July 24, 2017 Insurance Advocate

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Serving: New York, New Jersey, Connecticut, Eastern Pennsylvania and Washington D.C.

TO THE FORCE

Vol. 128 No. 13 | July 24, 2017

- Opioid Use - DeCarlo & Thompson on PTSD and WC - Speeding Care to Injured Workers …and more.

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Contents

14 WC to the Force [F EAT URE S ] 4

6

Foreword: Do Everything Possible…

Steve Acunto, Publisher On the Level: What’s It Going To Take?

Jamie Deapo

8

The Social Notebook: How Marketing to Your Community Gives You the Upper Hand Chris Paradiso

10

News Notes: Alice Kane Joins Clifford Chance LICONY Lists Wins in Albany P/C Net Income Drops 42.2 Percent in Q1

12

News Notes: CMSV Releases Fishlinger Optimism Index Results: Americans More Optimistic About Social Progress ShelterPoint Martials Experts on NYS Paid Family Leave

July 24, 2017 | Volume 128 Number 13

27

In Focus: Here’s the Thing About Millennials and Insurance Kelly Donahue-Piro

28

Guest Opinion: California’s Very Expensive Free Lunch Marilyn M. Singleton, MD, JD

30

Courtside: Failure to Pay Part of Premium Results in Cancellation of Entire Policy Lawrence Rogak

32

On My Radar: Appropriate to Effect “Force-Placed Insurance” Barry Zalma

34

Looking Back: May, 1992

37

Classifieds

[ A D F E ATUR E S ] 11

MSO: Ransomware Safety Tips

13

ShelterPoint: Paid Family Leave NY

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889

FOR ADVERTISING OR SUBSCRIPTION INFORMATION Call 914-966-3180 | email g@cinn.com

info@insurance-advocate.com www.insurance-advocate.com INSURANCE ADVOCATE / July 24, 2017 3

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[ FOREWORD ]

STEVE ACUNTO

Do Everything Possible... u…to encourage entrants into the business and to motivate those already in it to be properly licensed, that’s the idea. And the DFS may have caught wind of it, since insurance as a whole is destined to be reduced by 18% of staffers due to retirements, consolidations and the like. Wisely, Financial Services Superintendent Maria T. Vullo has announced that the NYS Department of Financial Services (DFS) has launched a new online application process to speed the re-licensing of agents and brokers whose original licenses have been expired for more than two years. The online re-licensing process is available to property/casualty and life and/or accident/health agents and brokers, as well as life and general consultants and life settlement brokers. According to the DFS, the next business day turnaround applies to applicants with no disqualifying conditions, such as disciplinary actions in other states. Applicants will be required to attest to the completion of pre-qualifying courses and furnish course numbers.

Lapses in individual licenses may occur for various reasons, such as the result of career changes or for personal reasons. More than 1,200 agents and brokers were re-licensed in 2016. To remind you, New York residents seeking re-licensing must have completed a re-licensing exam within the last two years or hold another license with the same lines of authority being applied for in the re-licensing application. Non-residents must be in good standing and currently licensed in their declared home state with the same lines of authority being applied for in their New York re-licensing application. Licenses, which will no longer be mailed upon issuance, can now be printed by licensees through the online system. The re-licensing of individuals whose licensing expired is one of a number of licensing transactions which may be accomplished using the DFS website. Other online licensee transactions include, but are not limited to, filing an original application to act as an individual agent or broker, renewing an individual license, or changing individual licensee address information. Additional information, as well as a link to the re-licensing application, can be found on the DFS website, www.dfs.ny.gov/insurance/relic.htm.

Two good business and public policy reads for the summer are Newt Gingrich’s not-surprisingly profound “Understanding Trump” and Ferris Eanfar’s nonpartisan “Broken Capitalism: This Is How We Fix It,” a look at Capitalism, Liberty, Political Economy, Globalism, Corporations, Corporate Governance, Artificial Intelligence, Income Inequality, Monetary Policy, Value Creation, Poverty—all discussed in his book, highly recommended

by Jen Bawden, a friend who has followed Eanfar’s writings and career.

Enjoy.…

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VOLUME 128 NUMBER 13 JULY 24, 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-Sartario 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., 1030 Lake Street, Greenwich CT, 06831. Periodical postage paid at Greenwich, CT and additional mailing offices.

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[ O N T H E L E VE L ]

JAMIE DEAPO

What’s It Going To Take? uWith 40+ years in the insurance business, all of it on the independent agency side, I just don’t understand what the problem seems to be.

Maybe it’s professional arrogance. A sense of smugness brought on by significant knowledge and a desire to return to the days when independent agencies generated stable and significant income.

It could be agents have started to believe all the hype that protection should be bought based on price and convenience.

There are billions of dollars being spent to predicate that myth and it’s very possible some agents have decided not to fight but to instead get into the price wars. There have always been some independent agents who sold that way and their numbers may be growing. Don’t get me wrong—price is a factor in buying protection, but not the only or primary factor.

Maybe it’s “deer in the headlights” syndrome. There is so much talk about Insuretech and the need to make buying protection more convenient and less costly, that agents are on overload with the whole situation and end up doing nothing. The competition seems overwhelming, and even their own carriers with whom they have had relationships for years are trying to push them out of the market.

I don’t know what it is but my question is a very simple one. Why the hell are independent agents not taking every opportunity to change the public’s perceptions about buying on price and convenience?

The ability to communicate with clients and prospects is at an all-time high.

Technology has made it so that just one person can have a significant voice and impact on large groups of people. With emails, websites, blogs, and social media, as well as all the older traditional methods of communicating, it’s really easy to reach a significant number of people and provide them with an important message.

That important message is that it’s crazy to risk your, your family’s and your business’s financial security and well-being on conveniently saving a few dollars. The average consumer, personal or business, does not have the necessary knowledge to know 6 July 24, 2017 / INSURANCE ADVOCATE

what coverage they should consider buying as well as how various insurance contracts differ. That is why they need a trusted, independent insurance agent to represent them and help protect their interests.

I realize that my last statement probably makes our E&O attorneys crazy as it possibly takes away the protections provided under Murphy v. Kuhn. That’s unfortunate but let’s be candid: most independent agents are professionals and not order-takers. They and their staff spend countless hours and thousands of dollars learning coverage and complying with CE. What a waste of knowledge and talent if you are merely going to let the competition take advantage of luring consumers away by promoting low prices and convenience.

It’s time all independent agents take up the challenge and actively and aggressively educate consumers on the serious risk involved with buying insurance protection solely on price and convenience. You all understand the risk in doing so. I know many of you have real-life stories of clients or consumers who have paid dearly by worrying more about price and convenience than having adequate and appropriate coverage.

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.

Recently an agent whom I know and respect put a very simple sign out in front of his agency. The sign said “We Spend More Than 15 Minutes On Your Insurance” and it included the Trusted Choice® logo. I posted it on our Facebook page and it was read by 625 people. I posted it on my personal Facebook page where it was seen by even more people, including many not in CONTINUED ON PAGE 33

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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

8864 Developmental Organizations 8865 Residential Care Facility Hotel/Motel 9052 Hotels NOC 9058 Restaurants in Hotels

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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The Workers’ Compensation Leader in NY Call Cosmo Preiato at (800)394-7004 ext. 203 Fax: (914)694-6004 e-mail: cosmop@friedlandergroup.com 2500 Westchester Avenue, Suite 400A Purchase, New York 10577 www.friedlandergroup.com Safety and Workers’ Compensation Strategies To Unleash Productivity and Profits Featuring insightful interviews with experts, including Paul O’Neill, the 72nd Secretary of the U.S. Treasury

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[ T H E SO C I A L N OT E B O OK ]

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

How Marketing to Your Community Gives You the Upper Hand uWhen you’re an independent insurance agency competing with the big name insurance companies, you have to remember the one thing that your agency can provide: an outstanding customer experience.

Your agency has the ability to build personable relationships with each and every one of your clients. Meanwhile, customers cannot receive the same memorable experience from an automated system.

Companies like Geico focus on concepts like cheap coverage within 15 minutes or less when they design their platforms. However, in 15 minutes I can guarantee that the customer doesn’t have a full understanding of their policy, liability, or coverage.

At Paradiso Insurance, we believe our customers are worth more than 15 minutes of our time, and I hope your agency believes the same.

Of course, the customer experience shouldn’t end there. Getting your local community involved with your agency’s marketing efforts will boost your customer experience astronomically.

Through community-based marketing, you will be able to dominate your local niche and truly connect with more members of your hometown, but that isn’t what it’s all about at the end of the day.

Paradiso Insurance, if you’re not familiar, is located in the small town of Stafford Springs, CT, and we believe in this community. We also believe that with the help of local independent insurance agencies everywhere, we can change the world, starting with one local community at a time. We’ve had a great impact on Stafford Springs in the past year, and are proud to say we are involved members of our com-

munity. Whether your agency is in a small town or a big city, we all have the power to do good and get involved.

Reverse Trick-or-Treat Our agency may not provide the cheapest or least expensive insurance coverage, but what we can do is provide the coverage needed at the most affordable price. We take pride in the relationships we build with our customers, and we want to make their insurance lives easy while still giving them our time, so they can understand their coverages. We want each and every one of our customers to have a positive and pleasant experience. That’s why we put so much emphasis on our 12 promises; if a customer is unsatisfied or we make a mistake, we work hard to make things right.

8 July 24, 2017 / INSURANCE ADVOCATE

Children at the Connecticut Children’s Medical Center cannot have candy, because certain nuts or chocolate can interfere with their treatments. Therefore, during Halloween, our insurance agency takes the time to collect toys from our community members to donate to these kids.

Furthermore, since we ask our local community members for help, it empowers them to make a difference and feel great doing it.

Additionally, we also create content about the Reverse Trick or Treat campaign, which is then pushed onto our social media channels. This way our followers are up to

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.

date on the campaign progress. Content consists of the various toys that are collected during the drive, thanking others for their generous donations, and an explanation of what exactly Reverse Trick or Treat is. Our community members love to see that they were tagged on our social media networks when it comes time to push out our content, and that helps their ongoing relationship with our agency.

At the end of the event, we create a video to show how everything went, and use it in an email campaign to share with all of our local customers and prospects.

This multi-touchpoint strategy is essential for visibility, and this visibility has a big influence on our agency’s overall reputation. We make a difference in many children’s lives with the help of our hometown, so it’s going to have a positive response in front of our audience.

Bikes for Reading Another campaign we run annually for our local community is called Bikes for Reading. Our insurance agency gives back to students at our local elementary school CONTINUED ON PAGE 33

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[ NEWS NOTES ]

Alice Kane LICONY Joins Clifford Lists Wins in Chance Albany uClifford Chance has welcomed Alice Kane to its US insurance practice.

Well-known in the field for several decades, Ms. Kane advises property and casualty, life, and health insurance clients on a wide range of regulatory and transactional matters. She previously served as the group general counsel at two Fortune 100 insurers, Zurich Insurance Group, and New York Life Insurance Company, where she led teams of in-house and outside counsel on complex M&A transactions, settled major government and insurance department investigations, and spearheaded the successful resolution of SEC enforcement actions, among other regulatory and governance matters.

More recently, Ms. Kane has focused on insurance regulatory matters, representing clients before the New York State Department of Financial Services and other state insurance departments. Over the past several years, she monitored both international and national insurance regulatory reforms at both the International Association of Insurance Supervisors (IAIS) and the National Association of Insurance Commissioners (NAIC).

She also represented clients on US health care reform before the Center for Consumer Information and Insurance Oversight (CMS), a division of the U.S. Department of Health and Human Services.

Her business experience extends to asset management. She served as executive vice president in charge of asset management for New York Life and as president of the mutual fund business for American General’s Variable Life and Annuity Division. She also founded a woman- and minority-owned institutional asset management business, Blaylock Asset Management.

Ms. Kane’s arrival coincides with the return to Clifford Chance of corporate partner Joseph Cosentino, who himself has significant experience in the insurance sector. Together, the two further bolster a growing US insurance M&A practice that includes partners Gary Boss and Nicholas Williams.[IA] 10 July 24, 2017 / INSURANCE ADVOCATE

uThree important pieces of legislation that will help New Yorkers increase their retirement investments, use existing policies to pay for long-term care expenses, and utilize technology to make board decisions passed both the Senate and Assembly and will be sent to the Governor for approval. The three bills were all 2017 legislative priorities for the Life Insurance Council of New York (LICONY). Life Insurance Council President and CEO Mary A. Griffin said, “The success of these bills further demonstrates that the Legislature and Department of Financial Services (DFS) understand that life companies are vitally important to New York, both in terms of economic development and in financial planning. I want to thank our members for advocating for these bills, and thank Senate Insurance Chair James Seward, Assembly Insurance Chair Kevin Cahill, and the DFS for working with the industry to make the passage of these bills a reality.”

The three bills that passed both houses of the legislature are: S.2525-B (Seward)/A.7152-A (Otis) which would provide people who own certain annuities with the option to automatically reinvest policyholder dividend distributions; S.2114-B (Seward)/A.7584-B (Crespo) which would refine the long-term care trigger to provide more New Yorkers who own certain life products with the ability to use existing benefits to cover long-term care expenses; and S.2095-A (Seward)/A.7531-A (Kavanagh) which would authorize domestic mutual life insurance companies to offer alternate methods for voting in uncontested board elections and receive voting materials electronically.

The bills will now be sent to Governor Cuomo for his review and LICONY is hopeful these bills will be signed into law.

The life insurance industry is a vital part of the New York economy. According to the American Council of Life Insurers, the life industry invests approximately $458 billion in New York’s economy. Of that,

The bills will now be sent to Governor Cuomo for his review and LICONY is hopeful these bills will be signed into law. about $371 billion is invested in state, county and city stocks and bonds that help finance business development, job creation, and services in the state.[IA]

P/C Net Income Drops 42.2 Percent in Q1 The private U.S. property/casualty insurance industry saw its net income after taxes drop to $7.7 billion in first-quarter 2017 from $13.4 billion in first-quarter 2016—a 42.2 percent decline—and its overall profitability, as measured by its annualized rate of return on average policyholders’ surplus, fall to 4.4 percent from 7.9 percent, according to ISO, a Verisk Analytics (Nasdaq:VRSK) business, and the Property Casualty Insurers Association of America (PCI).

The industry experienced $7.3 billion in direct catastrophe losses—the highest first-quarter catastrophe losses since the 1994 Northridge earthquake—and $2.3 billion above the direct catastrophe losses for first-quarter 2016. Insurers’ combined ratio deteriorated to 99.6 percent for firstquarter 2017 from 97.4 percent for firstquarter 2016. Insurers also saw some improvement from a year earlier. Net written premium growth accelerated to 4.0 percent for first-quarter 2017 from 3.2 percent for first-quarter 2016. Net investment gains increased by $1.2 billion to $14.4 billion in first-quarter 2017, from $13.2 billion for first-quarter 2016. The industry’s surplus reached a new all-time high value of $709 billion as of March 31, 2017, increasing $8.1 billion from $700.9 billion as of December 31, 2016.[IA]

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ADVERTORIAL

Ransomware - Dectect, Protect and Recover RECENT GLOBAL CYBER ATTACKS have garnered a lot of attention. Ransomware is a group of malware that prevents or limits users’ access to their computer systems, holding them hostage by either locking the screen or encrypting or otherwise disabling access to the data, until a ransom is paid (www.trendmicro.com).

Helping clients understand the threats of ransomware, and ways to avoid an attack, is another sign of the true insurance professional.

Ransomware is a significant worldwide problem, and it is not new. While attacks have become increasingly more common since 2005, the first reported attack occurred in 1989, targeting the healthcare industry (www.digitalguardian.com).

Reported ransomware attacks over the past 11 years exceeded data breaches by 7694 to 6013 (www.csoonline.com). It is estimated that 47% of companies in the United States were attacked in 2016.

Ransomware is more than just a nuisance. It disrupts businesses in several ways. Potential threats include exposure of confidential information, loss of essential data, and loss of revenue due to inability to access systems.

Several types of ransomware exist. One encrypts the data. The other locks users out of their device(s). Victims receive a message telling them they must pay $300 in bitcoin within a certain time period.

After that time period, the ransom may increase, or files may start being deleted.

Bitcoin is used because the owners are virtually anonymous. Payment of the ransom is meant to provide a decryption key that enables the victim to unlock their system and regain access to their data.

Paying the ransom does not mean that you will reclaim your data. Even after the ransomware is removed, there can still be an additional secondary malicious program residing on the system. Some ransomware is designed to delete data whether or not a ransom is paid.

There are a number of steps that should be taken to reduce exposure to ransomware, starting with regular security updates and external backup of systems.

Regular checks of the backup, testing the ability to restore the backed up informa-

tion, as well as knowing what is actually being backed up, are also essential preventative measures. The frequency of required backups will vary depending on the type of entity and data. A good antivirus and/or malware program with regular—preferably automatic—updates, and scanning, is always recommended.

Should a ransomware attack occur, it is important to turn off all devices and disconnect them from the system. Experts recommend that a ransom NOT be paid.

Contact all users to alert them of the attack, as well as to find out where the attack originated. This is done by pinpointing where and when the earliest evidence of the attack occurred. Reimaging infected devices will ensure that the ransomware is gone. Restoration of data from backup should only be done to a new device or one that has been wiped clean to prevent reinfection.

Keeping systems updated is an essential step in protection from malicious attacks. In May 2017, “Wannacry” infected more than 230,000 computers in over 150 countries. Hospitals in the United Kingdom were forced to cancel operations and divert ambulances. It is interesting to note that the vulnerability had been discovered, and a patch issued by Microsoft, two months prior to the May attack. Those who had not installed the patch remained vulnerable to attack. As of mid-June 2017, 327 ransom payments totaling over $132,000 had been made.

Another similar attack occurred on June 27, 2017. Starting in the Ukraine, it impacted systems around the world.

Multinational companies shut down operations in order to prevent spread of the attack. Some believe that the hacking tools used in these attacks were developed by and stolen from the National Security Administration (NSA), though this has not been confirmed (www.nytimes.com).

While ransomware infection is typically from downloading a file or opening an attachment to an e-mail, this is not always the case. “Wannacry” attacked computers without user intervention. The ransomware searches the internet for vulnerable computers running Microsoft operating systems.

Ransomware can disrupt operations and even destroy records of businesses and individuals. Hackers are becoming increasingly more sophisticated in their attacks.

Helping clients understand the risks of, their potential exposure to, and ways to protect themselves from ransomware attacks, is another value-added service of the professional insurance agent.

R

139 Harristown Road Glen Rock, NJ 07452, Suite 100 (800) 935-6900 www.msonet.com INSURANCE ADVOCATE / July 24, 2017 11

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[ NEWS NOTES ]

ShelterPoint Americans More Martials Optimistic About Experts on Social Progress NYS Paid Family Leave

CMSV Releases Fishlinger Optimism Index Results:

uThe Fishlinger Optimism Index™, a measure of public opinion centered on Americans’ optimism about the future, published by the Fishlinger Center for Public Policy Research at the College of Mount Saint Vincent (CMSV), rose to 69 percent in June—possibly attributable to the stock market’s record performance during the first half of the year.

Americans’ optimism, particularly regarding Social Progress, rose significantly, according to the results. This was influenced by former F.B.I. director James Comey’s testimony to Congress, the special counsel investigation into alleged Russian interference in the U.S. presidential election, and the Senate’s failure to pass an unpopular plan to repeal and replace the Affordable Care Act. Internationally, the beginnings of recovery in Europe as well as French president Emmanuel Macron’s victory over Marine Le Pen may have also helped boost optimism.

More than an economic measurement, the Fishlinger Optimism Index™ is built on opinion data for public officials, social/political issues, beliefs about the United States’ place in the world, and a series of value statements dealing with individuals’ feelings of success and security, as well as from ratings of government policies and officials. In measuring national leadership, the Fishlinger Optimism Index™ assesses public expectations for the effectiveness of federal policy and quality of governance both domestically and in global affairs. Social progress examines the potential for progressive reform. Personal prosperity explores individuals’ sense of achievement and economic stability.

In this study, the Fishlinger Center conducted online national surveys focusing on political issues in the United States.

The fieldwork for the polls was conducted using a blended national panel from Survey Sampling, Inc. Interviews were conducted November 29-December 15, 2016 and January 3-June 30, 2017. The 12 July 24, 2017 / INSURANCE ADVOCATE

The Center conducts deep and broad studies of public opinion on key public policy concerns through independent and objective research conducted by students, faculty, and other members of the academic community.

credibility interval for 1,000 respondents is plus or minus three percentage points.

The credibility interval is larger for subgroups and for differences between polls.

In addition to credibility interval, the polls are subject to other potential sources of error including, but not limited to, coverage and measurement error. Data was rim-weighted to match the national population on age, sex, Hispanic origin, and race. Question wording and topline results are available at fishlingercenter@mount saintvincent.edu.

The Fishlinger Center for Public Policy Research opened in February 2015 at CMSV. The Center conducts deep and broad studies of public opinion on key public policy concerns through independent and objective research conducted by students, faculty, and other members of the academic community. The Center is sponsored by William and Joan Fishlinger who wish to offer a forum for discourse that can stimulate intelligent dialogue about issues that deeply affect all Americans. The Center aims to enhance the relationship between the work of the College and the common good. Founded in 1847 by the Sisters of Charity, CMSV offers nationally-recognized liberal arts education and a select array of professional fields of study on a landmark campus overlooking the Hudson River in Riverdale, in northwest Bronx.[IA]

uShelterPoint Life Insurance Company has created an expert educational panel that discussed the impact of New York State’s Paid Family Leave (PFL) mandate on employers, employees, and the business community. The first discussion, titled, “What is Paid Family Leave (PFL)?

What does it mean for employers and employees?” took place on Wednesday, July 12, 2017. “The creation of this cross-disciplinary event stems from ShelterPoint Life’s foundational belief that we have a responsibility to simplify the process and educational curve of this new law for employers and employees,” stated Brian Dunham, Chief Actuary of ShelterPoint.

“With a deep understanding of the PFL mandate, this panel will educate attendees on the impact of PFL on all stakeholders to help ease the transition and reduce the uncertainty as we move toward the January 1, 2018, implementation date.” Panel participants included leadership from ShelterPoint Life (New York’s largest DBL carrier, based on 2015’s DB-680 reports) and the Society of Human Resource Management (SHRM), as well as legal subject matter experts from Jackson Lewis PC and Genser, Dubow, Genser & Cona LLP. Panelists delved into topics such as how to mitigate risk regardless of a business’ number of employees; how to address compliance considerations and protect both business and employee interests; how to best prepare for the mandate and understand the law’s financial and administrative burdens; and how the law may impact business operations.

For more information about ShelterPoint, please visit www.shelter point.com.[IA]

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WC Insurers Affected

OPIOID USE: Study Finds Prescription Use Among Injured Workers Decreased, Yet… uAs states implement reforms to address issues related to overuse and misuse of opioids, a new study released by the Workers Compensation Research Institute (WCRI) observed decreases in the frequency and amount of opioids dispensed to injured workers in a majority of study states. However, higher utilization of opioids and other high-risk utilization patterns were seen in some states in the most recent study period.

“This report serves as a tool to monitor ongoing policy changes on opioid utilization in 26 state workers’ compensation systems. By comparing variations in the use of opioids across the states, this study can help policymakers and stakeholders be better informed about the level of opioid use in their states and better target future efforts to address issues related to prescription opioids in their states,” said Ramona Tanabe, WCRI’s executive vice president and in-house counsel.

The study, Interstate Variations in Use of Opioids, 4th Edition, examines interstate variations and trends in the use of opioids and prescribing patterns of pain medications across 26 state workers’ compensation systems covering data from October 2009 through March 2015.

The following are sample findings from the study: • Comparing opioid utilization for workers injured in 2010 and 2013 over an average two-year period following the injury, the study found reductions in the average amount of opioids dispensed to injured workers in several states, with larger reductions seen in Kentucky, Maryland, Michigan, and New York.

• Despite the reductions, opioid use was prevalent among nonsurgical claims with more than seven days of lost time.

In 2013-2015, about 65-75% of these injured workers with pain medications received at least one opioid prescription in most of the study states. The proportion was higher in Arkansas (85%), Louisiana (80%), and South Carolina (80%).

• The average amounts of opioids received in Louisiana, New York, and Pennsylvania continued to be the highest among the 26 study states for claims with opioids. Although New York is among the states with a higher-than-typical amount, it is important to note the substantial decrease in both the frequency and amount of opioids in New York over the study period.

• The study observed a sizable percentage of claims with opioids that were receiving chronic opioids (at least 60 days of opioid supply over any 90-day period) and at higher doses (average daily dose of opioids exceeding 50 and 90 morphineequivalent milligrams).

14 July 24, 2017 / INSURANCE ADVOCATE

• Among claims with opioids, simultaneous use with at least one other sedating drug was seen in one-third to one-half of injured workers across the 26 states. Muscle relaxants and opioids were dispensed together in 28-48% of claims with opioids. Use of both opioids and benzodiazepines at the same time was seen in 0-9% of claims.

This study uses data comprising over 430,000 nonsurgical workers’ compensation claims and nearly 2.3 million prescriptions associated with those claims from 26 states. We observed prescription utilization over an average two-year period after the injury for claims with injuries arising from October 1, 2009, to September 30, 2013. The data included in this study represent 36-69% of workers’ compensation claims in each state.

The 26 states included in this study are Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. These states represent over two-thirds of the workers’ compensation benefits paid in the United States.

To download a copy of this study, visit WCRI’s website at https://www.wcrinet.org/reports/interstate-variations-inuse-of-opioids-4th-edition. The study was authored by Vennela Thumula, Dongchun Wang, and Te-Chun Liu. The Cambridge-based WCRI is recognized as a leader in providing high-quality, objective information about public policy issues involving workers’ compensation systems.

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Workers’ Compensation Benefits for Post­Traumatic Stress Disorder (PTSD) Written by Donald T. DeCarlo, Esq. and Roger Thompson, WCP uFor those who came of age during the middle of the past century, many recall references to “shell shock” and “battle fatigue” brought on by the horrific experiences that many young men and women were confronted with during the first and second world wars. This condition, now referred to as posttraumatic stress disorder (PTSD), is a serious mental condition that may develop after a person has experienced or witnessed a traumatic or terrifying event in which serious physical harm occurred or was threatened.

Most people who experience a traumatic event will have reactions that may include shock, anger, nervousness, fear, and even guilt. These reactions are common, and for most people, they go away over time. For a person with PTSD, however, these feelings continue and even increase, becoming so strong that they keep the person from living a normal life. People with PTSD have symptoms for longer than one month and cannot function as well as before the event occurred.

PTSD in Workers’ Compensation Claims for PTSD, because they generally lack objective signs of physical injury, are categorized as mental claims. Mental claims in the workers’ compensation program represent a tiny percentage of all claims; estimates put claims with a mental component at about one percent of claims overall, although this figure varies by state. Even though they represent a relatively small percentage of claims, mental injury claims arising from workplace activities or stressors are on the rise and can create major issues for both the employer and the insurer. An estimate from the National Institutes of Health (NIH) estimates that the cost to the American economy of mental claims and/or stress-related claims is close to $150 billion per year. This estimate is reflected in decreased productivity, absenteeism and significant increases in medical treatment costs.

One of the underlying cornerstones of the workers’ compensation program is that the employer generally takes the employee as the employer finds him or her, such that all the medical consequences that flow from a workplace injury or event are compensable.1 Employers, claims administrators, and insurers have begun to view PTSD as an ongoing and difficult challenge to claims management and administration. A few of those entities are beginning to take a proactive role in helping employees identify if and when they might be at risk of PTSD. They see the prevention and early 16 July 24, 2017 / INSURANCE ADVOCATE

An example of the complexity of the cause-effect link in mental workers’ compensation claims is seen in claims based on PTSD. identification of PTSD as an important part of their overall risk management.

Workers’ Compensation Coverage for Mental Claims An example of the complexity of the cause-effect link in mental workers’ compensation claims is seen in claims based on PTSD. Most commonly thought of in connection with soldiers and wartime, concerns for coverage of PTSD arose after the September 11 terrorist attacks. Though few would doubt the psychological impact of witnessing the devastation in New York and Washington D.C., or more recently the Sandy Hook elementary school tragedy or the Orlando nightclub shooting first-hand, by definition symptoms of PTSD do not appear for months or years after the event, making their connection to the workplace event difficult to assess.

As stated previously, because the employer generally takes the employee as the employer finds him or her, all the

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medical consequences and a portion of the lost income that flow from the primary injury are covered. Although there are many factors within the workers’ compensation setting that make PTSD claims difficult to anticipate and manage, two Donald T. DeCarlo, Esq. is the principal of an independent law firm in Fresh Meadows, NY, which focuses on mediation/arbitration and regulatory and insurance counseling. Previously, he was Partner at Lord Bissell & Brook LLP and headed its New York office.

He was Senior Vice President and General Counsel of The Travelers Insurance Companies, Deputy General Counsel for its parent corporation Travelers Group, Inc. and Executive Vice President and General Counsel for Gulf Insurance Group.

Mr. DeCarlo is a Certified ARIAS-US Arbitrator and Umpire, a Master Arbitrator for the NYS Insurance Department, and an Arbitrator for the American Arbitration Association and Center for Dispute Resolution. He is the Founder, Chairman and President of The American Society of Workers Comp Professionals, Inc. (AMCOMP).

In addition, Mr. DeCarlo is a Director of 17 companies in the insurance industry.

Mr. DeCarlo has authored numerous scholarly articles in legal and trade journals and is a co-author of two books on workers compensation insurance, Workers Compensation Insurance & Law Practice – The Next Generation and Stress in the American Workplace – Alternatives for the Working Wounded.

Mr. DeCarlo Chairs an Advisory Committee of the World Trade Center Captive Insurance Company, and formerly served as Chairman and Commissioner of the New York State Insurance Fund (NYSIF) for 10 years.

He also served as an Inspector for the NYS Athletic Commission.

18 July 24, 2017 / INSURANCE ADVOCATE

…unlike other comorbid factors—e.g., obesity, diabetes, hypertension, and some cardiac conditions—that are relatively easy to identify through observation and medical testing, PTSD almost always lurks silently in the shadows, only to become manifested when the employee is confronted with a physical or psychic trauma.

immediately come to mind. First, unlike other comorbid factors—e.g., obesity, diabetes, hypertension, and some cardiac conditions—that are relatively easy to identify through observation and medical testing, PTSD almost always lurks silently in the shadows, only to become manifested when the employee is confronted with a physical or psychic trauma. Second, PTSD, like other mental injury conditions, can have a significantly subjective component.

State Legislative Approaches to Mental Claims Including PTSD State workers’ compensation laws tend to treat mental claims unaccompanied by a physical stimulus in one of four ways.

The following describes the various states’ approaches to the subject of mental-mental claims. While some states, either through statute or case law, serve to bar compensation benefits for mental-mental claims, other states have established various thresholds to compensability.

• Group One: Certain states, including Alabama, Arkansas, Connecticut, Florida, Georgia, Idaho, Kentucky, Minnesota, Montana, Nevada, New Hampshire, Ohio, Oklahoma, and Wyoming, refuse to award compensation for so-called mental-mental claims, including PTSD, under any circumstances.

• Group Two: Mental-mental cases are compensable, but only if the stimulus is “unusual.” Colorado, Illinois, Iowa, Louisiana, Maine, Mississippi, Missouri, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Carolina and Vermont fall within this group. In most of the decisions, “unusual” means unusual for a typical person holding the claimant’s job. Thus, a police officer is expected to be able to handle some sorts of stress within his or her ordinary duties that would be deemed “unusual” for someone else in the general public.

• Group Three: Mental-mental cases are compensable, but only if the mental stimulus is sudden. Colorado, Louisiana, Maryland, Tennessee and Virginia fall within this group.

There is some spill-over between Groups Two and Three

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inasmuch as courts in those states have sometimes spoken as if the terms “unusual” and “sudden” were synonymous.

• Group Four: Mental-mental cases are generally compensable, whether or not the mental stimulus is sudden or unusual. Alaska, California, and Hawaii are generally included in this group.

States not found in the above listing generally have decisions falling into more than one grouping. Notwithstanding the above-noted categorization, some states limit mental stress claims related to bona fide personnel decisions. Among them are California, New York, North Dakota, Massachusetts, Maine, Texas and Utah. California further limits mental claims, requiring the employee to have been an employee for at least six months before a claim can be considered valid.

Judicial Holdings on PTSD Claims in New York In New York, injuries or death resulting solely as a result of mental disturbances and emotional strain brought on by the employment are compensable. In a 1975 decision, the New York Court of Appeals reversed a lower court order where the claimant was incapacitated by severe depression caused by the discovery of her immediate supervisor’s body after he had committed suicide.2 In the opinion, the Court of Appeals noted that “Having recognized the reliability of identifying psychic trauma as a causative factor of injury in some cases and the reliability by identifying psychological injury as a resultant factor in other cases, we see no reason for limiting recovery in the latter instance to cases involving physical impact. There is nothing talismanic about physical impact. We would note in passing that this analysis reflects the view of the majority of jurisdictions in this country and in England.”

The basic policy of workers’ compensation is that if the injury was accidental and arose in the course of employment, then recovery should be allowed.3 As one might expect, judicial rulings on coverage for workers’ compensation mental claims can be found on both sides of the scale of justice. Repeating the New York rule that mental injuries caused by work-related stress are compensable if the claimant can show that the stress that caused the injury was “greater than that which other similarly situated workers experienced in the normal work environment,” a New York appellate court affirmed a decision by the state’s Workers’ Compensation Board that denied benefits to a claimant who alleged that work-related stress caused her to develop depression, anxiety and post-traumatic stress disorder. The court observed that medical proof established that claimant sustained incapacitating mental trauma as a result of her work. But while claimant complained of longstanding harassment at the hands of her immediate supervisor, testimony by the supervisor contradicted those allegations and offered reasonable explanations for his behavior. Claimant testified she experienced more severe mental distress and stopped working after a staff meeting at which she was singled out and humiliated by one of her superiors, but the employer’s witnesses directly stated that claimant had not been singled out in any way at the meeting and that she did not appear to be upset at the time. The Board was free to credit the testimony of the employer’s witnesses.4

Roger Thompson is a retiree from Travelers Insurance following thirty years of service in the area of Workers Compensation. Prior to his retirement, Mr. Thompson was Director for Workers’ Compensation Legislative and Regulatory Issues. A graduate of the University of California, Santa Barbara, he began his career with Travelers in Des Moines, Iowa in 1969 and subsequently transferred to the Home Office in Hartford, Connecticut in 1976.

During his career with Travelers, Mr. Thompson worked with various trade associations including the American Insurance Association (AIA), The International Association of Industrial Accident Boards and Commissions (IAIABC) and served on the Research Committee at the Workers’ Compensation Research Institute (WCRI).

Mr. Thompson is married with two sons and has four grandchildren.

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In another New York decision, the appellate court affirmed a decision of the state’s Workers’ Compensation Board that denied a corporate bond trader’s application for an award of reduced earnings that he claimed were caused by a PTSD condition brought about by the September 11, 2001 terrorist attack on the World Trade Center. The broker worked on the 84th floor of the World Trade Center South Tower and escaped while the terrorist attack transpired. The court agreed with the Board that while there was no dispute that the bond trader suffered from PTSD, there was no medical opinion that he was incapable of engaging in his former profession and in fact, the trader engaged in his former profession for more than seven years after the attack and did not claim lost wages for most of that period. His lower earnings appeared to have been caused by several voluntary employment moves he made, as well as his decision to start what turned out to be an unsuccessful bond brokerage business of his own.5 It is important to recognize that an injury which is solely mental and based on work-related stress or strain which results from a lawful personnel action by the employer is not compensable if the evaluation, transfer or demotion, termination, or other disciplinary action was done in good faith.6 When such action is alleged to have caused an injury from mental stress, the Board will have threshold questions of whether “An ‘active participant’ to an accident that results in a mental disability is entitled to file for workers’ compensation benefits.”

The participation has been determined to be sufficient if the claimant is not actually in the physical accident, such as an automobile collision involving two or more vehicles, but suffers stress as a result of witnessing the event. This result is demonstrated where the Board and appellate division both agreed that a woman delivery person who, while driving her delivery truck, witnessed her daughter being killed in an automobile accident. The mother was entitled to benefits for stress, depression, and exacerbation of a gastrointestinal problem caused by the psychological trauma. Using the Wolfe decision as precedent, the conclusion was reached that the claimant was an “active participant” in the accident and that her injury arose out of the employment.7 Coverage under the standard workers’ compensation policy is composed of two parts: Part One coverage sets forth the insurer’s agreement to provide all benefits required of the insured by the workers’ compensation law of the state(s) covered, while Part Two of the policy establishes the insurer’s agreement to pay all sums—subject to policy limits—on account of the legal liability of the employer for damages because of bodily injury to an employee. Certain exclusions pertain to coverage under Part Two. Such exclusions under Part Two include liability assumed under a contract; punitive or exemplary damages; injury to an employee while employed in violation of law with the actual knowledge of the employer; any obligation imposed by certain laws or benefits of another state; intentionally caused or aggravated injuries; or bodily injury occurring outside the United States or Canada unless temporarily of these countries. A further exclusion applies to “damages arising out of coercion, demotion, eval20 July 24, 2017 / INSURANCE ADVOCATE

The bill limits claims to injuries that occur within three years of the last active date of employment and would disallow PTSD claims for triggering events that can be proved to be non-occupational. uation, reassignment, discipline, defamation, harassment, humiliation, discrimination against or termination of any employee, or any personnel practices, policies, acts or omissions.”

This final exclusion is designed to preclude an employee from bringing an action for damages based on any of the situations listed. These situations reflect specific areas where the allegation may represent the potential for PTSD claims. In New York, PTSD, where found compensable, is payable under Part One of the standard workers’ compensation policy.

State Legislative Activity to Cover First Responders Legislative efforts to make it easier for first responders to receive workers’ compensation benefits for mental stress injuries such as PTSD have cropped up recently in several states with varying degrees of success. In Colorado, House Bill 1229, which would expand state law to clarify the definition of a “psychologically traumatic event” and “serious bodily injury” under the compensation law, passed the Colorado House and would also require mental impairment claims to be supported by testimony from a licensed psychiatrist, rather than a physician, or a psychologist, according to the bill’s analysis. If signed into law, it will become effective on July 1, 2018.

Earlier this month, Vermont’s House of Representatives passed a presumption bill that would provide compensation benefits to first responders who suffer from PTSD resulting from on-the-job experiences. The bill limits claims to injuries that occur within three years of the last active date of employment and would disallow PTSD claims for triggering events that can be proved to be non-occupational.

Florida, where first responder PTSD issues are in the spotlight after an Orlando police officer was denied compensation benefits for PTSD for his role in responding to the Orlando nightclub shooting, also is considering making treatment for PTSD more accessible under its workers’ compensation law via two bills introduced earlier this year. Senate Bill 516 would amend an existing law that has barred police and firefighters from claiming mental injuries under workers’ compensation. The bill states that a mental injury must be “demonstrated by clear and convincing medical evidence” and must be connected to a specific incident. An alternative bill, Senate Bill 1088, would provide workers’ compensation for Florida firefighters, paramedics, emergency medical technicians, and law enforcement officers who suffer a mental injury—regardless of whether they have an accompanying physical injury—and have a “preponderance” of evidence showing the mental injury arose out of their work, CONTINUED ON PAGE 22

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according to a copy of the bill posted online. The legislation would also provide survivor benefits to family members if the mental injury results in the death of the first responder.

In April, the New York State Senate passed its $153 billion 2017-2018 state budget that included reforms to its workers’ compensation law. The new rule prevents the New York State Workers’ Compensation Board from disallowing a first responder’s claim for mental injury based on extraordinary work-related stress incurred if the stress is found to be not greater than that which usually occurs in the normal work environment.

These bills are important not only for providing access to services that first responders might need, but also for reducing the stigma around seeking treatment for mental health issues.

At the same time, advocates for employers and insurers are cautious about these PTSD bills, noting that they should be crafted to provide reasonable limits and evidence-based standards to avoid subjective claims.

Recognizing and Treating PTSD In attempting to address and reduce the potential for PTSD claims, it is important to recognize the symptoms of PTSD. Most often they begin within three months of the event. In some cases, however, they do not begin until years later. The severity and duration of the illness vary and some people recover within six months, while others suffer much longer.

According to the National Alliance on Mental Health, symptoms of PTSD often are grouped into four main categories, including: • Reliving: People with PTSD repeatedly relive the ordeal through thoughts and memories of the trauma. These may include flashbacks, hallucinations, and nightmares. They also may feel great distress when certain things remind them of the trauma, such as the anniversary date of the event.

• Avoiding: The person may avoid people, places, thoughts, or situations that may remind him or her of the trauma.

This can lead to feelings of detachment and isolation from family and friends, as well as a loss of interest in activities that the person once enjoyed.

• Increased arousal: These include excessive emotions; problems relating to others, including feeling or showing affection; difficulty falling or staying asleep; irritability; outbursts of anger; difficulty concentrating; and being “jumpy” or easily startled. The person may also suffer physical symptoms, such as increased blood pressure and heart rate, rapid breathing, muscle tension, nausea, and diarrhea.

• Negative Cognitions and Mood: This refers to thoughts and feelings related to blame, estrangement, and memories of the traumatic event.

PTSD is not diagnosed until at least one month has passed since the time a traumatic event has occurred. If symptoms are present, the doctor will begin an evaluation by performing a complete medical history and physical exam. Although there are no lab tests to specifically diagnose PTSD, the doctor may use various tests to rule out physical illness as the cause of the symptoms. If no physical illness is found, the individual may be referred to a psychiatrist, psychologist, or other mental 22 July 24, 2017 / INSURANCE ADVOCATE

The goal of PTSD treatment is to reduce the emotional and physical symptoms, to improve daily functioning, and to help the person better cope with the event that triggered the disorder. Treatment may involve psychotherapy (a type of counseling), medication, or both.

health professional who is specially trained to diagnose and treat mental illnesses. The diagnosis of PTSD is based on reported symptoms, including any problems with functioning caused by the symptoms. The doctor then determines if the symptoms and degree of dysfunction indicate PTSD—it is then diagnosed if the person has symptoms that last for more than one month.

The goal of PTSD treatment is to reduce the emotional and physical symptoms, to improve daily functioning, and to help the person better cope with the event that triggered the disorder. Treatment may involve psychotherapy (a type of counseling), medication, or both. Psychotherapy for PTSD involves helping the person learn skills to manage symptoms and develop ways of coping. Therapy also aims to teach the person and his or her family about the disorder, and help the person work through the fears associated with the traumatic event.

Furthermore, today’s workplace puts great pressure on employees to be productive and cost-efficient. Many workers live with fear of job loss associated with “downsizing” or with the growing movement into robotics. All of these factors can breed stress and culminate in claims for PTSD. Employers can take some basic steps to deal with these factors in the workplace: • Be alert to signs of stress among employees, and solicit input from employees and managers on this issue. Be aware that certain events, such as layoffs, may trigger stress levels in employees beyond what is to be expected on a day-to-day basis.

• Make employee assistance program (EAP) services available so that workers have ready access to help with dealing with stress.

• In the event of a severe workplace trauma, arrange for onsite intervention and counseling services. Though these steps will not make a business immune from the possibility of a workers’ compensation claim with a mental component, they will, at the least, help make stress recognition and prevention part of the workplace ethic.

1 Larson’s Workers’ Compensation Law, § 10.01 et seq.

2 Wolfe v Sibley Lindsay & Curr Co., 230 N. E. 2d 603 (1975) 3 Larson, Workers’ Compensation Law, § 2 4 In the Matter of Guillo v. New York City Housing Auth., 2014 N.Y. App. Div. (2014) 5 In the Matter of Launer v. Euro Brokers, 2014 N.Y. App. Div. LEXIS 2088 (March 27, 2014) 6 See New York Workers’ Compensation Law § 2 (7) effective on and after July 1, 1990.

7 Wyman v. Maidas Flower Shop, 1 A.D. 3d 728 (2003)

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Caring for Injured Workers: Providing Faster, Less Expensive Compensation Payments Through Modern Technologies Traditionally, workers’ compensation payers disburse claims payments by using checks. However, checks are costly and prone to fraud, and can be inconvenient for injured workers who may not have access to a bank. As payment systems become more modern, workers’ compensation payers should consider a payment process that is affordable, delivers payments on time and provides flexibility for those for whom banking is not a viable option.

Written by Sean Cox, Senior Vice President, DataPath, Inc.

Introduction Card-based account and payment solutions are used in several healthcare applications, including Flexible Spending Accounts, Health Savings Accounts, Health Reimbursement Arrangements and Medicare Set-Aside benefit accounts. It’s time to add workers’ compensation payments to this list.

Typically, injured workers receive their workers’ compensation via mailed checks. This is an antiquated payment system, fraught with paperwork, errors and unnecessary costs. Upgrading to a reloadable card-based payment process makes it easier for injured workers to receive their funds, especially for those who are remote, mobile or unbanked. Not only does this system provide benefits to the injured workers, payers also reap the rewards in terms of saving time and money.

History In 1908, the first workers’ compensation program was established by the federal government. There are now programs in all 50 states, as well as the District of Columbia, Puerto Rico and the U.S. Virgin Islands. In 2014 (the most recent available data), these programs covered 129.6 million employees, and over 62 billion dollars were paid in workers’ compensation benefits.i Yet, even in today’s technologically-advanced society, most workers’ compensation payments are made by checks mailed to the beneficiaries’ homes.

On the other hand, government agencies distribute benefits for many programs using prepaid cards or reloadable card-based payments. In fact, the July 2016 Report to the Congress on GovernmentAdministered, General-Use Prepaid Cards, determined that government agencies distributed $150 billion by prepaid cards in 2015, accounting for 2.5 percent of the government’s total expenditures.ii Some programs, such as the Supplemental Nutritional 24 July 24, 2017 / INSURANCE ADVOCATE

Assistance Program (SNAP), deliver their benefits using reloadable cards only.

Additionally, many states currently allow workers’ comp payments to be delivered through reloadable cards. Using reloadable card payment systems provides key advantages to both payees and payers, including easier and quicker access to benefits and reduced costs. Prepaid cards also are used for: • Women, Infants and Children (WIC) Supplemental Nutrition programs • Social Security benefits • Veterans Affairs programs • Child support programs • Unemployment benefits, and • Temporary Assistance for Needy Families programs.

It’s time for the benefits industry to adopt improved methods of dispersing compensation payments.

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Issues for Injured Workers

Consider too, that in order to receive payment through ACH, workers have to submit their banking information; therefore sophisticated thieves who gain access to computer and payment files make ACH transactions risky for both the payer and the recipient.

Consider the plight of a person who is hurt on the job. It’s very stressful for anybody when their main source of income suddenly disappears, but even more so when they’re injured while working and cannot do their jobs while they are healing.

In addition to dealing with the pain from their injuries, they now must go through the cumbersome filing process for workers’ compensation benefits.

Too often, injured workers are assured that they will receive their benefits by a specific day, but when the day comes, the check is not in the mail. After waiting another day or two, they contact their employer’s benefits representatives because they need to pay for their family’s living expenses, including rent, utilities, and groceries. They receive reassurance that the payment was mailed, but if it doesn’t arrive, then the injured worker must begin the process of applying for replacement checks.

Meanwhile, the continued loss of income is putting their families in financial jeopardy.

There are also other pieces to the workers’ compensation puzzle. Workers may receive their benefits on time, but for any number of reasons, they do not have bank accounts. Others work remotely or live away from their homes due to their jobs’ distant locations and don’t have access to their hometown banks; some injured workers live in areas where banks aren’t easily accessible. There are also many workers whose incomes aren’t sufficient or regular enough to maintain bank accounts, or they mistrust the safety of financial institutions.

According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, seven percent, or approximately nine million U.S. households, are unbanked, and an additional 19.9 percent, or about 24.5 million households, are underbanked.iii (Underbanked means that even though the household has an account at an insured financial institution, they continue to use alternative providers for financial services such as check cashing and payday loans.) Without bank accounts, the unbanked must find other ways to cash their workers’ compensation checks.

Depending on the injury sustained, both unbanked and underbanked worker-claimants may find it difficult to travel to a check cashing location. When they are finally able to cash their benefits checks, they face losing a portion of their already injury-reduced income due to high check-cashing fees.

Another issue faced by injured workers arises after their workers’ comp claims are filed. Due to the loss of income, injured workers may need to relocate because they are no longer able to afford their current residence. A worker who moves in a hurry may neglect to leave a forwarding address, resulting in lost checks. Even if injured workers report their new addresses to their employers, there may be additional delays in receiving the checks at their new dwelling.

monthly, it could cost $60,000 per month or more.

Another drawback to paper checks is their propensity to disappear. When checks are lost, payers spend additional time and money trying to locate missing checks and speaking with upset claimants regarding the status of their payments. If the checks cannot be found, the payments must be reissued, which requires even more money.

Injured workers who are mobile, such as migrant workers, present additional challenges when they forget to update their mailing information or do not have a permanent mailing address. When workers’ compensation payments are stolen and cashed illegally, it leads to costly fraud investigations. In its 2017 study, the Association for Financial Professionals (AFP) determined that check payments continue to be the most frequently targeted method by someone committing fraud, with 75 percent of reporting organizations stating they had experienced check fraud attempts or attacks in 2016.vi Additionally, escheatment may occur if the injured worker cannot be located.

Escheatment happens when, after a period of time, the abandoned or unclaimed workers’ compensation benefits are turned over to the state, instead of being returned to the payers.

An alternative to paper checks is electronic transactions, known as Automatic Clearing House (ACH) payments. The 2015 AFP Payments Cost Benchmarking Survey calculated the price of these transactions to be less than $1.00 per transaction.vii On average, using ACH to send workers’ compensation payments to a claimant’s bank account is about one-third the cost of a check. However, issues for payers still exist, including hidden processing fees, incorrect payment distribution, posting delays and payment duplication. Even more troublesome is that fraud incidents are increasing with ACH payments—up 30 percent in 2016.viii Consider also that in order to receive payment through ACH, workers have to submit their banking information; therefore sophisticated thieves who gain access to computer and payment files make ACH transactions risky for both the payer and the recipient. Finally, it’s important to remember that this solution is not viable for unbanked and underbanked injured workers.

Issues for Payers

Solutions

Problems related to manual workers’ compensation checks also exist for payers and self-insured companies. It’s understandable that there are costs associated with paper checks. The median cost of producing a paper check is $3.00,iv and can reach as high as $8.00.v In addition to the number of checks produced, the survey stated other factors that contribute to paper check costs, including printing, postage, check stock, wages and escheatment tracking. If a company issues 20,000 or more checks

The most efficient solution to the issues that arise with manual check writing is the one used by many government agencies and health-related companies: reloadable card-based payments. The benefits of this payment system are especially applicable to remote, migrant and unbanked/underbanked injured workers.

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INSURANCE ADVOCATE / July 24, 2017 25

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Once injured workers receive their card, they are required to log on to a secure online portal. In the portal, they activate the card through a registration process–no banking information required–increasing the security of this payment system. After registration is complete, the card can be used immediately and subsequent payments are reloaded electronically. Workers no longer need to wait for mail delivery because the payer can setup a reimbursement schedule, ensuring payments are made on time. Second, there are no check cashing or other related fees associated with using card-based payment options, which saves money for injured workers.

Finally, reloadable cards provide convenience for injured workers. They function just like debit cards and are accepted as payment almost anywhere, including online purchases. This means injured workers without bank accounts do not need to be concerned with carrying around large amounts of money after cashing their checks.

Yet, if desired, the cards can be used to withdraw cash from ATMs, as secure PINs are set up during registration. And because of the electronic reloading capabilities, injured workers do not need to notify payers if they move.

There are also several advantages to payers and self-insured companies that switch to reloadable card-based payments.

First, since checks no longer get lost in the mail, payers will receive fewer calls from upset injured workers, thus reducing the time spent locating missing payments. Moreover, the time required in tracking remote and mobile injured workers is reduced since benefits are reloaded onto the cards electronically. Cost savings is another factor, as all check-writing expenses are removed, and the need for issuing replacement checks is eliminated; there are only minimal costs incurred with reloadable cards. Because checks are no longer being mailed, fraud and escheatment issues are alleviated.

With accurate, timely payments, decreased operational expenses, and reduced errors, a reloadable card-based payment system is the right solution for remote, mobile and unbanked/underbanked injured workers and for workers’ compensation payers.

Conclusion The workers’ compensation payment industry is behind the times in how benefits are paid to injured workers. While many federal and state programs have transitioned away from older forms of payment and switched to reloadable cards, most workers’ compensation payers are still issuing paper checks. This payment system is costly to maintain for both payers and injured workers.

The answer is to use a reloadable card-based payment system which cuts costs for payers and assists injured workers with timely and easy-to-access funds.

Questions for Payers to Consider Here are five questions to help workers’ compensation payers and self-insured companies evaluate their current payment processes.

26 July 24, 2017 / INSURANCE ADVOCATE

Yet, if desired, the cards can be used to withdraw cash from ATMs, as secure PINs are set up during registration. And because of the electronic reloading capabilities, injured workers do not need to notify payers if they move.

• How are the workers’ compensation payments made currently?

• How much is it costing per payment? How much does it cost annually?

• How many employees receiving benefits work remotely?

• How many employees receiving benefits are unbanked or underbanked?

• How much time do payers spend answering inquiries regarding payments?

Payers may be surprised by the results of this evaluation, especially if their current workers’ compensation payment system is costly and inefficient to manage. The solution is to investigate other payment systems, including reloadable card payments, as viable alternatives.[IA] i https://www.ssa.gov/policy/docs/statcomps/supplement/2016/workerscomp.html ii https://www.federalreserve.gov/publications/other-reports/files/government-prepaid-report-201607.pdf iii https://www.economicinclusion.gov/surveys/2015household/ documents /2015_FDIC_Unbanked_Underbanked_HH_Survey _ExecSumm.pdf iv https://www.bottomline.com/application/files/faster-cost-effective-afppayments-cost-benchmark-survey-gen-us-srr-1510.pdf v “2013 AP Automation Study,” The Institute of Financial Operations, July 2013 vi https://commercial.jpmorganchase.com/jpmpdf/ 1320728778968.pdf vii https://www.bottomline.com/application/ files/faster-cost-effective-afp-payments-cost -benchmark-survey-gen-us-srr-1510.pdf viii https://commercial.jpmorgan chase.com/jpmpdf/13207287 78968.pdf

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[ IN FOCUS ]

K E L LY D O N A H U E - P I R O

Here’s the Thing About Millennials and Insurance uMillennials and how to work and manage them. It seems like there is a daily article posted just about this in the insurance space. Why are Millennials so hard to understand, manage and find as team members in your agency? Well, they are just different. In full transparency, I am by definition a Millennial. Born in 1981, I am right on the cusp of Generation X and Millennial. However, just like you I also struggle managing and mentoring Millennials.

Now in full disclosure, while I am a millennial I think I may be more of an Xennial. Xennials are a microgeneration between Millennials and Generation X, defined as being born between 1977 and 1983. We played outside, didn’t get cell phones until college, but still grew up with technology. Our entire childhood was not documented on social media and most likely our parents worked and so did we.

So, what makes Millennials such a challenge for us old-timers? I have recently concluded three major reasons we are all struggling so hard with this topic. Let me help break it down for you and your agency with some insight and guidance that may provide a few “aha” moments!

Have you ever had a millennial employee who said some pretty unprofessional things? Like words just fly out of their mouth without much thought to professionalism, who they are speaking to, or caring about the consequences? It happens, and it happens a lot! Millennials grew up with social media and most of them had cell phones by the time they were 13. This means that at any point in time, they can Tweet, Instagram and Facebook whatever is on their mind. Do you remember being 13? Remember the feelings and emotions you had? Well, when you were growing up, outbursts of emotion were most likely met with parental resistance.

Today’s millennial takes their emotion to social media—where a quick outburst over having to clean your room leads to a slew of their peers liking, loving and commenting on how unfair this is. Millennials actually received positive reinforcement,

quickly and oftentimes from strangers or distant acquaintances, confirming their position on a rather trivial manner.

Bringing this into the workplace, they can often spout off without much regard. This can be very challenging to deal with, when previous generations were groomed to see hierarchy, professionalism and restraint.

This leads me to my next observation.

Many Millennials don’t have much to lose.

Parenting has changed dramatically.

Millennial parents often took a friend’s approach (please note this is some, not all, parents). They were friendly with their children, often trying to negotiate with them rather than setting clear boundaries. As teens they were encouraged to focus on studies rather than work, $1000 Apple iPhones were given to them, $2000 Macbooks were common, and forget about the sneaker collections. When they didn’t like dance class, they didn’t have to go. Most teenage Millennials had more than I did after being a professional for five years. This leads to many Millennials living in Mom and Dad’s basement well into their twenties.

Why leave the basement when you have food, are still on your parent’s insurance, laundry is done, and have privacy and the safety of not having to worry about spreading your wings and paying bills? However, this means that in the event of conflict in the workplace, they don’t need a job. They would rather leave than work through conflict. There is not a driving need for a job, so they look at them more like “the company needs me more than I need them.”

This can drive a struggle for engagement and productivity.

Finally, due to parenting styles and social media, there is no hierarchy. On Twitter you can Tweet your dislike of a company’s product and get immediate gratification (even if you were completely wrong). Or you can Tweet a CEO and get a response. You can also Tweet major brands and celebrities and feel like they are responding to you directly. This means that there is no perceived hierarchy. Everyone is equal and you can speak to anyone at any time to get a response. Past generations val-

Kelly Donahue-Piro, founder and president of Agency Performance Partners, is a no-nonsense effectiveness expert who has helped hundreds of insurance agencies identify and capitalize on sustainable improvement opportunities. Her specialties include agency culture assessment and change; management and supervisory coaching and benchmarking; customer retention strategy development; digital marketing strategy, planning and implementation; and sales planning, management and skillbuilding.

In 2014, she created Agency Performance Partners with a mission to “partner with insurance entrepreneurs who dream to take their business to the next level and beyond, by relentlessly pursuing excellence in worldclass service and sales strategies.”

The centerpiece of the organization’s transformational work is its Agency Performance AssessmentTM, a comprehensive survey tool Kelly created to zero in on organization-wide improvement opportunities and provide the foundation for a customized agency action plan.

Mrs. Donahue-Piro is an engaging speaker who is available to conduct in-person and online agency success presentations that complement her firm’s one-on-one on-site and virtual consulting practice. Connect with her on social platforms, via email at kelly@agencyperformancepartners, or by phone at 401-415-6205.

ued hierarchy and chain of command. Most Millennials don’t understand hierarchy.

So the bottom line is how do we manage, attract and captivate Millennials? Here is the good news. They are growing up.

Millennials like me can be in our 30s, have real student loan debt, get mortgages and have kids. Children change a lot in people’s lives. What we need to remain certain of is the generation following Millennials and how to manage and attract them![IA] INSURANCE ADVOCATE / July 24, 2017 27

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[ G UEST O P I N I O N ]

M A R I LY N M . S I N G L E T O N , M D , J D

California’s Very Expensive Free Lunch uCalifornia’s state senate’s unipartisan passing of a sweeping single-payer health care bill, the Healthy California Act, has drawn attention to single-payer as a solution to the decaying Affordable Care Act. The ACA decreased competition and plan availability in health insurance and leaves patients holding the bag of unaffordable premiums, deductibles, and copays. It’s no surprise that a majority of state residents polled were in favor of universal, government-run health care—as long as it doesn’t raise their taxes.

But as the fanfare died down, pragmatists in the state assembly put the bill on hold as “woefully incomplete.”

The unrealistic bill provides that every California resident, regardless of age, employment, or immigration status, would be eligible for coverage with no premiums, copayments, or deductibles. Additionally, patients could see any “willing” provider without a referral and receive any service deemed medically appropriate, including chiropractic, vision, dental, ancillary health or social services, and National Institutes of Health-approved alternative therapies.

Insurers are only allowed to offer coverage for services that are not offered by the state.

“Providers” would be paid on a fee-forservice basis unless and until the Healthy California board establishes another payment methodology. The government thus has the unilateral ability to fix prices and payment methods–including State IOUs. According to the California senate’s own study, the estimated cost of the single-payer program is $400 billion, while California’s total budget for 2018 is $179.5 billion. The bill naively or slyly makes no mention of funding. The top contenders are (of course) a 15 percent employer tax, a 2.3 percent sales tax increase, a 2.3 percent gross receipts tax, and existing healthcare-directed federal, state, and local funds.

California’s default funding method is fleecing the taxpayers and then redirecting targeted tax revenues. Recently, voters approved California’s 2016 Healthcare, Research and Prevention Tobacco Tax Act, 28 July 24, 2017 / INSURANCE ADVOCATE

which added a $2 per pack tax, because the funds would go to physician training, disease prevention, medical research, Medi-Cal, and tobacco-use prevention and reduction. Gov. Brown now plans to shift some of the revenue to the general fund.

And then there’s the lure of the Golden Bear. The Supreme Court ruled in Memorial Hospital v. Maricopa County [Arizona] that the one-year residence requirement to receive free non-emergency medical services from the county violated the Equal Protection Clause by creating an “invidious classification” that impinges on the right of interstate travel by denying newcomers “basic necessities of life.” California has three border states and a large border country. If the Supreme Court has their say, the law could cover every soul who has a foot on California’s golden soil. Who will pay for the free-riders after the middle class has been taxed out of the state?

It is no wonder the assembly wants the senate to provide a “workable legislation that addresses financing, delivery of care, and cost control.”

Let’s face it. Why would we trust the government to manage our medical care?

The obvious example is the Veterans Health Administration. Congress has introduced a staggering 1,440 bills relating to veterans’ health since January 1, 2017.

Several of these bills are directed toward the ability to fire demonstrably incompetent or rule-breaking employees who have remained on the job for years and receive pensions and bonuses.

The real tragedy is that the call for single-payer ignores what patients really want. Deloitte’s 2016 Consumer Priorities in Health Care Survey found that patients overwhelmingly wanted “personalized provider interactions.” Of course, with a universal, government-run system comes universal privacy eradication and intrusion into our medical records. Secondly, people wanted “economically rational coverage.”

They did not say free; they just want value for their dollar. They want convenient

Dr. Singleton is a board-certified anesthesiologist, professor and Association of American Physicians and Surgeons Board of Directors member.

She graduated from Stanford and earned her MD at UCSF Medical School. Dr. Singleton completed two years of Surgery residency at UCSF, then her Anesthesia residency at Harvard’s Beth Israel Hospital. While still working in the operating room, she attended UC Berkeley Law School, focusing on constitutional law and administrative law. She interned at the National Health Law Project and practiced insurance and health law.

She teaches classes in the recognition of elder abuse and constitutional law for non-lawyers.

Dr. Singleton can be contacted directly at marilynmsingleton@gmail.com, 510-421-5800 (reporters and journalists welcome!). For permission to republish this op-ed, contact AngelPublicity@aol.com.

access. None of these things will be found in a government-run health care factory staffed by “willing” providers.

In truth, single-payer is not a cure for a broken system, but another manifestation of the attempt to depersonalize patients and doctors and convert them to obedient participants trapped in a system with no exit. They will have no choice but to ignore the reality that when the government runs out of money and the taxpayers are drained dry, payments and services will be reduced.

We must think local. Tap into physicians’ love and joy in delivering charity care, and use insurance for its intended purpose: major unexpected expenses.

Most importantly, ensure that patients and physicians can always deal directly with one another in an atmosphere of a trusting personal relationship.

With time to reflect, let’s hope our legislators realize that losing the hallmarks of good medicine is not worth the cost of free single-payer.[IA]

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[ COURTSIDE ]

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

Failure to Pay Part of Premium Results in Cancellation of Entire Policy Garcia v Government Empls. Ins. Co. Edited by Lawrence N. Rogak The issue in this case was whether the failure to pay the extra premium for an increase in the limits of an umbrella policy should result in cancellation of just the increased limit, or the entire policy. The Appellate Division holds that the non-payment cancellation applies to the entire policy, not just the increased limits. The result is particularly harsh because the cancellation took effect just hours after a serious accident, and the insured had paid the basic amount of the premium, just not the increased amount for the increased limits.—LNR uIn 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 from an order of the Supreme Court, Nassau County (J. Murphy, J.), entered June 17, 2015, which denied its motion for summary judgment dismissing the complaint. ORDERED that the order is reversed, on the law, with costs, and the defendant’s motion for summary judgment dismissing the complaint is granted.

On May 19, 2006, the plaintiff, Antonio Garcia, was injured when he was struck by a vehicle in a parking lot in Brooklyn. Garcia commenced an action against Jeanne Rakowski, who owned the vehicle, and Linda Danielson, who, with Rakowski’s permission, was driving it when it struck Garcia. In 2012, Garcia obtained a judgment against Rakowski and Danielson. After obtaining partial satisfaction of that judgment, Garcia sought to recover the unsatisfied portion of it from Government Employees Insurance Company. GEICO had issued an umbrella policy to Rakowski, and Garcia claimed that the umbrella policy was in effect when Rakowski’s vehicle struck him. After GEICO failed to satisfy the remainder of the judgment within 30 days of Garcia’s request, Garcia commenced this action 30 July 24, 2017 / INSURANCE ADVOCATE

…GEICO contended that Rakowski’s umbrella policy, which contained a liability limit of $2,000,000 for the contracted policy period, had been cancelled for nonpayment of premium, effective at 12:01 a.m. on May 19, 2006, only a few hours before Rakowski’s vehicle struck Garcia.

against GEICO pursuant to Insurance Law § 3420(a)(2). He alleged, in relevant part, that, at the time of the accident, Rakowski’s umbrella policy, in the amount of $1,000,000, was in effect. He also alleged that GEICO’s purported cancellation of that policy before the accident was “improper, invalid, and ineffective.”

GEICO moved for summary judgment dismissing the complaint on the ground that Rakowski’s umbrella policy was not in effect at the time of the accident. Specifically, GEICO contended that Rakowski’s umbrella policy, which contained a liability limit of $2,000,000 for the contracted policy period, had been cancelled for nonpayment of premium, effective at 12:01 a.m. on May 19, 2006, only a few hours before Rakowski’s vehicle struck Garcia.

In support of its motion, GEICO submitted evidence that in August 2005, Rakowski, who had a coverage limit of $1,000,000 for the period ending October 10, 2005, requested, and received, a renewal policy, for the period from October 10, 2005, to October 10, 2006, with a coverage limit of $2,000,000. Rakowski also added a rental property to the policy for that period. The increase in the coverage limit from

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.

$1,000,000 to $2,000,000 resulted in a $199 increase in the premium. The addition of the rental property, however, did not result in any increase in the premium.

Specifically, GEICO submitted the “Amended Declarations,” dated August 31, 2005, showing the $2,000,000 coverage limit for the period from October 10, 2005, to October 10, 2006, the increase of $199 “FOR ADDITIONAL COVERAGE TO SECOND MILLION,” and the increase of $0 for the addition of the rental property.

GEICO also submitted Rakowski’s deposition testimony that she had requested the $2,000,000 coverage limit for the period beginning October 10, 2005. Notably, the Amended Declarations stated: “AMENDED DECLARATION EFFECTIVE 10/10/05 SUPERSEDES ANY PREVIOUS DECLARATION BEARING THE SAME NUMBER FOR THIS POLICY PERIOD.” GEICO also submitted evidence that before the beginning of the renewal term, Rakowski made a $306 premium payment (the amount of the previous year’s premium), but had not paid the additional $199 that was due for the increase in her coverCONTINUED ON PAGE 36

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[ O N M Y R A DA R ]

BA R RY Z A L M A

Appropriate to Effect “Force-Placed Insurance” Pay Your Mortgage and Keep Insurance or Lose uMany people have – especially in the last ten years – had difficulty paying their mortgage and keeping the property insured as required by the mortgage documents. When the lender exercises its rights under the mortgage document, places “force-placed insurance” to protect their security, they are often sued by the defaulting mortgagor.

In Tonya Hill v. DLJ Mortgage..., United States Court of Appeals, Second Circuit — Fed.Appx. —-, 2017 WL 1732114 (May 3, 2017) Tonya Hill appealed an order dismissing her claims against DLJ Mortgage Capital, Inc. (“DLJ”), Selene Finance LP (“Selene”), and Doonan, Graves and Longoria, LLC (“Doonan”).

Hill alleged violations of the Fair Debt Collection Practices Act (“FDCPA”), the Real Estate Settlement Procedures Act (“RESPA”) and a state statute. Hill’s claims arise from her promissory note (the “Note”) in the amount of $379,200, and the mortgage on real property that she and her husband executed and delivered as security for the Note. Hill alleged that the defendants improperly sought to collect on her defaulted Note.

The District Court dismissed Hill’s FDCPA and RESPA claims with prejudice and declined to exercise jurisdiction over Hill’s state statutory claim. We assume the parties’ familiarity with the underlying facts, the procedural history of this case, and the issues on appeal.

ANALYSIS To state a claim, the complaint must plead enough facts to state a claim to relief that is plausible on its face. Although all allegations contained in the complaint are assumed to be true, legal conclusions are not presumed to be accurate.

A claim will have facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.

32 July 24, 2017 / INSURANCE ADVOCATE

“Force-placed insurance,” as defined by RESPA, is “hazard insurance coverage obtained by a servicer of a federally related mortgage when the borrower has failed to maintain or renew hazard insurance on such property as required of the borrower under the terms of the mortgage.”

FDCPA Claims Hill’s FDCPA claims are premised on monthly statements sent to her by Selene regarding the total amount owing under her Note. As the District Court explained, Selene sent these statements in compliance with the Truth in Lending Act federal regulations, which requires mortgage loan servicers to transmit monthly statements to consumers. With this in mind, the monthly statements here do not reflect attempts to collect on the debt evidenced by the Note.

RESPA Claim Hill alleged that the defendants, when purchasing force-placed insurance on her property, did not provide her with any of the information or requests required by RESPA’s Regulation X and charged her account for the insurance in violation of a different regulation.

“Force-placed insurance,” as defined

by RESPA, is “hazard insurance coverage obtained by a servicer of a federally related mortgage when the borrower has failed to maintain or renew hazard insurance on such property as required of the borrower under the terms of the mortgage.” 12 U.S.C. § 2605(k)(2). The allegations of

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.

INA 7-24-17.qxp_INA 7-24-17 7/17/17 2:57 PM Page 33

[ O N M Y R A DA R ] Hill’s complaint, all conclusory in nature, failed to state a plausible claim for relief under RESPA. Among other things, the RESPA allegations do not specify that Hill’s mortgage was “federally related.”

Hill also asserts that the District Court should have granted her leave to amend her complaint to assert a specified damages amount for her RESPA claim. Hill, however, never sought leave to replead her Amended Complaint from the District Court. The contention that the District Court abused its discretion in not permitting an amendment that was never requested is frivolous.

State-Law Claim Hill did not address her GBL claim on appeal, and accordingly has waived that claim. In fact, arguments not made in an appellant’s opening brief are waived. Even so, because the District Court correctly dismissed all of Hill’s federal claims, it was entitled to decline to exercise supplemental jurisdiction over her state-law claims.

ZALMA OPINION Not only was the appellate request to amend the complaint frivolous, it appears that the entire action was frivolous, and an attempt to avoid paying a mortgage and insure the property that was security for the debt. Although the Second Circuit affirmed the district court, one can only wonder why there was no sanction for the frivolous nature of the suit and appeal.

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ON THE LEVEL

THE SOCIAL NOTEBOOK

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the industry. It got picked up by Agency Nation, a digital publication of TrustedChoice.com, and received many more views.

My point is twofold. First, social media provides a great vehicle for leveraging distribution of your message, and secondly hats off to Jim Karras in Port Jefferson Station for caring enough to take the issue to consumers.

For years Geico has promoted 15 minutes to save 15%, which trivializes adequate and appropriate coverage and promotes convenience and saving money. Apparently Geico feels that making sure you are properly protected from financial loss isn’t worth investing more than 15 minutes. I believe that shows how much they care about the consumers they insure.

I’m asking every professional independent agent who cares about the security and financial well-being of their clients and potential clients to get the message out that there is more to buying insurance protection than price and convenience. Communicate it anywhere and everywhere you can.

Educate them to the subtle differences in insurance contracts that can have a negative impact on their protection. Help them to understand how to properly assess the risk they face and what is necessary to give them the protection they desire.

Challenge them to stare into the face of having too little or missing coverage and how that could impact them, their family or their business. No one likes spending money on insurance protection but everyone wants financial security. Consumers should understand the various insurance protections that are available and be able to decide how they want to protect themselves so there are no surprises when a loss occurs. Helping consumers choose the right protection at an affordable price is a job best handled by an independent agent.

I hope my message resonates with independent agents and gets them motivated to fight back. I believe most responsible consumers want to be properly protected. They just need to know the pitfalls of buying on convenience and price. That is why agents need to do a much better job communicating the risks and educating all consumers on what is involved in selecting and buying insurance protection.[IA]

by giving them incentives to read more.

We motivate students in grades 2-5 to achieve 70 hours or more of reading during the school year, and as a reward for their hard work have a chance to win a bike.

Once a scholar achieves 70 hours total for the year and has their hours signed by their parents and teachers, they are entered into our raffle. Our agency holds three raffles for the months of March, April, and May. Additionally, we give away four bikes in each raffle to one student in each grade.

Our Bikes for Reading campaign really is something special. The students get incredibly excited when we show up, and enjoy telling us about how much they’ve read. In fact, we’ve met students who have read over 200 hours and continue to read diligently every day.

What it comes down to is that we are making a positive impact on our community, starting with our young scholars. By holding this program, we’re encouraging our readers to grow into intellectuals who will one day give back to our community and make a positive impact on Stafford Springs when they grow up.

Our audience loves to see the content we share every year during our giveaways, too. Not only does this content speak to our brand, it gives us incredible visibility online. The true point of a program like this is to make a difference in your local community. However, if you have the opportunity to gain a following from it, then it is important to capitalize accordingly. Of course, receiving the various words of support and gratitude from parents and their children is just another reason we continue to do what we do.

The Stafford Springs Easter Egg Hunt This year we also helped with the Stafford Springs Easter Egg Hunt. Our town normally holds egg hunts around Easter, but due to new regulations the town could not host the event this year.

This was quite unexpected for a lot of our local residents here and left them pretty unhappy. Therefore, our insurance agency jumped in to sponsor and help organize the event, and within no time we had many other sponsors joining us to CONTINUED ON PAGE 37

INSURANCE ADVOCATE / July 24, 2017 33

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age limit. Finally, GEICO submitted evidence that in November 2005, it had mailed Rakowski a notice informing her that her policy would be cancelled effective 12:01 a.m. on May 19, 2006, if she did not pay the remainder of the premium. The cancellation notice referenced Rakowski’s policy number, which remained constant throughout the various policy periods.

Garcia opposed GEICO’s motion. He contended that there was an issue of fact as to whether Rakowski’s payment of $306 before the commencement of the policy period beginning October 10, 2005, secured a fully paid policy providing a full year of coverage for $1,000,000.

Additionally, Garcia contended that GEICO had failed to establish, prima facie, that it had validly cancelled the policy, whatever the limit of coverage. The Supreme Court denied GEICO’s motion, holding that there was a triable issue of fact as to whether Rakowski’s umbrella policy was severable as to the limits of liability. GEICO appeals.

GEICO contends that, as a matter of law, Rakowski’s umbrella policy for the

The question of divisibility arises when, for example, a policy covers separate properties or separate risks, and the policyholder has breached a condition or warranty as to one property or one type of risk, but not involving the loss at issue.

period commencing October 10, 2005, provided coverage of $2,000,000, and that Rakowski’s payment of only a portion of her premium for that policy resulted in GEICO’s valid cancellation of the policy after the prorated period covered by her payment expired. The umbrella policy, and Rakowski’s coverage, terminated upon cancellation at 12:01 a.m. on May 19, 2006, a few hours before Garcia was injured.

Garcia, in contrast, contends there is a triable issue of fact as to whether Rakowski’s umbrella insurance contract was, on the one hand, “entire,” or, on the

other hand, “severable” or “divisible.” If the policy was severable or divisible, Garcia contends, then Rakowski had a fully paid policy for $1,000,000 that lasted from October 10, 2005, to October 10, 2006.

Rakowski’s failure to pay the premium applicable to the “second million” of coverage meant only that she did not have the second million dollars of coverage, at any time. We agree with GEICO. Resolution of disputes about insurance coverage begin with examination of the language of the policy. Interpretation of unambiguous policy provisions, which must be given their plain and ordinary meaning, is a question of law. Further, while ambiguities in an insurance contract are to be interpreted in favor of the insured, ambiguities arise only where there is more than one reasonable interpretation of the policy, as measured by the reasonable expectations of the average insured.

In other words, even where policy language is susceptible of more than one interpretation, there is no ambiguity if only one of them is reasonable.

More specifically, an insurance contract is divisible when the contracting parties intend that it be divisible. The parties’

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[ COURTSIDE ] intention is to be gleaned from the language of the contract and the application of the rules governing contractual interpretation. The general rule is that an insurance contract is not divisible “when by its terms, nature, and purpose, it contemplates and intends that each and all of its parts and the consideration therefor shall be common each to the other and interdependent. On the other hand, the contract is considered severable and divisible when by its terms, nature, and purpose, it is susceptible of division and apportionment.”

The question of divisibility arises when, for example, a policy covers separate properties or separate risks, and the policyholder has breached a condition or warranty as to one property or one type of risk, but not involving the loss at issue. In the context of the insured’s nonpayment of a portion of the premium, the issue of divisibility arises when, for example, a policyholder has made a change to a fully paid policy but has not paid the additional premium occasioned by the change.

Depending on the insurance contract at issue, the lines of divisibility may run between the types of risk covered by the contract, such as property damage as opposed to personal injury, or between the different properties covered, such as where different vehicles or properties are covered by the policy.

When, however, an insured has increased liability limits of an entire policy as of the inception date of coverage, but has not paid the full premium and the policy has thus lapsed, the Court of Appeals has held that the policy is not divisible to provide coverage in a lesser amount than stated in the policy, at least where no different type of risk had been added to the policy.

Here, there is no ambiguity in Rakowski’s umbrella policy as to either coverage or divisibility. Rakowski contracted, before the policy term began, for an umbrella policy covering specified risks, with a coverage limit of $2,000,000. The policy she received unambiguously provided for the amount of coverage she had requested with respect to risks she had specified: the Amended Declarations of the insurance contract, dated August 31, 2005, stated that, for the policy period, of October 10, 2005, to October 10, 2006, the risks pertained to the specified properties and vehicles, and the coverage limit perCONTINUED ON PAGE 38

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make sure the egg hunt still took place. In fact, all of this helped create a panel of organizers and over 500 residents, and their kids attended the egg hunt.

Of course, the effect on social media and online was astounding, and we had many people thanking us for our involvement in the community and for helping to keep the egg hunt going. We brought happiness to a multitude of children who may not have had an egg hunt to begin with, so our audience loved to see the positive stories and content on their social media feeds.

Flag Day Barbecue Every year we make sure to host a huge celebration for Flag Day. That’s why this year we really pushed our marketing strategies online and in person. We made sure to invite all the local businesses in Stafford and spread the word to community hotspots, like the senior center and local library.

It was worth it too because a lot of attendees came to our free event. This year our insurance agency handed out hundreds of custom, patriotic t-shirts and collected retired flags that were given a proper disposal ceremony. Additionally, attendees could also pick up a free replacement flag and mounting kit if they needed one.

Hot dogs, hamburgers, sausages, chicken, and hand-cut roast beef were served all day long for free, thanks to the help of our local community members— the local fire departments even helped to display a giant 90-foot flag. Not to mention, Plymouth Rock Assurance, Radio 98.3, and Journey Found joined us to hand out goodies to attendees.

CONTINUED ON PAGE 38

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taining to those risks was $2,000,000.

Garcia argues, and our dissenting colleagues would conclude, that, because of how the premiums were set out in the Amended Declarations, there is an ambiguity as to whether Rakowski received a policy for $2,000,000 or $1,000,000, or as to whether the policy was divisible or severable as to the amount of coverage. We disagree. The fact that the premium was separately stated for the increase in the coverage limit is irrelevant here. The $1,000,000 renewal proposal of the policy from the previous year had already been sent out before Rakowski asked for an increase in the amount of coverage to $2,000,000. The “Amended Declarations,” which, by their terms, “SUPERSEDE[D] ANY PREVIOUS DECLARATION” for the policy period beginning October 10, 2005, were sent to Rakowski after she asked for the changes to her policy. Thus, the additional billing, which separated the original premium from the amount attributable to the increase, was unremarkable and did not give rise to an ambiguity in the policy that Rakowski had asked for and GEICO agreed to provide: a liability limit of $2,000,000 as of the beginning of the new policy period. Garcia is not seeking to divide Rakowski’s policy, but, in effect, to rewrite it to provide what Rakowski never asked for: a policy with coverage of only $1,000,000.

As Garcia points out, forfeiture is not favored in the law, and, where cancellation of an entire policy would result in forfeiture, courts may be reluctant to hold that an insurance contract is not divisible.

There is, however, no forfeiture here.

Rakowski asked for, and received, a $2,000,000 policy, and she had $2,000,000 in coverage from the outset of the policy period, October 10, 2005. Because she only paid part of the premium, her coverage was cancelled, upon notice, when the prorated premium for the coverage she contracted for was exhausted. In other words, Rakowski got everything she paid for, and she forfeited nothing.

That Rakowski “just missed” being insured for the injuries caused to Garcia is unfortunate, but nonetheless irrelevant to this analysis. GEICO sent its cancellation notice more than six months before Rakowski’s vehicle struck Garcia. We are not free to alter the meaning of the policy 38 July 24, 2017 / INSURANCE ADVOCATE

As Garcia points out, forfeiture is not favored in the law, and, where cancellation of an entire policy would result in forfeiture, courts may be reluctant to hold that an insurance contract is not divisible. to avoid the result caused by Rakowski’s nonpayment of the premium for her $2,000,000 policy.

Next, because there is no ambiguity in what Rakowski contracted for—$2,000,000 in coverage, as stated in the Amended Declarations of the policy—there is likewise no ambiguity in GEICO’s notice of cancellation, which referred to the policy number of Rakowski’s umbrella policy. The cancellation notice could only have pertained to Rakowski’s coverage of $2,000,000, which was the only coverage the policy provided for the policy period.

Finally, GEICO established, prima facie, that it properly sent Rakowski notice of the cancellation (see Jones v Allstate Ins. Co., 221 AD2d 596, 597). In opposition, Garcia failed to raise a triable issue of fact.

Garcia’s remaining contentions are without merit.

Accordingly, the Supreme Court should have granted GEICO’s motion for summary judgment dismissing the complaint.[IA] 2017 NY Slip Op 05202 Decided on June 28, 2017 Appellate Division, Second Department

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We also hosted a special celebration for my sister, Rachel. She recently competed in the Special Olympics and won the bronze medal in swimming. We celebrated with Rachel with cupcakes and a large cake in honor of her win. She also received a special news segment that day and was featured on Fox 61, thanks to Rich Coppola.

Of course, the news segment was even more exposure for our agency, but the big takeaway was that we were able to connect with an audience who may not have known about Rachel or her disability.

Stafford was filled with great food, great people, and a whole lot of red, white, and blue. Our social media networks received a lot of attention that day too, not just from our content either. In fact, many attendees shared their own content and tagged us in it. This is great for online exposure, because now your audience is marketing to their network for you.

Flag Day may not be widely celebrated like other holidays in America. However, at our insurance agency it is an annual celebration we share with the community. We pay respect to our flag, country, and all those who have served or are currently doing so.

Getting Involved It’s clear that community-based marketing is a powerful tool for your insurance agency to utilize. Of course, at the end of the day we have the power to influence a positive change in our communities. Therefore, if you’re looking to implement something similar to our own campaigns, don’t feel timid in asking us.

In fact, we’d love to see more insurance agencies involved with their local citizens.

Additionally, you can always look for charities, donation drives, or volunteer opportunities that better the community around you. At Paradiso Insurance, we all like to be involved in giving back in one way or another, and it’s why community-based marketing is a big part of what we do here.

Yes, this type of marketing can extend your reach, but you can make a difference by making your local area a better place to live in. When you connect to your audience in a positive way, you’ll see positive results both for your agency and those around you.[IA]

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