather than a pipe dream. We can hope that AHCA, if properly amended, might be a wedge of freedom rather than a way station on the road to a full crony capitalist/government takeover. The ultimate goal must still be the restoration of a free market. We need to get rid of the subsidies, mandates, and regulations that stand in the way, feeding the Swamp and propping up ObamaCare. ACA needs to die. The unshackled free market needs to kill it, before or after Congress repeals every last word.[IA]

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[ T H E S O C I A L N OT E B OOK ]

C H R I S PA R A D I S O

Instantly Grow Your Instagram uInstagram has become a huge element of branding in the digital marketing arena in the past years, therefore it’s critical to take advantage of advertising using sponsored content on this social media network. Sponsored content falls into three categories on Instagram: photo, video, and carousel. Photo advertisements are the traditional still images that Instagram is known for. The only difference between this and user generated photos is that sponsored content includes the word “Sponsored” under the username of the post. It’s also important to stand out, and video advertisements create notable atten-

tion by adding sound and motion; additionally, a 60-second or less video (in horizontal or vertical format) can be shared. Lastly, carousel advertisements are similar to photo advertisements; however, these ads allow the user to swipe left to see more images on the post. User engagement is important in the social media world, so it’s important to use sponsored content as a milestone in branding. 12 April 10, 2017 / INSURANCE ADVOCATE

Sponsored Content on Instagram Works for Anyone First off, advertisements on the app are native, meaning they won’t be disruptive when users are trying to engage with the platform. All of the ads have the same format and size which keeps things consistent. Therefore, your sponsored content will mesh well with organic content when displayed on the user’s feed. Sponsored content isn’t bothersome like an advertisement on a website or YouTube. For example, an advertisement that pops up to interrupt media can often discourage someone, and they’ll back out of the content they originally wanted to view. However, the only time a user will be aware of sponsored content on their Instagram feed is when they notice content from a page they aren’t following on their feed, or when they observe the “Sponsored” text on the post. Additionally, Instagram also now offers different call-to-action buttons with each ad. Agencies can now include tabs such as “Learn more,” “Shop now,” or “Download” in their posts to get users to engage with content outside of Instagram’s platform. These new tabs make it easier to promote an app and encourage website traffic.

Christopher Paradiso, CPIA , is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center. In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies to not only survive, but compete in today’s complex online marketing world. Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

Facebook’s ownership of Instagram’s ad space also allows advertisers to have more control over what is being advertised and to whom. For example, you can target age, gender, and specialized interests within the demographics section of Facebook’s Ad Creator. Furthermore, in recent months Instagram launched a new addition to its app known as “Business Tools.” This allows users to turn their personal Instagram account into a business one. When a business account is created, a new contact button is added to the page, which allows users to call, text, email, or get directions to the business by using apps outside of Instagram on their smartphone. Moreover, Instagram’s Insights allows agencies that have a business profile to view engagement statistics, who’s engaging in what, at what time, and at what location. Instagram also provides Business Tools and Insights free to anyone who has an Instagram and Facebook profile. This is particularly beneficial for small businesses, independent freelancers, or agencies who may not have it in their budget to pay for analytics or platforms that can publish content. CONTINUED ON PAGE 14

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WHY Y IIA ABNY? Only IIABNY gives you access to the Trusted ChoiceÂŽ brand: logo, shareable content, personalized vid deos, New mem mbers receive up to $1250 thrrough the Marketing Reimbursement

YOU BEL LONG WITH IIABN NY. IIABNY is THE trade association for independent insurance agents and brokers in New York.

Contac ct Jamie Deapo jdeapo@iiabny.org 800-962-7950 ext. 232 iiabny.org/join d

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[ T H E S O C I A L N OT E B OOK ] CONTINUED FROM PAGE 12

Instagram Communities Instagram is populated with hundreds upon thousands of communities, meaning marketers, advertisers, and businesses can

ator, but the content can also become associated with your agency’s brand. In fact, many users (particularly millennials) report using user generated content to influence their consumer decisions. Additionally, businesses can also use spe-

Instagram is actually also a great platform for giveaways too. It has very few rules to start a promotional giveaway, and contests are an excellent way to get different communities engaged with content. Additionally, contests that are the most successful in fostering brand awareness are those that: 1. Require a user to tag a friend in the comments of the contest post, or 2. Require users to post a photo or video with the business mentioned or tagged onto their personal Instagram. Not only does this cause a multitude of engagement, but it’s essentially free marketing. It also builds a great relationship with users, because a giveaway represents giving back to the Instagram community.

Content Matters

now pinpoint demographics by engaging with other profiles that share common interests. For instance, a business may use content from another user (with permission) that’s relevant to their business brand and tag the original creator in the post. Not only does this generate exposure to the original cre-

14 April 10, 2017 / INSURANCE ADVOCATE

cialized hashtags to engage with a particular community on Instagram. For example, HP and Lucasfilm teamed together to promote the new Star Wars film and created the #AwakenYourForce tag. Users who engaged with this tag would be entered for a chance to win movie tickets and a notebook computer.

On Instagram, content really does matter. Its sole platform is based on visual content; therefore, it’s important to share something that’s aesthetically appealing and follows the rules of design. Moreover, there is a greater response to quality content rather than content of great quantity. Sure, an agency can gain engagement from pushing out content daily, but it may lose views or likes simply because of poor design. In fact, both organic and sponsored posts receive about half the engagement of those that are well designed; in other words, user engagement increases when content has well designed visuals over content that is posted with less thought or creativity. On the other hand, visual appeal isn’t the only factor in an engaging post. It’s also about the actual content being shown. Whether it be a picture of a car or a video of an office set-up, it’s important to know the audience you’re engaging with. For example, a majority of Instagram’s sponsored content is geared around fashion, making up for over 500,000 different posts on the platform to date. Meanwhile, sponsored content of pets receives the most likes on average, followed by fashion, sports, food, and fitness. Therefore, understanding the subject matter is just as important as clear and concise design elements. Overall, sponsored content on Instagram can and does work. It all comes down to understanding the audience, aesthetics, and effort. The more time an agency puts into making thoughtful and creative content, the more engagement and exposure they will receive.[IA]

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ADVERTORIAL

Get the Lead Out LEAD POISONING is a serious health hazard, especially for young children. Helping clients understand the hazards of, and their possible liability for, injuries from lead poisoning is another value-added service of the professional insurance agent. The most common sources of lead exposure are lead-based paint and lead dust in older buildings. Some toys also include lead, especially those manufactured outside of the United States. On a national basis, lead-based paint was banned from residential buildings in 1978. All houses built before 1978 are considered by the Centers for Disease Control (CDC) to have at least some lead-based paint (www.cdc.org). New York City was ahead of the curve, banning use of lead-based paints in residential buildings in 1960 (www1.nyc.gov). Lead exposure can also come from industrial processes such as refining and smelting. As witnessed during the recent highly publicized problems with drinking water in Flint, Michigan, water can be contaminated with lead from the pipes it passes through. The Flint lead problem was reportedly due to lack of anti-corrosion protection on the water pipes. Lead leached from older service line pipes into the water that was going to homes, businesses and schools. Eight thousand children were exposed to lead and other toxins. Lead poisoning causes irreversible damage. Even small amounts can result in serious health effects, and in extreme cases lead poisoning can be fatal. There are treatments to lower the blood level of lead, but no cure for the effects of the poisoning. Children under the age of six are especially sensitive to lead poisoning (www.mayoclinic.org). In children, lead exposure leads to cognition and behavioral problems. In adults, lead exposure damages vital organs, and in pregnant women it can lead to reduced fetal growth. The economic impact of childhood lead poisoning is staggering, in both health and other costs. The problem of lead exposure and poisoning has decreased since leadâ&#x20AC;&#x2122;s use has been curtailed, but it is not gone altogether. The estimated long term social costs to Flint of the lead poisoning, including reduced productivity due to

potential lower IQs of those affected, as well as years of health issues, exceeds $458 million (www.time.com). Lead poisoning is believed to be even more of a problem in other cities, such as Cleveland (www.nytimes.com). The CDC estimates that 11% of households with children (over 4.2 million) are potentially exposed to harmful lead levels. Children with high lead levels require special, more costly education. Blood levels over one microgram per deciliter of blood result in measurable IQ impact. More than 12 million children in the United States had levels above this threshold in 2010. They are projected to suffer a $45 to $99 billion loss in lifetime productivity associated with this exposure (www.cdc.org). Lead poisoning has also been linked to increased crime. It is estimated that the decrease in crime may be due to the reduction of lead in the atmosphere, with the elimination of leaded gasoline in the 1970s under the Clean Air Act. Studies show that lead exposure impacts the region of the brain dealing with aggression (www.motherjones.com). Most insurance policies contain specific exclusions for lead, including testing for its presence as well as its removal. Numerous court cases have upheld these exclusions. This makes it even more important for anyone with a possible exposure to be sure to clean up and contain any lead, as the cost of doing so, and the cost of defending and paying any claim, would very likely not be covered under insurance. Numerous federal regulations are directed to lead in air, water, paints, dust

and soil. For example, lead in drinking water is addressed in the Clean Water Act as well as the Safe Drinking Water Act. The Clean Air Act regulates lead in the air (www.epa.gov). The Consumer Products Safety Commission (CPSC) currently has over 250,000 recalls for products that contain lead. Most of the recalls involve childrenâ&#x20AC;&#x2122;s toys and jewelry, as well as water bottles (www.cpsc.org). Cleaning up lead is neither easy nor cheap. Contractors who perform renovation, repair or painting (RRP) projects, or those who perform other lead-based paint activities such as abatement, inspections and risk assessments on buildings built prior to 1978, must be properly trained and produce the appropriate certificate. Collection of such information is a key component in the underwriting process. There are separate requirements for RRP and abatement activities. Lead poisoning represents a significant health hazard, with claims and related costs resulting in the millions of dollars. Helping clients protect themselves against the dangers of, and their potential liability to others for, lead exposure is another sign of the true insurance professional.

139 Harristown Road Glen Rock, NJ 07452, Suite 100 (800) 935-6900 www.msonet.com INSURANCE ADVOCATE / April 10, 2017 15

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Up in Smoke… Legalized Marijuana Costs Homeowners BY S E A N M AH E R , CO - F O U N D E R O F S W Y F F T

A hash lab exploded and fire spread through the apartment in midtown Ventura last month. The blaze started in the kitchen when the butane ignited in the secondstory flat. A similiar incident in Colorado Springs in September caused “extensive damage” to a duplex, also making its way to the attic of a nearby home. Thanks to the legalization of marijuana in 26 states and the District of Columbia, impresarios of this nature are cropping up everywhere. And lawmakers are hot on their heels with new amendments to regulate production. From July 2015, hash oil extractions using combustible gas or an open flame are now considered a class two felony in Colorado, with a charge of up to 16 years in prison. These operations are having a big impact, not only for the DIY home producers, but lawmakers, fire departments, and the insurance industry, too. A multi-billion dollar marijuana industry has led to a rise of indoor marijuana farms, amateur home labs and a growing ecosystem around this. New businesses seek insurance, as do small home oper16 April 10, 2017 / INSURANCE ADVOCATE

ations and recreational or medical users. Insurers that fork out for damages at the hands of some of these operations are forced to reevaluate the market and liability. So what does the rapid growth of the marijuana industry mean for homeowners and how can insurers protect these people?

AN EXPLODING MARIJUANA INDUSTRY In 2016, the legal marijuana industry value is expected to hit $7.1 billion. This is a lucrative market and it’s attracting a new labor force to parts of the country impacted by legislation. This means increased demand for real estate. In 2015, Denver reported an annual increase in home prices of 10%. And for industrial buildings that meet grower regulations for approved operations, the rent is rocketing. The legalized marijuana industry is a multifaceted network with growers, sellers and distributors, along with an infrastructure of electricians, construction workers, security and more, all working closely together and contributing to local economies. This is

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stimulating the housing market, but this increase in demand—at the same time— comes with problems. Homeowners are cautious about living close to marijuana operations, and as the phenomenon of lab explosions persists, it is causing people to be more wary. As amateur productions attempt to transition into larger scale operations, states like Colorado are witnessing major fire code violations at the hands of these new enterprises. According to Denver fire protection engineer Brian Lukus, these violations include overloaded electrical systems, noncompliant construction and unapproved equipment, with no certificate of occupancy. Businesses are required to have licenses approved by state and judicial agen-

New businesses seek insurance, as do small home operations and recreational or medical users. Insurers that fork out for damages at the hands of some of these operations are forced to reevaluate the market and liability.

cies and fire permits, with inspections to reduce the risks. However a burgeoning industry means a rise of new entrepreneurs trying their hand at marijuana productions, with a lack of expertise and enforced regulation leading to explosive results. So, who’s footing the bill for these exploding labs? As insurers haggle over damages, there is speculation that this will mean higher premiums for all to pay. And as business picks up, with new state legislation fueling the market, this is just the start of knock-on effects for homeowners.

DEVELOPING NEW HABITS AND RISKS IN THE HOME Between 2005 and 2015, some 8.6 million people in the US have stopped smoking cigarettes. This decline in tobacco smokers has been mitigated by a rise in marijuana smokers. A recent study in the British medical journal Lancet Psychiatry, revealed that 10 million more Americans smoke marijuana, compared to figures from 12 years ago. This brings the new total up to an estimated 31.9 million. The study also found the number of people using the drug on a regular basis, daily or near daily, has more than doubled, from 3.9 million to 8.4 million. In Colorado, the National Survey on Drug Use and Health revealed that the number of adults who had used the drug in the last 30 days went up from 7.6% in 2012 to 12.4% in 2014. However, in 2016 legalization in major states means the industry faces a potentially enormous uptick in numbers, which could also have implications on the risk of home fires. When it comes to the costliest damages of homes, fires are the leading cause of accidents initiated by humans. Smoking materials (meaning lighted tobacco products, not matches or lighters) cause five percent of an average of 365,000 home structure fires a year, clocking damages of around $7 billion, according to figures from the National Fire Protection Association (NFPA). For now, only time will tell if a climb in marijuana usage will correlate to a comparable increase in fire incidents across the country, and the impact this might have for residential fire safety and insurers.

HOW THE INSURANCE INDUSTRY IS RESPONDING As the fast-growing marijuana industry accelerates, expected to reach a value of $21.8 billion in 2020, insurers aren’t exactly fighting to provide coverage for these new businesses. The industry is legal under several state laws but not yet under federal law, which gives little incentive for insurers to jump on the bandwagon. But the industry will need protection; from the licensed marijuana farms growing milCONTINUED ON PAGE 30

INSURANCE ADVOCATE / April 10, 2017 17

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[ I N T H E A S S OC I AT I ON S ]

PIANY to Present LIRAP Distinguished Insurance Service Award to Keep uGLENMONT, N.Y.—The Professional Insurance Agents of New York State Inc. will present Johanna Keep, senior vice president of personal lines for CMS, LLC with its Distinguished Insurance Service award at the 42nd Annual Long Island Regional Awareness Program, April 26, 2017. The event will be held at Crest Hollow Country Club in Woodbury, N.Y. “Johanna is admired and respected by her peers and colleagues in the industry. This award recognizes her long-standing commitment to the insurance industry,” said John C. Parsons II, CIC, CPIA, AAI, president of PIANY. Keep has been in the insurance industry for more than 30 years, beginning in the sales division of Northwestern Mutual Life Insurance Co. She has been with CMS, LLC since 2014.

Participants also will have access to a sold-out trade show and networking opportunities throughout the day. The day’s events also will include two education sessions: JOHANNA KEEP Drones and Uber— Handling Emerging Risks presented by Cathy Trischan, CPCU, CIC, CRM, AU, ARM, AAI, CRIS, MLIS, in the morning. Errors & Omissions in the Cyber Age, also presented by Trischan, will be held in the afternoon.[IA]

“Johanna is admired and respected by her peers and colleagues in the industry.…”

[ IN THE NEWS ]

MSO Announces Promotion of Townley uGLEN ROCK, N.J.—MSO®, Inc. (The Mutual Service Office, Inc.) is pleased to announce the promotion of Megan Townley to the position of Director of Operations and Project Management. Ms. Townley joined MSO, Inc. in 1998 as Network Administrator and has held various positions including IT Manager and Manager of Marketing and Operations. She led the development efforts for the MSO Forms and Manuals Database. In addition, she lead the development and implementation of the MSO cloud environment which provides staff anywhere-anytime access to information and tools to do their jobs. Ms. Townley has a Bachelor of Science Degree in Biomedical Sciences from Texas A&M University. According to MSO CEO Jan Scites, 18 April 10, 2017 / INSURANCE ADVOCATE

“Megan has been instrumental in helping MSO build its national footprint in the P&C industry. She is a very valuable member of the team.” MSO is a national property and casualty MEGAN TOWNLEY rating service bureau, providing product development and rating services to the insurance industry since 1944. MSO has long been an industry leader, offering programs that are comprehensive and easy to use. MSO will work with companies to customize programs to meet a company’s marketing and underwriting requirements. For information on all of the programs and services offered by MSO, contact Sue C. Quimby, CPCU.[IA]

ISO Launches Market Landscape uISO announced the launch of ISO Market Landscape(TM), an interactive dashboard that allows insurance professionals across disciplines to visualize and benchmark their company's results with one of the largest property/casualty insurance databases in the world. ISO is a Verisk Analytics (Nasdaq:VRSK) business. ISO Market Landscape uses data visualization to benchmark insurer performance and identify specific segments and geographies with growth potential. Insurers can see where they are potentially underperforming or suffering from adverse selection and help find areas where they might expand their underwriting appetite. "To optimize their portfolios, insurers need actionable insights," said Beth Fitzgerald, president of ISO Solutions. "With ISO Market Landscape, insurance professionals can benchmark their performance and experience, identifying opportunities to improve growth and profitability." ISO Market Landscape is currently available for five lines of business: businessowners, commercial auto, commercial property, general liability, and homeowners. To learn more, visit www.verisk.com/ iso/marketlandscape. Since 1971, ISO has been a leading source of information about property/casualty insurance risk. For a broad spectrum of commercial and personal lines of insurance, ISO provides statistical, actuarial, underwriting, and claims information and analytics; compliance and fraud identification tools; policy language; information about specific locations; and technical services. ISO serves insurers, reinsurers, agents and brokers, insurance regulators, risk managers, and other participants in the property/casualty insurance marketplace. For more information, please visit www.verisk.com/iso.[IA]

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By Gregory V. Serio, NAIFA-NYS Executive Director

Why Carriers Need NAIFA THE NATIONAL ASSOCIATION OF INSURANCE position on the issues of highest importance to us should be AND FINANCIAL ADVISORS is in the process of re-engi- “Job #1” for every life insurance trade association, be they from neering its value proposition to its members, in an effort to lure the agent or carrier side of the ledger. Together, the insurance back those who may have lapsed enrollment and encourage carrier and insurance agent represent not just all sides of an inother, new members, to join the associsurance transaction, but also represent 1) ation. It is also working hard to conbig business and small business, 2) major vince carriers who may have grown and main street employers, and 3) high Closer coordination disenchanted with NAIFA that the orfinance and the local entrepreneur. In a ganization is as important to any carrier sense, the business landscape is covered between life insurers as one of their own company trade assoby virtue of the strategic relationship beciations. NAIFA deserves the chance to tween insurer and agent. and NAIFA—NYS and its re-prove its worth to the agent and carBecause NAIFA—NYS and all rier communities. NAIFA entities are comprised of individcounterparts across NAIFA—NYS has itself been going ual agents, it is crucial that companies through a significant transformation, step up to support the agent’s cause in the country and in some of it coordinated with that of its addition to supporting the efforts on national parent, but much of it of its behalf as pursued by the likes of the Washington provides the their own accord and on a New York-specific ACLI, LICONY and other carrier advoplan. Like NAIFA, the statewide assolife insurance industry a cacy groups. The voice of a thousand ciation grew distant from its members agents is a powerful asset, but it could use and its mission which is, as one the assistance of the formidable resources formidable presence NAIFA—NYS member put it, “to that the carriers have at their disposal. maintain a positive regulatory and legNAIFA—NYS enjoys a high level of and a unified voice islative environment through advocacy” coordination with our friends in LIamong other purposes. Over the past CONY, so much so that we share many where it counts. two years, however, NAIFA—NYS has members. In fact, NAIFA—NYS and its been like the Phoenix rising from the executive team are members of LICONY, ashes of its own immolation to once again be an effective voice and its chief executive is a member of NAIFA—NYS. LICONY for agents and the companies they serve in legislative and regu- members have even attended and participated in NAIFA—NYS latory halls. events. It is this kind of collaboration that hopefully will inspire This is why carriers need NAIFA, and why they need it to greater corporate support for the programming being done by be strong. Regulators, without a voice from the agents, hear NAIFA—NYS from carriers working in New York, whether doonly one sound. Carrier interests alone cannot be the only thing mestic or foreign insurers. regulators and legislators hear. Simply by design, agents are It is good for NAIFA and NAIFA—NYS to enjoy the supcloser to the consumers who companies serve, and can better port of insurance companies, but it is essential that those same connect those consumers to legislators—all elected officials, re- companies have an alternate voice aggressively working the corally—with messages that resonate much more effectively with ridors of government to improve the economic and regulatory that stakeholder group. Further, NAIFA members provide a atmospheres in every state for carriers, agents and the public we perspective on the most personal aspects of the life insurance jointly and proudly serve. business, the decision to buy coverage and obtaining that allimportant insurance protection. Providing this perspective in Founded in 1890 as The National Association of Life Underwriters the halls of the legislature or in the Department of Financial (NALU), NAIFA is one of the nation’s largest associations repreServices’ discussions and deliberations on everything from draft senting the interests of insurance professionals from every Congresregulations to enforcement matters is the unique province of sional district in the United States. NAIFA members assist the agents and advisors as represented by NAIFA. consumers by focusing their practices on one or more of the followCloser coordination between life insurers and NAIFA—NYS ing: life insurance and annuities, health insurance and employee and its counterparts across the country and in Washington pro- benefits, multiline, and financial advising and investments. vides the life insurance industry a formidable presence and a NAIFA’s mission is to advocate for a positive legislative and reguunified voice where it counts. Discussing and resolving varying latory environment, enhance business and professional skills, and policy provisions together in order to construct a single public promote the ethical conduct of its members. INSURANCE ADVOCATE / April 10, 2017 19

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[ G UEST OP I N I O N ]

A L I E TA E C K , M D

ObamaCare Subsidies Rob the Middle Class uAs the controversy rages between those Republicans who want full repeal and those who want to retain what might be “good” about ObamaCare, we are not asking the right questions. While they are arguing whether or not to keep the ObamaCare subsidies (or the equivalent as “tax credits”), is anyone asking what it is we are subsidizing? Why has medical care in the United States gotten so expensive? Why did the cost of a hospital stay go from an average of $17,000 in 2000 to $33,000 in 2010, while the average length of stay declined? Why do our hospital stays cost three times more than in other industrialized countries? The dirty little secret is that having insurance might be a guarantee that the insured pays MORE. And because deductibles have risen dramatically along with premiums, a family needs to pay thousands of dollars out of pocket before insurance kicks in. But how does this work? Most insurance companies have networks of “preferred providers.” One would assume that a “preferred provider” is a doctor or a lab that gives better rates, but the opposite is the case. As an example, one patient spent a day in the emergency room where the total bill came to $12,000. The “preferred provider” rate brought the bill down to $10,000, which happened to be that patient’s deductible. Upon further scrutiny, the breakdown of the bill showed a lab fee of $3,500—labs that would have cost less than $100 cash on the outside. When the hospital patient advocate was queried, the answer came back, “Your insurance company negotiated $10,000 and, since you have not met your deductible, you are bound to pay it. Paying the cash price is not an option.” She acknowledged that this seemed unfair, but would not budge. Another patient discovered that his insurance had lapsed and was given a cash price of $75 for an office visit. Once insurance was restored, the submitted fee was $275. Since he had not met his deductible, he was expected to personally pay the higher fee. 20 April 10, 2017 / INSURANCE ADVOCATE

The best recommendation would be for patients with high deductibles to hide any connection with an insurance company and negotiate the best cash prices for services.

Since 92% of people will not incur more than $5,000 per year in medical expenses, the middle class has been fleeced under ObamaCare in so many ways. Many patients have received subsidies. But this just means that taxpayers are forced to pay part of their premiums, and the patients are still stuck with those deductibles and the higher negotiated fees. So what is really happening? Insurance premiums have soared, and the insurance companies love it. They keep a percentage of the bloated premiums for “operating costs.” Hospitals are buying physician practices, and Medicaid and Medicare have agreed to pay the hospitals’ higher fees for the same service in the same location. No government official has been able to explain why. The ratepayers and taxpayers are the “forgotten men” in our medical system. Hospital and insurance executives are now commanding compensation that exceeds $1 million. One CEO of a consolidated hospital system in central New Jersey receives $9 million per year. What exactly does he do to merit this high salary? The usual reason for lavish executive pay is that the official brings lots of revenue into the business. The big hospital systems are businesses that profit massively at the expense of patients and taxpayers—although the excess might be called something other than profit if the hospital is tax-exempt (allegedly “nonprofit”). Our politicians are complicit in this heist, as last year insurance companies and

Dr. Alieta Eck graduated from the Rutgers College of Pharmacy and the St . Louis University School of Medicine in St. Louis, MO. She studied Internal Medicine at Robert Wood Johnson University Hospital in New Brunswick, NJ and has been in private practice with her husband, Dr. John Eck, MD in Piscataway, NJ since 1988, affordablehealthinc.org. She has been involved in health care reform since residency and is convinced that the government is a poor provider of medical care.

hospitals were among the ten greatest contributors to the campaigns of legislators who allow this scam on the middle class to continue. The best recommendation would be for patients with high deductibles to hide any connection with an insurance company and negotiate the best cash prices for services. Find a physician who is in no network and who can help navigate where to find cash-friendly sources of medicines, labs, and x-rays. Patients—with their doctors—need to take control of medical care once again. [IA]

The big hospital systems are businesses that profit massively at the expense of patients and taxpayers— although the excess might be called something other than profit if the hospital is tax-exempt (allegedly “nonprofit”).

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[ G UEST AR T I C L E ]

Top 10 Causes of Liability Losses Include Bedbugs, Crashes and Defective Products uNot only are liability losses increasing but they are getting more expensive, particularly in relation to global product recalls, corporate liability, cyber and environmental incidents, according to a new report by Allianz Global Corporate & Specialty (AGCS). Global Claims Review: Liability in Focus identifies defective product or work, crash and human error incidents as the largest causes of liability loss for businesses, based on analysis of insurance claims. “Liability losses are ubiquitous and can range from minor incidents to major disasters, always causing third party damage or injury,” says Alexander Mack, AGCS Board Member and Chief Claims Officer. “The risk landscape for companies is constantly shifting with liability risks on the rise globally. New technologies such as the Internet of Things, autonomous mobility or 3D printing will create fundamentally new liability scenarios for companies in almost every sector.” The AGCS Global Claims Review analyzes over 100,000 corporate liability insurance claims from more than 100 countries, with a total value of $9.3 billion, paid by AGCS and other insurers, between 2011 and 2016. Over 80 percent of losses arise from ten causes. Top 10 global causes of liability loss by total value of claims: 1. Defective product/work 2. Collision/crash 3. Human error 4. Accidental nature/damage 5. Slips/falls/falling objects 6. Water/fire/smoke damage 7. Environmental damage 8. Natural hazards 9. Vandalism/terrorism 10. Property damage

Trends The impact of a defective product or work is the largest cause of loss, accounting 22 April 10, 2017 / INSURANCE ADVOCATE

for almost a quarter of the value of all claims (23%). The average loss costs businesses in excess of $280,000 with the cost of product recalls being a major driver.

“The number of recalls has been steadily rising with increased focus on product and workplace safety, as well as more proactive regulation,” says Larry Crotser, head of AGCS Chief Claims Office, North America. Significant improvements in automotive and aviation safety may have reduced the number of collisions and crashes in recent years but these are still a major driver of liability losses, accounting for more than a fifth of the value of all claims (22%), as well as generating the most claims. Human error (19%) is the third top cause of loss, driven by incidents which result in major losses, such as aviation and shipping events or employee injury.

largest claims according to value. While class actions by consumers and investors remain largely a U.S. affair, a growing number of countries now also allow for collective actions. Conversely, foreign companies are increasingly being sued in the U.S.

Technology to Drive Big Shift in Liability Losses Digitalization and growing use of new technologies are likely to lead to a further shift in the liability risk landscape. Overall, the frequency of claims is expected to decline as trends such as autonomous driving improve road safety. However, technology will also bring new liability threats such as increasing cyber, product liability and recall risk. Automation is likely to lead to increased product liability risk for machinery and component manufacturers and software providers. New data protection laws around misuse or breaches of data will increase cyber liability for companies, potentially resulting in heavy fines and penalties, particularly in Europe from 2018, but also elsewhere.

Animal Claims Nearly two percent of claims analyzed involve animals. Deer incidents, particularly involving collisions with cars, account for 58 percent of animal-related liability claims and cost in excess of $4,225 per incident.

Larger Losses More Commonplace Losses in excess of $1 billion are becoming more commonplace and are no longer confined to the U.S. and Europe as regulators become tougher, supply chains more complex, and U.S.-style litigation and compensation awareness spreads around the globe. The U.S. continues to be the world’s largest liability market generating both the highest number of claims, and many of the

Bedbug/insect incidents account for almost 30 percent of animal-related liability claims received by insurers, with the number of bedbug incidents on the rise in the U.S. While bedbugs are found yearround, infestations and incidents peak during warmer months (April to August).[IA] Source: Allianz Global Corporate & Specialty

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[ O N MY R A DA R ]

BA R RY Z A L M A

Pay Before Accident to Reinstate Cancelled Policy No Excuse for Failure to Timely Pay Premium uInsurance premiums are hard to pay. Anyone who owns a car would prefer to only pay insurance premiums until after they have a loss so that they can collect and pass the expense on to the insurer. That, of course, defeats the purpose of insurance to spread the risk to all insureds. When insurers issue auto policies with a monthly premium, the failure to pay the monthly installment results in the cancellation of the policy. When the policy premium is paid late the policy is reinstated with no coverage for the period from the cancellation date to the reinstatement date. In Starr ex rel. Starr-Haller v. State Farm Mut. Auto. Ins. Co., Court of Appeals of Indiana, — N.E.3d —-2016 WL 4945398 (Sept. 16, 2016), the Indiana Court of Appeals was faced with the question of whether the insurer must pay for losses during a cancellation period because of the late—after an accident–payment of premium. Heather Starr-Haller, on behalf of herself and her minor son, Bradley, appealed the trial court’s entry of summary judgment for State Farm Mutual Automobile Insurance Company (“State Farm”) on Starr-Haller’s complaint.

FACTS Between December of 2011 and September of 2014, Starr-Haller had an automobile insurance policy through State Farm for her 1998 Chevy Blazer. State Farm provided Starr-Haller’s coverage in six-month terms. However, State Farm billed Starr-Haller for her coverage on a monthly basis. On three occasions between October 2012 and June 2014, Starr-Haller failed to timely pay the monthly installment due on her premium. Following each missed installment payment, State Farm mailed Starr-Haller a “Cancellation Notice” that stated both the amount due and a coverage “Cancel Date.” If Starr-Haller failed to pay her premium by the Cancel Date, the Cancellation Notices explained that the fol24 April 10, 2017 / INSURANCE ADVOCATE

Those notices stated again that, because Starr-Haller had made her installment payments after the relevant Cancel Dates, “there [wa]s no coverage between the date and time of Cancellation and the date and time of Reinstatement.” lowing would occur: “Payment prior to the date and time of cancellation will reinstate your policies. If paid after that date and time, you will be informed whether your policies have been reinstated and, if so, the exact date and time of reinstatement. There is no coverage between the date and time of cancellation and the date and time of reinstatement.” (Emphasis added.) Starr-Haller failed to timely pay premium. Following each late installment payment, State Farm mailed Starr-Haller a “Reinstatement Notice.” Those notices stated again that, because Starr-Haller had made her installment payments after the relevant Cancel Dates, “there [wa]s no coverage between the date and time of Cancellation and the date and time of Reinstatement.” According to the terms of Starr-Haller’s insurance agreement with State Farm, “[i]f [State Farm] cancel[s] this policy, then premium will be earned on a pro rata basis. [ ] Any unearned premium may be returned within a reasonable time after cancellation. Delay in the return of any unearned premium does not affect the cancellation date.” In August of 2014, Starr-Haller again failed to pay her automobile insurance installment premium. Accordingly, on September 3rd State Farm mailed StarrHaller another Cancellation Notice. Seven weeks after cancellation, on

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http:// shop.americanbar.org/eBus/Store/Pro ductDetails.aspx?productId=214624, or 800-285-2221 which is presently available. Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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[ O N M Y R A DA R ] “Payment prior to the date and time of cancellation will reinstate your policies. If paid after that date and time, you will be informed whether your policies have been reinstated and, if so, the exact date and time of reinstatement. There is no coverage between the date and time of cancellation and the date and time of reinstatement.”

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October 30, Starr-Haller dropped a check off at her State Farm agent’s place of business, after business hours, in the amount of $350. That evening, Starr-Haller’s minor son, Bradley, was involved in a one-car accident in the Chevy Blazer that resulted in injuries to him and totaled the vehicle. Sometime after the accident Starr-Haller paid the remaining $80 due. Upon receiving the total balance due, State Farm reinstated Starr-Haller’s automobile insurance coverage. Starr-Haller filed a claim with State Farm for coverage relating to the October 30 accident. State Farm denied the claim on the ground that it had cancelled StarrHaller’s coverage, which had not been reinstated as of the accident date.

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DISCUSSION AND DECISION

No Action Over or Labor Law Exclusion

Starr-Haller contended that State Farm “waived” its right to deny, and “is estopped from denying[,] coverage for the October 30, 2014[,] accident because of its pattern of repeatedly accepting late and non-conforming [installment] payments…and reinstating the policy.” It is well settled that contractual provisions of an insurance policy may be waived or that the insurer may be estopped from asserting such provisions. Where there are no disputed facts and the undisputed facts establish a party is entitled to judgment as a matter of law, however, summary judgment is proper. The term “estoppel” has a meaning distinct from “waiver” but the terms are often used synonymously CONTINUED ON PAGE 30

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[ COURTSIDE ]

L AW R E N C E R O G A K

Insurer Waits Until After Traverse Hearing to Issue Disclaimer Based on Failure to Cooperate; Too Late, Court Holds Batista v Global Liberty Ins. Co. of N.Y Edited by Lawrence N. Rogak A liability insurer issued a disclaimer three years after learning of the occurrence, and a year after receiving a default judgment against the insured. The insurer assigned counsel to represent the insured at a traverse hearing to challenge the validity of service of the summons, and only after the court found that the summons was properly served did the insurer disclaim. The Appellate Division held that an insurer must serve a disclaimer on both the

The defendant’s insured failed to answer or appear in the underlying action, and a default judgment was entered against him.

Lawrence N. ("Larry") Rogak has been practicing insurance law since 1981. He has defended over 23,000 lawsuits and arbitrations and has represented over 75 different insurance companies and self-insured corporations. Lawrence N. Rogak LLC is listed in Best's Recommended Insurance Attorneys, a distinction that requires written recommendations from at least 12 insurance carriers. A 1981 graduate of Brooklyn Law School, Mr. Rogak has published more books and articles on insurance law than any other New York attorney in the field.

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[ COURTSIDE ] In an action pursuant to Insurance Law § 3420(a)(2) to recover the amount of an unsatisfied judgment against the defendant’s insured, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Queens County (McDonald, J.), entered October 8, 2014, as denied its motion, inter alia, to compel discovery and granted that branch of the plaintiff ’s cross motion which was for summary judgment on the complaint to the extent of awarding the plaintiff the principal sum of $100,000. ORDERED that the order is affirmed insofar as appealed from, with costs. The plaintiff commenced this action pursuant to Insurance Law § 3420(a)(2) to recover the amount of an unsatisfied judgment against the defendant’s insured in an underlying personal injury action. The defendant’s insured failed to answer or appear in the underlying action, and a default judgment was entered against him. Approximately one year after receiving the default judgment with notice of entry, and nearly three years after learning of the subject claim, the defendant provided counsel to represent its insured in a hearing to determine the validity of service of the summons and complaint in the underlying action. After the Supreme Court determined that the defendant’s insured was properly served, the defendant issued a letter disclaiming coverage on the basis of the insured’s alleged failure to cooperate. The plaintiff contends that the purported disclaimer is invalid because it was untimely served and, in any event, there was no valid basis upon which the defendant could disclaim coverage. The plaintiff demonstrated her prima facie entitlement to judgment as a matter of law by proffering evidence that a copy of the underlying judgment with notice of entry was served upon the defendant, and that after 30 days the judgment still remained unsatisfied (see Insurance Law § 3420[a][2]; Darling Ferreira v Global Liberty Ins. Co. of N.Y., 119 AD3d 837, 837-838; Okumus v National Specialty Ins. Co., 112 AD3d 797, 798). In opposition, the defendant failed to raise a triable issue of fact. Contrary to the defendant’s contention, its disclaimer of coverage was ineffective. An insurance company has an affirmative obligation to provide written notice of a disclaimer of coverage as soon as is reasonably possible, even where the policyholder’s own notice

[ CLASSIFIEDS ] www.insurance-advocate.com THINKING ABOUT RETIREMENT, SLOWING DOWN, OR SELLING YOUR AGENCY? Established family owned NYC brokerage looking to acquire retail agencies up to $500k in commission. Call 347-514-6936 or email: Rino@sumcov.com of claim to the insurer is untimely (see Insurance Law § 3420[d]; Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029-1030; Okumus v National Specialty Ins. Co., 112 AD3d at 798). Where there is a delay in providing the written notice of disclaimer, the burden rests on the insurance company to explain the delay (see Okumus v National Specialty Ins. Co., 112 AD3d at 798). Under the circumstances of this case, the defendant failed to adequately explain its delay in issuing the disclaimer (see Darling Ferreira v Global Liberty Ins. Co. of N.Y., 119 AD3d at 838; cf. Endurance Am. Specialty Ins. Co. v Utica First Ins. Co., 132 AD3d 434; Okumus v National Specialty Ins. Co., 112 AD3d at 798). Accordingly, the Supreme Court properly denied the defendant’s motion, inter alia, to compel discovery and granted that branch of the plaintiff ’s cross motion which was for summary judgment on the complaint to the extent of awarding her the principal sum of $100,000, which is the limit of the subject policy, plus interest (see Insurance Law § 3420[a][2]; Friedman v Progressive Direct Ins. Co.,100 AD3d 591, 592; cf. Giraldo v Washington Intl. Ins. Co., 103 AD3d 775). In light of our determination, we need not reach the plaintiff ’s contention that the defendant’s motion, inter alia, to compel discovery was defective because it was not supported by an affirmation of good faith pursuant to 22 NYCRR 202.7. The plaintiff ’s remaining contentions are not properly before this Court or without merit.[IA] 2016 NY Slip Op 00320 Decided on January 20, 2016 Appellate Division, Second Department

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[ COVER ] CONTINUED FROM PAGE 17

ON MY RADAR CONTINUED FROM PAGE 25

lions of dollars of crop, to the medical smoker whose amateur operation puts their home at a greater risk of fire. Underwriters will need to decide how to handle marijuana within their policies, for those damages incurred as a direct result of marijuana production or consumption, or accidents that occur when people are under the influence. In Colorado, residents receive compensation for accidents, such as falling asleep smoking. But in other states this is not necessarily the case, and can often lead to court proceedings, personal liability and huge payments. The insurer Nationwide recently received court backing to refund payment of just over $160,000 to a medical marijuana patient whose home lab caught fire. The provider claimed the facility was an “increased hazard” and an ”unacceptable risk” that it had not been made aware of. Similarly, in Hawaii insurers accepted a $9,000 claim for stolen medical plants, though when this rose to $37,000, USAA refused to pay, arguing that under federal law it was illegal. Large-scale, country-wide advances in industry will dictate big changes for home insurers, and not only through increase in growers and the rise in house prices. If more people end up smoking, they’ll need to make sure homes are protected from fire hazards. But a rise of edible use as opposed to smoking marijuana would mean a different shift. Regardless, if people are spending increased periods of time in their homes, they are instantly at a greater risk of fire. This all means understanding a new way of life, gathering new data and using this to map possible outcomes and calculate accurate policies. It is these nuances that insurers will need to understand to assess individual risk, helping them navigate new territory and effectively predict the future. There’s no smoke without a fire, and insurers know this. These businesses will need to make sure that as makeshift hash-oil labs and individuals across the country are lighting up, they’ve no risk of getting burned.[IA]

30 April 10, 2017 / INSURANCE ADVOCATE

with respect to insurance matters. The conduct of an insurer inconsistent with an intention to rely on the requirements of the policy that leads the insured to believe that those requirements will not be insisted upon is sufficient to constitute waiver. Equitable estoppel is available if one party through his course of conduct knowingly misleads or induces another party to believe and act upon his conduct in good faith and without knowledge of the facts. On the other hand waiver is an intentional relinquishment of a known right involving both knowledge of the existence of the right and the intent to relinquish it. The elements of estoppel are the misleading of a party entitled to rely on the acts or statements in question and a consequent change of position to that party’s detriment. Before the October 30 accident, State Farm informed Starr-Haller that the untimely payment of her premium installment would result in State Farm cancelling her coverage until she had paid that installment and State Farm had affirmatively reinstated her coverage. The language in the Cancellation Notice was consistent with three such prior notices State Farm had sent to Starr-Haller. In reinstating Starr-Haller’s coverage on each of those three prior occasions, State Farm had expressly informed Starr-Haller that it had cancelled her coverage between the relevant Cancel Dates and Reinstatement Dates. State Farm, by its policy, reserved the right to accept late installment payments and to reinstate the policy and coverage prospectively but not to reinstate coverage retroactively during the period in which coverage had been cancelled due to nonpayment of the premium. State Farm’s actions with respect to the dates that encompassed the October 30 accident were identical to its actions during the three prior occasions in which State Farm had also cancelled StarrHaller’s coverage. That undisputed evidence plainly shows that State Farm did not intend to relinquish its right to deny Starr-Haller coverage during the period in which those cancellations of coverage had occurred. Likewise, that evidence demonstrates that State Farm’s course of conduct did not knowingly mislead or induce Starr-Haller to believe that she would have retroactive coverage if she did not pay her

Accordingly, State Farm met its burden to demonstrate that it is entitled to judgment as a matter of law, and Starr-Haller has failed to designate evidence to create a genuine issue of material fact on her claims against State Farm. As a result the summary judgment was affirmed.

premium installment when due. There is nothing in State Farm’s conduct that would have given Starr-Haller a right to rely upon anything other than the express terms of her insurance contract. Indeed, Starr-Haller’s argument that her unrefunded payments entitle her to coverage contravenes her contract with State Farm. Again, in the contract State Farm expressly reserved the right to accept late installment payments without reinstating coverage retroactively, declaring that any “[d]elay [by State Farm] in the return of any unearned premium does not affect the cancellation date.” At best, Starr-Haller has demonstrated that she is entitled to a refund from State Farm for those unearned premium payments, but she has not demonstrated that she is entitled to coverage. State Farm did not waive its right to deny Starr-Haller the coverage she now claims. Likewise the evidence shows that State Farm is not estopped from denying her that coverage. Accordingly, State Farm met its burden to demonstrate that it is entitled to judgment as a matter of law, and Starr-Haller has failed to designate evidence to create a genuine issue of material fact on her claims against State Farm. As a result the summary judgment was affirmed.

ZALMA OPINION This, in my opinion, is a frivolous suit. Starr-Haller, when she dropped off $350 on the date of the accident after hours at her agent’s office, was still $80 short of the premium owed and that was not paid until well after the accident. I suspect the $350 was delivered after the accident although no evidence presented as to the time of

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